Exhibit 40
OLIMPIA SPA - EXPLANATORY NOTE REGARDING THE ENLARGEMENT OF THE
SHAREHOLDING STRUCTURE
OLIMPIA, the partners in Olimpia (Pirelli S.p.A., Edizione Holding S.p.A.,
Unicredito S.p.A., Intesa BCI S.p.A.) and Xxxx S.p.A. (HOPA) have signed an
agreement (The deal) for the early reimbursement of the bond issued by Olimpia
and known as "Olimpia S.p.A. 1.5% 2001-2007" (approximately 262.5 million held
by Xxxx and approximately 0.7 million by a third party not bound by any
agreement with Hopa) as well as for an associated merger through incorporation
into Olimpia of a company wholly owned by Hopa (Holy), with minimum equity of
960 million Euro and no indebtedness. HOPA, which is not listed on the Stock
Exchange, owns directly and through two controlled companies -Holinvest e GPP
International - 4.420% of Olivetti, plus rights to purchase further shares in
Olivetti, as well as other instruments convertible into Olivetti shares, for an
overall potential stake in Olivetti of 10.176%.
After the incorporation of its own subsidiary Holy into Olimpia, HOPA will
obtain a 16% stake in Olimpia. The value of the aforementionend stake implies an
evaluation of Olimpia of roughly Euro 2.5 billion. As a result, the proportional
stakes of the current shareholders will be reduced as follows: Pirelli 50.4%;
Edizione Finance International (company controlled by Edizione Holding) 16.8%;
UniCredito Italiano and IntesaBCI 8.4% each.
The deal, which encompasses the early reimbursement of the XXXXXXX xxxx and the
incorporation of Holy into OLIMPIA,, will be implemented as follows:
- In addition to the terms of the "Olimpia S.p.A. 1.5% 2001-2007" loan,(by
which the reimbursement had to be done only in Olivetti
shares)OLIMPIAwill offer the bearers of its bonds the early
reimbursement with a combination of a given number of shares and of
convertible Olivetti bonds (Olivetti 1,5% 2001-2010); HOPA - directly or
through its subsidiaries Holinvest and GPP International - willaccept
the OLIMPIA offer and will subsequently request the early reimbursement
of the bond, thus obtaining approximately 100 million Olivetti ordinary
shares and roughly 164 million convertible Olivetti bonds;
- Holinvest - 100% controlled by HOPA - will be overall owner of
approximately 135 million convertible Olivetti 1.5% 2001-2010 bonds,
plus approximately 164 million Xxxxxxx xxxxx (the equivalent of which
will be converted, at the end of the deal - i.e. by June 30th, 2003 -
and further to the reimbursement by Xxxxxxx, to 164 million convertible
Olivetti 1.5% 2001-2010 bonds), and of roughly 486 million ordinary
shares in Olivetti;
- Holinvest will swap, by means of a definitive transaction, the
aforementioned approximately 486 million Olivetti shares for instruments
linked to the performance of the Olivetti share issued by a leading
counterparty. The terms of the transaction will be as follows:
- termination date: after 5 years;
- exclusive and discretionary right of the issuer to opt, upon
termination, for the physical delivery to Holinvest of the
aforementioned roughly 486 million Olivetti shares or for the
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payment of an equivalent amount of cash at the prevailing market
price of the same 486 mllion Olivetti shares;
- in the event of an early termination, the issuer would pay the
equivalent of the aforementioned Olivetti shares only in cash,
at the prevailing market price at the time of the early
termination, , except in some particular cases of reduced market
liquidity (predefined cases in which the issuer, wholly and
exclusively byits own discretion, may deliver to Holinvest a mix
of cash and Olivetti shares);
- payment to the bearer of a periodical interest equal to 85% of
the dividend paid on the 486 million Olivetti shares.
By the terms of this transaction, the issuer of the
Olivetti-linked instruments will definitively acquire the
aforementioned 486 million Olivetti shares of which it may make
use entirely at its own discretion,without no limitation on the
exercise of the relative voting rights or constraint to sell the
same shares. HOPA and Holinvest will transfer to their 100%
controlled subsidiary Holy:
- approximately 164 million convertible bonds Olivetti
1.5% 2001-2010;
- approximately 100 million Olivetti shares ;
- cash for approximately 99 million Euro;
- 19.999 % of Holinvest.
As stated above, the net assets of Holy will be equal to
approximately Euro 960 million; Holy will not have any
indebtedness or other liabilities.
- Holy will subsequently be contributed through incorporation into
OLIMPIA; HOPA, currently the sole partner in Holy, shall thus
obtain in exchange for its own stake in Holy a stake of 16% in
the incorporating company, OLIMPIA.
A stipulation of a shareholder pact is planned between HOPA and the current
shareholders of OLIMPIA and between OLIMPIA and XXXX as regards Holinvest.
AGREEMENT BETWEEN HOPA AND THE SHAREHOLDERS OF OLIMPIA
The rights of HOPA in OLIMPIA will be governed not only by the statutory
regulations of OLIMPIA, but also by a shareholders' agreement reached with the
current OLIMPIA shareholders. HOPA will not take part in the current existing
agreements among OLIMPIA shareholders, but will stipulate an independent
agreement with the former.
