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The BNP Paribas – BNL takeover

10 April 2008 – 11:40 – 12:55

Bruno CarlierHead of Compensation & Benefits – BNP Paribas

Ugo CuccagnaClient Solutions – BNP Paribas Securities Services

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The BNP Paribas – BNL take over

•Once upon a time, a french bank and an italian bank…

• January 2006, an unpredictable new situation

• Step by step

• A second domestic market : challenges and innovations

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Once upon a time…

• BNP Paribas

• a successful merger,

• a strong employee share ownership culture

• a cautious approach to acquisitions

• Banca Nazionale del Lavoro

• privatized in the 90’s

• a strong employee share ownership culture

• a most desired bride

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BNP Paribas, a strong employee share ownershipculture

• DSPP (discounted share purchase plan)

• annual plan (since 1988), subscription in June

• worldwide plan (72 countries, 250 entities), all employees

• market price – 20% ; small company top up; 5 years holding

• discount = taxable benefit (not in France)

• each year 0,5 to 1% of the share capital, 3 investment vehicles

• global take up: 33%, average take up: 6,000 €

• Global Stock Incentive Plan

• a mix of stock options and free shares

• annual plan (0,6% of capital), worldwide (3,500 to 4,000 participants),

• 4 years cliff vesting, then 4 years exercize period

• strike price = market

• performance condition on SO (relative to DJ Euro Stoxx Bank)

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BNP Paribas, a strong employee share ownershipculture

• Key Contributors Incentive Plan

• deferred bonus, cash indexed on BNPP share price

• annual plan, worldwide (ca 1500 participants)

• 3 years vesting, prorated + premium

• no performance condition, forfeited upon termination

• Voluntary Share Saving Plan (France only)

• ongoing plan

• market price, no discount

• company match: 32% of investment (up to 3,800 €)

• 5 years holding (some early release conditions)

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BNP Paribas, a strong employee share ownershipculture

• 91,000 employees or retirees are shareholders = over 5% of share capital

• 8 years later

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BNL, a strong employee share ownership culture

• Stock Options

• annual plans, worldwide (200 participants)

• plans 1999 and 2000 vested but underwater

• plans 2004 and 2005 : performance condition was not achieved

• ex employees still participants of pre 2001 plans

• Loyalty shares (labor agreement)

• 25 years of services from 1999 to 2001

• Free shares (€ 2,500 to € 7,700 depending on base salary)

• tax free if minimum holding (up to € 2,066) for 3 years

• Profit sharing (collective agreement)

• Free shares

• 50% of individual award (up to € 2,066) to be held for 3 years, tax free

• other 50% not restricted, tax free if held > 3 years

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BNL, a strong employee share ownership culture

• 15.000 BNL employees are shareholders (ca 2,5% of share capital)

• Up to the acquisition

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January 2006, an unpredictable new situation

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January 2006, an unpredictable new situation

• BNP Paribas confidentially secures control of BNL within 2 weeks

• BNL hopes a more secure and serene future

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Step by step

• March 2006: BNP Paribas secures external financing for the acquisition

• June 2006: Public Offer (1 BNL share = € 2,9275 in cash)

• March 2007 : BNP Paribas awards stock options to BNL executives

• June 2007: BNP Paribas 2007 DSPP offered to BNL employees

• October 2007: merger of BNL Spa and BNP Paribas

Each step had an impact either on BNL employeeshareholding or on BNP Paribas employee sharehoding

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BNP Paribas March 2006 € 5,5 bn rights issue :impact on BNP Paribas employee shareholding

• Public offering in France

• Private placement outside France

Major issuesresponsibilities of unit trusts Supervisory Board / Asset Manager- sell all rights (block or average during offering period) ?- sell some rights to generate enough cash to subscribe for shares?

