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Long Term Incentive Plan Clawbacks: Design, Tax and Other Legal Issues Presented by: Kathryn Bush April 10, 2012 Introduction • Since 2008, substantial growth of the use of clawbacks in Canada • Blakes Bulletin: “Clawbacks Coming to Canada” dealing with securities and corporate law aspects • Current public examples • Design issues • Canadian tax issues 2 U.S. Statutory Clawbacks • Sarbanes-Oxley Act of 2002 (SOX) – negative revision of financial results – executive misconduct – material non-compliance in the financial results – any incentive payments and entire payment – 1-year period – CEO and CFO – enforced by SEC 3 1
U.S. Statutory Clawbacks (cont’d) • Dodd-Frank Wall Street Reform & Consumer Protection Act (DFW) – applies in wider circumstances and to more employees than SOX – any material non-compliance that results in a financial restatement – all current and former executives 4 U.S. Statutory Clawbacks (cont’d) – 3-year look back – absolute liability – excessive portion of the award – enforced by the Issuer 5 Financial Stability Board Principles • FSB co-ordinating national financial authorities • Bank of Canada, OSFI and federal Ministry of Finance are FSB members • Principles for Sound Compensation Practices - Implementation Standards 6 2
Page 1 and 2: Strategies for Executive Compensati
Page 3 and 4: April 10, 2012 Strategies for Execu
Page 5 and 6: Incentive And Stock Compensation Ar
Page 7 and 8: Types of Private Equity Transaction
Page 9 and 10: Participation of Target/Portfolio C
Page 11 and 12: Exit Strategies and Investment Hori
Page 13 and 14: Key Design Considerations and Commo
Page 15 and 16: Stock Options - Rules for Canadian-
Page 17 and 18: Stock Options - Rules for Canadian-
Page 19 and 20: Share Purchase Loans • Management
Page 21 and 22: Cash-Based Long-Term Incentive Plan
Page 23 and 24: Cash-Based Long-Term Incentive Plan
Page 25 and 26: Non-Portfolio Company Incentives (c
Page 27 and 28: Acquirer (Buyer) Priorities in a Co
Page 29 and 30: Program Treatment - Equity Compensa
Page 31: Dollar Amount Converted to RSUs/DSU
Page 35 and 36: Type and Relative Prevalence of Cla
Page 37 and 38: Potential Tax Relief for Later Year
Page 39 and 40: Conclusion • Clawbacks in Canada
Page 41 and 42: Long Term Incentive Plan Clawbacks:
Page 43 and 44: - 3 - are subject to recoupment. It
Page 45 and 46: - 5 - U.S., a wide range of incenti
Page 47 and 48: - 7 - review our policy to assure t
Page 49 and 50: - 9 - Cash and Earnings Bonus Unit
Page 51 and 52: - 11 - underway or contemplated at
Page 53 and 54: - 13 - operate, the terminated part
Page 55 and 56: - 15 - use of the provision where a
Page 57 and 58: - 17 - interest paid or payable the
Page 59 and 60: - 19 - right is to postpone tax pay
Page 61 and 62: - 21 - taxpayer under subsection 7(
Page 63 and 64: Bill Sutherland Bill is a Senior Co

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