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Whitehaven Coal Limited : Annual Report 2008
DIRECTORS’ REPORT 7. REMUNERATION REPORT – AUDITED (CONTINUED) 7.2.2 Notes in relation to the table of directors’ and executive officers’ remuneration – audited (continued) D. Equity Participation and Option Deed The fair value for options issued under the Equity Participation and Option Deed is based on the fair value of options granted, measured using a Black Scholes model. The following factors and assumptions were used in determining the fair value of options on grant date: Grant Date 3/5/07 Expected option life/ Expiry date 10 years Fair value per option 7.2 cents Exercise price $1.00 Price of shares on grant date $1.00 Expected volatility 30% Risk free interest rate 5.88% Dividend yield 10% During the year ended 30 June 2007, the consolidated entity entered into an Equity Participation and Option Deed (the Deed) with entities related to Directors Andy Plummer and Tony Haggarty. In accordance with the Deed, the following shares and options in the Company have been issued to these related entities. Shares The related entities of Andy Plummer and Tony Haggarty hold 30 million shares in the Company (15 million shares each). The 30 million shares were issued at $0.50 per share. These shares comprise Tranche 1 (15 million shares) and Tranche 2 (15 million shares). Tranche 2 shares have been escrowed and will be released from escrow over a five year period but will be released earlier if the Company’s share price reaches $2.50 or the options referred to below lapse. Dividends (net of an allowance for tax) attaching to the escrowed shares will be held in escrow accounts and released at the time the shares are released. The company’s share price reached $2.50 during the year ended 30 June 2008 and accordingly, the Tranche 2 shares have been released from escrow. For accounting purposes, the difference between the consideration received by the Company and the fair value of the issued shares of $15,000,000 was recognised in the profit and loss for the period ended 30 June 2007 (2008: $nil). Options The related entities of Andy Plummer and Tony Haggarty were also granted 6 options each to acquire additional shares in the Company. The number of option shares is the percentage (the “Grant percentage” set out in the table below) of a deemed amount of issued shares. For the purposes of the Deed, the deemed number of shares is 300 million shares plus any shares issued under previous exercised options. Each option is exercisable when the share price reaches a certain level (as set out in the table below). All share prices will be considered attained when the volume weighted average price of ordinary shares on the ASX measured over 10 consecutive trading days reaches the required amount. Options 1 and 2 were exercised during the year ended 30 June 2008. Option 3 reached the target share price during the year ended 30 June 2008 and was exercised subsequent to year end. Option 4 also reached the target share price during the year ended 30 June 2008 and the director related entities have applied to exercise the option on 25 September 2008 with shares to be issued subsequent to the date of this financial report. All options have an exercise price of $1 and must be exercised by the related entities within 90 days of being notified the Company’s share price has reached the target share price. The number of option shares to be received will be reduced if a specified percentage of the Tranche 2 shares formerly held in escrow are not held at the time of the Company’s share price reaching the target share price specified in the option. For example if for option 5, only 50% of the Tranche 2 shares are held, then the number of option shares will be reduced to 50%/60% of the relevant grant percentage in the table below. 24
Annual Report 2009