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TERMS AND CONDITIONS OF THE NOKIA PERFORMANCE SHARE PLAN 2005
1. Definitions
Annual EPS or EPS: The annual Earnings Per Share or EPS number
(basic, reported) in the approved consolidated financial accounts
for Nokia Group (IFRS) for fiscal years 2004, 2006, and 2008, as
applicable, will be used for the measurement of the EPS growth,
which is one pre-determined financial performance criterion and
vesting condition under paragraph 4 below.
Average Annual Net Sales Growth: The Average Annual Net Sales
Growth, which is one pre-determined financial performance
criterion and vesting condition under paragraph 4 below, is
calculated as an average of the annual net sales growth rates in
the approved consolidated financial accounts for Nokia Group
(IFRS) for the Interim Measurement Period or Performance Period,
as applicable. The annual net sales figures for fiscal years
2004, 2005, 2006, 2007, and 2008, as applicable, will be used for
the calculation of the Average Annual Net Sales Growth.
Grant Amount: The number of Units that will be allocated to a
Participant. The Grant Amount represents the Threshold Number for
and is tied to either EPS Growth or Average Annual Net Sales
Growth, as indicated to the Participant at grant. The Grant
Amount equals the Threshold Number for each criterion. Under the
Plan, the Participant shall receive two Grant Amounts of equal
size one tied to EPS criterion and one tied to Average Annual Net
Sales Growth criterion.
Interim Measurement Period: The period comprising the fiscal
years 2005 and 2006. The measurement of the first payout during
the Performance Period under paragraph 4 will be based on Nokia's
performance during the Interim Measurement Period.
Maximum Number: The number of granted Units to vest, provided
that the Maximum Performance is achieved with respect to the
performance criterion, as determined in the Vesting Conditions
under paragraph 4.4. For each performance criterion, the Maximum
Number of Units equals four times the Threshold Number or Grant
Amount.
Maximum Performance: The performance level, which is defined for
each performance criterion under paragraph 4.4. The Maximum
Performance results in the Vesting of four times the Grant Amount
or Threshold Number.
Participant: Eligible persons who, based on the grant guidelines
approved by the Personnel Committee of the Board of Directors,
receive a grant of Performance Share Units under the Plan.
Performance Period: The period comprising the fiscal years 2005
through 2008. The fulfilment of the pre-determined performance
criteria as described under paragraph 4, is measured based on
Nokia's financial performance during this period. The two
separate, equally weighted performance criteria are Annual EPS
Growth and Average Annual Net Sales Growth.
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Performance Share Unit or Unit: Each Participant is offered at
grant a number of Performance Share Units, equalling the Grant
Amount. The Units will vest as Shares for the Participant to the
extent of and subject to the Vesting conditions under paragraph
4, and other restrictions under these Plan Rules.
Plan Rules: This document as adopted by the Board of Directors.
Settlement Date: The day of the settlement of the payouts under
the Plan. Subject to the Vesting conditions under paragraph 4
below, there will be two Settlement Dates, one after the Interim
Measurement Period and a second after the Performance Period as
defined under paragraph 6. The Settlement Date will be as soon as
practicable after the Vesting Date.
Share/Shares: Nokia ordinary shares to be transferred to
Participants based on vested Units. Nokia may, however, in its
sole discretion, use for the settlement of vested Units one or
more of the ways of funding described under paragraph 6,
including cash settlement.
Threshold Number: The number of Units to vest, provided that the
Threshold Performance is achieved with respect to the performance
criteria, as determined in the Vesting conditions of the Plan
under paragraph 4. For each performance criterion separately, the
Threshold Number equals the Grant Amount.
Threshold Performance: The minimum performance level, which
results in the Vesting of the Threshold Number or Grant Amount of
Units of a grant as defined under paragraph 4 below.
Vesting: Represents the moment in time, when the granted Units
shall vest as Shares and the Participant shall acquire the right
to receive full ownership of such number of Shares. The number of
Units that vest will be dependant on the fulfilment of the
Vesting conditions under paragraph 4. The Vesting conditions will
be measured after the close of the Interim Measurement Period,
and the close of the Performance Period, as defined under
paragraph 4. Nokia will arrange for the delivery of the vested
Shares as soon as practicable after Vesting Date, as described
under paragraph 6 below.
