Chrysler 2010 Annual Report Download - page 344

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Granting of ordinary shares of Fiat S.p.A. without payment
On 23 February 2009, the Board of Directors of Fiat S.p.A. passed an incentive plan which was subsequently approved by Shareholders in their annual
general meeting on 27 March 2009, based on the granting of rights which, subject to the achievement of predetermined performance targets (Non-Market
Conditions or “NMC”) for 2009 and 2010 and the continuation of the professional relationship with the Group, provided for 2 million Fiat S.p.A. ordinary
shares to be granted to the CEO of Fiat S.p.A. without payment. Under this plan the rights vested in a single tranche on the approval of the Group’s 2010
consolidated financial statements by the Board of Directors and the number of shares granted is determined as 25% of the rights granted in the event of
reaching the 2009 targets and 100% of the rights granted in the event of reaching the 2010 targets. The Group’s predetermined profitability targets relating
to 2009 were reached.
On 26 March 2010, Shareholders in general meeting introduced a pure retention component of 2 million additional rights into the Plan on the proposal
of the Board of Directors; the vesting of these rights is subject to the sole condition that the CEO’s professional relationship with the Group continues
until the approval of the 2011 Consolidated financial statements. Moreover, the term of the original plan was also extended until the approval of the 2011
Consolidated financial statements and the targets for 2010 and 2011 were redefined.
At 31 December 2010, the contractual terms of the plan were therefore as follows:
Vesting
Plan Beneficiary Number of shares Vesting date portion
Stock Grant 2009 (revised) Chief Executive Officer 4,000,000 1st Quarter 2010 (*) 500,000 (**)
1st Quarter 2011 (*) 375,000*NMC (**)
1st Quarter 2012 (*) 1,125,000*NMC (**)
1st Quarter 2012 (*) 2,000,000 (**)
(*) On approval of the prior year’s consolidated financial statements.
(**) Subject to continuation of the position held until the approval of the 2011 financial statements.
On 18 February 2011, the Board of Directors, having consulted the Compensation Committee, verified the vesting of 375,000 rights based on the
achievement of the predetermined operating targets and, in light of the extraordinary transactions occurring during the year, also voted to make vesting of
the remaining rights, which was dependent on the achievement of 2011 operating targets, conditional only on the continuation of a professional relationship
with the Group until the end of 2011.
As required by IFRS 2 the Group calculated the total incremental fair value arising from this change to the plan, which amounted to €19 million.
This incremental fair value is being recognised in the income statement over the residual vesting period of the plan together with the fair value already
calculated at the grant date and determined in 2009. The incremental fair value was calculated on the basis of the price of the Fiat S.p.A. ordinary share at
the date of the change, which was €9.75 per share.
Amendments to the stock option plans and stock grant plans of Fiat S.p.A. arising from the Demerger
With regard to the above incentive plans and in consideration of the proposed Demerger, the Board of Directors, which met on 21 July 2010, confirmed the
continuation of the share-based incentive plans the Group had in place, and voted to adopt, subject to the Demerger becoming effective and on the basis
of the powers delegated to it by Shareholders, the appropriate amendments necessary to ensure that these plans fulfil the objectives for which they were
adopted, even subsequent to the Demerger, while at the same time avoiding a revision of those plans that, even though fully legitimate, might appear to
dilute the intended alignment of the interests of management with those of the Company and its shareholders.
More specifically, applying the rules of the respective plans, the Board approved to realign the plans with respect to the shares underlying the stock options
and stock grants in strict relation to the allotment ratio applicable for the Demerger and to allow employees leaving Fiat S.p.A. and joining Fiat Industrial S.p.A
to retain their existing rights.
Those entitled to stock options or stock grants will, therefore, receive one ordinary Fiat S.p.A. share and one ordinary Fiat Industrial S.p.A. share for each
right they hold, with the option exercise price (for stock option plans) and the free granting of shares (for the stock grant plan) remaining unchanged.
For the stock option plans, vesting conditions for each plan, whether these be the continuation of a professional relationship with the Group or the
achievement of specific performance objectives, will expire on 31 December 2010, prior to the effective date of the Demerger.