At the annual Shareholders’ meeting held on 27 June 2019, it was resolved to implement a share program for the EQT AB Group employees
EQT is a global integrated firm with several investment strategies and presence in many countries. EQT is also a performance driven organization with clear aligned interest to drive value and returns in each investment strategy. To also ensure a collaborative approach across all investment strategies and focus on driving shareholder values, it is of importance that the Company can offer an incentive program linked to shares in the Company. The objective of the share program is to align employees’ performance to the interest of the shareholders, based on performance metrics tailored to the Company’s strategic goals on an annual basis. The intention is to ensure that all work towards the same goal of building out a successful EQT Platform and to reward employees for long term value creation benefiting the Company. In addition, the share program will be an important tool for the Company to recruit, motivate and retain the best talent, which is vital in order for the Company to achieve long-term value growth for its shareholders.
The share program is divided into five separate annual grants, each subject to a duration of approximately four years before final conversion to ordinary shares, comprising a one-year performance period during each of the financial years 2019–2023, followed by a three-year holding period. A maximum of in total approximately 35 per cent of the EQT AB Group employees will during the five annual grants (a maximum of approximately 180 EQT AB Group employees during the first annual grant and 280 EQT AB Group employees during the fifth annual grant) be invited to participate in the program. To the extent certain performance targets are met during a performance year, the participants will be invited to invest a variable amount in class C shares in or around March in the financial year following, and based only upon the performance during, each prior performance year (referred to in the below as a “relevant time of allocation”). The Company intends to finance 100 per cent (after tax) of each participant’s investment amount into the program. Thereafter, all class C shares allotted are subject to a three-year holding period, whereby the class C shares are converted into ordinary shares at the end of the holding period, subject to certain conditions as set out below. The class C shares carry the same economic rights as ordinary shares in the Company and a 1:10 voting right. For more information, see page 144 in the Prospectus – Shareholder capital and ownership structure.
Subject to the terms and conditions of the program and assuming full conversion, after the end of the holding period, each class C share will be converted into one ordinary share in the Company, if so determined by the board of directors. Conversion of class C shares into ordinary shares in the Company requires, as a general rule, that the participant (i) is not, during the holding period, determined to be a so called bad-leaver, at the discretion of the board of directors and (ii) has retained his or her class C shares throughout the full holding period. These conversion conditions are subject to local adjustments (including removal/amendment of the conversion conditions where such conditions are not permissible/possible due to applicable legislation or for regulatory reasons, including tax rules and regulations). A participant’s class C shares (all or a portion, as the case may be) may be redeemed, without any consideration, at any time during the holding period if the participant is in breach of the conversion conditions or other terms and conditions set out in the agreements with the participants as part of the program or in case redemption is necessary to ensure that the program is compliant with laws and regulations.
A maximum of in total approximately 300 employees in the EQT AB Group will for each of the five annual grants be entitled to participate in the share program. The participants are divided into categories and comprise (i) Partners, senior management members and Partner equivalents in non-investment advisory professional roles; maximum 100 participants, (ii) investment advisory professional managing directors and equivalent seniority level in non-investment advisory professional roles; maximum 70 participants, and (iii) investment advisory professional directors and equivalent seniority level in non-investment advisory professional roles; maximum 150 participants. The participants will be entitled to invest in class C shares corresponding to EUR 7,500 to EUR 375,000 per participant at each relevant time of allocation. For extraordinary performance, adding extraordinary value to the EQT Platform, an additional sum can be granted for investment up to maximum the double amount of the amounts stated above. Any participation requires that such participation, in the board of directors’ opinion, is permitted and appropriate with regard to applicable laws and regulations, including regulatory reasons, and that the Company deems it feasible at reasonable administrative and financial costs, where appropriate with local adjustments. The board of directors may also make other adjustments if significant changes in the Company or its environment would result in a situation where the adopted terms and conditions of the program no longer serve their purpose. Members of the board of directors are not eligible to participate in the share program.
The amount to be invested by each participant is dependent on the extent to which the performance targets have been achieved. The performance targets are measured during each performance year and are based on individual performance and the EQT AB Group’s performance, on the basis of performance criteria set by the board of directors and communicated to eligible participants. The performance targets are tied to the EQT AB Group’s financial targets, inter alia, revenue growth and EBITDA and in addition thereto the general competitiveness as well as the individual meeting or exceeding EQT’s highly set expectations on adding value to the EQT Platform. The final assessment of the extent to which the performance targets have been achieved is made on a discretionary basis by the board of directors or the remuneration committee, or by any person authorized by the board of directors or the remuneration committee. There is no automatic right to invest in the share program even if the performance targets, in whole or in part, could be considered to have been achieved.
The maximum total amount that may be invested into the share program for all participants is limited to a maximum of MEUR 17 at each relevant time of allocation, and MEUR 56 in total. Each participant’s number of class C shares, rounded off to the nearest whole number, will be calculated by dividing the investment amount by the average daily volume weighted price paid per share in the Company at Nasdaq Stockholm during ten trading days in conjunction with each relevant time of allocation and applying a relevant currency exchange rate SEK/ EUR at the time of such grants. However, the maximum total number of class C shares that may be allocated to participants pursuant to such investment shall equal a maximum dilution of approximately 0.3 per cent per annual grant, and approximately 1.0 per cent in total, in each case in terms of total shares in the Company at the first day of trading on Nasdaq Stockholm (including the class C shares). The number of class C shares, including the maximum number of class C shares that can be invested in, can be recalculated in case of a bonus issue, new issue of shares, conversion of convertible instruments, share split or reverse share split and in certain other cases. The latest point in time when the participants can invest in class C shares is the day prior to the annual shareholders’ meeting 2024.
The Company does not generally expect the conversion of the class C shares into ordinary shares in the Company to result in any social security costs for the Company. The Company intends to finance 100 per cent (after tax) of each participant’s investment amount into the program and the social security costs for this will be expensed in full during the performance year. The Company’s cost for the share program will be accounted for in accordance with IFRS 2 and be expensed during the performance year. Based on the assumption of full participation in the share program, the estimated cost for the share program according to IFRS 2 (including bonus costs and social security costs) is approximately maximum MEUR 40 per annual grant, and approximately MEUR 130 in total under the share program, using the assumptions set out above and a social security tax rate of 16.3 per cent on average.
The costs and dilution of the program are expected to have a marginal effect on EQT AB’s key ratios.
To implement the share program, the annual general meeting on 27 June 2019 further resolved to (i) insert a new share class of convertible and redeemable class C shares in the Company’s articles of association, (ii) authorize the board of directors to issue class C shares to a participating bank and thereafter repurchase such class C shares and (iii) transfer such class C to the participants following each performance year in accordance with the terms of the share program.