Group Compensation Policy - Financial Years as at December 31,

Transcription

1 G R O U P C O M P E N S AT I O N P O L I C Y F I N A N C I A L Y E A R S A S AT D E C E M B E R 3 1, MA R C H 1 2,

2 Group Compensation Policy - Financial Years as at December 31, I N F O R M AT I O N A L M E M O R A N D U M R E L AT I N G T O T H E S T O C K O P T I O N P L A N, P R E PA R E D P U R S U A N T T O A RT I C L E B I S O F T H E C O N S O B R U L E S U N D E R R E S O L U T I O N N O O F 1 4 M AY , A S S U B S E Q U E N T LY A M E N D E D A N D S U P P L E M E N T E D R O ME, MA R C H 1 2, P 41

3 Lottomatica Group spa Introduction On March 12, 2013 the board of directors of LOTTOMATICA GROUP S.p.A. (the Company or Lottomatica ) resolved to submit to the shareholders meeting scheduled on May 8 and 9, 2013, respectively on first and second call, the stock option plan, to be reserved for the Company and/or its subsidiaries employees, (the Stock Option Plan, or simply, the Plan ), on the assumption that their participation or expected participation in the share capital of the Company is an incentive to the value creation, in view of their strategic role within the Company and its group. The Stock Option Plan should be considered material pursuant to Article 114-bis, 3rd paragraph, of Legislative Decree no. 58 of February 24, 1998 (the TUF ), and to Article 84-bis, 2ndparagraph, of the CONSOB Regulations adopted pursuant to resolution no of May, 14, 1999, as subsequently amended and supplemented (the Issuers Regulations ), as among its Beneficiaries (as below defined) there are members of the board of directors of the Company, its general manager and other Executives with Strategic Responsibilities (as below defined), even though the Plan does not include specific provisions reserved to them, exception made for the 3-year further retention period under Section 4.6 hereof. This informational memorandum has been prepared in conformity with Form 7 of Attachment 3A of the Issuers Regulations, including as regards the numbering of its paragraphs. Definitions The terms referenced below have the following meanings: Shares Indicates the ordinary shares of the Company, listed on the Mercato Telematico Azionario MTA, organized and run by Borsa Italiana S.p.A., having a nominal value of 1 euro each, to be awarded pursuant to the Stock Option Plan. Beneficiaries Refers to the persons, employees of the Company and/or its subsidiaries, to whom the Options will be assigned. Board of Directors or Board Means the board of directors of Lottomatica, which resolved to submit the Plan to the approval by the shareholders through this informational memorandum Code Indicates the Italian Stock Exchange corporate governance code in its last edition of December Compensation and Nomination Committee Means the compensation and nomination committee of Lottomatica that reviewed and submitted this informational memorandum to the approval of the Board of Directors. Consob Indicates the Italian Securities and Exchange Commission Commissione Nazionale per le Società e la Borsa. P 42

4 Group Compensation Policy - Financial Years as at December 31, Grant Date Indicates the date on which the Board of Directors resolves to assign a number of Options to each of the Beneficiaries in execution of the Plan. Executives with Strategic Responsibilities Indicates the Beneficiaries who, pursuant to Consob Regulation no of March 12, 2010 on listed companies related party transactions, have the power and responsibility, either directly or indirectly, of the planning, direction and supervision of the activities of the Company, including directors (whether executive (6) or otherwise) of the Company. Consolidated EBITDA Means EBITDA as approved by the Board of Directors of the Company and as presented in the group s consolidated annual financial statements filed with the CONSOB for a calendar year. For LTI Plan purposes, the three-year cumulative actual Consolidated EBITDA will be reduced by (i) the excess of any non-recurring/one-off cash expenses (for example, inter alia, restructuring expenses) over the total budgeted amounts for the same period (for the budgeted expenses), and (ii) any non-recurring/one-off cash expenses that were not included in budget. However, the aforementioned non-recurring/ one-off cash expenses are not intended to include any amounts that are related to the Company s debt instruments (including hedge transactions), minority interests or income taxes. Exclusions of non-recurring/ one-off cash expenses from the adjustment to the actual Consolidated EBITDA amount must be specifically approved by the Board of Directors or the Compensation and Nomination Committee. Privileged Information Indicates information defined as such under Article no. 181 of the TUF, when directly concerning Lottomatica or its subsidiaries. Options Refers to the options included in the Stock Option Plan, which will give the respective Beneficiaries, under the established conditions, the right to subscribe for an equivalent number of Shares. Company or Lottomatica Refers to Lottomatica Group S.p.A. (6) Pursuant to Article 2.C.1 of the Code, the following are qualified executive directors o fan issuer: - the chief executive officer of the issuer or of a subsidiary having strategic relevance, including the chairmen when these are granted individual management powers or when they play a specific role in the definition of the business strategies; - the directors vested with management duties within the issuer or one of its subsidiaries having strategic relevance, or within a controlling company when the office is intended to also concern the issuer; - the directors who are members of the executive committee of the issuer, when no chief executive officer is appointed or when the participation in the executive committee, taking into account the frequency of the meetings and the scope of the relevant resolutions, entails, as a matter of fact, the systematic involvement of its members in the day-to-day management of the issuer. P 43

