EXHIBIT 4.7
CORDIANT COMMUNICATIONS GROUP PLC
RULES OF
THE CORDIANT COMMUNICATIONS GROUP
EXECUTIVE SHARE OPTION SCHEME
Adopted in Extraordinary General Meeting on 12 June 2001
Approved Part approved by the Inland Revenue
under Reference X21465 on 25 June 2001
Balance of Rules not approved by the UK Inland Revenue
Macfarlanes
10 Norwich Street
London EC4A 1BD
CORDIANT COMMUNICATIONS GROUP EXECUTIVE SHARE OPTION SCHEME
1 Definitions
1.1 In these Rules the following words and expressions shall have, where
the context so admits, the following meanings:
Advance Payment: an amount equal to the Maximum Number multiplied by the Market
Value of a Share on the Date of Grant divided by eight, such amount
being a payment on account of the Exercise Cost;
Announcement Date: the date on which the Company announces its results for any
period;
Approval Date: the date on which the Scheme is approved by the Company in
general meeting;
Associated Company: has the same meaning as in section 416 of the Income and
Corporation Taxes Act 1988;
Auditors: the auditors for the time being of the Company (acting as experts and
not as arbitrators);
Board: the board of directors of the Company or the Committee;
Bonus Discounted Option: a Discounted Option granted in conjunction with a Cash
Bonus to an Eligible Employee subject to the provisions of this
Scheme;
Cash Bonus: the bonus payable by a Participating Company or the Trustees to a
Participant on submission of an Exercise Notice equal to:
(i) the Exercise Cost for the Shares being acquired as a result
of that Exercise Notice; less
(ii) the Advance Payment in respect of the Shares being acquired
as a result of that Exercise Notice;
Committee: the Remuneration and Nominations Committee of the Board or such other
duly constituted committee of the Board as may be delegated with the
authority to consider the remuneration of directors and senior
employees of the Company such committee to be comprised wholly or
mainly of non-executive directors of the Company;
the Company: Cordiant Communications Group plc registered in England No.
1320869;
Control: has the same meaning as in section 840 of the Income and Corporation
Taxes Act 1988;
Date of Grant: the date on which an Option is, was or is to be granted under the
Scheme, pursuant to Rule 2.1;
Dealing Day: a day on which The Stock Exchange is open for the transaction of
business;
Discounted Option: an Option granted under the Scheme which is not a Market
Value Option;
Eligible Employee: a Group Employee who is required to devote substantially all
his working time to his duties with a Participating Company and who
has been nominated to participate in this Scheme by the Committee;
Exercise Cost: the amount which a Participant shall pay to acquire Shares under
his Option being equal to either:
(i) for a Standard Discounted Option, the Advance Payment; or
(ii) for a Bonus Discounted Option, the aggregate of
(a) the Advance Payment; and
(b) the excess, if any, of the aggregate Market Value
on the Date of Grant of the Shares to be acquired
on the exercise of that Option over the Advance
Payment; or
(iii) for a Market Value Option, the aggregate Market Value on the
Date of Grant of the Shares to be acquired on the exercise
of that Option;
2
Exercise Notice: a notice in writing to be given by the Participant on exercise
of an Option in such form as the Committee may from time to time
determine which shall, inter alia, specify:
(i) the number of Shares in respect of which the Option is to be
exercised;
(ii) that, in the case of a Discounted Option, the Participant
agrees that the appropriate proportion of the Advance
Payment should be set against the Exercise Cost by reference
to the proportion that the number of Shares being acquired
bears to the Exercise Number;
(iii) that, in the case of a Bonus Discounted Option, the
Participant agrees that the Cash Bonus due on submission of
the Exercise Notice be payable directly to or be retained by
the Grantor to be used to satisfy that part of the Exercise
Cost not satisfied by the Advance Payment;
(iv) that, in the case of a Bonus Discounted Option where there
is Withholding in respect of the Cash Bonus, that the
Exercise Notice can be treated by the Grantor as being a
series of Exercise Notices exercisable on the same day and
that the Participant agrees that the Grantor (or its agent)
can sell on behalf of the Participant sufficient Shares
following each such exercise other than the last one to
realise sufficient money to meet the Exercise Cost of the
subsequent exercise where the Exercise Cost was not
satisfied by the net amount received by the Grantor from the
Cash Bonus after Withholding;
(v) that where there is Withholding in respect of the exercise
of the Option that the Participant agrees that, unless the
person required to settle the Withholding is satisfied that
alternative arrangements have been made to ensure the
Withholding can be properly dealt with, the Grantor (or its
agent) can sell on behalf of the Participant sufficient
Shares to meet the amount of the Withholding;
(vi) that the Participant agrees with his employer to allow his
employer to recover the employer's National Insurance/social
security contribution liability relating to the exercise of
the Option from the Participant or, as the case may be,
enters into a
3
joint election with his employer that the employer's
National Insurance/social security contribution liability
shall be transferred to the Participant;
Exercise Number: the number of Shares which may be acquired on the exercise of
an Option calculated as set out in the Performance Condition;
Grantor: the Trustees or the Committee whichever grants the Option under Rule
2.1;
Grant Period: a period of forty-two days commencing on:
(i) the Approval Date;
(ii) the day following an Announcement Date; or
(iii) a day on which the Committee deems that exceptional
circumstances have occurred (which may without limitation
include recruitment of a new employee or promotion of a
Group Employee);
Group Employee: a director or employee of any Participating Company;
Injury, Ill Health, Disability: the cessation of employment or office by reason
of injury, ill health or disability provided the Board is satisfied,
on production of such evidence as it may reasonably require:
(i) that the individual has ceased to exercise and, by reason of
injury, ill health or disability, is incapable of exercising
that office or employment; and
(ii) that the individual is likely to remain so incapable for the
foreseeable future;
Market Value: in relation to a Share on any day its middle market quotation for
the immediately preceding Dealing Day as derived from the Daily
Official List of UK Listing Authority;
Market Value Option: an Option granted under the Scheme under which the price
payable by the Participant per Share is the Market Value of a Share at
the Date of Grant;
4
Maximum Number: the maximum number of Shares as determined in accordance with
Rule 2 which can be acquired on the exercise of an Option assuming the
Performance Condition is satisfied in full;
Model Code: the Model Code for transactions in securities by directors published
from time to time by The Financial Services Authority, and any code of
practice published by The Financial Services Authority in addition to
or replacement of such publication;
Old Schemes: the Cordiant Communications Group Equity Participation Plan and the
Cordiant Communications Group Performance Share Option Scheme both of
which were adopted by the Company in general meeting on 23 October
1997 and the Zenith Executive Incentive Plan adopted by the Board of
Zenith Media Holdings Limited on 8 December 1997;
Option: a right to acquire Shares granted or to be granted to Eligible Employees
by the Grantor pursuant to Rule 2.1 which has not lapsed, been
surrendered, renounced or exercised in full and the term "Option"
shall be construed to mean "Standard Discounted Option" or "Bonus
Discounted Option" or "Market Value Option" or all of them as the
context requires;
Participant: an Eligible Employee who has been granted an Option or (where the
context admits) his legal personal representative(s);
Participating Company: the Company and any other company of which the Company
has Control (and which is a Subsidiary of the Company);
Performance Condition: any condition imposed by the Committee under Rule 3.1,
whereby an Option is granted on the basis that it may not be
exercised, in whole or in part, until and to the extent that the
condition has been satisfied;
Phantom Option: means a contingent right to be paid a cash sum by the Trustees
or the employing company granted or to be granted to Eligible
Employees pursuant to the Addendum to these Rules which has not
lapsed, been surrendered, renounced or exercised in full;
5
Pregnancy: the cessation of employment arising upon the cessation of the right
to return to work pursuant to the provisions relating to maternity
contained in the Employment Rights Act 1996;
Recognised Exchange: a recognised stock exchange within the meaning of section
841 of the Income and Corporation Taxes Act 1988 or a recognised
investment exchange within the meaning of the Financial Services Act
1986;
Redundancy: the cessation of employment or office by reason of redundancy within
the meaning of the Employment Rights Act 1996;
Retirement: the cessation of employment or office by reason of retirement at,
or- beyond such age at which an individual is entitled to retire in
accordance with the terms of his contract of employment or where no
such age is specified at 60 or any other age with the consent of the
Board;
the Rules: the rules of the Scheme as the same may be amended from time to time
and Rule shall be construed accordingly;
the Scheme: this Cordiant Communications Group Executive Share Option Scheme
constituted and governed by the Rules with and subject to any
amendments thereto properly effected;
Secretary: the secretary of the Company or any agent acting on his behalf;
Share: an ordinary share of 50p in the capital of the Company;
Standard Discounted Option: a Discounted Option other than a Bonus Discounted
Option granted to an Eligible Employee subject to the provisions of
this Scheme;
Subsidiary: a company which is a subsidiary of the Company within the meaning of
section 736 of the Companies Act 1985;
The Stock Exchange: London Stock Exchange plc;
6
Trust: a trust for the benefit of those persons named in section 743 Companies
Act 1985, established by the Company or any Associated Company
thereof, and nominated for the purposes of this Scheme by the
Committee;
Trustees: the original trustees or other trustees for the time being of the
Trust who confirm to the Company that they will comply with the
Scheme; and
Withholding: a liability of a Participant to tax, duties or other amounts
arising on the exercise of an Option or the receipt of a Cash Bonus
which a Participating Company and/or the Trustees are required to
withhold and pay over to the appropriate authorities on account of
that liability.
