Impax Asset Management Regulatory News (IPX)

17 Jan 2007 16:02

Impax Group PLC17 January 2007 Impax Group plc ("Impax" or the "Company") The Company has today issued a circular seeking shareholder approval to increasethe number of Ordinary Shares, in respect of which awards may be made under theImpax Group Employee Benefit Trust 2005 ("EBT" or "Incentive Arrangement"), to24,250,000 Ordinary Shares. Background In January 2005 Shareholders approved the establishment by the Company of theIncentive Arrangement for the purposes, inter alia, of the grant of awards ofOrdinary Shares to employees of the Group. The purpose of establishing theIncentive Arrangement was to motivate and incentivise eligible participants toachieve value for Shareholders. Under the Incentive Arrangement, as approved byShareholders, the maximum number of Ordinary Shares that may be the subject ofawards was limited to 18,250,000 Ordinary Shares. The remuneration committee isproposing that the limit on the maximum number of Ordinary Shares that may bethe subject of awards under the Incentive Arrangement be increased to 24,250,000Ordinary Shares. The Incentive Arrangement The Incentive Arrangement was implemented in 2005 by means of an employeebenefit trust, known as the "Impax Group Employee Benefit Trust 2005". Fulldetails of the Incentive Arrangement were set out in the circular toShareholders dated 11 January 2005. The purpose of the Incentive Arrangementwas and remains to motivate and incentivise eligible participants to achievevalue for Shareholders. Under the Incentive Arrangement the Company issues new Ordinary Shares atnominal value to the trustee of the EBT for the purpose of making share awardsto eligible participants. The trustee of the EBT funds the purchase of suchOrdinary Shares by the sale of existing shares in the trust. Key employees (including executive directors) are eligible to participate in theIncentive Arrangement. The Incentive Arrangement, as approved by Shareholders,provided for awards of Ordinary Shares to be made in respect of the threefinancial years ending 30 September 2005, 30 September 2006 and 30 September2007, each with demanding performance criteria: The First Period: Year ended 30 September 2005 For awards in respect of the financial year ended 30 September 2005, the Companyperformance target required that the average mid-market share price increased toat least 9.5 pence per share for the 60 business days following the announcementof the results for that financial year ending 30 September 2005 and that TotalShareholder Return over the year exceeded that of the FTSE All Share Index overthe same period. The Second Period: Year ended 30 September 2006 For awards in respect of the financial year ended 30 September 2006, the Companyperformance target requires that the average mid-market share price increase toat least 12 pence per share for the 60 business days following the announcementof the results for that financial year and that Total Shareholder Return overthe year exceeded that of the FTSE All Share Index over the same period. The Third Period: Year ending 30 September 2007 For awards in respect of the financial year ending 30 September 2007, theCompany performance target requires that the average mid-market share priceincreases to at least 14 pence per share for the 60 business days following theannouncement of the results for that financial year and that Total ShareholderReturn over the year exceeds that of the FTSE All Share Index over the sameperiod. On 4 February 2005, being the date on which the Incentive Arrangement wasapproved by Shareholders, the closing mid-market price of an Ordinary Share was6.375p. Each award made under the Incentive Arrangement to an eligible participant isalso subject to demanding targets in relation to his or her own performance.Such performance targets are determined by the remuneration committee of theCompany taking into account the employee's position and role in the Group. Theremuneration committee bases these targets on the Company's agreed businessplan, with the individual components of achieving this plan assigned to theappropriate employees of the Group. In addition, generally any Ordinary Shares held by the trustees of the EBT forthe benefit of the family of any employee revert to the EBT for distribution toother employees and their families if the employee leaves employment with theGroup within 2 years of the end of the relevant period. For example, OrdinaryShares awarded in respect of the financial year ended 30 September 2005 willgenerally revert to the trustees of the EBT if the employee ceases to beemployed by the Group before 30 September 2007. The trustee of the EBT currently holds 14,800,080 Ordinary Shares, representing13.8% of the issued ordinary share capital of the Company. Awards over7,270,000 Ordinary Shares were made by the trustee of the EBT for the benefit ofemployees and their families in respect of the financial year ended 30 September2005. The Company intends to make recommendations to the trustee of the EBTthat awards over 7,610,080 Ordinary Shares be made for the benefit of employeesand their families in respect of the financial year ended 30 September 2006,subject to the Company performance target relating to the financial year ended30 September 2006, set out above, being satisfied. In addition, the EBT has sold1,394,920 