On January 27, 2006, the Securities and Exchange Commission (the "SEC") proposed sweeping amendments to the disclosure requirements for executive officer and director compensation and benefits. The SEC also proposed amendments relating to disclosure of related person transactions and certain other items as well as modification of the Form 8-K requirements for reporting compensation arrangements. The amendments would affect the disclosure required in registration statements, proxy and information statements, periodic and current reports and certain other filings.

The amendments would require that, at least for Securities Exchange Act of 1934 ("Exchange Act") reports, the affected disclosures be presented in "Plain English" – whether they were included in the report or incorporated by reference.

Comments are due on the proposed amendments by April 10, 2006. Final rules would apply to:

  • Forms 10-K for fiscal years ending 60 days or more after their publication in the Federal Register;
  • Forms 8-K as to triggering events occurring 60 days or more after their publication;
  • Most Securities Act of 1933 (the "Securities Act"), Exchange Act and Investment Company Act of 1940 registration statements becoming effective 120 days or more after their publication; and
  • Proxy statements filed 90 days or more after their publication.

Companies would only need to provide newly required information for the most recent fiscal year. Compensation or related person transaction disclosure for past periods would not have to be "restated."

Table of Contents

  1. Exexutive Summary
  2. Compensation Discussion and Analysis
  3. Compensation Tables
  4. Changes to Form 8-K
  5. Certain Relationships and Related Transactions
  6. Beneficial Ownership disclosure
  7. Foreign Private Issuers

I. Executive Summary

Executive compensation has been a corporate governance flashpoint and a major source of shareholder unrest and activism. Investors and regulators have been increasingly vocal about the lack of transparent and full disclosure regarding executive compensation. In the face of this wave of escalating criticism and calls for action, the SEC has proposed amendments, which, if adopted, will implement numerous changes to the disclosure requirements for reporting companies. These changes have both an overarching component, mandating new substantive disclosures in a number of areas, and also a detailed component, requiring very specific new elements on discrete aspects of a particular disclosure requirement. In particular, the amendments will:

  • Significantly revamp compensation and related party transaction disclosures in proxy statements and other SEC filings;
  • Revise the Form 8-K reporting requirements for executive compensation events;
  • Consolidate required corporate governance disclosures into one location; and
  • Extend the "Plain English" rules to compensation disclosures contained in or incorporated by reference into Exchange Act reports.

The following summary briefly reviews the principal features of the amendments and highlights the salient changes from existing requirements.

A. Proxy Statement Compensation Disclosures

The heart of the amendments is a major overhaul of the executive compensation disclosure rules. The amendments impose much more extensive compensation reporting and seek to create comprehensive and standardized disclosure. The amendments segment the specific compensation disclosures into three discrete sections with the intent of showing past, current and future compensation for the named executive officers. Each of these three sections include detailed tables of compensation information that are supplemented by narrative discussions.

1. Compensation Discussion and Analysis

Analogous to the Management’s Discussion and Analysis of Financial Condition and Results of Operations section required in Forms 10-K and other SEC filings, the Compensation Discussion and Analysis section is an entirely new disclosure requirement. The Compensation Discussion and Analysis section presents the company’s overarching philosophy and compensation objectives and is intended to provide investors with a contextual framework for the more specific compensation disclosures that follow the Compensation Discussion and Analysis in the proxy statement. The Compensation Discussion and Analysis provides the how and why of the company’s compensation strategies and arrangements.

What’s New/Different:

  • Compensation Discussion and Analysis is a new section that effectively replaces the heavily criticized Compensation Committee Report;
  • Unlike the Compensation Committee Report, the Compensation Discussion and Analysis section is considered soliciting material filed with SEC and is therefore covered by CEO/CFO certifications; and
  • In addition to the Compensation Committee Report, the stock price performance graph is no longer required.

Following the Compensation Discussion and Analysis, there are three discrete sections that display specific information on the past, current and potential future compensation of the named executive officers.

2. Summary Compensation Table

The Summary Compensation Table is the principal disclosure source for current compensation of named executive officers. While retaining and consolidating many of its former elements, the Summary Compensation Table would be revised and would include new columnar information. In addition, the Summary Compensation Table would be supplemented by two subsidiary tables that provide further details on incentive compensation.

