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18 July 2006
In June 2006 the Toronto Stock Exchange issued a notice with important implications for listed issuers with stock incentive compensation plans.
The principal purpose of the notice was to advise that listed issuers wishing to avoid a requirement to obtain securityholder approval for any amendment to their stock incentive compensation plans, whether material or not, have until June 30 2007 to alter their plans to include a detailed amendment procedure. After that date, listed issuers with plans that do not specifically provide that securityholder approval is not required for specified types of amendment will be required to obtain such approval for any amendment. A broad general amendment provision, typical of many plans, will not suffice to avoid the requirement for securityholder approval.
The Toronto Stock Exchange has advised listed issuers to introduce detailed amendment provisions in their plans at their next meeting of securityholders. Issuers proposing to include a provision which allows the board of directors (or a similar body) to make fundamental changes to a plan should include a description of the general nature of the changes that the board may make, together with examples. The Toronto Stock Exchange's rules continue to provide that certain amendments will require disinterested securityholder approval (notwithstanding the plan terms), including extensions or re-pricing of insiders' options.
The notice also provides an exception to the prohibition on extending insiders' stock incentives without disinterested securityholder approval in circumstances where the stock incentives expire during a trading blackout period implemented by the listed issuer. The Toronto Stock Exchange has advised that stock incentive compensation plans may be amended to provide for stock incentive rights to have conditional expiries - that is, fixed expiry times with provision for an extension if the fixed expiry occurs within a blackout period.
For further information on this topic please contact Neill May or Mark Haber at Goodmans LLP by telephone (+1 604 682 7737) or by fax (+1 604 682 7131) or by email (firstname.lastname@example.org or email@example.com).
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