Proposal to shareholders in general meeting in respect of stock option scheme for Group staff members
10 October 2007
Price sensitive
Dear shareholders,
At a general meeting held on 27 June 2007, a resolution was adopted pursuant to Article 2441, paragraph 8 of
the Italian Civil Code, to increase the company’s share capital by an amount of up to €20m via the issuance of
40 million new shares to be reserved for subscription by Mediobanca Group staff members by and no later than
1 July 2022. A medium-/long-term loyalty retention scheme is now being submitted to your approval, which
involves stock options being awarded to select beneficiaries who are Mediobanca Group employees against the
aforementioned capital increase.
1. Beneficiaries
The beneficiaries of the 2007 stock option scheme (the “Scheme”) are Mediobanca Group employees who
perform roles that are strategic to achievement of the Group’s objectives:
- members of the Mediobanca Management Board, who are chosen from among the Bank’s managerial
staff;
- certain directors of Mediobanca Group companies;
- senior figures in the management of Mediobanca and Mediobanca Group companies, in Italy and
elsewhere;
- highly-specialized staff in particular business areas;
- certain key operations and support staff.
Of the individuals listed under Article 152 sexies, comma 1, letter c)- c.2 of the Regulations for Issuers (i.e.
persons having regular access to privileged information who are authorized to adopt management decisions
which can impact on the issuer’s stock price trends and future prospects), in addition to the Management Board
members who are also Mediobanca Group employees, the only person included in this definition is the
company’s Head of Financial Reporting.
The terms of the Scheme are identical for all beneficiaries.
2. Rationale for adopting the Scheme
The rationale for the Scheme may be summarized as follows:
• to promote loyalty retention among management, by encouraging key staff members to remain with the
company;
• to equip the Group with an effective instrument with a view to recruiting the professional capabilities
required to grow the business both domestically and internationally;
• to improve and retain the company’s competitiveness in terms of executive remuneration over the
medium and long term;
• to help make the remuneration package offered more varied and flexible, by reducing the percentage of
direct costs, which are relatively high for the cash payment alone, in favour of instruments that are also
more advantageous in tax terms and make it possible to spread the cost over several years;
• linking executive pay, or a part thereof, to the creation of value for shareholders.
In terms of the criteria used for deciding on the size of awards based on financial instruments, the Scheme
establishes the criteria to be followed by the company’s governing bodies in proceding to decide both the actual
number of beneficiaries from among the categories referred to above and the number of stock options to be
assigned to them.
As already mentioned, participants in the Scheme are Mediobanca Group staff members with prominent roles,
such as Management Board members, directors of Group companies, members of senior management,
specialized staff with responsibilities for particular business areas, plus certain key operations and support staff,
who are identified by the relevant governing bodies from time to time. The choice of beneficiaries and the
quantity of options awarded are decided globally, in view of the results delivered by the Group during the period
concerned, but also individually, based on the grade of the person in question in organizational terms, how
strategic his/her role is, and the value of his/her individual performance based on objectives set and results
expected.
No provision is made under the Scheme for financial instruments not issued by Mediobanca to be awarded.
The tax effects linked to benefits deriving from the scheme are borne by the beneficiaries in line with the tax
regime in force at the time. It should also be noted that the scheme make make provision for special clauses
governing treatment of individuals resident outside Italy and in line with regulations in force in the country in
which each individual is resident for tax purposes.
It is not anticipated that the Scheme should require the support of a special provision to incentivize employee
company ownership as permitted under Article 4, paragraph 112 of Italian Law 350/03.
3. Procedure for approval and timescale for awards
Without prejudice to the jurisdiction of the Supervisory Board and the Remunerations Committee in respect of
awards made to Management Board members, the Scheme is operated and managed by the Managing Director
with the support of the Human Resources Department. The Management Board is responsible for approving and
updating the guidelines of the Scheme on the Managing Director’s proposal, including deciding overall quantities
for each award cycle. The Managing Director is responsible for deciding on awards to be made to individual
beneficiaries against these limites. The Managing Director is also authorized to individual awards over and above
the limits established for each award cycle upon the occasion of the recruitment of new key staff.
The procedure for approving this proposal was launched on 24 September 2007 when the guidelines of the new
Scheme were approved by the Management Board, and the Management Board itself formally adopted the
Scheme on 10 October 2007. The Supervisory Board expressed its consent on the same date, at the
Remuneration Committee’s recommendation.
The official market price of Mediobanca shares as at the aforementioned dates was €15.41 at 24 September
2007 and €15.78 at 10 October 2007.
Awards made under the terms of the Scheme will be disclosed to the market in accordance with supervisory
and regulatory provisions currently in force.
