Notes to the Consolidated Financial Statements  Cardno Limited and its Controlled Entities for the year ended 30 June 2010 Performance Equity Plan (PEP)  23. ISSUED CAPITAL OF CARDNO LIMITED CONTINUED  The PEP is designed to reward strong performance by individuals within the Cardno Group of companies. Options and  Rights are issued under the PEP (made in accordance with thresholds set in the plan approved at the 2009 AGM) which  provides certain employees (as determined by the Managing Director and Remuneration Committee) with the opportunity  to acquire shares in the Company, or rights to acquire shares in the Company. Movements in options throughout the year were as follows:  The options outstanding at 30 June 2010 have an exercise price in the range of $3.35 to $7.71. These options do not  entitle the holder to participate in any share issue of the Company.  The options issued prior to FY2010 are subject to a performance hurdle and will not vest unless there has been at least a  5% improvement per year (compounded) in the earnings per share of the Company over the vesting periods.  The options issued during FY2010 are subject to a performance hurdle and to vest the Company must achieve earnings  per share (EPS) growth in accordance with the following scale:  The fair values of options granted during the year has been calculated using the Black-Scholes model, taking into  account price volatility, risk free interest rates and the dividend yield. The model inputs for the fair value of options granted during the year ended 30 June 2010 include share price at grant  date of $4.07 (2009: $3.26), expected price volatility of the companies shares of 42% (2009: 33%), expected dividend  yield of 8.00% (2009: 8.28%) and risk free interest rate of 4.61% (2009: 6.73%). Page 50 of 80  EPS Growth Over 3 Years  % of Performance Options in  Tranche to Vest  <12.5% (<4% pa)  0%  12.5% (4% pa)  30%  >12.5% (4% pa) & <26% (8% pa)  Pro rata  26% (8% pa)  70%  >26% (8% pa) & <40% (12% pa)  Pro rata  ≥ 40% (12% pa)  100%  Grant Date  Exercise  Date  Expiry Date  Exercise  Price  $  Fair  Value  at  Grant  Date  $  Number of  Options at  Beginning  of Year  Options  Granted  Options  Lapsed  Options  Vested  Not  Exercised  Number of  Options as  at 30 June  2010  25 October  2007  19 October  2009  25 October  2009  7.57  0.68  230,000  -  -  230,000  -  25 October  2007  19 October  2010  25 October  2010  7.57  0.92  330,000  -  -  -  330,000  5 December  2007  29 November  2009  5 December  2009  7.71  0.70  1,272,500  -  103,000  1,169,500  -  5 December  2007  29 November  2010  5 December  2010  7.71  0.95  1,719,000  -  180,500  -  1,538,500  5 December  2008  29 November  2011  5 December  2011  3.35  0.41  2,421,000  -  163,000  -  2,258,000  2 December  2009  2 December  2012  2 December  2013  4.43  0.77  -  2,244,900  -  -  2,244,900  Weighted average exercise price  5.93  4.43  6.12  7.69  5.00  Weighted average remaining contract life  670 days  Total expense recognised $454,311 (2009: $552,687) 