TIDMDX.
RNS Number : 6586X
DX (Group) PLC
28 November 2017
28 November 2017
AIM: DX.
DX (Group) plc
("DX" or "the company")
Notice of General Meeting,
Posting of Circular,
and
New Share Incentive Awards
DX, the leading independent parcels, mail and logistics network
operator, announces that the Notice of General Meeting ("Notice")
and Form of Proxy, in respect of a general meeting, to be held at
the Company's registered office, at Ditton Park, Riding Court Road,
Datchet, Slough, SL3 9GL, on 15 December 2017, at 10.00am, will
today be posted to shareholders, and will shortly be available on
the Company's website.
Purpose of the Resolutions
As set out in the announcement on 20 October 2017 of the
Company's preliminary results for the Financial Year ended 30 June
2017, the Company has issued approximately GBP16.3 million of loan
notes (Tranche 1 Loan Notes) and, subject to the relevant
Resolutions being passed (and subject to certain other conditions),
further loan notes in the amount of approximately GBP7.7 million
(Tranche 2 Loan Notes) will be issued. The Tranche 1 Loan Notes and
the Tranche 2 Loan Notes (together, "Loan Notes") are constituted
by an instrument dated 19 October 2017 ("Loan Note
Instrument").
Further, as set out in an announcement on 20 October 2017,
certain changes were made to the membership of the Board. The
Company has agreed to, amongst other things, establish a
Performance Share Plan ("PSP") for the executive directors and
certain senior management of the Company on certain terms (more
detail as to which is given below). The Company has agreed to,
amongst other things, award (on certain conditions) Paul Goodson
and Russell Black, the new non-executive directors, 250,000
ordinary shares each ("Restricted Stock"). The Company has agreed
to establish the PSP and make the Restricted Stock awards to the
non-executive directors (the PSP and the Restricted Stock awards
together, the "Incentives") before 1 January 2018.
The authorities to be granted under the Resolutions are
necessary for the Company to comply with the terms of the Tranche 1
Loan Notes; necessary to allow the issue of the Tranche 2 Loan
Notes; and necessary to allow the Incentives to be put in place,
respectively.
If none, or not all, of the Resolutions are passed before 1
January 2018, the consequences could include some or all of the
following:
-- the Tranche 2 Loan Notes will not be issued
and the Company will not receive the proceeds
of the funding under them. The Board's view
remains that, if this funding is not received,
there is a material uncertainty as to the
ability of the Company to continue operating
as a going concern;
-- the maturity of the Tranche 1 Loan Notes will
shorten from 36 months to 18 months (or, if
the failure to obtain the appropriate authority
results in a breach of the terms of the Loan
Notes, the Loan Notes will become immediately
repayable (save as to a short grace period),
and the interest coupon payable in relation
to the Loan Notes will double from 8 per cent.
per annum to 16 per cent. per annum (with
the additional interest compounding with the
then existing principal amount outstanding
on the Loan Notes each quarter); and
-- the Incentives will not be put in place, with
the risk that the Directors who have been
appointed, on account of their specialist
skills and experience, to lead the turnaround
of the Company are not appropriately retained
and incentivised within the Company and may
terminate their appointment and, further,
the Company may be in breach of its contracts
with certain of its Directors and certain
holders of the Loan Notes.
Separately (and unrelated to the passing of the Resolutions), if
security is not granted before 1 January 2018 in accordance with
the terms of the Loan Notes to secure the Company's obligations
thereunder, the interest coupon payable in relation to the Loan
Notes will increase by 8 per cent. per annum (in addition to any
increase referred to above, and compounding on a similar
basis).
Recommendation of the Independent Director
Ian Gray is the independent director of the Company in relation
to the proposed Resolutions (as the other members of the Board are
holders of Tranche 1 Loan Notes and beneficiaries of the
Incentives). Mr Gray considers that all of the Resolutions to be
put to the Meeting are in the best interests of the Company and its
shareholders and are most likely to promote the success of the
Company for the benefit of its shareholders as a whole. Mr Gray
recommends that shareholders vote in favour of all of the proposed
Resolutions as each of the Directors (to the extent they are able)
intend to do in respect of their own beneficial holdings.
