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  • 2005-10-24 KONE’s Board of Directors Proposes the Awarding of Option Rights and Approves Share-Based Incentive Plan
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KONE’s Board of Directors Proposes the Awarding of Option Rights and Approves Share-Based Incentive Plan

Stock Exchange Release Published 24/10/2005

KONE Corporation’s Board of Directors has decided at its 24 October 2005 meeting to propose to the Extraordinary Shareholders Meeting of 21 November 2005 the awarding of stock option rights to approximately 250 employees of its global organization.

e purpose of the stock options is to encourage long-term efforts by key personnel to grow shareholder value and increase their commitment to the company by offering them an internationally competitive incentive program. The company’s CEO, President and Executive Committee members are not included in the option plan.
The stock options are to be marked with the symbol 2005C, and a maximum total of 2,000,000 class B shares will be offered for subscription. The maximum number of option rights per person is limited to 8,000 shares. Each stock option entitles its owner to subscribe for one (1) class B KONE share (after the proposed two-for-one share split). The class B shares for which these stock options can be exchanged constitute no more than 1.54% of the company’s total number of shares.
The share subscription period for stock option 2005C shall be 1 April 2008–30 April 2010. The share subscription period begins only if the average turnover growth of the KONE Group for financial years 2006 and 2007 exceeds market growth, the earnings before interest and taxes (EBIT) of the KONE Group for the financial year 2006 exceeds the EBIT for the financial year 2005, and the EBIT for the financial year 2007 exceeds the EBIT for the financial year 2006. If the above-mentioned criteria have not been attained, stock options 2005C expire in the manner decided by the Board of Directors.
In addition, the Board of Directors has decided on a share-based incentive plan for the company’s senior management, consisting of approximately 35 individuals. The potential reward is based on the growth in KONE’s sales and operating profit for 2006 and 2007. The reward is to be paid as a combination of class B shares and the cash equivalent of the tax and taxable benefit costs that are incurred. The share ownership plan amounts to no more than 0.2% of all the corporation’s shares. The plan prevents participants from transferring the shares during the fifteen-month period following the termination of each earning period.
This release includes the following appendices

  • Proposal of the Board of Directors to the Extraordinary Shareholders Meeting for awarding stock option rights
  • Terms and conditions of the 2005C stock options

Additional information on KONE’s compensation systems is available in the Corporate Governance section of the KONE website at www.kone.com.
Sender:
KONE Corporation
Tapio Hakakari
Director, Secretary to the Board
Minna Mars
Senior Vice President, Corporate Communications & IR
For further information, please contact:
Tapio Hakakari, Director, Secretary to the Board, tel. +358 204 75 4226
KONE is the world’s fourth largest elevator and escalator company and provides complete and innovative solutions for the installation, maintenance and modernization of elevators and escalators and the maintenance of automatic building doors. KONE provides safe and easy access to hundreds of millions of people daily in all parts of the world. KONE has annual net sales of approximately EUR three billion and about 27,000 employees. Its class B shares are listed on the Helsinki Exchanges.
www.kone.com

PROPOSAL BY THE BOARD OF DIRECTORS TO THE EXTRAORDINARY GENERAL MEETING OF SHAREHOLDERS CONCERNING THE ISSUE OF STOCK OPTIONS

The Board of Directors proposes that stock options be issued by the Extraordinary General Meeting of Shareholders of KONE Corporation to the key personnel of the KONE Group, as well as to a wholly-owned subsidiary of KONE Corporation, on the terms and conditions attached hereto.
The stock options shall, in deviation from the shareholders’ pre-emptive subscription rights, be offered to the key personnel of the KONE Group, as well as to a wholly owned subsidiary of the Company. It is proposed that the shareholders’ pre-emptive subscription rights be deviated from since the stock options are intended to form a part of the incentive and commitment program for the key personnel. The purpose of the stock options is to encourage the key personnel to work on a long-term basis to increase shareholder value. The purpose of the stock options is also to commit the key personnel to the Company.
In the event that the Extraordinary General Meeting of Shareholders approves the proposal by the Board of Directors concerning a change in the number of the Company’s shares, the maximum total number of stock options to be issued shall be 2,000,000. The stock options shall be marked with the symbol 2005C and they shall be distributed without compensation to the key personnel employed by or to be recruited by the KONE Group.
The share subscription price for stock option 2005C shall be the trade volume weighted average quotation of the KONE class B share on the Helsinki Stock Exchange between 24 October, 2005 and 18 November, 2005. From the share subscription price of stock options shall, as per the dividend record date, be deducted the amount of the dividend decided after the end of the period for determination of the subscription price but before share subscription.
The share subscription period for stock option 2005C shall be 1 April 2008–30 April 2010. The share subscription period begins only if the average turnover growth of the KONE Group for financial years 2006 and 2007 exceeds market growth, the Earnings before Interest and Taxes (EBIT) of the KONE Group for the financial year 2006 exceeds the EBIT for the financial year 2005 and the EBIT for the financial year 2007 exceeds the EBIT for the financial year 2006. If the above mentioned criteria have not been attained, stock options 2005C expire in the manner decided by the Board of Directors.
As a result of the share subscriptions with stock options 2005C, the share capital of KONE Corporation may be increased by a maximum total of EUR 1,000,000 and the number of class B shares by a maximum total of 2,000,000 new class B shares.
Option rights shall not be offered to people who belong to the inner circle of the Company.
The stock options now issued can be exchanged for class B shares constituting a maximum of 1.54% of the Company’s all shares and 0.63% of the voting rights of all shares after the potential share capital increase.
Helsinki, 24 October, 2005
The Board of Directors

