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2000 Stock Plan Design and Administration Survey

Letter to Our Members

Unifi Network Survey Unit NASPP/

Dear NASPP Member,

On behalf of both the National Association of Stock Plan Professionals and PricewaterhouseCoopers, I am pleased to present theresults of the 2000 Stock Plan Design and Administration Survey, an endeavor we undertook this year again with the invaluableassistance of PricewaterhouseCoopers and its Unifi Network Survey Unit.

Still the only one of its kind, this year's survey is more comprehensive than even our 1998 survey. As you will see, we have continuedto add new sections and to expand upon sections included in earlier surveys. We expect to continue to work with Unifi Network, adivision of PricewaterhouseCoopers, to further refine and enhance this survey to provide even more value-added information, andmaintain high standards of survey design, data accuracy and data analysis.

Very special thanks are due Susan Lowry and Shannon DeHart of PricewaterhouseCoopers for their diligent efforts compiling andanalyzing the survey data. I would also like to thank members of the NASPP Advisory Board and Executive Advisory Committee fortheir thoughtful input during the design phase.

Finally, thanks to all of you who took the time to fill out the survey questionnaire. Your participation in this and future surveys willensure this survey is an effective tool with which to understand and evaluate current trends in stock plan design and administration.As always, we welcome your comments, suggestions and questions.

I hope you find the enclosed report useful. Stay tuned to the NASPP website (www.naspp.com) for the on-line results as well as theStock Plan Features Database (accessible only to those respondents who agreed to share with others basic information about theircompanies' plan features).

Sincerely,

Sandra L. SussmanExecutive DirectorNational Association of Stock Plan Professionals



Copyright 2000 The National Association of Stock Plan Professionals

Unifi Network Survey Unit

Copyright 2000 PricewaterhouseCoopers LLP and

PricewaterhouseCoopers Global Human Resources Solution LLC.

All rights reserved.

Reproduction in whole or in part prohibited except by permission of the

copyright owners, and provided that attribution is given to Unifi Network.

Printed in the United States of America

Published by

The National Association of Stock Plan Professionals

and

Unifi Network Survey Unit

THIS REPORT IS INTENDED SOLELY FOR THE USE OF NASPP MEMBERS


Table of Contents


Introduction................................................................................................................................................................................1Survey Approach.................................................................................................................................................................... 2-3Highlights of This Year’s Study............................................................................................................................................ 4-7Participant Profile.................................................................................................................................................................. 8-9Utilization of Plan Shares (Overhang & Run Rate) ..............................................................................................................10Allocation of Most Recent Annual Grant......................................................................................................................... 11-12Source of Plan Shares ..............................................................................................................................................................13Omnibus Plans & Regulatory Issues ......................................................................................................................................14Stock Option Plans

Prevalence.............................................................................................................................................................. 15-17Plan Objectives ............................................................................................................................................................18Plan Features

Option Term ..................................................................................................................................................19FMV/Premium/Discount/Indexed Exercise Price .........................................................................................19Fair Market Value Determination..................................................................................................................19Stock Option Exercise Provisions .................................................................................................................19Minimum Criteria for Stock Option Plan Participation.................................................................................20Minimum Salary Level or Salary Grade for Stock Option Plan Participation...............................................20Trends in Changes to Minimum Stock Option Plan Participation.................................................................21Non-Compete Forfeiture Provisions........................................................................................................ 22-24Termination & Change in Control Provisions ...............................................................................................25Period Following Termination During which Vested Options can be Exercised ..........................................26Stock Option Repricing .................................................................................................................................27Exchange Options (Options in Lieu of Cash Compensation) ........................................................................28Deferral of Stock Option Gains .....................................................................................................................29Transferable Options ............................................................................................................................... 30-31

Granting PracticesDepth of Granting Practices .................................................................................................................... 32-34Granting Frequency ................................................................................................................................. 35-36Prevalence of Granting ISOs up to the ISO Limit Before Granting NQSOs.................................................37Effect of This Year’s Market Correction on Stock Option Granting Practices .............................................38Stock Option Vesting .............................................................................................................................. 39-40Stock Option Grant Guidelines......................................................................................................................41Stock Options for Contractors/Consultants ...................................................................................................42


Table of Contents


Stock Option Plans (continued)Charitable Stock Options...............................................................................................................................43Reload Options ..............................................................................................................................................44Other Practices ..............................................................................................................................................45

Stock/Unit PlansPrevalence.............................................................................................................................................................. 46-48Plan Objectives ............................................................................................................................................................49Features & Granting Practices

Depth of Granting Practices .................................................................................................................... 50-52Grant Frequency ............................................................................................................................................53Minimum Criteria for Stock/Unit Plan Participation.....................................................................................54Minimum Salary Grade for Stock/Unit Plan Participation ............................................................................54Stock/Unit Grant Vesting ..............................................................................................................................55Stock/Unit Grant Guidelines .........................................................................................................................56Stock/Units for Contractors/Consultants .......................................................................................................56Other Practices ..............................................................................................................................................56

Performance PlansPrevalence.............................................................................................................................................................. 57-58Plan Objectives ............................................................................................................................................................59Features & Granting Practices

Depth of Granting Practices .................................................................................................................... 60-62Minimum Criteria for Stock/Unit Plan Participation.....................................................................................63Minimum Salary Grade for Stock/Unit Plan Participation ............................................................................63Performance Period .......................................................................................................................................64Vesting...........................................................................................................................................................65

Employee Stock Purchase PlansPrevalence & Plan Objectives......................................................................................................................................66Utilization & Source of Plan Shares ............................................................................................................................67


Table of Contents


Employee Stock Purchase Plans (continued)Features & Practices

Type of Employee Stock Purchase Plan........................................................................................................68Eligibility Requirements................................................................................................................................68Participation Rates.........................................................................................................................................68Automatic Discount Applied to Purchase Price ............................................................................................69When Discount is Applied to FMV of Share Price .......................................................................................69Length of Offering Period .............................................................................................................................70Length of Purchase Cycle/Period ..................................................................................................................70How Stock Purchases are Made ....................................................................................................................70Definition of Annual Maximums...................................................................................................................70Mandatory Holding Period ............................................................................................................................71Retention Features .........................................................................................................................................71Employer Match ............................................................................................................................................72

Administrative Practices ..............................................................................................................................................73Deferred Compensation Plans........................................................................................................................................... 74-75Insider Issues ...................................................................................................................................................................... 76-77Ownership Guidelines........................................................................................................................................................ 78-81Board of Directors

Compensation Form & Equity Practices................................................................................................................ 82-85Stock Ownership Guidelines........................................................................................................................................86

Administrative Practices ................................................................................................................................................... 87-91Communication Practices.................................................................................................................................................. 92-94International Stock Plans

Plan Prevalence...................................................................................................................................................... 95-97Administrative Practices ........................................................................................................................................ 98-99Communication Practices ..........................................................................................................................................100

eCommerce EnterpriseProfile ........................................................................................................................................................................101Equity Practices ................................................................................................................................................. 102-104

Participant List............................................................................................................................................................... 105-109Definition of Terms ........................................................................................................................................................ 110-113


Introduction

Unifi Network Survey Unit NASPP/1

This year’s Stock Plan Design and Administration Survey, based on the responses of 345 US-headquartered public companies, is far more comprehensivethan the 1998 survey. (The survey questionnaire was expanded from 28 pages in 1998 to 50 pages in 2000.) The most important differences between the1998 survey and this year’s survey include the following:

! The following sections are new:• Trends in Changes to Minimum Criteria for Stock Option Plan Participation• Termination & Change in Control Provisions• Stock Option Repricing• Exchange Options (Options in Lieu of Cash Compensation)• Stock Options for Contractors/Consultants• Charitable Stock Options• Reload Options• International Equity Plans• E-Commerce Enterprise Equity Practices• Definition of Terms

! More detailed statistics are presented regarding:• Long-term incentive plan prevalence• Stock option plan features• Stock option, stock/unit and performance plan granting practices• Incentive stock option incidence• Employee stock purchase plans• Board of Directors compensation• International equity plans

! This year’s survey distinguishes between expatriates and non-US local nationals.

For members of the NASPP, the entire survey results will be posted on the NASPP website (www.naspp.com). Moreover, those survey participants thatagreed to share survey data in the stock plan features database will have access to the names of companies that offer specific features in their stock plans.This database will also be located on the NASPP website.

The Survey Unit of Unifi Network, a division of PricewaterhouseCoopers, can provide custom research for interested companies on an individual fee basis.(You can contact the PricewaterhouseCoopers/Unifi Network Survey Unit directly at 203-341-2227.)

http://www.naspp.com)/


Survey Approach


The survey is conducted every other year, with the next survey scheduled for the year 2002. This year’s survey approach included the following:

! We received 385 questionnaires from July through August of 2000. The final number of participant submissions totaled 345 oncequestionnaires from non-US-headquartered and private companies were excluded.

! We contacted approximately 98% of the respondents to clarify responses and ensure data accuracy.

! Both the numerator and denominator are documented for all percentages presented in the survey.

! In certain sections of the report, we classified all participating companies as either High-Tech or Non-High-Tech.

• High-Technology includes data from companies in the Biotechnology/Life Sciences, Computer Software andServices, High-Technology Manufacturing, and Telecommunications industries.

• Non-High-Technology includes data from companies in all remaining industries.

! We defined employee groups as follows:

• US-Based Employees:

− CEO & Senior Management: The organization’s executive team and other senior management positions,including functional area heads.

− Middle Management: Department managers and individuals in project/team leadership roles. This group ofemployees typically reports to senior management level.

− Other Exempt: Includes supervisors, other professionals and salaried support staff.

− Non-Exempt: Support personnel compensated on an hourly basis.


Survey Approach


• Expatriates and Non-US Local Nationals:

− Senior Management: The organization’s executive team and other senior management positions, includingfunctional area heads. (Excludes corporate CEO.)

− Middle Management: Department managers and individuals in project/team leadership roles. This group ofemployees typically reports to senior management level.

− “Other Exempt” and “Non-Exempt” have been combined into “Other Employees” since the definition ofexempt varies by country.

! “CEO and Senior Management” are not limited to the top five executives listed in a respondent’s proxy statement.

! We defined “currently granting” as companies that have a specific granting frequency and/or the company has granted toemployees within that last three years.

! Percentiles are presented in cases where the response includes a large variety of numbers. In these cases, 25th, 50th, and 75th

percentiles are presented. These statistics represent the distribution of the data.

• The 50th percentile – or median – is the central value of the data distribution. (For example, if 11 data pointswere reported, the 50th percentile would be the sixth highest value. If 10 data points were reported, the 50th

percentile would be midway between the fifth and the sixth highest value.

• The 25th and 75th percentiles represent the range of the middle half of the data.


Highlights of This Year's Study


As in previous years, this year's survey contains a wealth of information about stock plan design features and administrative practices. Following are highlightswe found particularly interesting.

The trend toward extending stock option grants further down the organizational ladder continues:

! Of all companies offering stock options, nearly 44% (versus 34% in 1998) push them all the way down to the non-exempt level,while nearly 74% (versus 62% in 1998) of responding high-tech companies grant options to non-exempt employees.

! Companies appear to be lowering the minimum criteria for stock plan participation (i.e., salary level or salary grade). Morecompanies lowered the minimum criteria in the past year than in any other year for US-based employees, expatriates and non-USlocal nationals.

! Retention, competitiveness and employee ownership are the most prevalent plan objectives for all types of stock option and awardplans and for US and non-US employees.

Both non-qualified stock options (NQSOs) and incentive stock options (ISOs) remain the most widely used type of stock option:

! Non-qualified stock options are still the most common form of equity compensation, with 95% of all the responding companiescurrently granting NQSOs.

! Use of ISOs among all companies appears to have increased significantly since our last survey. Sixty-two percent (214) of allresponding companies are currently granting ISOs (nearly half of which grant them all the way down to the non-exempt level),compared to 47% in 1998. This figure is fueled by a significant increase in ISO usage among non-high-tech companies (62%versus 40% in 1998), while usage among high-tech companies remained virtually flat. But, when looking at the NQSO and ISOcombinations, the use of ISOs only has decreased across the board (from 17% to 5% for high-techs and from 8% to 4% for non-high-techs), use of NQSOs only has decreased significantly for non-high-techs (from 59% to 38%), and use of both NQSOs andISOs has increased, also across the board (from 47% to nearly 58% for high-techs and from 32% to 57% for non-high-techs). Itappears companies are trying to strike a balance of tax-favored and non-qualified stock incentives. Approximately 80% ofcompanies granting both ISOs and NQSOs grant ISOs up to the ISO limit before granting NQSOs.

! Greater ISO usage notwithstanding, however, just 71% of companies that grant ISOs track disqualifying dispositions. Thus,many companies are losing out on what could be significant tax deductions. (For more on procedures for tracking disqualifyingdispositions, see the July-August 1998 issue of The Advisor on page 6.)




Stock option grant guidelines are utilized by most companies:

! Of the 80% of companies that said they use grant guidelines, 60% said that their guidelines are based on a set number of shares.We continue to find this curious, given another year of market volatility and increasing attention to the fact that, in up markets,this practice gives away more stock value (see the May-June issue of The Corporate Executive on page 1).

! More than half (55%) of companies using grant guidelines say they strictly adhere to them when determining grants.

The practice of option repricing appears to be declining:

! Whereas in 1996, 1997 and 1998, 3%, 4% and 6% of companies, respectively, repriced options, only 1% indicated doing so in1999.

! Of the companies that have repriced in the last ten years, fully 76% say they have stopped the practice since the FASB'sInterpretation No. 44 became effective.

The prevalence of stock ownership guidelines has remained fairly constant:

! Thirty-four percent of companies in 1998 and 32% of companies in 2000 have employee stock ownership guidelines.

! Ownership guidelines for Board of Directors have increased somewhat from 14% to 18% of all survey participants.

US companies are granting stock options and offering employee stock purchase plans to non-US local nationals:

! Approximately 85% of companies that already have a US equity program and employ non-US local nationals are granting optionsto legally eligible non-US local nationals. Of these companies, approximately 60% have broad-based plans (extended to managerlevel or below).

! Of companies offering employee stock purchase programs (the prevalence ranging from 25% to 50% depending on the country)to legally eligible non-US local nationals, the average participation rate across all countries is approximately 60%.




Companies with eCommerce subsidiaries or business units are still trying to figure it out:

! Many participants we talked to this year could not give us equity practices details because their company is still in process ofdeveloping its eCommerce entity.

! For those that are granting equity, the majority indicated that equity levels for eCommerce positions are comparable to the parentorganization, although, 9% of these companies are granting higher levels of equity grants to executives and middle managementof the eCommerce entity.

! Only 10 of the 107 companies (9%) with eCommerce subsidiaries or business units indicated having an equity program differentfrom the parent’s program.

Overall, use of restricted stock appears to be on the decline:

! Just 17% (60) of the companies responding to the survey said they grant restricted stock (not in lieu of cash) to some of theirexecutives (compared to 37% in 1998).

! The reasons most frequently cited for restricted stock grants are for retention purposes, upon hiring and as a special, one-timebonus.

Some performance plans have significant retention features:

! Nearly 25% (95) of companies with performance plans have vesting periods that extend beyond the completion of theperformance period.

! Half of those 95 companies extend vesting for at least two years beyond the performance period.

In terms of plan administration, companies are moving (albeit slowly) toward automated and electronic processes:

! The vast majority of companies (88%) still prefer original, hard copy exercise notices, but 78% (versus 72% in 1998) will accepta fax and 21% (versus 18% in 1998) accept e-mail notices.

! While 92% of all companies responding still use paper only for both grant notices and agreements, 35% post plan documents(other than individual grant agreements) on the company Intranet.




Companies are doing slightly more in terms of communication, but still not enough.

! Eighty-five percent of companies (versus 81% in 1998) distribute materials (other than the required plan prospectus) designed toassist plan participants, with 40% of those doing so via the Internet or company Intranet.

! Forty-one percent of companies (versus 28% in 1998) provide employees with seminars on stock compensation, although only28% have any sort of on-going educational materials for optionees.

! Curiously, the number of companies that notify optionees of upcoming expiration dates has decreased since 1998, from 76% to64%. And, a low 19% of companies notify employees of upcoming vesting dates.

! Sadly, 47% of companies indicated that optionees allow in-the-money options to expire, which may make the case forimplementing automatic exercise on the expiration date (a practice just 1% of companies use).

On a regulatory note:

! Nearly 22% of companies said they have some plans that are not subject to shareholder approval.

! Of those, just half disclose the unapproved plan(s) in their proxy statements.


Participant Profile


This year 345 US-headquartered companies participated in the survey.

By Fiscal Year-End 1999 Revenue

Cos. %Less than $100 million 48 13.9%$100 to $349.9 million 46 13.3%$350 to $999.9 million 54 15.7%$1 to $2.49 billion 74 21.4%$2.5 to $9.9 billion 74 21.4%$10 to $19.9 billion 24 7.0%$20 billion and above 25 7.2%

By Industry Classification

Cos. %Biotechnology/Life Sciences 16 4.6%Computer Software and Services 46 13.3%Durable Goods Manufacturing 38 11.0%Energy/Mining 15 4.3%Financial Services 41 11.9%Healthcare 5 1.4%High-Technology Manufacturing 26 7.5%Hospitality and Entertainment 9 2.6%Insurance 13 3.8%Media and Publishing 9 2.6%Miscellaneous Services 8 2.3%Non-Durable Goods Manufacturing 40 11.6%Pharmaceuticals 6 1.7%Public Utilities 13 3.8%Retail/Wholesale 23 6.7%Telecommunications 25 7.2%Transportation 12 3.5%

By Number of Full Time Employees

Number of Employees Cos. %1 to 100 7 2.0%101 to 250 13 3.8%251 to 750 34 9.9%751 to 1,500 31 9.0%1,501 to 2,500 29 8.4%2,501 to 5,000 44 12.8%5,001 to 10,000 53 15.4%10,001 to 30,000 69 20.0%30,001 to 100,000 44 12.8%Above 100,000 21 6.1%

US Companies with Non-US-Based Employees

Percent of Employees that areNon-US-Based Employees Cos. %(1)Less than 10% 90 36.3%10 to 19.9% 43 17.3%20 to 29.9% 27 10.9%30 to 39.9% 26 10.5%40 to 49.9% 19 7.7%50 to 59.9% 16 6.5%60 to 79.9% 17 6.9%80% and above 5 2.0%No response 5 2.0%

(1) Percents are based on 248 companies that indicated having non-USoperations.


Participant Profile


By Exchange

Cos. %NYSE 214 62.0%AMEX 5 1.4%Nasdaq 126 36.5%

By Geographic Region

Cos. %Midwest (OH, IN, MI, WI, IL, NM, OK, MO, IA, ND, SD, NE, AR, KS) 91 26.4%Northeast (ME, VT, NJ, MA, NY, CT, NH, RI, PA) 72 20.9%Southeast (MD, DE, VA, WV, KY, TN, NC, SC, GA, AL, FL, LA, MS) 54 15.7%Southwest (TX, NM, AZ, UT) 46 13.3%West (AK, CA, NV, OR, CO, WA, ID, MT, WY, HI) 82 23.8%

In the past 3 years, companies that:

Cos. %Had an initial public offering 47 13.6%Merged with or acquired a public company 116 33.6%Merged with or acquired a private company 125 36.2%Split its stock 125 36.2%Divested (spun-off a business unit) 89 25.8%Been divested (spun-off from the parent) 16 4.6%


Utilization of Plan Shares (Overhang & Run Rate)


Utilization is an important indicator of how much equity is being made available to employees. Utilization can be measured by analyzing the following:

! Overhang. Calculated as (outstanding grants + authorized plan shares that have not yet been granted + any plan shares that are pendingauthorization for the current fiscal year) divided by total shares outstanding. This percentage approximates the total percentage of the companyallocated to employees.