Vesting Date: The Vesting Date is the date of the Annual General
Meeting of Nokia in 2007 and 2009, respectively, as determined by
Nokia. The Vesting Date represents the day in which a participant
earns the shares, subject to the Vesting conditions as defined in
paragraph 4. There will be two Vesting Dates, one after the
Interim Measurement Period and a second after the Performance
Period as defined under paragraph 6. As soon as practicable after
Vesting Date, Nokia will arrange for the delivery of the vested
Shares as described under paragraph 6 below.
2. Purpose and Scope of the Plan
Nokia Corporation ("Nokia") may grant under the Performance Share
Plan 2005 (the "Plan") a maximum of 25.000.000 Nokia shares (the
"Shares") to eligible participants, subject to the terms and
conditions and other restrictions set out herein ("Plan Rules").
The purpose of the Plan is to recruit, retain and motivate
selected personnel of Nokia Group, and to promote their share
ownership.
To comply with the purposes of the Plan, the Personnel Committee
of the Board of Directors of Nokia ("Personnel Committee") shall
determine the grant guidelines of the Plan, as well as approve
the eligible persons of Nokia Group to receive grants under the
Plan (the "Participants") from time to time.
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3. Grant of Performance Share Units
At grant, each Participant will be offered a certain number of
Performance Share Units ("Grant Amount"). One Grant Amount is
tied to the EPS criterion and a separate Grant Amount tied to the
Average Annual Net Sales criterion. The granted Units will vest
as Shares to the Participants, subject to the Vesting conditions
described below under paragraph 4, and other terms and conditions
under these Plan Rules.
In connection with the grant, the Participant may be required to
give Nokia such authorizations and consents, as Nokia deems
necessary in order to administer the Plan. The fulfilment of such
requirements and the compliance with such instructions given by
Nokia forms a precondition of a valid grant.
4. Vesting Conditions of the Performance Share Units
4.1. Vesting and Settlement
The granted Units shall vest as Shares and the Participant shall
acquire the right to receive full ownership of such number of
Shares ("Vesting"), as determined in the Vesting conditions
described below in this paragraph 4 and be subject to Settlement
pursuant to paragraph 6 below, "Settlement of Grant".
4.2. Financial Performance Criteria and Vesting
4.2.1. The Vesting of Units under the Plan is determined by the
financial performance of Nokia during the Performance Period
comprising the fiscal years 2005 through 2008 ("Performance
Period").
4.2.2. Measurement of Nokia's performance during the Performance
Period will be based on the approved consolidated financial
accounts of Nokia Group (IRFS) as of the end of fiscal year 2008,
compared with those of 2004 and 2006.
4.2.3. If the Threshold Performance is not reached, no Units
shall be vested as Shares.
4.2.4. To the extent that the Threshold Performance is exceeded,
the number of Units to vest will increase linearly up to the
achievement of the Maximum Performance.
4.2.5. After the close of the Interim Measurement Period, to the
extent the Threshold Performance has been achieved or exceeded,
the number of Units equaling the Grant Amount shall vest. The
total number of Units that may be vested at such time, may,
however, not exceed the Grant Amount or Threshold Number.
4.2.6. For the full Performance Period (2005-2008), the total
amount of shares to be vested, if applicable, may not exceed four
times the Grant Amount or the Threshold Number, less any Shares
delivered after the Interim Measurement Period.
4.3. Threshold Performance
4.3.1. The Threshold Number, equalling the Grant Amount, shall
vest, if Nokia's financial performance equals one of the two
pre-determined financial performance criteria described below as
Threshold Performance.
The Threshold Performance level for each criterion is as follows:
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1) Average Annual Net Sales Growth: Nokia's Average Annual
Net Sales Growth rate for the Performance Period equals
3%.
2) EPS Growth (EPS): Nokia's EPS (basic, reported) equals
EUR 0.82 at the end of 2008.
4.4. Maximum Performance
4.4.1. The Maximum Number, which equals four times the Grant
Amount shall vest, if Nokia's financial performance equals or
exceeds one of the two pre-determined financial performance
criteria described below as Maximum Performance.
The Maximum Performance level for each criterion is as follows:
1) Average Annual Net Sales Growth: Nokia's Average Annual
Net Sales Growth rate for the Performance Period equals
or exceeds 12%.
