TRANSACTIONS WITH RELATED PARTIES Board of Directors Sorin SpA as of October 26, 2010 (updated thereafter by the Board of Directors on March 14, 2013) 1
INTRODUCTION This procedure (hereinafter the "Related Parties Procedure") was approved by the Board of Directors of Sorin SpA (hereinafter "Sorin" or the "Company") at its meeting of October 26, 2010, pursuant to Article 2391-bis of the Civil Code, pursuant to the Consob Regulation (as defined below) and pursuant to Article 9., Paragraph 1 of the Corporate Governance Code (Codice di Autodisciplina) (as defined hereunder). The Related Parties Procedure is published on the Company's website and can be accessed via the following link: http://www.sorin.com/eng/index.asp 1. OBJECTIVES This procedure sets out the principles by which Sorin abides in order to ensure transparency and propriety in substance and procedure in relation to related party transactions effected directly by Sorin or through companies controlled by Sorin. For the purposes of this Related Parties Procedure, transactions with related parties (hereinafter RPT ) shall mean any transfer of resources, services or obligations among Related Parties (as defined in Paragraph 5.8 below), regardless of whether or not consideration has been agreed, including: - mergers and spin-offs, if carried out with Related Parties; - any decision on the allocation of wages and economic benefits, in any form, to members of the administrative and control bodies and to key management (except as otherwise provided by the Consob Regulations (as defined hereunder) and subject to the exemptions described in Paragraph 13). In order to identify the RPTs under this Related Parties Procedure, the bodies involved in the examination and approval of the transactions and the bodies responsible for overseeing compliance with the Related Parties Procedure, each within its own authority, shall take into consideration the substance, and not merely the legal form, of the relationship. The Company's Board of Directors (the "Board"), taking into account the recommendations and opinions of the other corporate bodies, shall periodically evaluate, at least every three years, the effectiveness of the Related Parties Procedure and the need / prospect of revising the same. The disclosure obligations of the Related Parties Procedure shall be in addition, and not as an alternative, to the disclosure obligations under the Consolidated Law on Finance (TUF) (as defined hereunder). 2. RESPONSIBILITY Notwithstanding the provisions of Paragraph 15 of this Related Parties Procedure, the main party responsible for the correct application of the Related Parties Procedure is the Board. 3. EFFECTIVENESS 2
The Related Parties Procedure was adopted on October 26, 2010 by the Board and is effective from January 1, 2011. The procedure was updated thereafter on March 14, 2013. 4. SOURCES - Regulations containing all the principles regarding related parties transactions adopted by Consob Resolution no. 17221 of March 12, 2010 and subsequently modified by Consob Resolution no. 17389 of June 23, 2010 (hereinafter referred to as Consob Regulations ); - The Corporate Governance Code dated March 2006 Italian Stock Exchange, London Stock Exchange Group (hereinafter referred to as Corporate Governance Code ); - Legislative Decree no. 58 of February 24, 1998 (Consolidated Law on Finance) (hereinafter TUF ) and more precisely: o Articles 113-ter, 114, 115 and 154-ter. - Italian Civil Code (hereinafter c.c. ) and, more precisely: o Article 2391-bis. 5. DEFINITIONS 5.1 INDEPENDENT DIRECTORS For the purpose of this Related Parties Procedure, the directors that meet the independence requirements, as outlined in the Corporate Governance Code, are considered independent directors. 5.2 UNRELATED DIRECTORS For the purpose of this Related Parties Procedure, the directors other than the counterparty to a specific transaction and the counterparty's related parties, are considered unrelated directors. 5.3 RELEVANCE CRITERIA In order to identify the Major RPTs, the following criteria shall apply: (i) Equivalent-value ratio: the ratio between the countervalue of the RPT and the net equity derived from the latest published consolidated balance sheet of the Company or, if greater, the capitalization of the Company at the end of the last trading day included in the period covered by the most recently published accounting document (annual or semi-annual financial report or the interim financial report). Should the economic conditions of the RPT be determined, the countervalue shall be: a) In case of cash: the amount paid to or from the counterparty of the contract; 3