! Run Rate. Calculated as the total number of plan shares granted in the most recent year as a percent of total shares outstanding. This percentageindicates the annual rate at which equity is granted to employees.

The table below summarizes our findings regarding the two measures of equity utilization. As the table below indicates, high-technology companies differsignificantly from non-high-technology companies in terms of equity utilization practices.

As a % of Total Shares OutstandingOverhang (1) Run Rate

High-TechCos.

Non-High-Tech Cos.

High-TechCos.

Non-High-Tech Cos.

# of Companies 113 231 113 231Percentile (2)25th 13.4% 8.6% 2.2% 1.0%50th 20.4% 12.2% 4.3% 1.8%Average 21.5% 13.4% 5.8% 2.5%75th 28.9% 17.3% 8.1% 3.0%

(1) Number of companies includes only companies that provided both plan shares outstanding and authorized plan shares that have not yet been granted.(2) Percentiles represent the distribution of the data. (For example, if 11 data points were reported, the 50th Percentile – or median – would be the sixth highest value. If

10 data points were reported, the 50th percentile would be midway between the fifth and sixth highest value.) The 25th and 75th percentiles represent the range of themiddle half of the data.


Allocation of Most Recent Annual Grants


Allocation of Most Recent Annual Grant By Employee Groups Eligible to Receive Options

Companies That Grant Only to CEO and Other Senior Management (1)(2)

Non-High Tech Companies(As % of Most RecentTotal Annual Grant)

Employee Group Cos.25th

Percentile50th

Percentile75th

PercentileCEO 9 15.8% 17.0% 24.0%Next Top 4 9 18.0% 23.0% 28.0%Other Management (includes other Sr. Mgmt only) 9 25.7% 56.8% 66.0%

(1) Based on companies that currently only offer stock options to each of these employee groups.(2) No high-tech companies in the study grant options to only CEO and Other Senior Management.

Companies That Grant Only to Senior Management and Middle Management (1)

High-Tech Companies Non-High-Tech Companies(As % of Most RecentTotal Annual Grant)

(As % of Most RecentTotal Annual Grant)


Percentile50th

Percentile75th

Percentile Cos.25th

Percentile50th

Percentile75th

PercentileCEO 4 1.2% 2.4% 6.1% 64 6.9% 11.4% 18.1%Next Top 4 4 4.1% 4.6% 5.8% 64 8.0% 13.9% 20.8%Other Management (includes other Sr. Mgmt & Middle Management) 4 88.7% 93.5% 94.3% 64 62.8% 74.8% 82.5%

(1) Based on companies that currently only offer stock options to each of these employee groups.


Allocation of Most Recent Annual Grants


Allocation of Most Recent Annual Grant By Employee Groups Eligible to Receive Options (continued)

Companies That Grant Only to Senior Management, Middle Management, and Other Exempt Employees (1)




Percentile50th

Percentile75th

Percentile Cos.25th

Percentile50th

Percentile75th

PercentileCEO 17 4.3% 8.9% 11.4% 61 4.1% 7.5% 14.0%Next Top 4 17 8.0% 10.0% 17.1% 61 6.4% 11.1% 19.2%Other Management (includes other Sr. Mgmt & Middle Management) 14 (2) 30.0% 58.0% 70.0% 45 (2) 35.0% 50.0% 69.9%Other Exempt 14 (2) 10.0% 17.5% 45.1% 44 (2) 8.4% 18.5% 33.1%

(1) Based on companies that currently only offer stock options to each of these employee groups.(2) Excludes companies that combined Other Management and Other Exempt percentages.

Companies That Grant to All Employees (1)




Percentile50th

Percentile75th

Percentile Cos.25th

Percentile50th

Percentile75th

PercentileCEO 57 3.0% 6.2% 12.0% 48 3.6% 6.2% 11.8%Next Top 4 57 5.5% 10.0% 18.0% 48 5.0% 9.8% 15.3%Other Management (includes other Sr. Mgmt & Middle Management) 46 (3) 20.0% 36.7% 55.0% 41 (3) 18.7% 43.0% 56.0%Other Exempt 42 (4) 17.0% 26.7% 35.5% 26 (4) 19.8% 29.2% 44.6%Non-Exempt 42 (4) 2.0% 5.0% 10.0% 26 (4) 5.0% 8.0% 20.0%

(1) Based on companies that currently only offer stock options to each of these employee groups.(2) Excludes companies that combined Other Management, Other Exempt, and Non-Exempt percentages.(3) Excludes companies that combined Other Exempt and Non-Exempt percentages.


Source of Plan Shares


Source of Shares Issued Upon Exercise

High-Tech Non-High-TechCos. % (1) Cos. % (2)

Treasury/reacquired 15 13.3% 71 30.6%Original issue 76 67.3% 110 47.4%Both 19 16.8% 47 20.3%No response 3 2.7% 4 1.7%

Company replenishes shares through company buy-backs:


Yes 23 20.4% 61 26.3%No 87 77.0% 169 72.8%No response 3 2.7% 2 0.9%

Has an S-8 been filed?



(1) Percents based on 113 high-technology companies that participated in the survey.(2) Percents based on 232 non-high-technology companies that participated in the

survey.

Company has an Evergreen Plan (1):



Of those companies that do not have an Evergreen Plan, newshares are added by:


Adopting a new plan 15 18.3% 65 33.3%Amending an existing plan 30 36.6% 63 32.3%Company has done both 35 42.7% 57 29.2%No response 2 2.4% 10 5.1%

1) Evergreen Plan is defined as a plan whereby shares authorized under the plan areincreased each year based on an automatic formula.

2) Percents based on 113 high-technology companies that participated inthe survey.

3) Percents based on 232 non-high-technology companies that participated in thesurvey.

4) Percents based on 82 high-technology companies that do not have an EvergreenPlan.

5) Percents based on 195 non-high-technology companies that do not have an EvergreenPlan.


Omnibus Plans & Regulatory Issues


Company has an Omnibus Stock Plan:

Cos. % (1)Yes 267 77.4%No 75 21.7%No response 3 0.9%

Company has plans that are not subject to shareholder approval:


Of those companies that have plans not subject to shareholder approval, does the company's proxy statement disclose the unapproved plans?

Cos. % (2)Yes 37 49.3%No 38 50.7%

(1) Percents based on 345 companies that participated in the survey.(2) Percents based on 75 companies that indicated having plans that are not subject to shareholder approval.


Stock Option Plans – Prevalence


Plan Prevalence by US-Based Employees

All of the 345 participants have stock option plans and currently grant(1) options to US-based employees. The table below presents the prevalence of differenttypes of options on an overall basis and by mutually exclusive combinations of incentive stock options and non-qualified stock options currently granted toemployees for all companies, high-technology companies, and non-high technology companies.

Companies Currently Granting(1) Options to US-Based Employees

All CompaniesHigh-TechCompanies

Non-High-TechCompanies

Cos. %(2) Cos. %(3) Cos. %(4)STOCK OPTIONS: 345 100.0% 113 100.0% 232 100.0%

BY TYPE OF OPTION:Incentive Stock Options 214 62.0% 71 62.8% 143 61.6%Non-Qualified Stock Options 329 95.4% 107 94.7% 222 95.7%Tandem SAR (with option) 57 16.5% 10 8.8% 47 20.3%Freestanding SAR (without option) 48 13.9% 11 9.7% 37 15.9%

BY ISO & NQSO COMBINATIONS:Incentive Stock Options Only 16 4.6% 6 5.3% 10 4.3%Non-Qualified Stock Options Only 131 38.0% 42 37.2% 89 38.4%Both Incentive Stock Options &

Non-Qualified Stock Options198 57.4% 65 57.5% 133 57.3%

(1) “Currently grant” is defined as: Company has a specific granting frequency and/or company has granted options to employees withinthe last three years.

(2) Percents based on 345 companies that participated in the study.(3) Percents based on 113 high-tech companies that participated in the study.(4) Percents based on 232 non-high-tech companies that participated in the study.




Plan Prevalence by Expatriate Employees

Of the 209 companies that employ expatriates, 187 (89.5%) currently grant(1) options to expatriates. The table below presents the overall prevalence ofcompanies currently granting options to expatriates and of those companies that currently grant to expatriates, what different types of options/combination oftypes of options are granted. Data is presented for all companies, high-technology companies, and non-high technology companies.

Companies Currently Granting(1) Options to Expatriate Employees



Cos. % Cos. % Cos. %STOCK OPTIONS: 187 89.5% (2) 68 93.2% (3) 119 87.5% (4)

BY TYPE OF OPTION:Incentive Stock Options 69 36.9% (5) 27 39.7% (6) 42 35.3% (7)Non-Qualified Stock Options 173 92.5% (5) 61 89.7% (6) 112 94.1% (7)Tandem SAR (with option) 3 1.6% (5) 0 0.0% (6) 3 2.5% (7)Freestanding SAR (without option) 3 1.6% (5) 1 1.5% (6) 2 1.7% (7)

BY ISO & NQSO COMBINATIONS:Incentive Stock Options Only 14 7.5% (5) 7 10.3% (6) 7 5.9% (7)Non-Qualified Stock Options Only 118 63.1% (5) 41 60.3% (6) 77 64.7% (7)Both Incentive Stock Options &

Non-Qualified Stock Options55 29.4% (5) 20 29.4% (6) 35 29.4% (7)


(2) Percents based on 209 companies that employ expatriates.(3) Percents based on 73 high-tech companies that employ expatriates.(4) Percents based on 136 non-high-tech companies that employ expatriates.(5) Percents based on 187 companies that currently grant stock options to expatriate employees.(6) Percents based on 68 high-tech companies that currently grant stock options to expatriate employees.(7) Percents based on 119 non-high-tech companies that currently grant stock options to expatriate employees.




Plan Prevalence by Non-US Local National Employees

Of the 235 companies that employ non-US local nationals, 185 (78.7%) currently grant(1) options to non-US local nationals. The table below presents the overallprevalence of companies currently granting options to non-US local nationals and of those companies that currently grant to non-US local nationals, whatdifferent types of options are granted. Data is presented for all companies, high-technology companies, and non-high technology companies.

Companies Currently Granting(1) Options to Non-US Local Nationals



Cos. % Cos. % Cos. %STOCK OPTIONS: 185 78.7% (2) 77 87.5% (3) 108 73.5% (4)

BY TYPE OF OPTION:Non-Qualified Stock Options 184 99.5% (5) 77 100.0% (6) 107 99.1% (7)Tandem SAR (with option) 3 1.6% (5) 0 0.0% (6) 3 2.8% (7)Freestanding SAR (without option) 3 1.6% (5) 1 1.3% (6) 2 1.9% (7)


(2) Percents based on 235 companies that employ non-US local nationals.(3) Percents based on 88 high-tech companies that employ non-US local nationals.(4) Percents based on 147 non-high-tech companies that employ non-US local nationals.(5) Percents based on 185 companies that currently grant stock options to non-US local nationals.(6) Percents based on 77 high-tech companies that currently grant stock options to non-US local nationals.(7) Percents based on 108 non-high-tech companies that currently grant stock options to non-US local nationals.


Stock Option Plans - Plan Objectives


Survey participants indicated that retention, competitiveness, and employee ownership are the most prevalent stock option plan objectives and are also rated asthe top three most important.

Plan ObjectivePrevalence

Plan ObjectiveRated as one of the Top 3Most Important Objectives

Cos. %(1) Cos. %(1)Retention 340 98.6% 320 92.8%

Competitiveness 326 94.5% 293 84.9%

Employee ownership 305 88.4% 231 67.0%

Hiring practice 170 49.3% 65 18.8%

Wealth accumulation 152 44.1% 56 16.2%

Corporate identity 104 30.1% 19 5.5%

Substitute for pension 33 9.6% 6 1.7%

Other 22 6.4% 17 4.9%

(1) Percents based on 345 companies that currently grant stock options.


Stock Option Plans - Plan Features


Option Term

Cos. % (1)5 Years 37 10.7%7 Years 9 2.6%8 Years 5 1.4%10 Years 308 89.3%11 Years 2 0.6%12 Years 1 0.3%Other 11 3.2%

FMV/Premium/Discount/Indexed Exercise Price

Exercise Price is: Cos. % (1)Equal to Fair Market Value 344 99.7%Above Fair Market Value (Premium Exercise Price) 13 3.8%Below Fair Market Value (Discount Exercise Price) 8 2.3%Indexed (see glossary for definition) 0 0.0%

Fair Market Value Determination

Cos. % (1)Grant date closing price 167 48.4%Grant date high/low average price 113 32.8%Previous day’s close 43 12.5%Previous day’s high/low average price 10 2.9%Other 11 3.2%No response 1 0.3%


Stock Option Exercise Provisions

Cos. %(1)Broker-assisted cashless exercise 322 93.3%Stock swaps (stock-for-stock exercises) 241 69.9%Shares from exercise used to pay tax withholding 224 64.9%Shares previously owned used to pay tax withholding 131 38.0%Attestation 105 30.4%"Immaculate" exercise (net proceeds in shares) 101 29.3%Loans to exercise stock options 59 17.1%Early exercise prior to vesting, where shares are subject to forfeiture until vesting date 17 4.9%


Of those companies that allow stock-for-stock exercise, shares under the plan are counted asutilized as:

Cos. %(1)Net shares issued 103 42.7%Gross shares issued 113 46.9%No response 25 10.4%

(1) Percents based on 241 companies indicating that options can be exercised through stock swaps (stock-for-stockexercises).

Maximum Amount Company Allows to be Withheld if Optionees are Allowed to Use Sharesfrom Exercise to Pay Tax Withholding

Cos. %(1)Minimum required by federal and state income and employment tax withholding 132 58.9%Maximum required by federal and state tax applicable to exercise transaction 49 21.9%Whatever amount optionee selects (2) 38 17.0%No response 5 2.2%

(1) Percents based on 224 companies that allow shares from the exercise to be used to pay taxwithholding.

(2) No maximum, amount to be withheld is specified by optionee.




Minimum Criteria for Stock Option Plan Participation

Cos. %(1)All employees are eligible to participate (including all full-time employees only) 131 38.0%Management discretion 115 33.3%Salary grade 94 27.2%Position title 78 22.6%Job group/category 62 18.0%A discrete salary level 21 6.1%


Minimum Salary Level or Salary Grade for Stock Option Plan Participation (1)

Cos.10th

Percentile25th

Percentile50th

Percentile Average75th

Percentile90th

PercentileDiscreet Salary 17 $50,000 $60,000 $70,000 $68,529 $75,000 $81,000

Minimum Salary Grade Minimum 76 $30,675 $46,663 $65,230 $63,831 $75,550 $92,900 Midpoint 75 $45,000 $60,000 $83,300 $84,150 $100,000 $122,000 Maximum 75 $59,569 $78,750 $102,500 $103,820 $124,322 $146,000

(1) Excludes companies that grant to all employees.




Trends in Changes to Minimum Stock Option Plan Participation

The data indicates that companies are lowering the minimum stock option plan participation criterion. More companies have lowered the minimum participationcriterion in the past year than in any other year. This trend is also consistent for US-based employees, expatriates, and non-US local nationals of US companies.

US-BasedEmployees Expatriates

Non-USLocal Nationals

Minimum criterion for participation: Cos. %(1) Cos. %(2) Cos. %(3)

Is being lowered this year 12 3.5% 5 2.7% 5 2.7%

Has been lowered in the past year 53 15.4% 23 12.3% 23 12.4%

Has been lowered in the past 2 years 38 11.0% 18 9.6% 19 10.3%

Has been lowered in the past 3 years 22 6.4% 10 5.3% 12 6.5%

Was lowered more than 3 years ago 24 7.0% 12 6.4% 10 5.4%

Has never changed since inception of plan 161 46.7% 89 47.6% 85 45.9%

(1) Percents based on 345 companies that currently grant stock options to US-based employees.(2) Percents based on 187 companies that currently grant stock options to expatriates.(3) Percents based on 185 companies that currently grant stock options to non-US local nationals.




Non-Compete Forfeiture Provisons

Stock option grants are subject to non-compete forfeiture provisions:Cos. %(1)

Yes 82 23.8%No 262 75.9%No response 1 0.3%

(1) Percents based on 345 companies that currentlygrant stock options.

Of the companies with non-compete forfeiture provisions, the provisionappears in:

Cos. %(1)Grant agreements 61 74.4%Plan documents 36 43.9%Separate agreement 27 32.9%

(1) Percents based on 82 companies that have non-compete forfeiture provisions.

Option grant agreements are subjected to the following state's governinglaw:

Cos. % (1)State of incorporation 42 68.9%State where company's headquarters is located 12 19.7%State where services are performed 2 3.3%Optionee's state of residence 2 3.3%No response 3 4.9%

(1) Percents based on 61 companies that have non-compete forfeiture provisions intheir grant agreements.

Of the companies with non-compete forfeiture provisions, the provisionapplies to:

Cos. %(1)CEO only 2 2.4%CEO and other senior management only 10 12.2%All executives 10 12.2%All optionees 59 72.0%No response 1 1.2%

(1) Percents based on 82 companies that have non-compete forfeitureprovisions.

The following are events that could cause options to be forfeited:

Included inPlan

Document

Included inGrant

AgreementCos. % (1) Cos. % (2)

Competition 31 86.1% 52 85.2%Inappropriate use of trade secrets 22 61.1% 34 55.7%Solicitation of employees 18 50.0% 31 50.8%Disparagement 15 41.7% 18 29.5%Unavailable for consulting (3) 5 13.9% 7 11.5%

(1) Percent based on 36 companies that have non-compete forfeiture provisions in their plandocuments.

(2) Percents based on 61 companies that have non-compete forfeiture provisions in theirgrant agreements.

(3) Where post termination consulting agreement exists.




Non-Compete Forfeiture Provisions (continued)

Non-compete forfeiture provisions are in effect after termination for:

Cos. % (1)3 months 2 2.4%6 months 12 14.6%9 months 1 1.2%12 months 29 35.4%18 months 3 3.7%24 months 15 18.3%36 months 6 7.3%60 months 3 3.7%No response 11 13.4%

(1) Percents based on 82 companies that havenon-compete forfeiture provisions.

Is enforcement of the non-compete forfeiture provision governed by anarbitration clause?



Repercussions for violation of non-compete forfeiture provisions:

Cos. % (1)Forfeiture of vested options ("bad boy provision") 39 47.6%Claw-back of option spread on previously exercised options 12 14.6%Claw-back of actual gain on previously exercised options and

subsequent sale of shares20 24.4%

No response 11 13.4%


Has the company enforced any forfeitures/claw-backs for violation ofnon-compete provisions to date?

