January 9, 2004

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NYSE Changes FAQ 19 regarding Shareholder Approval of Equity Comp Plans

Just in case you didn’t notice, after the FAQs were first released, the NYSE staff confirmed that 401(k) plans, 423’s and parallel excess plans are exempt from the shareholder approval requirement portion of the rule (notwithstanding FAQ 1) – but also confirmed that these plans are subject to approval by the independent compensation committee or the majority of independent directors as well as the requirement that NYSE be notified when the exemption is used.

The NYSE staff revised FAQ 19 to clarify this through the addition of a second paragraph – below is the revised FAQ 19:

“19. When will an amendment to a 401(k) plan be considered a material revision?

Only if it affects the company stock aspects of the plan in a way that is otherwise a material revision. For example, adding to or changing investment funds – other than a company stock fund – to such a plan would not be considered a material revision.

401(k) plans are exempt from the shareholder approval requirement of the rule, but the Exchange does require listed companies to seek and obtain approval by their independent compensation committee or a majority of their independent directors for any material revision to an exempt plan. In addition, the Exchange must be notified when a listed company utilizes an exemption (see questions 22 & 26).”