1.2 In these Rules, except insofar as the context otherwise requires:
1.2.1 words denoting the singular shall include the plural and vice versa;
1.2.2 words importing a gender shall include every gender and references to
a person shall include bodies corporate and unincorporated and vice
versa;
1.2.3 reference to any enactment shall be construed as a reference to that
enactment as from time to time amended, modified, extended or
re-enacted and shall include any orders, regulations, instruments or
other sub-ordinate legislation made under the relevant enactment;
1.2.4 headings and captions are provided for reference only and shall not be
considered as part of the Scheme; and
1.2.5 all numbers required to be calculated shall be calculated to four
decimal places, unless otherwise specified.
2 Grant of Options
2.1 Subject to Rules 3 and 4, Options may be granted under this Scheme at
any time or times during a Grant Period but not later than the tenth
anniversary of the Approval Date either by the Trustees after
consulting the Committee or by the
7
Committee under the terms of these Rules. However, if the Grantor is
prevented by statute, order, regulation or government directive or the
Model Code from granting Options within any such periods, then the
Trustees may, with the agreement of the Committee, or the Committee
may grant Options within 21 days after the lifting of such
restrictions.
2.2 If the Trustees grant the Options, then when the Committee recommends
to the Trustees Eligible Employees to be granted Options, they shall
also recommend:
2.2.1 the Maximum Number for each Eligible Employee and/or
2.2.2 the Advance Payment which each Eligible Employee should be asked to
make in respect of a Discounted Option; and
2.2.3 whether the Option to be granted should be a Standard Discounted
Option or a Bonus Discounted Option or a Market Value Option.
The Trustees will then determine the Maximum Number and/or the Advance Payment
(if any) and the type of Option for each Eligible Employee as they
think fit.
If the Committee grants the Options then it shall make the determination of the
Maximum Number and/or the Advance Payment (if any) and the type of
Option for each Eligible Employee as it thinks fit.
2.3.1 Immediately before the Trustees grant Options in accordance with Rule
2.1 above the Trustees shall inform the Company of the aggregate of
the Maximum Numbers for the Options to be granted. The Trustees shall
also inform the Company as soon as practicable of any subsequent
reduction in the Maximum Numbers which arise as a result of any
Options granted by the Trustees lapsing, being surrendered or being
renounced.
2.3.2 If the Committee is granting the Options, it may do so either on the
basis that the Options are options to subscribe for Shares or that the
Trustees have agreed to satisfy the exercise of the Options. In the
case of Options to be satisfied by the Trustees the Committee will
inform the Trustees and the Company of the
8
aggregate of the Maximum Numbers for the Options to be granted. The
Committee shall also inform the Trustees and the Company as soon as
practicable of any subsequent reduction in the Maximum Numbers which
arise as a result of any Options granted by the Committee lapsing,
being surrendered or being renounced.
2.4 Upon receipt of the information pursuant to Rule 2.3 the Company, if
the Trustees do not already have sufficient shares available as part
of the assets of the Trust, will grant one or more options to the
Trustees over an aggregate number of Shares equal to the aggregate of
the Maximum Numbers of the Options which have been notified to the
Company or such lesser number as are required to ensure that the
Trustees shall have available sufficient Shares as may be required to
satisfy such Options pursuant to the Scheme.
2.5 Options shall be granted by deed and shall be evidenced by the issue
of a letter of grant to an Eligible Employee by the Grantor, such
letter constituting, in the case of a Discounted Option, the call for
the payment of the Advance Payment by that Eligible Employee. The
payment of the Advance Payment shall constitute a payment on account
of the Exercise Cost under a Discounted Option. The Advance Payment
shall not be refundable.
2.6 Any Option may be renounced in whole or in part by any Participant not
later than 30 days after the Date of Grant of that Option in which
case the Option shall for all purposes be taken never to have been
granted.
2.7 An option certificate shall be issued as soon as practicable after the
Date of Grant (or, in the case of a Discounted Option, after the
Grantor is in receipt of the Advance Payment), specifying the Maximum
Number, the Date of Grant, the Exercise Cost and the Performance
Condition.
2.8 No Option may be transferred, assigned or charged and any purported
transfer, assignment or charge shall be void ab initio. Each option
certificate shall carry a statement to this effect. For the avoidance
of doubt, this Rule 2.8 shall not prevent the Option of a deceased
Participant being exercised by his personal representative(s) within
the terms of these Rules.
9
3 Performance Condition
3.1 The exercise of any Option shall be subject to the satisfaction of a
Performance Condition which shall be determined by the Committee and
(where necessary) notified to the Trustees prior to the grant of an
Option. The Performance Condition which will determine the Exercise
Number for any Option must:
3.1.1 be based on such objective conditions as the Committee shall determine
from time to time PROVIDED THAT such conditions shall relate to the
underlying financial performance of the Company and that the exercise
of an Option shall not be dependent on the discretion of any person;
and
3.1.2 be specified at the Date of Grant.
3.2 The Committee may in its discretion waive, vary or amend the
Performance Condition:
3.2.1 where events happen which cause the Committee to consider that the
Performance Condition referred to in Rule 3.1 no longer represents a
fair measure of performance PROVIDED THAT it reasonably considers the
Performance Condition as varied or amended is not materially more or
less difficult to satisfy and FURTHER PROVIDED THAT the Participants
are given notice in writing of the variation as soon as practicable;
or
3.2.2 in accordance with the terms specified in the Performance Condition.
3.3 The Board shall, as soon as practicable following the measurement of
any such Performance Condition, give written notice to the
Participants concerned of the Exercise Number for their Options.