Summary of the PSP and Recovery Awards
Purpose
The PSP is being established as a share plan under which awards
of shares, the vesting of which is subject to performance
conditions, can be made to selected employees of the Company,
including the Chairman and the Executive Directors.
The PSP has been designed following consultation with the
Company's largest shareholders, and the initial awards to be made
under the PSP ("Recovery Awards") are designed to provide an
appropriate incentive for the new management team at DX to deliver
a turnaround in the Company. Accordingly, the terms of the PSP have
been specifically settled to take account of the Loan Notes which,
assuming their conversion rights are exercised, will have an impact
on the Company's issued share capital and also on awards made under
the PSP.
Operation
The Remuneration Committee of the Board of directors of the
Company (the "Committee") will supervise the operation of the
PSP.
Eligibility
Any employee (including an executive director but excluding any
non-executive director) of the Company and any of its subsidiaries
will be eligible to participate in the PSP at the discretion of the
Committee.
Grant of awards
The Committee may grant an award in one of two forms:
(i) nil or nominal cost options, where a participant can decide
when to exercise his/her award over ordinary shares in the Company
("Shares") during a limited period of time after it has vested;
or
(ii) a conditional award, where a participant will receive free
Shares on the vesting of his/her award.
The Committee may normally grant awards within six weeks
following: (i) the Company's announcement of its results for any
period; (ii) the Company's annual general meeting; or (iii) the
lifting of restrictions on dealing in Shares that prevented grant
of awards under (i) or (ii). The Committee may also grant awards
when there are exceptional circumstances which the Committee
considers justifies the granting of awards, and this includes the
ability to make the proposed Recovery Awards either: (i) within six
weeks following the 15 December 2017 Company General Meeting, and
(2) following the appointment of any individual (if later).
No awards will be granted after the tenth anniversary of the 15
December 2017 General Meeting.
No payment will be required for the grant of an award. Awards
are not transferable (other than to the participant's personal
representatives in the event of death). Any benefits obtained under
the PSP are not pensionable.
Proposed Recovery Awards - Limits
It is expected that Recovery Awards will be made to the Chief
Executive and the Chairman after the 15 December 2017 General
Meeting.
These Recovery Awards are anticipated to be made over material
numbers of shares:
(i) Chief Executive - approximately 13 million Shares
(ii) Chairman - approximately 7 million Shares
In addition, as the individuals will bear the obligation for the
payment of employers' National Insurance Contributions when the
Recovery Awards are exercised, the numbers of Shares in the
Recovery Awards will be further "grossed up" by c.16.7% to
compensate the holders of Recovery Awards for this transfer of
liability.
Additional Recovery Awards may be made to selected senior
executives, provided that the total number of Shares over which all
Recovery Awards (including compensatory awards in respect of the
transfer of Employers' NICs) are granted will not exceed 15% of the
issued share capital of the Company from time to time (and, as
further diluted by the awards under the PSP).
PSP Awards other than Recovery Awards - Limits
The PSP may be used in the future to make further awards which
are not Recovery Awards to Executive Directors or selected senior
managers. However, before making such awards the Company will
consult with its largest shareholders to agree an available "pool"
of available Shares for any such awards.
Vesting of Recovery Awards and Performance Conditions
Recovery Awards shall be subject to a Share Price performance
measure as follows:
3-4-5 Year Share Price % of Recovery Award that
target Vests
----------------------- ----------------------------
Less than 12.5p 0%
----------------------- ----------------------------
12.5p 25%
----------------------- ----------------------------
Between 12.5p and Pro-rata on straight-line
50p basis between 25% and 100%
----------------------- ----------------------------
50p 100%
----------------------- ----------------------------
The Share Price target will be tested at each of the third,
fourth and fifth anniversaries of the making of the Recovery
Awards, and on each occasion the Share Price measurement is to be
based on the 30 day average share price prior to the test date.
Achievement of a Share Price measurement on a later test date which
is greater than the achieved measurement on a previous test date
will result in additional vesting of the Recovery Award in
accordance with the above table.
