Stock Option Plans of QSC AG

The most important capital of QSC AG are its employees - their daily effort and entrepreneurial thinking are the main drivers for the company´s success in the long-run. The intention of the stock option plans is to motivate our employees and to bind them to QSC AG. That means not only executives or managers but the employees within our company.

The convertible bonds outstanding as of December 31, 2010 and 2009 under all programs (SOP) are shown below:

Outstanding Convertible Bonds
Outstanding at December 31, 2008	2,240,040	3.62
Granted during the year 2009	253,000	1.18
Forfeited during the year 2009	-86,777	4.46
Exercised during the year 2009	-	-
Outstanding at December 31, 2009	2,406,263	3.33
Granted during the year 2010	85,000	1.55
Forfeited during the year 2010	-399,927	3.63
Exercised during the year 2010	-129,395	2.11
Outstanding at December 31, 2010	1,961,941	3.27

The exercise prices of the remaining 1,961,941 convertible bonds range from € 1.00 to € 5.68, and the remaining term for exercise varies from “immediately exercisable” to August 23, 2018. The exercise price is set at the date of issuance and cannot be changed after that date. The Company expects conversion of the remaining bonds (depending on the market price development) to be completed by 2018 at the latest. At balance sheet date 1,614,504 of the remaining convertible bonds were exercisable, with the remaining convertible bonds being subject to the agreed retention period.

SOP 2006
	2010	2009
Expected average life of options SOP 2006	8 years	8 years
Dividend yield	0,00%	0,00%
Average risk-free interest rate	2.73%	3.17%
Expected volatility (3 years)	57.52%	57.68%
Average fair value of convertible bonds in €	0.97	0.75
Fair value of options granted for the year in €	82,694	189,457

QSC has established a total of six stock option programs since 1999, which call for the issuance of convertible bonds having a nominal value of € 0.01 each to employees and, with the consent of the Supervisory Board, to members of the Management Board as well as to consultants and suppliers. The participants in these programs are granted the right to convert each convertible bond into one share of registered, no-par stock against payment of the exercise price. The exercise price of the convertible bonds represents the market price of the share on the date of issuance.
The convertible bonds have a term of five or eight years and are subject to a vesting period of up to three years. On the basis of IFRS 2, no personnel expenses were recorded for the convertible bonds issued under the 2000, 2000A, 2001 and 2002 SOPs. The option values for the convertible bonds under the 2006 SOP were computed at the grant date with the aid of the Black-Scholes option-pricing model, with the following assumptions being employed. In 2009 and 2010, no convertible bonds were issued under the 2004 SOP.