Cos. % (1)None 53 64.6%Some 21 25.6%All 4 4.9%No response 4 4.9%


Is enforcement of forfeiture/claw-backs at the compensation committee'sdiscretion as opposed to strict liability?






Non-Compete Forfeiture Provisions (continued)

How is the non-compete communicated?

Cos. % (1)Plan document summary or other descriptive materials

73 89.0%

Verbally, in person 8 9.8%Verbally, via telephone 3 3.7%Verbally, on tape (audio or video) 0 0.0%Other 10 12.2%


What is the timing of the communication?

Cos. % (1)Shortly before, on, or shortly after exercise date 68 82.9%Shortly before, on, or shortly after grant date 2 2.4%Other 17 20.7%

(1) Percents based on 82 companies with non-compete forfeiture provisions.

Has your organization added a non-compete forfeiture provision withinthe last 3 years?



Are you considering adding a non-compete forfeiture provision?


(1) Percents based on 263 companies that didnot indicate having a non-competeforfeiture provision.




Termination and Change in Control Provisions

Number ofCompanies

All options are forfeited(vested & unvested)

Unvested options areforfeited (vested options

are still exercisable)

A portion of unvestedoptions are forfeited

(vesting accelerates forremaining portion of

unvested options)

No options are forfeited(options continue to vest

normally)

No options are forfeited(vesting accelerates on

unvested options)Treatment is at Board's

discretionEvent Responding Cos. %(1) Cos. %(1) Cos. %(1) Cos. %(1) Cos. %(1) Cos. %(1)

Termination for Cause 337 169 50.1% 156 46.3% 0 0.0% 3 0.9% 1 0.3% 8 2.4%

Involuntary Termination 335 24 7.2% 248 74.0% 8 2.4% 17 5.1% 15 4.5% 23 6.9%

Normal Resignation 335 58 17.3% 264 78.8% 0 0.0% 5 1.5% 2 0.6% 6 1.8%

Death 336 1 0.3% 154 45.8% 14 4.2% 25 7.4% 137 40.8% 5 1.5%

Disability 336 0 0.0% 162 48.2% 15 4.5% 51 15.2% 105 31.3% 3 0.9%

Normal Retirement 333 2 0.6% 165 49.5% 16 4.8% 55 16.5% 88 26.4% 7 2.1%

Early Retirement 327 8 2.4% 198 60.6% 11 3.4% 42 12.8% 47 14.4% 21 6.4%

Change in Control 321 3 0.9% 25 7.8% 3 0.9% 22 6.9% 206 64.2% 62 19.3%

(1) Percents based on number of companies responding to each event.




Period Following Termination or Change in Control During Which Vested Options can be Exercised.

Period FollowingTermination During

which Vested OptionsTermination for

CauseInvoluntaryTermination

NormalResignation Death Disability Normal Retirement Early Retirement Change in Control

can be Exercised Cos. %(1) Cos. %(1) Cos. %(1) Cos. %(1) Cos. %(1) Cos. %(1) Cos. %(1) Cos. %(1)1 month 31 21.4% 41 14.1% 45 17.8% 4 1.2% 9 2.7% 21 6.5% 25 8.3% 24 11.4%

2 months 1 0.7% 6 2.1% 6 2.4% 2 0.6% 2 0.6% 2 0.6% 4 1.3% 5 2.4%

3 months 96 66.2% 180 61.9% 173 68.4% 18 5.5% 27 8.2% 84 26.1% 117 38.6% 45 21.4%

5 months 1 0.7% 1 0.3% 1 0.4% 0 0.0% 0 0.0% 1 0.3% 1 0.3% 0 0.0%

6 months 7 4.8% 16 5.5% 11 4.3% 18 5.5% 19 5.7% 6 1.9% 8 2.6% 3 1.4%

7 months 0 0.0% 0 0.0% 0 0.0% 1 0.3% 0 0.0% 1 0.3% 1 0.3% 1 0.5%

9 months 0 0.0% 1 0.3% 0 0.0% 0 0.0% 1 0.3% 0 0.0% 0 0.0% 0 0.0%

12 months 6 4.1% 15 5.2% 10 4.0% 170 51.7% 139 42.0% 35 10.9% 22 7.3% 12 5.7%

13 months 0 0.0% 0 0.0% 0 0.0% 1 0.3% 0 0.0% 0 0.0% 0 0.0% 0 0.0%

15 months 0 0.0% 2 0.7% 0 0.0% 2 0.6% 2 0.6% 0 0.0% 0 0.0% 0 0.0%

18 months 0 0.0% 0 0.0% 0 0.0% 3 0.9% 0 0.0% 0 0.0% 0 0.0% 1 0.5%

22 months 0 0.0% 1 0.3% 0 0.0% 0 0.0% 0 0.0% 0 0.0% 0 0.0% 0 0.0%

24 months 0 0.0% 2 0.7% 1 0.4% 11 3.3% 9 2.7% 8 2.5% 7 2.3% 3 1.4%

36 months 0 0.0% 13 4.5% 1 0.4% 34 10.3% 41 12.4% 56 17.4% 31 10.2% 12 5.7%

48 months 0 0.0% 0 0.0% 0 0.0% 1 0.3% 1 0.3% 1 0.3% 1 0.3% 1 0.5%

60 months 0 0.0% 3 1.0% 0 0.0% 27 8.2% 30 9.1% 39 12.1% 33 10.9% 5 2.4%

84 months 0 0.0% 0 0.0% 0 0.0% 0 0.0% 1 0.3% 1 0.3% 0 0.0% 0 0.0%

Remaining term of option 3 2.1% 10 3.4% 5 2.0% 37 11.2% 50 15.1% 67 20.8% 53 17.5% 98 46.7%

145 100.0% 291 100.0% 253 100.0% 329 100.0% 331 100.0% 322 100.0% 303 100.0% 210 100.0%

(1) Percents based on number of companies responding to each event.




Stock Option Repricing

Of companies that currently grant options, the following number of companies have re-priced options in the past 10 years:

Cos. Currently Cos. Repricing OptionsGranting Options Cos. %(1)

All Companies 345 54 15.7%High-Tech Companies 232 35 31.0%Non-High Tech Companies 113 19 8.2%

(1) Percents based on the number of companies currently granting stock options.

Of the 54 companies that re-priced options in the last 10 years, the following number of companies re-priced options in each of the following years:

Years in whichOptions

Cos. Re-pricing Options inThis Year

CEO Excluded fromRepricing

Other Top ManagementExcluded from Repricing

Were Re-priced Cos. %(1) Cos. %(2) Cos. %(2)

1999 5 9.3% 4 80.0% 4 80.0%1998 19 35.2% 9 47.4% 7 36.8%1997 14 25.9% 3 21.4% 2 14.3%1996 11 20.4% 2 18.2% 1 9.1%

Before 1996 15 27.8% 0 0.0% 0 0.0%

(1) Percents based on 54 companies that have re-priced options in the past 10 years.(2) Percents based on the number of companies that re-priced options during the year indicated.

Of the 54 companies that re-priced options in the last 10 years, 75.9% have ceased any further re-pricing as a result of the FASB's new interpretation No. 44.

Company has ceased repricing Cos. %Yes 41 75.9%No 11 20.4%No response 2 3.7%




Exchange Options (Options in Lieu of Cash Compensation)

Company allows participants to forgo cash compensation and receiveadditional options instead:

Cos. % (1)Yes 17 4.9%No 328 95.1%

(1) Percents based on 345 companies that currently grant stockoptions.

Of the 17 companies that allow participants to exchange cashcompensation for additional stock options, the exercise price is:

Cos. % (1)Equal to FMV 16 94.1%Above FMV 0 0.0%Below FMV 1 5.9%

(1) Percents based on 17 companies that grant stock options in lieu of cashcompensation.

The grant value for options exchanged for cash is based on:

Cos. % (1)Face value of option grant (2) 11 64.7%Black-Scholes value of option grant 6 35.3%

(1) Percents based on 17 companies that allow participants toforgo cash compensation and receive additional options.

(2) Face value is defined as exercise price multiplied by number ofoptions.

The exchange ratio (1) for the exchange options is based on:

Cos. % (2)Equal exchange (3) 8 47.1%Higher option value (4) 7 41.2%Lower option value (5) 1 5.9%No response 1 5.9%

(1) Defined as the option grant value received compared to the dollaramount of cash forgone.

(2) Percents based on 17 companies that grant stock options in lieu ofcash compensation.

(3) $1 option grant value for $1 of cash forgone.(4) Greater than $1 of option grant value for $1 of cash forgone.(5) Less than $1 of option grant value for $1 of cash forgone.




Deferral of Stock Option Gains

Company allows deferral of stock option gains:


(1) Percents based on 345 companies currently granting stock options.




Transferable Options

Of the 345 companies that currently grant stock options, 105 (30.4%)allow for the transfer of options. The majority of these companies haveamended or adopted their plans within the past four years.

Year Amended Year AdoptedCos. %(1) Cos. %(2)

2000 2 3.6% 6 13.6%1999 10 18.2% 10 22.7%1998 13 23.6% 8 18.2%1997 19 34.5% 9 20.5%Prior to 1997 9 16.4% 10 22.7%No response 2 3.6% 1 2.3%

(1) Percents based on 55 companies that have amended their option plan to allow forthe transfer of options.

(2) Percents based on 44 companies that have adopted a plan to allow for the transferof options.

Approximately 58% of respondents provide transferability of options forboth new and outstanding grants.

Transferability applies to: Cos. %(1)New grants only 38 36.2%New and outstanding grants 61 58.1%No response 6 5.7%(1) Percents based on 105 companies that allow for the transfer of options.

The following employee groups are authorized to transfer options:Cos. %(1)

CEO only 4 3.8%CEO and other senior management only 42 40.0%All executives 5 4.8%All optionees 48 45.7%No response 6 5.7%(1) Percents based on 105 companies that allow for the transfer of options.

Company requires optionees who transfer options to retain a specificnumber of shares or options for future tax withholding:

Cos. %(1)Yes 5 4.8%No 93 88.6%No response 7 6.7%

(1) Percents based on 105 companies that allow for the transfer of options.

Company provides optionees with a gift tax valuation procedure for theiruse in transferring options:


(1) Percents based on 105 companies that allow for the transfer of options.

If the option plan provides for reloads, the reload option goes to:

Cos. %(1)Original optionees 15 62.5%Transferees 2 8.3%

(1) Percents based on 24 companies that grant reload options and allow for thetransfer of options.




Transferable Options (continued)

Of the 105 companies that allow for the transfer of options, 40 companies(38%) have actually had optionees transfer options (whether vested orunvested).

Number of Optionees Having Vested Options Unvested OptionsTransferred Options To-Date Cos. %(1) Cos. %(1)

1 18 17.1% 6 5.7%2 9 8.65 4 3.8%3 3 2.9% 2 1.9%4 2 1.9% 1 1.0%

>4 5 4.8% 1 1.0%(1) Percents based on 105 companies that allow for the transfer of options.

Very few transferees have exercised their transferred options.

Number of Transferees HavingExercised Options To-Date Cos. %(1)

0 1 2.6%1 6 15.4%2 4 10.3%3 2 5.1%4 1 2.6%

>4 1 2.6%No response 24 61.5%

(1) Percents based on 39 companies that have had optionees transfervested and/or unvested options.

Company permits option transferees to transfer options to otherauthorized transferees:


(1) Percents based on 105 companies that allow the transfer of options.

Company allows or intends to allow transfers beyond family or familytrusts and other family entities (other than charities):

Cos. %(1)Yes 5 4.8%No 94 89.5%No response 6 5.7%(1) Percents based on 105 companies that allow for the

transfer of options.

Company allows or intends to allow transfers to charities:


(1) Percents based on 105 companies that allow the transfer ofoptions.

Company is intending to amend or is considering amending its optionplan to permit transferability of options for:

Intending toamend plan

Consideringamending plan

Cos. %(1) Cos. %(1)Future grants only 0 0.0% 12 5.0%Outstanding & future grants 2 0.8% 8 3.4%(1) Percents based on 238 companies that do not allow for the transfer of options.


Stock Option Plans – Granting Practices


Depth of Granting Practices - US-Based Employees

Overall, 43.5% of companies in the survey grant options to all US-based employees. Of the 113 high-tech companies and 232 non-high technology companiesthat currently grant options, 73.5% and 28.9% respectively, grant to all US-based employees.

Depth of US-Based Employee Granting Practices by Employee CombinationsTotal

CompaniesCurrently

SeniorManagement

only

Senior and MiddleManagement

only

Senior Management,Middle Managementand Other Exempt (1)

All Employees(including

Non-Exempt)Granting(2) Cos. %(3) Cos. %(3) Cos. %(3) Cos. %(3)

ALL COMPANIES:Stock Options 345 12 3.5% 78 22.6% 105 30.4% 150 43.5%

Incentive Stock Options 214 6 2.8% 47 22.0% 66 30.8% 95 44.4%Nonqualified Stock Options 329 11 3.3% 74 22.5% 101 30.7% 143 43.5%Tandem SAR (with option) 57 3 5.3% 16 28.1% 23 40.4% 15 26.3%Freestanding SAR (without option) 48 2 4.2% 14 29.2% 17 35.4% 15 31.3%

HIGH-TECHNOLOGY COMPANIES:Stock Options 113 1 0.9% 4 3.5% 25 22.1% 83 73.5%


NON-HIGH-TECHNOLOGY COMPANIES:Stock Options 232 11 4.7% 74 31.9% 80 34.5% 67 28.9%


(1) May include some or all “other exempt” positions.(2) Currently granting is defined as company has a specific granting frequency and/or company has granted options to the employee group in the last three years.(3) Percents based on the number of companies currently granting each type of stock option.




Depth of Granting Practices - Expatriates

Overall, 89.5% (or 187 companies) of the 209 companies that employ expatriates currently grant stock options to expatriates.

Depth of Expatriate Granting Practices by Employee CombinationsTotal Companies

EmployingSpecified

Total CompaniesCurrently Granting

(1)

SeniorManagement

only


only

AllEmployees

(2)Employee Group Cos. %(3) Cos. %(4) Cos. %(4) Cos. %(4)

Companies with Senior Management Expatriates OnlyAll Companies 15 13 86.7% 13 100.0%High-Technology Companies 1 1 100.0% 1 100.0%Non-High-Technology Companies 14 12 85.7% 12 100.0%

Companies with Senior and Middle Management Expatriates OnlyAll Companies 38 31 81.6% 7 22.6% 24 77.4%High-Technology Companies 6 6 100.0% 1 16.7% 5 83.3%Non-High-Technology Companies 32 25 78.1% 6 24.0% 19 76.0%

Companies with All Employee Levels of ExpatriatesAll Companies 126 123 97.6% 2 1.6% 86 69.9% 35 28.5%High-Technology Companies 57 55 96.5% 1 1.8% 52 94.5% 2 3.6%Non-High-Technology Companies 69 68 98.6% 1 1.5% 34 50.0% 33 48.5%

(1) Currently granting is defined as company has a specific granting frequency and/or company has granted options to the employee group in the last three years.(2) Includes senior management, middle management and some or all “other expatriate” positions.(3) Percents based on the number of companies that employ the specified expatriate employee group.(4) Percents based on total number of companies that currently grant stock options.




Depth of Granting Practices - Non-US Local Nationals

Overall, 78.7% (or 185 companies) of the 235 companies that employ non-US local nationals currently grant stock options to non-US local nationals.

Depth of Non-US Local National Granting Practicesby Employee Combinations (1)

Total CompaniesEmployingSpecified


(2)

SeniorManagement

only


only

AllEmployees

(3)Employee Group Cos. %(4) Cos. %(5) Cos. %(5) Cos. %(5)

Companies with Senior and Middle Management Non-US Local Nationals OnlyAll Companies 15 14 93.3% 5 35.7% 8 57.1%High-Technology Companies 3 2 66.7% 1 50.0% 1 50.0%Non-High-Technology Companies 12 12 100.0% 4 33.3% 7 58.3%

Companies with All Employee Levels of Non-US Local NationalsAll Companies 180 158 87.8% 9 5.7% 53 33.5% 94 59.5%High-Technology Companies 80 73 91.3% 1 1.4% 10 13.7% 62 84.9%Non-High-Technology Companies 100 85 85.0% 8 9.4% 43 50.6% 32 37.6%

(1) Only most prevalent employee group combinations are presented.(2) Currently granting is defined as company has a specific granting frequency and/or company has granted options to the employee group in the last three years.(3) Includes senior management, middle management and some or all “non-US local national” positions.(4) Percents based on the number of companies that employ the specified non-US local national employee group.(5) Percents based on total number of companies that currently grant stock options.




Granting Frequency

Granting Frequency by Employee Group - US-Based Employees

CEO andOther SeniorManagement Middle Management Other Exempt Non-Exempt

Cos. %(1) Cos. %(2) Cos. %(3) Cos. %(4)More often than once per year 32 9.3% 20 6.0% 19 7.5% 10 6.7%Every 12 months 255 73.9% 248 74.5% 157 61.6% 77 51.3%Every 18 months 2 0.6% 3 0.9% 1 0.4% 0 0.0%Every 24 months 3 0.9% 6 1.8% 6 2.4% 4 2.7%Every 36 months 5 1.4% 3 0.9% 3 1.2% 1 0.7%No set frequency 43 12.5% 50 15.0% 58 22.7% 42 28.0%Other 5 1.4% 2 0.6% 4 1.6% 9 6.0%No response 0 0.0% 1 0.3% 7 2.7% 7 4.7%

(1) Percents based on 345 companies that currently grant stock options to the CEO and Other Senior Management.(2) Percents based on 333 companies that currently grant stock options to Middle Management.(3) Percents based on 255 companies that currently grant stock options to Other Exempt positions.(4) Percents based on 150 companies that currently grant stock options to Non-Exempt positions.

Granting Frequency by Employee Group - Expatriates

Senior Management Middle Management Other EmployeesCos. %(1) Cos. %(2) Cos. %(3)

More often than once per year 11 6.5% 13 8.2% 8 8.6%Every 12 months 133 78.2% 124 78.0% 53 57.0%Every 18 months 3 1.8% 2 1.3% 1 1.1%Every 24 months 2 1.2% 4 2.5% 2 2.2%Every 36 months 3 1.8% 2 1.3% 1 1.1%No set frequency 14 8.2% 11 6.9% 20 21.5%Other 2 1.2% 2 1.3% 3 3.2%No response 2 1.2% 1 0.6% 5 5.4%

(1) Percents based on 170 companies that currently grant stock options to Senior Management.(2) Percents based on 159 companies that currently grant stock options to Middle Management.(3) Percents based on 93 companies that currently grant stock options to Other Employees.




Granting Frequency by Employee Group - Non-US Local Nationals

Senior Management Middle Management Other EmployeesCos. %(1) Cos. %(2) Cos. %(3)

More often than once per year 10 5.8% 13 7.7% 8 8.2%Every 12 months 132 77.2% 121 72.0% 54 55.1%Every 18 months 1 0.6% 2 1.2% 0 0.0%Every 24 months 2 1.2% 3 1.8% 2 2.0%Every 36 months 3 1.8% 3 1.8% 0 0.0%No set frequency 19 11.1% 22 13.1% 26 26.5%Other 1 0.6% 1 0.6% 4 4.1%No response 3 1.8% 3 1.8% 4 4.1%

(1) Percents based on 171 companies that currently grant stock options to Senior Management.(2) Percents based on 168 companies that currently grant stock options to Middle Management.(3) Percents based on 98 companies that currently grant stock options to Other Employees.