What’s New/Different:

  • A Total Annual Compensation column will be required;
  • The principal financial officer will be required to be included in the Summary Compensation Table;
  • The top 3 (rather than the top 4) most highly compensated executive officers in addition to the principal executive officer and the principal financial officer would be included in the Summary Compensation Table;
  • A narrative disclosure accompanying the Summary Compensation Table would have to disclose annual total compensation of up to three non-officer employees whose total annual compensation exceeded that of any named executive officer;
  • Determining which named executive officers to include in the Summary Compensation Table (other than the principal executive officer and the principal financial officer) would be based on annual total compensation rather than base salary and bonus;
  • Grant date dollar values of equity awards (rather than numbers of units) will be required;
  • The distinction between short and long term compensation will be removed;
  • The Other Annual Compensation column will merge into the All Other Compensation column;
  • The de minimis reporting threshold of perquisites will be reduced to $10,000 per year per named executive officer. If the annual $10,000 threshold is exceeded, then the total perquisite value must be included in the All Other Compensation column and all perquisites must be identified in a footnote;
  • Annual aggregate increases in actuarial value of defined benefit plans and pension plans and all earnings (not just above-market earnings) on deferred compensation will be reported in the All Other Compensation column;
  • Values displayed in the Summary Compensation Table would have to appear only in U.S. dollars; and
  • The SEC comment sections in its proposing release contemplate the possible use of another table that would display in more detail the compensation items that are included in the All Other Compensation column.

3. Grants of Performance-Based Awards Table and Grants of All Other Equity Awards Table

The Summary Compensation Table will be supplemented by two new subsidiary tables, the Grants of Performance-Based Awards Table and the All Other Equity Awards Table. The Grants of Performance-Based Awards Table will display stock-based and non-stock-based incentive awards. The Grants of Performance-Based Awards Table will provide supporting detail to the dollar values listed in the Summary Compensation Table for incentive awards and will disclose the material elements of the awards. The Grants of All Other Equity Awards Table will cover any non-performance based incentive awards that do not fall within the Grants of Performance-Based Awards Table.

What’s New/Different:

  • Both equity and non-equity performance awards will be consolidated into tabular displays; and
  • Estimated future payouts, showing minimum, target and maximum payout will be displayed.

4. Outstanding Equity Awards at Fiscal Year-End Table and Option Exercises and Stock Vested Table

These two new tables are designed to show the accumulated value of each named executive officer’s prior compensatory equity awards that are outstanding and also the value the named executive officer realized in the most recent fiscal year from equity awards. The Outstanding Equity Awards at Fiscal Year-End Table provides a fiscal year-end snapshot of each named executive officer’s equity holdings. The Option Exercises and Stock Vested Table shows each named executive officer’s equity compensation realized in the most recent fiscal year.

What’s New/Different:

  • All outstanding equity awards will be consolidated in tabular displays;
  • Restricted stock/stock units that vested in the most recent fiscal year will be reported; and
  • Original grant date values of equity awards will be reported.

5. Retirement Plan Potential Annual Payments and Benefits Table and Nonqualified Defined Contribution and Other Deferred Compensation Plans Table

These two new tables are designed to show potential future compensation for the named executive officers. The Retirement Plan Potential Annual Payments and Benefits Table replaces the existing pension plan table and requires disclosure of a named executive officer’s estimated future post-employment benefits from qualified and nonqualified defined benefit plans. The Nonqualified Defined Contribution and Other Deferred Compensation Plans Table is intended to show each named executive officer’s future compensation that is derived from compensation deferral arrangements.

What’s New/Different:

  • Pension and deferred compensation arrangements will be included in enhanced tabular displays;
  • The projected dollar value of benefits for early and normal retirement of the named executive officers will be specifically disclosed; and
  • Earnings (not just above-market earnings) on deferred compensation will be reported.