According to the aforementioned new agreement, XXXX will have the right to
appoint a member of the board of directors of OLIMPIA and of the main companies
within the Olivetti group (substituting one of the directors designed by
Pirelli). HOPA will not have any right of veto, nor will it have any particular
power over Xxxxxxxx. In the event of disagreement over specific matters (related
to any extraordinary deal such as investments, buying and selling, financing or
any other resolutions that modify the company bylaws), HOPA shall have the right
to obtain the breakup of OLIMPIA and OLIMPIA shall have the subsequent right to
obtain the breakup of Holinvest; as a result HOPA will receive the proportional
share of OLIMPIA assets and OLIMPIA will receive the proportional share of
assets - as detailed above - owned by Holinvest. In any case the breakup cannot
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be enacted any earlier than 36 month after the stipulation of the agreements,
with the exception of some particular events (e.g. in the event of OLIMPIA
ceasing to own the stake in Olivetti at a given proportion existing at the time
of the stipulation of the agreements, or in the event of a merger being approved
between OLIMPIA or Olivetti with companies other than those controlled directly
or indirectly, or otherwise in the event of a failure to respect certain ratios
in Olimpia: debt/equity ratio 1/1). In such a case HOPA would have the right to
obtain the earliest breakup of OLIMPIA and XXXXXXX would have the subsequent
right to obtain the breakup of Holinvest.
In such a particular case Hopa - in addition to the proportional share of assets
in Olimpia - would obtain the recognition of an amount equal to Euro 0.35 per
share or the equivalent Olivetti financial instruments deriving from its share
in Olimpia. In the event an arbitration panel recognises the fairness of the
disagreement expressed by Xxxx, the premium would be equal to 0.6 Euro per
Olivetti financial instrument.
In the event of the non-renewal of the agreement between Hopa, Olimpia and its
shareholders, Hopa would be awarded a premium per share or per Olivetti
financial instrument. This premium would be jointly determined by all parties,
or, in the event of a failure to reach an agreement, by two investment banks, on
condition that the aforementioned premium would in any case equal the higher
figure between 0.35 Euro and the premium determined by the investment banks.
A further agreement will regulate the relationships between Pirelli and Edizione
Holding on the one hand and between Pirelli and Unicredito and Intesa on the
other. Should it prove necessary:
a) pre-empt a case of Accelerated Impasse due to the alteration of the
debt/equity ratio of Olimpia, by exceeding the 1/1 threshold,;
b) meet the asset requirements as at the effective date of any breakup of
Olimpia that identify with the 1/1 debt/equity ratio.
Pirelli and Edizione Holding will commit to provide Olimpia with sufficient
equity if necessary up to the debt/equity ratio of 1/1. This commitment will be
borne to the extent of 80% by Pirelli and 20% by Edizione Holding.
AGREEMENT BETWEEN OLIMPIA AND XXXX AS REGARDS HOLINVEST
The rights of OLIMPIA shareholders in Holinvest (in which Xxxxxxx would acquire
a stake of 19.999% through the incorporation of Holy into OLIMPIA) shall be
regulated not only by the bylaws of Holinvest but also by a shareholders'
agreement with HOPA. Said agreement shall specify the right of veto of OLIMPIA
as regards certain specific matters and the resolutions of extraordinary
meetings.
In addition, provisions shall be made for rights of lock-up and pre-emption as
regards the financial instruments held by Xxxxxxxxx and the co-sale of HOPA's
stake in Holinvest. For example, Holinvest must maintain, for a period of twenty
months from the signing of the agreements, at least the majority of the
financial instruments and of the convertible bonds Olivetti 1,5% 2001-2010 owned
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as at the date of the signing. A right of pre-emption will subsequently be
granted to Olimpia for those instruments and bonds, with the same terms and
conditions.
Upon expiry of the shareholders' agreement, a further right of pre-emption will
be granted to OLIMPIA and will remain valid over a broader period of time of two
years as regards the financial instruments held by Xxxxxxxxx.
* * * *
The effectiveness of the agreement that will regulate the deal detailed above
(the implementation of which could take some time) will nonetheless be
subordinated to the condition precedent that HOPA, all its subsidiaries and all
the shareholders of HOPA subjected to the shareholders' agreement of HOPA have
previously sold the Olivetti shares in their possession, except a maximum of 1
million shares per shareholder and that the aggregate stake of HOPA (and of the
shareholders of HOPA who are subjected to the agreement as well as its
subsidiaries), of OLIMPIA and of the shareholders of OLIMPIA be no greater than
30% of Olivetti.
The shareholders' agreements regarding the stake of HOPA in OLIMPIA and of
OLIMPIA in Holinvest will only come into force further to the sale of the stakes
held in Olivetti by HOPA, by its affiliates and its shareholders.
***
As a result of the deal, OLIMPIA:
- further to the merger through incorporation of Holy, will strengthen its
own financial position with debt reduction of approximately Euro 476
million and increase its equity by Euro 960 million; the Euro 476
million reduction in debt (vs a nominal value of Euro 1billion) was due
to the fact that in November 2001 Olimpia, in order to hedge the risk
relative to the value of Olivetti shares related to of the xxxxx Xxxxxxx
1.5% '01-'07, underwrote a forward agreement to purchase 263.5 million
Olivetti shares at a strike of Euro 1.81 per share. As a result of the
aforementioned forward agreement, the debt related to the Xxxxxxx xxxx
was accounted for in the balance sheet of Olimpia at its reimbursement
value (i.e. 263.5 million shares x 1.81 Euro per share = 476 million
Euro).
- further to the merger through incorporation of Holy, will improve its
Net Financial Position, with a cash injection of approximately Euro 99
million, which will allows a corresponding reduction in the loan
interest burden;
- will acquire greater flexibility, as it is no longer subjected - further
to the early reimbursement of the aforementioned Olimpia loan - to the
constraints and financial costs thereto associated.
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