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## Cardno Limited and its Controlled Entities for the year ended 30 June 2010 

## Long-Term Incentive Bonus 

## Employee Share Acquisition Plans (“ESAP”) 

Shares are issued under the ESAP, in accordance with thresholds approved by shareholders at the 2009 AGM. It provides employees with the opportunity to acquire shares in the Company for no consideration as a bonus component of their remuneration. Employees with 12 months service or greater who have worked an average of 100 hours or more per month are entitled to $1,000 of shares each year and employees with 6 to 12 months service are entitled to $500 of shares each year. Employees who work part time, who have greater than 12 months service and who have worked more than 600 hours per year are also entitled to $500 of shares each year. Shares issued under ESAP rank equally with other fully paid ordinary shares from the date of issue. 

Shares are issued in the name of the participating employee and are subject to a restriction period. The shares are restricted under the plan until the earlier of three years from the date of acquisition or the date they cease to be an employee. Once the restriction period is lifted the shares can be traded as fully paid ordinary shares. The ESAP has no conditions that could result in the recipient forfeiting ownership of shares. 

The number of shares still under a restriction period at 30 June 2010 are detailed in the table below: 

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Shares issued during the reporting period are valued at the average market price over the 5 trading days prior to the date of the issue to employees, which approximates the fair value. 

## Performance Equity Plan (PEP) 

The PEP is designed to reward strong performance by individuals within the Cardno Group of companies. Options and Rights are issued under the PEP, in accordance with thresholds 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. 

The plan rules contain a restriction on removing the “at risk” aspect of the instruments granted to executives. Plan participants may not enter into any transaction designed to remove the “at risk” aspect of an instrument before it vests. 

##  Options 

The plan operates by granting an option to key staff to purchase a prescribed number of shares at a pre-determined time in the future. During the 2010 financial year, options with a grant date fair value of $1,728,573 were issued with a vesting period of three years from the grant date. 

Each option is convertible to one ordinary share. The exercise price of the options, determined in accordance with the rules of the plan, is based on the weighted average price of the Company’s shares traded during the five days preceding the date of offering the option. All options expire on the earlier of their expiry date or termination of the employee’s employment. The options may be exercised at any time during a 12 month period ending thirty-six months after the date the options are issued. 

There are no voting or dividend rights attached to the options. Voting rights and dividends will be attached to the unissued ordinary shares when the options have been exercised. 

No options were exercised during the 2009/10 financial year. Options with a grant date fair value of $310,405 lapsed during the year as a result of vesting conditions not being satisfied. 

