EXHIBIT 87
Xxxxx
December 29, 2005
Between : [Party A]
Mediobanca Banca di Credito Finanziario S.p.A.
Piazzetta Xxxxxx, 1
Milano
and : [Party B]
Pirelli Finance Luxembourg SA
00, Xxx. Xx Xxxxxx Xxxxx
Xxxxxxxxxx
ZERO COST COLLAR OPTION TRANSACTION
-----------------------------------
The purpose of this letter agreement (this "CONFIRMATION") is to confirm the
terms and conditions of the Transaction entered into between us on the Trade
Date specified below (the "TRANSACTION"). This Confirmation constitutes a
"Confirmation" as referred to in the ISDA Master Agreement specified below.
This Confirmation is subject to, and incorporates, the definitions and
provisions of the 2000 ISDA Definitions (including the Annex thereto) (the "2000
DEFINITIONS") and the definitions and provisions of the 2002 ISDA Equity
Derivatives Definitions (the "EQUITY DEFINITIONS", and together with the 2000
Definitions, the "DEFINITIONS"), in each case as published by the International
Swaps and Derivatives Association, Inc. ("ISDA"). In the event of any
inconsistency between the 2000 Definitions and the Equity Definitions, the
Equity Definitions will govern. In the event of any inconsistency between the
Definitions and this Confirmation, this Confirmation will govern.
This Confirmation evidences a complete and binding agreement between you and us
as to the terms of the Transaction to which this confirmation relates. This
Confirmation supplements, forms a part of, and is subject to, the 1992 Multi
Currency Cross Border ISDA Master Agreement dated as of 28 December 2005, as
amended and supplemented from time to time (the "Agreement"), between Mediobanca
SpA and Pirelli Finance S.A. All provisions contained in the Agreement govern
this Confirmation except as expressly modified below and shall supersede all or
any prior written or oral agreement in relation to this transaction.
1. The terms of the particular Transaction to which this Confirmation relates
are as follows:
GENERAL TERMS FOR THE CALL LEG
Option Type : Call
Seller : Mediobanca SpA
Buyer : Pirelli Finance Luxembourg SA
Strike Price : EUR 2,6072, subject to the declaration by the Issuer
of a gross ordinary dividend of EUR 0,1093 during the
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period from and including the Trade Date to and
including the Expiration Date (the "Assumed
Dividend"). Should the Issuer declare an ordinary
dividend that exceeds the Assumed Dividend, the
Calculation Agent will reduce the Strike Price by
100,00 per cent of the difference between the
declared dividend and the Assumed Dividend. Should
the Issuer declare an ordinary dividend that is less
than the Assumed Dividend, the Calculation Agent will
increase the Strike Price by 100,00 per cent of the
difference between the declared dividend and the
Assumed Dividend.
GENERAL TERMS FOR THE PUT LEG
Option Type : Put
Seller : Pirelli Finance Luxembourg SA
Buyer : Mediobanca SpA
Strike Price : EUR 2,2897, subject to the declaration by the
Issuer of a gross ordinary dividend of EUR 0,1093
during the period from and including the Trade Date
to and including the Expiration Date (the "Assumed
Dividend"). Should the Issuer declare an ordinary
dividend that exceeds the Assumed Dividend, the
Calculation Agent will reduce the Strike Price by
100,00 per cent of the difference between the
declared dividend and the Assumed Dividend. Should
the Issuer declare an ordinary dividend that is less
than the Assumed Dividend, the Calculation Agent will
increase the Strike Price by 100,00 per cent of the
difference between the declared dividend and the
Assumed Dividend.
FOR BOTH THE LEGS:
Trade Date : December 28, 2005
Option Style : European
Shares : Telecom Italia SpA - IT0003497168
Number of Options : 40.000.000,00
Option Entitlement : One Share per Option
Premium per Option : EUR 0,00
Exchange : The Italian Stock Exchange
Related Exchange : The Italian Derivatives Market
Clearance System : Monte Titoli S.p.A.
PROCEDURE FOR EXERCISE
Expiration Time : At the close of trading on the Exchange
Expiration Date : June 16, 2006
Partial Exercise Applicable
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Automatic Exercise : Applicable
Party A's Telephone Number and Telex and/or Mediobanca Banca di Credito Finanziario S.p.A.
