8 May 2007 09:23
Telefonica SA08 May 2007 As provided in article 82 of the Spanish Stock Market Act (Ley del Mercado deValores), TELEFONICA, S.A. hereby reports the following NOTICE Further to the information filed on April 28th and May 2nd, 2007 with respect toTELEFONICA's investment in TELECOM ITALIA, it is hereby enclosed copy of theagreements related to this transaction that have been filed by ASSICURAZIONIGENERALI and MEDIOBANCA with the Securities and Exchange Commission (SEC), theUS stock market regulator, on Form 13D ("Schedule 13D to report the acquisitionof beneficial ownership of 5% or more of a class of equity securities"). Madrid, May 7th, 2007-------------------------------------------------------------------------------- CO-INVESTMENT AGREEMENT This agreement (the "Co-investment Agreement") is entered into on 28 April, 2007 BY AND BETWEEN • TELEFONICA S.A., a Spanish company with registered office at 28013, Madrid, Gran Via n. 28, Spain ("TE"); • ASSICURAZIONI GENERALI S.p.A., an Italian company with registered office at Piazza Duca degli Abruzzi n. 2, Trieste, Italy ("AG"); • SINTONIA S.A., a Luxembourg company with registered office at 1, Place d'Armes, L-1136 Luxembourg ("SI"); • INTESA SANPAOLO S.p.A., an Italian company with registered office at Piazza San Carlo n. 156, Torino, Italy ("IS"); • MEDIOBANCA S.p.A., an Italian company with registered office at Piazzetta Cuccia n. 1, Milano, Italy ("MB"); (collectively the "Parties" and each, individually, a "Party") WHEREAS 1. With the execution of this Co-investment Agreement the Parties wish toestablish the terms and conditions for (i) their participation into Centotrenta4/6 S.r.l., an Italian company with registered office at Galleria del Corso 2,Milan, Italy, fiscal code n. 05277610969 to be subsequently transformed andrenamed "Telco S.p.A.", an Italian joint stock corporation ("Telco" or "Newco"),and (ii) the presentation by the Parties, also on behalf of Newco, of an offer(the "Offer") for the acquisition by Newco from Pirelli & C. S.p.A. ("PC") andSintonia S.p.A. and Sintonia S.A. (together "Sintonia") (the "Acquisition") of100% of the share capital of a holding company named Olimpia S.p.A. ("O" andsuch shares, the "Olimpia Shares"), which in turn holds a stake of 17.99% of theordinary share capital of Telecom Italia S.p.A. ("TI"). 2. AG and MB are already shareholders of TI in which they respectively hold (i)as regards AG, approximately No. 543,40 million ordinary shares equal to 4.06%of TI's ordinary share capital; and (ii) as regards MB, approximately No. 206,46million ordinary shares equal to 1.54% of TI's ordinary share capital. 3. On 18 October 2006, AG and MB executed together with PC, SI and O ashareholders' agreement (the "Current Shareholders' Agreement"), attached heretoas Annex A, which, upon the sale by PC and SI of the Olimpia Shares shall ceaseto have any effect. 4. Therefore, subject to PC and SI deciding to accept the Offer, the Partieswish to fund and to manage Newco in accordance with the terms and conditions ofthis Co-investment Agreement, the Shareholders' Agreement (as defined below) andrelevant attachments. 5. A fundamental assumption of this Co-investment Agreement is that the TI andTE groups will be managed autonomously and independently, without prejudicehowever to the Parties' rights and prerogatives resulting from thisCo-investment Agreement and the Shareholders' Agreement. Now, therefore, in consideration of the foregoing, the Parties hereby, AGREE AND COVENANT as follows. 1. Telco The Parties acknowledge and agree that (i) Newco is currently a dormant companynamed Centrotrenta 4/6 S.r.l., having the by-laws attached hereto as Annex B,(ii) the Parties will acquire the entire share capital of Newco currently equalto Euro 10.000,00 , (iii) Newco, which is currently incorporated in the form ofa societa a responsabilita limitata, shall be transformed into a societa perazioni, (iv) Newco shall adopt the new by-laws attached hereto as Annex C (the"Newco's By-Laws"), which, to the maximum possible extent, contains theprinciples of governance of Newco, while the remaining agreements among theshareholders as to the governance of Newco and O (which it has not been possibleto insert in the Newco's By-Laws) are contained in the shareholders' agreementattached as Annex D to this Co-Investment Agreement (the "Shareholders'Agreement"). 2. Offer The Parties agree that the Offer shall be submitted to PC and Sintonia in thetext attached hereto as Annex E. The Parties hereby agree that (a) if the acceptance of the Offer by PC andSintonia (the "Acceptance") were not received by the Parties within the relevantacceptance period indicated in the Offer, or (b) one or more of the Parties'competent corporate body were not to approve the Acquisition within the 20Business Days period indicated in the Offer, unless the other Parties agree toproceed with the Acquisition and they agree to the adjustments to be done in therelevant documents, or (c) one or more of the necessary anti-trust or otherregulatory approvals indicated in the Offer were not obtained as indicated inthe Offer, then the Parties would carry out - and hereby undertake to do so -all the activities necessary and required to unwind the actions and transactionsalready executed or put in place on the basis of this Co-investment Agreement. The Parties agree that as soon as practicable following receipt of theAcceptance, they shall complete the acquisition of Newco and shall cause theadoption of the Newco's resolutions to implement the undertaking of thisCo-investment Agreement and the connected Shareholders' Agreements. 3. Funding and capitalisation of Newco The Parties agree that, in order to carry out the acquisition of the OlimpiaShares, Newco shall be funded as provided for in this Article 3 (and numericallyillustrated in the chart attached hereto as Annex F), it being however herebyagreed and understood (xx) that the following calculations are based on theassumption that each share of Newco will have par value of Euro 1,00, (yy) that,in the event the par value of each of the Newco's share were increased orreduced, the split indicated herein between nominal value and share premiumshall vary accordingly and (zz) that the price to be paid for the Acquisitioncorresponds to the price indicated in the Offer, with the consequence that, incase such a price were increased or reduced in accordance with the terms andconditions of the Offer, the following calculations shall be amendedaccordingly. The Parties agree that, prior to acquiring the Olimpia Shares, the extraordinaryshareholders' meeting of Newco shall resolve upon: (i) a first share capital increase reserved as follows: (x) an amount of Euro 1.375m (corresponding to Euro 2,53 per share), of which Euro 543m of nominal value and Euro 831m of share premium, to be subscribed for and paid in by AG which undertakes to fully subscribe for through the contribution in kind of its direct shares in TI free of any charges, options and rights in favour of third parties, pledges and encumbrances; and (y) an amount of Euro 522m (corresponding to Euro 2,53 per share), of which Euro 206m of nominal value and Euro 316m of share premium, to be subscribed for and paid in by MB which undertake to fully subscribe for through the contribution in kind of its direct shares in TI free of any charges, options and rights in favour of third parties, pledges and encumbrances (together, the "First Share Capital Increase"). (ii) upon resolution to transform Newco as provided for in Article 1 (iii) above, a second share capital increase reserved to TE, which TE undertakes to fully subscribe and pay in, for an amount of Euro 2,314m (corresponding to Euro 2,82 per share), of which Euro 821m of nominal value and Euro 1.493m of share premium, to be subscribed for and paid in by TE in cash through immediately available funds or through the conversion of the