6. Narrative Disclosure of Other Post-Employment Arrangements

In addition to the Retirement Plan Potential Annual Payments and Benefits Table and the Nonqualified Defined Contribution and Other Deferred Compensation Plans Table, disclosure of any other arrangement with each named executive officer that could trigger post-employment or change in control compensation or perquisites must be described in a narrative disclosure.

What’s New/Different:

  • The existing termination/change in control disclosure requirement will be superceded; and
  • The estimated annual dollar value of possible payments and the assumptions used to create the estimate will need to be disclosed.

7. Director Compensation Table

What’s New/Different:

  • A new table, similar to the Summary Compensation Table, will report all director compensation for the most recent fiscal year.

B. Other Changes

Among other things, the amendments also will make the following changes:

What’s New/Different for Related Person Transactions:

  • The related party (now called related person) transaction reporting threshold limit will be increased from $60,000 to $120,000;
  • Related person transaction reporting rules will be revised and consolidated in revised Regulation S-K Item 404(a) and will provide a more generalized statement of the applicable disclosure principles;
  • Related person transaction rules will also include disclosure of the company’s policies and procedures for reviewing, approving or ratifying related person transactions; and
  • Conforming amendments will be made to the Rule 16b-3 definition of Non-Employee Director to match new related person rules.

What’s New/Different for Corporate Governance Disclosure:

  • Corporate governance disclosure requirements appearing in several different portions of Regulation S-K (e.g., disclosure requirements relating to director independence, audit committee financial experts, board/committee meetings and compensation committee interlocks) would be consolidated in new Regulation S-K Item 407;
  • Disclosure will be required of any relationship not disclosed pursuant to revised Item 404(a) that the board of directors considered when establishing the independence of directors and nominees for director;
  • The audit committee charter would no longer have to be provided to shareholders in proxy statements if it is available on the company’s Web site; and
  • Disclosures similar to those now required for audit committees and nominating committees will be required for compensation committees and will include discussion of compensation committee processes, authority and delegation, and roles played by consultants and/or executive officers in determining compensation.

What’s New/Different for Plain English rules, Form 8-K, Beneficial Ownership Table:

  • Plain English rules will apply to the compensation/corporate governance/related person transaction information that is contained in or incorporated into the Exchange Act periodic reports;
  • Executive compensation reporting required under Form 8-K will be moved from the material definitive agreement category of Item 1.01 to a new, broader Item 5.02. As a result, fewer executive compensation events will have to be reported within four business days of the underlying event; and
  • Pledged shares must be disclosed in the Beneficial Ownership Table required by Regulation S-K Item 403(b).

II. Compensation Discussion and Analysis

The amendments contemplate a new Compensation Discussion and Analysis section, which would be a narrative designed to provide information about the compensation objectives and policies for named executive officers and context for (but not repeat) the compensation disclosure provided elsewhere. The Compensation Committee Report and the stock price performance graph currently required in proxy and information statements when directors are to be elected would be eliminated.

The Compensation Discussion and Analysis would explain all elements of the company’s compensation for named executive officers by describing:

  • The objectives of the company’s compensation program;
  • What the compensation program is designed to reward and not reward;
  • Each element of compensation and why the company chooses to pay each element;
  • How the company determines the amount (and, where applicable, the formula) for each element; and
  • How each element and the company’s decisions regarding that element fit into the company’s overall compensation objectives and affect decisions regarding other elements.

As proposed, the Compensation Discussion and Analysis section would address the full spectrum of potential remuneration from in-service compensation to post-termination. The proposing release contemplates very company-specific tailoring, specifically stating "[b]oilerplate disclosure would not comply with the proposed item." The instructions provide that the Compensation Discussion and Analysis section should focus on the material principles underlying the company’s executive compensation policies and decisions and the most important factors relevant to analysis of those policies and decisions. However, the SEC intends for the narrative to be sufficiently precise to identify material differences in compensation policies and decisions for individual named executive officers where appropriate.