b) In case of financial instruments: the fair value determined at the date of the RPT, in accordance with international accounting standards adopted by Regulation (EC) No. 1606/2002; c) In case of RPTs entailing funding or the granting of guarantees: the maximum amount payable. If the economic conditions of the RPT depend, in whole or in part, on amounts not yet known, the countervalue of the RPT is the maximum value receivable or payable under the agreement. (ii) Asset relevance ratio: the ratio between the total assets of the company in the RPT and the total assets of the Company. Data to be used shall be obtained from the most recently published consolidated balance sheet of the Company; whenever possible, similar data should be used for determining the total assets of the company involved in the RPT. For RPTs involving the acquisition or divestiture of shares in companies that have an impact on the area of consolidation, the value of the numerator is the total assets of the controlled company, regardless of the percentage of capital to be transferred. For RPTs involving the acquisition or divestiture of shares in companies that have no effect on the area of consolidation, the value of the numerator is: a) in the case of acquisitions, the countervalue of the RPT increased by the amount of any liabilities of the company acquired assumed by the purchaser; b) in case of divestiture, the price for the asset sold. For RPTs involving the acquisition and divestiture of other assets, the value of the numerator is: a) in case of acquisitions, the greater of the price and the book value that will be attributed to the assets after the RPT; b) in case of divestiture, the book value of the assets before the RPT. (iii) Liabilities relevance ratio: the ratio between total liabilities of the acquired company and the total assets of the Company. Data to be used shall be derived from the most recently published consolidated balance sheet of the Company; whenever possible, similar data should be used for determining the total liabilities of the company or business unit acquired. 5.4 NEGLIGIBLE TRANSACTIONS ( Negligible RPTs ) For the purpose of the Related Parties Procedure, this means the RPT of a total value of less than or equal to Euro 50,000.00, as approved by the Board which, for the purpose of quantifying such value, shall take into consideration: (i) the absence of appreciable risks to the investors and (ii) the fact that the RPT would be of a "negligible size", including when compared with the average value of the RPTs concluded in the previous 3 years. 5.5 MAJOR TRANSACTIONS ( Major RPTs ) For the purposes of this Related Parties Procedure, Major RPTs shall be the following: 4
a) RPTs where at least one of the Relevance Criteria, applicable depending on the specific transaction, exceeds 5%; b) RPTs with the publicly traded parent company (if there is one), or with entities that are related to the publicly traded parent company which are, in turn, also related to Sorin, where at least one of the Relevance Criteria is higher than 2.5%; c) RPTs that may affect the independence of the management of the Company (including RPTs relating to intangible assets), or which, in any case, relate to activities or assets of strategic importance for the Company, where at least one of the Relevance Criteria is higher than the 2.5%. The assessment of the strategic importance of certain assets or activities of the Company is the mandatory responsibility of the Board, which passes resolutions in that regard, from time to time, at the initiative of only one of its members, or at the request of the board of statutory auditors. 5.6 MINOR TRANSACTIONS ( Minor RPTs ) Any RPTs that cannot be defined as Major RPT, as per the preceding paragraph, are defined, for the purposes of this Related Parties Procedure, as Minor RPTs, unless they can be defined as Negligible RPTs. 5.7 REGULAR TRANSACTIONS ( Ordinary RPTs ) For the purposes of this Related Parties Procedure, Ordinary RPTs are intended as those RPTs that fall within the normal execution of the regular operating activity and related financial activity, carried out according to conditions equivalent to market or standard conditions. For the purpose of this Related Parties Procedure, operating activities are those main activities that generate revenues for the company and all those other operating activities that cannot be classified as investment or financial. In order to be considered ordinary, financial activity must be linked to the operating activity (i.e. financing obtained in order to carry out activities which are not linked to the operating activities cannot be considered as part of an Ordinary RPT because it is linked to investment activities). In order to understand if a transaction falls within the normal business of the operating activity or the financial activity related