Remuneration Information • Mar 29, 2011
Remuneration Information
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| Directors' Adoption: | [date] 2011 |
|---|---|
| Shareholders' Approval: | [date] 2011 |
| Expiry Date: | [date] 2021 |
Linklaters LLP One Silk Street London EC2Y 8HQ
Telephone (+44) 20 7456 2000 Facsimile (+44) 20 7456 2222
Ref 01/140/G Chapman/R Berglund
| Table of Contents | ||
|---|---|---|
| ------------------- | -- | -- |
| Contents | Page |
|---|---|
| 1 | Granting Awards 1 |
| 2 | Before Vesting 3 |
| 3 | Vesting of Awards 4 |
| 4 | Consequences of Vesting 5 |
| 5 | Vesting in other circumstances - personal events 7 |
| 6 | Vesting in other circumstances - corporate events 9 |
| 7 | Changing the Plan and termination 10 |
| 8 | General 11 |
| 9 | Definitions 13 |
The Grantor of an Award must be the Company, any other Member of the Group or a trustee of any trust set up for the benefit of Employees.
An Award granted under the Plan, and the terms of that Award, must be approved in advance by the Directors.
The Grantor may grant an Award to anyone who is an Employee on the Award Date in accordance with any selection criteria that the Directors in their discretion may set.
However, unless the Directors consider that special circumstances exist, an Award may not be granted to an Employee who on the Award Date has given or received notice of termination of employment, whether or not such termination is lawful.
Awards may only be granted within 42 days starting on any of the following:
Awards may not be granted at any time after the Expiry Date.
Awards are subject to the rules of the Plan, any Performance Condition and any other condition imposed under rule 1.6 (Other conditions) and must be granted by deed. The terms of the Award must be determined by the Grantor and approved by the Directors. The terms must be set out in the deed or any other document (which may be in electronic form), including:
1.4.6 whether the Participant is entitled to receive any Dividend Equivalent;
1.4.7 the Award Date; and
When granting an Award, the Grantor may make its Vesting conditional on the satisfaction of one or more conditions linked to performance. A Performance Condition must be objective and specified at the Award Date. The Grantor, with the consent of the Directors, may waive or change a Performance Condition in accordance with its terms or if anything happens which causes the Grantor reasonably to consider it appropriate to do so.
The Grantor may impose other conditions when granting an Award. Any condition must be specified at the Award Date and may provide that an Award will lapse if it is not satisfied. The Grantor, with the consent of the Directors, may waive or change a condition imposed under this rule 1.6.
Each Participant will receive a certificate setting out the terms of the Award as soon as practicable after the Award Date. The certificate may be the deed referred to in rule 1.4 (Terms of Awards) or any other document (which may be in electronic form). If any certificate is lost or damaged the Company may replace it on such terms as it decides.
A Participant is not required to pay for the grant of an Award.
If the Grantor grants an Award which is inconsistent with rule 1.2 (Eligibility), it will lapse immediately.
If the Grantor tries to grant an Award which is inconsistent with rules 1.10 (Individual limit), 1.11 (Plan limits – 10 per cent) or 1.12 (Plan limits – 5 per cent), the Award will be limited, and will take effect from the Award Date, on a basis consistent with those rules.
An Award must not be granted to an Employee if it would, at the proposed Award Date, cause the market value of Shares subject to Awards that he has been granted in respect of that financial year under the Plan to exceed 200% of his annual basic salary from Members of the Group. For these purposes, market value will be determined by the Directors and may be determined by reference to share price averaged over a period as specified by the Directors.
"Basic salary" means gross base salary excluding benefits in kind expressed as an annual rate payable on the Award Date. Basic salary payable in a currency other than sterling will be converted into sterling by using any rate of exchange which the Directors may reasonably select.
A Grantor must not grant an Award if the number of Shares committed to be issued under that Award exceeds 10 per cent of the ordinary share capital of the Company in issue immediately before that day, when added to the number of Shares which have been issued, or committed to be issued, to satisfy Awards under the Plan, or awards or option under any other employee share plan operated by the Company granted in the previous 10 years.
A Grantor must not grant an Award if the number of Shares committed to be issued under that Award exceeds 5 per cent of the ordinary share capital of the Company in issue immediately before that day, when added to the number of Shares which have been issued, or committed to be issued, to satisfy Awards under the Plan, or awards or options under any other discretionary employee share plan adopted by the Company granted in the previous 10 years.
Where the right to acquire Shares is released or lapses, the Shares concerned are ignored when calculating the limits in rules 1.11 (Plan limits – 10 per cent) and 1.12 (Plan limits – 5 per cent).
As long as so required by the Association of British Insurers, Shares transferred from treasury are counted as part of the ordinary share capital of the Company and as Shares issued by the Company.
