The Board of Directors of Arnoldo Mondadori Editore S.p.A. resolved to assign the options related to the stock option plan set up for the year 2009 by the Shareholders’ Meeting of 29 april 2009
The Board of Directors of Arnoldo Mondadori Editore S.p.A. passed a resolution today at the proposal of the Remuneration Committee to assign the options related to the Stock Option Plan set up for the year 2009 by the Shareholders’ Meeting on 29 April 2009, with a duration covering the three years 2009/2010/2011. In particular, the Board decided on allocation of a total of 2,300,000 options relating to 47 total beneficiaries.
The Plan is set up on annually assigning to beneficiaries personal and non-transferrable options for purchase of ordinary Mondadori shares held by the company as treasury shares – in the ratio of one share (regular dividend rights) for every option exercised – at an Exercise price corresponding to the arithmetic average of the reference prices of the Mondadori share recorded during the period starting from the assignment date of the options to the same day of the previous calendar month. Exercise of the options is allowed exclusively all together and at once, in the strike periods subsequent to the start date of the thirty-six month vesting periods.
With specific reference to the option assignments resolved today by the Board of Directors for the year 2009, below is the information required under Article 84 bis, paragraph 5 of the CONSOB Regulation no. 11971/1999 as amended (the “Issuers Regulation”).
Regarding the 2009/2010/2011 stock option plan for submission to the ordinary Shareholders' Meeting of 29/30 April 2009
Introduction
After the expiry of the stock option plan for the previous three-year period, 2006/2007/2008, on 25 March 2009 the Board of Directors of Arnoldo Mondadori Editore S.p.A. resolved, at the suggestion of the Remuneration Committee, to submit the creation of a Stock Option Plan for the three-year period 2009-2011 (the “Plan”) to the Ordinary Shareholders’ Meeting for approval.
The new three-year Plan submitted to the Meeting for approval takes the form of the assignment to the recipients, during each year in its life, of personal and non-transferable option rights that can be exercised in the ratio of one share for each option exercised in order to buy the Company’s own ordinary shares.
This Information Document is drawn up in accordance with Article 84 bis, paragraph 1, of Consob Regulations 11971/1999 as subsequently amended (the “Issuer Regulations”).
This information is provided, where applicable, in accordance with model 7 of Annex 3A to the Issuer Regulations. As fully specified in the Information Document, some aspects related to the implementation of the Plan will be defined by the Board of Directors in the performance of the delegated powers that the Company’s Shareholders’ Meeting is called upon to vest in it.
After the decisions that the Board of Directors takes in order to put the Plan in hand, provided that the resolution creating it is approved by the Shareholders’ Meeting and in conformity to the general criteria laid down in the said resolution, the consequent information will be provided in the manner and within the times prescribed in Article 84 bis, paragraph 5, of the Issuer Regulations. Specifically, Table 1 to the said model 7 of Annex 3A of the Issuer Regulations will be published when the resolutions regarding the actual assignment of the Options to the beneficiaries of the Plan are adopted.
The Ordinary Shareholders’ Meeting to approve the creation of the Stock Option Plan is convened on 29 April 2009 in first call and on 30 April 2009 in second call.
DEFINITIONS
The following terms used in this Information Document will have the meanings set out below:
“Assignments”: the allocations of Options for the Beneficiaries to be resolved by the Board of Directors in the performance of the delegated powers vested in it by the Ordinary Shareholders’ Meeting;
“Treasury Shares”: ordinary Arnoldo Mondadori Editore S.p.A. shares with a value of 0.26 euro each, traded in the blue chip segment of the On-Line Stock Market, held as Treasury Shares by the Company as per Article 2357 of the Italian Civil Code;
“Beneficiaries”: persons to be selected as assignees of the Options by the Board of Directors from the categories specified in the Shareholders’ Meeting that creates the Plan;
“Options”: personal, non-transferable rights that the Board of Directors is to assign to the Beneficiaries, which may be exercised to buy Treasury Shares in the ratio of one share with normal dividend rights for each Option exercised;
“Periods of Exercise”: the periods starting from the expiry of the vesting period after the Assignments of the Options during which the exercise of the Options is allowed;
“Plan”: The Stock Option Plan lasting over the three-year period 2009/2010/2011, submitted for the approval of the Company’s Shareholders’ Meeting called on 29/30 April 2009 in accordance with Article 114 of Legislative Decree 58 of 24 February 1998;
“Exercise Price”: the price at which the Beneficiaries pay for Treasury Shares exercising each Option that has been allocated to them. The Exercise Price is set by the Board of Directors having regard to the arithmetic mean of the reference prices of Mondadori shares recorded during the period starting from the date on which the Options are assigned back to the same day of the previous calendar month.
“Company”: Arnoldo Mondadori Editore S.p.A., with registered office at Via Bianca di Savoia 12, Milan.
1.1 Names of the beneficiaries who are members of the board of directors or of the managing committee of the issuer of the financial instruments, the issuer’s controlling companies and the companies directly or indirectly controlled by the issue
1.2 Categories of employees or collaborators of the issuer of the financial instruments and of the companies controlling or controlled by the issuer
The Plan is intended for persons to be selected from the following categories by the Company’s Board of Directors at the proposal of the Remuneration Committee:
– executives of the Company and its subsidiaries that have key roles in the attainment of the Mondadori Group’s strategic objectives;
– Directors of the Company and its subsidiaries;
– journalists employed by the Company and its subsidiaries who are editors and co-editors of newspapers and periodicals;
– executives of the parent company in managerial positions carrying out functions on behalf of the Company.
The Plan is such as to be considered “on a particularly large scale” in accordance with Article 114 bis, paragraph 3, of Legislative Decree 58/1998 and Article 84 bis, paragraph 2, of the Issuer Regulations, inasmuch as “relevant persons” may consequently also be selected that fall under the categories specified in Article 152 sexies, paragraph 1, sections (c) (1) and (c) 2 of the Issuer Regulations, namely:
a) members of the Company’s Board of Directors;
b) Company executives with regular access to inside information with the power to take management decisions that can influence the Company’s progress and future prospects.
1.3 Names of beneficiaries of the plans belonging to the following groups:
1.3 a) Beneficiaries with management functions specified in Article 152 sexies, paragraph 1, section (c) (2), in the issuing company
To be established after the Board of Directors’ resolution regarding the implementation of the Plan.
