Overall guidelines for incentive programmes for the Executive Board and SMT (Solar Management Team) of Solar A/S, see section 139 of the Danish Companies Act
1. Introduction
Under section 139 of the Danish Companies Act, the supervisory board of a listed company must establish overall guidelines for the company's share-based and non-share-based incentive programmes for supervisory or executive boards before a specific agreement is made for incentive pay for a member of the company's supervisory or executive boards. These guidelines must be transacted and approved by the company's annual general meeting.
Since 2006, Solar has run incentive programmes for certain management employees, defined as the Executive Board and SMT (Solar Management Team). Members of the Supervisory Board receive fixed pay and not incentive pay. The SMT is made up of the Executive Board, corporate directors and chief executive directors in the Solar subsidiaries (cf. Annual Report 2009 page 23).
Present overall guidelines cover incentive programmes for the Solar A/S Executive Board and SMT. The Executive Board is made up of the person(s) registered with the Danish Commerce and Companies Agency as CEO(s) of Solar A/S.
The Supervisory Board finds that combining a fixed salary with performance-dependent pay (incentive pay) for the Executive board and SMT members helps to ensure that Solar can attract and retain key staff while ensuring further incentive for value creation for shareholders.
The purpose of the overall guidelines is to establish a framework for incentive pay (both share-based and non-share-based) to ensure that incentive pay does not lead to carelessness, unreasonable behaviour or the acceptance of unusual risks.
The Supervisory Board finds that total remuneration is at a reasonable level and reflects the efforts, responsibilities and value creation for Solar of the Executive Board and SMT.
2. Principal ideas of incentive pay
Incentive programmes may consist of any form of variable pay, including share-based and non-share-based incentive programmes.
The following elements make up Solar's incentive programmes:
1. Share-based incentive programmes (share options), cf. item 3 below and
2. Non-share-based incentive programmes (bonus), cf. item 4
3. Share-based incentive programmes
The value of share-based incentive programmes granted within a financial year can total up to 50 per cent of the individual Executive Board/SMT member's fixed annual remuneration excl. pension contributions. When entering the current programme, a maximum of 100 per cent of fixed annual remuneration excl. pension contributions is granted.
Any granting for the year is published via NASDAQ OMX Copenhagen and the annual report.
The granting is meant to ensure value creation and fulfilment of Solar's long-term objectives.
The estimated present value of the share-based incentive programmes covered by these guidelines is determined in accordance with the principles of recognition in Solar's annual report under the accounting principles in force at the time in question.
The exercise price of any share instrument cannot be lower than the market price of the company's shares at the issue date. No consideration is paid for the share instrument unless the Supervisory Board decides otherwise.
In the case of any granting, the Supervisory Board can determine the period over which the share-based incentive programmes must vest and when the share-based incentive programmes can be exercised. After each granting to the SMT, the Supervisory Board may decide to stop the current programme. This current programme may be used 3 years after granting at the earliest and must be used by 4 years after the granting at the latest. Use can only take place up to maximum 6 weeks after publication of the company's annual report. In special cases, the Supervisory Board may make an exemption.
In case of an Executive Board / SMT member's resignation not resulting from a significant violation on the part of the Solar Group, share options become void if not exercised by the end of the employment. This becoming void is automatic and without notice.
Danish employees are taxed under section 28 of the Danish Tax Assessment Act, giving the company a right to deduct.
Shares for fulfilling obligations related to share-based incentive programmes are provided from Solar's existing holding of treasury shares, through buy-back of treasury shares or issue of new shares.
4. Non-share-based incentive programmes
Non-share-based incentive programmes, typically a bonus plan or performance contract, can have terms of one or several years or cover a period of less than a financial year. The term can also be unspecified at the time of granting if, for example, granting depends on a certain event taking place.
In special cases, the value of non-share-based incentive programmes per financial year can total up to 100 per cent of the individual Executive Board / SMT members' fixed annual remuneration excl. pension contributions.
Whether bonus is paid will depend on whether the conditions and objectives defined in the agreement have been fully or partially met. These may be targets for Solar's organic growth, EBITA, EBT adjusted for amortisation, ROIC, net working capital, personal objectives relating to the performance of the CEO / SMT member in question, his/her performance or the occurrence of a relevant event.
In case of an Executive Board / SMT member's resignation or Solar's dismissal, a proportionate share of bonus is received until the time of the employment's end. Executive Board members are also entitled to termination benefits equating to the last 12 months' fixed remuneration excl. pension contribution, cf. mention of this in the annual report.
5. Entering into and change of incentive programmes
If the Supervisory Board wants to enter into or change a specific agreement on incentive programmes with the Executive Board, such an agreement will be subject to present guidelines. Changes to the guidelines must be approved by the general meeting.
6. Publication
A provision stating that the general meeting has adopted guidelines for incentive pay of the Executive Board will be added to the company's articles of association under section 139 of the Danish Companies Act.
After approval by the general meeting, the guidelines will be published on Solar's website www.solar.eu.
No specific agreement for incentive pay can be made until the day after the publication of the approved guidelines on Solar's website www.solar.eu.
These guidelines were submitted to and approved by the Annual General Meeting on 16 April 2010.
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