Incentive program

The Nordic Paper annual general meeting 2022 resolved to issue not more than 600,000 warrants within the scope of a long term incentive programme for senior executives within Nordic Paper.

The rationale for the incentive programme is to create opportunities to motivate and retain senior executives within Nordic Paper. The incentive programme has been established as it is deemed desirable for senior executives within Nordic Paper to also be shareholders of the company.

The resolved incentive program is a three-year programme. In total, the incentive programme encompasses not more than 9 individuals. The incentive programme entails that senior executives within Nordic Paper are offered warrants at market value calculated according to the Black-Scholes valuation formulae. The participant must have entered into pre-emption agreement with a company within the Nordic Paper group to be entitled to participate in the incentive programme.

Each warrant shall entitle the holder to subscribe for one new share in the company at an exercise price equal to120 percent of the volume-weighted average price of the company’s share during the period of ten trading days falling immediately before the offer for subscription of the warrants (the “VWAP”), in any case not less than the quota value of the share. The exercise price thus calculated shall be rounded off to the nearest whole SEK 0.10, whereupon SEK 0.05 shall be rounded downwards. In accordance with customary conditions, the number of shares that each warrant entitles to will be recalculated should the company resolve on a share split, consolidation of shares, issue, etc.

If the volume-weighted average price of the company’s share during the period of ten trading days falling immediately before each exercise period (as described below) exceeds 170 percent of VWAP, the exercise price shall be increased with an amount corresponding to the part of such average price exceeding 170 percent of VWAP. Thereby, the participant’s maximum outcome in the programme is capped.

Each warrant shall entitle the holder to subscribe for one new share in Nordic Paper Holding AB (publ) during either (i) the two-week period following publication of the third interim report of 2025 or (ii) the two-week period following the fourth interim report of 2025 (entailing a vesting period of at least three years).

The price per warrant upon transfer to the participants shall be established by an independent appraiser or auditor firm retained by the company and correspond to the market value of the warrant calculated in accordance with the Black-Scholes valuation model.

Based on the number of shares in Nordic Paper of the date of the notice to the annual general meeting, the dilution effect of the warrant program will amount to approximately 0.89 percent. The company does not have previous outstanding incentive programmes.

In accordance with a proposal from the Board of Directors, the Annual General Meeting on 24 May 2023  approved the issue of a maximum of 329,000 warrants as part of a long-term incentive programme for senior executives of the Nordic Paper Group. The rationale for the incentive programme is to create opportunities to motivate and retain senior executives within the Nordic Paper Group. The incentive programme has been implemented according to the decision of the Annual General Meeting. After the implementation, the number of outstanding warrants from this programme amounts to 292,000.

The warrants were offered at market price. Each warrant entitles the holder to subscribe for one new share in the company at an exercise price of SEK 38.98 per share. The final price of the warrants was SEK 0.77. The value of the warrants has been calculated according to the Black-Scholes model.

The company is partly subsidising the participants’ acquisitions of warrants. The subsidy is paid out at the end of the programme. The subsidy to the participants is equal to 50% of the participants’ investment net after tax. The total cost of the subsidy, based on a warrant value of SEK 0.77 and an estimated marginal tax rate of 55%, amounts to SEK 0.3m including social security contributions. With some exceptions, in order to be eligible for the subsidy the participant must be employed by the company at the time of payment of the subsidy, must remain employed until the warrants can be exercised and must not have transferred their warrants prior to this.

In accordance with a proposal from the Board of Directors, the Annual General Meeting on 23 May 2024 approved a long term incentive program with the following content:

Participants in LTIP 2024/2027

LTIP 2024/2027 comprises a maximum of 9 participants in the Executive Management in Nordic Paper, which are divided into two categories: the CEO (”Category 1”) and other members of the Executive Management (8 participants) (“Category 2”). 

