Bulletin
Employee share option scheme
Currently there is one binding share-based compensation scheme for the Netia Group for the years 2011-2020, adopted by Netia's supervisory board on February 25, 2011 (the "2011 Plan").
The 2011 Plan is aimed at encouraging, retaining and motivating participants and to align their interests directly with those of the shareholders. Scheme participants are granted options for the Company’s shares for new issue. The number of shares which can be issued for the purposes of the 2011 Plan may not exceed 13,626,837 (there have been 177,620 shares issued under the 2011 Plan until now).
Description of 2011 Plan follows below.
2011 Plan (expires in May 2020)
On May 26, 2010, the annual shareholders meeting resolved to adopt a set of rules, to be administered by the Company’s supervisory board, for the issuing of up to 27,253,674 share options to the management board and employees of Netia with a latest possible exercise date of May 26, 2020. In addition, in order to satisfy the claims arising from the exercise of the options under the 2011 Plan, the shareholders meeting resolved to authorize the issuance of up to 13,626,837 series L shares.
The key terms of the 2011 Plan adopted by Netia’s supervisory board are as follows:
- The stock options shall be granted in the form of annual grants provided that in each calendar year the supervisory board may grant up to 3,893,382 stock options and the number of stock options granted in each calendar year to members of the Company’s management board may not exceed 1,946,691 stock options.
- The stock options may be exercised by the 2011 Plan participants within certain open periods, set by the supervisory board, falling between the vesting date of the stock options (which cannot be shorter than three years from the date of the stock option grant) and the expiry date of the stock options (which cannot be longer than the term of the 2011 Plan, i.e. by 26 May 2020). The supervisory board determines the vesting dates, the expiry dates and the strike price of each stock option grant.
- The supervisory board determined the following open periods in which participants may exercise their stock options: (i) the two-week period starting from the first day on which the Company’s shares are traded following the publication of the Company’s periodic financial reports; (ii) two-week period preceding the expiry date of the relevant stock option grant; and (iii) the period in which a tender offer for the sale or swap of the Company’s shares aimed at surpassing the threshold of holding more than 33% of all the voting securities in the Company is ongoing.
- The 2011 Plan participants are entitled to exercise their stock options on the condition that they continue their engagement with the Netia Group until the vesting date of the stock options (subject to change of control events and the termination of their engagement by the Netia Group without material cause) and the fulfillment of the business criteria set by the supervisory board for each year of the 2011 Plan. The proportion of the stock options exercised versus the number of stock options granted shall be equal to the lower of: 100% or the actual performance of the objectives set out as part of the performance criteria approved by the supervisory board and applicable in the financial year in which the stock options were granted.
- A participant exercising the stock options shall receive, free of charge, for each exercised stock option a number of series 1 warrants equal to the difference between the average market price of the Company’s shares as of the date of exercising the stock option and the strike price of the stock option divided afterwards by the average market price of the Company’s shares as of the date of exercising the stock option, subject to the limitation that one stock option authorizes its holder to receive up to one half of a series 1 warrant.
- One series 1 warrant authorizes its holder to subscribe for one series L share in the Company at its nominal value. The total number of series L shares of the Company which may be issued under the 2011 Plan is 13,626,837.
- The 2011 Plan is of a non-cash nature, whereby in order to pay the nominal value of the shares subscribed for pursuant to the 2011 Plan, the relevant company from the Netia Group in which the participant is employed shall grant to the participant on the date of the exercise of the stock options remuneration in a net amount equal to the nominal value of the Shares subscribed for by the given participant.
- The supervisory board of the Company may authorize the management board to establish the terms and determine the stock option grants to employees of the Netia Group.
Detailed terms of the 2011 Plan and vesting conditions for granted options are attached in the annexes below.
Stock option grants under the 2011 Plan in year 2011
Simultaneously with the adoption of the 2011 Plan, on February 25, 2011 the supervisory board of the Company awarded 2011 stock option grants to the management board members, totaling 1,725,000 options, on the terms set forth below: Mr. Mirosław Godlewski, President of the management board, was granted 575,000 stock options, and Messrs. Jonathan Eastick, Grzegorz Esz, Piotr Nesterowicz and Tom Ruhan were granted 287,500 stock options each. The strike price for the options granted to the management board equals PLN 5.23 and the earliest vesting date is February 25, 2014. The final exercise date for all granted stock options shall be May 26, 2020.
Moreover, on February 25, 2011 the supervisory board authorized the management board of the Company to grant to 65 employees of the Netia Group the stock options for the year 2011 in the total amount of 2,186,382. As at December 31, 2011 the management board granted, on the basis of the above authorization, 1,928,000 options to key employees.
In line with the rules of 2011 Plan, the supervisory board decided that 41.1% of the 3.6m options granted in 2011 be cancelled on the basis of performance versus agreed business objectives for 2011. As set out in 2011 Plan, such cancellation came into effect with the approval of the 2011 financial statements by the annual shareholders meeting held on June 19, 2012.