thereto, the Company shall follow the following general criteria: i) scope of the transaction. If the scope of the transaction is totally foreign to the activities typically carried out by the Company, this is clearly an indication that the activity may not be considered ordinary; ii) a recurring activity within the company s activities. The regular repetition of a transaction by the Company is an important indication of its being part of the Company s ordinary activities, in absence of any contrary indications; iii) size of transaction. A transaction that is part of the Company s operating activity may not fall within the ordinary exercise of such activity if the transaction's size is particularly significant; iv) contractual terms and conditions. More specifically, the activities for which non-monetary compensation is contemplated are normally not part of the ordinary exercise of operating activity, even 5
if subject to third-party appraisals. Similarly, contractual clauses that diverge from the uses and from standard negotiation procedures may represent a significant indication that they are not ordinary; v) counterparty s nature. Within the framework of RPTs, it is possible to identify a subgroup of transactions that are not part of the ordinary exercise of operating activity (or related financial activity) because they are carried out with a counterparty that has anomalous characteristics compared to the type of transaction carried out (i.e. transfer of capital goods, classified as non-current assets held for sale, to a company in temporary receivership that does not carry out activities in the field for which the goods are used or that is obviously lacking an organization suitable for using the goods). 5.8 RELATED PARTY An entity is a Related Party to the Company if: (a) directly or indirectly through subsidiaries, trustees or an intermediary: (i) it controls the Company, it is controlled by the Company, or it and the Company are under common control; (ii) it holds a stake in the Company that allows for exercising significant influence over it; (iii) it exercises control over the Company jointly with others; (b) it is an associated company of the Company; (c) it is a joint venture in which the Company is a participant; (d) it is one of the key management personnel of the Company or of its parent; (e) it is a close relative of a person referred to in paragraphs (a) or (d); (f) it is an entity in which a person referred to in paragraphs (d) or (e) exercises control, joint control or significant influence, or owns, directly or indirectly, a significant portion, but not less than 20% of voting rights; (g) it is a supplementary pension fund, collective or individual, Italian or foreign, established for the employees of the Company, or any other entity associated with it. In this Related Parties Procedure, all words and/or expressions not specifically defined and relevant in order to identify the Related Parties or the RPTs or definitions that are necessary to the application of the Related Parties Procedure have the same meaning as that attributed in the Consob Regulations. 6. IDENTIFICATION REQUIREMENTS OF INDEPENDENCE OF DIRECTORS The independent directors are considered as meeting the requirements of the Corporate Governance Code 1. 1 Pursuant to Article 3 of the Corporate Governance Code, the Board shall evaluate the independence of its non-executive members having regard more to the contents than to the form and keeping in mind that a director usually does not appear independent in the following events, to be considered merely as an example and not limited to: a) if he/she controls, directly or indirectly, the issuer also through subsidiaries, trustees or through a third party, or is able to exercise dominant influence over the issuer, or participates in a stockholders agreement through which one or more persons may exercise a control or considerable influence over the issuer; b) if he/she is, or has been in the preceding three fiscal years, a relevant representative of the issuer, of a subsidiary having strategic importance or of a company under common control with the issuer, or of a company or entity controlling the issuer or able to exercise considerable influence over the issuer, including jointly with others through a stockholders agreement; c) if he/she has, or had in the preceding fiscal year, directly or indirectly (e.g. through subsidiaries or companies of which he/she is a significant representative, or in the capacity as partner of a professional firm or of a consulting company) a significant commercial, financial or professional relationship: with the issuer, one of its subsidiaries, or any of its significant representatives; 6
