Holiday Inn 2008 Annual Report Download - page 89

25 Share-based payments
Annual Bonus Plan
The IHG Annual Bonus Plan 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 of up to half the deferred amount. The bonus and matching
shares in the 2005 plan 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 and 2007 plans
are released on the third anniversary of the award date. Under the
2006 and 2007 plans a percentage of the award (Board members –
100% (2006 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 immediately in cash, in
which case it is not accounted for as a share-based payment.
Under the terms of the 2008 plan, a fixed percentage of the bonus
is awarded in the form of shares with no voluntary deferral and no
matching shares. The awards in all of the plans are conditional on
the participants remaining in the employment of a participating
company. Participation in the Annual Bonus Plan 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 661,657
(2007 675,515) shares were awarded to participants.
Long Term Incentive Plan
The Long Term Incentive Plan 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. During the year, conditional rights over 5,060,509
(2007 3,538,535) 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 during
2008 and no options were granted in the year under the plan.
The latest date that any options may be exercised is 4 April 2015.
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 2008 and no options were granted
in the year under the plan. The latest date that any options could
be exercised under the three-year plan was 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
2008 and at 31 December 2008 no options had been granted under
the plan.
Former Six Continents Share Schemes
Under the terms of the separation of Six Continents PLC 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 308.5p to 593.3p. The
exchanged options were immediately exercisable and are not
subject to performance conditions. During 2008, 159,254 (2007
1,358,791) such options were exercised and 113,024 shares lapsed
(2007 nil), leaving a total of 2,424,605 (2007 2,696,883) such options
outstanding at prices ranging from 308.5p to 466.7p. The latest
date that any options may be exercised is 3 October 2012.
Notes to the Group financial statements 87
GROUP FINANCIAL STATEMENTS