shareholder's loan granted by TE (the "Second Share Capital Increase"); (iii) a third share capital increase reserved to IS, which IS undertakes to fully subscribe and pay in, for an amount of Euro 522m (corresponding to Euro 2,53 per share), of which Euro 206m of nominal value and Euro 316m of share premium, to be subscribed for and paid in by IS in cash through immediately available funds or through the conversion of the shareholder's loan granted by IS (the "Third Share Capital Increase"); (iv) a fourth share capital increase reserved to SI, which SI undertakes to fully subscribe and pay in, for an amount of Euro 412m (corresponding to Euro 2,53 per share), of which Euro 163m of nominal value and Euro 249m of share premium, to be subscribed for and paid in by SI in cash through immediately available funds or through the conversion of the shareholder's loan granted by SI (the "Fourth Share Capital Increase"). Consequently, after completion in full of the First Share Capital Increase,Second Share Capital Increase, Third Share Capital Increase and Fourth ShareCapital Increase (the "Share Capital Increases") the stakes in the share capitalof Newco shall be the following: (i) AG will hold a stake of 28,0%, (ii) MB willhold a stake of 10,6%, (iii) TE will hold a stake of 42,3%, (iv) IS will hold astake of 10,6% and (v) SI will hold a stake of 8,4%. The Parties agree that the extraordinary shareholders' meeting of Newcoresolving on the Share Capital Increases shall delegate the board of directorsof Newco to carry out and execute all the actions and formalities relating tothe Share Capital Increases required by law and provided for under thisCo-investment Agreement. The Parties acknowledge that (aa) the Share Capital Increases shall be resolvedupon during the same shareholders' meeting of Newco, provided that (x) thetransformation of Newco into a societa per azioni pursuant to article 1.(iii)and (y) the subsequent appointment of the new board of directors as provided inArticle 1.1(a) and (b) of the Shareholders' Agreement, shall be resolved afterthe resolution relating to the First Share Capital Increase, and in any case inorder to ensure that the resolutions listed under points from (i) to (iv) aboveshall be completed in the shortest possible timeframe, being they linked one toeach other, (bb) such extraordinary shareholders' meeting shall be heldfollowing the Acceptance and the satisfaction of the relevant conditions anddelivery of the appraisal made by an expert on the value of the TI shares ownedby AG and MB (which the Parties trust may be obtained prior to Closing (asdefined in the Offer) and in any case timely for the purpose of Closing, (cc)upon the resolution having been adopted, (x) the subscription of all the ShareCapital Increases shall occur and (y) the contribution in kind relating to theFirst Share Capital Increase and the contribution in cash relating to the otherShare Capital Increases shall be completed and fully paid in; (dd) in partialderogation to points (aa) through (cc) above, in the event that completion ofthe First Share Capital Increase were delayed because of the appointed expert'sappraisal is not delivered before Closing, then each of TE, IS and SI shallprovide, respectively and severally, to Newco a shareholder's loans (with nocompensation) for a term not exceeding 20 calendar days (the "Shareholders' LoanTerms") and for an amount equal to the sum of the Second Share Capital Increase,Third Share Capital Increase and Fourth Share Capital Increase respectively, andwhich TE, IS and SI shall convert into share capital in execution of the ShareCapital Increases respectively reserved to them at the earlier of aaa) thedelivery of the appraisal and the completion of the First Share CapitalIncrease, or bbb) the elapse of the Shareholders' Loan Term, provided that, inthe event under bbb), the First Capital Increase will take place as soon aspossible thereafter. The Parties further acknowledge and agree that: O on or before the Closing Date (as defined in the Offer), Newco shall borrow at market conditions from MB, IS or other primary financial institutions appointed by MB and IS, subject to acceptance in writing by TE, a loan for an amount of approximately Euro 1.000 m (the "Facility"). O immediately after the Closing Date (as defined in the Offer), the extraordinary shareholders' meeting of Newco shall resolve a fifth share capital increase for an amount up to Euro 900m, at an issue price of Euro 2,53 per share, which shall be open for subscription (to be fully paid in cash upon subscription) for a maximum term of six months as follows, and which purpose will be to finance the total or partial reimbursement of the Facility (the "Fifth Share Capital Increase"): (i) a portion of the Fifth Share Capital Increase in Class B shares, equal to the percentage corresponding to the stake held at that time by TE in the entire share capital of Newco, reserved to TE for a maximum period of 6 (six) months with the issue of Class B shares it being hereby agreed and understood that if any part of such portion of the Fifth Share Capital Increase has not been subscribed for by TE within such period of 6 (six) months, then this portion of the Fifth Share Capital Increase shall be deemed subscribed up to the amount of the subscriptions actually made by TE; (ii) a portion of the Fifth Share Capital Increase equal to the percentage corresponding to the stake held at that time by the existing Class A shareholders' in the entire share capital of Newco, reserved to the Fifth Share Capital Investors (as defined below) with the issue of Class A shares - bearing pro-quota the same rights and duties pertaining to the already existing Class A shareholders (and it being understood that no shareholder will be granted additional or special rights, unless granted to the relevant Class of Shares under the Shareholders' Agreement, the Co-investment Agreement and the By-Laws) - to be offered for subscription, for a maximum period of 5 (five) months, to one or more of such Fifth Share Capital Investors (as defined below), under the following conditions: (S) the amount to be contributed in cash by each Fifth Share Capital Investor in exchange for the shares subscribed under the Fifth Share Capital Increase shall be higher than Euro 100 million, and (S) the shares subscribed under the Fifth Share Capital Increase by each Fifth Share Capital Investor shall represent less than 5% of the entire share capital of Newco immediately after completion of the Fifth Share Capital Increase; it being hereby agreed and understood that if any part of such portion of the Fifth Share Capital Increase has not been subscribed for by such Fifth Share Capital Investors, then this portion of the Fifth Share Capital Increase shall be deemed subscribed up to the amount of the subscriptions actually made by the Fifth Share Capital Investors; (iii) a portion equal to the difference between (x) the portion of the Fifth Share Capital Increase reserved to the Fifth Share Capital Investors pursuant to point (ii) above and (y) the portion of such Fifth Share Capital Increase actually subscribed for by such Fifth Share Capital Investors, reserved to the existing Class A shareholders (i.e. IS, AG, SI and MB), with the issue of Class A shares to be offered for subscription, for a maximum period of 1 (one) month following the expiration of the 5 (five) month-period under point (ii) above, it being hereby agreed and understood that (aa) the Class A shareholders shall have the right to subscribe any unopted part of this portion of the Fifth Share Capital Increase not subscribed for by other Class A shareholders, and (bb) if any part of such portion of the Fifth Share Capital Increase has not been subscribed for by the Class A shareholders, then this portion of the Fifth Share Capital Increase shall be deemed subscribed up to the amount of the subscriptions actually made