Nokia Equity Program 2006 to follow the existing programs
January 26, 2006, Nokia Equity Program 2006, in line with the Equity Programs 2004 and 2005, has the following structure as approved by the Nokia Board of Directors:
- Performance shares - offered as the main equity-based incentive;
- Stock options - granted to a more limited group of employees;
- Restricted shares - only a small number granted to high potential and critical resources.
The Equity Program 2006 will focus on rewarding achievement and retaining critical talent, like the equity programs of previous years. Similarly, it is to align the potential value received by the participants directly with the performance of the company, thus aligning the participants’ interests also with the shareholders’ interests.
Performance shares under the Nokia Equity Program 2006 will vest provided that the company’s performance reaches the required threshold level measured by two independent, pre-defined performance criteria: average annual net sales growth and average annual earnings per share (’EPS’) (basic) growth during the performance period of 2006-2008. Both performance criteria are equally weighted and the actual performance under each of the two performance criteria is calculated independent of each other. The threshold level for the average annual net sales growth is 5 % and the maximum level is 20 %. The threshold level for the average annual EPS (basic) growth is EUR 0.96 and the maximum level is EUR 1.41. Provided that at least one of the threshold levels is met, the performance share units will vest in 2009.There is no interim measurement period as compared with the Nokia Equity Programs 2004 and 2005, which had a four-year performance period and an interim measurement period. If the maximum level for both performance criteria is met, the Nokia Equity Program 2006 may result in an aggregate maximum payout of 32.6 million Nokia shares.
The annual grant of performance share units in 2006 may result in a maximum payout of 18 million shares, should the maximum level for both performance criteria be met. In addition, a pool of performance share units intended for recruitments and special retention needs in 2006 is reserved in line with the practice adopted in 2005, and it may result in a maximum payout of 14.6 million shares (7.6 million of which remain unallocated from the 2005 program), should the maximum level for both performance criteria be met. These amounts together with the performance share unit amounts of the Nokia Equity Program 2005 and they were included in the pool reserved already in 2005.
Stock options of the Nokia Stock Option Plan 2005, approved by the Annual General Meeting 2005, will also be granted as part of the Nokia Equity Program 2006. The total maximum size of the Nokia Stock Option Plan 2005 is 25 million stock options. A maximum of 8.9 million stock options are planned to be granted in the annual grant in 2006, which amount corresponds to the annual grant in 2005. In line with the practice adopted in 2005, an additional pool of stock options intended for recruitment and special retention needs in 2006 is reserved and it amounts to a maximum of 7.9 million stock options.
In addition, Nokia will continue to use a limited number of restricted shares with a 3-year restriction period. The maximum total number of restricted shares that Nokia may grant during 2006 is 9.5 million. The annual grant in 2006 is planned to amount to a maximum of 2.3 million shares. In line with the practice adopted in 2005, a pool of restricted shares for special needs is reserved and it may result in a maximum payout of 7.2 million Nokia shares (3.2 million of which remain unallocated from the 2005 Plan). These amounts together with the restricted share amounts of the Nokia Equity Program 2005 and they were included in the pool reserved already in 2005.
As of December 31, 2005, the total dilution effect of Nokia’s performance shares, stock options and restricted shares currently outstanding, assuming full dilution (Performance Shares assumed to vest at maximum), is approximately 4.2 % The potential maximum effect of the Nokia Equity Program 2006, including the potential grants from the pools mentioned above, as well as the planned grants pertaining to the acquisition of Intellisync Inc, which was announced in November 2005, would be approximately another 1.4 percentage points.
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