Introduction

Your Board of Directors has determined that it would be in your and our best interests to implement the Stock Option Exchange Program. Under this program, our employees will be given a one-time opportunity to exchange their current stock options for proportionately fewer options at a new exercise price.

Stock options are a critical component of our compensation arrangements for employees. They encourage our employees to act as owners, which helps to align their interests with yours. We grant stock options to motivate and reward our employees for profitable growth and to encourage them to continue their employment with us.

Due to our undervalued stock price and the economic slow down, virtually all of our employees have stock options with exercise prices significantly higher than the current trading price of our common stock. Simply put, the perception is that these stock options have no value. As a result, our options are no longer effectively providing the employee motivation and retention that they were intended to provide.

In keeping with our recently announced business realignment, which is designed to help drive profitable growth, the Stock Option Exchange Program provides us a fresh start to motivate and reward our employees for their role in achieving this growth. By realigning the exercise prices of previously granted stock options with the current market price of our common stock, the program increases our employees' opportunity to realize value from their stock options.

We have structured the program to strike a balance between your interests and those of our employees. This is most evident by the manner in which the stock options will be exchanged. Using the value neutral approach described below, employees participating in the program will generally receive new options for a lesser number of shares then they surrender. This approach is designed to limit any dilution in your ownership.

Although your approval of the Stock Option Exchange Program is not required by law, by any regulations or by the terms of our stock option plans, we believe that sound corporate governance dictates that the program not be implemented unless it is approved by you. Several plan amendments to our stock option plans are necessary to implement the program. While your approval is not required for these amendments, we will not make these plan changes without your approval.