The amendments list numerous examples of items that should be considered for inclusion in the Compensation Discussion and Analysis, including:

  • Policies for allocating between long-term and currently paid out compensation;
  • Policies for allocating between cash and non-cash compensation, and among different forms of non-cash compensation;
  • For long-term compensation, the basis for allocating compensation to each different form of award (such as relationship of the award to the achievement of the company’s long-term goals, management’s exposure to downside equity performance risk, correlation between cost to the company and expected benefits to the company);
  • For equity-based compensation, how the determination is made as to when the award is granted;
  • What specific items of corporate performance are taken into account in setting compensation policies and making compensation decisions;
  • How specific elements of compensation are structured to reflect these items of the company’s performance and the executive’s individual performance;
  • The factors considered in decisions to increase or decrease compensation materially;
  • How compensation or amounts realizable from prior compensation (e.g., gains from prior option or stock awards) are considered in setting other elements of compensation (e.g., how gains from prior option or stock awards are considered in setting retirement benefits);
  • The impact of accounting and tax treatments of a particular form of compensation;
  • The company’s equity or other security ownership requirements or guidelines (identifying applicable amounts and forms of ownership) and any company policies regarding hedging the economic risk of such ownership;
  • Whether the company engaged in any benchmarking of total compensation or any material element of compensation, identifying the benchmark and, if applicable, its components (including component companies); and
  • The role of executive officers in the compensation process.

Unlike the existing Compensation Committee Report and stock price performance graph, the proposed Compensation Discussion and Analysis would be "soliciting material" and would be "filed" not "furnished" to the SEC, subject to Regulation 14A or 14C and Section 18 of the Exchange Act, and, if included or incorporated into a periodic report, covered by the Sarbanes-Oxley required CEO/CFO certifications.

III. Compensation Tables

The amendments reorganize the compensation tables and related disclosure into three broad categories:

  • Compensation for the most recent fiscal year (and the two preceding fiscal years), as reflected in a revised Summary Compensation Table that presents compensation paid currently or deferred (including options, restricted stock and similar grants) and compensation consisting of current earnings or awards that are part of a plan (which is supplemented by two tables providing back-up information for certain data in the Summary Compensation Table);
  • Holdings of equity-based interests that relate to compensation or are potential sources of future compensation, focusing on compensation-related equity-based interests awarded in prior years and "at risk," as well as recent realization on these interests, such as through vesting of restricted stock or the exercise of options and similar instruments; and
  • Retirement and other post-employment compensation, including retirement and deferred compensation plans, other retirement benefits and other post-employment benefits, such as those payable in the event of a change in control.

By requiring disclosure of both amounts earned (or potentially earned) and amounts subsequently paid out in some situations, this approach raises the risk of "double counting" some elements of compensation, which the SEC concedes in the proposing release.

The proposed compensation tables are set forth in the discussion below. In addition, the same tables, together with the instructions set forth in the proposed amendments to Item 402, appear as an Appendix to this Executive Compensation Client Alert.

A. Officers Covered

1. Named Executive Officers

Under the amendments, the named executive officers are the principal executive officer (PEO), the principal financial officer (PFO) and the three other most highly compensated executive officers. Under the existing rules, they are the chief executive officer and the four other most highly compensated executive officers. The following apply under the amendments:

  • All persons who served as the company’s principal executive officer or principal financial officer during the last fiscal year would be named executive officers regardless of compensation level and whether the officer served in that capacity at the end of the fiscal year;
  • If the principal executive officer or principal financial officer served in that capacity for only part of a fiscal year, information must be provided as to the individual’s compensation for the full year; and
  • As under the existing rules, if a named executive officer (other than the principal executive officer or principal financial officer) served as an executive officer during any part of the fiscal year, information is required as to the individual’s compensation for the full fiscal year.

2. Identification of Most Highly Compensated Officers; Dollar Threshold for Disclosure

Unlike the existing rules, which only look at total annual salary and bonus for the last fiscal year, the amendments use total compensation for the last fiscal year to identify the three most highly compensated executive officers. The amendments eliminate the existing rule that permits companies to exclude an executive officer (other than the chief executive officer) due to an unusually large amount of cash compensation that is not part of a recurring arrangement and is unlikely to continue (but retain an existing similar exclusion for cash compensation relating to overseas assignments performed by executive officers other than the principal executive officer or the principal financial officer).