Ordinary Shares to fund the purchase of these Ordinary Shares leaving1,975,000 out of a total of 18,250,000 Ordinary Shares available for allocationin the third performance period, i.e. the current financial year. Larger than anticipated awards have been recommended in these periods as aresult of the following: - Since the EBT was originally put in place in February 2005, employeeshave significantly out-performed against the Company's business plan andperformance targets. This out-performance is reflected in the Company's shareprice, which has averaged approximately 20 pence since 1 October 2006 (comparedto a Company performance target of 12 pence for the second performance periodwhich applies to the average mid-market share price for the 60 business daysfollowing the announcement of the Company's results for the year ended 30September 2006, which was made on 11 December 2006). The Company's shares arecurrently trading at 21.75 pence. - As part of this out-performance, the Company has recruited more seniorstaff than had been expected, and there are therefore more individualbeneficiaries of the EBT than had been envisaged in February 2005. Extension of Incentive Arrangement In order to be able to incentivise staff who are contributing significantly tothe Company's further growth, the remuneration committee believes that it isnecessary to top up the existing scheme in the current financial year. The remuneration committee is proposing that awards under the EBT of theadditional 6,000,000 Ordinary Shares would be subject to a Company performancetarget requiring the average mid-market share price to increase to at least 24pence per share for the 60 business days following the announcement of theresults for the financial year ending 30 September 2007 and that TotalShareholder Return over the year exceeds that of the FTSE All Share Index overthe same period. In addition, awards will only be made where employees havesatisfied demanding targets in relation to his or her own performance, asexplained above. The Company has not yet made any decisions to implement a new employee incentivescheme after September 2007 and will notify Shareholders of its intentions indue course. The award of Ordinary Shares under the Incentive Arrangement will impactdistributable reserves. Ordinary Shares issued to the EBT are initially regardedfor accounting purposes as not having totally left the Company's control and areaccounted for as Treasury Shares. The allocation of the Ordinary Shares for thebenefit of the family of a specific employee will result in a charge to theprofit and loss account based on the mid market price of the Ordinary Shares atthe "grant date" as defined by FRS 20 "Share based payments" which is defined asthe date of approval of the proposals. Full details of the accounting treatmentcan be found in Notes 19 and 32 of the Report and Accounts of the Company forthe year ended 30 September 2006. Extraordinary General Meeting An extraordinary general meeting of the Company is being convened on 9 February2007 for the purpose, inter alia, of considering a resolution to approve theincrease in the number of Ordinary Shares that may be the subject of awardsunder the EBT and is set out at the end of this document. In addition to theresolution relating to the approval of the increase in the maximum number ofOrdinary Shares in respect of which awards may be made under the EBT to24,250,000 Ordinary Shares, special resolutions will be proposed at theExtraordinary General Meeting:- (a) granting an authority to the Directors pursuant to section 80Companies Act 1985 to allot up to 6,000,000 Ordinary Shares to the trustee ofthe EBT for the purposes of the Incentive Arrangement; (b) disapplying the statutory pre-emption rights that would otherwiserequire such Ordinary Shares to be offered pro rata to all Shareholders; (c) approving the amendment of the Subscription Agreement between theCompany and the trustee of the EBT for the purpose of making awards of theadditional Ordinary Shares; and (d) approving the agreement pursuant to which the trustee of the EBT willgrant to the Company the option to repurchase any of the increased number ofOrdinary Shares which the trustee of the EBT does not hold for the benefit ofthe family of a specific employee as a result of the performance conditions notbeing satisfied. Recommendation The Directors believe that it is in the best interests of the Company and itsShareholders for the maximum number of Ordinary Shares which may be the subjectof awards under the EBT to be increased to 24,250,000 Ordinary Shares and theDirectors to be granted the authorities described in the document so as topermit the award of Ordinary Shares pursuant to the EBT. Accordingly, the Directors recommend Shareholders to vote in favour of theresolutions set out in the notice convening the Extraordinary General Meeting.In view of their potential interest in the EBT, Ian Simm, Nigel Taunt and KeithFalconer have undertaken to abstain from voting on the resolutions to beproposed at the Extraordinary General Meeting. For further information please contact Keith Falconer, Chairman Impax Group plc Copies of the circular may be obtained from the Company's registered office,Broughton House, 6-8 Sackville Street, London W1S 3DG This information is provided by RNS The company news service from the London Stock Exchange