Related Party Transactions TERNA S.p.A... · Related Party Transactions Coding 026 Page 7 of 25...

Guidelines

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Date

12/15/2016 Page 1 of 25

Related Party Transactions

Approved by the Board of Directors of Terna S.p.A.

in the meeting held on November 12, 2010*, as amended and integrated (* valid from January 1, 2011 last update: Board of Directors, 12/15/2016])

Guidelines

Approval and execution of


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CONTENTS

1. INTRODUCTION ........................................................................................................................................ 3

2. DEFINITIONS .............................................................................................................................................. 4

3. EXCLUDED TRANSACTIONS ............................................................................................................. 8

4. SURVEY OF THE RELATED PARTIES ......................................................................................... 10

5. TRANSACTIONS ATTRIBUTED TO THE BOARD OF DIRECTORS AND OTHER

DESIGNATED BODIES ....................................................................................................................................... 11

5.1. Identification of transactions..................................................................................... 11

5.2. Transactions of lesser importance ........................................................................... 12

5.3. Transactions of greater importance .......................................................................... 15

5.4. Urgent transactions .................................................................................................. 17

5.5. Framework resolutions ............................................................................................. 18

5.6. Transactions by subsidiaries .................................................................................... 18

6. TRANSACTIONS ATTRIBUTED TO THE SHAREHOLDERS’ MEETING ...................... 19

6.1. Urgent transactions .................................................................................................. 20

7. DISCLOSURE OF COMPLETED TRANSACTIONS ................................................................ 21

8. ENTRY INTO FORCE, MONITORING AND ADJUSTMENT OF THE PROCEDURE 21

9. ANNEXES ................................................................................................................................................... 23

9.1. Identification of Transactions of greater importance with Related Parties................. 23

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1. INTRODUCTION

Italian Legislative Decree no. 310 dated December 28, 2004 stating “Integrations and corrections to

the regulations of corporate laws and to the consolidated text on banking and credit” introduced in art.

2391-bis of the Italian Civil Code, a specific regulation regarding transactions with Related Parties

drawn up by companies that make use of the market for risk capital1, assigning to Consob the

authority for defining the “general principles” on the basis of which the administrative bodies of the

above-mentioned companies must adopt procedures for regulating, under the profile of transparency

and substantial and procedural correctness, the transactions in question. In compliance with the proxy

and the provisions established in arts 113-ter, 114, 115 and 154-ter of Italian Legislative Decree no.

58 dated February 24, 1998 (“TUF”, Consolidated Law on Finance), Consob, with resolution no. 17221

dated March 12, 2010, later amended by resolution no. 17389 dated June 23, 2010, issued the

“Regulations for provisions regarding transactions with third parties” (“Regulations”)2. The provisions

included in the Regulations, aimed at regulating the informative transparency with respect to the

market and the principles of transparency and substantial and procedural correctness with Related

Parties, are combined with the general principles regarding the duties of the Directors in conflict of

interest with art. 2391 of the Italian Civil Code and with art. 150 of the TUF, with the principles of

proper procedures included in the Governance Code of listed companies published by Borsa Italiana

S.p.A. (“Governance Code”) as well as with the accounting procedures established by the provisions

on financial statements included in the Italian Civil Code (arts 2423 et seq. of the Italian Civil Code)

and in art. 154-ter of the TUF.

In compliance with the above-mentioned regulatory framework and with the guidelines provided by

Consob on this matter, Terna S.p.A. (hereinafter referred to as the “Company”) adopted this

procedure, aimed at regulating the approval and execution of the transactions carried out by the

Company with Related Parties (“Procedure”) directly, or through its subsidiaries.

1 Namely, in compliance with the provisions of art. 2325-bis of the Italian Civil Code, “companies with shares listed on regulated

markets or distributed to the public”.

2 The Regulation must be interpreted considering the Consob Communication n. DEM/10078683 of September 24, 2010, as

amended.

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2. DEFINITIONS

Related Parties

In compliance with the terms established in Annex 1 of the Regulations (“Annex 1”) the following are

considered as the Company’s Related Parties:

a) The companies and the parties that either directly or indirectly, also through subsidiaries, trustees,

or nominees:

- Control the company, 3

- are controlled by the Company, 4

- are controlled by the same Parent Company of the Company,

- hold shares in the Company so as to be able to exercise their significant influence on the

Company, 5

3 Control is when the power is held to determine a company’s financial and management policies in order to obtain advantages

and benefits for its activities. Possibly, control exists when a party possesses, directly or indirectly, through its subsidiaries,

more than half of the voting rights of an entity unless, in exceptional cases, it can clearly be demonstrated that this possession

does not entail any type of control. Control also exists when a party possesses half, or a smaller share, of the voting rights

exercisable during a Shareholders’ Meeting if this party has the following:

a) the control of more than half of the voting rights by virtue of an agreement with other investors;

b) the power to determine the entity’s financial and management policies in effect by virtue of by-laws or an agreement;

c) the power to appoint or remove the majority of the Board Members or of the equivalent corporate governing body, and the

control of the entity held by that Board or Body;

d) the power to exercise the majority of the voting rights in the meetings of the Board of Directors or of the equivalent corporate governing body and the control of the entity is held by that Board or Body.

4 Subsidiary means an entity, even without being a juridical person, as in the case of a partnership, controlled by another entity.

5 Significant influence is the power of participating in determining a company’s financial and management policies without

having its control, through the possession of shares, clauses in the By-laws or agreements.