1.3 b) Persons with management functions in a company that is a direct or indirect subsidiary of the issuer if the carrying value of the investment in the said subsidiary represents more than 50% of the issuer’s assets as shown in the last approved financial statements, as per Article 152 sexies, paragraph 1, section (c) (3)
1.3 c) Natural persons that control the issuer who are employees or work as collaborators for the issuer
This is not applicable, as no such persons are considered in the framework of the Plan.
1.4 a) Description and numbers of the all executives with regular access to inside information with the power to take management decisions that can influence the issuer’s progress and future prospects, as per 152 sexies, paragraph 1, section (c) (2)
To be established after the Board of Directors’ resolution regarding the implementation of the Plan.
These executives will be selected by the Board of Directors from the managers of the Company’s Business and Head Office Departments, who are bound under Article 114, paragraph 7, of Legislative Decree 58/1998, to disclose transactions involving shares issued by the Company or other financial instruments linked to them.
1.4 b) Description and numbers of the all executives with regular access to inside information with the power to take management decisions that can influence the progress and future prospects of a direct or indirect subsidiary of the issuer if the carrying value of the investment in the said subsidiary represents more than 50% of the issuer’s assets as shown in the last approved financial statements, as per Article 152 sexies, paragraph 1, section (c) (3)
Not applicable.
1.4 c) Description and numbers of any other categories of employees or collaborators for whom different characteristics of the plans are envisaged
Not applicable.
1.4 d) Should exercise prices that differ according to the persons belonging to the two categories be envisaged for the stock option plans, such persons falling under sections (a) and/or (b) should be specified by name separately
No different characteristics of the Plan are envisaged for the categories of its Beneficiaries, and, specifically, the Exercise Prices of the Options, to be set in accordance with the criteria laid down in paragraph 4.19 below, will be the same for all the Beneficiaries.
2. Reasons for the adoption of the Plan
2.1 Objectives that it is intended to attain by implementing the plans
The reasons for the proposal to adopt the Plan, as those specified with reference to the Stock Option Plans for the previous three-year periods, are substantially related to the following objectives:
– to provide the Company and its subsidiaries with a tool to build up its management’s loyalty that will encourage managers to commit themselves to attaining strategic goals and will give them a share in the Company’s results;
– to enable the management, and thus the Company, to improve its approach to value creation.
The number of Options to assign each Beneficiary will be decided by the Board of Directors at the proposal of the Remuneration Committee.
The Plan has a three-year time span (2009/2010/2011) with Periods of Exercise following each Plan reference year. These Periods of Exercise will start after the end of a 36-month vesting period from the dates on which the Options are allocated. This length of time is considered appropriate in order to attain the objectives of encouraging and building up the loyalty of the management that are those contemplated in the Plan.
2.2 Key variables, also in the form of performance indicators, considered for the purposes of implementing plans based on financial instruments
The implementation of the Plan, in terms of the Beneficiaries’ actual possibility of exercising the Options allocated to them – as specified in paragraph 4.5 below – will be subject to the attainment of annual economic and/or financial performance targets to be set by the Board of Directors at the proposal of the Remuneration Committee.
The terms and conditions for the exercise of the Options will be applicable to all the Beneficiaries of the Plan and there are thus no different or special conditions for the various categories of Beneficiary.
2.3 Elements forming the basis of the calculation of the amount of the share-based payments, or the criteria for their calculation
The Board of Directors will decide the number of Options to be assigned to individual Beneficiaries at the proposal of the Remuneration Committee and within the limits laid down in paragraph 4 below, assessing the effective capacity of each Beneficiary to have a practical effect on the attainment of the results, progress and future prospects of the Company and the Group on the basis of their experience and ability and the function that they perform within the Company.
2.4 Reasons for any decision to allocate payment plans based on financial instruments not issued by the issuer itself, such as financial instruments issued by subsidiaries or controlling companies of the group in question, or third party companies; if the said instruments are not traded on regulated markets, information regarding the criteria adopted to measure their value
Not applicable.
2.5 Considerations regarding material tax and accounting implications that had an effect on the decision regarding the plans
No material tax or accounting implications had any effect on the proposal to adopt the Plan.
2.6 Support of the plans, if any, from the special fund for encouraging worker participation in enterprises in accordance with Article 4, paragraph 112, of Law 350 of 24 December 2003
2.7 The Plan receives no support from the special fund for encouraging worker participation in enterprises in accordance with Article 4, paragraph 112, of Law 350 of 24 December 2003.
3. Formalities for approval and timing of the Assignment of the financial instruments
3.1 / 3.2 Scope of the powers and functions that the shareholders’ meeting delegates to the board of directors for the implementation of the plans / names of the persons instructed to administer the plans, with their functions and responsibilities
In accordance with the provisions of Article 114 bis of Legislative Decree 58 of 24 February 1998, the creation of the Plan will be submitted for the approval of the Ordinary Shareholders’ Meeting of Arnoldo Mondadori S.p.A. that has been convened on 29 April 2009 in first call and on 30 April 2009 in second call.
The proposal to the Shareholders’ Meeting will be that the Board of Directors be delegated the functions necessary for the implementation of the Plan – in compliance with the basic features of the Plan as described in this Information Document – in terms of the selection of the Beneficiaries, setting their performance targets, assigning the Option rights and drawing up regulations to carry out the Plan in all its aspects.
Subject to the adoption of this Shareholders’ Meeting resolution, the Board of Directors, in consultation with the Remuneration Committee, will then adopt the resolutions related to the implementation of the Plan, which will cover the following points in particular:
a) approval of the regulations for the implementation of the Plan and any amendments thereto;
b) selection of the Beneficiaries from the categories specified by the Shareholders’ Meeting, referred to above;
c) assignment of the Options to the Beneficiaries that have been selected;
d) calculation of the Option Exercise Price in conformity to the principles laid down in paragraph 4 below;
e) selecting and setting the performance targets to which the assignment of the Options is subject in every year of the duration of the Plan and verifying that these targets have been attained.
3.3 Any procedures in place to review the plans, also in relation to possible variations in the basic targets
The procedures for the review of the Plan, also in relation to possible variations in the basic targets, will be determined by the Board of Directors when it approves the Plan regulations.