KONE CORPORATION STOCK OPTIONS 2005

The Board of Directors of KONE Corporation (Board of Directors) has on 24 October, 2005 resolved to propose to the Extraordinary General Meeting of Shareholders of KONE Corporation (KONE or Company) to be held on 21 November 2005 that stock options be issued to the key personnel of KONE and its subsidiaries (KONE Group) and to a wholly owned subsidiary of KONE on the following terms and conditions:
I STOCK OPTION TERMS AND CONDITIONS
1. Number of Stock Options
The maximum total number of stock options issued shall be 2,000,000, and they entitle their owners to subscribe for a maximum total of 2,000,000 class B shares in KONE.
2. Stock Options
The stock options shall be marked with the symbol 2005C.
The people to whom stock options are issued shall be notified in writing by the Board of Directors about the offer of stock options. The subscription period of stock options shall end on 31 January 2007 or on any earlier date determined by the Board of Directors. The Board of Directors shall decide on the approval of the subscriptions of stock options. Stock option certificates shall, upon request, be delivered to a stock option owner at the start of the relevant share subscription period, unless the stock options have been transferred to the book-entry securities system.
3. Right to Stock Options
The stock options shall, in deviation from the shareholders’ pre-emptive subscription rights, be gratuitously issued to the key personnel of the KONE Group and to KONE Capital Oy (Subsidiary), a wholly owned subsidiary of KONE. The shareholders’ pre-emptive subscription rights are proposed to be deviated from since the stock options are intended to form part of the Group’s incentive and commitment program for the key personnel.
4. Distribution of Stock Options
The Board of Directors shall decide upon the distribution of the stock options. The Subsidiary shall be granted stock options to the extent that the stock options are not distributed to the key personnel of the KONE Group.
The Board of Directors of KONE shall later decide upon the further distribution of the stock options subscribed by the Subsidiary, to the key personnel employed by or to be recruited by the KONE Group.
5. Transfer of Stock Options and Obligation to Offer Stock Options
The stock options are freely transferable, when the relevant share subscription period has begun. The Board of Directors may, however, permit the transfer of a stock option also before such date. The Company shall hold the stock options on behalf of the stock option owner until the beginning of the share subscription period. The stock option owner has the right to acquire possession of the stock options when the relevant share subscription period begins. Should the stock option owner transfer his/her stock options, such person is obliged to inform the Company about the transfer in writing, without delay.
Should a stock option owner cease to be employed by or in the service of the KONE Group, for any reason than the death of a stock option owner, or the statutory retirement of a stock option owner, such person shall, without delay, offer to the Company or its order, free of charge, the stock options for which the share subscription period specified in Section II.2 has not begun, on the last day of such person’s employment or service. The Board of Directors can, however, in the above-mentioned cases, decide that the stock option owner is entitled to keep such stock options, or a part of them, which are under the offering obligation.
Regardless of whether the stock option owner has offered his/her stock options to the Company or not, the Company is entitled to inform the stock option owner in writing that the stock option owner has lost his/her stock options on the basis of the above-mentioned reasons. Should the stock options be transferred to the book-entry securities system, the Company has the right, whether or not the stock options have been offered to the Company, to request and get transferred all the stock options under the offering obligation from the stock option owner’s book-entry account to the book-entry account appointed by the Company, without the consent of the stock option owner. In addition, the Company is entitled to register transfer restrictions and other respective restrictions concerning the stock options to the stock option owner’s book-entry account, without the consent of the stock option owner.