B. The Summary Compensation Table and Related Disclosure

1. Total Compensation Column

The proposed Summary Compensation Table is set forth below:

SUMMARY COMPENSATION TABLE

Name and principal position

Year
($)

Total
($)

Salary
($)

Bonus
($)

Stock Awards
($)

Option Awards
($)

Non – Stock Incentive Plan Compensation
($)

All Other Compensation
($)

(a)

(b)

(c)

(d)

(e)

(f)

(g)

(h)

(i)

PEO

___
___
___

             

PFO

___
___
___

             

A

___
___
___

             

B

___
___
___

             

C

___
___
___

             

This revised table will require that all compensation be disclosed in U.S. dollars and the sum of all compensation be shown. The new column disclosing total compensation would appear as the first compensation column - column (c). This column would aggregate the total dollar value of each form of compensation in the columns that follow it (columns (d) through (i)).

2. Salary and Bonus Columns

The next two columns would be the Salary and Bonus columns (columns (d) and (e)).

Compensation that is earned, but for which payment will be deferred, would be included as applicable in the Salary, Bonus or other column. A new instruction, applicable to the entire Summary Compensation Table and not just the salary and bonus columns as under the existing instruction, would provide that if any amount of compensation is currently payable (which must be included in the appropriate column) but has been deferred,

the amount deferred must be disclosed in a footnote to the applicable column. (The amount deferred would also generally be reflected as a contribution in the deferred compensation presentation.)

Where salary and bonus for the most recent fiscal year are not determined until after the Summary Compensation Table is initially published disclosure can no longer be deferred to the following year. Under the amendments, a Form 8-K report would need to be filed to disclose (in Item 5.02) any payment, decision or other occurrence that makes the amount of salary or bonus become fully or partially calculable. The Form 8-K disclosure would include the salary or bonus amount and a new total compensation figure including that salary or bonus amount.

3. Plan-Based Awards

a. Stock Awards and Option Awards Columns

The Stock Awards column (column (f)) would show stock-related awards that derive their value from the company’s equity securities or can be settled by issuing the company’s equity securities (e.g., restricted stock, restricted stock units, phantom stock, phantom stock units, common stock equivalent units or other similar instruments that do not have option-like features). The dollar amount shown would be based on the grant date fair value of the award determined pursuant to Financial Accounting Standards Board Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment (FAS 123R) for financial reporting purposes. Stock awards subject to performance-based conditions would also be included in this column. Under FAS 123R, the compensation cost calculated as the fair value is generally recognized for financial reporting purposes over the period in which the employee is required to provide service in exchange for the award (generally the vesting period). Under the amendments, however, the compensation cost calculated as the grant date fair value will be shown as compensation in the year in which the grant is made.

Awards of options, stock appreciation right grants, and similar stock-based compensation instruments that have option-like features would be shown in a similar manner in an Option Awards column (column (g)). Instead of showing the number of securities underlying the awards as the Summary Compensation Table does now, this column would show the grant date fair value of the award as determined pursuant to FAS 123R.

A footnote to the Stock Awards and Option Awards columns would be required which discloses all assumptions made in the valuations of the awards disclosed. The footnote will have to reference the discussion of these assumptions as set forth in the company's financial statements, footnotes to the financial statements or Management's Discussion and Analysis contained in the company's annual report to shareholders that is required to be provided to shareholders concurrently with or before their receipt of the annual meeting proxy statement. The referenced sections will be deemed to be a part of the disclosure provided pursuant to revised Item 402. If the SEC's proposed rule regarding Internet disclosure of proxy materials is finalized, then companies would be allowed to provide hyperlinks from the annual meeting proxy statement to the referenced sections contained in the annual report to shareholders.

The existing requirement in the Options/SAR Grants in Last Fiscal Year Table to report the potential realizable value of each option grant under 5% or 10% increases in value or the present value of each grant (computed under any option pricing model) would be eliminated.

The Stock Awards and Option Awards columns would also show by footnote the earnings on outstanding awards, whether the earnings were paid during the fiscal year, payable during the period but deferred, or payable by their terms at a later date but earned during the year. Prior year options or freestanding stock appreciation awards that the company repriced or otherwise materially modified during the last fiscal year would be disclosed based on the total fair value of the award as modified.

