Holiday Inn 2006 Annual Report Download - page 78

Notes to the Group financial statements
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 shares together with, in certain cases, a matching award
of free shares up to half the deferred amount. The bonus and
matching shares in the 2004 and 2005 plans are deferred and
released in three equal tranches on the first, second and third
anniversaries of the award date. The bonus and matching shares
in the 2006 plan are released on the third anniversary of the award
date. Under the 2006 plan a percentage of the award (Board
members – 80%; other eligible employees – 50%) must be taken in
shares and deferred. Participants may defer the remaining amount
on the same terms or take it in cash. The awards in all of the plans
are 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 569,293a(2005 624,508)
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. During the year, conditional rights over
4,277,550 (2005 5,173,633) shares were 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. The plan was
not operated in 2006 and no options were granted in the year
under the plan. The latest date that any options may be exercised
is April 2015.
a Adjusted for the share capital consolidation on 12 June 2006.
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 or 2006
and no options were granted in the year under the plan. The latest
date that any options may be exercised under the three-year plan
is 29 February 2008 and under the five-year plan is 28 February 2010.
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 2006 and at
31 December 2006 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 shares. As a result of this exchange,
23,195,482 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
2006, 3,678,239 (2005 4,138,482) such options were exercised,
leaving a total of 4,055,674 (2005 7,909,002) such options
outstanding at prices ranging from 308.48p to 593.29p for 2005
and 2006. The latest date that any options may be exercised
is October 2012.
76 IHG Annual report and financial statements 2006