Prevalence of Granting Incentive Stock Options up to the ISO Limit Before Granting Non-Qualified Stock Options

Number of CompaniesGranting ISO's and NQSO's

Companies Granting ISO'sup to ISO Limit Before

Granting NQSO'sto Employee Group Cos. %(1)

US-Based Employees: CEO and Senior Management 134 111 82.8% Middle Management 91 71 78.0% Other Exempt 57 42 73.7% Non-Exempt 32 25 78.1%

Expatriates: Top Management 46 38 82.6% Middle Management 40 31 77.5% Other Employees 20 18 90.0%

(1) Percents based on the number of companies that grant ISO's and NQSO's to the employee group.




Effect of This Year’s Market Correction on Stock Option Granting Practices

In connection with this year's market correction, the following companies have:

Cos. % (1)Re-priced options 3 0.9%Accelerated next year's grant 10 2.9%Deviated in another way from normal option practices 21 6.1%





Stock Option Vesting

Cliff/Graded Vesting

Cos. % (1)Cliff Vesting (2) 38 11.0%Graded Vesting (3) 307 89.0%


(2) For example, 100% of options vest after 1 year.(3) For example, 25% of options vest after years 1, 2,

3, 4 or 50% vest after year 1 and 25% vest afteryears 2 and 3.

Year in which 100% of Options are Vested by Cliff/Graded VestingSchedule

Cliff Vesting –Vesting Period

Graded Vesting –Vesting Period

Numberof Years Cos. % (1) Cos. % (2)

1 14 36.8% 0 0.0%2 6 15.8% 9 2.9%3 12 31.6% 102 33.2%4 2 5.3% 130 42.3%5 0 0.0% 54 17.6%6 0 0.0% 0 0.0%7 0 0.0% 2 0.7%8 0 0.0% 1 0.3%9 0 0.0% 0 0.0%

10 1 2.6% 4 1.3%No response 3 7.9% 5 1.6%

(1) Percents based on 38 companies that have cliff vesting schedules.(2) Percents based on 307 companies that have graded vesting schedules.

If option vesting schedule is graded, how do options vest?

Cos. % (1)Annually 275 89.6%Monthly 44 14.3%Quarterly 12 3.9%Other 12 3.9%

(1) Percent based on 307 companies thathave graded option vesting schedules.

If any or all options vest quarterly, the month that quarterly vestingbegins is:

Cos. % (1)Month 1 1 8.3%Month 3 4 33.3%Month 13 (after 1 year) 6 50.0%No response 1 8.3%

(1) Percents based on 12 companies that have quarterly vesting schedules.

If any or all options vest monthly, the month that monthly vesting beginsis:

Cos. % (1)Month 1 7 15.9%Month 7 2 4.5%Month 11 1 2.3%Month 13 33 75.0%Month 16 1 2.3%

(1) Percent based on 44 companies that havemonthly option vesting schedules.




Stock Option Vesting (continued)

Types of Option Vesting

Cos. % (1)Time-based only (2) 335 97.1%Performance accelerated (3) 49 14.2%Performance contingent (4) 16 4.6%

(1) Percents based on 345 companies that currently grant stock options.(2) Based only on tenure with the organization.(3) Time-based vesting, but vesting is accelerated based on achievement of

performance criteria.(4) Contingent based on achievement of performance criteria (e.g., if

performance criteria is not achieved, options do not vest).

Vesting Triggers for Performance Accelerated or PerformanceContingent Vesting Schedules

PerformanceAccelerated

Vesting

PerformanceContingent

VestingCos. % (1) Cos. % (2)

Individual performancestandards

19 38.8% 7 43.8%

Achieving a specifiedstock price

27 55.1% 10 62.5%

Peer group totalshareholder return

7 14.3% 4 25.0%

Other 14 28.6% 4 25.0%

(1) Percents based on 49 companies that have performance accelerated vesting schedules.(2) Percents based on 16 companies that have performance contingent vesting schedules.

Is the vesting schedule uniform for substantially all participants?

Cos. % (1)Yes 278 80.6%No 64 18.6%


Of the companies that do not have a uniform vesting schedule, thereasons are:

Cos. % (1)Executives have a different vesting schedule

than other participants30 46.9%

Company has more than one stock option planand each has a different vesting schedule

22 34.4%

Other 20 31.3%

(1) Percents based on 64 companies that do not have uniform vestingschedules for substantially all participants.




Stock Option Grant Guidelines

Of the companies currently granting stock options, 84.6% of companies havestock option grant guidelines.

Cos. % (1)Yes 292 84.6%No 53 15.4%


Criteria Used in Developing Stock Option Grant Guidelines

Cos. %(1)Salary grade 195 66.8%Management discretion 159 54.5%Individual performance 154 52.7%Competitive market practices 149 51.0%Position title 143 49.0%Job group/category 106 36.3%Company performance 64 21.9%Other criteria 10 3.4%

(1) Percents based on 292 companies that have stock option grant guidelines.

Stock option grant guidelines are based on:

Cos. % (1)Set number of options 176 60.3%Value of options 115 39.4%No response 1 0.3%


If grant guidelines are based on a set number of options, are guidelines adjustedfor stock splits?


(1) Percents based on 176 companies indicating that their stock optiongrant guidelines are based on a set number of options.

If stock option grant guidelines are based on the value of options, the value isbased on:

Cos. % (1)Number of options multiplied by share of price at grant 38 33.0%Valuation model (e.g. Black-Scholes) 68 59.1%Growth assumption, discounted to present 8 7.0%No response 1 0.9%

(1) Percents based on 115 companies indicating that their stock optiongrant guidelines are based on the value of options.

Company strictly adheres to stock option grant guidelines when determininggrants to employees:

Cos. % (1)Yes 161 55.1%No 131 44.9%



Stock Option Plans - Granting Practices


Stock Options for Contractors/Consultants

Overall, contractors/consultants are eligible to receive stock options at 68companies (19.7%) and have been granted stock options in the last 3 years at 44companies (12.8%).

Eligible forstock options

Receivedstock options

in last 3 yearsContractors/Consultants Cos. % (1) Cos. % (2)Individuals (3) 40 58.8% 21 47.7%Businesses (4) 49 72.1% 31 70.5%

(1) Percents based on 68 companies that extend stock option eligibility tocontractors/consultants.

(2) Percents based on 44 companies that have granted stock options tocontractors/consultants within the last 3 years.

(3) Defined as individuals that work for contractors/consulting companies.(4) Defined as contractors/consultants as a business entity.

When are options typically granted to contractors/consultants?

Cos. % (1)Upon or shortly after commencement of services 26 59.1%During the performance of services 8 18.2%Upon completion of services 5 11.4%Other 4 9.1%No response 1 2.3%

(1) Percents based on 44 companies that have granted stock options tocontractors/consultants within the past 3 years.

Stock options for contractors/consultants typically vest:

Cos. % (1)Immediately upon grant 8 18.2%Over time after date of grant (without regard to date services are completed)

13 29.5%

Over time after date of grant (with last portion of options vesting upon completion of services)

5 11.4%

Over time after date of grant, but vesting is accelerated based on early completion of services

0 0.0%

100% cliff vest upon completion of services 4 9.1%Same vesting schedule as employee options 14 31.8%

(1) Percents based on 44 companies that have granted stock options tocontractors/consultants within the past 3 years.

Do contractor/consultant grant agreements have a provision whereby stockoptions remain exercisable until the end of the option term in situations whereservices have been completed?

Cos. % (1)Always 10 22.7%Sometimes 20 45.5%Never 13 29.5%No response 1 2.3%

(1) Percents based on 44 companies that havegranted stock options to contractors/consultantswithin the past 3 years.




Charitable Stock Options

Company has adopted the practice of granting stock options to charitable organizations:



If your company is not currently granting stock options to charitable organizations, are you considering adopting the practice?


(1) Percents based on 342 companies that are not currently granting stock options to charitable organizations.




Reload Options

Company grants reload options:

Cos. % (1)Yes 49 14.2%No 296 85.8%


Company grants reload options on shares withheld for tax withholding:


(1) Percents based on 49 companies that grant reloadoptions.

Upon exercise of an option that entitles participants to a reload option, is theoptionee required to retain exercised shares for a period of time?


(1) Percents based on 49 companies that grant reloadoptions.

Length of Holding Period for Reload Options.

Cos. % (1)Less than 6 months 0 0.0%6 months 8 38.1%12 months 6 28.6%18 months 0 0.0%24 months 3 14.3%More than 24 months 1 4.8%Other 3 14.3%

(1) Percents based on 21 companies that requirereload options to be held for a certain period oftime.




Other Practices

In addition to normal option grants, events for which stock options are typically awarded:

Cos. % (1)Upon hire 269 78.0%For retention purposes 171 49.6%Special one time grant 157 45.5%Upon promotion 157 45.5%Other 36 10.4%


Who approves stock option grants?

Cos. % (1)Full board 57 16.5%Committee of board 245 71.0%Person designated by board or committee 42 12.2%No response 1 0.3%



Stock/Unit Plans – Prevalence



Of the 345 participants in the survey, 69 (20.0%) currently grant(1) stock/units to US-based employees. The table below presents the overall prevalence ofstock/units and type of stock/units currently granted to employees for all companies, high-technology companies, and non-high technology companies.

Companies Currently Granting(1) Stock/Units to US-Based Employees



Cos. % Cos. % Cos. %STOCK/UNITS: 69 20.0% (2) 15 13.3% (3) 54 23.3% (4)

BY TYPE OF STOCK/UNITS:Restricted stock award (not in lieu of cash) 60 87.0% (5) 13 86.7% (6) 47 87.0% (7)Restricted stock award in lieu of salary or bonus 10 14.5% (5) 2 13.3% (6) 8 14.8% (7)Restricted stock unit (not in lieu of cash) 12 17.4% (5) 2 13.3% (6) 10 18.5% (7)Restricted stock unit in lieu of salary or bonus 7 10.1% (5) 1 6.7% (6) 6 11.1% (7)Unrestricted stock (not in lieu of cash) 9 13.0% (5) 2 13.3% (6) 7 13.0% (7)Unrestricted stock in lieu of salary or bonus 4 5.8% (5) 1 6.7% (6) 3 5.6% (7)

(1) “Currently grant” is defined as: Company has a specific granting frequency and/or company has granted stock/units to employeeswithin the last three years.

(2) Percents based on 345 companies that participated in the study.(3) Percents based on 113 high-tech companies that participated in the study.(4) Percents based on 232 non-high-tech companies that participated in the study.(5) Percents based on 69 companies that currently grant stock/units.(6) Percents based on 15 high-tech companies that currently grant stock/units.(7) Percents based on 54 non-high-tech companies that currently grant stock units.




Plan Prevalence by Expatriate Employees

Of the 209 companies that employ expatriates, 26 (12.4%) currently grant(1) stock/units to expatriates. The table below presents the overall prevalence ofstock/units and type of stock/units currently granted to expatriates for all companies, high-technology companies, and non-high technology companies.

Companies Currently Granting(1) Stock/Units to Expatriate Employees






(2) Percents based on 209 companies that employ expatriates.(3) Percents based on 73 high-tech companies that employ expatriates.(4) Percents based on 136 non-high-tech companies that employ expatriates.(5) Percents based on 26 companies that currently grant stock/units to expatriate employees.(6) Percents based on 5 high-tech companies that currently grant stock/units to expatriate employees.(7) Percents based on 21 non-high-tech companies that currently grant stock/units to expatriate employees.




Plan Prevalence by Non-US Local National Employees

Of the 235 companies that employ non-US local nationals, 25 (10.6%) currently grant(1) stock/units to non-US local nationals. The table below presents theoverall prevalence and type of stock/units currently granted to non-US local nationals for all companies, high-technology companies, and non-high technologycompanies.

Companies Currently Granting(1) Stock/Units to Non-US Local Nationals






(2) Percents based on 235 companies that employ non-US local nationals.(3) Percents based on 88 high-tech companies that employ non-US local nationals.(4) Percents based on 147 non-high-tech companies that employ non-US local nationals.(5) Percents based on 25 companies that currently grant stock/units to non-US local nationals.(6) Percents based on 6 high-tech companies that currently grant stock/units to non-US local nationals.(7) Percents based on 19 non-high-tech companies that currently grant stock/units to non-US local nationals.


Stock/Unit Plans - Plan Objectives


Survey participants indicated that retention, competitiveness, and employee ownership are the most prevalent stock/unit plan objectives and are also rated as thetop three most important.










Other 9 13.0% 8 11.6%

(1) Percents based on 69 companies that currently grant stock/units.


Stock/Unit Plans – Features & Granting Practices



Of the 69 companies that currently grant stock/units, the majority of these companies grant stock/units to senior management only or senior and middlemanagement levels only.

Depth of US-Based Employee Granting Practices by Employee Combinations (1)Total

CompaniesCurrently

SeniorManagement

only


only




ALL COMPANIES:Stock/Unit Plans 69 28 40.6% 20 29.0% 11 15.9% 6 8.7%

HIGH-TECHNOLOGY COMPANIES:Stock/Unit Plans 15 7 46.7% 2 13.3% 3 20.0% 1 6.7%

NON-HIGH-TECHNOLOGY COMPANIES:Stock/Unit Plans 54 21 38.9% 18 33.3% 8 14.8% 5 9.3%

(1) Includes only most prevalent employee group combinations.(2) May include some or all “other exempt” positions.(3) Currently granting is defined as company has a specific granting frequency and/or company has granted stock/units in the last three years.(4) Percents based on the number of companies currently granting under stock/unit plans.





Depth of Expatriate Granting Practicesby Employee Combinations (1)

Total CompaniesEmploying


(2)

SeniorManagement

only


only

AllEmployees

(3)Expatriates Cos. %(4) Cos. %(5) Cos. %(5) Cos. %(5)




(1) Includes only most prevalent employee group combinations.(2) Currently granting is defined as company has a specific granting frequency and/or company has granted stock/units in the last three years.(3) Includes senior management, middle management and some or all “other expatriate” positions.(4) Percents based on the number of companies that employ expatriates.(5) Percents based on total number of companies that currently grant stock/units.







Non-US


(2)

SeniorManagement

only


only

AllEmployees

(3)Local Nationals Cos. %(4) Cos. %(5) Cos. %(5) Cos. %(5)




(1) Includes only most prevalent employee group combinations.(2) Currently granting is defined as company has a specific granting frequency and/or company has granted stock/units in the last three years.(3) Includes senior management, middle management and some or all “other non-US local national” positions.(4) Percents based on the number of companies that employ non-US local nationals.(5) Percents based on total number of companies that currently grant stock/units.




Granting Frequency

Granting Frequency by Employee Group - US-Based Employees

CEO andOther SeniorManagement Middle Management Other Exempt Non-Exempt

Cos. %(1) Cos. %(2) Cos. %(3) Cos. %(4)More often than once per year 5 7.7% 4 10.3% 2 9.5% 1 12.5%Every 12 months 27 41.5% 13 33.3% 5 23.8% 2 25.0%Every 18 months 0 0.0% 0 0.0% 0 0.0% 0 0.0%Every 24 months 0 0.0% 0 0.0% 0 0.0% 0 0.0%Every 36 months 2 3.1% 1 2.6% 1 4.8% 1 12.5%No set frequency 2 3.1% 0 0.0% 3 14.3% 1 12.5%Other 28 43.1% 19 48.7% 9 42.9% 2 25.0%No response 1 1.5% 2 5.1% 1 4.8% 1 12.5%

(1) Percents based on 65 companies that currently grant stock/units to the CEO and Other Senior Management.(2) Percents based on 39 companies that currently grant stock/units to Middle Management.(3) Percents based on 21 companies that currently grant stock/units to Other Exempt positions.(4) Percents based on 8 companies that currently grant stock/units to Non-Exempt positions.




Minimum Criteria for Stock/Unit Plan Participation

Cos. %(1)Management discretion 26 37.7%Position title 16 23.2%Salary grade 11 15.9%Job group/category 10 14.5%All employees are eligible to participate (including all full-time employees only) 5 7.2%A discrete salary level 2 2.9%


Minimum Salary Grade for Stock/Unit Plan Participation (1)

Cos.10th

Percentile25th

Percentile50th


Percentile90th

PercentileMinimum 9 $48,000 $108,200 $170,000 $179,767 $170,000 $460,000Midpoint 9 $38,200 $90,200 $112,500 $138,367 $132,500 $365,000Maximum 9 $28,400 $70,000 $72,200 $96,967 $95,000 $270,000

(1) Excludes companies that grant to all employees.




Stock/Unit Grant Vesting

Cliff/Graded Vesting

Cos. % (1)Cliff (2) 31 44.9%Graded (3) 38 55.1%

(1) Percents based on 69 companies that currentlygrant stock/units.

(2) For example, 100% of shares/units vest after 1 year.(3) For example, 25% of shares/units vest after years

1, 2, 3, 4 or 50% vest after year 1 and 25% vestafter years 2 and 3.

Year in which 100% of Stock/Unit Grants are Vested by Cliff/GradedVesting Schedule

Cliff Vesting –Vesting Period

Graded Vesting –Vesting Period

Numberof Years Cos. % (1) Cos. % (2)1 year 0 0.0% 2 5.3%2 years 1 3.2% 1 2.6%3 years 15 48.4% 1 2.6%4 years 6 19.4% 11 28.9%5 years 2 6.5% 6 15.8%6 years 0 0.0% 14 36.8%7 years 1 3.2% 1 2.6%8 years 0 0.0% 1 2.6%9 years 1 3.2% 1 2.6%10 years 1 3.2% 0 0.0%No Response 4 12.9% 0 0.0%

(1) Percents based on 31 companies that have cliff vesting schedules.(2) Percents based on 38 companies that have graded vesting schedules.

Does vesting accelerate upon termination of employment without cause?

Cos. % (1)Yes 4 5.8%No 45 65.2%Sometimes 19 27.5%No response 1 1.4%


Performance Accelerated Vesting

Overall, of 69 companies that currently grant stock/units, 18.8% (13 companies)indicated that vesting accelerates if specific performance criteria are achieved.

Cos.CurrentlyGranting

Vesting Can BeAccelerated Basedon Performance

Type of Stock/Unit Stock/Units Cos. % (1)Restricted stock award (not in lieu of cash) 60 12 20.0%Restricted stock award (in lieu of salary or bonus) 10 0 0.0%Restricted stock units (not in lieu of cash) 12 1 8.3%Restricted stock units (in lieu of salary or bonus) 7 0 0.0%Unrestricted stock (not in lieu of cash) 9 2 22.2%Unrestricted stock (in lieu of salary or bonus) 4 0 0.0%

(1) Percents based on the number companies that currently grant each respective type ofstock/unit.

Types of Performance Measures Used for Vesting Acceleration

Type of Performance Measure Cos. % (1)Stock price 3 23.1%Total shareholder return 3 23.1%Return on equity, assets or capital 3 23.1%Earnings per share 1 7.7%

(1) Percents based on 13 companies that have performance accelerated vestingon stock/unit grants.