Facsimile Number and Contact Details for Purpose Piazzetta Xxxxxx, 1
of Giving Notice Milano
Attention : X. Xxxxx - X. Xxxxxxxx
Tel. : x00 00 0000 000 - 872
Fax : x00 00 0000 000
Party B's Telephone Number Telephone Number and Attention : Mme. Xxxxxx Xxxxxxxx
Telex and/or Facsimile Number and Contact Details Tel. : 00000.0000000
for Purpose of Giving Notice Fax : 00000.000000000
Reference Price : means the average of the "Prezzo Ufficiale" of the
Shares, on the two business days before the
Expiration Date and the Expiration date (for the
avoidance of doubt this will be an average of three
prices), as determined by the Calculation Agent.
Prezzo Ufficiale : means the price as published by the Exchange at the
close of each trading day having the meaning ascribed
thereto in the Rules of the Markets Organised and
Managed by the Italian Stock Exchange, as current
from time to time.
SETTLEMENT TERMS
Physical Settlement : Applicable
Settlement Method Election Applicable
OTHERWISE
Cash Settlement : Applicable if required from Party B five business
days before the Expiration Date, h. 17.00 Milan
time.
Settlement Currency : Euro
Cash Settlement Payment Date : Three Currency Business Days after the relevant
Valuation Date
ADJUSTMENTS
Method of Adjustment : Calculation Agent Adjustment
EXTRAORDINARY EVENTS
Consequences of Merger Events :
a) Share-for-Share : Alternative Obligation
b) Share-for-Other : Options Exchange Adjustment
c) Share-for-Combined : Options Exchange Adjustment
Tender Offer : Applicable
a) Share-for-Share : Modified Options Exchange Adjustment
Milan - 29 Dec 2005 3/6
b) Share-for-Other : Modified Options Exchange Adjustment
c) Share-for-Combined : Modified Options Exchange Adjustment
Nationalization or Insolvency : Cancellation and Payment (Calculation Agent
Determination)
ADDITIONAL DISRUPTION EVENTS :
Change in Law: Not Applicable
Failure to Deliver : Applicable
Insolvency Filing : Applicable
Determining Party : In respect of "Insolvency Filing", means Mediobanca.
Hedging Disruption Not Applicable
Increased Cost of Hedging Not Applicable
Loss of Stock Borrow Not Applicable
Increased Cost of Stock Borrow Not Applicable
2. CALCULATION AGENT Mediobanca. Party A or any successor Calculation
Agent appointed by Party A. Party B may challenge any
determination or calculation by the Calculation Agent
within three Exchange Business Days following the
receipt by Party B of such determination or
calculation. If the parties are unable to agree on a
particular determination or calculation, a mutually
acceptable third party (the "Substitute Calculation
Agent") will be appointed within 24 hours following
the challenge by Party B to make a determination as
to the disputed matter. If either party determines
that the parties cannot agree on a Substitute
Calculation Agent, then each party shall select an
independent leading dealer in the relevant market,
which dealers shall agree on a third party
independent leading dealer, which dealer shall be the
Substitute Calculation Agent. The calculations and
determinations of the Substitute Calculation Agent,
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shall be binding and conclusive. Subject to the
foregoing, all determinations and calculations by the
Calculation Agent will be binding and conclusive in
the absence of manifest error. The costs, fees and
expenses (if any) relating to the appointment of a
third party shall be borne equally by both parties.
3. ASSIGNMENT : Party B shall be free to assign to Pirelli & C.
S.p.A., with head offices in Milan, via X.Xxxxx 10
all rights, liabilities, duties and obligations of
party B under and in respect of this Transaction and
Party A by executing this Confirmation acknowledges
and accepts such assignment (should it take place),
only subject to a five business days prior notice.
4. ACCOUNT DETAILS :
Payments to the Seller :
Payments to the Buyer :
5. OFFICES
The Office of Party A for the Transaction is: Milano
The Office of Party B for the Transaction is: Luxembourg
6. ADDITIONAL REPRESENTATIONS
Non-Reliance Applicable
Agreements and Acknowledgements Applicable
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Regarding Hedging Activities
Additional Acknowledgements Not Applicable
Confirmed as of the date first above written :
Mediobanca - Banca di Credito
Finanziario S.p.A.
By : By :
Name : Xxxxxxxxx Xxxxxxx Name : Xxxxxxx Xxxxx
Title : Manager Title : Manager
Authorized Signature Authorized Signature
Pirelli Finance Luxembourg SA
By : By :
Name : Name :
Title : Title :
Authorized Signature Authorized Signature
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