If the award has no performance conditions, but instead vests with the passage of time and continued employment, then the number of shares underlying the award and other details regarding the award would be shown in a separate table covering grants of equity awards. If the award has a performance condition, then the details on the estimated future payouts would be shown in a separate supplemental table covering grants of performance-based awards.

b. Non-Stock Incentive Plan Compensation Column

The Non-Stock Incentive Plan Compensation column (column (h)) would report the dollar value of all other amounts earned during the fiscal year under incentive plans. This column would be limited to awards where the relevant performance measure under the incentive plan is not tied to the price of the company’s equity securities or the award cannot be settled by issuing the company’s equity securities. Performance-based compensation under a long-term plan that is not tied to the price of the company’s stock (e.g., return on assets, return on equity, performance of a division, or other such measures) would be shown in the Summary Compensation Table for the year that the performance criteria are satisfied and the compensation is earned, whether or not payment is actually made in that year. The grant of an award (providing for future compensation if such performance measures are satisfied) under such a plan would be shown in the supplemental Grants of Performance-Based Awards Table in the year of grant (generally some year prior to the year in which performance-based compensation under the plan is reported in the Summary Compensation Table).

Earnings on outstanding awards of other incentive plans would also be included in the Non-Stock Incentive Plan Compensation column similar to the Stock Awards and Option Awards columns.

4. All Other Compensation Column

The final column in the Summary Compensation Table (column (i)) would disclose all other compensation. All compensation not properly reportable in the other columns would have to be reported in this column (including items now reported under the Other Annual Compensation column, which would be eliminated), with each item of compensation that exceeds $10,000 separately identified and quantified in a footnote. Each item of compensation less than that amount would be included in the column (other than aggregate perquisites and other personal benefits less than $10,000 as discussed below), but would not be required to be identified by type and amount.

Items that would be shown in the All Other Compensation column would include:

a. Earnings on Deferred Compensation

The All Other Compensation column would show all earnings on compensation that is deferred on a basis that is not tax-qualified, including non-tax qualified defined contribution retirement plans. Under the existing rules, only the portion that is "above-market or preferential" must be shown.

b. Increase in Pension Value

The All Other Compensation column would also show the total increase in actuarial value to the named executive officer of each plan that provides for the payment of retirement benefits, or benefits that will be paid primarily following retirement, that accrued during the year, including tax-qualified defined benefit plans and supplemental employee retirement plans, or SERPs, but not defined contribution plans.

c. Perquisites and Other Personal Benefits

The All Other Compensation column would further show all perquisites and personal benefits unless the aggregate amount is less than $10,000. Under existing rules, a company may omit perquisites and other personal benefits if the aggregate amount is the lesser of either $50,000 or 10% of the total of annual salary and bonus. Also, under the existing rules, only perquisites and other personal benefits that exceed 25% of the total amount for each named executive officer are required to be identified and quantified by footnote. The amendments modify this requirement so that, unless the aggregate value of perquisites and personal benefits is less than $10,000, any perquisite or other personal benefit must be shown and, if its value is the greater of $25,000 or 10% of total perquisites and other personal benefits, its value would be disclosed. As is the case today, tax "gross-ups" of perquisites would be separately quantified and identified in the tax reimbursement category, even if the associated perquisites or other personal benefits are eligible for exclusion or would not require identification or footnote quantification under the amendments. When perquisites must be identified, they must be described with some particularity, and, in addition, perquisites and personal benefits must be disclosed for directors. See "Compensation of Directors."

As in the past, the amendments do not draw a bright line as to what a perquisite is. The proposing release does, however, provide interpretive guidance regarding factors to be considered in determining whether an item is a perquisite or other personal benefit. Under that guidance:

  • An item is not a perquisite or personal benefit if it is integrally and directly related to the performance of the executive’s duties; and
  • Otherwise, an item is a perquisite or personal benefit if it confers a direct or indirect benefit that has a personal aspect, without regard to whether it may be provided for some business reason or for the convenience of the company, unless it is generally available on a non-discriminatory basis to all employees.