If a party possesses, directly or indirectly, (for example through subsidiaries) 20% or a greater part of the votes exercisable

during the Shareholders’ Meeting of the subsidiary, it is presumed it will have significant influence, unless the contrary can be

clearly demonstrated. Contrarily, if the party possesses, directly or indirectly (for example, through subsidiaries), a share that is

lower than 20% of the votes exercisable by the subsidiary’s Shareholders’ Meeting, it is presumed that the subsidiary does not

have any significant influence, unless this influence can be clearly demonstrated. The presence of a party possessing the

absolute or relative majority of the voting rights does not necessarily prevent another party from having significant influence.

The existence of significant influence usually occurs with the occurrence of one or more of the following circumstances:

a) representation in the Board of Directors, or in the equivalent body, of the subsidiary;

b) participation in the decision-making process, including the participation in decisions regarding dividends or other types of

revenue distribution;

c) presence of significant transactions between the holding and the subsidiary;

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- parties that jointly control the Company; 6

b) The Company’s affiliated companies; 7

c) The joint ventures in which the Company participates; 8

d) Executives with strategic responsibilities of the Terna Group or the Parent Company of Terna; 9

e) The close family members of the parties (natural persons) included in items a) and d); 10

f) The entities on which one of the natural persons described in item d) and e) exercises control,

joint control, or significant influence or in which these natural persons directly or indirectly hold a

significant share that is not lower than 20% of the voting rights; 11

d) inter-exchange of management staff;

e) availability of essential technical information.

By virtue of the above-mentioned statements, the following are considered related parties:

- the parent company of a company that exercises significant influence on the Company;

- the company on which one of the Company’s subsidiaries exercises significant influence.

Contrarily, the following are not considered related parties:

- parties that exercise significant influence on the company that controls the Company;

- subsidiaries of companies that are subject to significant influence on the part of the Company.

6 Joint control means sharing, according to contract terms, the control over an economic activity.

7 An affiliated company is a company even without being a juridical person, in which a party exercises significant influence but

not control or joint control.

8 Joint venture is a contract agreement with which two or more parties undertake an economic activity submitted to joint

control.

9 Executives with strategic responsibilities are those that have the power and the responsibility, directly or indirectly, of

planning, managing and controlling the activities of the issuer including directors (executive and non) and the actual members

of the Board of Statutory Auditors. In the context of the Terna Group, considering the roles carried out, executives with

strategic responsibilities are appointed by the Chief Executive Officer and are subsequently entered on the Register pursuant

to art. 4.

10 Close family members of a natural person are those family members that one expects can influence, or be influenced, by

the person involved in their relations with the Company. These may include:

- the spouse that is not legally separated or the common law partner;

the children and the persons supported by the involved party, of the spouse that is not legally separated or the common law

partner.

11 See definition under a).

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g) Complementary retirement funds provided as benefits for the Company’s employees or for any

other entity related to it. 12


“Related Party Transactions” are:

“any transfer of resources, services or obligations among related parties, regardless of whether for

valuable consideration”; these shall include: (i) “merger transactions13, spin-off by incorporation14 or

strictly non-proportional spin-off15, if carried out with related parties”; (ii) “any decision on the allocation

of wages and economic benefits, in whatever form, for members of the administrative and control

bodies and management personnel with strategic responsibilities”.

Transactions of greater importance

Transactions of greater importance are those Related Party Transactions identified in compliance with

the terms established in the annex to this document under 9.1.

Transactions of lesser importance

Transactions of lesser importance are those Related Party Transactions that are different from the

transactions of greater importance and the Transactions for Smaller Amounts identified by the

Company in compliance with the terms of the following chapter 3.

Transactions for Smaller Amounts

12 Related parties are the individual retirement funds established or promoted by the Company as well as funds on which the

Company is capable of exercising its influence.

13 Meaning the transactions that involve the Company and a related party.

14 Meaning transactions with a related party, namely transactions with which the Company splits for example part of its capital to

the advantage of the parent company or vice versa.

15 Meaning the transactions in which the Company’s equity is split, for example, over more companies with a non-proportional

assignment of shares to its Shareholders. Provided, naturally, that Shareholders exist that can be qualified as “Related

Parties” of the company and, particularly, Shareholders capable of exercising control or significant influence.

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Transactions for Smaller Amounts are those active or passive Related Party Transactions whose

value or countervalue is less than EUR 1,000,000.00.

Excluded Transactions

Excluded transactions are those Related Party Transactions identified by the Company pursuant to

the following chapter 3.

Independent Directors

Directors considered to be in possession of the requirements of independence identified by the

Company, in compliance with art. 3 of the Governance Code, part of the document “Criteria for

applying procedures for assessing independence of TERNA S.p.A.’s Directors” approved by the

Company’s Board of Directors at the meeting held on February 22, 2007, as subsequently amended

and integrated.

Unrelated Directors

In compliance with the terms established by art. 3, paragraph 1, letter i), of the Regulations,

“unrelated” Directors are those directors “that are different from the counterpart of a specific

transaction and of its related parties”.

Related Party Transactions Committee or Committee

A Board formed by at least three Directors, appointed by the Board, all independent, of which one acts

as the coordinator.

Executives with strategic responsibilities

Parties other than directors (executive and non) and the effective components of the Board of

Statutory Auditors, who have the power and responsibility, directly or indirectly, for the planning,

governance and control of the Company’ activities, who may be appointed by the Company.

Internal Controls

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The Internal Controls indicated in paragraphs 5.2.3 and 5.3.3 below, in compliance with the provisions

of art. 7, paragraph 1, letter d) and art. 8, paragraph 1, letter d) of the Regulations.