No Shares will be issued under the Plan if it would cause Listing Rule 6.1.19 (shares in public hands) to be breached.
A Participant is not entitled to vote, to receive dividends or to have any other rights of a shareholder in respect of Shares subject to an Award until the Shares are issued or transferred to the Participant.
A Participant may not transfer, assign or otherwise dispose of an Award or any rights in respect of it. If he does, whether voluntarily or involuntarily, then it will immediately lapse. This rule 2.2 does not apply to the transmission of an Award on the death of a Participant to his personal representatives
Except to the extent prohibited by law, an Award will lapse immediately if a Participant is declared bankrupt.
If there is:
the Directors may adjust the number or class of Shares or securities subject to an Award and, in the case of an Option, the Option Price in such way as they consider appropriate.
2.4.1 At any time before Vesting, the Directors may, in their absolute discretion, reduce an Award, determine that an Award or any part of it will not Vest or defer Vesting on such terms as they consider appropriate as a result of any matter set out in rules 2.4.2 or 2.4.3 below.
As soon as reasonably practicable after the end of the Performance Period, the Directors will, if necessary, determine whether and to what extent any Performance Condition or other condition imposed under rule 1.6 (Other conditions) has been satisfied or waived and how many Shares Vest for each Award.
Where an Award is not subject to a Performance Condition, subject to rules 1.6 (Other conditions), 5 (Vesting in other circumstances – personal events) and 6 (Vesting in other circumstances – corporate events), an Award Vests on the date of Vesting set by the Directors on the grant of the Award or, if on that date a Dealing Restriction applies to that Award, that Award Vests on the first date on which such Dealing Restriction ceases to apply.
Where an Award is subject to a Performance Condition, subject to rules 1.6 (Other conditions), 5 (Vesting in other circumstances – personal events) and 6 (Vesting in other circumstances – corporate events), an Award Vests, to the extent determined under rule 3.1 (Satisfying conditions), on the date on which the Directors make their determination under rule 3.1 (Satisfying conditions) or, if on that date a Dealing Restriction applies to that Award, that Award Vests on the first date on which such Dealing Restriction ceases to apply.
To the extent that any Performance Condition is not satisfied at the end of the Performance Period, the Award lapses, unless otherwise specified in the Performance Condition. To the extent that any other condition is not satisfied, the Award will lapse if so specified in the terms of that condition.
If an Award lapses under the Plan, it cannot Vest and a Participant has no rights in respect of it.
Within 30 days of a Conditional Award Vesting, the Grantor will arrange (subject to rules 4.4 (Cash and share alternative), 4.5 (Withholding) and 8.8 (Consents)) for the transfer, including a transfer out of treasury, or issue to, or to the order of, the Participant of the number of Shares in respect of which the Award has Vested. Notwithstanding the foregoing, if Vesting of a Conditional Award granted to a US Taxpayer is delayed under rules 3.2 or 3.3 due to a Dealing Restriction applying on the date originally set for Vesting, the Shares underlying the Conditional Award will be transferred no later than March 15 of the calendar year following the calendar year in which the date originally set for Vesting occurs.
4.2.2 The Option will lapse at the end of the period above or, if earlier, on the earliest of:
(i) the date the Participant ceases to be an Employee by reason of resignation or dismissal for gross misconduct; or
An Award, except an Option granted to a US Taxpayer, may include the right to receive a Dividend Equivalent which may be paid in cash or Shares (as determined from time to time by the Grantor with the consent of the Directors). Dividend Equivalents will be paid to any relevant Participant as soon as practicable after Vesting or exercise. For the avoidance of doubt, the Dividend Equivalent does not include the tax credit and the Directors may determine from time to time that Dividend Equivalents will not be paid in respect of all or part of a special dividend or other distribution.
The Grantor may, subject to the approval of the Directors, decide to satisfy a Conditional Award or an Option by paying an equivalent amount in cash (subject to rule 4.5 (Withholding)).
The Company may determine that an Award will be satisfied in cash at the Award Date or at any time before satisfaction of the Award, including after Vesting or, in the case of an Option, after exercise. In respect of Awards which consist of a right to receive a cash amount, the Directors may decide instead to satisfy such Awards (and any Dividend Equivalents) by the delivery of Shares (subject to rule 4.5 (Withholding)). The number of Shares will be calculated by reference to the market value of the Shares on the date of Vesting for Conditional Awards and the date of exercise for Options.
The Company, the Grantor, any employing company or trustee of any employee benefit trust may withhold such amount and make such arrangements as it considers necessary to meet any liability to taxation or social security contributions in respect of Awards. These arrangements may include the sale or reduction in number of any Shares or the Participant discharging the liability himself.
