The Securities and Exchange Commission has adopted final rules requiring increased disclosure of a company's equity compensation plans, with a focus on heightened disclosure of nonshareholder-approved plans. Below is a summary of the new disclosure and filing requirements. The published release regarding the new rules can be found at the SEC website (http://www.sec.gov/rules/final/33-8048.htm).

A significant portion of the new disclosure must be in a tabular format with the following information:

1. the aggregate number of securities to be issued upon the exercise of outstanding compensatory options, warrants or rights to purchase securities,

    

2. the weighted average exercise price of such outstanding options, warrants and rights, and

    

3. (the number of securities remaining available for future issuance under the company's equity incentive plans.

The required information may be aggregated (including all company plans, individual agreements and acquired plans that may have been assumed as the result of a merger) into two groups: those plans or agreements that have been approved by shareholders and those that have not.

This is how the tabular presentation will look:

The SEC is allowing the aggregation of plans and agreements to reduce the burden on companies that would result from a requirement to list the plans individually. However, the SEC has required the disclosure to be grouped into these two categories to ensure that investors have better clarity regarding the impact of nonshareholder approved plans.

The new rules also require a narrative description of all company equity compensation plans not approved by shareholders. If that information is already included in the required SFAS 123 accounting disclosure, the company may cross-reference to the stock option financial statement footnote, to the extent such footnote distinguishes between approved and non-approved plans.

In years that a company is seeking shareholder approval of any equity compensation plan, the same information for all plans must be included in the company's proxy statement. Where the shareholder proposal would have the effect of increasing the number of shares available for issuance under a plan, the table should include the number of securities remaining available for issuance under that plan, but should not include the number of the proposed increase.

In years that the company is required to make disclosures in its proxy statement, the required disclosure in the Form 10-K may be satisfied by incorporating by reference to the proxy statement, so long as the proxy statement is filed not later than 120 days after the end of the company's fiscal year.

The new tabular disclosure requirements are reflected in amendments to Item 201 of Regulation S-K. In addition, the SEC has amended Item 601(b)(10) of Regulation S-K, which sets forth the requirements for filing material contracts as exhibits to certain filings with the SEC. These include the company's annual report on Form 10-K. The amendment provides that all equity compensation plans adopted without shareholder approval that include grants to employees (whether or not they are executive officers) must be filed as an exhibit under Item 601(b)(10), unless such plan is immaterial in amount or significance.

In keeping with its current policies regarding disclosure of executive compensation for foreign registrants, the SEC has determined that it will not extend these requirements to foreign issuers who make filings with the SEC.

Companies must begin complying with the new rules starting with their Form 10-Ks to be filed for fiscal years ending on or after March 15, 2002. If the company is seeking shareholder approval of an amendment to an equity compensation plan, they must begin complying with the new rules in their proxy statements filed for annual shareholder meetings on or after June 15, 2002.