Unrelated Shareholders

In compliance with the terms established by art. 3, paragraph 1, letter l), of the Regulations, “Unrelated

Shareholders” are “those parties having the right to vote different from the counterpart of a specific

transaction and from the parties related both to the counterpart of a specific transaction and to the

company”.

3. EXCLUDED TRANSACTIONS

In compliance with the terms established by art. 13 of the Regulations, the provisions of said article

and therefore of this Procedure should not be applied:

a) To resolutions according to which the Shareholders’ Meeting determines the remuneration of

the Board Members and, if appointed, of the Executive Committee, in compliance with art.

2389, paragraph 1, of the Italian Civil Code;

b) To any resolutions regarding remuneration of the Directors entrusted with particular duties

included in the total remuneration agreed upon in advance by the Shareholders’ Meeting in

compliance with art. 2389, paragraph 3, of the Italian Civil Code;

c) To resolutions adopted by the Shareholders’ Meeting as per art. 2402 of the Italian Civil Code,

regarding remuneration owed to the members of the Board of Statutory Auditors.

The provisions of this Procedure do not apply to Transactions for Smaller Amounts.

With the exception of periodical information and specific obligations as mentioned below for the

transactions described in item 3) that follows, the Procedure is not applied:

1) To remuneration plans based on financial tools approved by the Shareholders’ Meeting in

compliance with the terms of art. 114-bis of the TUF and relative executive transactions;

2) To resolutions regarding remuneration of Directors entrusted with particular duties (different

from those stated in previous letter b), as well as of the other Executives having strategic

responsibilities, calculated on an individual basis, under the following conditions:

▪ That the Company has adopted a remuneration policy;

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▪ That in defining the remuneration policy a committee was involved exclusively formed by

non-executive Directors, the majority of which independent, coinciding, where formed with

the same characteristics, with the “Remuneration Committee”;

▪ That a report explaining the remuneration policy was submitted to the approval or to the

vote of the Shareholders’ Meeting;

▪ That the assigned remuneration is coherent with this policy;

3) To transactions that are part of the ordinary activities of the Company or of its subsidiaries or

affiliated companies or of the financial activities connected to it, provided they have been

carried out at conditions that are equivalent to the market or standard ones, meaning by this

statement:

▪ contracts whose subjects are activities aimed at developing and maintaining the National

Transmission Grid (NTG);

▪ contracts regarding dispatching activities (withdrawal and injections);

▪ contracts whose subject is the interruptible service;

▪ contracts whose subject is the instantaneous reduction of electricity withdrawal in the major

islands;

▪ contracts whose subject is regulating the terms for paying the transmission fee for

electricity withdrawn from the NTG and from virtual interconnection points;

▪ contracts regarding the virtual import system (“shipper” contracts and contracts with the

selected party”);

▪ contracts regarding connection to the NTG or to other electricity plants or the connection of

photovoltaic solar plants;

▪ agreements with companies that have electricity transmission grids in order to regulate

maintenance and development activities of the NTG and of interconnection devices with

other grids;

▪ contracts with the Electricity Market Operator with regard to its activities carried out on

behalf of the Company in the Dispatching Services Market;

▪ contracts whose subject is allocating the interconnection capacity with foreign countries;

▪ any additional transaction that is part of the ordinary operational activities of the Company

and of its subsidiaries or of affiliated companies and of related financial activities, carried

out under similar conditions as those referred to non-related parties for transactions of

similar nature, scope, characteristics and risk, based on regulated tariffs or fixed prices,

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namely corresponding to those referred to parties with whom the Company is obliged by

law to enter agreements based on specific consideration.

Should a transaction under item 3) be qualified as a transaction of greater importance,

according to the terms established in the annex 9.1, the Company: (i) notifies Consob – within

the terms indicated for publishing the informative document established by the Regulations –

about the counterpart, the subject and the consideration of the transaction that benefited from

the exclusion16; (ii) indicates in the interim and annual management reports, as part of the

information requested for periodic transparency purposes, which - among the transactions

subject to informative obligations included therein - were carried out with the exclusion clause

established in item 3).

4) To the transactions between the Company and its subsidiaries or among subsidiaries, even

jointly owned by the Company, as well as transactions with affiliated companies, provided that

other Related Parties of the Company have no significant interests in these companies. For the

purposes of this Procedure, a significant interest occurs in all cases in which there is a situation

that could be relevant for the purpose of assessing the interest in completing the transaction as

well as the substantial and procedural correctness of the transaction. Interests deriving from the

mere sharing of one or more Directors between the Company and its subsidiaries or affiliated

companies are not considered as significant interests.

5) To transactions to be carried out on the basis of instructions having objectives of stability issued

by Supervisory Authorities (in compliance with the immediate and periodical information

obligations to the market as specifically established by the Regulations).

4. SURVEY OF THE RELATED PARTIES

On the basis of the information and documents that are available for the Company, the Corporate and

Legal Affairs Department, together with the Administrative Department, the Human Resources and

Organization Department and Corporate Security Office, identifies in advance the map of Related

Parties on the basis of the provisions indicated in the previous paragraph 2 under “Related Parties”.

This map is produced as a list held by the Company (the “Related Parties Register”) which is

promptly made available to the departments of the Company and the Subsidiaries. The Related

Parties Register may be kept in electronic form and may contain information relative to the Group

16Consob does not have to be notified of ordinary transactions of lesser importance which benefiting from the exemption, are not

included in the accumulation as established in art. 5, paragraph 2, of the Regulations.

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Companies, Executives with strategic responsibilities and other Related Parties, also in different

sections.

