Definitions for Security options

Annual vesting limit

The total of the option benefits that may be deferred is subject to an annual limit of $100,000. The limit is based on the fair market value of the securities at the time the option was granted and the year in which these options could first be exercised. The amount of the benefit that can be deferred is not itself limited to $100,000.

Exercise

The term is used to describe the acquisition of securities under the terms of the option agreement but does not include the acquisition of shares under a provision of the option that allows an employee to receive shares equal in value to an increase in the value of the option.

Fair market value

The fair market value of a security at any particular time is usually equal to the value quoted on a stock exchange, if it is publicly traded. However there may be circumstances where this may not be the case. Specifically the fair market value of a security is the price that can be obtainable in an open and unrestricted market between knowledgeable, informed and prudent parties acting at arm's length where neither party is under any compulsion to purchase or sell the security.

Grant an option

The provision by an employer, or a qualifying person that does not deal at arm's length with the employer, to an individual, of a right to acquire securities of the employer or of a qualifying person that does not deal at arm's length with the employer.

Qualified donee

A qualified donee is generally a person to whom gifts can be made that qualify for the charitable donation deduction or tax credit.

Qualifying person

A qualifying person is a corporation or a mutual fund trust.

Security

A security is a share of the capital stock of a corporation or a unit of a mutual fund trust that is qualifying person.

Specified value

In most cases, the specified value of a security is the fair market value (FMV) of the security at the time the option is granted. Where there have been exchanges of options (to which subsection 7(1.4) of the Act apply or the security has been subject to stock splits or consolidations, the specified value is the initial FMV adjusted to take into account such events.

Specified shareholder

In general, a specified shareholder is a person who directly or indirectly owns 10% or more of the issued shares of any class of the capital stock of the corporation or any related corporation.

Vested

The term vested refers to the time when the employee can first exercise an option.

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