(dated October 31, 2005)

Talking Points - Why-and How to- Implement Internal Pay Equity?

Fred Cook, Frederic W. Cook & Co.

Why?

1. It is fair

2. It is economical

3. It mitigates market biases

4. It leads to better employee relations and a stronger company

How?

1. Best to proceed with CEO's cooperation and consent

2. Requires disconnecting CEO pay from CEO pay surveys

3. Set appropriate and competitive total compensation structure for major business heads

4. Then layer CEO and COO above that level, based on historical relationships or common sense, e.g., CEO/COO/EVP of 100/75/60-50

5. Mix may vary between levels, but need not