3.4 Description of the methods for the determination of the availability and assignment of the financial instruments on which the plans are based
The Options to allocate in the framework of the Plan embody the rights to acquire – in a ratio of one share with normal dividend rights for each Option exercised – ordinary Mondadori Treasury Shares already held by the Company either directly or through subsidiaries, or to be bought in accordance with permission resolved by the Shareholders’ Meeting in accordance with Article 2357 of the Italian Civil Code and Article 144 bis of the Issuer Regulations.
3.5 Role played by each director in deciding the characteristics of the said plans: any situations of conflict of interests arising among the Directors involved
The Plan’s characteristics and guidelines were prepared by the Remuneration Committee and submitted for collective appraisal by the Board of Directors so that it could draw up the necessary proposals for the creation of the Plan for submission to the Shareholders’ Meeting. The subsequent resolutions of the Board of Directors were adopted in conformity to the proposals made by the Remuneration Committee, composed of three non-executive Directors who are not Beneficiaries of the Plan.
3.6 Date of the decision taken by the competent body to propose the plans to the shareholders’ meeting and of the proposal, if applicable, of the remuneration committee
The creation of the 2009/2010/2011 Plan is submitted to the Shareholders’ Meeting for approval on 29/30 April 2009, after a decision taken by the Board of Directors on 25 March 2009, at the proposal of the Remuneration Committee on 19 March 2009.
3.7 Date of the decision taken by the competent body with regard to the assignment of the financial instruments and any proposal submitted by the remuneration committee, if applicable, to the said body
This will be the date of the Board of Directors’ resolution to implement the Plan and the relative Remuneration Committee proposal.
3.8 Market prices of the financial instruments on which the plans are based as recorded on the dates specified above, if traded on regulated markets
The market prices (reference prices) of Mondadori shares recorded on the dates mentioned in paragraph 3.6 above were:
Date Reference price 19 March 2009 2.315 25 March 2009 2.5425
For plans based on financial instruments traded on regulated markets, the terms in which and the methods according to which the issuer takes into account the possible concomitance between the following events in determining the timing for the assignment of the instruments in the implementation of the plans:
(i) the assignment and any decisions taken with regard to the matter by the remuneration committee; and
(ii) any relevant information as per Article 114, paragraph 1, of Legislative Decree 58 of 24 February 1998; for example, if such information is:
The Options will be allocated on the date of the Option Exercise Price of the Options and allocate the Options to the persons selected as Beneficiaries.
As regards the need to avoid any significant interference between the effect on the price of the Shares of relevant information disseminated in accordance with Article 114, paragraph 1, of Legislative Decree 58 of 24 February 1998 and the setting of the Option Exercise Price, when the Options are allocated their Exercise Price is in any event set on the basis of the mean market price recorded over a relevant period of time, as fully specified in paragraph 4.19 below, thus diluting the effect of any sudden rises or falls in the price of the Shares.
4. Characteristics of the financial instruments allocated
4.1 Description of the forms in which the share-based payment plans are structured
For each year of its duration, the Plan is structured on the allocation of personal, non-transferable Option rights to the Beneficiaries, which they may subsequently purchase, settling their price at the time of their physical delivery, for ordinary Mondadori Treasury Shares in the ratio of one Share for each Option exercised. They are therefore stock options.
4.2 / 4.3 / 4.4 period of actual implementation of the plan, specifying any different cycles involved / termination of the plan / maximum number of financial instruments, also in the form of options, assigned in each tax year with respect to the persons specified by name or the categories specified
The Plan lasts for the three-year period 2009/2010/2011.
The Options allocated to the Beneficiaries may be exercised, in every year of the duration of the Plan, at the end of the 36-month vesting period from the date of assignment during pre-determined Periods of Exercise falling between the first day of the thirty-seventh month and the last day of the seventy-second month after the said Option assignment dates.
The maximum total number of Options to be assigned throughout the duration of the Plan will be decided in such a way that the Shares underlying the Options – in a ratio of 1 Share for each Option exercised – do not exceed 3% of the Company’s share capital, which corresponds to 7,782,895 shares.
The Exercise Period of the Plan and the number of Options assigned in each year of its duration to the persons falling under the categories of Beneficiaries as specified in paragraph 1.2 above will be determined after the Board of Directors’ resolutions regarding the implementation of the Plan.
4.5 Methods and implementation clauses of the plan, stating whether the actual allocation of the financial instruments is subject to meeting conditions or attaining certain results, including performance results; description of such conditions and results
The methods and the implementation clauses of the Plan are set out in paragraphs 4.1, 4.2, 4.3 and 4.4 above.
The Board of Directors, at the proposal of the Remuneration Committee, will establish and decide the conditions on which the Options allocated to the Beneficiaries may be actually exercised, on the basis of the attainment of economic and/or financial performance targets on an annual basis.
The satisfaction of the conditions for the exercise of the Options will be verified by the Board of Directors in each year of the duration of the Plan within the first six months of the financial period after that in which the Options have been allocated.
The conditions for the exercise of the Options will apply to all the Beneficiaries and there are therefore no different conditions for different categories of Beneficiary.
4.6 Any restrictions on the availability of the financial instruments allocated, or on the instruments given when the options are exercised, particularly as regards the periods of time during which it is allowed or forbidden to transfer the instruments to the Company itself or to third parties
The Options to allocate in the framework of the Plan are personal and non-transferable, and they are not available inter vivos; they cannot be pledged or guaranteed in favour of the Company or third parties.
There are no restrictions on the availability of the Shares to be distributed when the Options are exercised.
4.7 Description of any conditions subsequent related to the allocation of the plans if the beneficiaries carry out any hedging transactions that allow them to neutralise any prohibitions on the sale of the financial instruments assigned, also in the form of options, or of the financial instruments received after the exercise of such options
Any conditions subsequent related to the allocation of the Plan should the Beneficiaries carry out hedging transactions that enable them to neutralise any prohibitions on the sale of the Options allocated will be determined in the Plan regulations to be drawn up by the Board of Directors.
4.8 Description of the effects of termination of employment /4.9 other possible causes of the cancellation of the plans
The effects of the various ways in which a Beneficiary may leave his position as a Director and/or terminate his employment, and the indication of other possible causes of cancellation of the Plan, will be determined in the Plan regulations to be approved by the Board of Directors.