II SHARE SUBSCRIPTION TERMS AND CONDITIONS

1. Right to Subscribe for New Shares
Each stock option entitles its owner to subscribe for one (1) class B share in KONE. The book equivalent value of each share is EUR 0.50. As a result of the share subscriptions, the share capital of KONE may be increased by a maximum total of EUR 1,000,000 and the number of class B shares by a maximum total of 2,000,000 new class B shares.
The Subsidiary shall not be entitled to subscribe for shares in KONE on the basis of the stock options.
2. Share Subscription and Payment
The share subscription period for stock option 2005C shall be 1 April 2008 – 30 April 2010.
However, the share subscription period begins only if following criteria have been attained:
the average turnover growth of the KONE Group for financial years 2006 and 2007 exceeds market growth and the Earnings before Interest and Taxes (EBIT) of the KONE Group for the financial year 2006 exceeds the EBIT for the financial year 2005 and the EBIT for the financial year 2007 exceeds the EBIT for the financial year 2006. If the above mentioned criteria have not been attained, stock options 2005C expire in the manner decided by the Board of Directors.
Share subscriptions shall take place at the head office of KONE or possibly at another location to be determined later. The subscriber shall transfer the respective stock option certificates with which he/she subscribes for shares, or, in the case of the stock options having been transferred to the book-entry securities system, the stock options with which shares have been subscribed for, shall be deleted from the subscriber’s book-entry account. Upon subscription, payment for the shares subscribed for shall be made to the bank account appointed by the Company. The Board of Directors shall decide on all measures concerning the share subscription.
3. Share Subscription Price
The share subscription price for stock option 2005C shall be the trade volume weighted average quotation of the KONE class B share on the Helsinki Stock Exchange between 24 October 2005 and 18 November 2005.
From the share subscription price of the stock options shall, as per the dividend record date, be deducted the amount of the dividend decided after the end of the period for determination of the share subscription price but before share subscription. The share subscription price shall, nevertheless, always amount to at least the book equivalent value of the share.
4. Registration of Shares
Shares subscribed for and fully paid shall be registered in the book-entry account of the subscriber.
5. Shareholder Rights
The dividend rights of the shares and other shareholder rights shall commence when the increase of the share capital has been entered into the Trade Register.
6. Share Issues, Convertible Bonds and Stock Options before Share Subscription
Should the Company, before the share subscription, increase its share capital through an issue of new shares, or an issue of new convertible bonds or stock options, a stock option owner shall have the same right as, or an equal right to, that of a shareholder. Equality is reached in the manner determined by the Board of Directors by adjusting the number of shares available for subscription, the share subscription price or both of these.
Should the Company, before the share subscription, increase its share capital by way of a bonus issue, the subscription ratio shall be amended so that the ratio to the share capital of shares to be subscribed for by virtue of the stock options remains unchanged. If the number of shares that can be subscribed for by virtue of one stock option is a fraction, the fractional part shall be taken into account by reducing the share subscription price.
7. Rights in Certain Cases
If the Company reduces its share capital before the share subscription, the subscription right accorded by the terms and conditions of the stock options shall be adjusted accordingly, as specified in the resolution to reduce the share capital.
If the Company is placed in liquidation before the share subscription, the stock option owner shall be given an opportunity to exercise his/her subscription right before the liquidation begins, within a period of time determined by the Board of Directors.
If the Company resolves to merge in another company as the company being acquired or in a company to be formed in a combination merger or if the Company resolves to be divided, the stock option owner shall, before the merger or division, be given the right to subscribe for the shares with his/her stock options, within a period of time determined by the Board of Directors. After such date no subscription right shall exist. In the above situations the stock option owner has no right to require that the Company redeems the stock options from him/her for market value.
If the Company, after the beginning of the share subscription period, resolves to acquire its own shares by an offer made to all shareholders, the stock option owners shall be made an equivalent offer. In other cases, acquisition of the Company’s own shares shall not require the Company to take any action in relation to the stock options.
If, before the end of the subscription period, a situation, as referred to in Chapter 14 Section 19 of the Finnish Companies Act, in which a shareholder possesses over 90% of the shares and the votes of the shares of the Company, and therefore has the right and obligation to redeem the shares of the remaining shareholders, or a situation, as referred to in Chapter 6 Section 6 of the Finnish Securities Market Act, arise, the stock option owners shall be entitled to use their right of subscription by virtue of the stock option within a period of time determined by the Board of Directors, or they shall be entitled to have an equal right to that of a shareholder to sell their stock options to the redeemer. A shareholder who possesses over 90% of the shares and the votes of the shares of the Company has the right to buy the stock option owner’s stock options for market value.
If the number of the Company’s shares is changed, while the share capital remains unchanged, the share subscription terms and conditions shall be amended so that the relative proportion of shares available for subscription with the stock options to the total number of the Company’s shares, as well as the share subscription price total, remain the same.
Converting the Company from a public company into a private company shall not affect the terms and conditions of the stock options.

III OTHER MATTERS

The laws of Finland shall be applied to these terms and conditions. Disputes arising in relation to the stock options shall be settled by arbitration, in accordance with the Arbitration Rules of the Central Chamber of Commerce.
The Board of Directors may decide on the transfer of the stock options to the book-entry securities system at a later date and on the resulting technical amendments to these terms and conditions, including those amendments and specifications to the terms and conditions which are not considered essential. Other matters related to the stock options shall be decided on by the Board of Directors. The stock option documentation shall be kept available for inspection at the head office of KONE.
The Company shall be entitled to withdraw the stock options which have not been transferred, or with which shares have not been subscribed for, free of charge, if the stock option owner acts against these terms and conditions, or against the regulations given by the Company on the basis of these terms and conditions, or against applicable law, or against the regulations of the authorities.
These terms and conditions have been made in Finnish and in English. In the case of any discrepancy between the Finnish and English terms and conditions, the Finnish terms and conditions shall decide.