Blackberry 2007 Annual Report Download - page 16

14
RESEARCH IN MOTION LIMITED
management’s discussion and analysis of financial
condition and results of operations continued
FOR THE THREE MONTHS AND FISCAL YEAR ENDED MARCH 3, 2007
On October 13, 2006, in accordance with applicable
Canadian securities laws, the Company contacted the OSC
on behalf of all Canadian securities regulators and requested
that the OSC issue a management cease trade order (the
“MCTO”) prohibiting trading in the Company’s securities
by its senior officers, directors and other insiders (who were
already subject to a Company-initiated trading blackout) as a
result of the Company’s inability to file its financial statements
for the second quarter of fiscal 2007. Under the terms of
the MCTO, the MCTO will be automatically revoked on the
second business day following the receipt by the OSC of all
filings the Company is required to make pursuant to Ontario
securities laws.
Scope of the Review
The Special Committee reviewed the facts and circumstances
surrounding the 3,231 grants of stock options to acquire
common shares that were made between December 1996
and August 2006 to 2,034 employees and directors of the
Company. Each grant was evaluated individually based
on the particular facts and circumstances in each case.
The Special Committee reviewed approximately 900,000
electronic and paper documents. The Special Committee
also reviewed stock-based awards granted prior to the
adoption of the Stock Option Plan. The Special Committee
conducted interviews of all then-current board members,
members of senior management and certain other employees
and former employees of the Company identified as being
involved in the options granting process or who were
otherwise relevant to the Review.
After reviewing all available relevant documentation,
the Special Committee determined the appropriate
measurement dates for the options for accounting purposes
based on the best available information, including:
• minutes of meetings of the Board of Directors and
Compensation Committee;
• contemporaneous emails and other documentation;
• personnel files and payroll records;
• insider trading reports; and
• interviews with employees, officers and directors.
In some cases where evidence existed that the recorded
grant date for an option was not the accounting
measurement date, contemporaneous documentation
evidencing the finality of the grant does not exist in a manner
that would enable the Special Committee to determine, with
finality, the measurement date for accounting purposes. In
these cases, the Special Committee used alternative methods
to determine an accounting measurement date. The Special
Committee noted that the majority of these instances
related to the period prior to February 27, 2002 (the period
in which the Company applied variable plan accounting for
all option grants, as described below), and therefore the
impact of the determination of an appropriate measurement
date was limited to the impact on the pro forma disclosures
under Statement of Financial Accounting Standard No. 123,
Accounting for Stock Based Compensation (“SFAS 123”),
and is not significant to either the pro forma disclosures or
to the amounts recorded in the Company’s statements of
operations under APB Opinion No. 25, Accounting for Stock
Issued to Employees (“APB 25”).
In cases where the contemporaneous documentation
evidencing the measurement date was not complete, the
Special Committee reviewed and analyzed all available
correspondence, including the Company’s master stock
option tracking spreadsheets and the Company’s instructions
to outside counsel to file insider trading reports. The Special
Committee used this documentation to support specific
measurement dates, or to establish a range of dates in which
to calculate an average rate to apply as a measurement date
proxy. The option tracking spreadsheets and instructions
to file insider trading reports were considered only when
there was no earlier correspondence or other evidence to
document a more reliable measurement date.
The Company believes that the evidence used to support
the measurement dates as described above and as supported
by the Special Committee’s conclusions is consistent with the
provisions of APB 25 and recent guidance from the SEC.
Option Granting Process
Subsequent to the IPO in 1997, the Stock Option Plan
provided for all options to be approved by the Board of
Directors or the Compensation Committee. Additionally, the
Stock Option Plan provided for options to be granted at an
exercise price not less than the closing price of the common
shares on the Toronto Stock Exchange or the NASDAQ Stock
Market, as applicable, on the last trading day preceding the