NOTE 7
EMPLOYEE BENEFITS

EMPLOYEE SHARE OPTION PROGRAM The Group has an employee share incentive plan for the granting of non-transferable options to non-commissioned employees. Options granted under the plan vest on the first day on which they become exercisable which is typically one year after the grant date. The vesting period for the employee share option plan is finite allowing eligible employees to exercise the option once certain non-market conditions are met. The options are settled in equity once exercised.

During 2005, options were granted over 1,707,866 shares of an average exercise price of NOK 74.20.

The following table illustrates the number (No.) and weighed average exercise price (WAEP) of share options for the ESOP:


* The 2005 share option program was canceled by the Board of Directors on 16 February 2006

The fair value of the options has been calculated using Black & Scholes option pricing model using the following assumptions:

• Historical volatility of 40% calculated based on 1 year historical share price movements
• Risk free interest rate of 2.5%
• Expected dividends of 0.5% per share
• 1 year option life

In addition the following assumptions have been used with regards to service conditions:

• 95% of all employees eligible for options will receive maximum number of granted options
• Expected turnover of 3%

A total expense of USDm 3.1 and USDm 2.9 has been included as salary costs in 2005 and 2004, respectively.

PENSIONS The Group has one defined benefit pension plan, covering primarily all of its Norwegian employees, of which requires contributions to be made to administered funds. The principal assumptions used in determining pension benefit obligations for the Group’s plans are shown below:






There are several defined contribution plans in the Group, and total pension cost amounting to USDm 1.1 related to the defined contribution plans has been recorded as Wages and social costs.

With effect from 1 January 2006 all employees in the defined benefit pension plan has been transferred to defined contribution plans and the defined benefit plan has been closed. The closure of the defined benefit plan resulted in a gain of USDm 3.0 which has been recorded as Wages and social costs.

TANDBERG Inc. has a 401-K contribution plan for its employees. Employees are eligible upon reaching the age of 21 and after 3 months of employment. Employees can defer up to 15% of their pre-tax salary up to a maximum of USD 14,000 per year. The employer must correspondingly contribute 35% of the first 8% paid in by the employees.

Pension payments from TANDBERG Inc. vest to the employees at 20% a year over a 5-year period. If an employee leaves the company before the end of the 5-year period, the unvested amount belongs to TANDBERG Inc. As of 31 December 2005, 220 employees participated in the pension plan. The pension costs for TANDBERG Inc. in 2005 were USD 402,083.