• Stock bonus held in an independent Trust

Major issuesTrusteeʼs responsibilities (see above)

• Most of the employee shareholding is via Unit Trusts

Major issues- local stock exchange constraints (re comprehensive prospectus)- how best protect interest of non french resident employee shareholders inunit trusts (any formal or official communication to employees wouldrequalify the private placement into public offering)

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BNP Paribas March 2006 € 5,5 bn rights issue :impact on BNP Paribas stock options and stock bonus

• Freeze all transactions on BNP Paribas stock + exercize of stockoptions during offering period until final result of rights issue

• Immediately following result,- adjust numbers of stock options and strike prices (14 plans; 5,000 optionees)

- adjust numbers of stock bonus (1,500 Participants)

Major issuesCommunications (hot line, intranet, BP2S internet site)Information systems, up to date individual informationTiming (resume quickly exercize of stock options)Correspondant network

• A new stock options plan was to be issued in March

Major issuesGrant date : when ?Should something be done with BNL employees ?

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June 2006 : Public Offer on BNL sharesimpact on BNL stock options and employees blocked shares

• The BNL perspective

Major issuesBlocked shares must be held until maturitySome shares can be sold but would lose tax benefit (employee =employer) Liquidity of stock options following delistingCommunications (with employees, with ex-employees, with BNPParibas)

• The BNP Paribas perspective

Major issuesEnsuring that most BNL shares are brought to the Public OfferFinding a tax efficient solution to avoid resulting costs for ees + erExploring all alternatives re BNL stock options (one plan almost at themoney) Keeping BNL employees andoptionees (incl. ex executives) motivatedCommunications (restrictions with BNL employees)

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March 2007 : BNP Paribas awards stock options to BNL executives

• The BNP Paribas perspective

Major issuesKeep control of IFRS cost whilst enlarging the benefit to BNL (andothers) Determine list of key employees at the time of a major internalreorganization Adjust size of individual awards compared toprevious BNL policy Communications(french or english)

• The BNL perspective

Major issues

Understand BNP Paribas policyTax qualifying strike price (closing price last month vs averageopening price last 20 days)New legislation on taxation of stock optionsFollow up on plan administrationCommunications (italian)

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June 2007 : BNP Paribas 2007 DSPP offered to BNL employees

• The BNP Paribas perspective

Major issues

No experience of such a large implementation outside of FranceGet BNL to strictly apply the terms and conditions of the planTreat BNL as any other local entityGet BNL and other BNP Paribas entities in Italy to join forcesKeep central custody in Paris of BNP Paribas shares

• The BNL perspective

Major issuesMake it a success following acquisitionKeep retirees happy although excluded from participatingKeep local administration of the plan under control (manualsubscription) Make best use of existingshare account system Find solutionsto avoid costly tax consequences Organizean efficient communication in the middle of a major reorganizationMinimize costs

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October 2007 : BNP Paribas and BNL Spa merge

• The BNL perspective

Major issuesBNL shares acquired from future exercize of prior BNL stock options areto be exchanged against BNP Paribas shares (same parity as merger) +cash residualKeep local administration of the plans under controlFind solutions to avoid costly tax consequencesCommunicate

• The BNP Paribas perspective

Major issues

Best solution for BNL stock options (although not the rationale formerger !) Outsource most of the administration of the plansKeep central custody in Paris of unsold BNP Paribas shares

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A second domestic market : challenges and innovations

C&B

GLO BAL

LO C

AL

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• Emotional

• they are so italian… they are so french…

• we are a Group… you are now part of our Group… (global, local)

A second domestic market : challenges and innovations

• Professional

• take care of your clients and sponsors

• but act as a global Compensation & Benefits team

• Confidential

• global financial engineering may prevent too much openess

• stock plans are hot issues, especially at BNL, but…

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A second domestic market : challenges and innovations

• BNP Paribas in Italy post BNL acquisition

• 4 divisions

• 20 business lines

• 35 subsidiaries or legal entities

• Above 18,500 employees

Major challengeEnsure optimization of administration of all stock plans in Italy

• All stakeholders combined forces to engineer best solution• BNP Paribas SA (Paris)

• BNL (Roma)

• BNP Paribas Securities Services (Paris & Milano)

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Country specific issues

• Local issues and employee considerations

• The application process

• One lucky break : no Promotore Finanziario needed

• Transactions and day to day management

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Country specific issues

• BNP Paribas Securities Services (Italy): sole tax agent for all BNPParibas Group companies in Italy

• Italian tax rules

• The closer the better : local support for local employees

• Employee communications

• Translations

• Take up considerations

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Local support, global coordination

• BNP Paribas SA (Paris): global coordinator

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Questions?

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