3.4 For the avoidance of doubt, the Performance Condition which shall
apply to the grant of Options before the Announcement Date for the
final results for the first accounting reference period ending after
the Approval Date under this Scheme shall be as follows:
10
3.4.1 for Eligible Employees who are not directors of the Company, it shall
be EPS Performance as set out in Part A of the Schedule to this
Scheme; and
3.4.2 for Eligible Employees who are directors of the Company, it shall be
EPS Performance for three quarters of the Shares under each Option and
TSR Performance, as set out in Part B of the Schedule to this Scheme,
for one quarter of the Shares under each Option.
4 Limits on this Scheme
4.1 The number of Shares which may be issued or become issuable pursuant
to this Scheme and the Old Schemes may not exceed 12% of the issued
ordinary share capital of the Company from time to time PROVIDED THAT
the Board shall adjust the aggregate number of Shares to reflect any
subsequent variation of share capital of the Company in such manner as
the Auditors confirm in writing to be, in their opinion, fair and
reasonable. For the purposes of this Rule 4.1, once the Exercise
Number has been determined for an Option then that Option shall be
treated as being an Option over the Exercise Number rather than the
Maximum Number of Shares and Options which have lapsed shall not be
counted.
5 Exercise of Options
5.1 Subject to Rules 5.2 and Rule 6 any Option may only be exercised:-
5.1.1 by the Participant providing he is a Group Employee on the proposed
date of exercise
5.1.2 in respect of the Exercise Number
5.1.3 on or after the later of the date the Board determines the Exercise
Number and the third anniversary of the Date of Grant.
5.2 Subject to Rule 6 where an event described in this Rule 5.2 occurs any
Option or part thereof may be exercised in respect of the Exercise
Number by the Participant
11
or, if he is deceased, by his personal representatives on or after the
later of the date the Board determines the Exercise Number and:
5.2.1 the death of the Participant;
5.2.2 the Participant ceasing to be a Group Employee where that cessation
was by reason of Injury, Ill Health, Disability, Pregnancy,
Redundancy, Retirement or other circumstances within the discretion of
the Grantor provided that the Grantor may in exercising its discretion
impose such additional conditions as they deem appropriate which must
be satisfied before the Option may be exercised;
5.2.3 the Participant ceasing to be a Group Employee where that cessation
was by, reason either of the company or companies of which he was a
Group Employee ceasing to be a Participating Company or of the office
or employment relating to a business or part of a business which is
transferred to a person who cannot be a Participating Company;
5.2.4 an opportunity to exercise the Option pursuant to Rule 5.4; and
5.2.5 an opportunity to exercise the Option pursuant to Rule 7.
5.3 An Option shall lapse and become thereafter incapable of exercise on
the earliest of the following events:
5.3.1 the day before the tenth anniversary of the Date of Grant;
5.3.2 the later of the first anniversary of the Participant's death and six
months after the date the Option is first exercisable pursuant to Rule
5.2.1;
5.3.3 six months after an Option is first exercisable pursuant to Rule 5.2.2
or 5.2.3;
5.3.4 immediately upon the Participant ceasing to be a Group Employee in
circumstances where his Option is not exercisable pursuant to Rule
5.2.1, 5.2.2 or 5.2.3;
12
5.3.5 the end of the period of exercisability determined in accordance with
Rule 7;
5.3.6 the Participant being adjudicated bankrupt;
5.3.7 the surrender of the Option by the Participant; and
5.3.8 60 days after the Date of Grant of the Option if the Participant has
not paid his Advance Payment to the Grantor by that time however if he
has paid only a proportion of the Advance Payment to the Grantor then
the Option shall only lapse to the extent of the proportion of the
Advance Payment not paid.
5.4 If a Participant, while continuing to hold an office or employment
with a Participating Company, is transferred or is to be transferred
to work in another country and as a result of that transfer the
Participant will either:
5.4.1 become subject to income tax on his remuneration in the country to
which he is transferred and the Grantor, after consultation with the
Committee, if the Grantor is the Trustees, are satisfied that as a
result he will suffer a tax disadvantage upon exercising an Option; or
5.4.2 become subject to restrictions on his ability to exercise an Option or
to deal in the Shares he will acquire upon the exercise of that Option
by reason of or in consequence of, the securities laws or exchange
control laws of the country to which he is transferred;
the Grantor, after consultation with the Committee, if the Grantor is
the Trustees, may at its discretion permit the Participant to exercise
the Option in the period commencing three months before and ending
three months after the transfer takes place.
6 Manner of Exercise of Options
6.1 A Standard Discounted Option may be exercised in whole or, subject to
Rule 6.8, in part by the Participant or, if he is deceased, by his
personal representatives, and the exercise shall be effective on the
date of receipt by the Grantor of a duly
13
completed Exercise Notice accompanied by the relevant option
certificate and the sum of(pound)1 only, the Exercise Cost having been
satisfied by the Advance Payment.
6.2 A Bonus Discounted Option may be exercised in whole or, subject to
Rule 6.8, in part by the Participant or, if he is deceased, by his
personal representatives, and the exercise shall be effective on the
date of receipt by the Grantor of a duly completed Exercise Notice
accompanied by the relevant option certificate and the sum of(pound)1
only, the Exercise Cost having been satisfied by the Advance Payment
and the Cash Bonus if any.
6.3 A Market Value Option may be exercised in whole or, subject to Rule
6.8, in part by the Participant or, if he is deceased, by his personal
representatives, and the exercise shall be effective on the date of
receipt by the Grantor of a duly completed Exercise Notice accompanied
by the relevant option certificate and the Exercise Cost.
6.4 A Discounted Option for which the Grantor has not received an Exercise
Notice before that Option is due to lapse pursuant to Rule 5.3 other
than Rule 5.3.8 shall be automatically exercised in respect of the
Exercise Number immediately prior to such lapse by the Grantor
applying the Advance Payment as full payment of the Exercise Cost.
6.5 Subject to Rules 6.6 and 6.9 where an Option is exercised in
accordance with Rules 6.1, 6.2, 6.3 or 6.4 the number of Shares to be
acquired other than those which the Participant has agreed shall be
sold on his behalf by the Grantor (or its agent) shall be transferred
to the Participant within 30 days of the date of exercise and the
Grantor shall arrange for the delivery of evidence of title in respect
thereof. Save for any rights determined by reference to a record date
preceding the date of transfer, such Shares shall rank pari passu with
the other shares of the same class then in issue.
6.6 If an Option granted by the Trustees (or whose exercise is to be
satisfied by the Trustees) is exercised the Trustees may within 7 days
of the date of exercise request the Company to issue sufficient Shares
to the Participant to satisfy the Option in full. If the Company is
able and willing to satisfy the Option in full the
15
Shares shall be issued to the Participant within 30 days of the date
of exercise and the Company shall arrange for the delivery of evidence
of title in respect of such Shares other than those which the
Participant has agreed shall be sold on his behalf to meet any
Withholding. Save for any rights determined by reference to a record
date preceding the date of allotment, such Shares shall rank pari
passu with the other shares of the same class then in issue. The
Trustees shall pay over the aggregate Exercise Cost (less any Advance
Payments if the Trustees have already paid an amount equal to such
Advance Payment to the Company under the terms of any options granted
by the Company to the Trustees pursuant to Rule 2.4) to the Company
when the Shares are issued. If the Company is unable or unwilling to
satisfy the Option in full Rule 6.5 shall apply as if the Trustees had
not requested the Company to satisfy the Option.
6.7 Where Shares are listed or dealt in on any Recognised Exchange then no
Option may be exercised in contravention of the Model Code or such
securities transactions rules of the Recognised Exchange as may from
time to time be in force.
6.8 An Option may be exercised in part. For the avoidance of doubt, the
Grantor may treat the exercise of an Option as a series of exercises
to be carried out on the same day.
