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25 February 2011

Confidential Information – adoption of a stock option plan for the years 2011-2020 (10/2011)

The Management Board of Netia SA ("Netia” or the “Company”), Poland's largest alternative provider of fixed-line telecommunications services, hereby announces that on 25 February 2011 the Supervisory Board of Netia, based on the authorization granted by the Annual Shareholders Meeting by way of resolution No. 26 dated 26 May 2010 (the “Resolution”), has adopted a n employee stock option plan for the Company for the years 2011-2020 (the “2011 Plan”).

The 2011 Plan authorizes the Supervisory Board to grant to the members of the Management Board of the Company and the employees of the Company and its subsidiaries (the ”Netia Group”) stock options authorizing the 2011 Plan participants to receive, free of charge, series 1 subscription warrants (the “Stock Options”). Each series 1 warrant authorizes its holder to subscribe for one Series L share in the Company for its nominal value. The terms of the 2011 Plan are based on the rules established by the Annual General Meeting in the Resolution (see current report No. 19/2010 dated 27 May 2010). The basic terms of the 2011 Plan are as follows:

  • The Supervisory Board is authorized to issue the total of 27,253,674 Stock Options under the 2011 Plan. 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 can not 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 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.

  • 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 shall be 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.

Simultaneously with the adoption of the 2011 Plan, the Supervisory Board of the Company has awarded 2011 Stock Option grants to the Management Board members of the companies on the terms set forth below: Mr. Mirosław Godlewski, President of the Management Board, was granted 575,000 (five hundred seventy five thousand) Stock Options, and Messrs. Jonathan Eastick, Grzegorz Esz, Piotr Nesterowicz and Tom Ruhan were granted 287,500 (two hundred eighty-seven thousand five hundred) 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, 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 2,144,000 (two million one hundred fourty four thousand).