4.10 Justification for any provision for the company’s redemption of the financial instruments in the plans envisaged under Article 2357 ff of the Italian Civil Code; the beneficiaries of the redemption should specify whether the provision is only intended for special categories of employee; the effects of termination of employment on this redemption
Not applicable.
4.11 Any loans or other facilitations intended to grant for the purchase of the stock as per Article 2358, paragraph 3, of the Italian Civil Code
Not applicable.
4.12 Assessments of the expected cost to the company on the date the stock is assigned, as measurable on the basis of terms and conditions that have already been decided, by total amount and with regard to each instrument in the plan
The expected cost to the Company is not measurable at present because it depends on the amount of Options that are allocated on their respective assignment dates and on the Exercise Price. The total economic charge of the Plan will be measured in accordance with IFRS 2 accounting principles, according to which stock options are measured at fair value at the time of assignment. Fair value is determined using a binomial method, having regard to the Plan regulations.
These benefits are recognised as staff costs through profit and loss during the period of service, consistently with the vesting period, starting from the assignment date, with a contra-entry in equity under “Stock option reserve”.
The benefits awarded to employees/Directors of subsidiaries by parent company Arnoldo Mondadori Editore S.p.A. are recognised as increases in the cost of the investment, with a contra-entry in equity under “Stock option reserve”.
After the assignment date, a change in the number of Options will entail an adjustment to the total cost of the Plan, which will be recognised according to the method described above. At the end of each financial period, the fair value amount of each Option previously measured is neither reviewed nor adjusted, but remains finally in the balance sheet; on this date, on the other hand, the estimate of the number of Options that will accrue up to expiry (and thus of the number of employees that will be entitled to exercise the Options) is adjusted. The variation in the estimate is taken away from the “Stock option reserve” item with a contra-entry in profit and loss among staff costs, or reducing “Equity investments” if they are benefits awarded to employees/Directors of subsidiaries.
When Options are exercised, the portion of “Stock option reserve” related to the options exercised is reclassified under “Equity premium reserve”; the portion of “Stock option reserve” related to Options cancelled or that have not been exercised when they expire is reclassified under “Other reserves”.
4.13 Any dilution effects on capital caused by payment plans
Not applicable, since the Plan does not entail any increase in the Company’s share capital.
4.14 Any limits envisaged on the exercise of voting rights and the allocation of ownership rights
No limits are envisaged on the exercise of voting rights or the allocation of ownership rights on the Shares purchased after the Options have been exercised
4.15 In the event of the shares not being traded on a regulated market, all necessary information regarding a reliable assessment of their value
Not applicable.
4.16 Number of financial instruments underlying each option
Each Option allocated entitles the Beneficiary to purchase one Share.
4.17 Expiry of the options
The Options expire on the first day after the end of the relative Exercise Period. Options not exercised before they expire are forfeited and consequently do not give the Beneficiaries any rights.
4.18 Methods and timing of exercise, special conditions
As already stated in paragraph 4.2 above, the Options may be exercised, in each year of the duration of the Plan, only during the Periods of Exercise that start from the end of the specific 36-month vesting period from the date on which they are allocated.
4.19 Exercise price of the options, or the methods and criteria for its calculation, particularly as regards:
a) the formula for the calculation of the exercise price in relation to a determinate market price (fair market value); and
b) the methods for the calculation of the market price adopted to determine the exercise price
The Option Exercise Price will be set by the Board of Directors – when it resolves the Assignment of the Options – having regard to the arithmetical mean of the reference prices of the Shares recorded by Borsa Italiana S.p.A. during the period starting from the date on which the Options are assigned back to the same day of the previous calendar month.
4.20 If the exercise price is not the same as the market price calculated as specified in paragraph 4.19 (b) (fair market value), the justification for the difference
Not applicable.
4.21 Criteria for providing for different exercise prices for different beneficiary or different categories of beneficiary
Not applicable.
4.22 If the financial instruments underlying the options are not traded on a regulated market, the value attributable to the underlying instruments or the criteria for calculating this value
Not applicable.
4.23 Criteria for the adjustments made necessary as a result of extraordinary capital transactions and other transactions entailing a change in the number of underlying instruments (capital increases, extraordinary dividends, grouping and splitting of underlying shares, mergers and demergers, conversions into other classes of share, etc.)
The criteria for the adjustments made necessary as a result of extraordinary capital transactions and other transactions entailing a change in the number of underlying instruments will be determined in the Plan regulations that are to be approved by the Board of Directors.
Segrate, 9th April 2009
Arnoldo Mondadori Editore S.p.A. today announced that its annual Corporate Governance Report is available for public inspection at the company’s headquarters and at the Borsa Italiana S.p.A. The document is also in the “Corporate Governance” section of the web site www.gruppomondadori.it.
Arnoldo Mondadori Editore SpA today announced the resignation of Achille Frattini as Member of the Board of Auditors, citing regulatory restrictions on multiple memberships of such boards in listed companies.
Frattini had been re-elected a Full Member of the Board of Auditors for the three-year period 2006 – 2008 by the company’s AGM on 26 April 2006, on the only list to be presented, that of the shareholder Fininvest SpA.
Francesco Antonio Giampaolo, who had already been appointed as Substitute Member on that same list, now replaces Achille Frattini as Full Member of the Board of Auditors.
Francesco Antonio Giampaolo was born at Orta Nova in Foggia province on 15 February 1943. He graduated in Economics and Business from Milan’s Catholic University of the Sacred Heart in 1969, and started work as Accounting Organisation and Procedures Manager in a major Milanese industrial firm. Mr Giampaolo has been a Registered Business Practitioner since 1975; his practice is entirely devoted to the corporate sphere and he has accumulated many years’ experience in legal, business and financial affairs. As technical adviser to the bench at the Court of Milan, he has carried out a number of commissions in addition to providing routine advice and valuations; he was made an Official Auditor in 1983, and for over twenty years has sat on or chaired Boards of Auditors in medium-sized and large companies in industry, commerce, finance and insurance.
Mondadori thanked Achille Frattini for his valuable contribution and professional advice over many years.
The board of directors of Arnoldo Mondadori Editore S.p.A. has agreed the assignment for the year 2008 for the options in the stock option plan deliberated by the AGM of 26 April 2006
The Board of Directors of Arnoldo Mondadori S.p.A. today approved a proposal by the company’s Remuneration Committee for the assignment for the year 2008 of the options pertaining to the stock option plan deliberated by the AGM of 26 April 2006 and referring to the three-year period 2006/2007/2008.