5 Lottomatica Group spa 1. Beneficiaries 1.1 Among the Beneficiaries, Marco Sala, Chief Executive Officer of Lottomatica, and Jaymin Patel, President and Chief Executive Officer of the Company s US based subsidiary of strategic relevance, GTECH Corporation, are members of the Board of Directors as well as Executives with Strategic Responsibilities. Among the Beneficiaries there are no members of management bodies of Lottomatica s parent companies, nor of its subsidiaries for whom conditions under Consob communication no. DME/ and DME/ of September 13, 2007 are applicable, such as the entitlement to additional rewards, Options (or a particular kind of them), offices or positions other than the employment, as a result of such subsidiary management membership. 1.2 The Plan is addressed to executives of the Company and/or its Italian subsidiaries and, in case of foreign subsidiaries, to Senior Vice Presidents, Vice Presidents, Key Directors and Managers. Among the Beneficiaries there are no consultants. 1.3 Among the Beneficiaries there is Renato Ascoli, General Manager and an Executive with Strategic Responsibilities. 1.4 Among the Beneficiaries who are Executives with Strategic Responsibilities there are also Alberto Fornaro, Chief Financial Officer of the Company, and Walter Bugno, President and CEO of Spielo International business division. There are no categories of employees for whom different terms and conditions were provided, exception made for the 3-year further retention period reserved to the Executives with Strategic Responsibilities under Section 4.6 hereof. 2. Reasons for the adoption of the Plan 2.1 Also this year, Lottomatica intends to focus the commitment of the Beneficiaries on targets of strategic importance, encourage loyalty and devotion as well as retain them within the group, link their compensation to the upgraded value gained by the shareholders and improve the competitiveness of Lottomatica by encouraging the achievement of prefixed objectives, as well as maintain the compensation of the Beneficiaries at competitive levels. Moreover, the Company believes that the Plan may align the interests of, among the others, the executive Directors, under the above Section 1.1, and the Executives with Strategic Responsibilities, under the above Sections 1.3 and 1.4, with those of the shareholders. In pursuing the above objectives, Lottomatica referred to, among others, Article 6 of the Code, whereby it is recommended that the variable components of the remuneration of the executive Directors and of the other Executives with Strategic Responsibilities be linked to predetermined and measurable criteria. At the same time, when setting multi-yearly performance targets as indicated under the above Section 2.2 and binding Executives with Strategic Responsibilities to a further 3-year retention period as indicated under the above Section 4.6, the P 44

6 Group Compensation Policy - Financial Years as at December 31, Company has sought to discourage exclusive focus on increasing the short term market value of the Shares, and more in general of the Company, which would undermine the creation of value in the medium-long period The Plan will be carried out over total time period of approximately seven years, which is considered appropriate to measure the Company s stable performance. As indicated under Section 2.3 below, the maximum number of Options to be assigned to each Beneficiary will be determined by the Board of Directors, pursuant to the criteria set forth under Section 4.4. In regards to the ratio between stock based incentive compensation and other components of total compensation packages of the Beneficiaries, the Company refers to the best practices adopted by companies operating in similar industries. 2.2 The exercise of Options by the Beneficiaries will be connected to and conditioned upon the Company s reaching certain Consolidated EBITDA levels during the 2013, 2014 and 2015 financial years, considered as the whole, as well as upon reaching a certain ratio between Consolidated Net Financial Position and Consolidated EBITDA at the end of the same 3 financial years, i.e. as of December 31, 2015, as will be more specifically set by the Board of Directors when implementing the Plan The performance conditions referred to under Section 2.2 above will be applied to all Beneficiaries equally and will be defined, without being necessarily the same, in strict relation to the medium and long-term objectives of the Company. The Board of Directors believes that the above performance indicators are the most appropriate to favor corporate value upgrades, also taking into consideration the kind of business of the Company. 2.3 The Board of Directors will determine the maximum number of Options to be assigned to each Beneficiary, pursuant to the criteria set forth under Section 4.4 below, taking into account the role of each Beneficiary in the corporate organization and its influence in the reaching both the general objectives and the development of the Company s business activities, and also considering the experience, competence the position and the years of employment with the group In addition to the criteria detailed under Section 2.3 above, the Board of Directors will be able to also take into account benefits granted pursuant to other prior or concurrent incentive share based plans, without being in any case bound to it. 2.4 The Plan is based on financial instruments issued by the Company, which waives the obligation to provide, pursuant to the Issuers Regulation, the rationale for attributing financial instruments issued by entities other than the Company. P 45