7. COMMITTEE CHARGED WITH THE EVALUATION OF THE MAJOR AND MINOR RELATED PARTIES TRANSACTIONS The Sorin Board has established a committee composed exclusively of 3 unrelated, non-executive independent directors meeting the requirements set out in Paragraph 6 above (the Committee ) More specifically, the Committee is responsible for: - Providing a preventive and binding opinion regarding the Related Parties Procedure and any amendment of it, as well as proposals that are to be made to the stockholders' meetings regarding amendments of the by-laws, if any, deemed necessary by the Board as part of the definition of the Related Parties Procedure; - Providing a justified and binding opinion on Major RPTs and providing a justified and nonbinding opinion on Minor RPTs. - The Committee has the right to be assisted, at company expense, by one or more independent experts chosen by the Committee, with a cap of EUR 50,000 for Minor RPTs and without any limits for Major RPTs. Should the directors of the Committee, including any one of them, not be considered Unrelated Directors at the time of a Major or Minor RPT, the Board shall identify, among its members, one or more directors having the requisites set by the Consob Regulations to have those directors fulfill the duties assigned to the Committee pursuant to the Related Parties Procedure.. 8. IDENTIFICATION OF RELATED PARTIES TRANSMISSION OF INFORMATION NEEDED FOR DRAFTING OF DISCLOSURE DOCUMENTS 8.1 Related Parties are identified by self-certification by which the person receiving the request for information sent by the Company declares under his own responsibility, that he is or is not a Related Party of the Company. 8.2 Directors, auditors, managers with strategic responsibilities in the Company and within companies part of Sorin Group as well as persons who, directly or indirectly, through one or more intermediaries: with a party who, jointly with others through a stockholders agreement, controls the issuer; or in case of a company or an entity with the relevant significant representatives; or is, or has been in the preceding three fiscal years, an employee of the abovementioned parties; d) if he/she receives, or has received in the preceding three fiscal years, from the issuer or a subsidiary or holding company of the issuer, significant additional remuneration compared to the fixed remuneration of non-executive director of the issuer, including the participation in incentive plans linked to the company s performance, including stock option plans; e) if he/she was a director of the issuer for more than nine years in the last twelve years; f) if he/she is vested with the executive director office in another company in which an executive director of the issuer holds the office of director; g) if he/she is shareholder or quotaholder or director of a legal entity belonging to the same network as the firm engaged for the accounting audit of the issuer; h) if he/she is a close relative of a person who is in any of the positions listed in the preceding points. 7
control even if together with other persons the Company, are controlled by the Company or together with the Company, are subject to common control; or own a stake in the Company that permits them to exercise a significant influence over it; are obliged to promptly inform the Business Affairs Director, no later than the 30 th calendar day of each quarter of the year, beginning from January 1 of each year, regarding any information that may be useful to provide a correct evaluation on whether they are to be classified as Related Parties and to identify other parties that may qualify as Related Parties considering the existing relationship between them. 8.3 Should there be any modification over the course of the year of information/data that was submitted, it shall be promptly communicated in writing to the Business Affairs Director by the aforementioned parties within 7 days from the date on which the party was informed of said modification. 8.4 It will be the Business Affairs Director s responsibility to set up and update a database, on a quarterly basis, of all Related Parties of the Company. Said database will contain the following information: - name and family name/business or other name of Related Parties; - nature of the related-party relationship; - relationship period. 8.5 The subsidiary and associate companies of the Company are responsible for timely communication to the Company of any RPT carried out. The updated list of the Related Parties to the Company is available on the corporate intranet web site, which is also accessible by subsidiary and associate companies. 