Where rule 5.2.1 (ii), (iii) and (iv) applies, the Award does not lapse but will Vest on the date of cessation or, if any Performance Condition applying to the Award cannot be (or has not been) measured on or before cessation, as soon as practicable after the first opportunity when such Performance Condition may be determined, but with respect to Conditional Awards granted to US Taxpayers, in no event shall Shares underlying the Conditional Awards be transferred later than March 15 of the calendar year following the calendar year in which the period as to which the Performance Condition is measured ends. However, except for Conditional Awards granted to US Taxpayers, the Directors may decide that the Award should Vest on the date of Vesting determined on the Award Date or on any other date.
Where rule 5.2.1(i), (v) and (vi) applies with respect to Conditional Awards granted to US Taxpayers, the Conditional Award does not lapse but will Vest on the date of cessation or, if any Performance Condition applying to the Conditional Award cannot be (or has not been) measured on or before cessation, as soon as practicable after the first opportunity when such Performance Condition may be determined, but in no event shall Shares underlying the Conditional Awards be transferred later than March 15 of the calendar year following the calendar year in which the period as to which the Performance Condition is measured ends.
Unless the Directors decide otherwise, the proportion of the Award which Vests should be reduced pro rata to reflect the acceleration of Vesting.
Where rule 5.2.1(i), (v) and (vi) applies, except for Conditional Awards granted to US Taxpayers, the Award does not lapse but will Vest on the date of Vesting. If the Award is subject to Performance Conditions, it will Vest to the extent that such Performance Conditions have been satisfied in accordance with rule 3.1 (Satisfying conditions) at the end of the Performance Period. However, the Directors may decide in their discretion that the Award should Vest on the date of cessation or, if any Performance Condition applying to the Award cannot be (or has not been) measured on or before cessation, as soon as practicable after the first opportunity when such Performance Condition may be determined.
Unless the Directors decide otherwise, the Award should be reduced pro rata to reflect the acceleration of Vesting, if any.
If a Participant remains an Employee but is transferred to work in another country or changes tax residence status and, as a result, he would:
then the Directors may decide that the Awards will Vest on a date they choose before or after the transfer takes effect. The Award will Vest to the extent they permit and may lapse as to the balance if the Directors so decide. Notwithstanding the foregoing, if this rule 5.5 applies with respect to a Participant who is, or is expected to become, a US Taxpayer, the Directors may decide to accelerate Vesting and the transfer of the underlying Shares to a date earlier than the date originally set for Vesting, but shall not extend, suspend or otherwise change the period of Vesting in any other manner.
For the purposes of rules 5 (Vesting in other circumstances – personal events) and 4.2 (Options), a Participant will not be treated as ceasing to be an Employee until he is no longer an Employee of any Member of the Group or if he recommences employment with a Member of the Group within seven days.
If the participant retains a statutory right to return to work, he will be treated as not having ceased to be an Employee until such time as he ceases to have such a right to return to work.
Where an Award Vests under rule 6.1 (Time of Vesting):
An Award will not Vest under rule 6.1 (Time of Vesting) but will be exchanged under rule 6.6 (Exchange terms) to the extent that:
To the extent that an offer to exchange a Conditional Award is made under rule 6.3.1 to a US Taxpayer, the Conditional Award will not Vest under rule 6.1 and will lapse to the extent such offer is declined by such US Taxpayer.
In this rule 6, "Directors" means those people who were members of the remuneration committee of the Company immediately before the Change of Control.
Where an Award is to be exchanged under rule 6.3 (Exchange), the exchange is effective immediately following the relevant event.
Where a Participant is granted a new award in exchange for an existing Award, the new award:
Except as described in the rest of this rule 7, the Directors may at any time change the Plan in any way.
7.2.2 The Directors can change the Plan and need not obtain the approval of the Company in general meeting for any minor changes:
(i) to benefit the administration of the Plan;
The Directors are not required to give Participants notice of any changes.
The Plan will terminate on the Expiry Date, but the Directors may terminate the Plan at any time before that date. The termination of the Plan will not affect existing Awards.
8.1.5 The Employee will have no claim or right of action in respect of any decision, omission or discretion, which may operate to the disadvantage of the Employee even if it is unreasonable, irrational or might otherwise be regarded as being in breach of the duty of trust and confidence (and/or any other implied duty) between the Employee and his employer.
8.1.6 No Employee has any right to compensation for any loss in relation to the Plan, including any loss in relation to:
The decision of the Directors on the interpretation of the Plan or in any dispute relating to an Award or matter relating to the Plan will be final and conclusive.
Neither the Company, the Grantor nor any Director shall be liable for:
Nothing in this Plan confers any benefit, right or expectation on a person who is not a Participant. No such third party has any rights under the Contracts (Rights of Third Parties) Act 1999 or any equivalent local legislation to enforce any term of this Plan. This does not affect any other right or remedy of a third party which may exist.