In particular, the Board defined the assignment of a total of 2,850,000 options to a total of 69 beneficiaries.
The plan is based on the annual assignment of options, which are personal and non-transferable, for the acquisition of Mondadori ordinary shares held by the company in its Treasury Stock – in the ratio of one share (regularly held) for each option exercised – at an exercise price of not less than the arithmetical average of the reference price for Mondadori shares in the period from the date of assignment of the options to the same day of the previous calendar month. The exercise of options may only be made in a single operation, in the exercise period subsequent to the stipulated thirty-six month vesting period.
This document contains the information, for the year 2008 and with specific reference to the assignments agreed today by the Board of Directors, required by the terms of Art: 84 bis, Para 5, of the CONSOB regulation n° 11971/1999 and subsequent modifications (“Issuers’ Regulations”).
Such information is provided, where applicable, according to the outline 7 of tf attachment 3 A of the Issuers’ Regulations.
TERMS USED
The terms listed below and used in this document may be defined as follows:
Assignment 2008: the allocation to beneficiaries of options for 2008 deliberated by the Board of Directors on 19 June 2008;
Treasury Stock: ordinary shares of Arnoldo Mondadori Editore S.p.A. with a nominal value of €0.26 for each share, traded in the blue chip segment of the electronic stock market managed by Borsa Italiana S.p.A., and held by the company as treasury stock as per Art. 2357 of the civil code;
Beneficiaries: the persons identified by the Board of Directors on 19 June 2008 as beneficiaries of the options for the year 2008;
Options: the right, personal and non-transferable, given to beneficiaries by the Board of Directors on 19 June 2008 and exercisable for the acquisition of shares from the treasury stock in the ratio of one share (regularly held) for each option exercised;
Exercise period: the period from 20 June 2011 to 19 June 2014, the period in which, exclusively in a single operation, options may be exercised;
Plan: the stock option plan, established, as per Art. 114 bis of Legislative Decree n° 58 of 24 February 1998, by the company’s Annual General Meeting of 26 April 2006 and referring to the three-year period 2006/2007/2008;
Exercise price: the price of €4.565, for purchase by the beneficiaries, for the exercise of each option allocated. The exercise price was determined by the Board of Directors on 19 June 2008 and corresponds to the arithmetical average of the reference price for Mondadori shares in the period from the date of assignment of the options to the same day of the previous calendar month;
Company: Arnoldo Mondadori Editore S.p.A., corporate address – Via Bianca di Savoia 12, Milan.
1. Beneficiaries
1.1 Names of beneficiaries who are members of the board of directors, or better, the management board of the issuer of financial instruments, of holding companies of the issuer and any companies directly or indirectly controlled by it.
1.2 Categories of employees or associates of the issuer of financial instruments and any holding or subsidiary companies of the same.
The Plan is aimed at beneficiaries to be identified by the Board of Directors, in response to proposals by the Remuneration Committee, from among those in the following categories:
– executives of the Company and its subsidiaries with functions having a relevant impact on the achievement of the Mondadori Group’s strategic objectives;
– directors of the Company and its subsidiaries;
– journalists employed by the Company with the role of editor or co-editor of a title;
– managers of the holding company with an executive role that is carried out in the interests of the Company.
The Plan is of “particular relevance” under the terms of Art. 114 bis of Legislative Decree. 58/1998 and Art. 84 bis para.2 of Issuers’ Regulations in that it foresees, among the possible beneficiaries identified, persons that:
a) are members of the board of directors of the Company;
b) are executives of the Company with regular access to privileged information and the powers to take management decisions that could impact on the evolution and future prospects of the Company.
With regard to the assignments for 2008, those indicated who are currently members of the board of directors of the Company are:
Marina Berlusconi – Chairman
Maurizio Costa – Deputy Chairman and Chief Executive
Carlo Maria Vismara – Director
1.3 Names of beneficiaries who are part of the following groups:
1.3 a) beneficiaries with executive functions, indicated in Art. 152-sexies, para 1, c)-c.2 in the share issuing compan
Not applicable.
1.3 b) persons with executive functions in directly or indirectly held subsidiary companies of a share issuer, when the book value of the stake in the aforementioned subsidiary company corresponds to more than fifty percent of the assets of the share issuer, as declared in the most recently approved annual report, as indicated in Art. 152-sexies, para. 1, c)-c.3
Not applicable
1.3 c) individuals with a controlling interest in the share issuer, who are employees or provide their professional services to the share issuer
Not applicable
1.4 a) description and number, of all of the executives with access to privileged information and with the powers to take management decisions that could impact on the evolution and future prospects of the share issuer, as indicated in Art. 152-sexies, para. 1, c)-c.2
There are 9 executives among the beneficiaries of the assignment for 2008 with regular access to privileged information and the powers to take management decisions that could impact on the evolution and future prospects of the Company, as indicated in Art. 152-sexies, para. 1, c)-c.2 in the Issuers’ Regulations.
These executives – the heads of the business divisions and the central functions of the Company – fall within the description of relevant individuals identified by the board of directors and subject, as per Art. 114 para. 7 of D.Lgs. 58/1998, to the obligations for the communication of operations involving shares issued by the Company or other financial instruments linked to the shares.
1.4 b) description and number, of all of the executives with access to privileged information and with the powers to take management decisions that could impact on the evolution and future prospects of directly or indirectly held subsidiary companies of a share issuer, when the book value of the stake in the aforementioned subsidiary company corresponds to more than fifty percent of the assets of the share issuer, as declared in the most recently approved annual report, as indicated in Art. 152-sexies, para. 1, c)-c.3
Not applicable.
1.4 c) description and number of any other categories of employee or associate for which the Plan foresees different characteristics plan.
Not applicable.
1.4 d) in cases in which, with regard to stock options, for persons indicated in a) and b) exercise price is foreseen that is different from that for persons in the two categories, it is necessary to indicate separately those under a) and/or b), and their names
Different characteristics are not foreseen in the Plan for the categories of beneficiaries and, in particular, the exercise price for Options, which are determined by the criteria indicated in para. 4.19 below, are the same for all beneficiaries
2. The motivations for the Plan
2.1 The aims to be achieved by the application of the Plan
The reasons that underlie the Company’s adoption of the Plan are essentially to:
– provide the Company and its subsidiaries with a way of building loyalty among the management and aimed at focusing on the commitment to the attainment of strategic objectives;
– allow management itself, and therefore the Company, to develop an orientation toward the process of value creation.