6.9 When an Option has been exercised, the Grantor may determine that, in
substitution for the Participant's right to acquire such number of
Shares as the Grantor may decide (so that his right to acquire such
Shares shall cease and be extinguished), he shall be paid by way of
additional emoluments a sum equal to the cash equivalent of that
number of Shares. For the purposes of this Rule, the cash equivalent
of any Shares is the amount by which the Market Value of those Shares
on the date on which the Option was exercised exceeds the Exercise
Cost. As soon as reasonably practicable after a determination has been
made under this Rule that the Participant shall be paid a sum in
substitution for his right to acquire any number of shares:-
6.9.1 the Grantor shall pay to him or procure the payment to him of that sum
in cash; and
15
6.9.2 if he has already paid the Grantor for those Shares, the Grantor shall
return to him (or procure the return to him of) the amount so paid by
him.
Any payment under this Rule shall be subject to such deductions or
arrangements (to take account of tax or similar liabilities) as may be
required by law or as the Grantor may reasonably consider to be
necessary.
7 Takeovers, Reconstructions and Liquidations
7.1 If any person obtains Control of the Company as a result of making:
7.1.1 a general offer to acquire the whole of the issued share capital of
the Company (other than that which is already owned by him) which is
unconditional or which is made on a condition such that if it is
satisfied the person making the offer will have Control of the
Company; or
7.1.2 a general offer to acquire all the shares (other than shares which are
already owned by him) in the Company which are of the same class as
Shares subject to an Option
then the Company shall notify all Participants and the Trustees as soon as is
practicable of the offer and any Option may be exercised (but so that
any exercise hereunder shall be conditional upon Control being
obtained) from the date of the receipt of that notification up to the
expiry of a period ending six months from the time when the person
making the offer has obtained Control of the Company and any condition
subject to which the offer is made has been satisfied.
7.2 If under Section 425 of the Companies Act 1985 it is proposed that the
Court sanctions a compromise or arrangement likely to affect or apply
to Shares then the Company shall give notice thereof to all
Participants at the same time as it sends notices to members of the
Company calling the meeting to consider such a compromise or
arrangement. Any Option may then be exercised by a Participant subject
to the terms of this Rule before the later of the expiry of six months
from the date of such notice and the date on which the Court sanctions
such compromise
16
or arrangement. The exercise of an Option under this Rule 7.2 shall be
conditional on such compromise or arrangement being sanctioned by the
Court and becoming effective. If the Shares acquired on exercise of
the Option are not subject to such compromise or arrangement then the
Participant shall transfer or otherwise deal with the Shares
transferred to him so as to place him in the same position (so far as
possible) as would have been the case if such Shares had been subject
to such compromise or arrangement.
7.3 If any person becomes bound or entitled to acquire Shares in the
Company under sections 428 to 430F of the Companies Act 1985 any
Option may be exercised at any time when that person remains so bound
or entitled.
7.4 If notice is duly given of a general meeting at which a resolution
will be proposed for the voluntary winding-up of the Company, then the
Company shall notify all Participants and the Trustees as soon as is
practicable and any Option shall be exercisable (but so that any
exercise hereunder shall be conditional upon such resolution being
passed) at any time thereafter until the resolution is duly passed or
defeated or the general meeting is concluded or adjourned, whichever
shall first occur. If such resolution is passed an unexercised Option
shall thereupon lapse.
7.5 If notice is duly given of a general meeting at which a resolution
will be proposed whereby:
7.5.1 the class of shares for the time being constituting Shares will be
altered; or
7.5.2 the rights attaching to shares which for the time being constitute
Shares will be altered so that such shares will cease to be Shares
then the Company shall notify all Participants and the Trustees as soon as is
practicable and an Option shall at the discretion of the Committee be
exercisable (but so that any exercise hereunder shall be conditional
upon such resolution being passed) at any time thereafter until such
resolution is duly passed or defeated or the general meeting adjourned
sine die, whichever shall first occur. If such a resolution is passed,
an unexercised Option shall thereupon lapse.
17
7.6 The periods of exercisability under Rule 5.2.5 and the date of lapse
under Rule 5.3.5 are those of whichever of the preconditions of Rules
7.1, 7.2, 7.3, 7.4, or 7.5 are first achieved. The subsequent
achievement of any other preconditions will not cause a period of
exercisability to begin nor a date of lapse to arise provided that
Options shall not continue to be capable of exercise following the end
of the period of exercisability in Rule 7.3.
7.7 For the purpose of this Rule 7 a person shall be deemed to have
obtained Control of a Company if he and others acting in concert with
him have together obtained Control of it.
7.8 The exercise of an Option pursuant to the preceding provisions of this
Rule 7 shall be subject to the provisions of Rule 6 above.
8 Substitution of Shares
8.1 Notwithstanding the provisions of Rule 7 if any company (hereinafter
called the "Acquiring Company") shall:-
8.1.1 obtain Control of the Company as a result of making:-
8.1.1.1 a general offer to acquire the whole of the issued share
capital of the Company which offer is made on a condition
that if the condition is satisfied the Acquiring Company
will have control of the Company; or
8.1.1.2 a general offer to acquire all shares of the Company which
are of the same class as the Shares; or
8.1.2 obtain Control of the Company in pursuance of a compromise or
arrangement sanctioned by the Court under Section 425 of the Companies
Act 1985; or
8.1.3 become bound or entitled to acquire shares in the Company under
Sections 428 to 430F of the Companies Act 1985
18
any Participant may at any time within the appropriate period (as
defined in Rule 8.2 below) by agreement with the Acquiring Company
release his Option under the Scheme ("the Old Option") in
consideration of the grant to him of an option ("the New Option")
which is equivalent (as defined in Rule 8.3 below) to the Old Option
but relates to shares in a company other than the Company (being
either the Acquiring Company or some other company within the
provisions of sub-paragraphs (b) or (c) of paragraph 10 of Schedule 9
to the Income and Corporation Taxes Act 1988).
8.2 For the purposes of Rule 8.1 above the appropriate period means:-
8.2.1 In a case falling within Rule 8.1.1 a period of six months beginning
with the time when the Acquiring Company has obtained control of the
Company and (if applicable) any condition subject to which the Offer
is made is satisfied;
8.2.2 In a case falling within Rule 8.1.2 the period of six months beginning
with the time when the court sanctions the compromise or arrangement;
and
8.2.3 In a case falling within Rule 8.1.3 the period during which the
Acquiring Company remains bound or entitled as mentioned in that Rule.
8.3 For the purposes of Rule 8.1 above the New Option shall be equivalent
to the Old Option if the requirements of paragraphs 15(3)(b) to (d)
inclusive of the said Schedule 9 are met. The New Option shall, for
all other purposes of the Scheme, be treated as having been acquired
at the same time as the Old Option.
8.4 For the avoidance of doubt if the Participant does not release his
rights pursuant to the provisions of this Rule or exercise his Option
pursuant to the provisions of Rule 7 hereof then all Old Options held
by him shall lapse.
8.5 With effect from the date on which a Participant releases the Old
Option in consideration of the grant to him of the New Option Rules 1
and Rules 5 to 11 inclusive shall in relation to the New Option be
construed for the purposes of that New Option as if references
directly or indirectly to "the Company" and to
19
"Ordinary Shares" were references to the Acquiring Company and to
shares in the Acquiring Company or as the case may be the other
company falling within sub-paragraphs (b) or (c) of paragraph 10 of
Schedule 9 to the Income and Corporation Taxes Act 1988.
8.6 If, in accordance with this Rule 8, an Old Option is released and a
New Option granted, the New Option shall not be exercisable under Rule
7 by virtue of the event by reason of which the New Option was
granted.