In addition to the Share Price targets stated above, the
Committee must be satisfied with overall financial performance to
allow any vesting of Recovery Awards on any occasion.
Recovery Awards for which the Share Price target is attained at
any test date will vest 12 months later (being the fourth, fifth
and sixth anniversaries of the award date) provided that the
participant is still a director or employee in the Company's group
at that time.
For ease of calculation, the Committee may choose to align all
Share Price test dates for participants to those for the Recovery
Awards granted to the Chief Executive and the Chairman.
An award in the form of an option will normally remain
exercisable until the tenth anniversary of the date of grant.
The Committee may allow awards to be settled in cash (in whole
or part) where the Committee considers it appropriate to do so.
For future awards which are not Recovery Awards, the Committee
may impose such performance conditions as it considers appropriate
which must be satisfied before any such award will vest.
A performance condition may be altered if circumstances or
events are such that the Committee, acting fairly and reasonably,
considers that it would be appropriate to do so. Any altered
performance condition shall not be materially less difficult to
satisfy than the original performance condition.
Specific features of Recovery Awards related to the Loan
Notes
Recovery Awards will reflect the commercial impact of the Loan
Notes in the following ways:
-- The exercise of the conversion rights under
the Loan Notes (whether in whole or in part)
on any occasion will not result in adjustment
of the Share Price targets for Recovery Awards
as described above;
-- The exercise of the conversion rights under
the Loan Notes (whether in whole or in part)
will result in proportionate increases in
the number of Shares within Recovery Awards
to maintain participants' percentage award
holdings (by reference to the percentage
of issued share capital which these awards
represented at the date when the first Recovery
Awards are granted after the 15 December
2017 General Meeting);
-- If less than 50% of the conversion rights
under the Loan Notes have been exercised
by the first Share Price test date at the
third anniversary of the award date of the
Recovery Awards, the first Share Price test
date will be 3.5 years from the award date
of the Recovery Awards (rather than 3 years
from the grant, although any performance
vested shares from this assessment may still
vest on the fourth anniversary of the award
date).
Orderly Marketing
It shall be a term and condition of an individual's
participation in the PSP that all dealings in shares to be acquired
from the PSP shall only be by arrangement with the Company's
nominated broker from time to time, and failure to comply will
entitle the Company to apply the 'malus and clawback' provisions of
PSP as considered appropriate by the Committee.
Payment on account of dividends
Unless the Committee decides otherwise prior to the normal
vesting date, a participant will receive a payment (in Shares or
cash), on or shortly following vesting of his conditional share
award or exercise of his option, of an amount equivalent to the
dividends that would have been paid on the Shares vested under the
award between the time when the award was granted and the time when
it vested (and assuming reinvestment in Shares on the relevant ex
dividend dates).
Leaving employment
As a general rule, an award will lapse upon a participant
leaving the employment of the Company's group. However, if before
the vesting of an award a participant ceases to be a director or
employee within the Company's group by reason of death, injury,
ill-health or disability, statutory redundancy, retirement with the
agreement of his or her employer, the sale of the participant's
employing business by the group or other circumstances which the
Committee determines in its discretion, then the award will be
retained and may vest on the normal vesting date to the extent
determined by the performance conditions measured over the full
performance period, unless determined otherwise by the
Committee.
The Committee may, at its discretion, allow awards to vest in
such circumstances at the time of cessation of employment, in which
case awards would normally be subject to the performance conditions
as measured over the shorter period to the date of cessation of
employment.
In either case, there will also be a pro-rata reduction in the
size of the award for the time that has elapsed up to the date of
cessation compared to the vesting period (which for Recovery Awards
will be 3 years) unless the Committee determines that it would be
inappropriate to apply a pro-rata reduction in the particular
circumstances.
Where an individual holding a vested award leaves the Company's
employment, the individual will be able to exercise that vested
award within 12 months of the date of cessation of employment,
unless the reason for such cessation is the individual's misconduct
in which case the award will lapse.
Corporate events
In the event of a takeover, scheme of arrangement or winding up
of the Company (not being an internal corporate reorganisation),
all awards may vest early to the extent that the performance
conditions have, in the opinion of the Committee, been satisfied at
that time.