8.6 In cases in which the Company, through the Business Affairs Director and the Investor Relations unit, is required to draft and publish a disclosure document in conformity with the TUF and/or the Consob Regulations, the Board shall promptly provide the Business Affairs Director with all the information and/or documents needed so that the compliance matters required by sector laws and regulations can be observed. 9. IDENTIFICATION OF TRANSACTIONS BY THRESHOLDS OF RELEVANCE 9.1 Before carrying out any RPT, before undertaking any commitment, the Board has the responsibility of evaluating its nature and identifying its threshold of relevance. Said activity is carried out with the support of the Business Affairs function which has all the internal transaction instructions aimed at insuring both the preventive reporting of all RPTs and the efficient flow of information to the Committee with regard to said RPT. The Business Affairs function also institutes, including through appropriate information tools, the expost controls of the RPTs aimed at detecting all of the transactions, making the appropriate disclosures, if any, to the Committee. 8
The Business Affairs function performs a double role: - A role of coordination between the Committee, that is required to express an opinion justifying the transaction, and the Board; - A role of support to the Board for the correct reporting, identification and procedural management of the RPT. 9.2 The Board evaluates the RPTs by adopting one of the following distinct procedures, depending on the relevance of the RPT: In case of Minor RPTs, their cumulability is to be evaluated. Specifically, should the Company, during its course of business, execute more than one Minor RPT with the same Related Party or with persons related to the latter or the Company itself, it is to be determined if said RPTs are homogeneous or made pursuant to a single plan. In case for whatever reason the RPTs are to be considered cumulative pursuant to Paragraph 12 hereunder, their relevance must be determined by adding the value of each RPT, obtained by applying to each the above Relevance Criteria. Should the sum of the cumulated RPTs, even by the application of a single Relevance Criteria, be above the threshold of relevance referenced in Paragraph 5.5 above, such RPTs shall be part of a single disclosure document drafted in accordance with Article 5 of the Consob Regulations; For the purposes of cumulability, transactions carried out by Italian or foreign subsidiaries shall also be included, whereas the transactions excluded pursuant to Articles 13 and 14 of the Consob Regulations ("Cases and options of exclusion", "Direction and coordination, subsidiary companies and affiliate companies") shall not be considered. 10. MEANS FOR GETTING INFORMATION ABOUT RPTs AND FOR APPROVING RPTs 10.1 PROCEDURE FOR MAJOR RPT 10.1.1 The responsibility for the resolution of Major RPT lies exclusively with the Board which shall deliberate after having carefully examined the transactions. This review shall be supported by all necessary documentation in order to illustrate the reasons for the related RPTs, the related suitability as well as the substantial correctness of the conditions at which the RPTs are concluded 10.1.2 The Board shall deliberate on Major RPTs subject to a favorable opinion of the Committee justifying the transaction. The Committee s opinion shall take into consideration the Company s interest in executing the transaction, the suitability and the substantial correctness of the conditions, but it shall not provide its opinion in relation to other aspects and, more specifically, in relation to management decisions attributed exclusively to the discretionary opinion of the executive directors. The Committee members shall meet as a board, and will consult with each other in order to share and compare their opinions. Following said consultation, the Committee members shall be asked to vote in line with the clauses set forth in specific rules that the Committee shall issue and approve at the first meeting following its installation. The Committee has the option of requesting assistance from one or more unrelated independent experts of its choice, at company expense. 10.1.3 The Committee is involved in the negotiation phase and in the preliminary approval phase through the receipt of a complete and timely flow of information, and has the option of requesting 9