by the Class A shareholders . For the purposes of this Fifth Share Capital Increase: (i) "Fifth Share Capital Investor" shall mean any company or person, other than a Telecom Operator (as defined below), which is a reputable qualified Italian institutional or private investor, to be selected by IS in agreement with the other Class A shareholders - such agreement not to be unreasonably withheld - and subsequently submitted for acceptance to TE, acceptance which can not be unreasonably denied, that after acquiring any stake in NewCo shall adhere to this Co-investment Agreement and the Shareholders' Agreement and be subject to obligations thereto and will not have any special rights in the corporate governance of NewCo, other than those attached to Class A shares in accordance with the By Laws and the Shareholders Agreement and those resulting from the applicable law; and (ii) "Telecom Operator" shall mean any company or person operating in the telecom sector and any company or person holding (x) a controlling stake in any non-listed company operating in the telecom sector or (y) a stake in a listed company operating in the telecom sector which exceeds 10% of the share capital or which, even though is below 10% of the share capital, enables the holder to appoint one or more members of the board of directors of the listed company. 4. Class A and Class B shares The Parties agree: (A) that, as already provided for in the Newco's By-Laws, theshare capital of Newco shall be divided into two separate categories: the ClassA and the Class B shares, (B) that all the share capital increases, followingthe Fifth Share Capital Increase, shall be resolved "in opzione" pursuant toarticle 2441, first paragraph, of the Italian Civil Code splitting the overallamount of shares so as to reflect the proportion from time to time existingbetween Class A and Class B shareholders, (C) that TE shall receive andthereafter acquire (through share capital increases or exercise of thepre-emption right set forth in the Newco's By-Laws) only Class B shares or ClassA shares to be converted into Class B shares, while the other Parties includingthe Fifth Share Capital Investors (as defined below) and the Italian QualifiedInvestors (as defined in the Shareholder's Agreement), if any, shall hold ClassA shares, save for the possibility to acquire Class B shares in case of exerciseof the pre-emption right to be converted into Class A shares, (D) that the ClassB shares shall have exactly the same economic and administrative rights as theClass A shares, save as provided for in the Shareholders' Agreement and in theNewco's By-Laws, and (E) that the Parties - following the completion of theFifth Share Capital Increase - favourably envisage the potential analysis offurther contribution of TI Shares into Newco (without prejudice for theprinciples under the "stand still" clause of the Shareholders Agreement)provided that in such an event the right to subscribe further capital increasesin cash shall be granted to the other existing shareholders in order to allowavoidance of possible dilutions. 5. Business of Newco The Parties agree that (I) the business of Newco shall only be that ofinvesting, holding and disinvesting, directly and indirectly, in TI shares, (II)however, the corporate scope of Newco shall permit, in principle, the carryingout of certain services in the field of activity of TI, provided however that,in order to carry out such services, the prior authorisation of theshareholders' meeting of Newco shall be required pursuant to Article 2364, firstparagraph, No. 5), such authorisation to be approved with the favourable vote ofat least 95% of the share capital of Newco. 6. Shareholders' Agreement The Parties recognize and agree (i) that the Shareholders' Agreement containsprovisions relating inter alia to (x) the governance of Newco, (y) thegovernance of O, including the definition of the criteria concerning theappointment of the directors in TI, to the extent feasible and (z) the transferof Newco, O and TI shares, (ii) that the Newco's By-Laws have been drafted inorder to reflect to the maximum possible extent the principles of governance ofNewco and the transfer of Newco's shares and (iii) that the remaining principlesof governance of Newco and O, which was not possible to insert in Newco'sBy-Laws, are contained in the Shareholders' Agreement. 7. Confidentiality No Party shall make any announcement, communication or disclosure in relation tothis Co-investment Agreement, or in relation to the ongoing negotiations betweenthe Parties, or in relation to the status of the same without the other Party'sprevious written consent, unless this is required by law and/or by the competentauthorities. In this case, the Parties undertake to provide with no delay, tothe extent feasible, to the other Parties notice and/or copy of theannouncement, communication or disclosure required by law and/or by thecompetent authorities. 8. Costs and expenses Each Party shall pay its own costs and expenses (including fees anddisbursements of any external legal or financial advisers and accountants)incurred in connection with the preparation, negotiation, and execution of thisCo-investment Agreement. Each Party represents and warrants that this Co-investment Agreement has beenconcluded without the participation, assistance or intervention, direct orindirect, of any broker, intermediary, commission agent, business agent orsimilar party, who may claim any expenses, fees, royalties, commission or othercosts due to the preparation, negotiation, and execution of this Agreement fromthe other Parties. 9. Notices Any notice, objection or other communication to be given by one Party to theother under, or in connection with, this Co-investment Agreement shall be inwriting and signed by or on behalf of the Party giving it. It shall be served bysending it by fax to the number set out in this Article 9, or delivering it byhand, or sending it by pre-paid recorded delivery, special delivery orregistered post, to the address set out in this Article 9 and in each casemarked for the attention of the relevant Party set out in this Article 9 (or asotherwise notified from time to time in accordance with the provisions of thisArticle 9). Any notice so served by hand, fax, post or e-mail shall be deemed tohave been duly given: (a) in the case of fax, at the time of the receipt of delivery; or (b) in the case of prepaid recorded delivery, special delivery or registered post, at the date indicated in the receipt of delivery, (c) in the case of e-mail delivery at the e-mail address indicated below, with receipt of delivery, provided that in each case where delivery by hand or by fax occurs after 6 p.m.on a Business Day or on a day which is not a Business Day, service shall bedeemed to occur at 9 a.m. on the following Business Day. Any references to timein this Article are to local time in the country of the addressee. The addresses and fax numbers of the Parties for the purpose of Article 9 are asfollows:To TE: Telefonica S.A., Gran Via n. 38, Planta 9, 28013, Madrid, Spain To the attention of: the Group General Counsel (Ramiro Sanchez de Lerin), Ph: + 34 91 584 0207 Fax: + 34 91 531 3206 E-mail: secretaria.general@telefonica.es To AG: ASSICURAZIONI GENERALI S.p.A., Piazza Duca degli Abruzzi n. 2, 34132 Trieste, Italy To the attention of: Mr. Giovanni Perissinotto Ph: + 39 040 671036 Fax: + 39 040 671260 E-mail: giovanni_perissinotto@generali.com To SI: SINTONIA S.A. 1, Place d'Armes, L-1136 Luxembourg Luxembourg To the attention of: Mr. Gustave Stoffel Ph: + 352 26 266255 Fax: + 352 26 266256 E-mail: gustave.stoffel@pt.lu To IS: INTESA SANPAOLO S.p.A. Piazza Scala n. 6, 20121 Milano, Italy To the attention of Mr. Gaetano Micciche and Mr. Fabio Cane Ph: + 39 02 879 42650 Fax: + 39 02 879 43 540 E-mail: gaetano.micciche@intesasanpaolo.com, and Fabio.cane@intesasanpaolo.com To MB: MEDIOBANCA S.p.A. Piazzetta Cuccia n. 1, 20121 Milano, Italy To the attention of: Mr. Clemente Rebecchini and Ms. Cristiana Vibaldi Ph: + 39 02 8829 202 and + 39 02 8829 455 Fax: + 39 02 8829 943 E-mail: clemente.rebecchini@mediobanca.it, cristiana.vibaldi@mediobanca.it A Party may notify the other Party of a change to its name, relevant addressee,address or fax number for the purposes of this Article 9, provided that, suchnotice shall only be effective on: (i) the date specified in the notice as the date on which the change is to take place; or (ii) if no date is specified or the date specified is less than five (5) Business Days after the date on which notice is given, the date following ten (10) Business Days after notice of any change has been given. 