Information Memorandum About the Threeyear Cash Incentive Plan Based Also on Financial Instruments of the Parmalat Group

Transcription

1 Information Memorandum About the Threeyear Cash Incentive Plan Based Also on Financial Instruments of the Parmalat Group (prepared in accordance with Article 84-bis of the Issuers Regulations approved by the Consob with Resolution No of May 14, 1999, as amended)

2 This Information Memorandum was prepared by the Parmalat Group to provide its shareholders and the market with information about a motion to adopt a Three-year Cash Incentive Plan, as explained in detail below, submitted for approval to the Company s Shareholders Meeting on April 22, More specifically, this Information Memorandum was prepared pursuant to Article 84-bis of the Issuers Regulations and consistent with the guidelines provided in Form No. 7 of Annex 3A to the Issuers Regulations. The Plan calls for the award of a cash bonus that will be determined based on specific performance parameters, one of which is a parameter tied to the price of the Parmalat stock. This three-year incentive is not based on the physical delivery of the underlying financial instruments, entailing exclusively the payment of a cash bonus based on an indicator tied to the performance of the Parmalat stock over the reference three-year period (total shareholder return). The Plan qualifies as highly material pursuant to Article 144-bis, Section 3, of the Uniform Financial Code (TUF) and Article 84-bis, of the Issuers Regulations because it is addressed to employees of Parmalat S.p.A. and the Group, identified in accordance with the abovementioned Article 144-bis of the TUF. This Information Memorandum is available to the public at the Company s registered office, at 4 Via delle Nazioni Unite, Collecchio (Parma), on the Company website at and at the offices of Borsa Italiana Spa, the company that operates the securities market. The definitions of the main terms used in this document are summarized below: Company indicates Parmalat S.p.A., with registered office at 4 Via delle Nazioni Unite, Collecchio (PR). Group means Parmalat S.p.A. and the companies that it controls, directly or indirectly, in accordance with the provisions of the laws currently in effect. Board of Directors indicates the Company s Board of Directors. Plan indicates the Long-term Incentive Plan reserved for certain strategic resources of Parmalat S.p.A. and Italian and foreign companies that it controls in accordance with Article 2359 of the Italian Civil Code. Beneficiaries are the Plan s beneficiaries designated by the Board of Directors.. Plan Approval Date is the date when the Plan was approved by the Shareholders Meeting. Performance Targets are the Plan s targets, the level of achievement of which determines the amount of the bonus distributed to each Beneficiary at the end of the Performance Period. 2

3 Vesting Period indicates the three-year period from 2013 to 2015 over which the achievement of the Performance Targets is verified. Relationship indicates the employment and/or collaborative and/or administrative relationship existing between the Beneficiary and the Company or one of its Subsidiaries. Subsidiaries are the Italian and/or foreign companies controlled by the Company in accordance with Article 2359 of the Italian Civil Code. Award is a contingent right to receive a sum of money within the Plan s framework. 3

4 1. Beneficiaries 1.1. Listing by name of the Beneficiaries who are members of the Board of Directors of the Issuer, the companies controlling it and those that it controls, directly or indirectly. The names of the Beneficiaries of the Three-year Cash Incentive Plan belonging to the categories mentioned in Paragraph I of Annex 3A to Form 7 of the Consob Issuers Regulations are listed below. If replacements in the posts listed below should become necessary in 2013, the party(ies) designated as replacement(s) shall also be included among the Plan s Beneficiaries, as applicable. a) Yvon Guérin, Chief Executive Officer. b) Pierluigi Bonavita, Group Chief Financial Officer. c) Philippe Laborne, Business Operation Analysis & Development Director. d) The Chief Executive Officers and General Managers (Direttori Generali) of the main Pertinent Companies of the Parmalat Group Categories of employees or associates of the Issuer, the companies controlling the Issuer and those controlled by it. The Beneficiaries are designated at the sole discretion of the Board of Directors from among top managers who perform the most strategically significant functions at the Company and its Subsidiaries with a material impact on the creation of value for the Company and its shareholders. Beneficiaries may be designated after the Plan Approval Date, provided this is done before the end of the Vesting Period Listing by name of Plan Beneficiaries who belong to the following groups: a) General Managers of Parmalat S.p.A. 4