information and making observations to the delegated bodies and persons responsible for conducting the negotiations or preliminary approval. 10.1.4 The Board may approve the Major RPTs notwithstanding the Committee s opposing opinion on the condition that the execution of said RPTs is authorized, as per Article 2354, Paragraph 1, number 5) c.c. by the stockholders' meeting that passes the resolution, as provided for by Article 11, Paragraph 3 of the Consob Regulations, with the following means (the so-called whitewash mechanism): (i) the resolution is approved, on the condition that: 1. the quorums as provided by the Company's by-laws for a validly constituted meeting and for passing resolutions have been met, and 2. there is no negative vote of the majority of unrelated voting stockholders at the stockholders' meeting; (ii) the condition set forth in n. 2 of point (i) above is subject to the presence at the stockholders' meeting of a number of unrelated stockholders that represents at least 10% of the Company capital stock. 10.1.5 Should a Major RPT involve the interests of a Sorin director, the director who then becomes a Related Party in the transaction shall provide comprehensive and timely disclosure to the Board regarding the existence of the relevant interest as per Article 2391 c.c., and shall abstain from participating in resolutions. Should the Board approve said director s participation in the preliminary approval phase and the final approval phase, the Board may allow such director, after having consulted the board of statutory auditors, to participate in both the preliminary approval and final approval phases of the transaction. 10.1.6 In Major RPTs that are to be carried out, including through Sorin controlled companies, the Company shall issue (pursuant to article 114, Paragraph 6 of the TUF) a disclosure document drafted pursuant to Exhibit 4 of the Consob Regulations, as provided by Article 5 of the Consob Regulation. The Company shall prepare such disclosure document in the case mentioned in Paragraph 9.2 hereinabove. In such instance the Company shall prepare a single disclosure document for all the cumulable RPTs. 10.2 PROCEDURE FOR MINOR RPT 10.2.1 The procedure illustrated below is applied exclusively for Minor RPTs, unless otherwise expressly provided hereunder. 10.2.2. The responsibility for the approval of Minor RPTs is vested with the delegated bodies (hereinafter Delegated Bodies ), which, depending on the situation, are responsible with regards to the specific Minor RPT on the basis of the powers conferred to them by virtue of a board resolution appointing the body as a Delegated Body. Should no Delegated Bodies exist, the Board is responsible for the approval of the Minor RPTs. The Delegated Bodies may at any time submit to the Board for approval, the Minor RPTs, for which they are responsible. 10.2.3 In any case, the Minor RPTs are approved subject to the non-binding opinion of the Committee. The Committee has the option of being assisted by one or more independent and unrelated experts of the Committee's choice, at company expense, for a maximum expense as set forth in the preceding 10
Article 7 for each Minor RPT. The unrelated independent experts 2 may be asked to express their opinion and/or assessment, depending on the situation, of the economic conditions and/or technical aspects and/or on the legality of the Minor RPTs. The non-binding opinion of the Committee shall be adopted mutatis mutandis in conformity with the means set forth in Paragraph 10.1.2 hereinabove. 10.2.4 The Delegated Bodies or the Board (depending on the situation) shall report about the execution of the Minor RPTs at least on a quarterly basis, and provide all the necessary documentation for a clear representation of such Minor RPTs to the Board (in case of Delegated Bodies), to the board of statutory auditors and to the Committee. 10.2.5 Should the Committee provide a negative opinion regarding the Minor RPT, Sorin (within 15 days from the closing of each quarterly fiscal period) shall make available to the public (at the registered office and with the means set forth in Part III, Title II, subtitle I of the Issuer Regulations) a disclosure document that contains the indication of the counterparty, the subject matter and the price of the Minor RPTs approved during the relevant quarter notwithstanding the aforementioned negative opinion, as well as the reasons as to why said opinion was not shared. Within the same timeframe, the Committee s opinion is made available to the public as an attachment to the disclosure documents or on Sorin s Internet site. 10.3 TRANSACTIONS FOR WHICH THE STOCKHOLDERS MEETING IS RESPONSIBLE In those cases where, based on legal or by-law regulations, the RPTs are the responsibility of the stockholders' meeting or must be approved by the latter, the procedure to be applied shall be during the negotiation phase, the preliminary approval phase and the phase of approval of the proposed resolution to be submitted to the stockholders is that described in Paragraph 10.1 for the Major RPTs and that described in Paragraph 10.2 for the Minor RPTs. 10.4 PROCEDURES TO BE APPLIED IN CASE SORIN IS CONSIDERED A COMPANY OF LIMITED SIZE Should Sorin s approved consolidated