10. Variations No variation of this Co-investment Agreement shall be valid unless it is inwriting and signed by or on behalf of each of the Parties. The expression"variation" shall include any variation, amendment, supplement, deletion orreplacement however effected. 11. Severability If any provision of this Agreement is held to be invalid or unenforceable, thensuch provision shall (so far as it is invalid or unenforceable) be given noeffect and shall be deemed not to be included in this Co-investment Agreement,but without invalidating any of the remaining provisions of this Co-investmentAgreement. In any such event the Parties shall negotiate in good faith and agreeall those amendments to this Co-investment Agreement which are consequentlynecessary to replace the invalid or unenforceable provision with terms having asnear as possible the same commercial effect with a view to maintain unalteredthe Parties' mutual interests as currently protected under this Co-investmentAgreement and in any case preserving a balance between their respective rightsand obligations in enabling them to fully perform their obligations ascontemplated hereunder. 12. Entirety of Agreement This Co-investment Agreement constitutes together with its Annexes the entireagreement and understanding of the Parties in relation to the transactionshereby contemplated and supersedes any and all prior agreements andarrangements, whether written or oral, that may exist between the Parties withrespect to the matters contemplated therein. 13. No waiver and further assurances No failure or delay by any of the Parties in exercising any right or remedyprovided by law or pursuant to this Co-investment Agreement shall impair suchright or remedy or operate or be construed as a waiver or variation of it orpreclude its exercise at any subsequent time and no single or partial exerciseof any such right or remedy shall preclude any other or further exercise of itor the exercise of any other right or remedy. Each of the Parties undertakes tothe others to perform (or procure the performance of) all further acts andthings, and execute and deliver (or procure the execution and delivery of) suchfurther documents (including without limitation any agreement or arrangementwhich shall be entered into between the Parties) as set forth in thisCo-investment Agreement, as may be required to implement and/or give effect tothis Co-investment Agreement and the transactions contemplated hereunder. 14. Governing law/Exclusive Jurisdiction This Co-investment Agreement shall be governed by, and interpreted in accordancewith, the laws of the Republic of Italy. Any disputes arising out of or inconnection with this Co-investment Agreement shall be submitted by the Partiesto arbitration. The venue of the arbitration shall be Milan. The arbitrationshall be conducted in the English language and in accordance with ICC Rules. * * * * *TELEFONICA S.A. ASSICURAZIONI GENERALI S.P.A.__________________________________ __________________________________ INTESA SANPAOLO S.P.A. MEDIOBANCA S.P.A. _____________________________ __________________________________SINTONIA S.A. __________________________________ -------------------------------------------------------------------------------- SHAREHOLDERS' AGREEMENT This agreement (the "Shareholders' Agreement") is entered into on April, 28 2007 BY AND BETWEEN • TELEFONICA S.A., a Spanish company with registered office at 28013, Madrid, Gran Via n. 28, Spain ("TE"); • ASSICURAZIONI GENERALI S.p.A., an Italian company with registered office at Piazza Duca degli Abruzzi n. 2, Trieste, Italy ("AG"); • SINTONIA S.A., a Luxembourg company with registered office at 1, Place d'Armes, L-1136 Luxembourg ("SI"); • INTESA SANPAOLO S.p.A., an Italian company with registered office at Piazza San Carlo n. 156, Torino, Italy ( "IS"); • MEDIOBANCA S.p.A., an Italian company with registered office at Piazzetta Cuccia n. 1, Milano, Italy ("MB"); (collectively the "Parties" and each, individually, a "Party") WHEREAS 1. With an agreement of even date (the "Co-investment Agreement"), the Partieshave agreed to establish the terms and conditions for (i) their participationinto Centotrenta 4/6 S.r.l., an Italian company with registered office atGalleria del Corso 2, Milan, Italy, fiscal code n. 05277610969 to besubsequently transformed and renamed as Telco S.p.A. ("Telco" or "Newco"), (ii)the presentation by the Parties also on behalf of Newco of an offer (the"Offer") for the acquisition by Newco from Pirelli&Co. S.p.A. ("PC") andSintonia S.p.A. and Sintonia S.A. (together "Sintonia") (the "Acquisition") of100% of the share capital of an holding company named Olimpia S.p.A. ("O" andsuch shares the "Olimpia Shares"), which in turn holds a stake of 17.99% of theordinary share capital of Telecom Italia S.p.A. ("TI"), (iii) the capitalizationand funding of Newco in connection with the Acquisition, (iv) the division ofNewco's share capital into two classes of shares, (v) the corporate scope ofNewco, and (vi) the general framework in which the respective obligations of theParties under the Co-investment Agreement are inserted; 2. The Parties now wish to agree on the principles relating inter alia to (i)the corporate governance of Newco, (ii) the governance of O, (iii) theappointment of directors in TI and (iv) the transfer of the Newco's shares andthe O and TI's shares directly or indirectly owned by Newco. Now, therefore, in consideration of the foregoing premises which together withthe Annexes of this Shareholders' Agreement are an essential part hereof, theParties hereby, AGREE AND COVENANT as follows: 1. Corporate governance of Newco 1.1 The Parties agree that the corporate governance of Newco is reflected, tothe maximum possible extent, in the Newco's by-laws (the "Newco's By-Laws"). Inparticular: (a) The composition of the board of directors of Newco shall be based on the principle of proportionality as follows. The Newco's By-Laws shall provide that the number of directors shall be equal to ten. Should a director of Newco, who has been designated by one of the Parties, resign or otherwise cease for any reason whatsoever to hold his office, the relevant Party shall have the right to designate the new director in order to preserve the composition of the Board of directors referred to in this clause and the Parties shall exercise their rights so as to cause the appointment of the person indicated by the relevant Party. Should one of the Parties decide to revoke one or more of the directors designated by such Party, all the Parties shall vote in the relevant shareholders' meeting for such revocation, provided that the Party asking the others to vote for the revocation of one or more of its designated directors shall keep Newco and the other Parties fully harmless and indemnified for any damages connected therewith; (b) The Newco's By-Laws shall contain a voting list system to ensure that: (i) the Parties holding the Class A shares will be entitled to appoint so long as they holds a percentage of at least 50% plus one share of the share capital of Newco six directors, including the Chairman; for this purpose, it is hereby agreed between the Parties