- Shareholder Information
Notice of Meeting
Appendix 2 - Taylor Wimpey Share Option Plan ('TW Share Option Plan')
Introduction
The TW Share Option Plan will be administered by the Remuneration Committee (the 'Committee') of the Company's Board of Directors (the 'Board'). The TW Share Option Plan provides for the Committee to grant options over Ordinary Shares in the Company ('Shares') and phantom options, which entitle the participants to cash payments with a value equivalent to the excess of the market value of a specified number of Shares on the exercise date over the exercise price. No consideration is payable by the participant for the grant of options or phantom options.
The TW Share Option Plan also allows for the grant of approved share options under a schedule to the rules which is intended to be approved by HM Revenue & Customs under Schedule 4 to the Income Tax (Earnings and Pensions) Act 2003 as a company share plan.
Eligibility
Awards may only be made to Executive Directors or other employees of the Company and its subsidiaries (the 'Group'), selected at the discretion of the Committee.
Timing of grants
The Committee may grant awards within 42 days of the approval of the TW Share Option Plan by shareholders or following the announcement date of the Company's annual or half-yearly results. The Committee may also grant awards at other times, where there are exceptional circumstances which it considers justify the granting of awards.
No awards may be granted more than 10 years after the approval of the TW Share Option Plan by shareholders.
Individual grant limit
An individual may not be granted awards in any financial year over Shares having a market value at the award date in excess of 300% of the individual's annual base salary (200% in the case of executive directors).
The maximum expected value of awards under both the TW Performance Share Plan and the TW Share Option Plan combined in any financial year for Executive Directors will not exceed the expected value of a TW Performance Share Plan award of 200% of salary.
The Remuneration Committee will retain discretion to determine in exceptional circumstances (such as attracting new hires) an award quantum for Executive Directors in excess of the above maximum quantum. Any enhanced awards made pursuant to such discretion will not exceed 300% base salary.
Under current statutory limits, a participant may only hold approved share options over £30,000 worth of Shares (valued at the grant date) at any time.
Share capital limits
Awards may be granted over new issue Shares, treasury Shares or Shares purchased on the market through an employee benefit trust.
No award may be granted under the TW Share Option Plan if the maximum number of Shares issuable under the award, together with the maximum number of Shares issuable or issued pursuant to awards or options granted under the TW Share Option Plan or any other employee share plan operated by any Company in the Group in the previous 10 years would exceed 10% of the Company's issued ordinary share capital at the time.
No award may be granted under the TW Share Option Plan if the maximum number of Shares issuable under the award, together with the maximum number of Shares issuable or issued pursuant to awards or options granted under the TW Share Option Plan, or any other discretionary share plan operated by any Company in the Group in the previous 10 years, would exceed 5% of the Company's issued ordinary share capital at the time.
The above limits include new issue Shares and treasury Shares but not Shares purchased on the market through an employee benefit trust.
Exercise price
The exercise price per Share payable by a participant on exercise of an option, and used to determine the value payable on exercise of a phantom option, may not be less than the market price of a Share on the dealing day preceding the grant date (or, if the Committee so decides, the average of the prices for the three preceding dealing days).
Vesting of awards and performance conditions
Awards will normally become exercisable at the end of a performance period of not less than three years, as soon as the Committee has determined the extent to which the applicable performance conditions have been met.
For the first awards granted under the TW Share Option Plan to Executive Directors, the proportion of each award which vests will depend on the excess of the Company's return on capital employed ('ROCE') in the last year of the performance period over the Company's cost of capital ('COC'), determined according to the following table:
| Company's ROCE in excess of the cost of capital |
Proportion of award vesting |
| Below the cost of capital | 0% |
| Equal to the cost of capital | 25% |
| Between the cost of | |
| capital and 3 percentage | |
| points over the cost of capital | 25%-100% pro rata |
| 3 or more percentage points | |
| over the cost of capital | 100% |
| ROCE will be calculated basedon the Company's earnings before interest, taxand amortisation. COC will be calculated based on the following formula: |
|
| (risk free rate + equity riskpremium)/(1 - tax rate) x (average operating assets employed- average net debt) |
|
| + net interestcost | |
| average operating assets employed | |
- Equity risk premium means the premium published in Bloomberg (or such other recognised source to be determined by the Remuneration Committee) as at the balance sheet date
- Operating assets means capital employed excluding intangibles as set out in the Company's latest published annual accounts
- Net debt means borrowings less cash or cash equivalents
- Net interest cost means interest on borrowings less interest received
- Risk free rate means UK Government gilt yields as at the balance sheet date.
The Committee may review the performance conditions for each grant of awards and may apply different conditions to future awards, provided they remain no less challenging and are aligned with the interests of shareholders.
Exercise period
Awards may normally be exercised between the vesting date and the expiry date, which may be no later than the tenth anniversary of the date of grant.
Cessation of employment
As a general rule, an award will lapse if a participant ceases to be employed within the Group before the vesting date. However, if a participant leaves employment because of:
- the participant's death
- disability
- injury
- the Company or business in which the participant is employed ceasing to be part of the Group
- other reasons, at the discretion of the Committee
then a part of the participant's award will become exercisable, which will be determined by the Committee depending on the Company's performance and the proportion of the performance period which has elapsed at the date of cessation.
Corporate events
In the event of a takeover, scheme of arrangement or voluntary winding up of the Company (other than an internal corporate reorganisation), all awards will vest immediately. The part of each award which becomes exercisable will be determined by the Committee depending on the Company's underlying financial performance and the proportion of the performance period which has elapsed. Alternatively, with the agreement of the acquiring Company, awards may be replaced with equivalent new awards over shares in that Company.
In the event of an internal corporate reorganisation, awards will be replaced by equivalent new awards over shares in a new holding Company unless the Committee decides that awards should vest on the basis which would apply in the case of a takeover.
Variation of share capital
In the event of any variation of the Company's share capital, a demerger or payment of a special dividend, or such other circumstances as the Committee considers appropriate the Committee may make such adjustment as it considers fair and reasonable to the number of Shares subject to an award and the exercise price.
Participants' rights
Awards are not transferable, except to a participant's legal personal representatives on the participant's death.
Awards will not confer any shareholder rights until the awards have been exercised and the participants have received their Shares. No dividend equivalents will be payable in respect of the period before exercise.
Any Shares allotted when an award is exercised will rank equally with Shares then in issue, except for rights arising by reference to a record date prior to their allotment.
Awards do not count as part of participants' pensionable salaries for the purpose of employers' contributions to any Group pension schemes or other benefits.
Alterations to the TW Share Option Plan
The Board, on the recommendation of the Committee, may at any time amend the provisions of the TW Share Option Plan in any respect, provided that the prior approval of shareholders is obtained for any amendments that are to the advantage of participants in respect of the rules governing eligibility, limits on participation, the overall limits on the issue of shares, the basis for determining a participant's entitlement to, and the terms of, the Shares to be acquired and the adjustment of awards.
The requirement to obtain the prior approval of shareholders will not, however, apply to any minor alteration made to benefit the administration of the TW Share Option Plan, to take account of a change in legislation or to obtain or maintain favourable tax, exchange control, securities law or regulatory treatment for participants or for any Company in the Group.
Overseas plans
The Board may at any time, without further shareholder approval, establish further plans in overseas territories. Any such plan must be similar to the TW Share Option Plan but may be modified to take account of local tax, exchange control, securities law or regulations. Any Shares made available under such plans shall be counted towards the limits on individual and overall participation in the TW Share Option Plan.