If the shares purchased in accordance with the terms and conditions of theStockPurchase Plan are retained by an employee for three years from theinvestmentdate and the employment with the Ericsson Group continues during that time,theemployee will be entitled to the following matching of shares, free ofconsideration, in addition to the regular matching of oneshare:
* The President may be entitled to an additional performance match ofup to nine shares for each one purchased.
* Other senior managers may be entitled to an additional performancematch of up to either four or six shares for each one purchased.
The nomination of senior managers will be on the basis of position,seniorityand performance at the discretion of the Remuneration Committee,which willapprove participation and matching share opportunity.
The terms and conditions of the additional performance match under theExecutivePerformance Stock Plan will be based on the outcome of three targets, whichareindependent of each other and have equal weighting. The three targets are:
* Up to one third of the award shall vest provided the compound annualgrowth rate (CAGR) of consolidated net sales between year 0 (2012 financialyear) and year 3 (2015 financial year) is between 2 and 8 percent, which corresponds to consolidated sales of SEK 241.7 billion and SEK 286.9billion for the financial year 2015. Matching will begin at a threshold levelof 2 percent CAGR and increase on a linear scale to full vesting of thisthird of the award at 8 percent CAGR.
* Up to one third of the award shall vest provided the compound annualgrowth rate (CAGR) of consolidated operating income between year 0 (2012financial year) and year 3 (2015 financial year) is between 5 and 15 percent,which corresponds to consolidated operating income of SEK 21.4 billion andSEK 28.1 billion for the financial year 2015. For the purpose ofestablishing the Operating Income Growth base, the non-cash charge for ST-Ericsson,has been excluded from the consolidated financial results for 2012.Matching will begin at a threshold level of 5 percent CAGR and increase on alinear scale to full vesting of this third of the award at 15 percent CAGR.
* Up to one third of the award will be based on the cash conversionduring each of the years during the performance period, calculated as cashflow from operating activities divided by net income reconciled to cash. One ninth of the total award will vest for any year, i.e. financial years 2013, 2014 and 2015, if cash conversion is at or above 70 percent.
The Board of Directors considers that long-term value creation will bereflectedin the success of these targets, aligning executives with long-termshareholderinterests. There will be no allocation of shares if none of thethresholdlevels have been achieved, i.e. CAGR is less than 2 percent for net salesandless than 5 percent for operating income, and a 70 percent cash conversionhasnot been achieved during the performance period. The minimum matching atthethreshold levels is 0. The maximum number of performance matchingshares - 4shares, 6 shares and 9 shares respectively - will be allocated if themaximumperformance levels of CAGR of 8 percent for net sales and 15 percent foroperating income have been achieved, or exceeded, and a cash conversion of70percent or more has been achieved each year during the period.
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