5 b) Other managers with strategic responsibilities of Parmalat S.p.A. who received during the year a total compensation (equal to the sum of cash compensation and compensation based on financial instruments) that was larger than the highest total compensation awarded to any member of the Board of Directors or the General Managers of Parmalat S.p.A. None of the executives with strategic responsibilities of Parmalat S.p.A. received during the year a total compensation that was larger than the highest total compensation awarded to any member of the Board of Directors and the General Managers of Parmalat S.p.A. c) Individuals controlling Parmalat S.p.A., who are employees of Parmalat S.p.A. or collaborate with it as associates. d) In the case of smaller-size companies, pursuant to Article 3, Section 1, Letter f) of Regulation No of March 12, 2010, provide an indication in the aggregate for all managers with strategic responsibilities of the issuer of financial instruments. e) Employees or associates of other categories for whom the Plan provides different features (e.g., executives, middle managers, office staff, etc.). The Plan s incentive mechanism is the same for all Plan enrollees, with differences only in two areas: a) the percentage rate of the allocated incentive, as the incentive s percentage increases based on the importance of function performed; b) different performance parameters for Beneficiaries of the Parent Company and Beneficiaries of the Pertinent Companies of the Parmalat Group. 2. Reasons for adopting the Plan 2.1. Objectives pursued with the attribution of the Plan s bonuses. With the adoption of this Plan, the Parmalat Group is pursuing the objective of providing the Group s strategic resources with an incentive to improve medium/long-term performance, in terms both of operating results and stock price of Parmalat S.p.A. More specifically, the Plan pursues the following objectives: Have top management focus on medium/long-term objectives, consistent with an approach based on performance sustainability; 5

6 Align top management s interest with that of the shareholders; Strengthen the retention policies for managers who currently are not Plan beneficiaries, introducing a factor that brings the compensation package in line with market practices Key Variables, Including Performance Indicators, Taken Into Account for Plan Awards. Upon enrollment in the Plan, each Beneficiary is told the amount of his/her personal award. The actual award of the abovementioned amount is conditional, in addition to reaching the Plan Access Gate, on achieving the following specific performance targets: a) for 60% of the incentive: based on cumulative EBITDA for the three-year period compared with the cumulative EBITDA target of the Three-year Plan; b) for 20% of the incentive: based on the amount of Net Sales at the end of the Three-year Plan (Net Sales amount for 2015) compared with the 2015 Net Sales target of the Three-year Plan; c) for 20% of the incentive: Parmalat s Total Shareholder Return (hereinafter also TSR ) benchmarked against the performance of this indicator for the companies included in the STOXX Europe 600 Food & Beverage Index during the period from January 1, 2013 to December 31, The comparison between Parmalat and the companies in the index will performed based on their ranking. For the Pertinent Companies of the Parmalat Group, the a) and b) targets are for the specific Pertinent Company. The actual distribution to the Beneficiaries of the bonuses attributable upon achievement of the Plan s performance targets is conditional on the achievement of the three-year EBITDA gate for the Parmalat Group and, for Pertinent Company Beneficiaries, on the achievement of the three-year EBITDA gate for their respective Pertinent Company Factors for Determining the Amount of the Bonus Based on Financial Instruments, or Criteria for Its Determination The specific performance targets correlated to the different objectives will be communicated to the each Beneficiary upon enrollment in the Plan. 6

7 The bonuses for indicators a) and b) will be awarded if a minimum level of performance is achieved, corresponding to a bonus equal to 65% of the bonus allocated for achieving the target. The achievement of the maximum target will result in the payment of a bonus equal to 150% of the bonus allocated for achieving the target. For performances falling between the minimum and the target or between the target and the maximum the bonus will be determined by linear interpolation. As for the component of the bonus tied to the TSR, 100% of the bonus will be paid if Parmalat s TSR is higher than the median for the benchmark panel. If Parmalat s TSR is higher than the third quartile of the benchmark panel, the bonus paid (maximum bonus) will be equal to 150% of the target bonus Reasons for possibly deciding to award compensation plans based on financial instruments not issued by the issuer of financial instruments, such as financial instruments issued by subsidiaries or parent companies or companies outside the issuer s group; if the abovementioned financial instruments are not traded on a regulated market, provide information on the criteria applied to determine the value attributable to them. This Plan is based in part on monetary instruments linked to the performance of the stock of Parmalat S.p.A. (as described in Section 2.2). This choice pursues the objective of providing the Group s strategic resources with an incentive to improve both the stock price of Parmalat S.p.A. and the operating results Assessments concerning significant tax and accounting considerations that affected the definition of the Plan. The Plan s structure was not conditioned by the applicable tax laws or by accounting considerations Indicate whether the Plan receives support from the special fund to incentivize employee participation in companies, as set forth in Article 4, Section 112, of Law No. 350 of December 24, Not applicable 3. Approval process and timing of the award of financial instruments 7