The scale of the Options to be allocated to each of the Beneficiaries is established by the board of directors, in response to proposals by the Remuneration Committee.
Contextually, the board of directors has established – in line with the criteria outlined in para. 4.19 below – the exercise price and has deliberated the allocation of Options.
The Plan is extended across a period of time of three years (2006/2007/2008) and foresees periods for the exercise of Options subsequent to each year of reference of the plans. Such periods begin after a vesting period of 36 months from the date of the allocation of Options. The length of this last period, as well as being imposed by fiscal regulations with a view to recognising favourable fiscal conditions, is considered appropriate to the realisation of the Plan’s incentive and loyalty objectives.
2.2 Key variables, also in the form of performance indicators considered for the allocation of plans based on financial instruments
The implementation of the Plan, in terms of the effective exercising of the Options allocated to the Beneficiaries, is subordinate – as is outlined in para. 4.5 below – to the achievement of annual performance objectives of business and/or financial nature.
Exercise conditions are applicable to all Beneficiaries and there are therefore no different or particular conditions for different categories of Beneficiary
2.3 Elements underlying the determination of the scale of rewards based on financial instruments, or better, the criteria for its determination
The number of Options awarded to individual Beneficiaries has been determined by evaluating the effective capacity of each individual to effectively impact the attainment of results, on the basis of experience, competence and role within the Company.
2.4 Underlying reasons for the eventual allocation of compensation plans based on financial instruments not issued by the issuer of financial instruments, such as holding or subsidiary companies or third parties; where such instruments are not traded on regulated markets information concerning the criteria used to determine their attributable value
Not applicable.
2.5 Evaluations concerning significant implications of a fiscal or accounting nature that have affected the determination of the Plans
The structure of the Plan was conditioned by current fiscal legislation, in particular:
2.6 Eventual support for the Plan by the special Fund to provide incentives for employees of the Company, as per Art. 4, para. 112, of law n°350 of 24 December 2003
The Plan receives no support from the special Fund to provide incentives for employees of the Company, as per Art. 4, para. 112, of law n°350 of 24 December 2003
3. Approval process and timing for the allocation of instruments
3.1 / 3.2 The powers and functions attributed by the Shareholders to the board of directors for the implementation of the Plan/indication of those appointed to administer the Plan, their function and competence
As already stated, the Plan was established by and ordinary general meeting of the Shareholders of Arnoldo Mondadori Editore S.p.A. on 26 April 2006. The AGM attributed the functions for the management of the Plan to the board of directors, which operates with the support and in response to the proposals of the Remuneration Committee.
In particular, the board of directors, in agreement with the Remuneration Committee:
a) approves the regulations for the implementation of the Plan and any eventual modifications;
b) presents Plans to the AGM for approval in general outline and any eventual modifications of a significant nature;
c) identifies, in line with the categories indicated by the AGM, the Beneficiaries;
d) allocates Options to the identified Beneficiaries;
e) determines the exercise price for Options in line with the normal value of the shares;
f) identifies and quantifies, for each year length, the performance objectives to be reached before Options may be exercised and verifies that such objectives have effectively been attained;
g) regulates all emerging rights and/or rectifies the conditions of allocation in cases where extraordinary operations are effected on the Company’s share capital as per para. 4.23 below.
3.3 Any existing procedures for the revision of the Plan also in response to changes in the basic objectives
With the exception of that outlined in para. 4.23 below, no procedures are foreseen for the revision of Plan in response to changes in the basic objectives.
Any eventual substantial changes to the Plan that may become necessary in the light of changed business conditions and new Group objectives will be proposed by the board of directors to a General Meeting of the Shareholders.
3.4 Description of the way in which the availability and allocation of the financial instruments underlying the Plan are determined
Allocated Options include the right to purchase – in the ratio of one share (regularly held) for each option exercised – Mondadori ordinary shares already in the portfolio or to be acquired on the basis of authorisation from, in the most recent case, the AGM of 22 April 2008, as per Art. 2357 of the civil code and Art. 144-bis of the Issuers’ Regulations.
3.5 Role of each director in the determination of the characteristics of the mentioned Plans; any grounds for conflicts of interest on the part of directors involved
The characteristics and guidelines for the Plan have been drawn up by the Remuneration Committee and presented to the board of directors before, in turn, being presented to a General Meeting of the Shareholders.
It should be noted that the deliberations of the board of directors concerning, in particular, the identification of Beneficiaries and the allocation of Options, have been adopted:
– in line with the relative proposals made by the Remuneration Committee, which is made up of three non-executive directors who are also not Beneficiaries of the plan;
– with the abstention of interested directors.
3.6 Date decided by the competent body for the approval of the Plan by the Shareholders and any eventual proposal to the aforementioned body formulated by an eventual remuneration committee
The establishment of the Plan for 2006/2007/2008 was presented for approval to the AGM of 26 April 2006 following the decision taken by the board of directors on 14 March 2006 on the basis of the proposal made by the Remuneration Committee on 9 March 2006.
3.7 Date decided by the competent body for the assignment of instruments and any eventual proposal to the aforementioned body formulated by an eventual remuneration committee
The board of directors decided the date for the assignment of Options for the year 2008, indicating also the exercise price, on 19 June 2008 on the basis of the proposal made by the Remuneration Committee on 12 June 2008.
3.8 Market price, recorded on the aforementioned dates, for the financial instruments underlying the Plan, if traded on regulated markets
The market price (reference price) for Mondadori shares recorded on the dates as indicated in paras. 3.6 and 3.7 above, were as follows:
Date Reference price 09/03/2006 7.934 14/03/2006 8.027 12/06/2008 4.288 19/06/2008 3.911
3.9 In the case of plans based on financial instruments traded on regulated markets, in what terms and on what basis does the issuer take account, in the context of the identification of the timing for the allocation of the instruments in pursuance of such plans, of the possible temporal coincidence between:
i) such allocation and eventual decisions taken in this regard by the remuneration committee, and
ii) the circulation of eventual relevant information, as per Art. 114, para. 1; for example, in the case where such information are:
With regard to the timing of the allocation of Options, reference is made to the dates of the deliberations with which, as indicated above, the board of directors, following a proposal by the Remuneration Committee determined the exercise price for Options and allocated Options to the persons identified as Beneficiaries.