The Company is not required to send to Participants copies of any documents or notices normally sent to the holders of its Shares.
The Company will pay the costs of introducing and administering the Plan. The Company may ask a Participant's employer to bear the costs in respect of an Award to that Participant.
The Company and any Subsidiary may provide money to the trustee of any trust or any other person to enable them or him to acquire Shares to be held for the purposes of the Plan, or enter into any guarantee or indemnity for those purposes, to the extent permitted by Section 682 of the Companies Act 2006 or any applicable law.
By participating in the Plan the Participant consents to the holding and processing of personal information provided by the Participant to any Member of the Group, trustee or third party service provider, for all purposes relating to the operation of the Plan. These include, but are not limited to:
8.7.1 administering and maintaining Participant records;
The Participant is entitled, on payment of a fee, to a copy of the personal information held about him or her, if anything is inaccurate the participant had the right to have it corrected.
All allotments, issues and transfers of Shares will be subject to any necessary consents under any relevant enactments or regulations for the time being in force in the United Kingdom or elsewhere. The Participant is responsible for complying with any requirements he needs to fulfil in order to obtain or avoid the necessity for any such consent.
Shares issued to satisfy Awards under the Plan will rank equally in all respects with the Shares in issue on the date of allotment. They will not rank for any rights attaching to Shares by reference to a record date preceding the date of allotment. Where Shares are transferred to a Participant, including a transfer out of treasury, the Participant will be entitled to all rights attaching to the Shares by reference to a record date on or after the transfer date. The Participant will not be entitled to rights before that date.
If and so long as the Shares are listed and traded on a public market, the Company will apply for listing of any Shares issued under the Plan as soon as practicable.
English law governs the Plan and all Awards and their construction. The English courts have exclusive jurisdiction in respect of disputes arising under or in connection with the Plan or any Award.
In these rules:
"Acquiring Company" means a person who has or obtains control (within the meaning of Section 995 of the Income Tax Act 2007) of the Company;
"Award" means a Conditional Award or an Option;
"Award Date" means the date on which an Award is granted by deed under rule 1.4 (Terms of Awards);
"Change of Control" means:
"Company" means BAE SYSTEMS plc;
"Conditional Award" means a conditional right to acquire Shares granted under the Plan;
"Dealing Restrictions" means restrictions imposed by statute, order, regulation or Government directive, or by the Model Code or any code adopted by the Company based on the Model Code and for this purpose the Model Code means the Model Code on dealings in securities set out in Listing Rule 9, annex 1 (of the London Stock Exchange), as varied from time to time;
"Directors" means, subject to rule 6.4 (Directors), the board of directors of the Company, the remuneration committee of the board of directors or a duly authorised person or group of persons;
"Dividend Equivalent" means an amount equal to the dividends payable on the number of Vested Shares over the Vesting Period as determined by the Directors;
"Employee" means any employee of a Member of the Group (including an executive director of the Company);
"Expiry Date" means [insert date] 2021, the tenth anniversary of shareholder approval of the Plan;
"Grantor" means, in respect of an Award, the entity which grants that Award under the Plan;
"London Stock Exchange" means London Stock Exchange plc;
"Member of the Group" means:
"Option" means a right to acquire Shares granted under the Plan;
"Option Period" means a period starting on the grant of an Option and ending at the end of the day before the tenth anniversary of the grant, or such shorter period as may be specified under rule 4.2 (Options) on the grant of an Option;
"Option Price" means the fair market value (which, for Options granted to US Taxpayers, shall be determined in a manner consistent with 1.409A-1(b)(5)(iv)) of the Shares subject to an Option on the Award Date as determined by the Directors under rule 1.4.8,or, except with respect to Options granted to US Taxpayers, zero;
"Participant" means a person holding an Award or his personal representatives;
"Performance Condition" means any performance condition imposed under rule 1.5 (Performance Conditions) which, for Conditional Awards granted to US Taxpayers, will be a purely objective performance condition, the determination of the satisfaction of which will require no exercise of discretion;
"Performance Period" means the period in respect of which a Performance Condition is to be satisfied;
"Plan" means these rules known as "The BAE SYSTEMS Restricted Share Plan 2011", as changed from time to time;
"Shares" means fully paid ordinary shares in the capital of the Company;
"Subsidiary" means a company which is a subsidiary of the Company within the meaning of Section 1159 of the Companies Act 2006;
"US Taxpayer" means a Participant who is or becomes subject to income taxation under the laws of the United States of America;
"Vesting" in relation to an Option, means an Option becoming exercisable and in relation to a Conditional Award, means a Participant becoming entitled to have the Shares transferred to him subject to the Plan; and
"Vesting Period" means the period from the Award Date to the date of Vesting.
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