4. Long-term incentives
3.5 In the event a non-Dutch national is appointed to the
Corporate Executive Board and the board member will
reside and work outside of the Netherlands, the
Supervisory Board may award Total Cash that also takes
account of the relevant local reference market.
4.1 Long-term incentives are intended to reinforce
sustainable performance consistent with the Ahold
strategy; and to align (more closely) the interests of
executives with those of the shareholder.
4.2 Corporate Executive Board members are eligible to
participate in two long-term incentive plans: stock
options and a conditional share plan.
4.3 The Ahold stock option plan provides for the right to
purchase Company stock at a predetermined price
during a predefined period of time. Options will be
granted annually. The exercise price equals the closing
market price of the Company's stock at Euronext
Amsterdam on the last stock exchange trading day prior
to the grant date.
50% of the granted options will have a term of five
years and 50% of the granted options will have a term
of ten years. The vesting of the stock option grants
made in 2005 to the Corporate Executive Board
members are subject to performance criteria at vesting.
Both five year term and ten year term options will be
exercisable after three years under the condition that
the performance criteria have been met.
The performance criterion is the average EVA
improvement versus targeted improvement over the
three financial years prior to vesting. The vested amount
of options will range from 80% to 120% of the targeted
number of options depending on performance against
the vesting criteria. When performance against the
vesting criteria is below 80% of target, zero options will
vest.
The maximum number of options, calculated at the
vesting level of 120%, will be: 121,500 for the CEO;
and 90,000 for the other Corporate Executive Board
members.
4.4 Corporate Executive Board members are eligible to
participate in the Ahold performance share plan 2004 -
2006. This is a performance stock plan based upon
Ahold's Total Shareholder Return ("TSR") relative to
that of a selected group of companies in Ahold's core
business (the peer group) measured over the years
2004 - 2006. TSR measures all the gains (share price
growth and dividends) shareholders receive over a
certain period of time.
The Supervisory Board has determined that TSR
performance will be compared to the following peer
group:
- Sysco Corporation
- Wal-Mart Stores, Inc.
- Safeway, Inc.
- Albertson's, Inc.
- Kroger and Co
- Casino S.A.
- Metro A.G.
- Carrefour S.A.
- Tesco Plc.
Based on this peer group Ahold will be ranked on its
total return to shareholders. External specialists will
determine the ranking and hence the number of shares
that will vest after the three-year performance period.
The determination of the final ranking will be audited
by the Company accountant.
The number of shares that will vest depends on the
ranking of Ahold within the peer group. There will be no
shares that vest below the sixth position of the peer
group of ten companies (including Ahold). For the third
position the target number of shares (100%)
conditionally granted will vest. The maximum number
of shares is 150% of the target number of the shares
conditionally granted. Should Ahold reach the first
position within the peer group, this maximum number
of shares will vest.
COMPANY RANKING
Vested
shares
Ranking
10, 9, 8 or 7
0
Ranking
6
25
Ranking
5
50
Ranking
4
75
Ranking
3
100
Ranking
2
125
Ranking
1
150
Corporate Executive Board members will be required to
retain shares acquired under this plan for a period of at
least three years after shares are acquired, or until the
end of employment if this period is shorter than the
three years retaining period. The Corporate Executive
Board members shall, however, not be prohibited from
selling shares adequate to cover taxes due at grant.
In evaluating its long-term incentive plans the Company
is assisted by external advisors.
AHOLD ANNUAL REPORT 2005 25