Such deliberations were not adopted at the same time as relevant information was published, as per Art. 114, para. 1 of D. Lgs. 58/1998, in order to avoid significant interference between the impact of such information on market share prices and the definition of the exercise price of the Options.
It should also be noted that the exercise price for Options is in any case defined on the basis of the average share price recorded over a significant period of time, as per Art. 9, para. 4, a) of the TUIR, as is outlined in more detail in para. 4.19 below, thereby reducing the effect of eventual unexpected increases or decreases in the share price.
4. Characteristics of the instruments attributed.
4.1 Description of the form in which plans for compensation based on financial instruments are structured;
The instruments attributed are in the form of Option rights that can be exercised, exclusively in a single operation, and in the exercise period indicated below, for the subsequent purchase, with the obligation for physical delivery, of Mondadori ordinary shares from treasury stock, in the ratio of one share for every Option exercised. In consequence, a stock option.
4.2 / 4.3 / 4.4 Indication of the period for the effective implementation of the plan, with reference also to eventual alternative cycles foreseen / terms of the plan / maximum number of financial instruments, also in the form of options, assigned in every fiscal year for each individual nominated or category indicated
The following table shows, for the assignment for 2008 agreed by the board of directors on 19 June 2008, the number of Options allocated:
– to Beneficiaries who are also currently members of the board of directors of the Company;
– to all of the executives who are Beneficiaries of the Plans who have regular access to privileged information and the powers to take management decisions that could impact on the evolution and future prospects of the Company, indicate in Art. 152 sexies, para 1, c)-c.2 of the Issuers’ Regulations;
– to all Beneficiaries of other categories as indicated in 1.2 (executives of the Company and its subsidiaries with functions having a relevant impact on the achievement of the Mondadori Group’s strategic objectives, including journalists employed by the company and its subsidiaries with the role of editor or co-editor of a title).
Also indicated is the exercise price – determined according to the criteria outlined in para. 4.19 below – and the exercise period.
Year of reference Name/Category Options allocated Allocation date Exercise price Exercise period 2008 Marina Berlusconi – Chairman 360,000 19.6. 2008 4.565 20.6.2011/19.6.2014 2008 Maurizio Costa – Chief executive 450,000 19.6.2008 4.565 20.6.2011/19.6.2014 2008 Carlo Maria Vismara – Director 70,000 19.6.2008 4.565 20.6.2011/19.6.2014 2008 All of the executive Beneficiaries indicated in Art. 152 sexies, para 1, c)-c.2 of the Issuers’ Regulations 550,000 19.6.2008 4.565 20.6.2011/19.6.2014 2008 All Beneficiaries of other categories (executives of the Company and its subsidiaries with functions having a relevant impact on the achievement of the Mondadori Group’s strategic objectives, including journalists employed by the company and its subsidiaries with the role of editor or co-editor of a title). 1,420,000 19.6.2008 4.565 20.6.2011/19.6.2014
4.5 Terms and conditions for the implementation of the plan, specifically whether the attribution of instruments is subordinate to the verification of certain conditions, or better, the achievement of determined results, also performance based; description of such conditions and results
The regulations for the Plan foresee that the board of directors identify the effective conditions for the exercise of Options attributed to the Beneficiaries with reference to the attainment of performance objectives of a business and/or financial nature on annual basis.
Satisfaction of the conditions for exercising Options is verified by the board of directors, for each year of the length of the Plan, within the first six months of the subsequent year to which the Options pertain.
The board, in agreement with the Remuneration Committee, has identified, as conditions for the exercise of Options, the attainment of performance objectives based on ROE and free-cash flow.
The conditions for exercise apply to all Beneficiaries of the Plans and there are therefore no different conditions for other categories of Beneficiary.
4.6 Indications of any eventual restrictions affecting the attributed instruments or on the instruments deriving from the exercise of options, with particular reference to the terms within which the subsequent transfer to the same company or to third parties is permitted or forbidden
Allocated Options are personal and non-transferable and not available “inter vivos” and may not be pawned or used as a guarantee for the Company or for third parties.
There are no restrictions on the availability of the shares deriving from the exercise of Options.
4.7 Description of any eventual conditions in regard to the attribution of the plans in the case in which beneficiaries effect hedging operations that make it possible to neutralise any restrictions on the sale of financial instruments allocated, also in the form of options, or instruments deriving from the exercise of options
Further to what is stated in para. 4.6 above, no specific conditions are foreseen in regard to the attribution of the plans in the case in which beneficiaries effect hedging operations that make it possible to neutralise any restrictions on the sale of Options attributed.
4.8 Description of the effects determined by a termination of the professional relationship
The effects determined by a termination of the professional relationship with persons identified as Beneficiaries are as follows:
– in the case of retirement during the period of validity of the Plan, Beneficiary retains the right to exercise, in the exercise period, any exercisable Options;
– in the case of the death of a Beneficiary, the conditions outlined above apply to the legal heirs of the Beneficiary.
– in the case of a professional relationship terminated by the voluntary resignation or the rightful dismissal, for grave misconduct or violation of duty, good faith and loyalty undermining the basis underlying the Plan, the Beneficiary loses all rights, with the consequence that all exercisable Options attributed under the terms of the Plan and not yet exercised will be immediately and automatically extinguished, without any right of indemnity or compensation of any kind.
– in the case of a professional relationship terminated for reasons other than those outlined above, the board of directors will determine, as and when appropriate, what line should be taken on exercisable Options.
In cases where the Beneficiary is a director of the Company or of a subsidiary, as per Art. 2359 of the civil code., of Arnoldo Mondadori Editore S.p.A., the following will apply:
(i) in the case where a director voluntarily resigns from the board or the directorship is lawfully revoked, as per Art. 2383 of the civil code., the Beneficiary will lose all rights, with the result that all exercisable Options allocated to the director and not yet exercised will be automatically extinguished without any right of indemnity or compensation of any kind;
(ii) in the case of the end of the mandate for a director, as per Art.. 2382 of the civil cod., the board of directors will determine, as and when appropriate, what line should be taken on exercisable Options;
(iii) in the case where a director’s mandate is terminated for reasons other than those stated above at (i) and (ii) or for expiry of the mandate, the Beneficiary will retain the right to exercise any exercisable Options.