Stock/Unit Grant Guidelines

Of the companies currently granting stock/units, 49% of companies have grantguidelines.


(1) Percents based on 69 companies that currently grantstock/units.

Criteria Used in Developing Stock/Unit Grant Guidelines

Cos. %(1)Management discretion 20 58.8%Salary grade 15 44.1%Job group/category 12 35.3%Position title 10 29.4%Other criteria 3 8.8%

(1) Percents based on 34 companies that have stock/unit grant guidelines.

Stock/Units for Contractors/Consultants

Overall, 5 companies indicated granting stock/units to contractors/consultants.

Receivedstock/unit grant in last 3 years

Contractors/Consultants Cos. % (2)Restricted Stock 4 80.0%Restricted Stock Unit 1 20.0%Unrestricted Stock 1 20.0%

(1) Percents based on 5 companies that currently grant stock/units grant tocontractors/consultants.

Other Practices

In addition to normal stock/unit grants, events for which stock/units aretypically awarded:

Cos. % (1)For retention purposes 38 55.1%Upon hire 33 47.8%Special one time bonus 31 44.9%Upon promotion 18 26.1%Employee elects to receive stock/units in lieu of

cash compensation (salary and/or bonus)7 10.1%

Other 4 5.8%



Performance Plans – Prevalence



Of the 345 participants in the survey, 100 (29.0%) currently grant(1) under performance plans to US-based employees. The table below presents the overallprevalence of performance plans and type of performance plan currently granted to employees for all companies, high-technology companies, and non-high-technology companies.

Companies Currently Granting(1) Under Performance Plan to US-Based Employees



Cos. % Cos. % Cos. %PERFORMANCE PLANS: 100 29.0% (2) 17 15.0% (3) 83 35.8% (4)

BY TYPE OF PERFORMANCE PLAN:Performance Shares 76 76.0% (5) 14 82.4% (6) 62 74.7% (7)Performance Units 38 38.0% (5) 3 17.7% (6) 35 42.2% (7)

(1) “Currently grant” is defined as: Company has a specific granting frequency and/or company has granted under performance plans toemployees within the last three years.

(2) Percents based on 345 companies that participated in the study.(3) Percents based on 113 high-tech companies that participated in the study.(4) Percents based on 232 non-high-tech companies that participated in the study.(5) Percents based on 100 companies that currently grant under performance plans.(6) Percents based on 17 high-tech companies that currently grant under performance plans.(7) Percents based on 83 non-high-tech companies that currently grant under performance plans.


Performance Plans – Prevalence


Plan Prevalence by Expatriate Employees & Non-US Local Nationals

Of the 209 and 235 companies that employ expatriates and non-US local nationals, respectively, 34 (16.3%) and 33 (14.0%) currently grant(1) under performanceplans to expatriates and non-US local nationals, respectively. The table below presents the overall prevalence of performance plans and type of performance plancurrently granted to expatriates and non-US local nationals for all companies.

Companies Currently Granting(1)

Under Performance PlanExpatriateEmployees

Non-US LocalNationals

Cos. % Cos. %PERFORMANCE PLANS: 34 16.3% (2) 33 14.0% (2)

BY TYPE OF PERFORMANCE PLAN:Performance Shares 23 67.6% (3) 21 63.6% (4)Performance Units 17 50.0% (3) 17 51.5% (4)

(1) “Currently grant” is defined as: Company has a specific granting frequency and/or company has granted under performance plans toemployees within the last three years.

(2) Percents based on 209 companies that employ expatriates and 235 companies that employ non-US local nationals, respectively.(3) Percents based on 34 companies that currently grant under performance plans to expatriate employees.(4) Percents based on 33 companies that currently grant under performance plans to non-US local nationals.


Performance Plans - Plan Objectives


Survey participants indicated that retention, competitiveness, and employee ownership are the most prevalent performance plan objectives and are also rated asthe top three most important.










Other 14 14.0% 12 12.0%

(1) Percents based on 100 companies that currently have performance plans.


Performance Plans – Features & Granting Practices



Of the 100 companies that currently grant under performance plans, the majority of these companies grant to senior management only or senior and middlemanagement levels only.

Depth of US-Based Employee Granting Practices by Employee Combinations (1)Total

CompaniesCurrently

SeniorManagement

only


only




ALL COMPANIES:Performance Plans 100 63 63.0% 26 26.0% 8 8.0% 1 1.0%

HIGH-TECHNOLOGY COMPANIES:Performance Plans 17 15 88.2% 1 5.9% 1 5.9% 0 0.0%

NON-HIGH-TECHNOLOGY COMPANIES:Performance Plans 83 48 57.8% 25 30.1% 7 8.4% 1 1.2%

(1) Includes only most prevalent employee group combinations.(2) May include some or all “other exempt” positions.(3) Currently granting is defined as company has a specific granting frequency and/or company has granted under performance plans in the last three years.(4) Percents based on the number of companies currently granting under performance plans.





Depth of Expatriate Granting Practicesby Employee Combinations (1)



(2)

SeniorManagement

only


only

AllEmployees

(3)Expatriates Cos. %(4) Cos. %(5) Cos. %(5) Cos. %(5)


(1) Includes only most prevalent employee group combinations.(2) Currently granting is defined as company has a specific granting frequency and/or company has granted under performance plans in the last three years.(3) Includes senior management, middle management and some or all “other expatriate” positions.(4) Percents based on the number of companies that employ expatriates.(5) Percents based on total number of companies that currently grant under performance plans.







Non-US


(2)

SeniorManagement

only


only

AllEmployees

(3)Local Nationals Cos. %(4) Cos. %(5) Cos. %(5) Cos. %(5)


(1) Includes only most prevalent employee group combinations.(2) Currently granting is defined as company has a specific granting frequency and/or company has granted under performance plans in the last three years.(3) Includes senior management, middle management and some or all “other non-US local national” positions.(4) Percents based on the number of companies that employ non-US local nationals.(5) Percents based on total number of companies that currently grant under performance plans.




Minimum Criteria for Performance Plan Participation

Cos. % (1)Position title 42 42.0%Salary grade 34 34.0%Management discretion 31 31.0%Job group/category 25 25.0%All employees are eligible to participate (including all full- time employees only)

4 4.0%

A discrete salary level 4 4.0%

(1) Percents based on 100 companies that currently have performance plans.

Minimum Salary Grade Eligible for Performance Plan Participation

Cos.10th

Percentile25th

Percentile50th


Percentile90th

PercentileMinimum 29 $75,100 $97,500 $110,000 $127,323 $150,000 $205,300Midpoint 28 $85,300 $126,150 $158,400 $167,077 $212,100 $265,000Maximum 28 $108,870 $160,250 $195,080 $209,248 $272,500 $330,000

(1) Excludes companies where all employees are eligible to participate in the performance plan.




Performance Period

Company's performance plan specifies a performance period:

Cos. % (1)Yes 95 95.0%No 5 5.0%

(1) Percents based on 100 companies that currentlyhave performance plans.

Overlapping or Consecutive Performance Periods

Cos. % (1)Overlapping (2) 76 80.0%Consecutive (3) 17 17.9%No response 2 2.1%

(1) Percents based on 95 companies that havespecific performance periods.

(2) For example, a new performance periodcommences while others are still going on.

(3) For example, a new performance periodcommences after the previous performanceperiod ends.

Length of Performance Period

Performance Performance Shares Performance UnitsPeriod Cos. %(1) Cos. %(1)1 year 8 11.3% 7 18.9%2 years 4 5.6% 3 8.1%3 years 40 56.3% 20 54.1%4 years 7 9.9% 4 10.8%5 years 5 7.0% 0 0.0%6 years 1 1.4% 0 0.0%No response 6 8.5% 3 8.1%

(1) Percents based on 71 companies that grant performance shares and have a specific performanceperiod.

(2) Percents based on 37 companies that grant performance units and have a specific performanceperiod.




Vesting

Performance Grants That Have a Vesting Period after Completion of the Performance Period

Performance Periodis a Specific

Length of Time

Plan has Vesting Periodafter Completion ofPerformance Period

Cos. Cos. %(1)Performance Plans 95 23 24.2%

By Type of Performance Plan:Performance Shares 71 18 25.4%Performance Units 37 7 18.9%

(1) Percents based on the number of companies with a specific performance period.

Length of Vesting Period after Completion of Performance Period

Performance Shares Performance UnitsLength of Vesting Period Cos. %(1) Cos. %(1)1 year 3 16.7% 0 0.0%2 years 9 50.0% 3 42.9%3 years 4 22.2% 4 57.1%5 years 2 11.1% 0 0.0%

(1) Percents based on the number of organizations that provided vesting period details.


Employee Stock Purchase Plans – Prevalence & Plan Objectives


Plan Prevalence

Company has an employee stock purchase plan: Cos. % (1)Yes 213 61.7%No 131 38.0%No response 1 0.3%

(1) Percents based on 345 companies that participatedin the survey.

Plan Objectives

Survey participants indicated that employee ownership, competitiveness, and retention are the most prevalent employee stock purchase plan objectives and arealso rated as the top three most important.



Cos. %(1) Cos. %(1)Employee Ownership 197 92.5% 182 92.4%Competitiveness 154 72.3% 135 87.7%Retention 120 56.3% 100 83.3%Wealth Accumulation 108 50.7% 69 63.9%Corporate Identity 102 47.9% 57 55.9%Hiring Practice 59 27.7% 21 35.6%Substitute for Pension 17 8.0% 7 41.2%Other 8 3.8% 4 50.0%

(1) Percents based on 213 companies that have employee stock purchase plans.


Employee Stock Purchase Plans - Utilization & Source of Plan Shares


Utilization of Plan Shares

As a % of Total Shares Outstanding

Shares Held byEmployees

at FYE

Total PotentialESPP Employee

Ownershipat FYE (1)

Total SharesPurchased

During MostRecent FY

# of Companies 111 151 143Percentile (2) 25th 0.2% 0.8% 0.1% 50th 0.4% 1.7% 0.2% Average 0.8% 2.5% 0.3% 75th 0.9% 3.0% 0.4%

(1) Represents shares held by employees at fiscal year end plus the aggregate number of employee stock purchase plan shares available for future purchase plus anypending authorizations of plan shares.

(2) Percentiles represent the distribution of the data. (For example, if 11 data points were reported, the 50th Percentile – or median – would be the sixth highest value. If10 data points were reported, the 50th percentile would be midway between the fifth and sixth highest value.) The 25th and 75th percentiles represent the range of themiddle half of the data.

Source of Plan Shares

Section 423 Plans Non-Section 423 PlansCos. %(1) Cos. %(2)

Treasury/reacquired 51 33.1% 10 20.8%Open market purchase 29 18.8% 31 64.6%New issue 99 64.3% 7 14.6%

(1) Percents based on 154 companies that have Section 423 plans.(2) Percents based on 48 companies that have Non-Section 423 plans.


Employee Stock Purchase Plans – Features & Practices


Type of Employee Stock Purchase Plan

Cos. % (1)Section 423 plan 154 72.3%Non-section 423 plan/non-qualified plan 48 22.5%No response 11 5.2%

(1) Percents based on 213 companies that have employee stock purchase plans.

Eligibility Requirements

Section 423 Plans Non-Section 423 PlansCos. %(1) Cos. %(2)

No eligibility requirements 19 12.3% 8 16.7%Minimum hours per week 97 63.0% 16 33.3%Minimum service 75 48.7% 20 41.7%Minimum age 16 10.4% 19 39.6%


Participation Rates(1)

Section 423 Plans

Cos.10th

Percentile25th

Percentile50th


Percentile90th

PercentileUS only 143 9.1% 23.5% 42.0% 45.0% 65.0% 86.0%Worldwide 112 8.8% 25.0% 41.5% 45.5% 67.1% 90.0%

Non-Section 423 Plans

Cos.10th

Percentile25th

Percentile50th


Percentile90th

PercentileUS only 42 2.5% 5.0% 14.5% 25.6% 40.0% 64.0%Worldwide 32 2.0% 9.5% 23.3% 27.6% 41.5% 64.0%

(1) Participation rate based on eligible employees.




Automatic Discount Applied to Purchase Price

Section 423 Plans Non-Section 423 PlansPercent Discount Cos. %(1) Cos. %(2)0% 6 3.9% 25 52.1%5% 2 1.3% 3 6.3%10% 12 7.8% 2 4.2%15% 134 87.0% 10 20.8%No response 0 0.0% 8 16.7%


When Discount is Applied to FMV of Share Price

Section 423 Plans Non-Section 423 PlansPercent Discount Cos. %(1) Cos. %(2)Lower of beginning/end of offering period 72 46.8% 1 2.1%Lower of beginning/end of purchase cycle/period 52 33.8% 5 10.4%Beginning of purchase cycle/period 5 3.2% 4 8.3%End of purchase cycle/period 13 8.4% 3 6.3%Other 7 4.5% 3 6.3%No response 5 3.2% 32 66.7%





Length of Offering Period

Section423 Plans

Non-Section423 Plans

Cos. %(1) Cos. %(2)1 month 4 2.6% 6 12.5%3 months 22 14.3% 2 4.2%6 months 33 21.4% 3 6.3%9 months 1 0.6% 0 0.0%12 months 44 28.6% 3 6.3%24 months 31 20.1% 1 2.1%27 months 2 1.3% 0 0.0%Other 3 1.9% 2 4.2%No response 14 9.1% 31 64.6%


Length of Purchase Cycle/Period

Section423 Plans


Cos. %(1) Cos. %(2)1 month 11 7.1% 13 27.1%2 months 8 5.2% 14 29.2%3 months 30 19.5% 2 4.2%6 months 71 46.1% 3 6.3%12 months 11 7.1% 2 4.2%24 months 1 0.6% 1 2.1%Other 3 1.9% 0 0.0%No response 19 12.3% 13 27.1%


How Stock Purchases are Made

Section423 Plans


Cos. %(1) Cos. %(2)Payroll deductions 152 98.7% 48 100.0%Cash 16 10.4% 6 12.5%


Definition of Annual Maximums

Section423 Plans


Cos. %(1) Cos. %(2)Dollar amount 94 61.0% 21 43.8%Percent of salary 76 49.4% 21 43.8%Number of shares 39 25.3% 2 4.2%Other 6 3.9% 5 10.4%





Mandatory Holding Period

Plan Has Mandatory Holding Period:

Section423 Plans


Cos. %(1) Cos. %(2)Yes 22 14.3% 7 14.6%No 131 85.1% 41 85.4%No response 1 0.6% 0 0.0%


Length of Mandatory Holding Period

Section423 Plans


Cos. %(1) Cos. %(2)3 months 1 4.5% 0 0.0%6 months 2 9.1% 1 14.3%12 months 11 50.0% 3 42.9%Other 7 31.8% 3 42.9%No response 1 4.5% 0 0.0%

(1) Percents based on 22 companies that have Section 423 plans and mandatoryholding periods.

(2) Percents based on 7 companies that have Non-Section 423 plans and mandatoryholding periods.

Retention Features

ESPP Has Retention Feature(1)

Section423 Plans


Cos. %(2) Cos. %(3)Yes 4 2.6% 3 6.3%No 148 96.1% 45 93.8%No response 2 1.3% 0 0.0%

(1) Retention feature in which suspension from the plan occurs if purchasedshares are sold within a specific time period.


Length of Suspension from ESPP if Employee Sells Shares

Section423 Plans


Cos. %(1) Cos. %(2)3 months 1 25.0% 0 0.0%6 months 1 25.0% 0 0.0%12 months 2 50.0% 2 66.7%Other 0 0.0% 1 33.3%

(1) Percents based on 4 companies that have a retention feature in whichsuspension from the plan occurs if purchased shares are sold within a specifictime period.

(2) Percents based on 3 companies that have a retention feature in whichsuspension from the plan occurs if purchased shares are sold within a specifictime period.




Employer Match

Plan Has Employer Match

OverallSection

423 PlansNon-Section

423 PlansCos. %(1) Cos. %(2) Cos. %(3)

Yes 16 7.9% 1 0.6% 15 31.3%No 185 91.6% 152 98.7% 33 68.8%No response 1 0.5% 1 0.6% 0 0.0%

(1) Percents based on 202 companies that have indicated having either a Section 423plan or a non-Section 423 plan.


Employer Match

Percent Match: Cos. %(1)10% 3 18.8%15% 5 31.3%25% 1 6.3%50% 5 31.3%No response 2 12.5%

(1) Percents based on 16 companiesthat have employer matches.

Vesting on employer match:

Cos. %(1)Yes 5 31.3%No 11 68.8%

(1) Percents based on 16 companiesthat have employer matches.

Length of Vesting Period on Employer Match

Cos. %(1)12 months 1 20.0%Other 4 80.0%

(1) Percents based on 5 companies thathave vesting on employer matches.


Employee Stock Purchase Plans – Administrative Practices


Departments that Participate in Plan Administration

Participates inAdministration

Has Lead Role inAdministration

Cos. %(1) Cos. %(2)Human Resources 176 82.6% 125 71.0%Treasury/Finance 129 60.6% 41 31.8%Legal 119 55.9% 12 10.1%Accounting 113 53.1% 10 8.8%Corporate Secretary 59 27.7% 10 16.9%Other 28 13.1% 13 46.4%

(1) Percents based on 213 companies that have employee stockpurchase plans.

(2) Percents based on the number of companies that indicated that thefunctional area participates in plan administration.

Company outsources all or some of ESPP administration:


(1) Percents based on 213 companieswith employee stock purchaseplans.

Company tracks disqualifying dispositions for Section423 plans:


(1) Percents based on 154 companies thathave Section 423 plans.

How are disqualifying dispositions handled?Cos. %(1)

Third party administrator handles 68 55.3%Participants are surveyed to determine nature of

disposition52 42.3%

Code certificates issued so transfer agent and/orbroker can track

16 13.0%

Other 17 13.8%

(1) Percents based on 123 companies that track disqualifying dispositions.

In company's S-8 registration covering the Section 423 plan, companyregisters "plan interests" (in addition to shares) and files Form 11-k:


(1) Percents based on 154 companiesthat have Section 423 plans.


Deferred Compensation Plans


Company has deferred compensation plan:


(1) Percents based on 345 companies thatparticipated in the survey.

Employees Eligible to Participate in Deferred Compensation Program

Cos. % (1)Top executives 75 37.5%All executives 74 37.0%All salaried employees 10 5.0%Other 39 19.5%No response 2 1.0%

(1) Percents based on 200 companies that have a deferredcompensation plan.

Eligibility based on minimum salary level:


(1) Percents based on 200 companies that havea deferred compensation plan.

Minimum Salary Level Eligible For Deferred Compensation

Cos. 81Statistics: 10th Percentile $80,000 25th Percentile $85,000 50th Percentile $100,000 Average $113,116 75th Percentile $130,600 90th Percentile $165,000

Types of Compensation That Can Be Deferred

Cos. % (1)Salary and annual incentives/bonus 89 44.5%Salary, annual incentives/bonus, & long-term incentive payouts 34 17.0%Annual incentives/bonus only 33 16.5%Salary, annual incentives/bonus, stock option gains, & long-term

incentive payouts12 6.0%

Annual incentives/bonus and long-term incentive payouts 11 5.5%Salary only 8 4.0%Salary, annual incentives/bonus, and stock option gains 7 3.5%Salary, stock option gains, & long-term incentive payouts 1 0.5%Annual incentives/bonus, stock option gains, and long-term

incentive payouts1 0.5%

Annual incentives/bonus and stock option gains 1 0.5%Long-term incentive payouts only 1 0.5%No response 2 1.0%

(1) Percents based on 200 companies that have a deferred compensation plan.