To update the map:

I. each Company department has the obligation to report all the information in its possession that is

useful for the survey of Related Parties;

II. On an annual basis and whenever necessary based on the information received, the Corporate

and Legal Affairs Department requests that the parties that directly control, even jointly, the

Company, as well as the parties that directly hold shares in the Company so as to exercise

significant influence on the latter:

▪ provide or confirm, if already provided, in case of natural persons, the information regarding

such persons, their respective close family members, the entities directly or indirectly controlled

by them or by their close family members, relative to the entities on which they or their close

family members exercise joint control, or significant influence;

▪ provide or confirm, if already provided, in the case of legal persons, the information regarding:

- themselves and their direct or indirect parent companies, subsidiaries that are directly or

indirectly controlled;

- relative executives with strategic responsibilities as well as close family members of the

latter and the companies directly or indirectly controlled by them, as well as entities which

they jointly control or have significant influence over.

▪ provide or confirm, if already provided, in the case of Executives with strategic responsibilities,

the aforementioned information, when applicable.

The information is collected by the competent Departments indicated and is entered onto the Related

Parties Register, providing mutual disclosure. The Related Parties Register is updated at least once a

year and whenever deemed necessary on the basis of the information received.

5. TRANSACTIONS ATTRIBUTED TO THE BOARD OF DIRECTORS AND OTHER DESIGNATED BODIES

5.1. Identification of transactions

The Company Department assigned to investigating a transaction (or “Assigned Department”)

preliminarily verifies:

a) any connection of the counterpart in compliance with the principles of this Procedure using the

list of the Related Parties Register as stated in the above-mentioned Chapter4;

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b) that the transaction does not fall in one of the exclusion situations as stated in the above-

mentioned Chapter3;

c) the classification of a transaction being either of greater or lesser importance, in compliance

with the terms established in this Procedure.

For the purposes of the aforementioned controls, the Assigned Department may also rely on the joint

advising support of the Corporate and Legal Affairs Department, of the Administrative Department, of

the Human Resources and Organization Department and of the Corporate Security Office. These

Departments may, where necessary, also request the opinion of other Departments involved.

Following the positive outcome of such verifications, the Assigned Department will immediately notify

the transaction – by drawing up an appropriate report – to the Corporate and Legal Affairs Department

and its own Head. The latter will inform the Chief Executive Officer.

5.2. Transactions of lesser importance

Transactions of lesser importance are examined and approved, following a grounded and unbinding

assessment by the Related Party Transactions Committee according to the following procedure.

5.2.1. Review of the transaction

Following the classification of the transaction as a Transaction of lesser importance, the Chief

Executive Officer, having received notification of the same and, upon the conclusion of the

investigation stage, authorizes the documentation relative to the transaction under analysis for

compliance with the relative obligations to be forwarded to the Corporate and Legal Affairs

Department and, in turn, to the members of the Committee. The information must specifically regard

the nature of the relation, the principal terms and conditions of the transaction, the total expected

value of the transaction and the methods used to determine the amount, the expected time frame for

its implementation, the analysis procedure followed, the reasons underlying the transaction and any

risks for the Company and its subsidiaries.

The Committee shall conduct its own assessment within a timetable that is compatible with the

completion of the transaction and shall draw up a report on the resolutions passed on the subject,

indicating in writing its grounded, non-binding opinion regarding the Company’s interest in completing

the transaction, in the convenience and substantial fairness of the economic conditions also in light of

the overall result of the supervision and coordination activities or of any transaction that may be aimed

at fully eliminating the damage, if any, from an individual related party transaction. Should the financial

terms of the transaction be deemed equivalent to market or standard terms, the supporting

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documentation under review by the Committee and the resolution adopted by the Committee itself

shall highlight elements of comparison in an objective manner.

In the event one or more members of the Committee express a negative opinion regarding the

transaction’s completion, the reasons supporting their individual opinions must be included in the

report.

For its own analyses purposes, the Committee may request the Company to use independent experts

appointed by the Company itself, or, alternatively, to use specialized independent consultants external

to the Company designated by the Committee. The costs for services rendered by the consultants will

be charged to the Company.

In the case that one of the members of the Committee is related to the transaction, said member is

obliged not to participate in the activities of the Committee and the Internal Controls pursuant to

paragraph 5.2.3 shall apply.

5.2.2. Approving the transaction

Having issued its opinion, the Committee forwards the same to the Corporate and Legal Affairs

Department which forwards it to the department or body responsible for approving the transaction

(jointly the “Competent Body”) for the purposes of the subsequent approval of the transaction.

If the transaction is the responsibility of the Board of Directors, the Committee immediately forwards to

the Chairman and to the Chief Executive Officer, as well as to the Corporate and Legal Affairs

Department all the documents specified in the above-mentioned paragraph in order to summon the

Board of Directors meeting.

Full disclosure of the transaction and the investigation conducted is provided to the members of the

Board of Directors, usually at least 5 days before the date established for the Board meeting,

integrated with the opinion issued by the Committee.

If the opinion expressed by the Committee is favourable, the approval of the Related Party

Transaction also includes the reasons for the Company’s interest in carrying out the transaction, as

well in the appropriateness and substantial correctness of the relative conditions.

If the Committee’s opinion on the completion of the Related Party Transaction is unfavourable, the

decision may be made not to continue with the transaction, or

- in any case, the transaction may still be authorized. In this case, if the transaction is the

responsibility of the Board of Directors, the latter explains in detail in the approval

resolution the reasons underlying the decision, having taken into account the

Company’s interest in completing the transaction and the appropriateness and

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correctness of its conditions, attaching to the meeting’s minutes, the Committee's

opinion;

- if the transaction is not the responsibility of the Board of Directors, the Assigned

Department will then inform the Chief Executive Officer.