9 Variation of Share Capital
9.1 In the event of any variation of the share capital of the Company,
including, but without prejudice to the generality of the preceding
words, any capitalisation or rights issue or any consolidation,
sub-division or reduction of capital the number of Shares subject to
any Option and any exercise price payable under the Option may be
adjusted by the Grantor (after consultation with the Committee, if the
Grantor is the Trustees) in such manner as the Auditors confirm in
writing to be, in their opinion, fair and reasonable.
9.2 A variation pursuant to Rule 9. 1 above shall be deemed to be
effective from the record date at which the respective variation
applied to other shares of the same class as the Shares. Any Options
exercised within the period from the record date to the date when the
Options are adjusted shall be treated as exercised with the benefit of
the variation confirmed by the Auditors.
9.3 The Grantor shall take such steps as it considers necessary to notify
Participants of any adjustment made under Rule 9.1 and to call in,
cancel, endorse, issue or reissue any relevant documentation
consequent upon such adjustment.
10 Administration and Amendment
10.1 The Board shall have the power to administer and interpret the Scheme
and the decision of the Board on all disputes shall be final save
where the Rules require the confirmation of the Auditors.
20
10.2 The Board may from time to time with the approval of the Trustees
amend these Rules provided that:
10.2.1 no amendment may materially adversely affect a Participant's rights
under an Option granted prior to the amendment being made without the
Participant's consent;
10.2.2 the provisions relating to:
10.2.2.1 the persons to whom, or for whom, benefits are provided
under the Scheme;
10.2.2.2 the limitations on the number of Shares specified in Rule 4;
10.2.2.3 the maximum entitlement for any one Participant;
10.2.2.4 the basis for determining a Participant's entitlement to,
and the terms of, Options to be provided and for the
adjustment thereof in the event of a capitalisation issue,
rights issue, sub-division or consolidation of Shares or
reduction of capital or any other variation of capital
cannot be altered to the advantage of Participants without the prior approval of
the shareholders of the Company in general meeting (except for
amendments to benefit the administration of the Scheme, to take
account of a change in legislation or to obtain or maintain favourable
tax, exchange control or regulatory treatment for Participants in the
Scheme or for the Company or for any Participating Company).
10.3 Notwithstanding any provision of the Scheme other than Rule 10.2 the
Board may, in respect of Options granted or to be granted to Eligible
Employees who are or who may become subject to taxation outside the
United Kingdom on their remuneration, amend or add to the provisions
of the Scheme and the terms of Options as it considers necessary or
desirable to take account of or to mitigate or to comply, with
relevant overseas taxation, securities or exchange control laws
provided that the terms of the Options granted to such Eligible
Employees are not
21
overall more favourable than the terms of the Options granted to other
Eligible Employees.
10.4 The cost of establishing and operating the Scheme shall be borne by
the Participating Companies in such proportions as the Board shall
determine.
10.5 Any notice or other communication under or in connection with the
Scheme may be given by the Company or the Trustees, as the case may
be, either personally or by post, and to the Company or the Trustees,
as the case may be, either personally or by post to the Secretary;
items sent by post shall be pre-paid and shall be deemed to have been
received 72 hours after posting.
10.6 The Trustees shall at all times keep available sufficient Shares to
satisfy to the full extent possible all Options granted by or to be
satisfied by the Trustees, taking account of any other obligations of
the Trust to transfer Shares, provided that in the event that an
Option ceases to be exercisable under these Rules the Trustees shall
be free to deal with the Shares which were subject to that Option as
they see fit, subject to the deed of trust constituting the Trust. The
Company shall at all times keep available sufficient Shares to satisfy
to the full extent possible all Options granted by the Committee which
are not to be satisfied by the Trustees.
10.7 For the purposes of Rule 10.6 Shares shall be available where they are
part of the assets of the Trust or are subject to an agreement whereby
the Trustees can require that the Shares are transferred or issued to
it or transferred or issued directly to the Participants in
satisfaction of the Trustees obligation to satisfy Options, but shall
not be available where the Trustees have agreed or may be required to
transfer Shares other than on the exercise of an Option.
11 Miscellaneous
11.1 The Scheme shall terminate upon the tenth anniversary of the Approval
Date or at any earlier time by the passing of a resolution of the
Board or an ordinary resolution of the Company in general meeting.
Termination of the Scheme shall be without prejudice to the subsisting
rights of Participants.
22
11.2 The rights and obligations of any individual under the terms of his
office or employment with any Participating Company shall not be
affected by his participation in the Scheme or any right which he may
have to participate therein, and an individual who participates
therein shall waive any and all rights to compensation or damages in
consequence of the termination of his office or employment for any
reason whatsoever insofar as those rights arise or may arise from his
ceasing to have rights under or be entitled to exercise any Option
under the Scheme as a result of such termination.
11.3 The existence of any Option or Options shall not affect in any way the
right or power of the Company or its shareholders to make or authorise
any or all adjustments, recapitalisation, reorganisations, reductions
of capital, purchase or redemption of its own shares pursuant to the
Companies Act 1985 or other changes in the Company's capital
structure, or any merger or consolidation of the Company, or any issue
of bonds, debentures, preferred or prior preference stock ahead of or
convertible into, or otherwise affecting the Shares or the rights
thereof, or the dissolution or liquidation of the Company, or any sale
or transfer of all or any part of its assets or business, or any other
corporate act or proceeding, whether of a similar character or
otherwise.
23
APPROVED PART
NB: This Part governs the grant of Options which are approved by the Inland
Revenue.
12 In this Part the term "Approved Option" shall mean a right to acquire
Ordinary Shares granted under this Part. No Discounted Options may be
granted under this Part.
13 An Approved Option shall be governed by the Rules of the Scheme
subject to the following modifications:-
13.1 There shall be a definition of Act which shall read as follows:-
"Act: Income and Corporation Taxes Act 1988;"
13.2 The definition of Approval Date shall be amended to read:-
"Approval Date: the date upon which the Scheme receives formal Inland
Revenue approval;"
13.3 There shall be a definition of Excluded Person which shall read as
follows:-
"Excluded Person: a person who has a material interest in the Company
being an interest of 10% or more in the Company's share capital
contrary to paragraph 8 of Schedule 9 to the Act;"
13.4 The following words shall be added to the end of the definition of
Group Employee:-
"who, if he is a director, is required by the terms of his employment
or office to work for the Group or any part of it for 25 hours or more
per week (exclusive of meal breaks) and who is not an Excluded
Person;"
13.5 The definition of Share shall be amended to read:-
24
"Share: an ordinary share of 50p in the capital of the Company which
complies with the provisions of paragraphs 10 to 14 of Schedule 9 of
the Act;"
13.6 In Rule 3.2.1 the words "not materially" shall be amended to read
"no".
13.7 A new rule shall be added to Rule 4 which shall be designated as Rule
4.2 and shall read as follows:-
"4.2 An Option granted to an Eligible Employee shall be limited and
take effect so that the aggregate of:-
4.2.1 the Market Value of the Shares to be subject to the Option; and
4.2.2 the market value of all shares comprised in subsisting options
granted to the Eligible Employee pursuant to the Scheme or any other
option scheme (other than a savings related share option scheme)
approved under Schedule 9 to the Act which is established by the
Company or any Associated Company
shall not exceed the limit referred to in paragraph 28(1) of Schedule
9 to the Act."