8 3.1. Scope of the powers and functions delegated by the Shareholders Meeting to the Board of Directors for the purpose of implementing the Plan. On March 20, 2013, the Board of Directors of Parmalat S.p.A. approved this Information Memorandum. The Plan, defined within the framework of the Group s Compensation Policies, is being submitted for approval to the Shareholders Meeting convened for April 22, The Shareholders Meeting is required to deliberate with regard to giving the Board of Directors a mandate to implement and manage the provisions of the Plan Indication of the parties responsible for managing the Plan and their function and jurisdiction. The Board of Directors of Parmalat S.p.A. is responsible for managing the Plan Any procedures established to revise the Plan in the event of potential variations in basic objectives. The Plan may be amended in response to extraordinary events that, even potentially, could affect the value of the Parmalat shares and the Plan s economic content in general. Any amendments to the Incentive Plan must be reviewed by the Parent Company s Nominating and Compensation Committee and approved by the Board of Directors, before submitting them to the Shareholders Meeting for approval Description of the methods applied to determine the availability and award of the financial instruments on which the Plan is based. The Plan calls for the distribution of a cash bonus and does not call for the award of financial instruments. Subsequent to the approval of the 2015 financial statements by the Shareholders Meeting of the Parent Company, the Board of Directors of Parmalat S.p.A. will assess the performance of the Group and the Pertinent Companies, determined in part on the performance of the Parmalat stock, (as described in Section 2.2) and recommend the award of the bonus, which will be disbursed in cash Role performed by each Director in determining the Plan s characteristics and existence of any conflict of interest situation affecting the Directors involved. Pursuant to Article 2389 of the Italian Civil Code, the Plan was approved by the Board of Directors of Parmalat S.p.A. upon a proposal by the Compensation Committee and with a prior favorable opinion by the Board of Statutory Auditors. 8

9 3.6. Date of the resolution adopted by the Board of Directors to submit the Plan to the Shareholders Meeting for approval and of the proposal by the Nominating and Compensation Committee. Meeting on March 14, 2013, the Board of Directors approved the Long-term Incentive Plan, upon a proposal by the Compensation Committee, which met on March 12, Date of the resolution adopted by the Board of Directors regarding the award of financial instruments and of any proposal submitted to the Board of Directors by the Nominating and Compensation Committee. Not applicable 3.8. Market Price, Recorded on the Abovementioned Dates, for the Financial Instruments Underlying the Plan A portion of the final cash bonus is determined based on Parmalat s performance in terms of TSR. Under the Plan, this indicator shall be measured between January 1, 2013 and December 31, 2015 and compared with the TSR of a peer group of companies consisting of companies included in the STOXX Europe 600 Food & Beverage Index, measured over the same reference period. In defining the computation method to measure the TSR performance of Parmalat and of each individual company in the peer group, the average of the closing prices for 90 calendar days up to an including January 1, 2013 was taken as the beginning reference point Terms and modalities that Parmalat takes into account, as part of the process of defining the timing of the award of financial instruments in implementation of the Plan, regarding the potentially coincident timing of: i) the abovementioned award or any decision adopted by the Compensation Committee, and ii) the dissemination of any material information, as defined in Article 114, Section 1, for example when such information is: a. not yet public and capable of favorably affecting market prices, or b. already public and capable of unfavorably affecting market prices. On the occasion of the resolution concerning the Plan, an announcement to the market was issued pursuant to and for the purposes of the laws and regulations in effect at the time. 9

10 During the Plan s implementation phase, information will be disclosed to the market, when so required by the laws and regulations in effect at the time. 4. Characteristics of the awarded financial instruments 4.1. Description of how compensation plans based on financial instruments are structured. The Plan call for the disbursement of a cash bonus based on the level of achievement of the targets defined in Section 2.2. The duration of the Vesting Period is three years, running from 2013 to Indication of the period of effective implementation of the Plan, also with regard to different Plan cycles, if any. The Plan implementation period runs from 2013 (Plan enrollment) and 2015 (end of the Plan) End of the Plan. The LTI Plan will end on December 31, 2015, with the distribution of the incentive to the Beneficiaries, based on the level of achievement of the targets defined in Section 2.2, scheduled for May Maximum number of financial instruments, including options, awarded each reporting year to the individuals identified by name or the specified categories. The Plan calls for the disbursement of a cash bonus and does not call for the award of financial instruments Plan modalities and implementation clauses, specifying whether the actual award of financial instruments is predicated on the satisfaction of certain conditions or the achievement of specific results, including performance targets; description of the conditions and results. The disbursement of the cash bonus is conditional on the achievement of the performance targets described in Section 2.2 and on the continuation of the relationship between the Beneficiary and the Beneficiary s company Indication of any availability restrictions on the awarded instruments or on the instruments resulting from the exercise of options, specifically with regard to the 10