Main terms and conditions LTIP 2024/2027

The main terms and conditions for LTIP 2024/2027 are:

• Payment under LTIP 2024/2027 will be made in cash after Nordic Paper’s annual general meeting held in 2027 (the ”Vesting Period”).
• Payment of LTIP 2024/2027 requires, with certain exceptions, that the participant is employed by the Nordic Paper group during the Vesting Period and is depending on the level of fulfilment of the performance criteria for LTIP 2024/2027.
• The payment is based on the participant’s annual salary (the participants fixed cash salary, excluding holiday pay) as of 31 December 2026 (the “Base Salary”). The maximum amount that the participant may receive (in total) corresponds to 80 percent of the Base Salary for Category 1 and 60 percent of the Base Salary for Category 2.
• For half (50 percent) of the amount that the participant receives in LTIP 2024/2027, net after taxes, the participant shall acquire Nordic Paper shares on Nasdaq Stockholm. If the participant has inside information and the participant therefore is prohibited from acquiring shares in Nordic Paper in connection to the LTIP 2024/2027 payment, the shares shall be acquired as soon as possible, however no later than the next annual general meeting. Further information regarding the “Shareholding requirement” is presented below.

Performance criteria for LTIP 2024/2027

Payment after the Vesting Period depends on the level of fulfilment of the financial performance criteria Return on operating capital during the financial years 2024-2026 (the “Measurement Period”). 

Return on operating capital shall be calculated on the basis of the financial information presented in Nordic Paper’s annual reports for the financial years 2024, 2025 and 2026 (adjusted for extra ordinary items as per the Board’s discretion and calculated as a three-year average) during the Measurement Period.

The level for the performance criteria (threshold and maximum level) have been determined by the board of directors. If the maximum level is reached, the cash payment will amount to the maximum levels set out above. If the threshold level is not reached, no payment will be made. If the target achievement of the performance criteria is between the threshold and maximum level, payment will be made on a linear basis.

Information regarding threshold, maximum level and target fulfilment will be presented in connection with the annual general meeting held in 2027.

Shareholding requirement

As apparent from the above, the participants in LTIP 2024/2027 shall acquire Nordic Paper shares on Nasdaq Stockholm for half (50 percent) of the amount that the participant receives, net after taxes. To further increase the long-term joint interests of the participants and the Company’s shareholders, the participants in LTIP 2024/2027 will also make an undertaking to hold the shares acquired to LTIP 2024/2027 for a three-year period ending after the annual general meeting held in 2030. In case the participant cannot show that he or she has acquired shares to LTIP 2024/2027 during 2027, or if the participant transfers the shares allocated to LTIP 2024/2027 during this three-year period, the participant, with certain exceptions granted by the board of directors in the individual case, will not be invited to participate in any future LTIPs and any participation in ongoing LTIPs will be terminated.

Preparation of the proposal and the structuring and management of LTIP 2024/2027

LTIP 2024/2027 has been prepared by the remuneration committee. LTIP 2024/2027 has also been discussed at board meetings during the first months of 2024 and the proposal has been finally adopted by the board of directors.

The remuneration committee shall be responsible for the details concerning the structure, management and interpretation of the detailed terms and conditions that shall apply between Nordic Paper and the participant for LTIP 2024/2027, including, inter alia, how the participants’ fulfilment of the shareholding requirement shall be regulated, within the framework of the terms and guidelines set out herein and considering the purpose of the programme. The remuneration committee shall be authorised to make adjustments in LTIP 2024/2027 to fulfil certain rules or market conditions in other jurisdictions. The remuneration committee shall also have the right to make other adjustments, including, inter alia, the right to decide on a reduced payment to the participants, if there are significant changes in the Nordic Paper group or in the market which according to the board of directors would mean that decided conditions for LTIP 2024/2027 are no longer appropriate.

Costs for LTIP 2024/2027

The maximum cost for Nordic Paper due to LTIP 2024/2027 (the “Cap”) is an amount corresponding to 3 percent of the Company’s average net profit during the financial years 2024-2026 (social securities contributions included). The costs will be expensed over the Vesting Period and are expected to have a marginal impact on Nordic Paper’s key ratio.

If the Cap is reached, the payment that the participants are entitled to will be reduced accordingly. If the threshold level for the performance criteria is not achieved, no payment will be made, and no costs will be incurred.