7 Lottomatica Group spa 2.5 No specific tax or accounting implications have impacted the Plan. 2.6 The Plan is not financed by the special incentive fund aimed at favoring the employees investment in their companies, pursuant to Article 4, 112th paragraph of Law no. 350 of 24 December Approval of the Plan and timetable for the Option allocation 3.1 The Company s ordinary Shareholders meeting convened to approve the Plan will be asked to confer upon the Board of Directors all necessary or appropriate powers to execute the Plan. By mere way of example, the Board of Directors will have the following powers, with the ability to appoint designees in whole or in part: (i) identifying the Beneficiaries among the executives of Lottomatica and/or its Italian subsidiaries, as well as among the Senior Vice Presidents, Vice Presidents, Key Directors and Managers of its foreign subsidiaries, and setting the number of Options to be so assigned to each such participant; (ii) setting the result-based conditions and/ or the performance targets to which exercise of the Options will be subjected; (iii) establishing all other terms and conditions to execute the Plan; (iv) preparing and approving the terms and conditions governing the Plan, as well as amending and/or supplementing them, in accordance with the present informational memorandum and having consulted, if necessary, the Compensation and Nomination Committee. 3.2 The Plan will be managed by the Resources and Shared Services Department of the Company, for the Beneficiaries being employees of Italian subsidiaries, and by the Gtech Corporation Human Resources Department, for the others employees; they will both cooperated with the Corporate Affairs Department of the Company (i) for the issuance of the Shares or for the use of own Shares, as the case may be, (ii) to ensure compliance with internal dealing disclosure obligations, and (iii) for the drafting of the terms and conditions of the Plan and of this Informational Memorandum; dealers or similar entities will be engaged as well to supply investment related services. 3.3 No specific procedures are designed for Plan s reviews consequential upon amendments to the performance targets, which shall therefore simply require the approval by the Board of Directors, and not also by the shareholders, to the extent that the provisions contained in this information memorandum remain unaffected, similarly to the consequences of the events under Section 4.23 hereof. 3.4 In order to serve the Plan, the Board of Directors (i) was empowered to increase the Company s share capital any pre-emption right being waived pursuant to Article 2441, fourth paragraph, second period of the Italian Civil Code by the extraordinary shareholders meeting of the Company held on April 28, 2011 for five years therefrom or, based upon the authorization by the shareholders meeting scheduled of May 9, 2012 (ii) will be entitled to use own Shares. P 46

8 Group Compensation Policy - Financial Years as at December 31, Marco Sala and Jaymin Patel, in their capacity as Board members of Lottomatica and Beneficiaries, have abstained from discussing and voting during the Board meeting where it was resolved to submit it to the shareholders meeting. 3.6 The Board of Directors resolved to submit the Plan to the shareholders approval, at the meeting held on March 12, 2013, upon proposal by the Compensation and Nomination Committee of the same date. 3.7 The Board of Directors is expected to set the maximum number of Options to be allocated to each Beneficiary, in one or more times, based on the powers granted by the shareholders meeting (see Section 3.4 above). 3.8 The official price of the Shares on the Mercato Telematico Azionario organized and run by Borsa Italiana S.p.A., on the date under Section 3.6 above (i.e., March 12, 2013), was equal to Euro The official price of the Shares on the date on which the Board of Directors will make its decisions pursuant to Section 3.7 above, will be disclosed to the market pursuant to article 84-bis of the Issuers Regulations. 3.9 The Board of Directors is expected to grant the Options to the Beneficiaries, in one or more tranches, simultaneously with reviewing the semi-annual consolidated interim results. Thus the Company does not take any measure to avoid that the granting date may coincide with the dissemination of Privileged Information, which indeed is the case, also considering that: (i) the process to determine the strike price, based on the average Share market price over a significant period of time (see Section 4.19 below), should avoid that it can be influenced by the simultaneous dissemination of Privileged Information; and (ii) more in general, such disclosure would very hardly affect the vesting of the Plan, which indeed depends on three-year future performance targets. 4. Characteristics of the financial instruments to be assigned 4.1 The Plan provides for the assignment for free of Options, which permits the Beneficiaries, pursuant to the relevant conditions, to subscribe for newly issued Shares or to receive Shares within the Company s portfolio, if any, by means of physical delivery (so called stock option ). 4.2 The Options will be assigned to the Beneficiaries in one or more tranches and will be exercisable at the end of a three-year vesting period and, in any case, within the time limit indicated under Section 4.18 below. Please refer to Section 4.6 below for certain special constraints which make the Shares arising from the Options and assigned to Executives with Strategic Responsibilities not entirely available at the time of their vesting. P 47