Stock option grants under the 2011 Plan in year 2012
On April 25, 2012 the Supervisory Board granted new stock options to the management board members (the 2012 stock option grants). Mr. Mirosław Godlewski, President of the management board, was granted 690,000 stock options, and Messrs. Jonathan Eastick and Tom Ruhan were granted 345,000 stock options each. The strike price for the options granted to the management board equals PLN 6.16 and the earliest vesting date is April 25, 2015. The final exercise date for all granted stock options shall be May 26, 2020.
Moreover, the supervisory board authorized the management board of the Company to grant to employees of the Netia Group the stock options for the year 2012 in the total amount of 2,144,000. As at December 31, 2012 the management board granted, on the basis of the above authorization, 1,944,000 options to key employees.
On May 1, 2012 the supervisory board granted stock options to Mr. Mirosław Suszek, the newly appointed management board member. Mr. Mirosław Suszek was granted 345,000 stock options with the strike price of PLN 6.16 and the earliest vesting date on May 1, 2015. The final exercise date for granted stock options shall be May 26, 2020.
Stock option grants under the 2011 Plan in year 2013
Moreover, the supervisory board authorized the management board of the Company to grant to employees of the Netia Group the stock options for the year 2013 in the total amount of 2,144,000. As at December 31, 2013 the management board granted, on the basis of the above authorization, 1,944,000 options to key employees.
In line with the rules of 2011 Plan, the supervisory board decided that 50.0% of the 3.7m options granted in 2013 be cancelled on the basis of performance versus agreed business objectives for 2013. As set out in 2011 Plan, such cancellation came into effect with the approval of the 2013 financial statements by the annual shareholders meeting.
Stock option grants under the 2011 Plan in year 2014
Moreover, the Supervisory Board reserved for the Management Board of the Company an additional pool of 710,698 stock options, which may be allocated later in 2014, and authorized the Management Board of the Company to grant a further 1,940,000 stock options for the year 2014 to employees of the Netia Group.
As at December 31, 2014 the management board granted, on the basis of the above authorization, 1,772,000 options to key employees.
On May 17, 2014 the Supervisory Board granted stock options to Mr. Adam Sawicki, the recently appointed President of the Management Board. Mr. Sawicki was granted 400,000 stock options with the strike price of PLN 5.28 and the earliest vesting date on June 2, 2017. The final exercise date for granted stock options shall be May 26, 2020. In accordance with the above mentioned resolution of Netia’s Supervisory Board, the grant of stock options to Mr. Sawicki became effective on June 2, 2014, i.e., with the commencement of performance of his duties as Chief Executive Officer.
In line with the rules of 2011 Plan, the supervisory board decided that 56.2% of the outstanding options from the 3.7m options granted in 2014 be cancelled on the basis of performance versus agreed business objectives for 2014. As set out in 2011 Plan, such cancellation will come into effect with the approval of the 2014 financial statements by the annual shareholders meeting.
Furthermore, Netia’s Supervisory Board decided to waive the continuation of the plan starting from 2015, in particular to discontinue granting the stock options in 2015 and in subsequent years. The plan remains in force with regard to rights acquired by its participants prior to the above resolution of the supervisory board.
Status of the 2011 Plan as at December 31, 2014
Netia recognizes the cost of share-based awards to employees (including share options) over the vesting period and the fair value of options is determined using a binomial pricing model and taking into account business performance criteria in the financial year in which the options were granted. The cost of options recorded in 2014 amounted to PLN 2,605 thousands.
On June 28, 2013 Netia’s Supervisory Board adopted a resolution on decreasing by PLN 0.16 the strike price of all existing options issued under the Plan 2011. The resolution followed the completion in May 2013 of an offer to repurchase shares, under which Netia acquired 16,012,630 of its own shares for the price of PLN 8 per share. The above purchase had an impact on the market price of the Company’s shares equivalent to a dividend payment and therefore it resulted in a proforma decrease of the market price of the Company’s shares and a corresponding decrease of the value of all the existing options granted to the participants of the stock option plan in years 2011-2013. By reducing the strike price of the existing options, the Supervisory Board has effectively neutralized the impact of the share repurchase on the value of the stock option plan.
On June 17, 2014, as a result of dividend payment, the strike prices of the outstanding options decreased by PLN 0.42 and range currently between PLN 4.12 and PLN 5.58.
The table below summarizes the data on the stock option that were in the program at December 31, 2014:
| Participants / Strike price | PLN 4.12 | PLN 4.58 | PLN 4.63 | PLN 4.65 | PLN 4.66 | PLN 4.86 | PLN 5.03 | PLN 5.06 | PLN 5.58 | |
|---|---|---|---|---|---|---|---|---|---|---|
| Members of the Management Board | - | - | - | - | - | 400,000 | - | - |
- |
400,000 |
| Employees and former MB members | 1,019,802 | 604,943 | 1,222,460 | - | 228,532 | - | 23,560 | - |
1,697,875 |
4,797,172 |
| Total | 1,019,802 | 604,943 | 1,222,460 | - | 228,532 | 400,000 | 23,560 | - | 1,697,875 |
5,197,172 |
Update as of December 31, 2014