13.8 Rule 5.1.1 shall be amended to read as follows:-
"if at the date of exercise the Participant is employed by a
Participating Company and is not an Excluded Person; and"
13.9 In Rule 6.5 the phrase "Subject to Rules 6.6 and 6.9" shall be amended
to read "Subject to Rule 6.6"
13.10 Rule 6.9 shall not apply under the Approved Part
13.11 In Rule 8.3 the reference to "paragraph 15(3)(b)" shall be replaced by
a reference to "paragraph 15(3)(a)".
13.12 The following sentence shall be added to the end of Rule 9.1
25
"No variation to the number of Shares comprised in an Option or the
Exercise Cost thereof shall be made pursuant to any of the provisions
contained in this Rule until the Board of Inland Revenue have approved
such variation."
13.13 A new rule shall be added to rule 10.2 which shall be designated Rule
10.2.3 and shall read as follows:-
"10.2.3 no amendment to the Approved Part made while the Approved Part
continues to have the approval of the Board of Inland Revenue shall be
effective until approved by the Board of Inland Revenue."
13.14 None of the provisions relating to Withholding shall apply under the
Approved Part and the definition of Exercise Notice and Rule 6.6 shall
be amended appropriately to take account of this.
14 The Addendum dealing with Phantom Options does not form part of the
Approved Part.
26
SCHEDULE
Performance Condition
General
15 In accordance with Rule 3.1 of the Scheme, an Option may only be
exercised in whole or in part upon the fulfilment of the Performance
Condition imposed by the Committee and subject to any, other
requirements of the Rules.
16 Part A of this Schedule sets out the method of determining the
Exercise Number where an Option is made subject to EPS Performance.
17 Part B of this Schedule sets out the method of determining the
Exercise Number where an Option is made subject to TSR Performance.
18 Where an Option is expressed as being subject in part to EPS
Performance and in part to TSR Performance the Exercise Number for the
Option shall be determined as though there were two sub-options, one
being subject to EPS Performance and the other being subject to TSR
Performance. The Maximum Number for each such sub-option shall be the
appropriate proportion of the Maximum Number of the Option.
Part A - EPS Performance
19 Subject to paragraphs 2, 3, 4 and 5 of this Part A of the Schedule the
number of Shares that a Participant shall be entitled to acquire on
the exercise of an Option (i.e. the Exercise Number) shall subject to
1.3 below be calculated immediately following the Final Announcement
Date as set out in 1.1 and 1.2 below.
19.1 If EPS Performance is less than the Hurdle Rate and/or the EPS
Performance is less than 5% per annum then if the Option is a
Discounted Option the Exercise Number shall be ten, subject to 1.3
below and if the Option is a Market Value Option the Exercise Number
shall be zero, the Participant shall not be entitled to acquire any
Shares and the Option shall lapse.
27
19.2 If EPS Performance is equal to or greater than the Hurdle Rate and
equal to or greater than 5% then the Exercise Number shall be
determined by multiplying the Maximum Number by the Percentage
Exercisable. The Percentage Exercisable shall be calculated in
accordance with the following table:
EPS Performance Percentage Exercisable
> 5% and < 13% 12.5% + ((EPS Performance - 5%) x 27.5%)
- --------------------
8%
> 13% and < 20% 40% + ((EPS Performance - 13%) x 60%)
- - ---------------------
7%
> 20% 100%
19.3 If the Committee considers that the EPS Performance has been
disappointing because of adverse external factors it may extend the
Performance Period to 48 months. In that case the reference to the
third anniversary of the Date of Grant in Rule 5.1.3 shall be taken to
be a reference to the fourth anniversary of the Date of Grant and the
provisions of paragraphs 2 and 3 of this Part A of the Schedule shall
be amended to reflect the additional year in the Performance Period
(and so be based on quarters and not thirds). If the Committee still
considers that the EPS Performance has been disappointing because of
adverse external factors at the end of that extended Performance
Period it may extend the Performance Period to 60 months with
comparable amendments to Rule 5.1.3 and paragraphs 2 and 3 of this
Part A of the Schedule (based on fifths).
20 Where an Option is exercisable in accordance with Rule 5.2.1, 5.2.2 or
5.2.3 the Exercise Number for that Option shall be calculated
immediately following the relevant Announcement Date as follows:
20.1 Where the event occurs on or before the First Announcement Date the
Exercise Number shall be one third of the Exercise Number which would
have been calculated in accordance with paragraph 1 of this Part A of
the Schedule on the assumption that the Performance Period ended on
the accounting reference date for
28
the accounting reference period the results of which are announced on
the First Announcement Date.
20.2 Where the event occurs after the First Announcement Date but on or
before the Second Announcement Date the Exercise Number shall be two
thirds of the Exercise Number which would have been calculated in
accordance with paragraph 1 of this Part A of the Schedule on the
assumption that the Performance Period ended on the accounting
reference date for the accounting reference period the results of
which are announced on the Second Announcement Date.
20.3 Where the event occurs after the Second Announcement Date the Exercise
Number shall be the Exercise Number which would have been calculated
in accordance with paragraph 1 of this Part A of the Schedule.
21 Where an Option is exercisable in accordance with Rule 5.2.4 the
Exercise Number for that Option shall be calculated immediately after
the Trustee determines that the Participant may first exercise his
Option as follows provided that the Committee may use its best
estimate of the likely EPS Performance for the relevant period to
enable the Exercise Number to be determined prior to the relevant
Announcement Date.
21.1 Where the date of calculation occurs on or before the First
Announcement Date the Exercise Number shall be one third of the
Exercise Number which would have been calculated in accordance with
paragraph 1 of this Part A of the Schedule on the assumption that the
Performance Period ended on the accounting reference date for the
accounting reference period the results of which are announced on the
First Announcement Date.
21.2 Where the date of calculation occurs after the First Announcement Date
but on or before the Second Announcement Date the Exercise Number
shall be two thirds of the Exercise Number which would have been
calculated in accordance with paragraph 1 of this Part A of the
Schedule on the assumption that the Performance Period ended on the
accounting reference date for the accounting reference period the
results of which are announced on the Second Announcement Date.
29
21.3 Where the date of calculation occurs after the Second Announcement
Date the Exercise Number shall be the Exercise Number which would have
been calculated in accordance with paragraph 1 of this Part A of the
Schedule.
22 Where an Option is exercisable in accordance with Rule 5.2.5 the
Exercise Number for that Option shall be the Maximum Number provided
that the Committee is satisfied that either
22.1 EPS Performance is not less than the Hurdle Rate (measured as if the
Performance Period is the period commencing with the accounting period
following the Base Year and ending at the end of the last accounting
period prior to the date when the option becomes exercisable in
accordance with Rule 5.2.5 for which there has been an Announcement
Date) and the underlying performance of the Company has not
deteriorated since the end of that last accounting period; or
22.2 if the option becomes exercisable before the Announcement Date for an
accounting period after the Base Year, the underlying performance of
the Company has not deteriorated since the end of the Base Year.
23 Where an Option is exercised in accordance with Rule 6.4 then
irrespective of whether the Exercise Number has been determined under
paragraph 1, 2, 3 or 4 of this Part A of the Schedule the Exercise
Number shall always be ten.