In the event of an internal corporate reorganisation, awards
will be replaced by equivalent new awards over shares in a new
holding company, unless the Committee decides that awards should
vest on the same basis as described above.
Awards may also vest on the same basis if a demerger, special
dividend or other similar event is proposed which, in the opinion
of the Committee, would affect the market price of the Shares to a
material extent.
Variation of capital
In the event of any variation of the Company's share capital, or
in the event of a demerger, payment of a special dividend or other
similar event which materially affects the market price of the
Shares, the Committee may make such adjustments as it considers
appropriate to the number of Shares subject to an award and/or the
exercise price payable (if any). For Recovery Awards, the exercise
of conversion rights under the Loan Notes will allow for
adjustments in the number of Shares subject to the Recovery Awards
as detailed above.
Malus and Clawback
The Committee retains a power to reduce the potential vesting of
unvested awards (including to zero) (often referred to as 'malus')
or to recoup the value of previously vested awards from an
individual within 3 years of the date of vesting if it considers it
appropriate to do so (often referred to as 'clawback').
The Committee may choose to exercise this power in circumstances
of:
-- a material misstatement of results;
-- errors, or inaccurate or misleading information
leading to incorrect vesting of awards;
-- misconduct of the individual if sufficiently
serious to permit summary dismissal;
-- breach of "orderly marketing" (see Orderly
Marketing section above);
-- other circumstances which, in the Committee's
opinion, have a significantly adverse impact
on the Company's reputation (or would have
if made public) to justify the operation of
clawback.
In the circumstances of misconduct by the individual, the period
for the potential operation of clawback is not limited to 3
years.
Participants' rights
Awards will not confer any shareholder rights on participants
until the awards have vested and the participants have received
their Shares.
Rights attaching to Shares
Any Shares allotted when an award vests (or for an award
structured as an option, when it is exercised) will rank equally
with all other Shares then in issue (except for rights arising by
reference to a record date prior to their allotment).
Alterations
The Committee may alter the PSP or any terms of an award at any
time in any respect. No alterations may be made to the material
disadvantage of any participant or in respect of any rights already
acquired by him (other than a change in any performance condition)
without the consent of a majority of participants responding to any
relevant request.
Proposed Awards to Russell Black and Paul Goodson
Whilst not awarded under the terms of the PSP, it is proposed to
make awards of "restricted stock" to Russell Black and Paul Goodson
after the 2017 General Meetings. Such awards are not linked to
performance and will have the following key features:
-- The proposed awards to each individual represent
awards over 0.12% of current issued share
capital;
-- In line with awards to the Chairman and Chief
Executive, such awards will reflect the transfer
of Employers' National Insurance Contributions
and the numbers of Shares will be further
"grossed up" by c.16.7% to compensate the
holders of the awards for this transfer of
liability;
-- The "restricted stock" share awards will vest
after 3 years, subject to continued service
as a Director;
-- Good leaver and change of control provisions
similar to those for PSP awards (as described
above) will apply;
-- The awards made will be counted towards the
overall 15% of issued share capital from time
to time available for Recovery Awards;
-- As for Recovery Awards, the exercise of the
conversion rights under the Loan Notes (whether
in whole or in part) will result in proportionate
increases in the number of Shares within the
"restricted stock" awards for the Non-executives
which will maintain the individuals' percentage
award holdings (by reference to the percentage
of issued share capital which these awards
represented at the date when the first Recovery
Awards are granted after the 15 December 2017
General Meeting).
This announcement contains inside information for the purposes
of Article 7 of Regulation (EU) 596/2014.
Enquiries:
DX (Group) plc
Ron Series, Chairman T: 020 3178 6378
Lloyd Dunn, Chief Executive
Officer
Zeus Capital (Nominated Advisor T: 020 3829 5000
and Joint Broker)
Nick How, Giles Balleny (Corporate
Finance)
Dominic King (Corporate Broking)
KTZ Communications T: 020 3178 6378
Katie Tzouliadis, Irene Bermont-Penn,
Emma Pearson
This information is provided by RNS
The company news service from the London Stock Exchange
END
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