Deferred Compensation Plans


The Latest an Election to Defer Salary or Bonus Can Be Made

Cos. % (1)Before the start of the year 163 81.5%1st Quarter 7 3.5%2nd Quarter 11 5.5%3rd Quarter 11 5.5%4th Quarter 10 5.0%After all services are performed, but before payment 6 3.0%

(1) Percents based on 200 companies that have a deferred compensation plan.

Deferral periods under the plan include:

Cos. %(1)For a specific period (e.g. 10 years) or a certain date (e.g. 12/31/08) 117 58.5%Until termination of employment (2) 142 71.0%Until a period after employment terminates (3) 57 28.5%Other 14 7.0%

(1) Percents based on 200 companies that have a deferred compensation plan.(2) For any reason including death, disability, or retirement.(3) For example, until age 65 even if employment terminates sooner or for up to 10 years after

termination of employment.

Available Phantom Investment Choices

Cos. %(1)Mutual fund or index 108 54.0%Market rate of interest 87 43.5%Company's own stock 79 39.5%Above market rate of return 21 10.5%


Available Payout Alternatives

Cos. %(1)Lump sum only 24 12.0%Installments only 3 1.5%Lump sum and installments 168 84.0%No responses 5 2.5%

(1) Percents based on 200 companies that have a deferredcompensation.

Form of Payout

Cos. %(1)Cash only 145 72.5%Stock only 8 4.0%Cash and stock 44 22.0%No responses 3 1.5%


Company has registered the plan with the SEC:


(1) Percents based on 200 companies that havea deferred compensation plan.


Insider Issues


Company has an insider trading compliance program:


(1) Percents based on 345 companies thatparticipated in this survey.

Insiders are required to clear all transactions, including stock plan transactions(e.g., stock option exercises in advance):

Cos. % (1)Yes 271 85.0%No 48 15.0%

(1) Percents based on 319 companies that havean insider trading compliance program.

Insiders’ stock certificates (non-restricted securities) are legended:



Company prohibits hedging transactions in company stock:



Company has a window or blackout period for:

Cos. % (1)Insiders 299 93.7%Non-insiders 96 30.1%


Copies of plans and agreements are filed with SEC forms 10-K or 10-Q exhibits:



10-K exhibit listing includes all plans, management contracts and othercompensatory agreements:


(1) Percents based on 319 companies that have aninsider trading compliance program.


Insider Issues


Who handles Forms 3, 4 and 5 completion and filing?

Cos. % (1)Stock administrator 146 45.8%In-house counsel 175 54.9%Outside counsel 25 7.8%Insider him- or herself 18 5.6%

(1) Percents based on 319 companies that haveinsider trading compliance program.

Company files Forms 3, 4 and 5 electronically:



Who handles Form 144 completion and filing?

Cos. % (1)Broker handling the sale 177 55.5%In-house counsel 121 37.9%Stock administrator 76 23.8%Inside him or herself 42 13.2%Outside counsel 29 9.1%

(1) Percents based on 319 companies that have aninsider trading compliance program.


Ownership Guidelines


Company has stock ownership guidelines for employees:



Ownership guidelines apply to:

Cos. % (1)CEO only 9 8.1%Senior management (including CEO) 65 58.6%Other management and above 28 25.2%All equity plan participants 7 6.3%No response 2 1.8%

(1) Percents based on 111 companies that have stockownership guidelines.

Ownership guidelines based on:

Cos. % (1)Multiple or percent of compensation 89 80.2%Set number of shares 15 13.5%Other 6 5.4%No response 1 0.9%

(1) Percents based on 111 companies that have stock ownership guidelines.

If guidelines are based on a multiple or percent of compensation, compensation isdefined as:

Cos. % (1)Base salary only 71 79.8%Total cash (salary plus annual incentives) 9 10.1%Total compensation (salary, annual incentives, and long-term incentives)

6 6.7%

Other 3 3.4%

(1) Percents based on 89 companies indicating that guidelines are based on a multiple or percent ofcompensation.




Multiple When Compensation Defined as Base Salary - By Employee Group

Multiple ofChief Executive

OfficerNext Top 4Executives

Other SeniorManagement Other Management

Base Salary (1) Cos. %(2) Cos. %(2) Cos. %(2) Cos. %(2)1 2 3.0% 7 10.8% 16 27.1% 14 60.9%2 3 4.5% 16 24.6% 27 45.8% 6 26.1%3 9 13.4% 27 41.5% 12 20.3% 2 8.7%4 14 20.9% 8 12.3% 1 1.7% 0 -5 26 38.8% 4 6.2% 2 3.4% 1 4.3%6 5 7.5% 2 3.1% 0 - 0 -7 3 4.5% 0 - 1 1.7% 0 -8 2 3.0% 0 - 0 - 0 -

10 2 3.0% 1 1.5% 0 - 0 -12 1 1.5% 0 - 0 - 0 -

67 100.0% 65 100.0% 59 100.0% 23 100.0%

(1) If a company indicated a range for each employee group, we averaged the lowest and highest multiple of the range.(2) Percents based on total number of companies that provided the multiple of salary for each employee level.




Company has increased the levels for ownership guidelines in the last 3 years:


(1) Percents based on 111 companies that havestock ownership guidelines.

Stock options count toward satisfying stock ownership guidelines:


(1) Percents based on 111 companiesthat have stock ownership guidelines.

Types of Options that Count Toward Satisfying Stock Ownership Guidelines

Cos. % (1)All options 10 41.7%All vested options 8 33.3%All vested and in-the-money options 5 20.8%No response 1 4.2%

(1) Percents based on 24 companies that allow stock options to counttoward satisfying stock ownership guidelines.

Types of Holdings that Count Towards Satisfying Stock Ownership Guidelines

Company CountsTowards Satisfying

Ownership GuidelinesNumber of Cos.that have thistype of plan Cos. %(1)

Shares purchased through employee stock purchase plan

63 57 90.5%

Shares in 401(k) plan 95 85 89.5%Phantom stock/deferred stock units 41 34 82.9%Shares held in employee stock ownership plan (ESOP)

32 24 75.0%

Unvested restricted stock 66 43 65.2%Unvested performance share 31 9 29.0%Other 23 20 87.0%

(1) Percents based on number of companies that have each respective plan.

How long (after hire or notification of ownership guidelines) do employees have tomeet the guidelines?

Cos. % (1)1 year 6 5.4%2 years 1 0.9%3 years 16 14.4%4 years 6 5.4%5 years 46 41.4%6 years 0 -7 years 7 6.3%8 years 26 23.4%No response 3 2.7%





Company requires employees to retain all or part of share/equity awards untilguidelines are met:



Company has rewards/incentives or penalties connected with ownership guidelines:


(1) Percents based on 111 companiesthat have stock ownership guidelines.

Situations in Which Rewards/Incentives or Penalties are Used

Cos. % (1)Reward for meeting requirements early 24 82.8%Reward for meeting requirements 6 20.7%

(1) Percents based on 29 companies that have rewards/incentives or penalties connectedwith ownership guidelines.


Board of Directors – Compensation Form & Equity Practices


Of all participants, 311 (90.1%) companies indicated that they have a separate equityplan for the board of directors.

Cos. % (1)Yes 311 90.1%No 34 9.9%


Form of Compensation

Cos. % (1)One FormCash only 8 2.6%Stock only 2 0.6%Options only 43 13.8%

Two FormsCash + Stock 11 3.5%Cash + Restricted Stock 23 7.4%Cash + Options 115 37.0%Stock + Options 4 1.3%Restricted Stock + Options 2 0.6%

Three FormsCash + Stock + Options 43 13.8%Cash + Restricted Stock + Options 49 15.8%Cash + Stock + Restricted Stock 4 1.3%Stock + Restricted Stock + Options 1 0.3%

All FormsCash + Stock + Restricted Stock + Options 6 1.9%

(1) Percents based on 311 companies that indicated that they have aseparate equity plan for the Board of Directors.

Retainer Dollar Value by Revenue Range(1)

Revenue Range Cos.25th

Percentile50th

Percentile75th

PercentileLess than $100 million 17 $10,000 $10,000 $14,000$100 to $349.9 million 27 $10,000 $16,000 $24,000$350 to $999.9 million 39 $15,000 $20,000 $25,000$1 to $2.49 billion 61 $20,000 $27,000 $36,000$2.5 to $9.9 billion 66 $25,000 $35,500 $50,000$10 to 19.9 billion 22 $30,000 $42,500 $60,000$20 billion and above 19 $25,000 $36,000 $50,000

(1) Whether delivered in cash, stock, restricted stock, or any combination thereof, butexcludes value of stock options.

Directors can elect to receive stock-based compensation in lieu of cash:


(1) Percents based on 311 companies thatindicated that they have a separate equityplan for Board of Directors.

Types of Stock-Based Compensation Directors May Elect to Receive in Lieu of Cash

Cos. % (1)Shares of stock in lieu of cash 86 69.4%Stock options in lieu of cash 44 35.5%Discounted stock options in lieu of cash 8 6.5%

(1) Percents based on 124 companies that indicated directors can elect to receive stock-based compensation in lieu of cash.




Frequency of Equity Grants by Type of Equity

Stock OptionsStock

(unrestricted) Restricted StockCos. %(1) Cos. %(1) Cos. %(1)

Granted upon Initial Election to Board Only 19 7.2% 9 12.7% 13 15.3%Granted upon Election & Re-Election Only (2) 13 4.9% 3 4.2% 5 5.9%Annual Grant Only (2) 145 55.1% 37 52.1% 47 55.3%Higher One-Time Award Upon Initial Election and

Lower Annual Grant Thereafter82 31.2% 2 2.8% 9 10.6%

No response 4 1.5% 20 28.2% 11 12.9%263 100.0% 71 100.0% 85 100.0%

(1) Percents based on the number of companies that grant each respective type of equity.(2) If respondents indicated that stock-based awards are granted upon election and re-election

and the term of the director is one year, then this is captured as an annual grant.

Stock Options

Overall Number of Options Granted by Frequency of Equity Grant

Number of Stock Options25th 50th 75th

Cos. Percentile Percentile PercentileGranted Upon Initial Election to Board Only 16 5,000 15,000 41,000

Granted Upon Election & Re-Election Only (1) 12 4,500 18,500 30,000

Annual Grant Only (1) 128 2,000 4,000 7,325

Higher One-Time Award Upon Initial Election andLower Annual Grant Thereafter:

Granted Upon Initial Election to Board 80 10,000 15,500 25,000

Annual Grant Thereafter 80 2,718 5,000 10,000

(1) If respondents indicated that stock-based awards are granted upon election and re-electionand the term of the director is one year, then this is captured as an annual grant.

Number of Options - Granted Annually Only (1)

Number of Stock Options25th 50th 75th

Revenue Range Cos. Percentile Percentile PercentileLess than $100 million 6 5,000 7,500 8,000

$100 to $349.9 million 19 3,000 5,000 7,000

$350 to $999.9 million 19 2,500 5,000 10,000

$1 to $2.49 billion 32 2,000 4,000 8,250

$2.5 to $9.9 billion 31 1,870 4,000 5,000

$10 to 19.9 billion 9 2,000 3,200 3,500

$20 billion and above 12 2,000 3,375 10,000

(1) If respondents indicated that stock-based awards are granted uponelection and re-election and the term of the director is one year, thenthis is captured as an annual grant.




Stock Options (continued)

Number of Options - Higher One-Time Award Upon Initial Election and LowerAnnual Grant Thereafter

Grant Upon Initial Election25th 50th 75th


$100 to $349.9 million 13 10,000 20,000 25,000

$350 to $999.9 million 14 10,000 20,000 25,000

$1 to $2.49 billion 15 6,000 10,000 20,000

$2.5 to $9.9 billion 10 8,000 10,000 15,000

$10 to 19.9 billion 2 --- --- ---

$20 billion and above 1 --- --- ---

Annual Grant Thereafter25th 50th 75th


$100 to $349.9 million 13 5,000 8,333 11,000

$350 to $999.9 million 14 4,000 5,000 10,000

$1 to $2.49 billion 15 2,250 3,000 6,000

$2.5 to $9.9 billion 10 2,500 5,750 10,000

$10 to 19.9 billion 2 --- --- ---

$20 billion and above 1 --- --- ---

Stock (Unrestricted)

Overall Number of Shares Granted by Frequency of Equity Grant

Number of Shares of Stock(unrestricted)

25th 50th 75thCos. Percentile Percentile Percentile

Granted Upon Initial Election to Board Only 7 1,000 1,000 10,000

Annual Grant Only (1) 25 500 979 1,700


Restricted Stock

Overall Number of Restricted Shares Granted by Frequency of Equity Grant

Number of Shares ofRestricted Stock

25th 50th 75thCos. Percentile Percentile Percentile

Granted Upon Initial Election to Board Only 11 1,000 1,000 2,000

Granted Upon Election & Re-Election Only (1) 5 2,000 2,750 5,400

Annual Grant Only (1) 31 654 1,000 3,000

Higher One-Time Award Upon Initial Election and LowerAnnual Grant Thereafter:

Granted Upon Initial Election to Board 10 300 650 1,200Annual Grant Thereafter 10 1,700 2,500 3,054





Stock option grant levels are determined by:

Cos. %(1)Set number of shares (2) 190 72.2%Grant face value (3) 23 8.7%Present expected value (4) 21 8.0%Other 20 7.6%No response 9 3.4%

(1) Percents based on 263 companies that grant optionsto directors.

(2) Regardless of current stock price.(3) Number of shares times stock price.(4) Based on Black-Scholes or other method.

Type of Option Vesting

Cos. %(1)Immediate 52 19.8%Cliff vesting 74 28.1%Graded vesting 129 49.0%No response 8 3.0%

(1) Percents based on 263 companies thatgrant options to directors.

Prevalence of Monthly and Quarterly Vesting for BOD Stock Options

Cos. %(1)Monthly vesting 19 14.7%Quarterly vesting 12 9.3%

(1) Percents based on 129 companies that have graded vestingschedules for director stock options.

Year in which 100% of Options are Vested by Cliff/Graded Vesting Schedule

Cliff Vesting - Graded Vesting -Number Vesting Period Vesting Periodof Years Cos. %(1) Cos. %(2)1 year 39 52.7% 7 5.4%2 years 3 4.1% 7 5.4%3 years 13 17.6% 52 40.3%4 years 2 2.7% 41 31.8%5 years 5 6.8% 16 12.4%Other 0 0.0% 2 1.6%No response 12 16.2% 4 3.1%

(1) Percents based on 74 companies that have cliff vesting for directorstock options.

(2) Percents based on 129 companies that have graded vesting for directorstock options.

Graded Vesting Schedule Structures

Cos. %(1)Equal installments (e.g. 25% after years 1,2 3, 4) 107 82.9%Beginning loaded and then equal installments (2) 16 12.4%Beginning with equal installments and then back-end loaded (3) 3 2.3%Increasing percentage (4) 1 0.8%No response 2 1.6%

(1) Percents based on 129 companies that have graded vesting schedules fordirector stock options.

(2) For example: 50% after year 1 and 25% after years 2, 3(3) For example: 25% after years 1, 2 and 50% after year 3(4) For example:10% after year 1, 20% after year 2, 30% after year 3,

40% after year 4


Board of Directors – Stock Ownership Guidelines


Company has stock ownership guidelines for outside directors:


(1) Percents based on 311 companies thatindicated that they have a separate equityplan for the Board of Directors.

Stock ownership guidelines are based on:

Cos. %(1)Fixed number of shares 25 40.3%Multiple of retainer 21 33.9%Percentage of annual equity awards 0 0.0%Other 14 22.6%No response 2 3.2%

(1) Percents based on 62 companies that have stock ownership guidelines.


Administrative Practices


Company outsources all or some stock plan administration:


(1) Percents based on 345 companies that participatedin the study.

Percent of Stock Plan Administration Outsourced

Cos. %(1)Less than 25% 54 35.1%25% to 50% 20 13.0%50% 16 10.4%50% to 75% 14 9.1%More than 75% 45 29.2%No response 5 3.2%

(1) Percents based on 154 companies that outsource allor some stock plan administration.

Departments Participating in Stock Plan Administration

Participates inStock Plan

Admin.

Has PrimaryResponsibility for

Stock Plan Admin.Cos. %(1) Cos. %(2)

Legal 231 67.0% 43 18.6%Human Resources 291 84.3% 160 55.0%Accounting 186 53.9% 12 6.5%Corporate Secretary 161 46.7% 41 25.5%Finance 216 62.6% 67 31.0%Other 36 10.4% 22 61.1%

(1) Percents based on 345 companies that participated in the study.(2) Percents based on the number of companies indicating that each respective

department participates in stock plan administration.

Company has one or more stock administrators dedicated solely toadministering company's stock plans:

Cos. %(1)Yes 177 51.3%No 168 48.7%

(1) Percents based on 345 companies that participated in the study.




Indicate the number of stock plan administrators that are dedicated solelyto administering the company's stock plans:

Number of Administrators Cos. %(1)1 91 51.4%2 50 28.2%3 17 9.6%4 8 4.5%>4 9 5.1%No response 2 1.1%

(1) Percents based on 177 companies that have stock plan administratorsdedicated solely to administering the company's stock plans.

Company utilizes software to administer stock plans:

Cos. %(1)Yes 313 90.7%No 32 9.3%


Type of Software Utilized

Cos. %(1)Program provided by a vendor (canned product) 275 87.9%Customized program developed by external vendor 22 7.0%Program developed in-house 41 13.1%

(1) Percents based on 313 companies that utilize software to administer their stockplans.

Forms of Exercise Notice Accepted:

Cos. %(1)Written original 304 88.1%Fax 270 78.3%Broker generated exercise notice 149 43.2%Verbal/Telephone 74 21.4%E-mail 73 21.2%


Company posts plan documents on the company intranet:

Cos. %(1)Yes 121 35.1%No 224 64.9%


Company posts plan documents on the website of a 3rd party stock planadministrator or brokerage firm:

Cos. %(1)Yes 34 9.9%No 311 90.1%





Company only distributes plan documents (1) via intranet or website andnot in paper:


(1) "Plan documents" excludes individual grant agreements.(2) Percents based on 345 companies that participated in the study.

How are individual grant notices and agreements distributed?

Cos. %(1)Paper only for both notice and agreement 317 91.9%Electronic only for both notice and agreement 8 2.3%Paper for notice and electronic for agreement 7 2.0%Paper and electronic for both notice and agreement 12 3.5%No response 1 0.3%


Company permits/requires electronic/digital signatures on grantagreements:

Cos. %(1)Does not allow electronic/digital signature 208 86.3%Permits electronic/digital signature 16 6.6%Requires electronic/digital signature 7 2.9%No response 10 4.1%

(1) Percents based on 241 companies that provide grant agreements and requireacknowledgement of grant agreements.