24.1 In this Part A of the Schedule the following words and expressions
shall, where the context admits, have the following meaning(s)
respectively:
"Base Year" the last accounting reference period of
the Company ending prior to the Date of
Grant;
"EPS" the fully diluted earnings per share of
the Company as calculated on the basis
of the headline earnings figure
according to the principles of Statement
of Investment Practice No. 1 issued by
the United Kingdom Society of Investment
Professionals and subject to such
30
adjustment to exclude exceptional items
and other significant non-recurring
items as the Committee may consider
appropriate and if the period covered by
the accounts is more or less than one
year the EPS shall be recalculated on an
annualised basis having due regard to
any seasonal variations in the business
of the Company;
"EPS Performance" the annual rate of increase of the EPS
of the Base Year over the Performance
Period expressed as a percentage, such
percentage being calculated as follows:
EPS Performance = [(EPS2)1/n -1] x 100
----
[(EPS1 ) ]
Where:
(i) EPS1 is EPS for the Base Year
(ii) EPS2 is EPS for the last accounting reference
period in the Performance Period
(iii) n is the number of years in the Performance
Period;
PROVIDED THAT if EPS1 would be zero or negative
then the Base Year shall be the most recent
accounting reference period of the Company
when EPS1 would be positive prior to the Base
Year in which case the length of the
Performance Period, other than for the
purposes of the definitions of First
Announcement Date, Second Announcement Date
or Final Announcement Date, shall be adjusted
accordingly;
31
"First Announcement Date" the Announcement Date for the final
results for the first accounting
reference period of a Performance
Period;
"Final Announcement Date" the Announcement Date for the final
results for the third or last accounting
reference period of a Performance
Period;
"Hurdle Rate" the annual rate of increase of the Index
of Retail Prices (All Items) (the "RPI")
over the Performance Period expressed as
a percentage plus 3% being calculated as
follows:
Hurdle Rate = 3% + [(RPI2)1/n -1] x 100
----
[(RPI1 ) ]
Where:
(i) RPI1 is the RPI figure published for
the month before the start of the
Performance Period.
(ii) RPI2 is the RPI figure published
for the last month of the Performance
Period.
(iii) n is the number of years in the
Performance Period;
"Performance Period" a period of 36 consecutive months
commencing with the start of the
accounting period immediately following
the Base Year for which accounts have
been published except where the length
of the period is adjusted in accordance
with the provisions of this Scheme and
the Rules;
32
"Second Announcement Date" the Announcement Date for the final
results for the second accounting
reference period of a Performance
Period.
24.2 In this Part A of the Schedule except in as far as the context
otherwise requires words and expressions shall have the same meanings
as in the Scheme.
Part B - TSR Performance
25 Subject to paragraphs 2, 3, 4 and 5 of this Part B of the Schedule the
number of Shares that a Participant shall be entitled to acquire on
the exercise of an Option (ie. the Exercise Number) shall be
calculated immediately following the Final Announcement Date by
multiplying the Maximum Number by the Percentage Exercisable. The
Percentage Exercisable shall be calculated in accordance with the
following table:
The Company's TSR relative to the Percentage Exercisable
Comparator Group
Below Median Nil
Median 20%
50th-58th percentile 40%
59th-66th percentile 60%
67th-75th percentile 80%
Upper quartile 100%
If the Committee considers that the TSR Performance has been
disappointing because of adverse external factors it may extend the
Performance Period to 48 months. In that case the references to the
third anniversary of the Date of Grant in Rule 5.1.3 shall be taken to
be references to the fourth anniversary of the Date of Grant and the
provisions of paragraphs 2 and 3 of this Part B of the Schedule shall
be amended to reflect the additional year in the Performance Period
(and so be based on quarters and not thirds). If the Committee still
considers that the TSR Performance has been disappointing because of
adverse external factors at the end of the extended Performance Period
it may extend the Performance Period to 60
33
months with comparable amendments to Rule 5.1.3 and paragraphs 2 and 3
of this Part B of the Schedule (based on fifths).
26 Where an Option is exercisable in accordance with Rule 5.2.1, 5.2.2 or
5.2.3 the Exercise Number for that Option shall be calculated
immediately following the relevant Announcement Date as follows:
26.1 Where the event occurs on or before the First Announcement Date the
Exercise Number shall be one third of the Exercise Number which would
have been calculated in accordance with paragraph 1 of this Part B of
the Schedule on the assumption that the Performance Period ended on
the accounting reference date for the accounting reference period the
results of which are announced on the First Announcement Date.
26.2 Where the event occurs after the First Announcement Date but on or
before the Second Announcement Date the Exercise Number shall be two
thirds of the Exercise Number which would have been calculated in
accordance with paragraph 1 of this Part B of the Schedule on the
assumption that the Performance Period ended on the accounting
reference date for the accounting reference period the results of
which are announced on the Second Announcement Date.
26.3 Where the event occurs after the Second Announcement Date the Exercise
Number shall be the Exercise Number which would have been calculated
in accordance with paragraph 1 of this Part B of the Schedule.
27 Where an Option is exercisable in accordance with Rule 5.2.4 the
Exercise Number for that Option shall be calculated immediately after
the Trustee determines that the Participant may first exercise his
Option as follows providing that the Committee may use its best
estimate of the likely TSR Performance for the relevant period to
enable the Exercise Number to be determined prior to the relevant
Announcement Date.
27.1 Where the date of calculation occurs on or before the First
Announcement Date the Exercise Number shall be one third of the
Exercise Number which would have been calculated in accordance with
paragraph 1 of this Part B of the Schedule on
34
the assumption that the Performance Period ended on the accounting
reference date for the accounting reference period the results of
which are announced on the First Announcement Date.
27.2 Where the date of calculation occurs after the First Announcement Date
but on or before the Second Announcement Date the Exercise Number
shall be two thirds of the Exercise Number which would have been
calculated in accordance with paragraph 1 of this Part B of the
Schedule on the assumption that the Performance Period ended on the
accounting reference date for the accounting reference period the
results of which are announced on the Second Announcement Date.
27.3 Where the date of calculation occurs after the Second Announcement
Date the Exercise Number shall be the Exercise Number which would have
been calculated in accordance with paragraph 1 of this Part B of the
Schedule.
28 Where an Option is exercisable in accordance with Rule 5.2.5 the
Exercise Number for that Option shall be the Maximum Number provided
that the Committee is satisfied that either
28.1 EPS Performance is not less than the Hurdle Rate (measured as if the
Performance Period is the period commencing with the accounting period
following the Base Year until the end of the last accounting period
prior to the date when the option becomes exercisable in accordance
with Rule 5.2.5 for which there has been an Announcement Date) and the
underlying performance of the Company has not deteriorated since the
end of that last accounting period; or
28.2 if the option becomes exercisable before the Announcement Date for an
accounting period after the Base Year, the underlying performance of
the Company has not deteriorated since the end of the Base Year.
29 Where an Option is exercised in accordance with Rule 6.4 then
irrespective of whether the Exercise Number has been determined under
paragraph 1, 2, 3 or 4 of this Part B of the Schedule then the
Exercise Number shall always be ten.
