WTG.L Regulatory News (WTG)

21 March 2016

Watchstone Group plc

 ("Watchstone" or the "Company" or the "Group")

Management Incentive and Retention Plan

Watchstone (LON:WTG) announces that it has implemented a new management incentive and retention plan ("Plan"), adopted by the Board on the recommendation of the Company's Remuneration Committee following independent external advice and consultation with major shareholders. Grants under the Plan have been made to a number of key executives none of whom are members of the Company's Remuneration Committee ("Participants"). The Board (excluding any Participants) believes that the Plan is in the best interests of the Company and its shareholders.

Richard Rose, Non-executive Chairman said; "After taking extensive advice and following consultation with shareholders, we have designed an executive incentive plan that is rooted in the creation of value for all shareholders. The Plan recognises the Group's complex history and its diverse nature following the disposal of the Professional Services Division. Against this backdrop, the Board decided to implement a cash-based scheme, focussed on delivering growth in the value of the Company's operating businesses going forward without penalising, or enhancing returns for, management in respect of historic matters. Accordingly, the Board will not grant share options to the Participants."

The Plan is a cash-based incentive and retention scheme that will only be triggered upon value-crystallising events (including, inter alia, a takeover of the Group or disposals of individual divisions) in excess of base values. A market price of 250 pence per share (being approximately a 18.5% premium to the closing share price on 18 March 2016) for the Group as a whole (including all its assets and liabilities) has been used to ascribe a base value to each division ("Hurdle"). The Hurdle will be adjusted, inter alia, for cash invested by the Group and dividends or other proceeds paid to the Group by the respective divisions. The benefits paid pursuant to the Plan (if any) will specifically exclude the impact of, or adjustment for:

a) the Company's current cash balances (amounting to approximately £95m at 31 December 2015, equating to approximately 98% of the current market capitalisation);

b) the cash to be released from escrow at the end of 2016 and the deferred contingent consideration payable pursuant to the disposal of the Professional Services Division; and

c) any cash paid to resolve liabilities relating to events which occurred prior to the appointment of the new Board of the Company on 29 May 2015.

Participants will be entitled to a share of up to a total of 9.5‎% of any growth in value of each division of the Group above the Hurdle (as adjusted for cash invested or generated from 1 January 2016).

Indro Mukerjee, Group Chief Executive Officer and Mark Williams, Group Finance Director, are Participants and Directors and, accordingly, the potential payments to each of them are related party transactions pursuant to Rule 13 of the AIM Rules. In addition, Stefan Borson, Group General Counsel & Company Secretary, is also a Participant.

a) Indro Mukerjee's will be entitled to up to 5% of any growth in value of each division of the Group above the Hurdle (as adjusted for cash invested or generated from 1 January 2016); and

b) Mark Williams and Stefan Borson will each be entitled to up to 2.25% of any growth in value of each division of the Group above the Hurdle (as adjusted for cash invested or generated from 1 January 2016).

The Board (with the exception of Mr Mukerjee and Mr Williams, the related parties pursuant to the AIM Rules), having consulted with Peel Hunt LLP, in its capacity as the Company's nominated adviser, believe that the terms of the Plan are fair and reasonable insofar as the Company's shareholders are concerned.

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