How is the exercise date defined?

Cos. %(1)Date notice and payment received 184 53.3%Date notice received (with or without payment) 139 40.3%Other 19 5.5%No response 3 0.9%


Company tracks disqualifying dispositions for incentive stock options:


(1) Percents based on 214 companies thatcurrently grant incentive stock options.

How are disqualifying dispositions handled?

Cos. %(1)Participants are surveyed to determine nature of disposition (2) 94 62.3%Code certificates issued so transfer agent and/or broker can track 21 13.9%Third party administrator handles 19 12.6%Other 40 26.5%

(1) Percents based on 151 companies that track disqualifying dispositions.(2) For example, sales or deposits to street name account.




FMV for W-2 reporting of stock option exercise gain and tax withholding,is determined by:

Cos. %(1)Exercise date closing stock price 151 43.8%Exercise date high/low average 96 27.8%Exercise date bid/ask average 9 2.6%Previous day's closing stock price 36 10.4%Previous day's high/low average 9 2.6%Previous day's bid/ask average 1 0.3%Other 37 10.7%No response 6 1.7%

(1) Percent based on 345 companies that currently grant stock options.

Swap Value for stock-for-stock exercises is determined by:

Cos. %(1)Exercise date closing stock price 90 37.3%Exercise date high/low average 78 32.4%Exercise date bid/ask average 5 2.1%Previous day's closing stock price 32 13.3%Previous day's high/low average 11 4.6%Previous day's bid/ask average 1 0.4%Other 10 4.1%No response 14 5.8%

(1) Percents based on 241 companies that have stock-for-stock exerciseprovisions.

For broker assisted cashless exercises, gain and tax withholding aredetermined by:

Cos. %(1)Actual Sale Price 199 61.8%Exercise date closing stock price 39 12.1%Exercise date high/low average 48 14.9%Exercise date bid/ask average 3 0.9%Previous day's closing stock price 18 5.6%Previous day's high/low average 5 1.6%Previous day's bid/ask average 0 0.0%Other 5 1.6%No response 5 1.6%

(1) Percents based on 322 companies that have broker assisted cashlessexercise provisions.

Company furnishes grant agreements to optionees:

Cos. %(1)Yes 322 93.3%No 23 6.7%

(1) Percents based on 345 companies thatcurrently grant stock options.

Grant agreements are furnished to:

Cos. %(1)All optionees 316 98.1%Top management optionees only 5 1.6%No response 1 0.3%

(1) Percents based on 322 companies that furnish grant agreements.




Company requires optionees to acknowledge grants:


(1) Percents based on 322 companies thatfurnish grant agreements.

If an optionee fails to acknowledge a grant, the methods ofcommunication optionees may use to acknowledge grants include:

All OptioneesTop ManagementOptionees Only

Cos. %(1) Cos. %(2)Mail 212 89.8% 3 60.0%Fax 32 13.6% 1 20.0%Memorandum 28 11.9% 0 0.0%e-Mail 8 3.4% 0 0.0%Company intranet 6 2.5% 0 0.0%Telephone - automated system 1 0.4% 0 0.0%

(1) Percents based on 236 companies that furnish all optionees with grantagreements and require acknowledgement.

(2) Percents based on 5 companies that furnish top management only withgrant agreements and require acknowledgement.

If an optionee fails to acknowledge a grant, company follow-ups by:

Cos. %(1)e-Mail 163 67.6%Telephone - verbal 132 54.8%Memorandum 89 36.9%Mailer 70 29.0%Other 11 4.6%

(1) Percents based on 241 companies that requireoptionees to acknowledge grants.

Company suspends the ability to exercise options until the grant isacknowledged:


(1) Percents based on 241 companies that requireoptionees to acknowledge grants.


Communication Practices


Company distributes materials (other than the required plan prospectus)designed to assist plan participants:



Company distributes materials via the internet or the company intranet:

Cos. % (1)Yes 117 40.1%No 175 59.9%

(1) Percents based on 292 companies that distributematerials to assist plan participants.

Materials Distributed via the Internet or Company Intranet:

Cos. % (1)Annual Report 93 79.5%FAQ's 90 76.9%Plan documents 89 76.1%

(1) Percents based on 117 companies that distributematerials via the internet or company intranet.

Company provides employees with stock compensation seminars:



How often are stock compensation seminars conducted?

Cos. % (1)On an ad hoc basis 92 65.7%Annually 26 18.6%Upon hire 13 9.3%Semi-annually 11 7.9%Upon grant 7 5.0%Quarterly 7 5.0%Monthly 6 4.3%Upon vesting 1 0.7%

(1) Percents based on 140 companies that providestock compensation seminars.

Company notifies optionees of upcoming vesting dates:



Company notifies optionees of upcoming expiration dates:






How far in advance of expiration does notification occur?

InitialNotification

Follow-upNotification

Cos. % (1) Cos. % (1)30 days 39 17.6% 93 41.9%3 months 82 36.9% 48 21.6%6 months 53 23.9% 15 6.8%1 year 37 16.7% 1 0.5%Other 15 6.8% 24 10.8%

(1) Percents based on 222 companies that notify optionees of upcomingexpiration dates.

Optionees are notified of upcoming expiration dates by:

Cos. % (1)Letter 160 72.1%E-mail 84 37.8%Verbal 64 28.8%Other 13 5.9%

(1) Percents based on 222 companies that notifyoptionees of upcoming expiration dates.

Company indicated that optionees allow "in the money" options to expire:



Company provides for automatic exercise on expiration date:



Company has a communications program under which optionees areprovided, on an on-going basis, educational materials regarding theiroptions:






Extent to Which Employees Understand the Value of Stock Options - By Employee Group

Thorough General Limited Not at All No Response

Cos. % (1) Cos. %(1) Cos. % (1) Cos. %(1) Cos. %(1)CEO and Other Senior Management 290 84.1% 48 13.9% 4 1.2% 0 0.0% 3 0.9%Middle Management 87 25.2% 222 64.3% 29 8.4% 0 0.0% 7 2.0%Other Exempt 13 3.8% 125 36.2% 133 38.6% 13 3.8% 61 17.7%Non-Exempt 4 1.2% 33 9.6% 133 38.6% 59 17.1% 116 33.6%



International Stock Plans – Plan Prevalence


Overall, 206 companies (59.7%) indicated that they have stock plans for non-US local nationals.

By Type of Stock Plan Cos. % (1)Stock Option Plan 204 99.0%Employee Stock Purchase Plan 112 54.4%Stock Plans 41 19.9%

(1) Percents based on 206 companies that have stock plans for non-US local nationals.

Indicate what best describes your non-US local national stock plans:

US PlanExtendedAbroad International/Sub Plan

Plan that AllowsCountry Specific

Variations No ResponseCos. %(1) Cos. %(1) Cos. %(1) Cos. %(1)

Stock Option Plan 161 78.9% 16 7.8% 22 10.8% 5 2.5%Employee Stock Purchase Plan 75 67.0% 10 8.9% 12 10.7% 15 13.4%Stock Plans 30 14.6% 6 2.9% 5 2.4% 0 0.0%

(1) Percents based on the number of companies that provided details about their non-US local national stock plans, espps, and stock option plans.




International Stock Option Plans - Prevalence by Country

CompanyEmploys Local

Nationals

Stock Options areOffered to Legally

Eligible Local Nationals

Local National StockOption Plan is

Broad Based (1)Country Cos. Cos. %(2) Cos. %(3)Australia 106 91 85.8% 54 59.3%Belgium 74 63 85.1% 38 60.3%Brazil 85 71 83.5% 41 57.7%Canada 149 137 91.9% 82 59.9%China 67 47 70.1% 30 63.8%France 116 102 87.9% 63 61.8%Germany 115 100 87.0% 60 60.0%Hong Kong 82 72 87.8% 42 58.3%India 53 43 81.1% 29 67.4%Ireland 51 45 88.2% 25 55.6%Israel 29 25 86.2% 18 72.0%Italy 80 70 87.5% 43 61.4%Japan 99 86 86.9% 56 65.1%Korea 58 47 81.0% 30 63.8%Malaysia 45 35 77.8% 22 62.9%Mexico 86 72 83.7% 40 55.6%New Zealand 41 35 85.4% 21 60.0%Norway 39 34 87.2% 21 61.8%Philippines 35 25 71.4% 16 64.0%Portugal 36 32 88.9% 20 62.5%Russia 27 20 74.1% 12 60.0%Singapore 90 80 88.9% 51 63.8%Spain 82 70 85.4% 32 45.7%Sweden 67 59 88.1% 40 67.8%Switzerland 73 63 86.3% 39 61.9%Taiwan 62 53 85.5% 33 62.3%Thailand 50 38 76.0% 23 60.5%The Netherlands 87 75 86.2% 45 60.0%United Kingdom 160 149 93.1% 90 60.4%

(1) Broad based plan is defined as a plan that extends to manager level or below the manager level.(2) Percents based on the number of companies that indicated they employ local nationals in each respective country.(3) Percents based on the number of companies that offer stock options to legally eligible local nationals.




International Employee Stock Purchase Plans (ESPP) - Prevalence and Participation Rates by Country

CompanyEmploys Local

Nationals

ESPP is Offered to Legally EligibleLocal Nationals ESPP Participation Rate(2)

Country Cos. Cos. %(1) Cos.50th

Percentile AverageAustralia 106 41 38.7% 23 50.0% 50.5%Belgium 74 22 29.7% 9 50.0% 52.3%Brazil 85 24 28.2% 9 79.0% 60.4%Canada 149 74 49.7% 47 35.0% 44.7%China 67 14 20.9% 3 - 93.3%France 116 45 38.8% 22 94.0% 68.2%Germany 115 45 39.1% 22 60.5% 57.9%Hong Kong 82 32 39.0% 13 51.2% 49.6%India 53 10 18.9% 4 65.0% 63.8%Ireland 51 20 39.2% 10 74.0% 65.4%Israel 29 12 41.4% 6 64.0% 63.3%Italy 80 28 35.0% 9 57.8% 58.9%Japan 99 41 41.4% 17 50.0% 51.9%Korea 58 19 32.8% 10 75.2% 70.8%Malaysia 45 15 33.3% 8 57.5% 55.2%Mexico 86 23 26.7% 9 33.5% 47.2%New Zealand 41 11 26.8% 3 - 38.9%Norway 39 11 28.2% 2 - -Philippines 35 9 25.7% 4 40.5% 48.4%Portugal 36 12 33.3% 3 - 63.6%Russia 27 5 18.5% 0 - -Singapore 90 41 45.6% 22 67.5% 59.3%Spain 82 28 34.1% 10 45.0% 47.1%Sweden 67 28 41.8% 12 90.0% 77.9%Switzerland 73 30 41.1% 11 50.0% 49.9%Taiwan 62 25 40.3% 13 69.6% 60.3%Thailand 50 15 30.0% 4 67.7% 61.3%The Netherlands 87 33 37.9% 16 58.5% 59.9%United Kingdom 160 77 48.1% 47 44.0% 48.3%

(1) Percents based on the number of companies that indicated they employ non-US local nationals in each respective country.(2) No statistics are reported where there are fewer than 3 cases. In instances where there are 3 responses, the average is presented. Where there are

four or more cases, the 50th percentile and average are presented.


International Stock Plans - Administrative Practices


Is the administration for non-US local nationals typically outsourced:


(1) Percents based on 206 companies that have stockplans for local nationals.

What percentage of the local national stock plan administration is outsourced?

Cos. % (1)Less than 25% 7 11.5%25% to 50% 7 11.5%50% 8 13.1%50% to 75% 11 18.0%More than 75% 27 44.3%No response 1 1.6%

(1) Percents based on 61 companies that outsourcesome or all local national stock plan administration.

Company utilizes the same vendor for outsourced stock plan administration acrossthe different countries:


(1) Percents based on 61 companies that outsourcesome or all local national stock plan administration.

Local national stock plans are administered:

Cos. % (1)Primarily from the US 170 82.5%At the local country level 3 1.5%Both 25 12.1%No response 8 3.9%

(1) Percents based on 206 companies that have stock plans for local nationals.

Administrative practices are primarily the same as the US:



Departments that Participate in Stock Plan Administration

Cos. % (1)Human Resources 158 76.7%Legal 122 59.2%Treasury/Finance 106 51.5%Accounting 90 43.7%Corporate Secretary 67 32.5%Other 21 10.2%

(1) Percents based on 206 companies that have localnational stock plans.


International Stock Plans - Administrative Practices


Extent to which stock option spread at exercise is charged to the local subsidiary toobtain local corporate deductions:

Cos. % (1)Not at all 103 50.5%In selected locations 33 16.2%In a majority of locations 11 5.4%All locations 29 14.2%No response 28 13.7%

(1) Percents based on 204 companies that have stockoption plans for local nationals.

Stock option spread at exercise is distributed to non-US participants:

Cos. % (1)In local currency 68 33.3%In US currency 117 57.4%Via wire transfer 85 41.7%Via check 90 44.1%



International Stock Plans - Communication Practices


Extent to which stock program materials are translated into local languages fornon-US participants:

Cos. % (1)Always 14 6.8%Sometimes 59 28.6%Never 119 57.8%No response 14 6.8%


Stock option plan materials that are translated into local languages some or all ofthe time:

Cos. % (1)Grant agreements 39 53.4%Confirmation ofexercise

13 17.8%

Offering materials 46 63.0%Other 23 31.5%

(1) Percents based on 73 companies that grant stockoptions and translate some or all of their programmaterials.

Company provides non-US local nationals with seminars on stock compensation:



Company notifies non-US local nationals of upcoming expiration dates:




eCommerce Enterprise - Profile


Overall, 107 companies indicated that they have an eCommerce enterprise.

eCommerce enterprise's relationship to the parent organization:

Cos. % (1)Subsidiary 17 16.8%Division/Business Unit 71 70.3%Part of IT Function 12 11.9%No response 1 1.0%

(1) Percents based on 101 companies that provideddata about their eCommerce enterprise.

Primary business objective of the eCommerce enterprise:

Cos. % (1)Bring existing business online 29 28.7%Pursue new business models that potentially compete with existing distribution channels

29 28.7%

Develop new product and service offerings 27 26.7%Other 9 8.9%No response 7 6.9%

(1) Percents based on 101 companies that provided data about their eCommerce enterprise.

Exit strategy of the eCommerce enterprise from the parent:

Cos. % (1)No planned exit 80 79.2%IPO 7 6.9%Partner buyout 2 2.0%Sell to another organization 1 1.0%Spin-off as a separate organization 12 11.9%

(1) Percents based on 101 companies that provided data about theireCommerce enterprise.


eCommerce Enterprise - Equity Practices


How do eCommerce enterprise equity grant levels compare to grant levels of the parent (by employee group)?

Head of eCommerce& Senior Management Middle Management Other Exempt Non-ExemptCos. %(1) Cos. %(1) Cos. %(1) Cos. %(1)

Lower than parent's 2 2.0% 1 1.0% 1 1.0% 0 0.0%Comparable to parent's 67 66.3% 63 62.4% 47 46.5% 27 26.7%Higher than parent's 9 8.9% 9 8.9% 7 6.9% 4 4.0%No response 23 22.8% 28 27.7% 46 45.5% 70 69.3%





If the eCommerce enterprise is a subsidiary, indicate the type of equity granted toeCommerce employees:

Cos. % (1)Parent company stock options 12 70.6%Subsidiary stock options 2 11.8%Phantom stock options 1 5.9%No response 2 11.8%

(1) Percents based on 17 companies where the eCommerceenterprise is a subsidiary.

Method Used for Determining Option Grant Levels for eCommerce enterpriseEmployees

Cos. % (1)Equity allocation methodology where a percent of shares outstanding is targeted

3 3.0%

Target number of options (regardless of current stock price/option value)

45 44.6%

Target grant value (whereby actual number of options changes based on value of options)

26 25.7%

No response 27 26.7%


Does the eCommerce enterprise have an equity program that is different from theparent company's:



Differences between the eCommerce enterprise equity program and the parentcompany's equity program:

Cos. % (1)Target pay mix is different 6 60.0%Different vesting provisions 5 50.0%Options are offered further down into the organization 3 30.0%Type of equity granted 3 30.0%

(1) Percents based on 10 companies that have different equity programs for their eCommerceenterprise.

Employees of the parent company receive equity grants in the eCommerceenterprise:


(1) Percents based on 10 companies that havedifferent equity programs for their eCommerceenterprise.

Parent company employees that receive equity in the eCommerce enterprise:

Cos. % (1)Parent company senior executives 3 75.0%Parent company employees that were on the original project team/task force that developed the eCommerce enterprise

1 25.0%

Parent company executives of any shared services with the eCommerce Enterprise

1 25.0%

Other 1 25.0%

(1) Percents based on 4 companies that have different eCommerce equity programs and granteCommerce equity to parent company employees.




eCommerce enterprise employees receive parent company equity grants:

Cos. % (1)Yes 6 60.0%No 4 40.0%

(1) Percents based on 10 companies that havedifferent equity programs for their eCommerceenterprise.

eCommerce enterprise employees that receive parent company equity grants:

Cos. % (1)eCommerce senior executives 5 83.3%eCommerce employees that were on the initial project team/task force

3 50.0%

eCommerce executives of any shared services with the parent company

3 50.0%

Other 2 33.3%

(1) Percents based on 6 companies that have separate eCommerce equity programs and some or alleCommerce enterprise employees receive parent company equity grants.

Employees that were on the initial project team/task force that developed theeCommerce enterprise receive special equity-based awards:



The nature of the award for participation in the initial project team/task force:

Cos. % (1)Cash recognition award 2 20.0%Venture investment participation 1 10.0%Other 4 40.0%

(1) Percents based on 10 companies that have special equity grants foremployees on the initial project team/task force.


Participant List


3M Company (Minnesota Mining and Manufacturing Company)A. H. Belo Corp.Abbot LaboratoriesAdolph Coors CompanyAdvanced Fibre Communications, Inc.Advanced Tissue Sciences, Inc.Advantica Restaurant Group, Inc.Aetna, Inc.AGENCY. COM Ltd.Agilent Technologies, Inc.Alaska Air Group, Inc.Allergan, Inc.Allete (Minnesota Power)Alliance Pharmaceutical Corp.Allied Riser Communications Corp.Allstate Corp. (The)Alltel Corp.Alpha Industries, Inc.Alza Corp.AMCORE Financial, Inc.American AirlinesAmerican Express CompanyAmerican Management Systems, Inc.American Medical Security Group, Inc.ANADIGICS, Inc.ANC Rental Corp.Apache Corp.AptarGroup, IncArtesyn Technologies, Inc.Arthur J. Gallagher & Co.Ashland, Inc.Aspen Technology, Inc.AT&T Corp.Autodesk, Inc.Automatic Data Processing, Inc.AutoZone, Inc.