4. Characteristics of shares awarded
The Scheme is based solely on the award of stock options, which entitle the awardee to subscribe for ordinary
Mediobanca shares traded on markets operated by Borsa Italiana.
The competent governing bodies will award quantities of stock options on a regular basis against the maximum
amount approved by shareholders in general meeting on 27 June 2007. The options may be exercised starting
from the third year subsequent to the date on which they were awarded, and are exercisable for a period of five
years once the vesting period has expired.
The Scheme may be implemented subsequent to the mandate being granted by shareholders in general
meeting, and will expire in the eighth year following the last award cycle, and without prejudice to the
foregoing, by and no later than 1 July 2022.
A maximum number of 40,000,000 stock options may be awarded in execution of the mandate to be granted
by shareholders, which shall entitle the assignees to subscribe for a like number of ordinary Mediobanca shares.
It is the responsibility of the competent governing bodies to decide the exact maximum number of stock
options that may be awarded in each financial year covered by the Scheme, and such decision shall be taken
on the basis of the criteria described in section 2 above, to decide on the number of stock options to be
awarded and to identify beneficiaries from the categories listed in section 1, again on the basis of same criteria.
The stock options are exercisable within the terms described above.
Options are made personally to the assignee, save for inheritance rights where appropriate. Following
acquisition of shares as a result of exercising the options, said shares may be traded immediately within the
limits established by legal and regulatory provisions, e.g. on market abuse and internal dealing, as reflected in
internal regulations.
In the event of an employment relationship terminating for whatever reason (save for retirement), no option
rights as yet unexercised, whether vested or not, shall be recognized unless otherwise decided by the Managing
Director.
The Scheme makes no provision for its own cancellation or for redemption by Mediobanca.
The Scheme makes provision for exercise of stock options to be assisted by temporary loans granted by
Mediobanca pursuant to Article 2358 of the Italian Civil Code at the beneficiary’s request. Any terms and
conditions applicable to such loans shall be established by means of a specific resolution to be adopted by the
governing bodies.
The cost of the stock options is calculated as from the award date by using valuation models based on market
indicators, and is shared pro-rata over the entire vesting period. It is not possible to calculate the exact current
amount of the anticipated expense for each year of the scheme, as the decision regarding the number of stock
options and the individual cycles of awards to be made is the responsibility of the governing bodies. In line with
the costs actually incurred in previous years in respect of similar schemes adopted by the Group, it should be
noted that the sustainability of such cost is always appraised in the light of the company’s results and the
possible impact on cost/income and compensation/income indicators at the time when the awards are made.
Shares for use in connection with the long-term Scheme together represent 4.5% of the company’s fully diluted
share capital. The impact on the value of the stock market price and possible dilution of the company’s share
capital are negligible, given that: the awards will be made in several cycles spread over a considerable period of
time; the vesting period has a duration of 36 months; the exercise period too is considerable (five years from
when the vesting period finishes, for a total of eight years from the date on which the award is made); and tax
regulations currently in force provide for incentives not to sell part of the shares for a minimum period of five
years following exercise.
No provision is made under the scheme for exercise of voting or asset rights in respect of ordinary Mediobanca
shares deriving from exercise of stock options.
The strike price for options awarded is the normal stock market price (see Article 9, paragraph 4 letter a) of
Italian Presidential Decree 917/86) calculated on the basis of the arithmetical average of prices recorded on the
Milan stock market in the month prior to the award being made.
In the event of extraordinary transactions involving the company’s shares, i.e. in the event of a change in
control of the Bank’s shares, the options will become exercisable immediately, even if they refer to expiry dates
yet to occur, without prejudice to the final term for their exercise.
It shall also be the responsibility of the Management Board, at the proposal of the Managing Director, to
establish:
• restrictions on the exercise of the stock options in the periods immediately prior to the company’s main
reporting dates and other institutional occasions, e.g. approval of full-year and interim results, annual
general meetings, shares going ex-rights, etc.;
• the obligation incumbent upon certain beneficiaries of the Scheme with particularly prominent roles to
reinvest at least fifty percent of any capital gains earned on Mediobanca shares and to hold said shares
for at least 18 months, irrespective of tax issues.
We therefore invite you to adopt the following resolution:
“The shareholders of Mediobanca in general meeting, having heard the Management Board’s proposal in this
respect,
HEREBY RESOLVES TO:
- adopt a long-term loyalty retention scheme involving the award of stock options to select beneficiaries who
shall be employees of the Mediobanca Banking Group on the terms and according to the methods set forth
herein;
- to vest the Management Board and Managing Director with the broadest powers to carry out all deeds,
measures and formalities required in order to implement this resolution.