35
30.1 In this Part B of the Schedule the following words and expressions
shall, where the context admits, have the following meaning (s)
respectively:
"Base Year" the last accounting reference period of
the Company ending prior to the Date of
Grant;
"Comparator Group" shall mean the following groups:
Grey Advertising
Havas Advertising
Interpublic
Omnicom
Publicis
True North Communications
WPP
Aegis
Taylor Nelson Sofres
GWR
Scoot Com
BskyB
Capital Radio
Carlton Communications
Chime
EMI
Incepta
Maiden
Pearson
Reed International
Tempus
United Business Media
Future Network
Scottish Media
PROVIDED THAT the Committee may, at its
absolute discretion, vary, add, remove
or alter the companies making up the
Comparator Group
36
where events happen which cause the
Committee to consider that such a change
is appropriate to ensure that the
Performance Condition continues to
represent a fair measure of performance
PROVIDED THAT it reasonably considers
the Performance Condition as varied or
amended is not materially more or less
difficult to satisfy and FURTHER
PROVIDED THAT the Participants are given
notice in writing of the variation as
soon as practicable;
"First Announcement Date" the Announcement Date for the final
results for the first accounting
reference period of a Performance
Period;
"Final Announcement Date" the Announcement Date for the final
results for the third or last accounting
reference period of a Performance
Period;
"Performance Period" a period of 42 consecutive months
commencing with the start of the
accounting period immediately following
the Base Year for which accounts have
been published;
"Second Announcement Date" the Announcement Date for the final
results for the second accounting
reference period of a Performance
Period;
"TSR" is the return obtained from the
ownership of a share over the
Performance Period, taking account of
capital appreciation, dividends paid and
any other issues or distributions. For
the purpose of the calculation, which is
expressed as an annualised return on
capital, it is assumed that a share is
bought at the beginning of the
37
Performance Period and sold at the end
of the Performance Period. The purchase
of the share is to be treated as
performed at the average of the market
value of a share over the 12 months
preceding the beginning of the
Performance Period and the sale of the
share is to be treated as performed at
the average market value of a share over
the six months preceding the end of the
Performance Period. Dividends and other
benefits are assumed to be received when
the shares are marked ex-dividend and
regarded as cash receipts. Payments to
take up rights or due on partly paid
shares are regarded as cash outflows on
the appropriate dates. Adjustments are
made for takeovers, mergers, demergers
and other corporate events;
"TSR Performance" The TSR of the Company is compared to
the TSR of each of the companies in the
Comparator Group, with those companies
being ranked in order of their TSR over
the Performance Period and the company
having the worst rate of return ranked
at the bottom.
30.2 In this Part B of the Schedule except in as far as the context
otherwise requires words and expressions shall have the same meanings
as in the Scheme.
38
Addendum to The Cordiant Communications
Group Executive Share Option Scheme
("Addendum")
Pursuant to Rule 10.3 of the Scheme, the
Board adopted this Addendum to
facilitate the grant of Phantom
Options under the Scheme to
Eligible Employees to take account
of or to mitigate or to comply with
relevant overseas taxation,
securities or exchange control
laws. The terms of Phantom Options
granted pursuant to this Addendum
may not be overall more favourable
than the terms of Options granted
to other Eligible Employees. The
Rules of the Scheme shall apply to
Phantom Options as they apply to
Options except where the context
requires that a modified approach
is adopted. Phantom Options may be
granted either by the Trustees
after consulting the Committee or
by the Committee. If the Phantom
Options are granted by the
Committee, the cash sum shall be
paid to the Participant by the
employing company.
In this Addendum, the words and
expressions used in the Scheme
39
shall bear, unless the context
otherwise requires, the same
meaning herein save to the extent
this Addendum shall provide to the
contrary.
The terms of a Phantom Option (which, if
it is a Discounted Phantom Option,
is a contingent right to be paid a
cash sum by the Trustees or the
employing company equal to the
Market Value on the date that the
Exercise Number or part thereof is
automatically exercised and, if it
is a Market Value Phantom Option,
is a contingent right to be paid a
cash sum by the Trustees or the
employing company equal to the
difference between the Market Value
on the date that the Exercise
Number or part thereof is
automatically exercised and the
Market Value of the Exercise Number
or part thereof on the Date of
Grant) will mirror the terms of an
Option except in the following
respects. The Exercise Cost shall
be L Nil and, if it is a Discounted
Phantom Option, the Phantom Option
will lapse 60 days after the Date
of Grant if the Participant has not
entered into any "Waiver Agreement"
40
with a Participating Company (being
his employing company) by that
time. The Waiver Agreement shall
specify the amount to be deducted
from the remuneration of an
Eligible Employee (being equal to
the Advance Payment that would have
been required if the Eligible
Employee had been granted a
Standard Discounted Option rather
than a Phantom Option) and the
period (not exceeding three years)
over which the amount shall be
deducted. To reflect the rules of
the Scheme as they apply to Advance
Payments, if the Waiver Agreement
is not entered into in full, the
Phantom Option will be deemed to be
renounced to the same proportionate
extent.
Subject to Rule 5.2 a Phantom Option
shall be exercised automatically
provided the Participant is a Group
Employee in respect of the Exercise
Number on the later of the date the
Board determines the Exercise
Number and the third anniversary of
the Date of Grant.
When a Phantom Option is exercised
automatically the relevant cash
41
sum shall be paid to the
Participant by the Trustees or the
employing company within 30 days of
the relevant exercise date under
deduction of all taxes and charges
as appropriate.
Where an event described in Rule 5.2 occurs before the relevant dates specified
in the last but one paragraph above and which does not cause the Phantom Option
to lapse immediately the Phantom Option or part thereof shall be exercised
automatically on the later of the date the Board determines the Exercise Number
and the date referred to in the relevant provision of Rule 5.2 except where Rule
7 requires that the automatic exercise should be deferred until the outcome of
the relevant condition is known
42
Addendum to The Cordiant Communications Group Executive Share Option Scheme for
Eligible Employees resident in France ("French Addendum")
Pursuant to Rule 10.3 of the Scheme, the Board adopted this French Addendum to
facilitate the grant of Options under the Scheme to Eligible Employees resident
in France. For the purpose of the French plan, Options granted in accordance
with the French Plan may be designated as Qualifying French stock Options within
the meaning of the conditions set in the French Company Law (Loi du 24 juillet
1966 code Societes commercailes, articles 208 -1 to 208-8-2) modified by the
bill adopted on May 2, 2001 ("French Qualified Options").
The Rules of the Scheme shall apply to French Qualified Options as they apply to
Options except as varied below:-
31 In this French Addendum, the words and expressions used in the Scheme
shall bear, unless the context otherwise requires, the same meaning
herein save to the extent this French Addendum shall provide to the
contrary.
32 No Discounted Options may be granted under this French Addendum.
33 There shall be a definition of Excluded Person which shall read as
follows:-
"Excluded Person: a person who has a material interest in the Company
being an interest of 10% or more in the Company's share capital;"
34 The following proviso shall be added to the end of the definition of
Grant Period:-
"PROVIDED THAT no French Qualified Option may be granted during any of
the following periods:-
(i) A period of 10 Dealing Days before and after the
publication of the Company's annual report and
accounts
(ii) A period commencing with the date when any
Director of the Company acquires unpublished price
sensitive
43
information (as defined in the Model Code) and
ending 10 Dealing Days after the information has
been published; or
(iii) A period of 20 Dealing Days following the payment
of a dividend or an increase in the issued share
capital of the Company
35 The definition of Group Employee shall be amended to read as follows:-
"Group Employee: an employee of (including a director who is employed
by) any Participating Company who in either case is not an Excluded
Person;"
36 The definition of Market Value shall be amended to read as follows:-
"Market Value: in relation to a Share on any day the higher of:-
(i) its middle market quotation for the immediately preceding Dealing
Day as derived from the Daily Official List of UK Listing Authority;
and
(ii) the average of the opening buying prices of the Share for the
twenty immediately preceding Dealing Days as derived from the Daily
Official List of UK Listing Authority.
37 If the Participant dies and does not have a personal representative
recognised as such under English law then references in the Rules to
the Participant's personal representatives shall be deemed to mean his
heirs under French law. Any person claiming to be the Participant's
heir shall provide evidence satisfactory to the Committee that he is
the sole heir entitled to exercise the French Qualified Option or that
any other persons entitled to share in the French Qualified Option
consent to his exercising the French Qualified Option on behalf of all
of them.
38 Rule 5.3.2 shall be amended to read " the date falling six months
after the Participant's death".
44
39 The adjustment of the exercise price or number of Shares subject to
French Qualified Option under Rule 9 shall be made in accordance with
article 208-5 of the French Company Law of 24 July 1966 .
s