The ambition with the long term performance based incentive program is to ensure a long term commitment for the current senior executives and key employees in the group, and to improve Niscayah Group’s possibilities for future recruitments. Utilizing shares in the company as an essential instrument in the incentive program will encourage shareholding and long-term increase of value in Niscayah Group, creating mutual objectives for current shareholders and participants in the incentive program. In the light of the above, the Annual General Meeting decided to implement a long term performance based share program (”LTIP 2010”).
Description of LTIP 2010
LTIP 2010 is based on the following principles, which reflects some of the Company’s continuous principles of remuneration:
i) the participants acquired B-shares in Niscayah Group at market price by private funding,
ii) the participants must stay employed in the group during a specified period of time in order to be entitled to allotment of performance based shares, and
iii) the outcome of LTIP 2010 is related to the result of the company.
LTIP 2010
The Annual General Meeting decided to implement LTIP 2010 in Niscayah Group in accordance with the main principles set forth below.
1. Approximately 20 senior executives and key employees were offered to participate in LTIP 2010.
2. The duration of the program is approximately three years.
3. Senior executives and key employees who participated in LTIP 2010 acquired shares by private funding in Niscayah Group (“Investment Shares”) at market price on NASDAQ OMX Stockholm.
Each participant may only count a maximum number of Investment Shares towards LTIP 2010, such amount not exceeding a certain value of the participant’s fixed annual salary for 2010, divided by the closing price of one B-share in Niscayah Group on NASDAQ OMX Stockholm on 1 March 2010.
4. Provided that the participant (i) holds the Investment Shares during a minimum period of three years from the acquisition date, however including the day of the disclosure of the first quarterly report for 2013 (the “Investment Period”), and (ii) is still employed or has a similar employment in Niscayah Group during the entire Investment Period, unless the Board of Directors is of the view that this requirement may be waived in a specific case, each Investment Share will thereafter entitle to allotment of maximum three performance based B-shares in Niscayah Group (“Performance Shares”) free of charge, provided that the performance targets stated below are meet.
5. The number of Performance Shares to be allotted for each Investment Share will be based on Niscayah Group’s earnings per share (”EPS”) for the financial year 2010 compared to the financial year 2009. A prerequisite for allotment of Performance Shares, is that the minimum level of Niscayah Group’s EPS for the financial year 2010, decided upon by the Board of Directors, is achieved. If the minimum levels of Niscayah Group’s EPS for the financial year 2010 is achieved, the participants will be entitled to allotment of one (1) Performance Share per Investment Share. A maximum outcome of LTIP 2010, which would lead to allotment of three (3) Performance Shares per Investment Share, requires that Niscayah Group’s EPS for 2010 will increase by the Board’s determined maximum level compared to Niscayah Group’s EPS for the financial year 2009. If Niscayah Group’s EPS for the financial year 2010 increases between the minimum- and the maximum level, a linear proportioning shall be made with regard to the number of Performance Shares, between one (1) and three (3), to be allotted for each Investment Share.
6. Performance Shares shall be allotted within 30 days after the end of the Investment Period.
7. The number of Performance Shares to be allotted for each Investment Share may be subject to conversion as a result of new share issues, share splits, reverse share splits or similar actions. No adjustments shall be made for dividends.
8. To ensure delivery of shares the Board of Directors may enter into an agreement with a third party, whereby the third party in his own name shall acquire and transfer B-shares in the company to the participants in accordance with LTIP 2010.
9. The Board of Directors shall have the possibility to decide on reduction of the allotment of Performance Shares if the Board of Directors are of the view that an allotment – taking into account the financial result of the group and its financial position – is unreasonable at an objective assessment.
10. The participation in LTIP 2010 presupposes that such participation is possible from a legal perspective and that such participation, according to the assessment of Niscayah Group, is reasonable due to administrative and financial costs.
11. The Board of Directors shall be responsible for the more detailed framing and handling of LTIP 2010 within the scope of the main principles stated above and shall also be entitled to make such minor adjustments of these principles that may be required due to legal or administrative conditions.
Costs for LTIP 2010 and impact on key ratios
LTIP 2010 may cause increased personnel costs, partly in the form of IFRS 2 - Share based allowances, partly in the form of social security contributions.
These costs are estimated, based on the closing price of one B-share in Niscayah Group at 23 March 2010 of SEK 15.60, and the following material assumptions of an annual share price increase of 10 percent, an annual staff turnover of 10 percent, a rate of outgoing social security contributions of 25 percent and a 50 percent fulfillment of the performance related targets of the Performance Shares, to approximately SEK 9 million, including SEK 2 million in social security contributions. The costs for LTIP 2010, calculated on a pro forma basis for 2009, gives a negative impact of approximately 0.04 percentage points for Niscayah Group’s operating margin and a reduction in earnings per share of approximately SEK 0.01.
If the maximum number of Performance Shares are to be allotted and if all participants will remain in LTIP 2010, given the above stated assumptions, the costs are estimated to approximately SEK 19 million, including SEK 5 million in social security contributions.
However, the Board of Directors assesses that the positive impact on the Company’s result that is expected from increased shareholding by senior executives and key employees, and the possibility of further increasing their shareholding within LTIP 2010, outweighs the costs related to the LTIP 2010.
Percentage of total number of shares and dilution effects
The number of shares issued in Niscayah Group amounts to 365 058 897 shares.
According to LTIP 2010, a maximum number of 912 000 shares can be allotted to the participants free of charge, equivalent to approximately 0.2 percent of the total outstanding shares of Niscayah Group. LTIP will not lead to any dilution because the program is proposed to be secured through an arrangement with third party, whereby the third party in his own name shall acquire and transfer shares in the company to the participants.
Hedging of costs for the program and delivery of shares under LTIP 2010
In order to hedge costs related to the program, the Board of Directors has been authorized to acquire treasury shares. To ensure delivery of B-shares in Niscayah Group according to LTIP 2010, Niscayah Group intends to enter into an agreement with a third party, whereby the third party in his own name shall acquire and transfer B-shares in the company to the participants in accordance with LTIP 2010.