Skandia: Revised proposal for stock option program

Skandia's Board submits revised proposal for stock option programme Skandia's Board of Directors today decided to submit to the Annual General Meeting on 5 April 2000 a revised proposal for a stock option programme for the group's employees. The programme, which is directed to senior executives as well as to employees in general, is based on the issuance of independent stock options from a trust established specifically for this purpose. Technically this will be accomplished through a directed new issue to the trust of promissory notes with detachable warrants. At the same time, the trust will issue stock options to the participating employees. Upon exercise of stock options, the trust will subscribe for new shares for subsequent transfer to the employees. Under the programme, stock options will be granted yearly during a three- year period (2000-2002). The proposed programme entails that, in principle, all employees will be granted stock options each year, free of charge. Each such option corresponds to a warrant for a new Skandia share. If the employee remains employed for one year after being granted options, he or she will be able to use each option to purchase one Skandia share at a price corresponding to that which applied on the date that the option was granted. This part of the programme will include not more than 3,000,000 stock options during the three-year period. The term of these options will be three years and three months. Senior executives will not be included in the general stock option allocation, but will instead be granted stock options, free of charge, based on a yearly, individual evaluation. In order to be able to exercise these stock options and take part in the value appreciation of Skandia's stock, these executives must remain employed for three years after the option grant. Allocation to senior executives will be based on local market conditions, among other things. Most of these options will be allocated to key employees in the international operations. This part of the programme will include not more than 19,500,000 stock options during the three-year period. The term of these options will be seven years. The intention is that Skandia's president and CEO, Lars-Eric Petersson, will be granted 75,000 stock options for 2000. A total of not more than 24,000,000 stock options are intended to be granted during the three-year period (before the bonus issue proposed today by the Board), of which a small portion will be earmarked to cover certain costs, mainly employer social security charges, associated with the programme. If all options are exercised, the number of shares outstanding will increase by approximately 4.5 per cent. Assuming 25 per cent annual growth in the value of Skandia's stock over a three-year period, the value transfer to the employees for one year's grant of options will amount to just under 0.8 per cent. In its technical design, the new programme corresponds to the one proposed for consideration by an extraordinary shareholders' meeting on 27 January. This meeting was cancelled, since is was learned that certain Swedish institutional shareholders needed more time to consider the proposal. The revised proposal now being submitted includes a smaller number of stock options. This has been achieved by, among other things, eliminating the reserve for possible, future structural deals, that was included in the earlier proposal. In addition, the term of the options has been shortened. Commenting on the programme, Skandia's Chairman, Lars Ramqvist, said: "Competitive and going-rate compensation and incentive programmes are becoming more essential in all companies, especially in human capital- intensive companies like Skandia. Through the proposed stock option programme, it will be possible to offer a competitive and attractive programme to the group's key employees, especially those who are active internationally. Moreover, through the programme's design, the employees and shareholders will have the same goals in the form of good growth in the value of Skandia's stock. The original programme was well received by Skandia's non-Swedish shareholders. Through the changes that have now been made, it should be possible for the revised programme to be accepted also by Skandia's Swedish institutional shareholders." More detailed information on the proposed stock option programme will be sent to Skandia's shareholders together with the invitation to attend the Annual General Meeting. Technically the proposed issuance of promissory notes with detachable warrants for the subscription of new shares in Skandia Insurance Company Ltd entails the issuance of three promissory notes to the trust. Each of the promissory notes will have 8,000,000 detachable warrants for the subscription of new shares, with terms until 2007, 2008 and 2009, respectively. The exercise price for the new shares will correspond to the market price of Skandia's stock during the week following the release of the interim report for the first quarter of 2000, and during the week following the release of the year-end report for 2000 and 2001, respectively. For further information, please contact: Birgitta Hammarström, Press Manager, Skandia, tel. +46-8-788 27 55, +46-70-378 27 55 ------------------------------------------------------------ Please visit http://www.bit.se for further information The following files are available for download: http://www.bit.se/bitonline/2000/03/07/20000307BIT00900/bit0001.doc http://www.bit.se/bitonline/2000/03/07/20000307BIT00900/bit0002.pdf