2) EPS Growth (EPS): Nokia's EPS (basic, reported) equals or
exceeds EUR 1.33 at the end of 2008.
The following table below summarizes each Performance criterion
(Table A)
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Potential range of
Threshold Maximum share delivery
Financial Accounts 2004 Measurement Period Performance Criterion Performance Performance (Settlement)
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EPS EUR0.70 Interim Measurement EPS for 2006 (basic, EUR0.75 EUR0.96 Zero shares or Grant Amount
(basic, reported) Period (2005-2006) reported)
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-1% Interim Measurement Average Annual Net Sales 3% 12% Zero shares or Grant Amount
Average Annual Net Sales Period (2005-2006) growth rate (2005-2006)
(basic, reported) (basic, reported)
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EPS EUR0.70 Performance Period EPS for 2008 (basic, EUR0.82 EUR1.33 Zero shares to 4X Grant Amount,
(basic, reported) (2005-2008) reported) less any shares delivered from
Interim Measurement Period
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-1 Performance Period Average Annual Net Sales 3% 12% Zero shares to 4X Grant Amount,
Average Annual Net Sales (2005-2008) growth rate (2005-2008) less any shares delivered from
(basic, reported) (basic, reported) Interim Measurement Period
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4.5. Measurement and calculation of grant payout
The measurement of Nokia's performance under the Plan shall be
made after the close of the Interim Measurement Period as well as
after the Performance Period. Based on each of these
measurements, the number of Units being vested and the number of
Shares shall be calculated, which calculation will always be
subject to the approval of Nokia's financial accounts by the
Annual General Meeting of Shareholders for the relevant year.
Nokia shall carry out the measurement of Nokia's performance and
calculation of the number of Units being vested and the
corresponding number of Shares under the Plan as well as the
payout in its sole discretion.
The calculation of the number of Units being vested shall not
result in fractional Shares. The number of Units vesting shall be
rounded to the nearest whole Share.
4.6. Vesting Date
The measurement and calculation will be confirmed on the day of
the Annual General Meeting of Nokia in 2007 and 2009, as
determined by Nokia ("Vesting Date"). The Vesting Date represents
the day, in which a participant
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earns the Shares, subject to the fulfilment of the Vesting
conditions determined in this paragraph. There will be two
Vesting Dates: one after the Interim Measurement Period and a
second after the Performance Period. The vested Shares shall be
transferred to the Participant and settled on or about the
Settlement Date as defined under paragraph 6.
4.7. Interim and Final payout
The payout based on achievement during the Interim Measurement
Period shall not exceed the Grant Amount. The portion of the
payout after the close of the Interim Measurement Period that
would have, pursuant to the Vesting conditions under 4 above,
exceeded this limit, will be paid out in 2009, if justified by
the second measurement of performance after the close of the
Performance Period.
The final payout based on the achievement during the Performance
Period shall not exceed four times the Grant Amount. The number
of Units being vested shall be adjusted by the number of Units
delivered after the close of Interim Measurement Period.
4.8. Changes in employment
If the employment of the Participant terminates prior to Vesting
Date for any reason other than early retirement, retirement,
permanent disability (as defined by Nokia at its sole
discretion), or death, the Participant will not acquire ownership
of the vested Shares and they will not be transferred to the
Participant's account on or about the Settlement Date.
If the employment of the Participant terminates prior to Vesting
Date by reason of early retirement, retirement, permanent
disability (as defined by Nokia at its sole discretion) or death,
the ownership of the Shares vesting will pass to the Participant
and the Shares will be transferred to the Participant's account
at the Settlement Date.
In cases of voluntary and/or statutory leave of absence of the
Participant, Nokia has the right to defer the Vesting Date and
Settlement Date
5. Prohibited transactions
The Participants are not entitled to enter into any derivative
agreement or any other corresponding financial arrangement
relating to the Units or Shares until the Shares have been vested
and transferred to the Participant after the Vesting Date.
6. Settlement of Grant
Nokia may, in its sole discretion, use for the settlement of the
Units one or more of the following: newly issued Shares, Nokia's
own existing Shares (treasury shares), Shares purchased from the
open market, or, in lieu of Shares, cash settlement.