In compliance with the terms established in art. 114, paragraph 1, of the TUF, in case of transactions

of lesser importance approved with the unfavourable opinion of the Committee, the Company, in

compliance with corporate procedures, within fifteen days of the closing of each quarter, draws up and

makes available to the public, using the modalities indicated in the Regulations, a document including

indications on the counterpart, the object and the consideration for approved transactions in the

quarter referred to, as well as the reasons for which it was deemed not to share the above-mentioned

unfavourable opinion. With the same terms, the opinion is made available to the public in an annex to

the above-mentioned informative document or on the Company’s website.

5.2.3. Internal Controls


obliged to not participate in the activities of the Committee and the opinion pursuant to paragraph

5.2.1 above must be made unanimously by another two unrelated Independent Directors, or by a

majority of the other unrelated Independent Directors in the case of a Committee comprising more

than three Directors.

In the event at least two unrelated Independent Directors are not present, the opinion is issued by the

unrelated Independent Directors that are present, or by the Board of Statutory Auditors or by an

independent expert appointed by the Board of Directors.

For this purpose, as soon as the disclosure of transaction has been received pursuant to the previous

paragraph 5.2.1, the members of the Committee will immediately notify the Corporate and Legal

Affairs Department of the existence of their possible related situations with regard to each specific

transaction.

As regards the Internal Controls pursuant to this paragraph 5.2.3, the provisions established by this

Procedure with reference to the duties and powers of the Committee with regard to Transactions of

lesser importance shall apply.

In case of an unfavourable opinion, the compatible provisions established in paragraph. 5.2.2 shall

apply.

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5.3. Transactions of greater importance

The Board of Directors shall review and approve Transactions of greater importance following the

reasoned and favourable opinion of the Committee, according to the following procedure.

5.3.1. Review of the transaction

Following the classification of the transaction as a Transaction of greater importance, having received

disclosure of the same, the Chief Executive Officer, from the investigation stage of the Transaction of

greater importance, forwards to the Corporate and Legal Affairs Department the exhaustive and

updated documents, information and data and authorizes its disclosure to the Committee members or

to the members and/or experts appointed by the same. The information is forwarded promptly to the

Committee and in any case during the Board meeting at which the transaction is first disclosed, in

order that the Committee or one of its appointed representatives or experts may be involved in the

negotiation and investigation stages through the receipt of a full and timely data stream and with the

right to request additional information and formulate observations to be submitted to the Chief

Executive Officer. The information forwarded must specifically regard the nature of the relation, the

principal terms and conditions of the transaction, the total expected value of the transaction and the

methods for determining its amount, the expected time frame for its implementation, the analysis

procedure followed, the reasons underlying the transaction and any risks for the Company and its

subsidiaries.

The Chief Executive Officer shall decide on what may be considered the investigation stage and when

the transaction is sufficiently mature to submit it for formal evaluation by the Committee, and shall ask

the Committee to express its opinion.

The Committee shall conduct its own assessment within a timetable that is compatible with the

completion of the transaction and shall draw up a report on the resolutions passed on the subject,

indicating in writing its grounded opinion of the Company’s interest in completing the transaction, the

convenience and substantial fairness of the economic conditions, also in light of the overall result of

the supervision and coordination activities or of any transaction that may be aimed at fully eliminating

the damage, if any, from an individual related party transaction. Should the financial terms of the

transaction be deemed equivalent to market or standard terms, the supporting documentation under

review by the Committee and the resolution adopted by the Committee itself shall highlight elements

of comparison in an objective manner.

In the event one or more members of the Committee express a negative opinion regarding the

transaction’s completion, the reasons supporting their individual opinions must be included in the

report.

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For the purposes of evaluating the transaction, the Committee may require the Company to use any of

the independent experts who may have been appointed by the Company, or specialized independent

consultants external to the Company, who are appointed by the Committee. The costs for services

rendered by the consultants will be charged to the Company.


obliged not to participate in the activities of the Committee and the Internal Controls pursuant to


5.3.2. Approving the transaction

Transactions of greater importance shall be approved by the Board of Directors.

The Committee shall promptly provide the Chairman of the Board, the Chief Executive Officer and the

Corporate and Legal Affairs Department with the documentation relating to the transaction, its own

reasoned opinion and the opinion of the independent expert, if any, in order to summon a meeting of

the Board of Directors.

The full and adequate disclosure of the transaction and the investigation conducted shall be provided

to the Board members usually at least five days prior to the date established for the Board meeting at

which the transaction is to be approved, integrated with the opinion issued by the Committee.

If the Committee delivers a favourable opinion regarding the completion of the transaction, the Board

of Directors may give final approval to the transaction, thereby providing adequate reasons with

respect to the Company’s interest in completing the transaction and in the convenience and

substantial fairness of the related conditions.

If the Committee has expressed a previous unfavourable opinion or has expressed a previous

unfavourable opinion that contains objective, reasonable and timely conditions or remarks regarding

the transaction, the Board may:

▪ decide not to continue with the transaction, or

▪ resolve to continue with the transaction in full acceptance of the objective, reasonable and timely

conditions or remarks formulated by the Committee, or

▪ resolve to continue with the transaction despite the unfavourable opinion of the Committee,

clearly explaining the reasons for the decision, particularly with regard to the Company’s interest

in the completion of the transaction and the fairness and convenience of its conditions - provided

that, where expressly permitted by the by-laws, the completion of the transaction is authorized,

pursuant to art. 2364, paragraph 1, number 5) of the Italian Civil Code, by the Shareholders’

Meeting. In this case, without prejudice to the majorities required by law and the by-laws, the

transaction shall not be completed if:

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- the Unrelated Shareholders present at the Shareholders’ Meeting represent at least

10% of the share capital with voting rights and;

- the majority of the unrelated voting Shareholders – thus excluding any abstentions –

votes against the transaction.

