Annual Report 2007 in PDF - Cairn Energy PLC

NOTES TO THE ACCOUNTS
CONTINUED
7. Staff Costs (continued)
Cairn India Employee Stock Option Plan (2006)
The Cairn India Employee Stock Option Plan (2006) (‘CIESOP’), which was adopted by Cairn India in November 2006,
is a discretionary arrangement that allows the company to grant options over its shares to selected employees and
executive directors.
Under the plan, Cairn India will grant options equivalent to 88,265,718 equity shares (when aggregated with the number of
options to be granted pursuant to the Cairn India Performance Option Plan (2006) (‘CIPOP’) of the face value of Rs.10 each at
an exercise price that will be determined by the Remuneration Committee, but not less than the fair market value of the equity
shares on the date of grant to each of the eligible employees of Cairn India.
Options will generally vest on the third anniversary of grant, subject to the individuals remaining in employment. In accordance
with generally prevailing practice in India, the ability to exercise these options will not be subject to the satisfaction of any
additional performance conditions. Option exercises will be settled by an allotment of shares to the relevant individual.
The following table details the number and WAEP of share options issued under the CIESOP at the Balance Sheet date:
98 CAIRN ENERGY PLC ANNUAL REPORT 2007
Number WAEP (Rs.)
Outstanding at the beginning of the year – –
Granted during the year 8,982,755 164.27
Lapsed during the year (437,045) 160.00
Exercised during the year – –
––––––––––– –––––––––––
Outstanding at the end of the year 8,545,710 164.49
––––––––––– –––––––––––
Exercisable at the end of the year –
Weighted average fair value of options granted in year Rs.89.4
Weighted average remaining contractual life of outstanding options 9.47 years
The CIESOP options have been valued using the Black–Scholes model. The main inputs to the model are as per the CISMP
above.
The fair value of the options is based on an independent valuation using the following assumptions:
1 January 20 September
Vesting Date 2010 2010
Vesting % 100% 100%
Volatility 41.04% 36.40%
Risk free rate 7.50% 7.23%
Cairn India Performance Option Plan (2006)
The CIPOP was adopted by Cairn India in November 2006, and is a discretionary arrangement that allows the company to grant
options over its shares to selected employees and executive directors.
Under the plan, Cairn India will grant options equivalent to 88,265,718 equity shares (when aggregated with the number of
options to be granted pursuant to the CIESOP) of the face value of Rs.10 each at an exercise price of Rs.10 each to each of the
eligible employees of Cairn India.
The vesting of these options will generally be dependent on both continued employment and the extent to which
predetermined performance conditions are met over a specified period of at least three years. Initially, the performance
condition attached to options granted pursuant to the CIPOP will be based on the TSR of Cairn India compared to the TSR of a
group of exploration, production and integrated oil companies.