Insider Trading Policy
Adopted August 3, 2004
As Amended through May 13, 2008
This is to confirm and formalize the Company’s policy and procedures regarding trading by employees in Company securities, including common stock. The responsibilities summarized in this policy arise because the Company is publicly owned, and it is important that all employees be familiar with and act in a manner consistent with this policy.
Overview of the Insider Trading Prohibition
Under the federal securities laws, it is unlawful for a person to buy or sell a company’s securities while in possession of material, nonpublic information. It does not matter that the information is not “used” in deciding to make the trade; simply knowing the information when trading can be sufficient to violate the law. In addition, a person can be liable for disclosing this type of information to third parties (often referred to as “tipping”) who then trade in the securities, even though the disclosing person does not engage in any securities transaction or profit from the third party’s trade.
What is "material" information? There is no statutory definition of what type of information is “material.” However, a common guideline is whether there is a substantial likelihood that a reasonable investor would consider the information to be important in deciding whether to purchase or sell a security. By way of example, information that could be "material" includes annual and quarterly financial information; negotiations or agreements regarding significant acquisitions, mergers or dispositions; significant developments in major litigation; a change in dividend policy; developments concerning significant potential liabilities; changes in senior management; or obtaining or losing a major contract or customer. Material information may be either positive or negative, and it may consist of information about a customer, supplier or other company that is confidential and obtained in the course of employment with the Company.
What is "nonpublic" information? In general, information is “nonpublic” until it is publicly disseminated, which can occur by the issuance of a press release, disclosure in a document filed with the SEC, or through a public webcast.
What are the possible penalties? Federal law imposes significant penalties for insider trading violations. Individuals who trade while in the possession of material, nonpublic information can incur a civil penalty of up to three times the profit gained or loss avoided, a criminal fine of up to $5 million, and a jail sentence of up to 20 years. In addition, the Company may be liable if employees engage in insider trading. Individuals who engage in insider trading also may be liable to other purchasers or sellers of securities.
Company Policy against Insider Trading
It is the Company’s policy that no employee may engage in any purchase or sale of the Company’s securities while in the possession of material, nonpublic information. An employee also may not trade securities of a customer or supplier of the Company or of any other company about which the employee possesses material, nonpublic information as a result of employment with the Company. Since the “materiality” of information generally is viewed with “20-20 hindsight,” it is the Company’s policy to be conservative in this regard. This policy covers an employee’s family members as well as others living in the employee’s household, and employees are responsible for ensuring that these individuals also comply with the policy. Transactions that an employee may independently consider necessary (for example, to meet an emergency cash need) are not exceptions to this policy. In addition, employees must maintain the confidentiality of nonpublic information and should not disclose that information to others who do not have a legitimate Company-related need for the information or, without disclosing the nonpublic information, recommend that others buy or sell a security. Company common stock held indirectly by an employee in the Company’s 401(k) plan is covered by this policy.
Company Procedures for Securities Transactions
Pre-clearance for trades by officers and directors. All purchases and sales of Company securities (including transfers of Company common stock within the Company’s 401(k) plan) by officers and directors must be cleared in advance by the Chairman and Chief Executive Officer or, in the case of a transaction by the Chairman and CEO, clearance by the Lead Independent Director. The only exception to this pre-clearance procedure is for the exercise of a stock option, but only if no shares of stock are sold in the open market in connection with the exercise
Permitted time periods for trades by officers, directors and designated employees. Assuming pre-clearance, officers and directors may purchase or sell Company securities only during the “window period” that begins on the third business day after the Company publicly releases quarterly or annual financial results and extends for 20 business days. The Company from time to time may designate non-officer employees whose responsibilities result in the possession by those employees of material, nonpublic information and who may purchase or sell Company securities only during those window periods. However, the ability of an officer, director or other designated person to engage in transactions in Company securities during window periods is not automatic or absolute, since no trades may be made even during a window period by an individual who possesses material, nonpublic information.
Prearranged Trading Plans (Rule 10b5-1 Plans). SEC Rule 10b5-1 provides a defense from insider trading liability if trades occur pursuant to a pre-arranged “trading plan” that meets certain specified conditions. Under this rule, if you enter into a binding contract or written plan that specifies the amount, price and date on which securities are to be purchased or sold, and these arrangements are established at a time when you do not possess material nonpublic information, then you may claim a defense to insider trading liability if the transactions under the trading plan occur at a time when you have subsequently learned material nonpublic information. The details of the rule are complex, and further information about the rule is available upon request from the General Counsel. Any person subject to the pre-clearance requirements of this Policy who wishes to implement a trading plan under SEC Rule 10b5-1 must first pre-clear the proposed trading as set forth above and must pre-clear the plan with the General Counsel. Transactions that comply with a pre-cleared trading plan will not require further pre-clearance at the time of the transaction. Notwithstanding any pre-clearance of a Rule 10b5-1 trading plan, the Company, its officers and directors assume no liability for the consequences of any transaction made pursuant to such plan.
During corporate buyback. Directors and officers shall not sell or exchange any Company securities for a period from the date a Company buyback is announced (or, if not announced, the date any buyback commences), through 30 days following the completion of any buyback.
Prohibited transactions. Officers and directors shall not encumber any portion of their Company securities or use Company securities as collateral for any purpose, unless any such transaction is approved in advance by the Chairman and Chief Executive Officer and the Lead Independent Director.
Compliance and questions. The Company considers it extremely important that all employees conduct themselves in a manner consistent with this insider trading policy. Each employee is responsible for his or her compliance with this policy and the related procedures, and the Company will endeavor to answer any questions employees may have regarding this subject. Employees are requested to direct any questions regarding the Company’s insider trading policy or procedures to the Company’s general counsel.