The proposed shareholders' resolution shall specify the conditions of effectiveness of the

deliberations.

5.3.3. Internal Controls

If at least three unrelated Independent Directors are not available, the review of the transaction is

conducted by the unrelated Independent Directors present, if any, or, alternatively, by the Board of

Statutory Auditors, or by an independent expert appointed by the Board of Directors.

For the Internal Controls established in this paragraph 5.3.3, the compatible provisions established by

this Procedure with reference to the duties and powers of the Committee on the subject of

Transactions of greater importance shall apply.

In the presence of an unfavourable opinion, the compatible provisions referred to in the previous


5.4. Urgent transactions

Where expressly permitted by the by-laws, the previous paragraphs 5.2 and 5.3 shall not apply, in

case of justified emergency, to the transactions that are not attributed to or that do not require the

authorization of the Shareholders’ Meeting, provided that:

a) if the transaction falls under the responsibility of the Chief Executive Officer, the Chairman of

the Board of Directors is informed of the reasons for urgency prior to the completion of the

transaction;

b) these transactions subsequently become, without prejudice to their effectiveness, the subject

matter of a non-binding resolution at the next valid ordinary Shareholders’ Meeting;

c) the Board of Directors prepares a report containing an adequate justification of the reasons for

urgency. The Board of Statutory Auditors reports to the Shareholders’ Meeting its assessment

on the existence of the reasons for urgency;

d) the report and the assessment referred to in paragraph c) are made available to the public at

least twenty-one days before the date established for the Shareholders’ Meeting at the

registered office and as per the modalities set out in Title II, Chapter I, of the Consob

Regulation No. 11971 of 1999 concerning the regulations of issuers (the "Issuers’

http://www.consob.it/documenti/Regolamentazione/normativa/regemit.htm

http://www.consob.it/documenti/Regolamentazione/normativa/regemit.htm

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Regulations"). These documents may be included in the disclosure document provided for by

the Regulations.

e) Within a day after the Shareholders’ Meeting, the Company makes available to the public, as

per the formalities specified in Title II, Chapter I of the Issuers’ Regulations, information on

voting results, particularly with regard to the number of total votes cast by Unrelated

Shareholders.

Without prejudice to the disclosure requirements provided for by the Regulations.

5.5. Framework resolutions

The Board of Directors may approve framework resolutions for series of homogeneous transactions to

be carried out with specific categories of Related Parties.

In this case, framework resolutions shall:

▪ not be effective for more than a year;

▪ refer to sufficiently determined transactions;

▪ report the expected maximum amount of transactions to be completed during the reference period

and the reasons for the expected conditions.

Full disclosure, at least on a quarterly basis, shall be made to the Board of Directors on the

implementation of the framework resolutions.

With reference to the adoption of framework resolutions, there is no prejudice to the provisions

referred to in previous paragraphs 5.2 and 5.3 which, instead, do not apply to individual transactions

completed in the implementation of framework resolutions. Transactions completed in the

implementation of a framework resolution described in an information document that has been

published pursuant to art. 5 of the Regulations shall not be counted for the purpose of accumulation

set forth in the Regulations.

5.6. Transactions by subsidiaries

Without prejudice to the provisions set out in previous chapter 3, Related Party Transactions that are

conducted by the Company through a subsidiary17 (meaning that such transactions, though performed

17 As defined in art. 2359, paragraphs 1 and 2 of the Italian Civil Code.

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by the subsidiary, are attributed to the Company pursuant to a prior examination or approval by the

latter) shall be prepared and approved in compliance with the terms set out in this paragraph.

In this regard:

▪ Any transaction performed by Italian or foreign subsidiaries shall be deemed under “review” or

“approval” by the Company which was previously reviewed or approved by a Company

representative, under delegated authority, even in the absence of resolutions delivered by

corporate bodies or internal regulations;

▪ “Review" shall mean not the mere receipt of information about the transaction performed by the

subsidiary but any assessment of the transaction that could lead to an action – also a non binding

opinion – which can affect the approval process of the transaction by the subsidiary.

Without prejudice to the provisions set out in the previous chapter 3, the Board of Directors of the

Company reviews in advance or approves the Transactions of greater importance or the Transactions

of significant interest that were identified by the Company pursuant to the Governance Code.

More specifically, without prejudice to the provisions of the previous Chapter 3, in case of Related

Party Transactions, including those of greater importance, of subsidiaries that are under review or

approval by the Company, the provisions set out in previous paragraphs 5.1, 5.2 and 5.3 shall apply.

In the case of an unfavourable opinion issued by the Committee with regard to Transactions of greater

importance, the Company may continue with regard to the approval upon receipt of a favourable

opinion of two additional independent experts appointed by the same, or alternatively, according to the

methods indicated in the previous paragraph 5.3.2.

Subsidiaries shall provide the Company with all necessary information for the purposes of the

disclosures envisaged by this Procedure.

6. TRANSACTIONS ATTRIBUTED TO THE SHAREHOLDERS’ MEETING

For Related Party Transactions attributed to or requiring the authorization of the Shareholders’

Meeting, the proposed resolutions to be submitted to the Shareholders’ Meeting shall be adopted,

unless otherwise provided for by legal provisions, by the Board of Directors in compliance with the

provisions set out in the previous paragraphs 5.2 and 5.3 respectively for Transactions of lesser

importance or Transactions of greater importance.