The proposing release states: "The concept of a benefit that is ‘integrally and directly related’ to job performance is a narrow one" and "[t]he fact that the company has determined that an expense is an ‘ordinary’ or ‘necessary’ business expense for tax or other purposes or that an expense is for the benefit or convenience of the company is not responsive to the inquiry as to whether the expense provides a perquisite or other personal benefit for disclosure purposes."

Items that the proposing release identifies as perquisites or personal benefits include:

  • Club memberships not used exclusively for business entertainment purposes;
  • Personal financial or tax advice;
  • Personal travel using vehicles owned or leased by the company;
  • Personal travel otherwise financed by the company;
  • Personal use of other property owned or leased by the company;
  • Housing and other living expenses (including but not limited to relocation assistance and payments for the executive or director to stay at his or her personal residence);
  • Security provided at a personal residence or during personal travel, commuting expenses (whether or not for the company’s convenience or benefit); and
  • Discounts on the company’s products or services not generally available to employees on a non-discriminatory basis.

Items that the proposing release states would not be perquisites or personal benefits include:

  • Travel to and from business meetings;
  • Other business travel;
  • Business entertainment;
  • Security during business travel; and
  • Itemized expense accounts the use of which is limited to business purposes.

The amendments specifically state that the aggregate incremental cost to the company and its subsidiaries is the proper measure of value of perquisites and other personal benefits.

d. Additional All Other Compensation Column Items

The All Other Compensation column also would include:

  • Amounts paid or accrued pursuant to a plan or arrangement in connection with any termination (or constructive termination) of employment or a change in control;
  • Annual company contributions or other allocations to vested and unvested defined contribution plans;
  • The dollar value of any insurance premiums paid by the company for life insurance benefiting a named executive officer;
  • "Gross-ups" or other amounts reimbursed during the fiscal year for the payment of taxes; and
  • The compensation cost computed in accordance with FAS 123R for any security of the company or its subsidiaries purchased from the company or its subsidiaries (through deferral of fees or otherwise) at a discount from the market price of such security at the date of purchase, unless that discount is available generally either to all security holders or to all salaried employees of the company.

5. Captions and Table Layout

The amended Summary Compensation Table eliminates the captions "annual compensation" and "long term compensation." The amendments also modify the definition of "long term incentive plan" to eliminate any distinction between a "long term" plan and one that may provide for periods shorter than one year. The amendments define an "incentive plan" as any plan providing compensation intended to serve as incentive for performance to occur over a specified period.

C. Supplemental Annual Compensation Table

In addition to the Summary Compensation Table, the amendments would require two supplemental tables, the Grants of Performance-Based Awards Table and the Grants of All Other Equity Awards Table, which are derived from and intended to complement the Summary Compensation Table.

The Grants of Performance-Based Awards Table is set forth below:

GRANTS OF PERFORMANCE-BASED AWARDS

Name

Performance-Based Stock and Stock based Incentive Plans: number of shares, units or other rights (#)

Performance –Based Options: number of secutities underlying options(#)

Non-Stock Incentive Plan Awards: number of units or other rights(#)

Dollar amount of consideration paid for award , if any($)

Grant Date for Stock or Option Awards

Performance or other period until vesting or payout and Option Expiration Date

Estimated future payouts

Threshold ($) or (#)

Target ($) or (#)

Maximum ($) or (#)

(a)

(b)

(c)

(d)

(e)

(f)

(g)

(h)

(i)

(j)

PEO

                 

PFO

                 

A

                 

B

                 

C

                 

This new table would show the terms of each performance-based grant, including grants of both stock-based and non-stock-based awards, made to a named executive officer during the last fiscal year, and would include columns detailing the number of shares, units or other rights granted, the dollar amount of the consideration, if any, paid for the award, the grant date, the performance or other period until vesting or payout, the expiration date and the estimated minimum, target and maximum future payout of the award. Under the amendments, an award would be considered performance-based, and thus disclosed in the Grants of Performance-Based Awards Table, if it is subject to either a performance condition or a market condition, as those terms are defined in FAS 123R.

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