Avid Technology, Inc.Avis Group Holdings, Inc.Avon Products, Inc.AVT Corp.Baldor Electric CompanyBally Total Fitness Holding Corp.Bank of America CorporationBank One Corp.Bausch & Lomb, Inc.BB&T Corp.Bergen Brunswig Corp.Bio-Rad Laboratories, Inc.Black & Decker Corp. (The)Blockbuster, Inc.Borders Group, Inc.Boston Scientific Corp.Broadcom Corp.Budget Group, Inc.Building Materials Holding Corp.Burlington Northern Santa Fe Corp.Business Objects S.A.Cablevision Systems Corp.Cabot Microelectronics Corp.CacheFlow, Inc.Caliper Technologies Corp.Callaway Golf CompanyCampbell Soup CompanyCapital Corp of the WestCapstead Mortgage Corp.Catalyst International, Inc.Cell Pathways, Inc.Centura Banks, Inc.Ceridian Corp.Charles Schwab Corp. (The)Charter Communications, Inc.Chiron Corp.Chubb Corp. (The)


Participant List


Citizens Communications CompanyCNF, Inc.Cohesion Technologies, Inc.Collins & Aikman Corp.Columbia Energy GroupCone Mills Corp.Consolidated Papers, Inc.Constellation Energy GroupConvergent Communications, Inc.Convergys Corp.Cooper Cameron Corp.CoorsTek, Inc.Covance, Inc.Cox Communications, Inc.DaimlerChrysler AGData Systems & Software, Inc.Dave & Buster's, Inc.Del Webb Corp.Dell Computer Corp.Delphi Automotive Systems Corp.Digimarc Corp.Digital Impact, Inc.Dollar Thrifty Automotive Group, Inc.Dollar Tree Stores, Inc.Dominion Resources, Inc.Dow Chemical Company (The)Drovers Bancshares Corp.Duke-Weeks Realty Corp.Dupont Photomasks, Inc.Eastman Chemical CompanyEastman Kodak CompanyEaton Vance Corp.ECC International Corp.Ecolab, Inc.Edison InternationalEl Paso Energy Corp.Electro Rent Corp.

Electro Scientific Industries, Inc.Eli Lilly And CompanyEMC Corp.Emerson Electric CompanyEnergy East Corp.Enron Corp.Equant N.V.Equifax, Inc.ESCO Technologies, Inc.eToys, Inc.Exxon Mobil Corp.Fannie MaeFBL Financial Group, Inc.Federated Department Stores, Inc.Federated Investors, Inc.FedEx Corp.FileNET Corp.FINOVA Group, Inc. (The)First Data Corp.First Financial Holdings, Inc.FirstEnergy Corp.FleetBoston Financial Corp.Focal Communications Corp.Franklin Resources, Inc.Freddie MacFriendly Ice Cream Corp.Gardner Denver, Inc.Gaylord Container Corp.General Dynamics Corp.General Semiconducter, Inc.Getty Images, Inc.Gillette Company (The)Glenayre Technologies, Inc.Goodyear Tire & Rubber Company (The)Graco, Inc.Great Lakes Chemical Corp.Greenbrier Companies, Inc. (The)


Participant List


Guidant Corp.H.B. Fuller CompanyHarleysville National Corp.Harmonic, Inc.Hartford Financial Services Group, Inc. (The)Hartford Steamboiler Inspection and Insurance Company (The)Herman Miller, Inc.Hewlett-Packard CompanyHibernia Corp.HNC Software, Inc.Home Depot, Inc. (The)Home Savings and Loan Company of Youngstown, Ohio (The)Houghton Mifflin CompanyHousehold International, Inc.Huntco, Inc.Huntington Bancshares, Inc.Illinois Superconductor Corp.Immunex Corp.Incyte Genomics, Inc.Ingram Micro, Inc.InnerDyne, Inc.Insteel Industries, Inc.Intel Corp.International Paper CompanyInternet Capital Group, Inc.Intraware, Inc.Intuit, Inc.Investors Financial Services Corp.Irwin Financial Corp.IT Group, Inc. (The)iXL Enterprises, Inc.J.C. Penney Company, Inc.Johnson & JohnsonJohnson Controls, Inc.Juno Online Services, Inc.K2, Inc.Kellogg Company

Kerr-McGee Corp.Key Technology, Inc.KeyCorpKeyspan Corp.Lanier Worldwide, Inc.Leap Wireless International, Inc.Lee Enterprises, Inc.Lennox International, Inc.Limited, Inc. (The)Lincoln National Corp.Linens 'n Things, Inc.Littelfuse, Inc.LTV Corp. (The)Lucent Technologies, Inc.M&T Bank Corp.Macromedia, Inc.Manugistics Group, Inc.MapInfo Corp.Marriott International, Inc.McKesson HBOC, Inc.Mead Corp. (The)MediaOne Group, Inc.medibuy.com, Inc.Medtronic, Inc.Mentor Graphics Corp.MGIC Investment Corp.Micromuse, Inc.Micron Electronics, Inc.Mitchell Energy & Development Corp.Montana Power Company (The)MTS Systems Corp.National City Corp.National Semiconductor Corp.National Service Industries, Inc.National-Oilwell, Inc.Neose Technologies, Inc.New Era of Networks, Inc.


Participant List


New Frontier Media, Inc.New York Times Company (The)Newport Corp.Newport News Shipbuilding, Inc.Nextel Communications, Inc.Norstan, Inc.Northern Trust Corp.Northrop Grumman Corp.Objective Systems Integrators, Inc.Occidental Petroleum Corp.OGE Energy Corp.Old Kent Financial Corp.OMNOVA Solutions, Inc.One Price Clothing Stores, Inc.ONEOK, Inc.ONTRACK Data International, Inc.Paccar, Inc.Pacificare Health Systems, Inc.Palm, Inc.Parker Drilling CompanyPayless ShoeSource, Inc.Pegasus Solutions, Inc.PeopleSoft, Inc.Per-Se Technologies, Inc.Photronics, Inc.Pioneer Natural Resources CompanyPlantronics, Inc.Plum Creek Timber Company, Inc.PNC Financial Services GroupPPL Corp.Praxair, Inc.Presstek, Inc.PRI Automation, Inc.Procter & Gamble Company (The)Progressive Corp. (The)Public Service Company of New MexicoPublic Service Enterprise Group, Inc.

QAD, Inc.Qualcomm, Inc.Quest Diagnostics, Inc.Quintiles Transnational Corp.Radian Group, Inc.Ravenswood Winery, Inc.Reader's Digest Association, Inc (The)Reebok International Ltd.Regions Financial Corp.Republic Group, Inc.Retek, Inc.Revlon, Inc.Reynolds and Reynolds Company (The)Richardson Electronics, Ltd.Robert Mondavi Corp. (The)Rockwell International Corp.Ryan's Family Steak Houses, Inc.Ryder System, Inc.Ryerson Tull, Inc.S1 Corp.Safeway, Inc.Saks, Inc.Sara Lee Corp.SBC Communications Inc.Scientific-Atlanta, Inc.Scotts Company (The)Sears, Roebuck and Co.Select Comfort Corp.Signal Technology Corp.Smurfit-Stone Container Corp.Sonoco Products CompanySouthwestern Energy CompanySprings Industries, Inc.Standard Microsystems Corp.Starbucks Corp.Storage Technology Corp.Storage USA, Inc.


Participant List


Sunbeam Corp.Sunoco, Inc.SunTrust Banks, Inc.Swiss Army Brands, Inc.Symbol Technologies, Inc.T. Rowe Price Associates, Inc.Talbots, Inc. (The)Talk City, Inc.TekelecTeligent, Inc.Tellabs, Inc.Temple-Inland, Inc.Texas Instruments, Inc.Toro Company (The)Toys "R" Us, Inc.Tribune CompanyTricon Global Restaurants, Inc.Trimeris, Inc.TRW, Inc.Tupperware Corp.Union Bank of California, N.A.Union Pacific Corp.United Airlines, Inc.United Health Group, Inc.United Stationers, Inc.Unitil Corp.UNOVA, Inc.UnumProvident Corp.US Oncology, Inc.USA Education, Inc. (Sallie Mae)UST, Inc.UtiliCorp United, Inc.Vail Resorts, Inc.Valassis Communications, Inc.Valmont Industries, Inc.Veritas DGC, Inc.Veritas Software Corp.

Vical, Inc.Vulcan, Inc.Wachovia Corp.Websense, Inc.WebTrends Corp.Wellpoint Health Networks, Inc.Wells Fargo & CompanyWestern Security BankWeyerhaeuser CompanyWhirlpool Corp.White Electronic Designs Corp.Wisconsin Energy Corp.Xircom, Inc.


Definition of Terms


Attestation – An affidavit or declaration of share ownership by which an optioneeexercising an option by a “Stock Swap” (see below) can avoid surrendering aphysical stock certificate for the shares used to exercise the option.

Bid-and-Asked Quotation – A stock price quote given in the form of a pricerange. The bid is the highest price anyone has declared that he/she wants to payfor a security at a given time; the asked is the lowest price anyone will accept atthe same time.

Blackout Period – A period of time prior to the release of annual or quarterlyfinancial information during which the “Insiders” of a public company (see below)are restricted by the company’s insider trading policy from trading in companystock.

Black-Scholes – A complex mathematical formula created by Fischer Black andMyron Scholes, used to calculate the theoretical present value of a stock option atthe grant date using variables such as stock price, exercise price, volatility, andexpected option term to exercise.

Cashless Exercise/Same Day Sale – A transaction in which an optionee exercisesa stock option and simultaneously sells some or all of the shares, with a portion ofthe sale proceeds delivered to the company by the broker to pay the exercise price.

Clawback – A non-compete agreement feature where option exercise profits arerecouped by the company for violation of non-compete provisions.

Common Stock – Units of ownership of a corporation. Common stockholders aretypically entitled to vote on the selection of directors and other matters.Distinguished from “preferred stock,” which generally has more favorabledividend and liquidation rights, although more limited voting rights.

Disparagement – A non-compete agreement feature where options are forfeited ifthe former employee speaks of the organization in a negative manner with theintent to condemn or discredit.

Disqualifying Disposition – The disposition of stock acquired under an ISO orSection 423 ESPP, before statutory holding period requirements are met. Adisqualifying disposition triggers taxable income subject to ordinary tax rates(versus long-term capital gain rates).

Employee Groups:

• CEO and Senior Management – The organization's executive team andother senior management positions, including functional area heads.

• Middle Management – Department managers and individuals in project/teamleadership roles. This group of employees reports directly to seniormanagement level.

• Other Exempt – Includes supervisors, other professionals and salariedsupport staff.

• Non-Exempt – Support personnel compensated on an hourly basis.

Employee Stock Purchase Plan (ESPP) – A type of broad-based stock plan thatpermits employees to use payroll deductions accumulated typically over a 3, 6, 12-month, or longer purchase period to acquire stock from the company, often at up toa 15% discount. A popular type of ESPP is also known as a “Section 423 plan,”after the applicable tax code section governing this type of plan. A non-qualifiedstock purchase plan could be similar to a Section 423 plan, but without satisfyingall the requirements of Section 423 (e.g., a discount in excess of 15%), or simply apayroll deduction/open market purchase plan.

Equity Security – An ownership interest in a company. Common and preferredstock are types of equity securities. Equity securities can be distinguished from“debt securities,” such as bonds, and from “derivative securities,” such as stockoptions.

Exchange Options – Stock Options that are exchanged for cash compensation at aspecified exchange rate.

Exercise – The act of acquiring the underlying securities subject to a stock optionby paying the “Exercise Price.”


Definition of Terms


Exercise Price – The price per share to be paid to exercise a derivative securitysuch as a stock option.

Expiration Date – The last date that a derivative security such as a stock optioncan be exercised or converted to the underlying securities.

Fair Market Value (FMV) – The price, based on the current market valuedetermined by supply and demand, for which a buyer and seller would be willingto make a transaction.

Form 3 – The initial form filed with the SEC and the issuer’s stock exchange byall directors, officers, and holders of 10% or more of any class of equity securitiesof the issuer, pursuant to Section 16(a) of the Securities Exchange Act of 1934.Form 3 details the direct and indirect holdings of the issuer’s stock, includingstock options and awards. Form 3 must be filed within ten calendar days after aperson becomes a Section 16 insider, whether or not the insider owns anycompany shares.

Form 4 – Periodic form filed with the SEC and the issuer’s stock exchange whenthere has been a non-exempt change in an insider’s ownership of company stock,such as a purchase, sale or option exercise. Form 4 must be filed by the insider bythe tenth calendar day of the month in which the change took place.

Form 5 – Year-end form filed with the SEC and the issuer’s stock exchange toreport certain transactions exempt from Form 4 reporting and any changes notpreviously reported by the insider on Form 3 or Form 4. Form 5, if required, mustbe filed within 45 days after the end of the issuer’s fiscal year.

Form S-8 – A very brief form of Registration Statement filed with the SEC toregister shares to be issued under an employee stock plan. Does not require filingof the Prospectus.

Grant – The issuance of an award under a stock plan, such as a stock option orshares of restricted stock.

Grant Date –The date on which an option or other award is granted.

Incentive Stock Option (ISO) - An option that has met certain requirements setforth in the Internal Revenue Code, thus entitling the optionee to favorable taxtreatment upon exercise and sale. Such an option is free from regular tax at thedate of grant and the date of exercise (when a non-qualified option would becometaxable). If two holding period tests are met (two years from grant and one yearfrom the exercise), the profit on the option qualifies as a long-term capital gainrather than ordinary income. If the holding periods are not met, there has been a“Disqualifying Disposition."

Insider – An officer, director or principal shareholder of a publicly ownedcompany and members of his or her immediate family. This category may alsoinclude other people who obtain nonpublic information about a company and owea duty not to use it for personal gain.

Legend – A notice on a stock certificate typically stating that transfer of the sharesrepresented by that certificate is restricted for whatever reason.

Mandatory Holding Period – A period of time after grant, vesting, exercise, orpurchase, determined by the company (i.e., not statutory), during which theunderlying stock cannot be sold.

Non-Qualified Stock Option (NQSO) – An employee stock option not meetingIRS criteria for ISOs (incentive stock options) and therefore triggering a tax uponexercise. This type of option requires withholding of state and federal income tax,Medicare and FICA/FUTA on the excess of the fair market value over the exerciseprice on the exercise date.

Non-Section 423 Plan/Non-Qualified Plan – For the purposes of this study, thisis any employee stock purchase plan that does not qualify for tax purposes as aSection 423 Plan. (See definition of Section 423 Plan.)

Offering Period – Under an employee stock purchase plan, this is the period oftime over which payroll deductions are made. The accumulated payroll deductionsin each offering period are typically applied to purchase stock at the end of theperiod. Longer offering periods (24+ months) may be made up of interimpurchase cycles/periods.


Definition of Terms


Optionee – A person who has been granted a stock option.

Option Price – See “Exercise Price” above.

Performance Units – Grants of dollar-denominated units whose value iscontingent on performance against predetermined objectives over a multi-yearperiod of time. Actual payouts may be in cash or stock.

Performance Shares – Grants of actual shares of stock or “phantom stock” whosepayment is contingent on performance as measured against predeterminedobjectives over a multi-year period of time; same as performance units except thatthe value paid fluctuates with stock price changes as well as performance againstobjectives. Payout may be settled in cash or stock.

Phantom Stock Award – A type of incentive grant in which the recipient is notissued actual shares of stock on the grant date but receives an account creditedwith certain number of hypothetical shares. The value of the account increases ordecreases over time based on the appreciation or depreciation of the stock priceand the crediting of phantom dividends. Payout may be settled in cash or stock.

Purchase Cycle/Period – Shorter periods (e.g., 6 months) within a Section 423ESPP offering period (of, say, 24 months) that allow participants to purchaseshares under the plan more frequently.

Reload Option – A replacement stock option granted by some companies tooptionees upon a “Stock Swap”. The number of reload shares granted generally isequal to the number of shares delivered to exercise the option plus, in some cases,any shares withheld for tax withholding obligations. The exercise price of the newoption is the current market price; the reload option generally expires on the samedate that the original option would have.

Repricing – The exchange of high-priced, usually “Out-of-the-Money" stockoptions for lower-priced options.

Restricted Stock Award – Grants of shares of stock subject to restrictions on saleand risk of forfeiture until vested by continued employment or other measures.Restricted stock typically vests in increments over a period of several years.Dividends or dividend equivalent rights may be paid, and award holders may havevoting rights, during the restricted period.

• Performance Accelerated Restricted Stock Award Plans(“PARSAPs”), also known as performance-accelerated stock(“PARS”) and time-accelerated restricted stock award plans(“TARSAPs”) – Grants of restricted stock or restricted stockunits that may vest early upon attainment of specifiedperformance objectives. Otherwise, a time-vesting schedulewould remain in effect.

Section 423 Plan - A type of employee stock purchase plan (named after theapplicable tax code section governing this type of plan), approved by shareholders,that enables employees to purchase stock and not have taxable income until theydispose of the shares after a required holding period.

Shares Outstanding – The number of company shares currently held byshareholders, as tracked by the transfer agent.

Stock Appreciation Right (SAR) – A contractual right, often granted in tandemwith an option, that allows an individual to receive cash or stock of a value equalto the appreciation of the stock from the grant date to the date the SAR isexercised.


Definition of Terms


Stock Option – A contractual right granted by the company, generally under astock option plan, to purchase a specified number of shares of the company’s stockat a specified price (the exercise price) for a specified period of time (generallyfive or ten years). Assuming the exercise price is the same as the market price of ashare of the company’s stock on the grant date, the option will become morevaluable if the market price goes up, because the option effectively gives theoptionee the right to buy the stock in the future at a discount. (This definitiondescribes an “employee stock option,” as distinguished from a “listed” or“exchange-traded” option.)

• Incentive Stock Options (ISOs) – See above.

• Non-Qualified Stock Options (NQOs) – See above.

• Reload Stock Options – See above.

• Performance Stock Options – (performance acceleratedvesting, performance contingent vesting) – Options that havesome aspect of their vesting or exercise price subject to specifiedperformance criteria (e.g., attaining a specified stock price).Options with performance vesting provisions generally becomeexercisable at or near the end of the option term, regardless ofperformance, to secure favorable accounting treatment; someoptions, however, will only vest if performance criteria are met(contingent vesting).

• Premium Stock Options – Options that have an exercise priceabove market value at the time of grant.

• Discount Stock Options – Just the opposite of premiumoptions, having an exercise price below market value at the timeof the grant. Often used when cash compensation is to bedeferred by converting it into stock options.

• Indexed Stock Options – Options that have an exercise pricewhich may fluctuate above or below market value at grant,depending on the company’s stock price performance relative to aspecified index or the movement of the index itself. Indexedoptions differ from performance options in that the exercise priceof indexed options typically remains variable until the option isexercised.

Transferable Stock Options – Options that provide by their terms that they maybe transferred by the optionee, generally only to a family member or to a trust,limited partnership or other entity for the benefit of family members, andsometimes to a charity.

Treasury Stock – Shares of the company’s stock that have been repurchased orotherwise reacquired by the company and are said to be “held in treasury.”Whether the treasury shares count as “issued” or as “outstanding” shares of thecompany is a matter of state corporate law. Generally, a company may not vote itsown shares held in treasury.

Vesting Schedule – Schedule setting forth when, and to what extent, optionsbecome exercisable or restricted stock or stock units are no longer subject toforfeiture. Cliff vesting typically means the option grant vests in one installment.Graded vesting means options vest in multiple installments over time (forexample, 20% per year over five years).

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