Telstra 2013 Annual Report Download - page 185

NOTES TO THE
FINANCIAL STATEMENTS
(CONTINUED)
FINANCIAL STATEMENTS
Telstra Corporation Limited and controlled entities Telstra Annual Report 2013 183
(d) Other equity plans
In exceptional circumstances, Telstra has put in place structured
retention incentive plans. These are designed to protect Telstra
from the loss of employees who possess specific skill sets
considered critical to the business and where Telstra is vulnerable
to losing key personnel. Such retention plans are not restricted to
senior executives. The plans are granted on an ad hoc basis and
the participants receive Telstra shares deferred for a certain amount
of time.
As part of his Service Agreement negotiated upon appointment, the
Chief Financial Officer (CFO) was allocated 96,500 performance
shares of which 50 per cent are eligible to vest after two years and
the remaining 50 per cent are eligible to vest after three years from
the date of commencement of his employment. Vesting is subject
to an assessment of performance by the Board and performance
shares are forfeited in the event of resignation before vesting. In the
event of redundancy or termination of employment for no reason, a
pro rata entitlement of the performance shares as at the time of
cessation of employment vest.
TESOP99 and TESOP97
As part of the Commonwealth’s sale of its shareholding in financial
years 2000 and 1998, Telstra offered eligible employees the
opportunity to buy ordinary shares of Telstra. These share plans
were:
• the Telstra Employee Share Ownership Plan II (TESOP99); and
• the Telstra Employee Share Ownership Plan (TESOP97).
Although the Telstra ESOP Trustee Pty Ltd (wholly owned
subsidiary of Telstra) is the trustee for TESOP99 and TESOP97 and
holds the shares in the trust, the participating employee retains the
beneficial interest in the shares (dividends and voting rights).
Generally, employees were offered interest free loans by the Telstra
Entity to acquire certain shares, and in some cases the employees
became entitled to certain extra shares and loyalty shares as a
result of participating in the plans. All shares acquired under the
plans were transferred from the Commonwealth either to the
employees or to the trustee for the benefit of the employees.
While a participant remains an employee of an entity within the
Telstra Group or, in the case of TESOP97 only, the company that
was their employer when the shares were acquired, there is no date
by which the employee has to repay the loan. However, a
participant may, at any time:
• elect to repay the loan and have the shares transferred into their
name; or
• arrange through the trustee the sale of the shares where the
proceeds of the sale (after deducting the costs of sale) will be
enough to repay the loan.
The loan shares, extra shares and, in the case of TESOP99, the
loyalty shares were subject to a restriction on the sale of the shares
or transfer to the employee for three years or until the relevant
employment ceased. This restriction period has now been fulfilled
under each plan.
If a participant ceases to be employed by an entity within the Telstra
Group or, in the case of TESOP97 only, the company that was their
employer when the shares were acquired the employee must repay
their loan within two months of leaving to acquire the relevant
shares. This is the case except where the restriction period has
ended because of the employee’s death or disablement (in which
case the loan must be repaid within 12 months).
If the employee has ceased employment and does not repay the
loan when required, the trustee must sell the shares if the sale
proceeds (after deducting the costs of sale) will be enough to repay
the loan. The sale proceeds must then be used to pay the costs of
the sale and any amount outstanding on the loan, after which the
balance will be paid to the employee. The Telstra Entity’s recourse
under the loan is limited to the amount recoverable through the sale
of the employee’s shares.
27. EMPLOYEE SHARE PLANS (CONTINUED)