Holiday Inn 2009 Annual Report Download - page 101

GROUP FINANCIAL
STATEMENTS
Notes to the Group financial statements 99
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
any matching shares awarded are released on the third anniversary
of the award date. The bonuses in 2006 and 2007 were eligible
for matching shares, all of which will be released on the third
anniversary of the award date. In 2006 and 2007, participants
could defer up to 100% of the total annual bonus, with the
deferred amount being accounted for as a share-based payment.
Under the terms of the 2008 and 2009 plans, 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 or leaving for a qualifying reason as
per the plan rules. 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 1,058,734 (2008 661,657) shares were awarded to
participants. This number includes 228,000 shares awarded
as part of recruitment terms or for one-off individual
performance-related awards.
Long Term Incentive Plan
The Long Term Incentive Plan allows Executive Directors and
eligible employees to receive share awards, subject to the
satisfaction of performance conditions, set by the Remuneration
Committee, which are 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
5,754,548 (2008 5,060,509) 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 2009 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
2009 and no options were granted in the year under the plan. All
options outstanding at 31 December 2008 were either exercised
or lapsed in 2009.
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 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 2009 and at 31 December 2009
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 2009, 380,457 (2008
159,254) such options were exercised and 43,088 shares lapsed
(2008 113,024), leaving a total of 2,001,060 (2008 2,424,605) such
options outstanding at prices ranging from 308.5p to 434.2p. The
latest date that any options may be exercised is 3 October 2012.
27 Share-based payments