Holiday Inn 2005 Annual Report Download - page 66

24 SHARE-BASED PAYMENTS
Short Term Deferred Incentive Plan The IHG Short Term Deferred
Incentive Plan (STDIP) enables eligible employees, including
Executive Directors, to receive all or part of their bonus in the
form of IHG PLC shares together with, in certain cases, a matching
award of free shares up to 0.5 times the deferred amount. The
bonus and matching shares are deferred and released in three
equal tranches on the first, second and third anniversaries of the
award date, conditional on the participants remaining in the
employment of a participating company. Participation in the
STDIP is at the discretion of the Remuneration Committee. The
number of shares is calculated by dividing a specific percentage of
the participant’s annual performance related bonus by the middle
market quoted prices on the three consecutive dealing days
immediately preceding the date of grant. A number of executives
participated in the plan during the year and conditional rights over
624,508 IHG PLC shares were awarded to participants.
Performance Restricted Share Plan The Performance Restricted
Share Plan (PRSP) allows Executive Directors and eligible
employees to receive share awards, subject to the satisfaction of a
performance condition, set by the Remuneration Committee, which
is normally measured over a three year period. Awards are normally
made annually and, except in exceptional circumstances, will not
exceed three times salary for Executive Directors and four times
salary in the case of other eligible employees. In determining the
level of awards within this maximum limit, the Remuneration
Committee takes into account the level of Executive Share Options
granted to the same person. At 31 December 2005, conditional rights
over 5,173,633 IHG PLC shares had been awarded to employees
under the plan. The plan provides for the grant of ‘nil cost options’
to participants as an alternative to conditional share awards.
Executive Share Option Plan For options granted, the option price
is not less than the market value of an ordinary share, or the
nominal value if higher. The market value is the quoted price on
the business day preceding the date of grant, or the average of the
middle market quoted prices on the three consecutive dealing days
immediately preceding the date of grant. A performance condition
has to be met before options can be exercised. The performance
condition is set by the Remuneration Committee.
In April 2005, options were granted to 58 employees over 2,104,570
IHG PLC shares at 619.83p per share. For options granted in 2005,
the Company’s adjusted earnings per share over the three year
performance period ending 31 December 2007 must increase by at
least nine percentage points over the increase in the UK Retail
Price Index for the same period for any of the award to vest.
Options granted in 2005 are exercisable between 2008 and 2015,
subject to achievement of the performance condition.
Sharesave Plan The Sharesave Plan is a savings plan whereby
employees contract to save a fixed amount each month with a
savings institution for three or five years. At the end of the savings
term, employees are given the option to purchase shares at a price
set before savings began. The Sharesave Plan is available to all UK
employees (including Executive Directors) employed by participating
Group companies provided that they have been employed for at
least one year. The plan provides for the grant of options to subscribe
for ordinary shares at the higher of nominal value and not less than
80% of the middle market quotations of the ordinary shares on the
three dealing days immediately preceding the invitation date. The
plan was not operated during 2005 and no options were granted in
the year under the plan.
US Employee Stock Purchase Plan The US Employee Stock
Purchase Plan will allow eligible employees resident in the US
an opportunity to acquire Company American Depositary Shares
(ADSs) on advantageous terms. The plan, when operational, will
comply with Section 423 of the US Internal Revenue Code of 1986.
The option to purchase ADSs may be offered only to employees of
designated subsidiary companies. The option price may not be
less than the lesser of either 85% of the fair market value of an
ADS on the date of grant or 85% of the fair market value of an
ADS on the date of exercise. Options granted under the plan must
generally be exercised within 27 months from the date of grant.
The plan was not operated during 2005 and at 31 December 2005
no options had been granted under the plan.
Former Six Continents Share Schemes
Under the terms of the Separation in 2003, holders of options
under the Six Continents Executive Share Option Schemes were
given the opportunity to exchange their Six Continents PLC options
for equivalent value new options over IHG PLC shares. As a result
of this exchange, 23,195,482 IHG PLC shares were put under option
at prices ranging from 308.48p to 593.29p. The exchanged options
were immediately exercisable and are not subject to performance
conditions. During 2005, 4,138,482 such options were exercised,
leaving a total of 7,909,002 such options outstanding at prices
ranging from 308.48p to 593.29p. The latest date that any options
may be exercised is October 2012.
notes to the financial statements
64 InterContinental Hotels Group 2005