holding the Class A that: (x) they will concur in the presentation of one list; (y) the list shall be determined based on the principle of proportionality by the Parties holding the Class A shares unanimously, failing which unanimity within the terms indicated in the By-Laws, the proportionality will be as follows: two directors will be indicated by AG, one director will be indicated by each of IS, SI and MB, the Chairman will be indicated unanimously; the same principle shall apply for any possible direct or indirect designation of O and TI's directors. (ii) TE, as holder of Class B shares will be entitled to appoint (x) so long as it holds a percentage of at least 30% of the share capital of Newco four directors, including the Vice-Chairman, and (y) so long as it holds a percentage of at least 20% of the share capital of Newco, two directors; It being understood that, should (x) the holders of Class A shares hold less than 50% plus one share, and/or (y) TE as holder of Class B shares holds more than 50% plus one share , the Parties shall appoint the directors on the basis of the same proportionality principles under points (i) and (ii) above, which would in any case grant the majority of the directors to the class of shares representing at least 50% plus one share of the entire share capital of Newco and seven out of ten directors to the class of shares representing more than 70% of the entire share capital of Newco. It is also understood that in the event any Class of shareholders dilutes below the aforementioned percentages it shall cause the resignation of the relevant exceeding director/s. (c) On the following matters (the "Reserved Matters"), the board of directors will decide with the vote of at least seven directors, it being however agreed and understood that if three or more directors abstained from voting on any of the Reserved Matters or remained absent from the relevant meeting the quorum will be reduced to the vote of the majority of the directors in office (i.e. the vote of six directors), provided however that, if the absent or abstaining directors from the relevant meeting are three or more TE directors, then (x) the discussion and resolutions about such Reserved Matter shall be postponed to a subsequent meeting (to be held not earlier than five business days later than the first meeting), where any resolution relating to such Reserved Matters will require the special majorities referred to above, (y) each of the directors shall be entitled to ask that such subsequent meeting be held by teleconference or videoconference, and (z) in the event that three or more directors, are absent or abstaining from the relevant subsequent meeting, the quorum will be reduced to the vote of the majority of the directors in office (i.e. the vote of six directors): (aa) acquisition, disposal and encumbrance (directly or indirectly in any form or manner) of O's or TI's shares or any rights attached thereto including, but not limited to, voting rights, (with the exception of the sale by O and/or by Newco (or by the entity resulting from the merger between O and Newco) of TI shares in order to adhere to a tender offer, it being understood and agreed that this decision will be taken by the board of directors with a simple majority subject however to the prior authorization of the shareholders' meeting and to the right of "Riscatto" as provided for in article 28 of the Newco's By-laws); (bb) carrying out of investments other than in O and in TI; (cc) capital expenditure and financial structure decisions for amounts in excess of Euro 75 million; (dd) decisions on the vote to be exercised in (x) the extraordinary shareholders' meeting of TI convened pursuant to Article 2365 of the Italian Civil Code to approve resolutions on transactions of extraordinary nature (including but not limited to resolutions having an impact on the share capital of TI capital, such as increases or decreases, mergers and de-mergers, with the exception however of resolutions provided under art. 2446-2447 of the Italian civil code or other resolutions required to comply with applicable mandatory regulations) and (y) the shareholders' meeting of O; or (ee) approval and amendments of the budget of Newco; (d) the shareholders' meeting of Newco shall resolve with the vote of (i) at least 75% of the entire share capital on (x) share capital increases with the exclusion of the option right pursuant to Article 2441, 4th and 5th paragraph of the Italian Civil Code, (y) mergers and de-mergers (except the merger between O and Newco) determining a dilution of the shareholders, and (z) amendments to the provisions of the Newco's By-Laws regarding the appointment of the board of directors and the quorum of board of directors and shareholders meetings; and (ii) at least 65% of the entire share capital on the following matters: (A) any other matter pertaining to the extraordinary shareholders meeting of Newco, with the exclusion of mergers with companies wholly owned by Newco or in which Newco holds a stake of at least 90% of the entire share capital, which shall be referred to the Board of Directors of Newco pursuant to Articles 2505 and 2505-bis of the Italian Civil Code and will be resolved with the special majorities set forth under Article 1 (c) above, save for the merger of O into Newco, which the Parties believe appropriate to analyse expeditiously as to the most efficient way to carry on after the Acquisition and shall therefore be approved with simple majority; (B) dividend policy of Newco; it being however agreed and understood that- both for the matters under this Article 1.1(d)(i) and (ii) above - in case one or more shareholders holding more than 30% of the entire share capital abstained from voting or remained absent from the relevant meeting the quorum will be reduced to the vote of at least 50% plus one share of the entire share capital; (e) the shareholders' meeting of Newco shall resolve the prior authorisation necessary pursuant to Article 2364, first paragraph, No. 5), to carry out the services referred to in Article 3 of Newco's By-Laws with the vote of at least 95% of the Newco's share capital. 1.2 The Parties agree that (except as provided for below in Article 8.5)deadlocks at the level of the board of directors and shareholders' meetings onthe matters referred to under items (aa) and (dd) of paragraph 1.1.(c) above andunder paragraph 1.1(d) above with the exception of item (B) shall be resolved asfollows: (aa) the Parties shall try to find an amicable compromise within fifteen calendar days as of the relevant meeting; (bb) then a new meeting shall be convened and at such meeting the decision will be passed with a simple majority, i.e. without the special quorum referred to in letters (c) and (d) above; (cc) in any such cases (i.e. where the decision were taken with simple majority and with the negative vote expressed by either TE or MB or AG or IS or SI, or by the members of the board of directors designated by either TE, or AG or SI or ISor MB, hereinafter the "Dissenting Shareholder"), the Parties shall be bound to cause upon request by a Dissenting Shareholder, (who will be entitled to deliver to the other Parties, within the following thirty days, a notice (the "De-merger Notice") requiring the other Parties to cause), as soon as possible, (a) the merger between Newco and O (if not already done at that time), and (b) the non-proportional de-merger of the company resulting in the attribution to the beneficiary company to be owned 100% by each Dissenting Shareholder of a percentage of all the assets and liabilities of Newco after merger with O corresponding to the stake held by each of such Dissenting Shareholder in Newco after merger with O ((a) and (b) jointly, hereinafter, the "De-merger"). In such case (x) the Parties shall implement, adopt and vote, and cause the directors designated by them to implement, adopt and vote, all