Stock options and performance shares
If the underlying stock increases in value, the option becomes more valuable. If the underlying stock decreases below the 'grant' price or stays the same in value as the 'grant' price, then the option becomes worthless. They provide employees the right, but not the obligation, to purchase shares of their employer's stock at a certain price for a certain period of time.
Options are usually granted at the current market price of the stock and last for up to 10 years. To encourage employees to stick around and help the company grow, options typically carry a four to five year vesting period, but each company sets its own parameters. Advantages Disadvantages Allows a company to share ownership with the employees. Used to align the interests of the employees with those of the company.
In a down market, because they quickly become valueless Dilution of ownership Overstatement of operating income Nonqualified Stock Options Grants the option to buy stock at a fixed price for a fixed exercise period; gains from grant to exercise taxed at income-tax rates Advantages Disadvantages Aligns executive and shareholder interests.
Company receives tax deduction. No charge to earnings. Dilutes EPS Executive investment is required May incent short-term stock-price manipulation Restricted Stock Outright grant of shares to executives with restrictions to sale, transfer, or pledging; shares forfeited if executive terminates employment; value of shares as restrictions lapse taxed as ordinary income Advantages Disadvantages Aligns executive and shareholder interests. No executive investment required.
If stock appreciates after grant, company's tax deduction exceeds fixed charge to earnings. The number of stock options that may be exercised out of the total number of stock options granted and the number of performance shares definitively awarded within the scope of the Plans will therefore depend: In order to take into account the impact of the Airgas acquisition and its financing, the principle was adopted: The precise objective will be communicated ex post.
In sum, the applicable performance conditions are as follows: The limits set by the Board of Directors for are identical to those for and are as follows: For all the executive officers: For each executive officer individually: They are applicable to the grants as follows: This obligation will remain in force until it is exceeded by the effect of the above-mentioned rules resulting from the French Commercial Code. The Board granted options to subscribe for shares in the Company in accordance with the following terms:.
Subject to the performance conditions that apply to both the performance share and stock option plans defined below , the provisions of the Plan Regulations are essentially unchanged as compared to those of the Plan term of the Plan: The number of stock options that may be exercised out of the total number of stock options granted and the number of performance shares definitively awarded within the scope of the Plans will therefore depend:.
In order to take into account the impact of the Airgas acquisition and its financing, the principle was adopted:. The absolute TSR objective remains unchanged as compared to the previous plans, i. The objective with regard to the relative part of TSR is based on the average of the two indexes. Any grant for a performance lower than the average of the two indexes is impossible.
The rate of achievement of the performance conditions will be recorded by the Board at the time of its adoption of the financial statements for the financial year. The precise objective set for EPS will be made public ex post , at the close of the Board meeting determining the rate of achievement of the performance conditions.