Employee Incentive Compensation Plan or Plan Amendment Filed as Exhibit to Form 8-K After Shareholder Approval

Members of our Public Company Advise Practice have been fielding questions on the best practice with respect to filing a company’s equity incentive plan or an amendment to an existing equity incentive compensation plan after shareholder approval at the company’s annual meeting. In these cases, the form of plan or plan amendment would have been included in the company’s proxy statement, but would not have been filed in final form.

Note that although this update refers to equity incentive compensation plans and amendments, Item 5.02(e) of Form 8-K applies to any “material compensatory plan, contract or arrangement (whether or not written), as to which [a company’s] principal executive officer, principal financial officer, or a named executive officer participates or is a party,” and is not limited to plans or amendments that relate to either equity compensation or incentive compensation.  Also note that although this update discusses compensatory plans, agreements and arrangements approved by a company’s shareholders, Item 5.02(e) is not limited to those approved by shareholders.

Although filing a copy of the plan or plan amendment with the Form 8-K is not required per General Instruction B.4. to Form 8-K, we recommend that the company file the plan or plan amendment as an exhibit to the Item 5.02(e) Form 8-K report and not (i) incorporate by reference to the form of plan or plan amendment included with the proxy statement for shareholder approval or (ii) wait to file the plan with the next Quarterly Report on Form 10-Q, as would otherwise be required by Item 601(b)(10)(iii). We would also recommend that the Item 5.02(e) report be filed together with the Item 5.07 Form 8-K, which reports the results of voting at the meeting (and, if applicable and timely, the Item 5.07(d) report on the company’s decision with respect to a say-on-frequency vote at the meeting), because the subject matter is related, the filing deadline is the same and combining the two reportable events may be somewhat more efficient.

We believe that this is better practice because (a) filing the final plan or amendment with the Form 8-K will facilitate more timely reference to the actual terms of the plan or amendment, to the extent that anyone reading the Form 8-K report has questions and (b) may reduce the risk that filing the plan or amendment with the next Form 10-Q or Form 10-K might be inadvertently overlooked.

As background, a company must file a Form 8-K under Item 5.02(e) if either of the following occurs:

  • The company adopts a new material compensation plan, contract or arrangement, or materially amends an existing plan, contract or arrangement, in which the principal executive officer, principal financial officer or other named executive officer participates or is a party; or
  • The company makes or amends a material grant or award under a material compensation plan, contract or arrangement to the principal executive officer, principal financial officer or other named executive officer and the grant or award has terms that are not consistent with the terms of the plan, contract or arrangement previously disclosed.

Note that Item 5.02(e) does not require reporting to the extent that the plan, contract or arrangement “does not discriminate in scope, terms or operation, in favor of executive officers or directors” of the company and is “available generally to all salaried employees” of the company, such as a company-wide group health plan.

Note also that compensatory plans, contracts and arrangements covering directors and executive officers under Item 601(b)(10)(iii)(A), and equity plans, contracts and arrangements adopted without shareholder approval as described in Item 601(b)(10)(iii)(B), are not considered “material definitive agreements” for purposes of Item 1.01, even though they fall within the definition of material contract for purposes of Regulation S-K Item 601(b)(10). While disclosure of compensatory plans, contracts or arrangements covering executive officers is not required under Item 1.01, such disclosure may be required under Item 5.02(e).

Note further that if a plan or plan amendment is subject to shareholder approval, the company is considered to have adopted the plan when the shareholders have approved it. The obligation to file a Form 8-K report is triggered by shareholder approval, not when the plan is approved, subject to shareholder approval, by the board of directors. See SEC Exchange Act Form 8-K Compliance and Disclosure Interpretations, Question 117.08.

As always, please contact any member of PCAP with any questions. Thank you.