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Share Performance Plan

To incentivise executives via variable long-term incentive compensation, the 2012, 2015 and 2017 Annual General Meetings approved the contingent capital necessary to support the so-called Share Performance Plans (SPP 2012, SPP 2015 and SPP 2017). SPP 2017 is replacing SPP 2012 and SPP 2015. However, this does not affect subscription rights issued before 14 June 2017.

The concrete design of the Share Performance Plans 2012, 2015 and 2017 lean on the concept of a share performance programme. They are characterised by the fact that participating executives are entitled to a variable remuneration in shares, when attaining a demanding target. In contrast to a common stock option programme, when attaining a target, shares are not issued in an amount that at least corresponds to the market rate of the company stock at the time of granting the subscription rights, but at the respectively lowest issue amount of currently € 1.00. The essential reason for this lies in the fact that in a Share Performance Programme, the value of the respective stock takes the place of cash compensation, so that stocks ideally should be issued without counter performance. A special economic advantage, compared to a common stock option programme, does not result for the participants as at the time the subscription rights are granted, and therefore at the outset, it is taken into consideration that the participants receive the total value of the shares (minus the respectively lowest issue amount of currently € 1.00), and not only, as in regular stock option plans, the difference between the market rate when granting subscription rights and the market rate at issue of the shares. The determination of an issue amount of currently € 1.00 is imperative from a corporate law perspective, as the issue of new shares under the respective pro-rata amount of the share capital is not permitted.

Under these plans, Share Performance Awards may be granted to a level that may result in in a total of up to 13,000,000 (4,000,000 for SPP 2012, 3,000,000 for SPP 2015 and 6,000,000 for SPP 2017) bearer shares of the Company being issued at maturity to members of the Management Board and other key employees. During the fourth quarter of 2016, a total of 793,903 SPAs (2015: 796,617 awards) were granted to the Management Board and key employees. These awards could result in a maximum of 1,587,806 bearer shares (2015: 1,593,234) being issued at maturity. This is because each Share Performance Award grants up to two subscription rights to Company shares, each of which in turn entitle the holder to the subscription of one Company share. Previous awards can be found the respective annual financial reports. The holder has to contribute € 1.00 per share at the date of issue. Share Performance Awards can only be exercised, if, when and to the extent that key performance indicators are achieved. Key performance indicators of SPP 2012 and 2015 are “Group Revenues”, “Operating Income Before Impairments”, “Net Cash Generated by Operating Activities” and “Share Priceupon which the Supervisory Board had to determine at least two per grant and define their weighting. SPP 2015 also includes the key performance indicator of “Total Shareholder Return”. Equally weighted key performance indicators of SPP 2017 are only “Share Price” and “Total Shareholder Return”. Key performance indicators for each individual tranche of the Share Performance Awards are determined by the Supervisory Board.

Within each of the key performance indicators set forth above there also is a “Minimum Target” that has to be reached, so Share Performance Awards can be exercised (partially), as well as a “Maximum Target” that, once it is reached, allows for all Share Performance Awards to be exercised to the full amount within the framework of weighting the respective key performance indicator.

Duration of Programmes and Exercise periods

SPP 2017

Share Performance Awards may only be exercised for the first time after the waiting period has expired. The “Waiting Period” for a tranche of Share Performance Awards always starts with the determined issue date, and ends with the expiry of the fourth anniversary after the issue date. The “Issue Date” is deemed to be the time at which the Company offers the Share Performance Awards to the Beneficiaries, regardless of the time of receipt, or the acceptance of the offer (Grant). Another time within the acquisition period of the respective tranche can be determined as the Issue Date by the offer.

The term of each Share Performance Award is four years and one month (including the Exercise Period after expiry of the Waiting Period), starting at the Issue Date.

If Share Performance Awards are not exercised by the end of the term or cannot be exercised for reasons beyond the Company’s control, they expire without replacement or compensation. This does not affect the authorisation to re-issue Share Performance Awards that are forfeit prematurely.

SPP 2012 and SPP 2015

After expiry of the Waiting Period, Share Performance Awards issued in a tranche and the resulting subscription rights can be exercised. The exercise must occur within a maximum time period of twelve months from the end of the respective Waiting Period (“Exercise Period”).

Share Performance Awards and resulting subscription rights can always be exercised continuously within the Exercise Period. Lockup periods are excluded. The following time periods are considered lockup periods: (i) those thirty day periods that each end on the day of the annual press conference and on the day on which a quarterly report or semi-annual report of the Company is made available to the public; (ii) the time period from the beginning of the day, on which the Company publishes an offer for the purchase of new shares, or bonds with conversion and/or option right or conversion obligation, in the Company publications, until the expiration of the (extended, if need be) subscription period; and (iii) the time period from expiry of the 37th day before an Annual General Meeting until the beginning of the 21st day before an Annual General Meeting (not counting the day of the Annual General Meeting).