and any actions, documents and resolutions necessary to complete the De-merger within a reasonably short timeframe, but in any case no later than 6 months following the Demerger Notice or, if the transaction is subject to any authorizations by law or contract, within 6 months following the obtaining of such authorizations, and (y) Newco shall proceed with the execution of the Reserved Matter only after the effective date of the De-merger. Except if TE exercised the Call Option under Article 8.5(a) below, immediately upon receipt of the De-merger Notice, the portion of O or TI Shares corresponding to the Dissenting Shareholder's stake in Newco shall be deposited in escrow with a fiduciary company or otherwise, in any case to secure the effectiveness of the De-merger and the exercise of the relevant voting rights thereon in accordance with the Dissenting Shareholders' instructions. If TE exercises the Call Option under Article 8.5(a) below, immediately upon receipt of the Call Option notice, the O or TI Shares being the object of the Call Option shall be deposited in escrow with a fiduciary company or otherwise, in any case to secure the effectiveness of the Call Option and, subject to deposit in escrow of the full Call Option price, the exercise of the voting rights thereon in accordance with TE instructions. Upon effectiveness of the De-merger under this Article 1.2 (and also in the case under Article 8.5), the Dissenting Shareholder shall no longer be bound by this Agreement. Without prejudice to the provision under 1.1 (c) above in relation to thereduction of the relevant quorum in case of absence or abstention, if therelevant quorum in respect of any Reserved Matter, other than items (aa) and(dd) of 1.1(c) above and of 1.1(d) above except for item (B), is not met, therelevant proposal will be deemed to be rejected and no action will be taken. TE will have the right to appoint one out of three effective members in theBoard of Statutory Auditors of Newco, to be indicated as Chairman, and onealternate member (Collegio Sindacale). The other Class A shareholders will have the right to appoint two out of threeeffective members in the Board of Statutory Auditors of Newco, and one alternatemember (Collegio Sindacale). 2. Class A and Class B shares The Parties agree: (A) that, as already provided for in the Newco's By-Laws, theshare capital of Newco shall be divided into two separate categories: the ClassA and the Class B shares, (B) that all the share capital increases following theFifth Share Capital Increase (as defined in the Co-investment Agreement) and,for the duration of this Agreement, shall be resolved "in opzione" pursuant toarticle 2441, first paragraph, of the Italian Civil Code splitting the overallamount of shares so as to reflect the proportion from time to time existingbetween Class A and Class B shareholders, (C) that TE shall receive andthereafter acquire (through share capital increases or exercise of thepre-emption right set forth in the Newco's By-Laws) only Class B shares or ClassA shares to be converted into B shares, while the other Parties, including theFifth Share Capital Investors (as defined in the Co-investment Agreement) andthe Italian Qualified Investors (as defined below), if any, shall hold Class Ashares, save for the possibility to acquire Class B shares in case of exerciseof the pre-emption right to be converted into A shares, (D) that the Class Bshares shall have exactly the same economic and administrative rights as theClass A shares, save as provided for herein and in the Newco's By-Laws, and (E)that the Parties - following the completion of the Fifth Share Capital Increase(as defined in the Shareholders' Agreement) - will favourably envisage thepotential analysis of further contribution of TI Shares into Newco (withoutprejudice for the principles under the "stand still" clause of this Agreement)provided that in such an event the right to subscribe further capital increasesin cash shall be granted to the other existing shareholders in order to allowavoidance of possible dilutions. 3. Business of Newco The Parties agree that (I) the business of Newco shall only be that ofinvesting, holding and disinvesting, directly and indirectly, in TI shares, (II)however, the corporate scope of Newco shall permit, in principle, the carryingout of certain services in the field of activity of TI, provided however that,in order to carry out such services, the prior authorisation of theshareholders' meeting of Newco shall be required pursuant to Article 2364, firstparagraph, No. 5), such authorisation to be approved with the vote of at least95% of the share capital of Newco. 4. Corporate governance of O The Parties agree that the principles of corporate governance referred to inArticle 1 above shall also apply mutatis mutandis to O. As a consequence, TEshall be entitled to designate a percentage of the directors, including theVice-Chairman, to be appointed by Newco in O reflecting its shareholding in theNewco's share capital and to appoint one out of three members of Board ofStatutory Auditors of O to be indicated as Chairman, and one alternate member(Collegio Sindacale). O will be subject to the activity of direction and coordination of Newco. As aconsequence, prior to any board of directors meeting or shareholders' meeting ofO taking place, the Parties shall cause the board of directors of Newco toconvene and to resolve on the decision to be then adopted in the relevantcorporate body of O. More in particular, any decision to be taken at the levelof the board of directors and shareholders' meeting of O will be previouslyagreed by the board of directors of Newco in accordance with the principle ofthe Newco's governance referred to above (including special majorities whererequired), with the understanding and the agreement that the Parties shall causethe directors of O, respectively designated, to conform to the resolutionadopted at the level of Newco. In case of merger of O and Newco, the governance of O (or the incorporatingentity as the case may be) will be that of Newco as provided for in Article 1above, provided however that TI will not be subject to the activity of directionand coordination of Newco or O (or the incorporating entity as the case may be). 5. Provisions relating to TI and TE The Parties recognize and agree that the TI and TE groups will be managedautonomously and independently, without prejudice however to the Parties' rightsand prerogatives resulting from this Shareholders' Agreement. The Parties further recognize and acknowledge that, without prejudice of theindependence and autonomy of any of TI's management decision, the investment inNewco implies a strategic vision and perspective. Therefore the Parties willfavorably regard any strategic initiative that the TI's and TE's respectivemanagements may jointly carry out, in their autonomy and independence. As soon as possible after Closing (as defined in the Offer), and for the entireterm of the Shareholders' Agreement the board of directors of Newco or O, as thecase may be, shall approve the list to be submitted to the shareholder' meetingof TI, for the appointment of the directors of TI pursuant to the followingcriteria: (i) TE - to the extent holding at least 30% of the Newco's sharecapital - shall have the right vis-a-vis the other Parties to designate twodirectors of TI (x) to be included as designees for appointment in the board ofTI in the list presented by O or Newco (as the case may be) and (y) to theextent feasible, pursuant to Article 2386, first paragraph, of the Italian CivilCode ("cooptazione"); and (ii) the Class A shareholders which are Party to thisAgreement - to the extent holding at least 50% plus one share of the Newco'sshare capital - shall designate the other members of the list as follows: (x)three members unanimously and (y) the remaining members on the basis, mutatismutandis, of the same proportionality