financial statements indicate at any time that neither Sorin s assets nor its revenues exceed Euro 500,000,000.00, Sorin shall apply in the subsequent fiscal periods, the procedure for Minor RPTs as provided in Paragraph 10.2 above, including in the case of a Major RPT. In such case Sorin shall be required to draft a disclosure document for each of the Major RPTs, pursuant to Article 5 of the Consob Regulations. Should only one of the two aforementioned parameters not be met by Sorin in two consecutive fiscal years, Sorin shall fully apply the procedures mentioned in Paragraph 10.1 for Major RPTs. 11. TRANSACTIONS OF ITALIAN OR FOREIGN CONTROLLED COMPANIES Sorin shall promptly receive from the Italian and foreign controlled companies all information required to allow the identification of the Related Parties and of the nature of the transactions carried out by such 2 Sorin may agree on the criteria for the nomination of the independent experts (i.e. persons registered on special registers and/or having specific professional requisites). 11
companies. This is also necessary in order to prepare the disclosure document that needs to be transmitted to the market in accordance with the terms and the conditions of the Consob Regulations. Should Sorin examine in advance or approve, with any means and regardless of an express resolution, RPTs carried out by Sorin Group controlled companies, be they Italian or foreign, the provisions set forth in the preceding Paragraphs 10.1, 10.2 and 10.3 shall apply. 12. MECHANISM FOR THE CUMULABILITY OF TRANSACTIONS The Business Affairs director shall be responsible for keeping track of all transactions considered to be Minor RPTs in order to verify subsequently if said transactions, cumulable with others, exceed the thresholds of relevance. The Minor RPTs that are concluded within a single fiscal period even if concluded by Italian or foreign controlled companies and that, if considered cumulatively (summed) exceed the threshold set for Major RPTs, shall be part of a disclosure document containing information on all the cumulable RPTs, prepared pursuant to Article 5 of the Consob Regulations. The transactions concluded during the same fiscal period that are cumulable are: 12.1 PUBLIC DISCLOSURE those with the same Related Party; those with parties related both to such Related Party and to the Company; those transactions that are homogeneous; those realized in the execution of a single plan. In cases where the threshold of relevance is exceeded by the accumulation of transactions, the disclosure document shall be made available to the public within 15 days from the approval of the transaction which caused the threshold to be exceeded. The disclosure document shall contain all the transactions, including on an aggregate basis, that were considered in the accumulation. Should the transaction that caused the threshold to be exceeded have been carried out by a controlled company, the disclosure document shall be made available within 15 days from when Sorin received news of the approval. 13. EXEMPTIONS In addition to the cases for which the Consob Regulations provide exemption from the above procedure, Sorin also applies the exemptions described below, allowed by the Consob Regulations on an optional basis. 13.1 In particular, the following are exempt from the provisions contained in this Related Parties Procedure, to the extent allowed by the Consob Regulations: (i) (ii) Negligible RPTs; compensation plans based on financial instruments approved by the stockholders' meeting pursuant to Article 114-bis of the TUF, as amended, and its enactment regulations; 12
(iii) resolutions (other than those indicated in Article 13, Paragraph 1 of the Consob Regulations) related to remuneration for directors, board members holding special offices and other managers with strategic responsibilities, provided that: a) the Company has adopted a remuneration policy; b) a committee consisting solely of non-executive directors, most of whom are independent, has been involved in the definition of the remuneration policy; c) a report illustrating the remuneration policy has been submitted for approval or advisory vote of the stockholders' meeting; d) the remuneration awarded is consistent with this policy. (iv) (v) (vi) Ordinary RPTs, without prejudice to the obligations referenced in Paragraph 13.2 hereunder; RPTs with or between companies controlled (also jointly) by Sorin, as long as there are no interests (qualified as significant pursuant to Paragraph 13.3 hereunder) of other Related Parties of the Company within the subsidiary or associate companies that are counterparties to the RPT ; urgent RPTs, in accordance with the provisions set forth in Paragraph 13.4 hereunder as well as in the Company s by-laws. In the presence of specific reasons, the Board of Directors reserves the right to apply the rules contained in this Related Parties Procedure to transactions normally classified as exemptions. 