The term of Share Performance Awards is five years each, starting at the Issue Date.

Share Performance Awards that are not exercised or could not be exercised until the end of the term expire or forfeit without compensation. The above provision about the authorisation of a repeated issue of prematurely forfeited Share Performance Awards remains unaffected.

Exercise price

The “Exercise Price” per share within SPP 2012, 2015 and 2017 corresponds to the amount of the share capital attributable to each individual share at the point in time when subscription rights are exercised, currently € 1.00.

The exercise price has to be paid for each subscribed share when exercising subscription rights.

Further information regarding previous grants of share performance awards can be found in Evotec’s Annual Reports.

Expiration of Stock Option Schemes

SPP 2012, SPP 2015 and SPP 2017 were implemented to replace the stock option programme as the Company’s long-term incentive compensation scheme for executives. Stock options issued in existing stock option schemes I to VII remain valid.

Date of the Ordinary Annual General Meeting Programme
07 June 1999 Programme I
26 June 2000 Programme II
18 June 2001 Programme III
07 June 2005 Programme IV
30 May 2007 Programme V
28 August 2008 Programme VI
16 June 2011 Programme VII

Duration of Programmes and Exercising of Options

Each of the options from Programmes I to III entitle the holder to purchase one share of the Company’s stock within ten years of the option grant date. The holder may exercise after two years up to one third of his or her options, after three years up to two thirds and after four years all of his or her options. The Management Board is authorised to postpone the period for the initial exercise of the options, for parts of the Group or the Company as a whole, from two to three years after option rights had been granted. In this case, affected holders of subscription rights can exercise half of their subscription rights after three years at the earliest and all of their subscription rights after four years respectively. Options from Programmes IV, V and VI entitle the holder to purchase one share of the Company’s stock within six years of the option grant date. The holder may exercise his options after three years. All options under the Option Plan 2011 are destined for grant to members of the Executive Board. Options from Programme VII entitle the holder to purchase one share of the Company’s stock within eight years of the option grant date. The holder may exercise his options after four years.

Options can only be exercised within certain exercise periods. For Programmes I to III, each exercise period lasts for two weeks and commences on the third trading day after each of the following events: the release of the quarterly results by Deutsche Börse AG, the annual press conference on the financial statements of the Company and the ordinary Annual General Meeting of the Company. For Programmes IV to VI, options may be exercised throughout the given year. This excludes those three-week periods (holding periods), which shall end, respectively, on the date of the ordinary Annual General Meeting of the Company, the date of the annual press conference on the financial statements of the Company and the date on which a quarterly report of the Company is made available to the public.

Under Programme I, each of the options entitles the holder to purchase one share of Evotec with a nominal value of € 1.00 at a predetermined strike price which is the XETRA closing price of the Evotec shares on the last trading day before the options were granted. For all options granted in the year 1999, the strike price is € 6.50*. Options can be exercised only if the share price at the time of exercise is at least 5% above the strike price.

Under Programmes II and III, each of the options entitles the holder to purchase one share of Evotec with a nominal value of € 1.00 at a strike price which is 5% above the XETRA closing price of the Evotec share on the last trading day before the options were granted. Options can be exercised only if the XETRA closing price of the Evotec share on the last trading day before the beginning of the exercise period is at least equal to the strike price.

Under Programmes IV, V and VI, each of the options entitles the holder to purchase one share of Evotec with a nominal value of € 1.00 at a strike price which is the average price of the XETRA closing price of Evotec shares on the last three trading days before the options were granted. Options can be exercised only if the average price of the XETRA closing price of the last 20 trading days before the beginning of the exercise period (three years after the date of issuance) exceeds the average price of the last 20 trading days before the issuance of stock options by at least 33%. If this is not the case, the price of either four or five years after the issuance of the stock options will apply.

Under Programme VII, each of the options entitle the holder to purchase one share of Evotec with a nominal value of € 1.00 at a strike price equal to the price of one share at the time of the grant of the option. The Option Plan 2011 stipulates an exercise hurdle of a 20% price increase against the share price at the time of granting. The option holder may exercise his options only if this hurdle is achieved on one relevant day during the waiting period. The “relevant day” is respectively the day prior to the annual financial report, the quarterly report, an interim report or the half-year financial report is made available to the public.

Evotec will regularly provide in its financial reports the total number of options available for future exercise.

The shares to be delivered to the holders of the share options upon exercise come from the conditional capital increases adopted by the Annual General Meeting on 07 June 1999, 26 June 2000, 18 June 2001, 07 June 2005, 30 May 2007, 28 August 2008 and 16 June 2011.

*After stock split of two for one share of 18 August 2000