applied in Article 1.1(b)(i) above amongthe Class A shareholders which are Party to this Agreement. The directors designated by TE in Newco, O and TI shall be directed by TE toneither participate, nor vote at the board of directors meetings (and TE, to theextent applicable, shall neither attend nor vote, at any shareholders' meetingsof Newco or the entity resulting from the merger of O with Newco, as the casemay be) at which there will be discussed and proposed resolutions relating tothe policies, management, and operations of companies directly or indirectlycontrolled by TI providing their services in countries where regulatory andlegal restrictions or limitations for the exercise of voting rights by TE (asindirect and ultimate shareholder of such companies) are in force. Even though as of the date hereof TE does not envisage any burden, restrictionor divestment to be imposed on TE by any regulatory or antitrust authority inrelation to the Acquisition or once the Acquisition has been implemented, theParties agree that if any competent antitrust or regulatory authorities in anycountry shall impose on TE or on TI any burden or divestment finally confirmedby the competent authorities (the "Burden") resulting from TE's equityinvestment in Newco and indirectly in TI, then TE, in case the Burden is imposedon TE, or each of the Parties, in case the Burden is imposed on TI, will havethe right to request a De-merger as provided for in Article 1.2(cc) of thisShareholders' Agreement. The Parties agree that in the event that the Acquisition is subject toconditions precedent by competent antitrust or regulatory authorities whichrequire TE to reduce its prerogatives and rights in terms of governance in Newcoand/or in O and/or in TI, then TE shall be bound to satisfy such conditionsprecedent and the Parties shall agree in good faith the amendments to thisShareholders' Agreement which, while preserving the fulfilment of suchconditions precedent, shall preserve as much as possible the overall spiritunderlying this Shareholders' Agreement. 6. Disposition of TI material assets or material changes in TI's strategy In the event of (i) any transfer in whatever form of any of the foreign assetshold directly or indirectly by TI having a value of more than Euro 4bn pertransaction (or series of transactions occurred within a period of 12 months forthe same assets) or (ii) TI entering into a significant strategic alliance withany "Telecom Operator" (to be construed as to include any person, company orentity operating in the telecom sector and any person, company or entity holding(a) a controlling stake in any non-listed company operating in the telecomsector or (b) a stake in a listed company operating in the telecom sector whichexceeds 10% of the share capital or which, even though is below 10% of the sharecapital, enables the holder to appoint one or more members of the board ofdirectors of the listed company), then TE, within the following thirty calendardays, will have the right to deliver a De-Merger Notice to the other Parties,who will bound to cause, the De-merger as provided for in Article 1.2(cc) ofthis Shareholders' Agreement and in such case the Parties shall implement, adoptand vote, and cause their directors designated by them to implement adopt andvote, all and any actions, documents and resolutions necessary to complete theDe-merger within a reasonably short timeframe, but in any case no later than 6months following the Demerger Notice or, if the transaction is subject to anyauthorizations by law or contract, within 6 months following the obtaining ofsuch authorizations. 7. Stand still The Parties represent to each other that (i) as of the date of this Agreementthey respectively own or hold, directly or indirectly, the interests in TIshares indicated in Annex 7 hereto (the "Relevant TI Interests"), calculated bytaking into account all the shares and interests also held by entities connectedto the Parties pursuant to Article 109 of Legislative Decree No. 58 of February28, 1998 (the "Connected Entities") and (ii) they have not executed nor takenpart, directly or indirectly, also by means of the Connected Entities, in anyagreement whatsoever, also oral, concerning interests in TI shares grantingvoting rights on the matters listed in Article 105 of Legislative Decree No. 58of February 28, 1998 or any option rights, convertible bonds, warrants,derivatives, granting the right to subscribe or acquire TI shares grantingvoting rights on the matters listed in Article 105 of Legislative Decree No. 58of February 28, 1998 (collectively the "TI Voting Shares") that may cause theholding by the Parties, Newco and the Connected Entities, taken as a whole, of anumber of TI Voting Shares exceeding the 30% mandatory tender offer thresholdpursuant to article 109 of Legislative Decree No. 58 of February 28, 1998 (the"Threshold"). The Parties also acknowledge that O is currently part of apre-emption agreement with Holinvest S.p.A. under which Holinvest S.p.A. isallowed to hold up to n. 492,697,862 plus 1% of the overall number of the issuedTI Voting Shares (the "Holinvest Shares"). For the purpose of this Article 7,the "Initial Balance" shall be equal to the number of TI Voting Shares resultingfrom the difference between (i) the number of TI Voting Shares equal to theThreshold and (ii) the total aggregate number of the TI Voting Shares held by O,the Relevant TI Interests and - until waiver of the pre-emption rights set outin pre-emption agreement with Holinvest S.p.A. as provided below - the HolinvestShares. Starting from the date hereof and for the duration of this Agreement, each Partyundertakes not to execute or take part, directly or indirectly, also by means ofthe Connected Entities, in any agreement whatsoever, also oral, concerning TIVoting Shares (including option rights) that may cause the holding by theParties, Newco and the Connected Entities, taken as a whole, of a number of TIVoting Shares exceeding the Threshold. Without prejudice to the above, the acquisition of TI Voting Shares will bepermitted to each Party for a number of TI Voting Shares not exceeding theirrespective Relevant TI Interests as at the date hereof plus the percentagepro-rata of the Initial Balance corresponding to the relevant Party's percentagein Newco's share capital following the Fifth Share Capital Increase. In such acase, the Parties agree that any such further acquisition of TI Voting Sharesshall be immediately communicated to the other Parties and to a secretary officeunder the coordination of MB and/or by an entity selected and appointed by MB.In addition, each Party shall inform the other Parties and the secretary officeunder the coordination of MB and/or by an entity selected and appointed by MBabout the number of TI Voting Shares held at the end of each calendar quarter.In any case it is agreed that the Parties (x) shall make as soon as possibleafter execution of this Shareholders' Agreement precise calculation as to theInitial Balance and (y), upon Closing, shall cause O to waive any rights underthe pre-emption agreement with Holinvest S.p.A.. The Parties agree that, in the event a breach by a Party of the provisionscontained in this Article 7 causes the overcoming of the Threshold and thetriggering of the obligation to launch a mandatory tender offer pursuant toArticle 109 of Legislative Decree No. 58 of February 28, 1998, such a Partyundertakes to (i) hold harmless and indemnify the other Parties from anydamages, losses, costs and expenses arising out from such a breach (ii) take thewhole responsibility of the mandatory tender offer, if required, or of the saleof the exceeding stake, to the extent possible, and (iii) bear all the costsconnected with the mandatory tender offer and all other costs (includingadvisory services) borne by the other Parties. 