As soon as practicable after Vesting Date and subject to the
fulfilment of the other Plan Rules, the Shares, and their cash
equivalent shall, as instructed by Nokia, be transferred to the
Participant's personal book-entry, brokerage or bank account,
provided that the Participant has performed all the necessary
actions to enable Nokia to instruct such a transfer
("Settlement").
The participants shall not be entitled to any dividend or have
any voting rights or any other rights as a shareholder to the
Shares until and unless the Shares have been transferred to the
Participant on the applicable Settlement Date.
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7. Terms of employment
The grant of Performance Share Units does not constitute a term
or a condition of the Participant's employment relationship with
Nokia, nor does it form a part of the Participant's employment
contract under applicable local laws. The granted Units do not
form a part of the Participant's salary or benefit of any kind.
8. Taxes and other Obligations
Pursuant to applicable laws, Nokia is or may be required to
collect withholding taxes, social security charges or fulfil
other employment related obligations upon making Grants to
Participants, or on the receipt or sale of the Shares by the
Participants. Nokia shall have the right to determine how such
collection, withholding and other measures will be arranged or
carried out, including but not limited to potential sale of the
Shares on behalf of the Participants for the fulfilment of such
liability.
The Participants are personally responsible for any taxes and
social security charges associated with the Shares. This includes
responsibility for any and all tax liabilities in multiple
countries, if the participant has resided in more than one
country during the Performance Period. The Participants are
advised to consult their own financial and tax advisers (at their
own expense) in connection with the Grant of Units in order to
verify their tax position.
The Participants are also responsible for any potential charges
debited by financial institutions in connection with the
Settlement of the grants or any subsequent transaction related to
the Shares.
9. Breach of the Plan Rules
The Participant shall comply with the Plan Rules in force from
time to time, as well as any instructions given by Nokia
regarding the Plan, including those regarding the grants in
paragraph 3 above. If the Participant breaches the Plan Rules
and/or any instructions given by Nokia regarding the Plan, Nokia
may at its discretion, at any time prior to Vesting, rescind the
Grant to a Participant who is in breach.
10. Validity of the Plan
The Plan shall become valid and effective upon the adoption by
the Board. The Board may at any time amend, modify or terminate
the Plan and/or the Plan rules. The Board may make such a
resolution in its absolute discretion at any time, including but
not limited to situations where required resolutions by Nokia's
Annual General Meeting of Shareholders are not received.
Such a resolution by the Board may also, as in each case
determined by the Board, affect the granted Units that are then
outstanding, but not settled.
11. Administration
Nokia shall administer the Plan in accordance with guidelines
approved by its Board of Directors or the Personnel Committee, as
the case may be. Nokia has the authority to interpret and amend
these Plan Rules. Nokia may also amend these Plan Rules, adopt
such other rules and procedures, and take such other measures, as
it shall deem necessary or appropriate for the administration of
the Plan.
Nokia has the right to determine the practical manner of
administration and settlement of the Grants, including but not
limited to the acquisition, issuance, sale, and transfer of the
Shares to the Participant. Furthermore, Nokia has
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the right to require from the Participant the submission of such
information or contribution that is necessary for the
administration and settlement of the Grants.
12. Governing Law and settlement of disputes
The Plan is governed by Finnish law. Disputes arising out of the
Plan shall be settled by arbitration in Helsinki, Finland in
accordance with the Arbitration Rules of the Finnish Central
Chamber of Commerce.
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13. Other Provisions
Any notices to the Participants relating to this Plan shall be
made electronically, in writing, or any other appropriate manner
as determined by Nokia.
The grant of Units by Nokia to some Participants may be limited
and/or subject to additional terms and conditions due to laws and
other regulations applicable outside Finland.
Nokia has the right to transfer globally within Nokia Group
and/or to an agent of Nokia Group any of the personal data
required for the administration of the Plan and the settlement of
the grants. The data may be administered and processed either by
Nokia or an agent authorized by Nokia in the future. The
Participant is entitled to request access to data referring to
the Participant's person, held by Nokia or its agent and to
request amendment or deletion of such data in accordance with
applicable laws, statutes or regulations. In order to exercise
these rights, the Participant must contact Nokia Group Legal
department in Espoo, Finland.