13.2 Regarding ordinary Major RPTs, Sorin shall meet the following disclosure obligations: (i) (ii) communication to Consob of the counterparty, the subject matter and the price for the exempted RPT, within 7 days from the approval of the transaction, or from the conclusion (including preliminary) of the contract or from the approval of the proposal to be submitted to the stockholders' meeting; indication in the interim report on operations and in the annual report on operations, pursuant the provisions of Article 5, Paragraph 8 of the Consob Regulations, of which of the RPTs subject to disclosure obligations indicated in such last provision have been concluded by taking advantage of the exemption provided by the preceding Paragraph 13.1 (iv). 13.3 For the purposes of the exemption mentioned in the preceding Paragraph 13.1 (v) (i.e. transactions with or between controlled companies), the following are considered significant: (i) (ii) interests for which an economic value of the RPT above the negligible threshold set out in Paragraph 5.4 can be identified, pursuant to the preceding Paragraph 13.1 (i); interests shared by one or more managers with strategic responsibility, should said managers benefit from incentive plans based on financial instruments or from variable compensation contingent on results obtained by subsidiary or associate companies of Sorin Group with which the transaction was carried out; 13
(iii) (iv) interests of the entity controlling Sorin, where the investment held by it (even if indirectly) in the company that is a counterparty to the RPT, controlled by or related to Sorin, has an actual weight greater than that of the investment that the same holds in Sorin; interests regardless of the economic value identifiable in the RPT as evaluated from time to time by the Company's Board in relation to any single RPT. 13.4 The exemption of the preceding Paragraph 13.1 (vi) (i.e. urgent RPTs) is subordinated to the existence of the following conditions: (i) (ii) (iii) (iv) (v) (vi) the transaction must not be the responsibility of the stockholders' meeting, nor should it need to be authorized by the stockholders' meeting; for Major RPTs, the disclosure obligations provided by Article 5 of the Consob Regulations shall apply; Should the RPT be the responsibility of a delegated body, the chairman of the Board shall be informed about the reasons of urgency before the execution of the transaction. If the Board chairman, in relation to such specific RPT, cannot be considered as an unrelated independent director, the Committee members shall be informed about the reasons of urgency before the execution of the transaction; The RPTs must later be the subject of a non-binding resolution, without prejudice to their effectiveness, adopted by the next ordinary stockholders' meeting; The body that convenes the stockholders' meeting for the purpose of passing a resolution pursuant to the preceding Paragraph 13.4 (iv) shall prepare a report containing clear explanation of the reasons of urgency; The control body must report to the stockholders' meeting its assessments in relation to the existence of the reasons of urgency; (vii) The report and the assessments referenced in the preceding Paragraphs 13.4 (v) and 13.4 (vi) shall be made available to the public (at least 21 days prior to the date of the stockholders meeting of referenced in the preceding Paragraph 13.4 (iv)) at the registered office and with the means indicated in Part III Title II, Subparagraph I of the Issuer Regulations. Such documents may be part of the disclosure document issued pursuant to Article 5, Paragraph 1 of the Consob Regulations; (viii) By the day following the stockholders meeting referenced in Paragraph 13.4 (iv), all information regarding the voting outcome, and more specifically regarding the number of votes that were cast overall by unrelated parties, shall be made available to the public (pursuant to Part III, Title II, Subparagraph I of the Issuer Regulations). 14. COORDINATION WITH PROCEDURES ADOPTED PURSUANT TO ARTICLE 154-BIS OF LEGISLATIVE DECREE N. 58 OF FEBRUARY 24, 1998 This Related Parties Procedure shall ensure coordination with the administrative and accounting procedures pursuant to Article 154-bis of the TUF. 14
15. RESPONSIBILITIES The board of statutory auditors of the Company is responsible for overseeing: (i) the conformity of this Related Parties Procedure with the principles of the Consob Regulations; and (ii) the compliance and correct application of this Related Parties Procedure. 15