17.2. Cash-settled share-based payment plan

On 4 September 2017, the Supervisory Board of OPL S.A. adopted the incentive programme (“the programme”) for the key managers of the Orange Polska Group (“the participants”), which is based on derivative instruments (“phantom shares”), whose underlying assets are the Orange Polska S.A. shares listed on the Warsaw Stock Exchange.

The purpose of the programme is to provide additional incentives to motivate senior managers to achieve mid-term commercial and financial objectives, resulting from Orange Polska’s strategy and to lead to the increase of the value of the Company’s shares.

The terms of the programme are as follows:

1. Participation in the programme was voluntary.
2. The participants could purchase at the beginning of the programme a total of up to 2,315,000 phantom shares from the basic pool for a price of PLN 1 per phantom share.
3. In case of meeting certain criteria regarding the average price of Orange Polska shares (not fulfilled) and NPS (Net Promoter Score) (fulfilled), the participants could purchase in the fourth quarter of 2020 additional packages of up to 1,438,500 and 616,500 phantom shares, respectively, for a price of PLN 1 per phantom share.
4. Phantom shares shall be bought back from the participants by the Company, at Orange Polska’s average share price in the first quarter of 2021, only when it is not lower than the average of Orange Polska’s closing share prices in the third quarter of 2017. Otherwise, phantom shares shall not be bought back, resulting in the loss of invested funds by the participants.

The following tables illustrate the number and average fair value of phantom shares and options for phantom shares granted by OPL S.A.:

The following tables illustrate the key assumptions used in calculation of the fair value of phantom shares and options for phantom shares granted by OPL S.A. as at 31 December 2020 and 2019:

As a result of the programme, PLN 1 million was recognised as a decrease in labour expense in the 12 months ended 31 December 2020 (PLN 10 million was recognised as an increase in labour expense in the 12 months ended 31 December 2019). The carrying amount of liabilities recognised as employee benefits as at 31 December 2020 and 2019 amounted to PLN 12 million and PLN 13 million, respectively.