oppies, page-16

I just read the conditions of the option issue. The way I understand it the key points of the proposal are:

1. He only has access to 1m options per year over 3 years; not all at once.
2. They are to be issued within one month of the AGM i.e. by mid-Dec
3. The exercise price is the VWA of the SP over the 10 days prior to issue (i.e. the 10 days prior to mid December)
4. In order to be eligible for exercise,
4a. the VWA of the company's SP must increase relative to the exercise price i.e. the SP must be higher than its level in mid-Dec
4b. the VWA of the SP must outperform the ASX Small Ords Index

The implications are:

A. Points 2 & 3 above imply that the more the SP falls between now and mid-December the more attractive the exercise price will be for Lange. Conversely the more it recovers between now and then the higher the EP will be

B. Point 4a above means that the SP must have recovered beyond the level it was at, at the time of option issue (i.e. mid-Dec 08) before the options can be exercised. You would expect this to be an easy hurdle given we must be at the bottom of the market

C. Also because of point 4a, if the SP reverses into a long-term uptrend as we are all expecting and hoping, then 4a ceases to be a hurdle, once the SP surpasses the mid-Dec price. The only hurdle that will remain will be 4b.

D. Point 4b means that NMS has to outperform the small caps market in general. This doesn't mean the SP has to go up; it could drop but it must drop less than the Index and must remain above the mid-Dec price.

All in all, the SP has to improve subtantially from the mid-Dec SP for the options to become attractive for Lange. Unfortunately, if the market recovers sufficiently such that exercise become attractive, but then stagnates such that NMS manages to outperform the Index (just) and there is no significant, sustained long-term improvement in NMS SP (which is what we shareholders are interested in), he still stands to make a good profit because the exercise price will be pegged to NMS' historically low mid-Dec price. I would like to see an additional hurdle based on absolute % increase in SP year on year as each 1m is vested. On the other hand, the proposal is based on industry practice in relating the company's SP to the index. Lange is lucky with the timing of the proposal because of the bottoming of the market.

Do we vote and risk putting him off-side or do we support the motion?