2012 Annual Report (2 April 2013) - Grange Resources

2012 ANNUAL REPORT
39
PAGE
Service Agreements
On appointment to the Board, all Non-executive Directors
enter into a service agreement with the Company. The
agreement summarises the Board policies and terms, including
compensation, relevant to the office of Director.
Remuneration and other terms of employment for the Managing
Director, and the other key management personnel are formalised
in service agreements. Each of the agreements provide for the
provision of performance related variable remuneration and other
benefits.
In 2012, the Company entered into an Employment Agreement
with its new Managing Director, Mr Richard Mehan. The details of
Mr Mehan’s employment contract, as advised to the ASX on 31
July 2012, are as follows:
◆ ◆ Total fixed annual remuneration (“TFR”) inclusive of
superannuation of $545,000; and
◆ ◆ A variable annual reward composed of a short term incentive
component of up to a maximum of 21.1% of TFR ($115,000)
and a long term incentive component of up to a maximum of
25.7% of TFR ($140,000).
The Short Term Incentive (“STI”) is determined by the Board
annually and will be based on Mr Mehan’s performance. 50%
of the STI payment will be linked to Company performance,
as measured by key performance indicators set for Company
performance by the Board. 50% of the STI payment will be
linked to Mr Mehan’s personal performance as measured against
personal key performance indicators set by the Board. The Short
Term Incentive will be paid as cash.
The Long Term Incentive (‘LTI”) is granted in the form of
performance rights to shares in the Company. Subject to the
achievement of qualifying hurdles set by the Board, the Company
will grant to Mr Mehan an annual LTI up to a value of $140,000
(i.e. 25.7% of his TFR). The rights to shares will vest in line with
terms as set by the Remuneration Committee subject to the
achievement of hurdles.
Under the agreement, in the event Mr Mehan is terminated by the
Company with notice or resigns with requisite notice, providing he
abides by the good leaver provisions contained in the agreement,
he will be paid three months salary and superannuation in
addition to all unpaid salary, notice and leave entitlements. He will
also receive a pro-rata of the maximum annual dollar value of both
the short term incentive and long term incentive payments which
would otherwise be distributed to him following the next annual
performance and remuneration review. Any unvested options
or rights would also vest as and when they fall due provided the
good leaver provisions are also met.
In the event of illegal acts or serious breaches the Company may
terminate the Managing Director without notice. In such instances
payment to Mr Mehan would be limited to unpaid salary and leave
entitlements.
All contracts with other key management personnel of the
consolidated Grange Group are ongoing and provide for
termination of employment at any time by giving three months
notice or by the Company paying an amount equivalent to three
months remuneration in lieu of notice.
Share-based Compensation
Under the Grange Resources Limited Long Term Incentive Plan
(the Plan), the Board may, from time to time grant options or
rights, or both, to eligible employees. The Plan is designed to
provide long term incentives for executives to deliver long term
shareholders returns. Under the Plan, participants are granted
options or rights which only vest if certain timing or performance
conditions are met. Participation in the Plan is at the Board’s
discretion and no individual has a contractual right to participate
in the Plan or to receive any guaranteed benefits.
The contract provides for an annual review of the Managing
Director’s remuneration with effect from 1 January 2014. In
undertaking the review the Board is required to consider the
following:
(a) The Managing Director’s individual performance, as
determined by the Board;
(b) The performance of the Company, as determined by the
Board; and
(c) Market conditions, taking into account the remuneration of
Managing Directors in similar companies.