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3. Corporate Governance Statement

3.12 Conflicts of interest – Application of article 7:96 of the Belgian Code of Companies and Associations

3.12 Conflicts of interest – Application of article 7:96 of the Belgian Code of Companies and Associations

EXCERPT FROM THE MINUTES OF THE MEETING OF THE BOARD HELD ON 19 FEBRUARY 2020

Article 7:96 of the BCCA was applied by the Board of February 19, 2020 in the context of the decisions relating to the CEO remuneration, the performance bonus and LTI grants (relevant excerpt from the minutes of the meeting)

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Prior to any deliberation or decision by the Board of Directors concerning the approval of the 2019 bonus pay-out, the LTI vesting and the 2020 LTI plans, metrics and grants, the approval of the CEO bonus based on 2019 performance, the CEO 2020 base salary and the CEO 2020 LTI grant (including stock options, stock awards and performance shares), J.-C. Tellier stated that he had a direct financial interest in the implementation of said decisions (items 5.1 to 5.3). In accordance with Art. 7:96 of the BCCA, he withdrew from the meeting of the Board of Directors in order to not participate in the deliberation and vote relating to these issues. The Board of Directors established that Art. 7:96 of the BCCA was applicable to these operations. J.-L. Fleurial also left the room before any deliberation or decision on these issues.

5.1.    Corporate Results 2019 bonus payout/LTI award vesting and 2020 Targets

Decision: After review, the Board unanimously RESOLVED to approve the recommendations of the Governance, Nomination and Compensation Committee (‘GNCC’) relating to (i) the 2019 bonus payout (Corporate Performance Multiplier or “CPM”) based on the year end 2019 results (Adjusted EBITDA), (ii) the Adjusted EBITDA target for 2020 bonus payout and (iii) the metrics used for the Performance Share Plan 2020-2022 (payout 2023). It further endorsed the vesting (and total payout) in 2020 relating to the 2017-2019 Performance Share Plan as well as the stock award vesting for the 2017-2019 plan (payout 2020).

The Board further RESOLVED to approve an exceptional additional bonus of € 3.5m (addition to the budget) to take into account a challenging year for employees with the PVS evolution, with many employee departures and uncertainty, combined with solid results for short-term performance and several other important successes which are not fully reflected in the CPM. The additional budget is excluded from the Adjusted EBITDA figure for the CPM calculation above (but is included in the overall results).

5.2    UCB Long Term Incentives Grants in 2020

Decision: Upon recommendation of the GNCC, the Board unanimously RESOLVED to approve the following Long-Term Incentive Plans and the main terms and conditions thereof:

  • UCB stock option plan 2020: Issue of 718 000 stock options, in principle on April 1, 2020 unless exceptional circumstances, for approximately 415 employees (not taking into consideration employees hired or promoted to eligible levels between January 1, 2020 and April 1, 2020).

The exercise price of these options will be the lower of (i) the average of the closing price over the 30 calendar days preceding the offer (i.e. in principle from March 1-31, 2020) or (ii) the closing price of the day preceding the offer (in principle March 31, 2020).

UCB will determine a different exercise price for those eligible employees subject to legislation which requires a different exercise price. Stock options will have a vesting period of 3 years as of the date of grant, except for countries where this is not allowed or is less favorable.

  • Stock awards and Performance Shares (“PSP”) grants 2020 – 2022: Allocation of an initial amount of 1 361 000 shares of which:

    • an estimated number of 802 000 shares (stock awards) to eligible employees, namely to about 1 961 employees (excluding new hires and promoted employees up to and including April 1, 2020), according to the applicable allocation criteria. These free shares will be allocated if and when the eligible employees are still employed with the UCB Group 3 years after the grant of awards;

    • an estimated number of 204 000 shares to Upper Management employees for the Performance Share Plan 2020, namely to about 139 individuals, according to the applicable allocation criteria. These free shares will be delivered after a 3-year vesting period and the number of shares actually allocated will vary from 0% to 150% of the number of shares initially granted depending on the level of achievement of the performance conditions set by the Board of UCB SA/NV prior to the moment of the grant;

    • exceptionally for 2020, an estimated transition grant of 355 000 shares to be granted to certain employees, due to a market re-alignment of the LTI policy. This one-time grant is to be made to employees who experience a reduction in grant value when comparing the previous and new Long-Term Incentive policy. These additional free shares are to be granted in 2020 and will vest in 3 tranches, on a diminishing basis, between 2023 and 2025, if the eligible employees are still employed within the UCB Group on the respective annual vesting dates. 

The estimated figures under (i) and (ii) do not take into account employees hired or promoted to eligible levels between January 1, 2020 and April 1, 2020.

  • It was acknowledged that the financial impact for the Company of the granting of options is linked to the difference between the acquisition cost of own shares by the Company (or the share price at vesting date for cash settled plans) on the one hand and the strike price of the options paid to the Company by the beneficiary upon exercise of the options on the other hand. For the stock awards and the PSP, the financial impact corresponds to the value of the UCB shares at the time of acquisition by the Company in view of delivery, or at the time of vesting for cash settled plans.

  • The Board further decided to delegate all powers to the members of the Executive Committee, acting jointly two by two and with faculty of sub-delegation, to do whatever is necessary, required or useful to execute and implement the above decisions, including the finalization of all required documentation, the actual grant decision, the final terms and conditions and modalities of the plans and incentives. 

5.3    CEO compensation and LTI

Decision: Upon recommendation of the GNCC, the Board unanimously approved the following compensation for the CEO performance:

  • CEO base salary as of 01.03.2020: € 1 143 233 (against € 1 109 935 in 2019);

  • CEO bonus pay-out 2020 (performance 2019): € 1 368 750;

  • CEO LTI 2020:

  • stock options: 40 214 (3 years and 9 months vesting);

  • performance shares: 27 024 (3-years vesting).

Although not a conflict of interest within the meaning of 7:96 of the BCCA, it can also be noted that Evelyn du Monceau withdrew from the deliberations and votes of the Board related to the appointment of Fiona du Monceau. Similarly, Jean-Christophe Tellier withdrew from the discussion and voting regarding his proposed appointment in major external bodies (IFPMA and BCR).

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