11 deadlines by which the subsequent transfer to the company or to outsiders is allowed or prohibited Description of any cancellation clauses regarding plan awards if the beneficiaries execute hedging transactions to neutralize any prohibition to sell the awarded financial instruments, including options, or instruments resulting from the exercise of options Description of the effects caused by the termination of the employment relationship. a) If a Beneficiary is fired for cause or resigns without cause, or if a Director is revoked from office for cause or resigns without cause, or in the case of cancellation without cause by the Company or the employee, the Beneficiary will be automatically excluded from the Plan and, consequently, the right to receive undisbursed bonuses will be immediately cancelled and stripped of any further effect. b) If a Beneficiary resigns for cause, or if a Director is nor reelected or removed from office for reasons other than dismissal for cause or resigns for cause, or in the case of cancellation for cause by the employee, the bonus will be disbursed, prorated and based on an assessment of the level of target achievement performed by the Nominating and Compensation Committee, with the Committee having the right to arrive at a more favorable determination. c) The provision set forth in Letter b) above shall apply also if the employment relationship with the Beneficiary or the Director s term of office is ended as a result of death, disability resulting in total and permanent inability to work or achievement of the requirements for retirement Indication of any other causes for cancellation of the Plan. There are no causes for cancellation of the Plan Reasons for the possible redemption by the Company of the financial instruments subject of the plan, adopted pursuant to Article 2357 and following articles of the Italian Civil Code; beneficiaries of the redemption, indicating whether the redemption is available only to certain categories of employees; effects of the end of the employment relationship on the redemption. 11

12 4.11. Any loans or other subsidies that the Company plans to provide for purchasing shares in accordance with Article 2358 of the Italian Civil Code Indication of assessments regarding the expected cost to the company on the date of plan awards, as determinable based on predefined terms and conditions, both in terms of total amount and for each plan instrument. The costs of the Three-year Incentive Plan are included in the targets of the Three-year Industrial Plan. More specifically, the total consolidated cost of the Plan for the relevant three-year period is estimated as ranging between zero and a maximum of about 6.5 million euros, if the maximum Plan targets are achieved Indication of any potentially dilutive effects on capital determined by the plan s compensation Any limits applicable to the exercise of voting rights and the attribution of ownership rights If the shares are not traded on a regulated market, any useful information for a complete assessment of the value attributable to them Number of financial instruments underlying each option Expiration date of options Method (American/European), timing (e.g., period valid for exercise) and exercise clauses (e.g., knock-in and knock-out clauses). 12

13 4.19. Option exercise price or methods and criteria for its determination, specifically with regard to: a) the exercise price computation formula based on a specific market price (fair market value) (for example: exercise price equal to 90%, 100% or 110% of the market price); and b) modalities for determining the market price used as reference for determining the exercise price (for example: closing price on the day before the award, average for the day, average for the past 30 days, etc.) If the exercise price is not the same as the market price determined as stated in Section 4.19.b (fair market value), reasons for the difference Criteria on the basis of which different exercise prices were selected for different beneficiaries or different categories of beneficiaries If the financial instruments underlying the options are not traded on a regulated market, indicate the value attributable to the underlying instruments or the criteria for determining their value Criteria for the adjustments required due to extraordinary share capital transactions and other transactions entailing a change in the number of underlying instruments (capital increases, extraordinary dividends, reverse splits and splits of the underlying shares, mergers and demergers, transactions for the conversion into other classes of shares etc.). In the event of extraordinary share capital transactions and other transactions that modify the Group s scope of consolidation and/or profound changes in the macroeconomic and business scenario, the Board of Directors of Parmalat S.p.A., with the input of the Nominating and Compensation Committee, has the power to amend the reference amount of the performance targets referred to in Section

14 4.24. Issuers of shares shall attach to this document the annexed Schedule 1, filling in: a) in all cases, Section 1 of Tables 1 and 2, filling in the relevant fields. b) l Section 2 of Tables 1 and 2, filling in the relevant fields, based on the characteristics predefined by the Board of Directors. For members of the Board of Directors or the Management Board, General Managers and other executives of the issuer with strategic responsibilities, supply, by citing information published pursuant to Article 84-quarter, the data required for Section 1, Table 1, and the information requested in paragraph 1, including those of: - Item 1.1; - Letters a) and b) of Item 1.3; Not applicable, - Letters a) and b) of Item 1.4. The Plan calls for the disbursement of a cash bonus and does not call for the award of financial instruments. 14

15 ANNEX The table below summarizes the Plan s total potential costs: Function LTI target (% RAL) Enrollees Target Total costs (EUR) Maximum CEO 100% 1 650, ,000 Other beneficiaries 70% - 100% 8 2,573,000-3,660,000 3,870,000-5,492,000 Total 9 3,223,000-4,310,000 4,845,000-6,467,000 15