4.9 Indications of other eventual causes of annulment
Further to the provisions regarding the exercise period for Options, in the case of a sale to third parties of the control of a subsidiary of Arnoldo Mondadori Editore, the exercise of Options allocated to Beneficiaries who are employees or directors of the said company must be completed within 30 days of announcement being made to the Beneficiaries of the sale of control. After this period the exercisable Options allocated to such Beneficiaries on the basis of the Plan will be considered automatically extinguished without any right of indemnity or compensation of any kind.
4.10 Motivations concerning the eventual possibility of “redemption”, by the company, of the financial instruments that are the object of the plan, as per Art. 2357 and ff. of the civil code; the beneficiaries of such redemption indicate whether this would apply only to specific categories of employee; the effects of the termination of the professional relationship on such a redemption
Not applicable.
4.11 Eventual loans or other subsidies that may be applied for the purchase of shares, as per Art. 2358, para. 3 of the civil code
Not applicable.
4.12 Indications regarding the evaluation of charges that the company expects to meet on the date of allocation, determinable on the basis of the terms and conditions already outlined, for the total amount and in relation to each instrument in the plan
According to the terms of IFRS 2, stock options are evaluated at fair value at the moment of allocation. Given the regulations governing the Plan, fair value is determined using a binomial model.
Such benefits are booked as personnel costs during the period of service, consistently with the vesting period and starting from the date of allocation and balanced under net assets in the item “Reserve for stock options”.
The benefits recognised directly by the parent company Arnoldo Mondadori Editore S.p.A. to employees/directors of subsidiary companies are book as an increase in cost of the relative stake holding, and balanced under net assets in the item “Reserve for stock options”.
Subsequent to the date of allocation, a change in the number of options will involve an adjustment to the overall cost of the Plan to be booked as indicated above. At the end of each year the fair value of each Option previously determined is neither reviewed or updated, but remains definitively acquired and booked under net assets; on the same date, meanwhile, there is an updating of the estimate of the number of shares that will mature by the expiry date ( and therefore the number of employees that will have the right to exercise the Options). Changes in the estimate may lead to an adjustment in the “Reserve for stock options”” booked to the income statement between personnel costs or a reduction in the item “Equity holdings” if relative to benefits recognised to employees/directors of subsidiary companies.
When Options are exercised the part of the “Reserve for stock options” relative to the options exercised is reclassified under “Share premium reserve”; the part of the “Reserve for stock options” relative to cancelled options, or un-exercised options at the expiry date, is reclassified under “Other reserves”.
The parameters used for the numerical calculation of binomial tree for the 2008 allocations are as follows:
Year of allocation 2008 Exercise price of option 4.565 Life of option (residual years) 6 Current price of underlying shares at the date of allocation in € 3.911 Expected share price volatility 35% Dividend yield 8.9491% Interest rate without risk for the duration of the option 5.15%
4.13 Indication of eventual dilutory effects determined by compensation plans
Not applicable in that the Plan does not involve a capital increase for the Company
4.14 Eventual limits foreseen for the exercise of voting rights and the attribution of rights on assets
No limits are foreseen for the exercise of voting rights and for the attribution of rights on assets referring to shares purchased as a result of the exercise of Options.
4.15 In the case where shares are not traded on regulated markets, all useful information for an overall evaluation of the attributed value
Not applicable.
4.16 Number of financial instruments underlying each option
Each Option attributed gives the right to the acquisition of one Share.
4.17 Expiry of Options
Options expire on the first day subsequent to the term of the exercise period as indicated in the table at 4.2 above. Options that are not exercised by this date are cancelled and consequently no longer carry any rights for Beneficiaries.
4.18 Exercise procedures, timing and conditions
Options may be exercised, in a single operation, exclusively in the exercise period that begins from the expiry of the specific vesting period of 36 months from the date of the allocation of Options, as indicated in the table at 4.2 above.
4.19 Exercise price of options and the procedure and criteria for its determination, in particular concerning:
a) the formula used for the calculation of the exercise price in relation to the fair market value, and
b) the procedure for the determination of the market price used as the reference price for the determination of the exercise price
The exercise price for Options has been determined by the board of directors – as outlined in para. 3.7 above – in line with Art. 9, para. 4, a) of the TUIR, with reference to the “normal value” of the Shares, and corresponds to the arithmetical average of the reference price for Mondadori shares in the period from the date of assignment of the options to the same day of the previous calendar month.
The exercise price for Options is indicated in the table at 4.2 above.
4.20 In the case of the exercise price not being equal to the reference price determined as indicated at 4.19.b above (the fair market value), what are the reasons for the difference
Not applicable.
4.21 Criteria for which different exercise price would apply to the various individuals and categories of Beneficiary
Not applicable.
4.22 In the case in which the financial instruments underlying the options are not trade don regulated markets, an indication of the attributed value of the underlying instruments or the criteria for determining such value
Not applicable.
4.23 Criteria for adjustments made necessary as a result of extraordinary capital operations and other operations involving changes in the number of underlying instruments (capital increases, extraordinary dividends, reverse splits or splits in underlying shares, mergers and disposals, conversion operations in other categories of shares etc.)
In the case of the following extraordinary operations, the board of directors, with a view to maintaining unaltered the economic aspect of the allocated Options, will proceed, when conditions allow, to adjusting the exercise price and/or the number of Shares in relation to the Options not yet exercised:
(a) operations for reverse splits or splits;
(b) operations for free capital increases;
(c) operations for paid capital increases with the issue of shares, of shares linked to warrants, convertible bonds or bonds convertible with warrants;
(d) mergers or disposals;
(e) operations for capital reductions.
In the case of any of the above, and always assuming appropriate conditions, the board of directors will proceed with the adjustment of the acquisition price according to widely accepted rules practiced by financial markets, making use of standard adjustments and nominating an independent expert to make a judgement on the correctness of the method used for the adjustment to the price and the result obtained. Such adjustment, as well as the judgement of the independent expert, will be communicated in writing to the Beneficiaries.
Segrate, 19/6/2008
Arnoldo Mondadori Editore S.p.A. today announced that its annual Corporate Governance Report is now available for public inspection at the company’s headquarters and at the Borsa Italiana S.p.A.
The document is also available on the “Corporate Governance” section of the web site www.gruppomondadori.it.