Untitled - David Kronemyer

(i) Overall Scheme Limits
Ir is proposed to increase the limits on lhe total number of shares over which options may be
granted under the schemes to reflect the increase in the company's share capital since these
limits were last revised in 1984 and to make the limits of the two schemes more consistent
with one another. Following the proposed changes it will continue to be the case that the
number of shares that may be placed under option at any time, when aggregated with the
number of shares issued on the exercise of options granted in the preceding ten years and
any shares remaining subject to such options, may not exceed l07o o[ the Company's
Ordinary Shares in issue at that time. Of these, only half may relate ro options under the
1984 Scheme and under the previous executive share option scheme adopted in l9Z3 (under
which there are still some subsisting options although it is not intended to grant further
options under that scheme). There will also be a limit on the maxinum number of Onlinary
Shares available for each scheme of, in each case, l09o of the Company's current issued
0rdinary Shares.
ln addition to the limits contained in the rules of the Company's schemes, there is
currently a fur-ther constraint on the number of shares available for the grant of options. This
is because in I984, when shareholders approved the introduction of two share option
schemes by INMOS International plc, the Board undertook to treat the limits in the
Company's schemes as if the l0% limir applicable to all irs schemes were reduced to 9%
with a proportionate reduction in the limit applicable to its executive share option schemes.
The schemes established by INMOS International plc related both to that company and
to its subsidiary companies. 'fhe operations of the INMOS companies have however recently
been restructured as a result of which all the subsidiary companies of INMOS International
plc have been transferred elsewhere within the Group. INMOS International plc, the shares
ofwhich were used for the INMOS schemes, is now a dormant company. No shares have
been issued under its schemes, nor will any further options be granted. In these
circumstances it is considered to be inappropriate for the grant of options under the
Company's schemes to continue to be constrained by the INMOS schemes. Accordingly, if
the proposals to amend the Company's schemes are approved by shareholders, it is intended
to cease to apply the undetaking given in 1984.
(ii) The 1984 Scheme
The limits on the value of shares over which an individual can receive options under the
1984 Scheme were last amended in 1986 to distinguish between the limit designed to
eomply with the ABI's guidelines on employee share schemes (which applies to all options
other than those granted under the SAYE Scheme) and that required by the Inland Revenue
(which applies only to options intended to qualify for tax reliefl.
It is now proposed to amend the first ofthese limits to reflecl the recently revised ABI
guidelines. The limit currently places a restriction of four times the individual's salary on
the value of shares over which options may be granted in a ten year period. The amenderl
limit will allow an employee who reaches the four times salary limit and then exercises some
of his/her options to have them replaced by further options up to the four times salary limit.
Such options will only be granted if, after taking into account an individual employee's
pedormance, the Executive Share Option Scheme Committee ol the Board is satisfied that
there has been sufficient improvement in the Group's perlbrmance in at least the two
preceding years to justify their grant. The grant ofoptions under the 1984 Scheme will
continue to require the approval of the Executive Share Option Scheme Committee, all
members of which are non-executive Directors.
The Directors believe that this proposal, if implemented, will make it possible to
ensure that the Company's most senior execulives, on whom the success of the Group vitally
depends, will have a continued incentive to remain with the Group and to strive for its
improved performance. It also believes that within the revised limirs on the grant ol options
under the Company's share option schemes referred to above, the Company will have
sufficient shares available to maintain a programme for the grant of options including the
grant of such replacement options where appropriate.
The Ordinary Resolution to give effect to these proposals is set out as Resolution l0 of
the Notice ofAnnual Ceneral Meeting on pages 14 and 15.