2006 Annual Report - Fiat SpA

Incentive Plan pursuant to Article 114 bis
of Legislative Decree 58/98
Stockholders,
The May 3, 2006 Stockholders Meeting resolution approved the
motions submitted by the Board of Directors and authorised an
incentive plan with 20 million underlying Fiat ordinary shares
based on financial instruments issued by leading financial
institutions and linked to Fiat shares. On November 3, 2006,
the Board of Directors examined the above mentioned plan in
light of the changed market conditions and, after receiving the
opinion and proposals of the Nominating and Compensation
Committee, resolved that, subject to authorisation by today’s
Stockholders Meeting pursuant to Article 114 bis of the
Consolidated Law on Financial Intermediation, an incentive
plan based on stock options was a more convenient technical
solution.
This decision confirms the importance of the involvement
of executives that hold key positions with respect to the
Company’s and Group’s operating performance in order
to promote retention of such key managers as well as to
align their interests with those of the stockholders. We believe
that key management’s involvement is a fundamental element
of our corporate governance; moreover we deem that the
motivation of management through the granting of financial
instruments reflecting the Company’s market value contributes
to the development of confidence in the Company’s growth
and promotes management’s identification with the Group.
The incentive plan will have a duration of eight years, with
a four-year lock up period, and will be based on a maximum
of 20 million underlying Fiat ordinary shares, 50% representing
newly issued shares and 50% outstanding shares, offered at
a strike price of 13.37 euros, equal to the arithmetical average
of the official prices posted on the Borsa Italiana S.p.A.’s
market in the thirty days preceding the Board resolution.
Grantees of the plan are the Chief Executive Officer of Fiat
S.p.A. Sergio Marchionne, for 10 million options corresponding
to an equal number of outstanding ordinary shares, and for an
332 Items on the Agenda and Related Reports and Motions
additional 10 million options, corresponding to an equal
number of newly-issued shares, more than 300 executives,
identified by the Chief Executive Officer among Group
employees, who have a significant impact on business results.
The options granted to employees and 50% of the options
granted to the Chief Executive Officer have a four-year vesting
period, in equal annual quotas, predicated on the achievement
of predetermined financial targets in the reference period.
These options are exercisable starting from the approval of
the 2010 Financial Statements. The residual 50% of the options
granted to the Chief Executive Officer has a four-year vesting
period in equal annual quotas and is exercisable starting
November 2010.
In order to service the options granted to employees with
newly issued shares, on November 3 2006, the Board exercised
the powers granted to it pursuant to Article 2443 of the Italian
Civil Code for the capital increase to service the incentive plan.
The capital increase is reserved to employees of the Company
and/or its subsidiaries, within a limit of 1% of the capital stock,
i.e. for a maximum of 50,000,000 (fifty million) euros through
the issue of a maximum of 10,000,000 (ten million) ordinary
shares with a par value of 5 (five) euros each, corresponding
to 0.78% of the capital stock and 0.92% of the ordinary capital,
at the above mentioned price of 13.37 euros. Execution of this
capital increase is subject to the approval by today’s
Stockholders Meeting of the incentive plan and is dependant
on the conditions of the plan being satisfied. It is envisaged
that the 10 million options based on outstanding shares will
be acquired over the duration of the plan pursuant to the terms
and conditions envisaged by law.
Given its specific characteristics, the plan does not have
support from special funds.
Finally, we remind you that, in addition to the incentive plan
that you have been asked to approve, other stock option plans
have been granted to directors and managers. Such plans were
approved between 1999 and 2004, and consist of a total
of 18,353,900 options outstanding on December 31, 2006,
including 7,683,900 already exercisable for the same number
of Fiat ordinary shares.
Detailed information on the characteristics of said plans, as
well as on this incentive plan, is provided in the Report on
Operations and the Notes to the Statutory and Consolidated
Financial Statements, as prescribed by the relevant regulation
and International Financial Reporting Standards (IFRS),
respectively.
Turin, February 20, 2007
On behalf of the Board of Directors
Luca Cordero di Montezemolo
Chairman
Items on the Agenda and Related Reports and Motions 333