Compensation Philosophy

Our philosophy in setting compensation policies for executive officers is to maximize stockholder value over time. The Leadership Development and Compensation Committee (LDCC) sets our compensation policies applicable to executive officers, including the chief executive officer, and evaluates the performance of such officers. The LDCC strongly believes that executive compensation should be directly linked to continuous improvements in corporate performance and increases in stockholder value and has adopted the following guidelines for compensation decisions:

Provide a competitive total compensation package that enables Sun to attract and retain key executive talent;

Align all pay programs with Sun's annual and long-term business strategies and objectives; and

Provide variable compensation opportunities that are directly linked to the performance of Sun and that link executive reward to stockholder return.

Options and Restricted Stock

The LDCC also believes that it is in the best interests of our stockholders for our executive officers to own Sun stock.

The LDCC believes that stock options provide our executive officers with the opportunity to purchase and maintain an equity interest in Sun and to share in the appreciation of the value of the stock. The LDCC believes that stock options directly motivate an executive to maximize long-term stockholder value. The options also utilize vesting periods in order to encourage key employees to continue to be employed by Sun.

The Committee considers the grant of each option subjectively, considering factors such as the individual performance of executive officers and competitive compensation packages in the industry.

For more information regarding executive compensation and employee stock options please review our most recent proxy statement.

Mandatory Expensing of Stock Options

For detailed information regarding Sun's position on the issue of mandatory expensing of stock options, please review Sun's response in support of The Broad-Based Stock Option Plan Transparency Act of 2003, HR 1372 and S. 979.