REC Silicon Annual Report 2019

78 Notes to the consolidated financial statements, REC Silicon Group REC Silicon Annual Report 2019 The resulting short-term liabilities of approximately USD 29.3 million, income tax payable of approximately USD 24.3million, and interest payable of approximately USD 4.9million, has been reported in current liabilities. INDEMNIFICATION LOAN See note 17 The indemnification loan is related to the bankruptcy of a former subsidiary in 2012. At December 31, 2019, the indemnification loan is NOK 200.0million (USD 22.8million) and can only be called when certain conditions are met. Once the loan is called, outstanding amounts will bear interest at a rate of NIBOR plus 0.5 percent. The Company received a claim dated December 16, 2019 of NOK 150million fromNordea under the indemnification loan. According to the letter, Nordea’s claim for NOK 150million is based on an assumption that its loss will exceed said amount when the estates are concluded. However, the relevant bankruptcy estates have not yet been concluded. Therefore, the amount of loss suffered by Nordea as a result of the bankruptcy cannot be calculated at this time. Given this and other uncertainties concerning the basis for the claim, the Company has responded by denying the claim. The status and timing of the indemnification loan is subject to uncertainty. SHARE-BASED COMPENSATION In 2014, 2015, and 2016 REC Silicon granted 8,000,000 share options during each year, and in 2017, 2018, and 2019 12,000,000 share options were granted to certain key employees. These programs are for six years. The first three years are a lock-up period. The vesting of the options for eligible employees will take place in equal parts in the fourth, fifth and sixth years of each program, on each June 30 of each year. The options were granted at a strike price of NOK 3.50 in 2014, NOK 2.30 for 2015, NOK 1.92 for 2016, 1.19 in 2017, 1.52 in 2018, and 0.81 in 2019. These option programs are synthetic programs; the options will be settled in cash. Cash payments due to an eligible employee following any disbursement date is limited to a maximum amount in each calendar year equal to the employee’s base annual salary effective January 1st in the year of the disbursement. Any unexercised options are forfeited upon termination of employment. Due to the reverse share split (See note 15 above) all previous granted options are divided by 10 and all strike prices are multiplied by 10. See table below. Fair values were estimated using the Black-Scholes option price model. Expected volatility was based on historical volatility and no dividends were expected in the periods. Expected lifetime and vesting periods were set at the time of allocation based on expectations that employees would exercise options early due to the structure of the programs, including the annual profit cap, and the volatility of the Company’s share price. OPTIONS OUTSTANDING AT DECEMBER 31, 2019 PROGRAM EXERCISE PRICE (NOK) NO. OPTIONS TOTAL FAIR VALUE (USD MILLION) REMAINING CONTRACTUAL LIFE (YEAR) 2014 35.00 648,193 0.00 0.50 2015 23.00 647,559 0.00 1.50 2016 19.20 648,309 0.01 2.50 2017 11.90 1,016,558 0.04 3.50 2018 15.20 1,200,000 0.05 4.50 2019 8.10 1,200,000 0.12 5.50 Total 5,360,619 0.22 Differences between the number of options granted for each year and the number of outstanding options in the table above are due to options that have been forfeited upon termination of employment. Options forfeited for 2019 and 2018 were zero and 499,668 respectively. The amount recognized in the statement of income for share based compensation was a credit of USD 0.1million in 2019 and a credit of USD 0.4million in 2018. 32