Therefore, the approval for transactions by the Shareholders' Meeting shall be preceded by the

following phases:

▪ identification of transactions;

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▪ review of transactions by the Related Party Transactions Committee (or Internal Controls) in

compliance with the provisions of the previous paragraphs 5.2.1 and 5.3.1 respectively for

Transactions of lesser importance and Transactions of greater importance;

▪ review and approval of the proposal of the Shareholders’ Meeting by the Board of Directors;

▪ convening of Shareholders’ Meeting by the Board of Directors.

The report prepared by the Board of Directors for the Shareholders' Meeting shall describe the

characteristics of transactions and indicate the reasons of convenience for the Company upon

completion of these transactions.

In the event that the proposed resolutions submitted to the Shareholders’ Meeting are approved

despite the negative opinion of the Committee (or of the Internal Controls), the provisions referred to in

the previous paragraph 5.3.2 on the Transactions of Greater Importance and 5.2.2 on the

Transactions of Lesser Importance shall apply.

6.1. Urgent transactions

Where expressly allowed for by the by-laws, in case of justified urgent situations related to corporate

crisis18,the provisions of the previous paragraph shall not apply in the negotiation phase, during the

preparatory inquiry and the approval process of the proposed resolutions of Related Party

Transactions attributed to or requiring the authorization of the Shareholders’ Meeting, provided that:

a) The Board of Directors prepares a report containing an adequate justification of the reasons for

urgency and the Board of Statutory Auditors reports to the Shareholders’ Meeting its

assessment on the existence of the reasons for urgency;

b) The report and the assessment referred to in paragraph a) are made available to the public at

least twenty-one days before the date established for the Meeting at the registered office and

as per the formalities set out in Title II, Chapter I of the Issuers’ Regulations. These documents

may be included in the disclosure document pursuant to the Regulations.

Without prejudice to any Shareholders’ majorities as indicated by the law and the provisions set out in

the by-laws, where the evaluation of the Board of Statutory Auditors is negative, the transaction may

not be executed in the following cases:

18 For the purposes of the Regulations, by "corporate crisis" not only the case shall be meant in which the Company enters

bankruptcy proceedings or the case in which business continuity is uncertain but also a situation of financial distress that is

likely to result in a significant reduction of share capital pursuant to arts 2446 and 2447 of the Italian Civil Code, or the rapid

deterioration of the core capital ratio during severe tensions in the financial markets.

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▪ the unrelated Shareholders attending the Meeting do not represent at least 10% of the share

capital with voting rights and

▪ the majority of the unrelated voting Shareholders – thus excluding any abstentions – votes

against the transaction.

The proposed shareholders' resolution shall specify the conditions of effectiveness of the

deliberations.

Otherwise, within one day after the Shareholders’ Meeting, the Company shall make available to the

public, as per the formalities set out in Title II, Chapter I of the Issuers’ Regulations, the information

concerning the voting results, particularly with regard to the total number of votes expressed by

unrelated Shareholders.

Without prejudice to the disclosure requirements provided for by the Regulations.

7. DISCLOSURE OF COMPLETED TRANSACTIONS

The Board of Directors and the Board of Statutory Auditors shall be informed, at least with regard to

Related Party Transactions concluded by the Company and by subsidiaries in the period in question,

at the time the Board convenes to approve the Financial Statements pursuant to art. 154-ter of the

TUF.

8. ENTRY INTO FORCE, MONITORING AND ADJUSTMENT OF THE PROCEDURE

This Procedure and any subsequent amendments are approved by the Company’s Board of Directors

following the reasoned and favourable opinion of the Related Party Transactions Committee, and shall

be posted on the Company’s website and referred to, also by reference to said website, in the annual

management report pursuant to art. 4, paragraph 7 of the Regulations19.

The Board of Directors identifies any statutory changes that may be necessary to implement the

Procedure and submits them to the Extraordinary Shareholders' Meeting for approval, upon reasoned

and favourable opinion of the Related Party Transactions Committee.

To guarantee coordination with the administrative and accounting procedures pursuant to art. 154-bis

of the TUF, the information referred to in paragraph 7 shall also be provided to the officer responsible

19Disclosure of the timings of any reviews and updates performed is made in the context of the Annual Corporate Governance

Report pursuant to art. 123-bis of the TUF.

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for drawing up the corporate accounting records on a regular basis and the same shall also have

access to Related Parties Register.

The Board of Statutory Auditors shall monitor compliance of this Procedure with applicable law as well

as respect of this Procedure by addressees and shall report on these matters to the Shareholders’

Meeting pursuant to art. 2429, paragraph 2, of the Italian Civil Code or art. 153 of the TUF.

In particular, the Board of Statutory Auditors shall assess compliance of the procedures with the

principles indicated in the Regulations and respect of this Procedure when approving the individual

transactions entered into by the Company.

This Procedure shall be reviewed at least once every three years, also in consideration of the

ownership and organizational structure of the Company and the Group, and the effectiveness shown

by the Procedure in its application. The opinion of the Related Party Transactions Committee shall be

required even when, after the review, it is decided not to amend the Procedure in any way.

The Company’s Chief Executive Officer may add amendments to this Procedure that are needed due

to changes in the organizational structure of the Company and the Group.

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9. ANNEXES

9.1. Identification of Transactions of greater importance with Related Parties

This annex defines – in compliance with the provisions set out in Annex 3 of the Regulations (“Annex

3”) – the quantitative criteria for the identification of Transactions of Greater Importance with Related

Parties.

