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  Share based payments

Equity plans
Pursuant to a stock option scheme, option rights have been granted to employees. The Company currently has two fixed stock option plans both included in the Framework plan, of which one, established in 2001, qualifies as a Time Accelerated Restricted Stock Award Plan (‘TARSAP’). In addition, the Company has a performance-based stock award plan (‘Restricted Share Plan’ or ‘RSP’) and a stock purchase plan.

In general, all options may only be exercised after a lock-up period of at least three years. If this lock-up period for legal or tax reasons is not possible, exercising of option rights during this three-year period is discouraged.

During the year all shares earned from vested and exercised options as well as vested awards under the restricted share plan have been satisfied by issuing new shares.

Since 2005, employees at Group companies have participated in local cash based profit sharing plans which have largely replaced the equity plans.

Framework Plan
The Company established a stock option plan, the Framework Scheme Regarding the Grant of Options to Senior Management (the ‘Framework Plan’) in 1997, which enables the Company to issue options to purchase Bearer Depository Receipts (BDR’s) to eligible recipients. The purpose of the plan is to provide long-term incentives to our senior management. Over 300 senior management members qualify to receive options under the plan. Members of the Supervisory Board are not eligible to receive options.

The Board of Management annually determines grants of options under the plan. All such grants are subject to the terms and conditions of the plan, and must be approved by the Supervisory Board. The number of options permitted to be granted under the plan normally may not exceed 2% of the outstanding ordinary shares of the Company on the first day of the year in which the options are granted. The exercise price of an option granted under the plan must be at least equal to the market price of the BDRs at the time the option is granted. The option period is in the range of 5-10 years.

For grants made from 2001 up to and including 2003 under the TARSAP, the only variable is when the options will vest. Ultimately, all options granted will vest six years after the grant date. However, through achievement of certain predetermined performance criteria, an employee has the ability to accelerate the vesting date. Vesting is in principle subject to continued employment with the Group at the vesting date at all times. The performance criteria affect the timing of the vesting date, but do not affect the total award. The measurement date for accounting purposes is the grant date.

Awards of options with performance criteria granted as of 2004 will vest only if and insofar as the relevant predetermined performance criteria have been met. The remainder will lapse.

Restricted Share Plan
In February 2001, the Board of Management, with the approval of the Supervisory Board, introduced an equity-based restricted share plan, pursuant to which a limited number of senior staff members and the members of the Board of Management may be granted newly issued or existing BDRs. All grants under this plan are free of charge for the participants, but subject to the achievement of specific pre­determined performance targets in order to be earned. The vesting period is in the range of 3-5 years.

The maximum number of BDRs which may be granted under this plan in any one year normally may not exceed 1% of the outstanding ordinary shares of the Company on the first day of that year.

Share Appreciation Rights
Vedior also grants Share Appreciation Rights (SARs) to certain employees in the United States. Regarding these Share Appreciation Rights the fair value of the amount payable to the employees is recognised as an expense with a corresponding increase in liabilities. The fair value is initially measured at grant date and spread over the period during which the employees become unconditionally entitled to payment. The fair value of the Share Appreciation Rights is measured based on a Black-Scholes model, taking into account the terms and conditions upon which the instruments were granted. The liability is re-measured at each balance sheet date and at settlement date.

Vedior Equity Plans Services B.V.
The operation and management of the Restricted Share Plan and the Framework Plan is performed by an independent company named Vedior Equity Plans Services B.V. This company also acts as the grantor to all participants, with the exception of participants in the United States of America and France, where Vedior N.V. acts as grantor for legal reasons.

The number and weighted average exercise prices of share options is as follows.

Framework Plan	Number of options	2006		2005
		Weighted average exercise price	Number of options	Weighted average exercise price
Outstanding at the beginning of the period	5,892,688	10.60	7,070,961	10.61
Forfeited during the period	-332,179	12.51	-558,293	12.24
Exercised during the period	-1,599,495	8.90	-619,980	9.52
Outstanding at the end of the period	3,961,014	10.40	5,892,688	10.60
Exercisable at the end of the period	1,789,676		1,726,462

The options under the Framework Plan outstanding at 31 December 2006 have an exercise price in the range of €4 to €16 and a weighted average remaining contractual life of 5.0 years (2005: 5.8 years). The options exercised in 2006 had a weighted average share price of €16.10 (2005: €14.01).

Restricted Share Plan	2006	2005
	Number of shares	Number of shares
Outstanding at the beginning of the period	2,027,907	1,742,919
Forfeited during the period	-154,595	-56,321
Vested during the period	-707,536	-77,317
Granted during the period	372,220	418,626
Outstanding at the end of the period	1,537,996	2,027,907

The restricted shares which vested in 2006 under the Restricted Share Plan had an average value of €14.68 (2005: €10.81).

Share Appreciation Rights	Number of SARs	2006		2005
		Weighted average exercise price	Number of SARs	Weighted average exercise price
Outstanding at the beginning of the period	166,035	13.63	108,730	13.45
Granted during the period	58,915	15.34	57,305	13.96
Outstanding at the end of the period	224,950	14.07	166,035	13.63
Exercisable at the end of the period	0		0

The fair value of services received in return for stock options granted are measured by reference to the fair value of stock options granted. The estimate of the fair value of the services received is measured based on a Black and Scholes model. The contractual life of the option is used as an input into this model. Expectations of early exercise are incorporated into the model for the Framework Plan and SARs. For the Restricted Share Plan, the expected life is assumed the same as the remaining time until vesting.

The inputs into the Black-Scholes option pricing model were:

Share Appreciation Rights	2006	2005
Share price at 31 December	15.71	12.52
Weighted average exercise price	15.34	13.96
Expected volatility	49.5%	52.2%
Expected life	3.5 years	3.5 years
Risk free interest rate	3.7%	2.9%
Expected dividend yield	2.1%	2.2%

Restricted shares	2006	2005
Weighted average share price	15.34	13.96
Weighted average exercise price	0	0
Expected volatility	49.6%	52.2%
Expected life	3 years	3 years
Risk free interest rate	3.3%	2.8%
Expected dividend yield	2.1%	2.2%

The expected dividend yield is based on the average of projections for the coming three years made by external financial analysts, and projected at a constant level thereafter.

The risk free interest rate is based on the interest rate swap curve at the date of grant. For each option the risk free rate is equal to the zero-coupon yield with corresponding maturity.

The expected volatility is based on historic volatility, which is calculated based on the weighted average remaining life of the stock options.

Stock options are granted under performance conditions and the condition of continued employment with the Company at the moment of vesting. The level of expected forfeiture is taken into account based on historical practice and managements expectations of future employment and the realisation of performance targets within the Group.

Additionally, several share option grants before 7 November 2002 are still outstanding. The recognition and measurement principles in IFRS 2 have not been applied to these grants in accordance with the transitional provisions in IFRS 1 and IFRS 2.

Employee stock purchase plan
In March 2001, the Board of Management, with the approval of the Supervisory Board, introduced an employee stock purchase plan for United States employees only. The enactment of this plan for a period of three years was approved at the Annual General Meeting of shareholders held on 4 May 2001. The extension for another three year period was approved at the Annual General Meeting of shareholders held on 7 May 2004. During the three year period, a maximum of 1,050,000 new or existing depository receipts can be purchased by eligible employees for a consideration equal to 85% of the market price of the depository receipts at either the date of purchase or the date of the beginning of the relevant six months purchase period, whichever is lower. In 2006, a total number of 83,561 (2005: 63,182) depository receipts were purchased under this plan for which new shares were issued.

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