9 Lottomatica Group spa 4.3 The Plan will, in any case, terminate on December 31, 2019, apart from the above said constraints. 4.4 The Plan provides for the assignment of an aggregate maximum number of 1,679,819 Options. In particular, the Beneficiaries indicated under Sections 1.1 and 1.3 above will be entitled to the following maximum number of Options: Marco Sala no. 349,069 Options, Jaymin Patel no. 164,761 Options, Renato Ascoli no. 125,665 Options. Beneficiaries under Section 1.4 above will be entitled to an aggregate maximum number of 177,792 Options. 4.5 Procedures, modalities, terms and conditions to execute the Plan which are not described in this informational memorandum shall be set by the Board of Directors based on the powers granted to it by the shareholders meeting called to approve the Plan. As indicated under Section 2.2 above, the exercise of Options by the Beneficiaries will be connected to and conditioned upon the Company s reaching certain Consolidated EBITDA levels during the 2013, 2014 and 2015 financial years, considered as the whole, as well as upon reaching a certain ratio between Consolidated Net Financial Position and Consolidated EBITDA at the end of the same 3 financial years, i.e. as of December 31, 2015, as will be more specifically set by the Board of Directors when implementing the Plan. 4.6 The Options are assigned to the Beneficiaries on individual basis and cannot be transferred by deed inter vivos in any way, nor pledged or anyway disposed of, whether for free or for consideration, whether by effect of law or otherwise; they shall not be subject to any deed of enforcement or precautionary measures by third parties by pain of immediate forfeiture of all the rights awarded to the Beneficiary under the Plan. The Shares resulting from the exercise of Options will be freely transferable, except for those of the Beneficiaries identified under Sections 1.1, 1.3 and 1.4 above, who are required to retain for three years following the vesting of the Options a quota of Shares ( N ) obtained through the following calculation: N = [( PN x NE ) ( PSP x NE )] x 0.20 / PN where: 4 PN means normal unit value, that is the arithmetic average of the official prices of the Shares during the thirty days prior to the vesting date of the Options; 4 PSP means strike price, that is the unit exercise price of the Options; 4 NE means the number of vested Option. 4.7 No forfeiture is provided in case a Beneficiary carries out hedging transactions aimed at circumventing the prohibition to dispose of the assigned Shares under Section 4.6 above. 4.8 In the event that the employment is terminated by the employer (other than as P 48

10 Group Compensation Policy - Financial Years as at December 31, the result of just cause or on justified grounds), or by resignation of the Beneficiary for any reason, or for any other reason (other than by the employer for just cause or on justified grounds), the Beneficiary will definitively lose, simultaneously with the termination of the employment, the right to exercise those granted Options not yet exercisable, while he or she may exercise the exercisable options which have not yet been exercised for six months from such termination date. In the event that the employment is terminated by the employer as the result of just cause or on justified grounds, the Beneficiary will definitively lose, simultaneously with the termination of the employment, the right to exercise any outstanding granted Options, whether or not yet exercisable on the date of termination. The Board of Directors may, in its discretional and unchallengeable judgment, allow the Beneficiary to exercise all or part of the granted Options in a more ample manner than that provided for herein, and assign an appropriate term, in any case not lower than thirty days, or grant to other Beneficiaries the granted Options that become available after termination of the employment with one or more Beneficiaries. The Options will not be cancelled should the Beneficiary move from the company to one of its subsidiaries or vice versa, or from one subsidiary to another, provided that he/she remains an employee of an employer. The Board of Directors, if possible and in its discretional judgment, may allow the Beneficiary to maintain the rights set forth under the Plan, at the same conditions, in the event that the employment is terminated but, at the same time, the Beneficiary takes or maintains the office as director of the Company and/or one of its subsidiaries. In case of death of the Beneficiary, the following provisions shall apply: 4 the exercisable Options at the date of the Beneficiary s death, but which have not yet been exercised, may be exercised by his or her heirs or successors within the irrevocable term of six months from the date of death or, if earlier, by the end of the exercise period, subject to delivery by the heirs or successors of the appropriate evidence of their entitlement; 4 those not yet exercisable Options at the date of the Beneficiary s death shall be forfeited and no longer entitled to become exercisable, with no entitlement of the heirs or successors to any indemnity or compensation whatsoever. The Board of Directors may grant the forfeited Options to other Beneficiaries. 4.9 No causes for cancellation of the Plan are given No Option redemption by the Company is given No loans nor other facilities are given to favor the exercise of the Options, pursuant to Article 2358 of the Italian Civil Code. P 49