Quantitative criteria

Transactions in which at least one of the following relevance indexes, applicable depending on the

specific transaction, is greater than the 5% threshold, are considered “Transactions of Greater

Importance”:

a) Value relevance ratio: the ratio between the transaction value and the net equity20 drawn from

the latest consolidated financial statement published by 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 latest published periodic accounting document (annual or half-year financial report or interim

management report).

Should the economic conditions of the transaction be determined, the transaction value shall be:

i) for the cash component, the amount paid to or by the contracting counterpart;

ii) for the components represented by financial instruments, the fair value determined at the

date of the transaction, in compliance with international accounting standards adopted with

Regulation (EC) No. 1606/2002;

iii) for transactions involving financing or granting of guarantees, the maximum amount payable.

If the economic conditions of the transaction depend, wholly or partially, on figures that are not

yet known, the equivalent value of the transaction shall be the maximum receivable or payable

value under the Agreement.

20 If the Company that is required to comply with the Regulations, draws up consolidated accounts, the assessment regarding

relevance indexes having exceeded the maximum level, is prepared by making reference to the consolidated shareholders’

equity or alternatively, if it is higher, to the capitalization. Also due to the need that, in evaluating the transaction size,

homogeneous, albeit alternative, parameters are applied, the value of shareholders' equity should not include, for the purposes

of Annex 1, any third party interest: this is also to be consistent with the separate identification, as regards the Group equity, of

the share capital and the reserves attributable to minority interests in consolidated subsidiaries, as required by international

accounting standards.

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b) Asset relevance ratio: the ratio between the total assets of the entity involved in the transaction

and the Company’s total assets. Data to be used shall be drawn from the latest consolidated

financial statement published by the Company; where possible, similar data shall be used to

determine the total assets of the entity involved in the transaction.

For transactions involving the acquisition and transfer of shares in companies that have an

impact on the consolidation area, the numerator value shall be the total assets of the investee,

regardless of the percentage of capital available.

For transactions involving the acquisition and transfer of shares in companies that have no

impact on the consolidation area, the numerator value shall be:

i) in case of acquisitions, the equivalent of the transaction plus the liabilities of the acquired

company eventually taken on by the purchasing company21;

ii) in case of transfers, the consideration for the divested business.

For transactions involving the acquisition and transfer of other assets (other than the purchase of

shares), the numerator value shall be:

i) in the case of acquisitions, the higher of the consideration paid and the accounting amount

that will be attributed to the assets22;

ii) in the case of transfers, the accounting value of the assets.

c) Liabilities relevance index: is the ratio between the total liabilities23 of the acquired entity and the

Company’s total assets. The data to be used shall be taken from the most recent consolidated

financial statement published by the Company; where possible, similar data shall be used to

determine the total liabilities of the company or of the business unit acquired.

The relevance threshold is reduced to 2.5% for transactions carried out with a listed parent company,

or with subjects that are related to the latter and that are, in turn, related to the Company.

21 In particular, the value of the numerator will also include the liabilities of the acquired company only if it is provided for by

contract that the purchasing company must take on certain obligations with regard to those liabilities as, for example pursuant to

art. 1273 of the Italian Civil Code, the taking over by the transferee of the debts of the acquired company. In the absence of

obligations of this nature, the numerator will be equal only to the equivalent value of the transaction.

22 To this end, the Company shall determine beforehand the accounting amount that will be attributed to those assets in its

financial statements. For example, where the Company has acquired property and intends to recognize it at fair value in its

financial statement, the numerator of the ratio will be reported at fair value, if it is higher than the equivalent value of the

transaction.

23 For the purpose of calculating the total liabilities, the liabilities of the purchased entity's financial statement that are part of the

equity shall be excluded.

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Unless otherwise provided in the Regulations, for the purposes of calculating their greater or lesser

importance, Related Party Transactions are evaluated on an individual basis. In particular, in verifying

whether the size limits have been exceeded, the Company shall only consider the single transactions

carried out at the beginning of the fiscal year that do not fall in the category of the transactions that

have been excluded because of the small amounts involved or because they are ordinary

transactions, i.e., transactions that are carried out with subsidiaries or affiliated companies. In the case

of allocation of remuneration and economic benefits, in whatever form, for directors and officers as

well as key managers, the remuneration allocated to each director, officer and manager shall thus

represent an autonomous transaction with a Related Party, to be considered individually for the

purposes of selecting the applicable procedure and transparency rules24.

In the case of accumulation of multiple transactions, the Company shall first determine the relevance

of each transaction on the basis of the above-mentioned index or indexes, if applicable. To verify

whether the estimated threshold has been exceeded, the results of each index shall then be added up.

In verifying whether the size limits have been exceeded on a cumulative basis, the transactions for

which informative notes have already been prepared shall not be considered even though the fiscal

year has not ended.

In performing such evaluation, the Company shall also verify whether, should the size limits have been

exceeded due to the cumulative effect, an information document has already been published: in

verifying whether the size limits have been exceeded again on a cumulative basis, although the fiscal

year has not yet ended, the transactions that have already been the subject of an information report, in

fact, shall no longer be considered.

Alternative calculation methods

If one or more accumulated transactions are identified as “most relevant” pursuant to the indexes

indicated above and this result is manifestly unreasonable due to special circumstances, the Company

shall ask Consob for alternative methods of calculating the said indexes. To that end, the Company

shall provide Consob with the essential characteristics of the transaction and the special

circumstances upon which the request was based prior to the conclusion of the negotiations.

26 With reference to the indicated under paragraph 2.2 of the specified Consob application notice, special attention shall be paid

to the "remuneration allocation” as such. To guarantee transparency, accumulation rules – to be enforced by each executive

having strategic responsibility – with regard to homogeneous transactions or transactions that are linked to each other, shall

apply.

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