CLL.L Regulatory News (CLL)

14 Mar 2006 07:05

Cello Group plc14 March 2006 Cello Group PLC("Cello") New Performance Share Option Plan Introduction Cello has adopted a new Performance Share Option Plan. The RemunerationCommittee of Cello recently carried out a review of the long term incentivearrangements for executive directors and other senior employees. Following thereview the Committee concluded that the existing arrangements should be replacedby a new Performance Share Option Plan. Background Cello previously operated two share option plans, the Enterprise ManagementIncentive Plan 2004 ("the EMI Plan") and the Cello Unapproved Share Option Plan2004 ("the Unapproved Plan"). Under these two plans ("the original share plans")options were granted with an exercise price equal to the market price at thegrant date. Following its review the Remuneration Committee concluded that, going forward,market value share option plans were not the most appropriate vehicles throughwhich Cello's senior executives should be granted long term incentives andaccordingly, under the new Plan, options will be structured as conditionalawards over fully paid shares with an exercise price equal to the nominal valueof the shares, currently 10p per share. As relatively ungeared investments,awards under the Plan will more closely match the returns received byshareholders than is the case with market value share options. In addition,these awards are likely to provide a closer correlation between actual rewardlevels and accounting charges going forward, as well as being less dilutive thanmarket value options. In addition, directors and eligible employees who elect to receive up to 50% ofcash bonuses, net of tax and national insurance, in the form of Cello shareswill be granted a conditional award over an equal number of shares under thePlan. Subject to the individual's continued employment by Cello and ownership ofthe shares issued in lieu of bonus, the matching shares will vest after fouryears subject to the performance conditions having been met. Principal provisions of the Plan Individual limits. Awards of options over shares, excluding bonus matchingshares, worth no more than 150% of basic salary may be made each year. Therewill also be a limit on the cumulative number of shares, excluding bonusmatching shares, which may be awarded to any individual over the life of thePlan. This limit has been set at 500,000 shares. Overall dilution limit. The Plan will be subject to the existing overalldilution limit which applied to the original share plans and was set out in theAdmission Document at the time of Cello's admission to AIM in November 2004.Therefore, in any ten year period from the date of adoption of the originalshare plans no more than 15% of the issued ordinary share capital of the companyfrom time to time may in aggregate be allocated under any share schemes operatedby the company. Performance conditions. Options will be exercisable four years after grantsubject to the extent to which a performance condition has been achieved overthe initial three year period after the award is made and subject to therecipient's remaining in Cello's employment for a further year. There will be noability to retest this condition and vesting will also be conditional uponearnings per share increasing in each of the three years after the date ofgrant. For any awards made in the first year following the implementation of thePlan the performance condition will be based on Cello's compound annual growthin earnings per share in the three years following the date of grant as shownbelow:- - no awards will vest if the CAGR is less than 10 per cent. - 20 per cent of awards will vest if the CAGR is 10 per cent. - 100 per cent of awards will vest if the CAGR is 15 per cent or more - if the CAGR is between 10 and 15 per cent. the percentage of awards vesting will be determined on a straight line basis between 20 and 100 per cent. Changes to performance conditions. The Remuneration Committee may applydifferent conditions for future awards and may also vary the performanceconditions applying to existing awards, for example, to take account oftechnical events such as changes in accounting standards and treatments.However, in both cases, the Committee will consult with Cello's majorshareholders before doing so. Change of control. On a change of control of the company (or, if the Committeedetermines, in the case of a demerger) options will be exercisable subject tothe extent to which the performance conditions have been satisfied up to thedate of the event (taking account of the fact that the conditions will bemeasured over a shorter period than originally envisaged). On a change ofcontrol that occurs as a result of an internal reorganisation, awards will berolled over (unless the Committee determines otherwise). Leavers. Options will normally lapse if a participant leaves the company.However, in certain "good leaver" situations (such as death, illness, disabilityetc.), or in other exceptional circumstances, options will either (i) beexercisable early subject to the extent to which the Committee determines thatthe performance conditions have been satisfied at the relevant time (againtaking account of the fact that the conditions will be measured over a shorterperiod than originally envisaged) or (ii) remain unaffected and vest at the endof the original four year period, in both cases with a pro rata reduction insize (unless the Committee waives the requirement to pro rate awards). Life of the Plan. The Plan will have a ten year life, although the Committeewill review it after no more than five years. Grants of awards The Remuneration Committee expects shortly to make the first awards under thePlan at which time a further announcement will be made. 14 March 2006 Enquiries:Cello Group PLC 020 7457 2020Kevin Steeds, Chairman College Hill 020 7457 2020Adrian Duffield/Ben Way This information is provided by RNS The company news service from the London Stock Exchange