11 Lottomatica Group spa 4.12 The Plan s burden on the Company is not yet quantifiable Assuming the full allocation and exercise of the Options under Section 4.4 above, the Plan s dilutive effect would be equal to approximately 0.97% of Lottomatica s current Share capital No restrictions are imposed on voting or dividend rights of the Shares resulting from the exercise of the Options No information is given to appraise the Shares as they are traded on the Mercato Telematico Azionario organized and run by Borsa Italiana S.p.A Each Option will give the right to subscribe for one Share The expiration date for the exercise of the Options is provided under Section 4.18 below Options may be exercised by the Beneficiaries in one or more tranches, but in any case for not less than a given percentage of exercisable Options for each such tranche in the period running from the 31st day following the approval by the Board of Directors of the consolidated financial statements of the Company as of December 31, 2015 and the third anniversary of such day, and in any case by no later than December, 31, Such exercise period will be suspended during such times as provided for by the Plan s terms and conditions or the law, or as recommended by the Board of Directors The Board of Directors in compliance with Article 2441, fourth paragraph, second period of the Italian Civil Code - shall determine the Options strike price taking into account the market price of the Shares over a significant period of time, in any case not to fall below the arithmetical average of the Shares official prices on the Mercato Telematico Azionario from and excluding the Grant Date up to the same day of the precedent month The Options strike price corresponds to their fair market value No different strike prices are given among the Beneficiaries, assuming just one Grant Date for all No need to appraise the financial instruments underlying the Options, as the underlying Shares are traded on the Mercato Telematico Azionario organized and operated by Borsa Italiana S.p.A In the event of capital increases whether for free or for consideration other than those serving stock incentive plans, including the Plan, or splits or reverse- P 50

12 Group Compensation Policy - Financial Years as at December 31, splits of Shares, reserve distributions, mergers, demergers, delisting of the Shares from the official trading on the Mercato Telematico Azionario, change of control over the Company, new law provisions or other events capable of impacting the Options, the Shares, or the likelihood that the Plan s performance targets be met, the Company s Board of Directors will make such changes or amendments to the Plan as it considers necessary or appropriate to keep its content unaltered to the extent possible, including allowing the Beneficiaries to exercise the Options in advance of their vesting. Table under form 7 of attachment 3A to the Issuers Regulations is annexed hereto. P 51

13 Lottomatica Group spa BOX 2 stock option SECTION 2 New assignment options on the basis of the decision: - on the board of directors to propose to the shareholders meeting - of the competent body for the implementation of the shareholders meeting resolution NAME AND SURNAME OR CATEGORY Office (only to be specified for parties named individually) Date of shareholders meeting resolution Description of instrument Number of options Assignment date Strike price Market price of the underlying shares on the assignment date Potential exercise period Marco Sala CEO of Lottomatica Group SpA May 8, 2013 Options on ordinary Shares Lottomatica Group S.p.A. with physical liquidation 349,069 N/D N/D N/D Jaymin Patel Director of Lottomatica Group SpA and President and CEO of GTECH Corp. May 8, 2013 Options on ordinary Shares Lottomatica Group S.p.A. with physical liquidation 164,761 N/D N/D N/D Renato Ascoli General Manager of Lottomatica Group SpA May 8, 2013 Options on ordinary Shares Lottomatica Group S.p.A. with physical liquidation 125,665 N/D N/D N/D Executives with Strategic Relevance May 8, 2013 Options on ordinary Shares Lottomatica Group S.p.A. with physical liquidation 177,792 N/D N/D N/D Other employees May 8, 2013 Options on ordinary Shares Lottomatica Group S.p.A. with physical liquidation 862,532 N/D N/D N/D P 52

14 Graphic design, illustrations and layout Lottomatica - Corporate Graphic Design and Brand Book