After Microsoft’s completes its acquisition of Nokia’s handset business, Stephen Elop, the former Nokia CEO and currently EVP of its devices and services unit, is expected to get approximately $25.5 million as compensation. The details were revealed today by Nokia in a proxy filing ahead of its November 19 AGM where shareholders will vote on the acquisition.
Nokia had paid Elop $6.2 million when he joined the company in 2010 from Microsoft where he was heading its Business division. As fate would have it, Nokia will pay about $7.7 million to Elop to go to Microsoft where he is expected to head the devices division. Microsoft will pay the remaining 70 percent or approximately $17.8 million. The relevant text from the filing follows.
Service Contract With Stephen Elop
We entered into an amendment with Mr. Elop to his service contract, which became effective on the date of the Purchase Agreement. Under the terms of the amendment, Mr. Elop resigned from our Board of Directors and from his positions of President and Chief Executive Officer as of the date following the date of the Purchase Agreement, September 3, 2013. Mr. Elop will serve as Executive Vice President of Devices & Services until the Closing, after which it is anticipated that he will become employed with Microsoft pursuant to the terms of an employment agreement with Microsoft.
Under the amendment to his service contract, Mr. Elop agreed that the change in his position (described above) would not entitle him to terminate his service contract for cause under the terms of his service contract, which provide for payment of 18 months of his base salary and management short-term cash incentive (calculated at 100% of target) as well as accelerated vesting of his outstanding equity awards upon such a termination by Mr. Elop for cause. Under Mr. Elop’s original agreement, if Mr. Elop’s service contract was terminated without cause, or he resigned as a result of a significant reduction in his duties and responsibilities, in either case within 12 months following a change of control, he would be entitled to receive 18 months of his base salary and management short-term cash incentive (calculated at 100% of target) as well as accelerated vesting of his outstanding equity awards. Under his original agreement, Mr. Elop would be entitled to these same benefits if he terminated his employment for cause at any time regardless of a change of control, but would be entitled only to the same cash severance benefit (but not the acceleration of all equity awards) if his service contract was terminated by Nokia without cause prior to a change of control. However, under the change of control provisions of Mr. Elop’s agreement as amended, Mr. Elop may terminate his employment on or following the Closing (and assuming he has not materially breached his service contract prior to such termination) or Nokia may terminate his employment without cause prior to the Closing, and in either such case, Mr. Elop will be entitled to receive 18 months of his base salary and management short-term cash incentive (calculated at 100% of target) as well as accelerated vesting of his outstanding equity awards.
Although the actual amount of these termination payments and the value of equity acceleration will not be determined until such termination occurs, using compensation values and the Nokia closing share price of EUR 4.12 per share on September 6, 2013, and an assumed Closing Date of in the first quarter of 2014, such pro forma amounts are estimated to be approximately EUR 18.8 million in the aggregate. This amount includes: base salary and management incentive EUR 4.1 million, value of benefits EUR 0.1 million and pro forma value of equity awards EUR 14.6 million. Once the actual amount is determined, pursuant to the terms of the Purchase Agreement, 30% of the amount (EUR 5.65 million) will be borne by Nokia and the remaining 70% of the amount (EUR 13.17 million) will be borne by Microsoft pursuant to the purchase price adjustment mechanism described in “The Purchase Agreement—Purchase Price Adjustments” beginning on page 41. Mr. Elop is subject to a covenant restricting him from working for certain specified competitors of Nokia, provided that upon Mr. Elop’s commencement of employment with Microsoft, Nokia will waive his competition restriction as to Microsoft.