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Diligent directors come up with new CEO incentive scheme

Monday 15th April 2013

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Diligent Board Member Service's directors have come up with a new incentive scheme for chief executive Alex Sodi to replace the stock options it has to cancel after granting him too many.

The plan, which will be put to shareholders on June 4 at the annual meeting, will offer Sodi stock and options provided he meets revenue and earnings growth, the company said in a statement. If he meets all of his targets, the company estimates the cumulative cost of some US$6.3 million for an impact of 8 US cents per share on an earnings per share basis, and a dilution of 5 US cents per share.

Earlier this year, Diligent found that a 2009 award to Sodi exceeded the cap in the 2007 Plan by 1.6 million shares and a 2011 award exceeded the cap in the 2010 Plan by 2.5 million shares. A 2011 award to another executive exceeded the cap in the 2010 Plan by 250,000 shares.

The 2009 grant, which offered Sodi the option to buy up to 2.4 million shares at 14 US cents apiece, will have the 1.6 million shares exceeding the cap cancelled and replaced with an option to purchase the same amount of stock at the closing price on the last trading day before the grant date, probably around June 4.

As part of the deal, Sodi will get a cash award in US dollars of up to 1.6 million times the difference between the original and final exercise price if the company achieves sales growth of at least 7 percent in the 2014 year. That will be paid out in three tranches, and will be reduced if Diligent's stock price plus dividends falls below three-quarters of the exercise price.

Sodi's 2011 grant, which offered options to buy 3 million shares at 82 US cents, will have 2.5 million options cancelled and replaced with 2.25 million shares contingent on Diligent meeting 7 percent sales growth.

He will also get an annual 62,500 shares if the company achieves either 15 percent EPS growth or 15 percent total shareholder return growth in four 12-month measurement periods starting from April 1 this year.

Diligent's shares were unchanged at $6.36 today, and have gained 16 percent this year.

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