The Board of Directors of HKScan Corporation has decided on the establishment of a new share-based long-term incentive scheme for HKScan's key management. It comprises a Performance Share Plan (also “PSP”) as the main structure and a Restricted Share Plan (also “RSP”) as a complementary structure.
The objectives of the share-based long-term incentive scheme are to align the interests of the management with those of HKScan’s shareholders by creating a long-term equity interest for the management and, thus, to promote shareholder value creation in the long term, to commit the management to HKScan and its strategic targets and to promote long-term performance culture within HKScan.
Performance Share Plan
The Performance Share Plan consists of annually commencing individual performance share plans, each with a three-year performance period, followed by the payment of the potential share reward.
The commencement of each individual plan is subject to a separate decision of the Board of Directors in each case.
The first plan (PSP 2018 - 2020) commences effective as of the beginning of 2018 and the potential share rewards thereunder will be paid in the spring 2021 if the performance targets set by the Board of Directors are achieved. The potential rewards will be paid in class A shares of HKScan.
The performance targets based on which the potential share reward under PSP 2018 - 2020 will be paid are the comparable EBIT (operating profit) and comparable EPS (earnings per share) of HKScan.
Approximately 30 individuals are eligible to participate in PSP 2018 - 2020.
If all the performance targets set for PSP 2018 - 2020 are fully achieved, the aggregate maximum number of shares to be paid based on the first plan (PSP 2018 - 2020) is approximately 910,400 shares. This number of shares represents a gross earning, from which the applicable payroll tax is deducted and the remaining net value is paid to the participants in shares.
The aggregate value of this first plan (PSP 2018 - 2020), estimated based on the average share price of the last trading day preceding the date hereof, is approximately EUR 2.7 million.
If the individual’s employment with HKScan terminates before the payment date of the share reward, the individual is not, as a main rule, entitled to any reward based on the plan.
Restricted Share Plan
The complementary Restricted Share Plan consists of annually commencing individual restricted share plans, each with a three-year vesting period after which the allocated restricted share grants will be paid to the participants in class A shares of HKScan.
The commencement of each individual plan is subject to a separate decision of the Board of Directors in each case.
The purpose of the Restricted Share Plan is to serve as a complementary share-based long-term incentive structure for the key management in relation to retention. Eleven individuals belonging to the top management are eligible to participate in RSP 2018 - 2020.
A precondition for the payment of the share reward based on the Restricted Share Plan is that the employment relationship of the individual participant with HKScan continues until the payment date of the share reward.
In addition to the afore-mentioned employment precondition, the Board has for RSP 2018 – 2020 set a company level financial criterion, the fulfilment of which is a precondition for the payment of the share reward under the plan. This criterion is based on the average comparable ROCE (return on capital employed) before taxes.
The first plan (RSP 2018 - 2020) within the Restricted Share Plan structure commences effective as of the beginning of 2018 and the potential share rewards thereunder will be paid in the spring 2021.
The aggregate maximum number of shares to be paid based on the first plan, RSP 2018 – 2020, is 43,900 shares. This number of shares represents a gross earning, from which the applicable payroll tax is deducted and the remaining net value is paid to the participants in shares.
The aggregate value of this first three-year plan (RSP 2018 - 2020), estimated based on the average share price of the last trading day preceding the date hereof, is approximately EUR 0.13 million.
Other terms
The earning opportunity of the participants within the above programs is capped. If the end value of the class A share of HKScan within the individual three-year plan exceeds three times its start value, the exceeding value of the reward will be cut and will not be paid.
HKScan applies a share ownership recommendation to the members of the Group Leadership Team. According to this recommendation each member of the Group Leadership Team is expected to retain in his/her ownership at least half of the net shares received under the share-based incentive programs of the company until the value of his/her share ownership in HKScan corresponds to at least the amount of his/her annual gross base salary.
The Board of Directors anticipates that no new shares will be issued based on the program and that the program will, therefore, have no dilutive effect on the registered number of the company’s shares.
