Note 26 - Stock-based payment


Audited by PwC
Novozymes has previously established stock option programs for Executive Management, other managers, and other employees. The purpose of the stock option programs has been to ensure common goals for management, employees, and shareholders. Allocation of options has been, and remains, dependent on profit, value-creation, and sustainability targets being achieved.
For the period 2007–2010 annual stock option programs were established conferring the right to purchase one share per stock option at a nominal price of DKK 10. Allocations were made on the basis of the individual employee's basic salary and achievement of a series of business targets – both financial and nonfinancial – set by the Board of Directors for each year. The stock options have a vesting period of four years, followed by an exercise period of five years. In order to exercise the options, the employee must still be employed on the exercise date. This does not apply to persons who have retired, taken a voluntary early retirement pension, or been given notice. There was no stock option program covering all employees in 2010 as the general condition for the allocation was not met.
Executive Management has previously also been allocated stock options with a maturity period of between six and eight years. For other managers and other employees, the stock options have previously been allocated with a maturity of eight years.
The above-mentioned stock option programs are primarily equity settled, and no liability is recognized for these. In the case of allocations in countries where ownership of foreign stock is not permitted, the value of stock options is settled in cash, and a liability of DKK 31 million has been recognized for this in 2010 (2009: DKK 25 million). The intrinsic value of the program in 2010 was DKK 37 million (2009: DKK 26 million).
A stock purchase plan under the gross salary deduction scheme was established for Danish employees in 2010, with employees buying shares at the official trading price. Total employee costs of DKK 25 million recognized for this plan in 2010 are included in Note 3 - Employee costs. A total of 31,076 shares have been transferred to employees.

Number Exercise Remaining
of options price per term to
Executive Other Other that can be option maturity
Stock options in Novozymes A/S Management managers employees Total exercised in DKK  (years)
Outstanding at January 1, 2010 596,206    1,468,429   1,270,263   3,334,898   1,211,474  327*  5**
Additions during the year   -  4,116    -  4,116 
Options exercised in 2010 (9,679) (401,732) (384,223) (795,634)  188*
Terminations in 2010   -  (8,089) (60,019) (68,108)      
Outstanding at December 31, 2010 586,527    1,062,724 826,021    2,475,272 755,750   373*  5**
  
Outstanding at January 1, 2009 456,005    1,403,619   1,297,463   3,157,087   1,447,748  298*  5**
Additions during the year 157,581  159,523  125,079  442,183 
Options exercised in 2009 (17,380) (76,555) (137,742) (231,677)  161*
Terminations in 2009   -  (18,158) (14,537) (32,695)      
Outstanding at December 31, 2009 596,206    1,468,429   1,270,263   3,334,898   1,211,474  327*  5**

* The exercise price is a weighted average of several option programs.
** Remaining term to maturity is stated as a weighted average of the outstanding options. 

Number Exercise Remaining Market
of options price per term to value in
Executive Other Other that can be option maturity DKK
Stock options in Novozymes A/S Management managers employees Total exercised in DKK  (years) million  
Outstanding program 2002   -  10,750  51,643  62,393  62,393  169  38 
Outstanding program 2003 24,720  123,217  278,828  426,765  426,765  148  266 
Outstanding program 2006 8,458  249,112    -  257,570  257,570  344  110 
Outstanding program 2006   -  2,145    -  2,145  2,145  400 
Outstanding program 2007 149,911  214,069  162,128  526,108    -  495  148 
Outstanding program 2007   -  26,244    -  26,244    -  585 
Outstanding program 2007   -  6,877    -  6,877  6,877  596 
Outstanding program 2008 245,857  248,175  213,498  707,530    -  390  275 
Outstanding program 2008   -  17,294    -  17,294    -  417 
Outstanding program 2008   -  8,055    -  8,055    -  403 
Outstanding program 2009 157,581  149,386  119,924  426,891    -  443  146 
Outstanding program 2009   -  3,284    -  3,284    -  529 
Outstanding program 2010   -  4,116    -  4,116    -  752 
Outstanding at December 31, 2010 586,527  1,062,724  826,021  2,475,272  755,750   373*  5** 1,002 

* The exercise price is a weighted average of several option programs.
** Remaining term to maturity is stated as a weighted average of the outstanding options. 

Market value is calculated on the basis of the Black–Scholes model for valuation of options. The historical volatility over the last year is used when calculating the value of the options at year-end. The risk-free interest is based on Danish government bonds with a maturity equivalent to the option's expected remaining term to maturity. The expected maturity is fixed at one year after the expiry of the binding period, or the option's expiry date if this is within one year.

The following assumptions are used when calculating market value at the end of the period:


          2010 2009  
Dividend per share, DKK 8.00 5.75
Volatility, % 25.1 30.3
Average risk-free interest, % 1.0 1.6
Share price 777 540
   

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