8. Capital Increases - Transfer of shares 8.1 Capital increases of Newco In the event of an increase of capital of Newco, without consideration or with consideration without exclusion of the option right, the shareholders who hold Class A shares shall have the right to receive and subscribe Class A shares and the shareholders of Newco who hold Class B shares shall have the right to receive and subscribe for Class B shares. In the event that any holders of Class A shares have not fully exercised their pre-emption right, the other holders of Class A shares shall have the preferred right to exercise the pre-emption on the unopted Class A shares. In the same manner, in the event that any holders of Class B shares have not fully exercised their pre-emption right, the other holders of Class B shares shall have the preferred right to exercise the pre-emption on the unopted Class B shares. In the event that after the exercise of the option and pre-emption rights by the holders of Class A shares remain Class A shares not subscribed, such shares may be subscribed, by means of the exercise of the option and pre-emption right, by the holders of Class B shares in proportion to their shareholding on the total number of Class B shares issued by Newco, subject to the automatic conversion of the aforesaid Class A shares at the rate of one newly issued Class B share (having the same characteristics as the Class B shares in circulation) for each Class A share subscribed. In the event that after the exercise of the option and pre-emption rights by the holders of Class B shares remain Class B shares not subscribed, such shares may be subscribed, by means of the exercise of the option and pre-emption right, by the holders of Class A shares in proportion to their stakeholding on the total number of Class A shares issued by Newco, subject to the automatic conversion of the aforesaid Class B shares at the rate of one newly issued Class A share (having the same characteristics as the Class A shares in circulation) for each Class B share subscribed. 8.2 Transfer of shares of Newco 8.2.1 Within the limits provided by this article 8.2 and by article 8.3., the shares of Newco are transferable to shareholders of Newco and to third parties. The provisions of this article 8.2 and of article 8.3 apply not only to the transfer of the shares of Newco, but to the transfer of any right whatsoever relating to them, including, by way of example, (i) all shares or potential financial instruments of Newco (including those provided for in article 2346 of the civil code) having voting rights or convertible into shares having voting rights, (ii) all bonds or other financial instruments convertible into, exchangeable with, or conferring to the relevant owner the right to subscription or to acquisition of shares or financial instruments with voting rights of Newco, as well as shares originating in the respective conversion or the exercise of the abovementioned rights, (iii) any other right, title, and/or financial instrument (including rights of option and/or warrant and/or equity swap) that gives a right to the acquisition of and/or subscription to shares and/or financial instruments and/or bonds convertible into/ or exchangeable with, shares or financial instruments having voting rights or convertible into shares having voting rights in Newco, and/or the shares and/or financial instruments acquired on the basis of their exercise. The provisions of this article 8.2 and article 8.3 regard - in addition - not only the transfer of full ownership of the shares of Newco and the rights relating thereto, but also the transfer of the bare ownership and whatsoever real rights of enjoyment, exclusive of the real rights of guarantee. For the purposes of this article 8.2 and article 8.3, by act of transfer is meant any transfer by deed between living people, in whatever manner (such as, for purely illustrative purposes, sale, barter, contango, fiduciary transfer, and the modification of the entitlement to the relationship underlying a possible fiduciary commission, the conferring or borrowing of titles, or rather title deeds, without consideration or out of generosity, amalgamation, splitting) able to be accomplished, directly or indirectly, in whole or part, including in a transitory manner, the ownership or availability of the Shares and whatever rights, interests, including of a non-property nature, deriving from or connected to the entitlement to the shares of Newco. For the purposes of this Article 8.2, "Italian Qualified Investors" shall mean any company or person, other than a Telecom Operator, which is a reputable qualified Italian institutional or private investor previously accepted in writing by the holders of Class B shares, provided that simultaneously with the acquiring of any stake in Newco, it shall adhere to any agreement executed by the other shareholders of Newco in relation to the shares of Newco to be transferred (including this Agreement). The provisions of this article 8.2 and article 8.3 do not apply with regard to transfers in favour of companies entirely owned or controlled or controlling pursuant to Article 2359, first paragraph No. 1 of the Civil Code, or operations of partial non-proportional de-merger of Newco, merger by incorporation of entirely owned companies, and merger between companies entirely owned or controlled or controlling pursuant to Article 2359, first paragraph No. 1 of the Civil Code by the same shareholder, provided that the transfer shall be subject to a condition subsequent whereby in case of subsequent change of control of said companies, the shares of Newco shall be deemed not having been transferred and shall have to be returned back to the original Shareholder Transferring Class A Shares (as defined below) or Shareholder Transferring Class B Shares (as defined below), as the case may be. To the extent it does not prevent the other shareholders from exercising the redemption right under Article 8.4 below or any other right under this Shareholders' Agreement, the Co-investment and the By-Laws, the provisions of this article 8.2 and article 8.3 do not apply also to transfers through derivative transactions or borrowing of titles according to which the original Shareholder Transferring Class A Shares (being a bank, financial company or insurance company), as the case may be (i) shall have the full title and ownership of the shares of Newco upon termination of the relevant transaction, and, in any case, (ii) shall maintain medio tempore all administrative and economic rights on the shares of Newco under the derivative transaction or being object of the borrowing of titles and (iii) shall not affect ; failure of such conditions will entail the immediate application of this article 8.2 and following article 8.3. 8.2.2 The shareholder who intends to transfer Class A shares (hereinafter the "Shareholder Transferring Class A shares") to a potential third party acquirer, including a shareholder of Newco (hereinafter, a "Person Bidding for Class A shares") must offer them in advance on equal terms to the other shareholders who hold Class A shares and subsequently, under the circumstances set forth by the following point (ii), to the shareholders who hold Class B shares; the holders of Class A shares may acquire the shares offered in pre-emption in proportion to the number of Class A shares held by each of them compared with the total number of Class A shares issued by Newco; the holders of Class B shares may acquire the shares offered in pre-emption, under the circumstances set forth in the following point (ii) below and in proportion to the number of Class B shares held by each of them compared with the total number of Class B shares; the above mentioned procedure shall occur in compliance with the following mechanisms: (hereinafter the "Right of Pre-emption"): (i) The Shareholder Transferring Class A shares must transmit a communication, by registered or certified mail with return receipt requested to the chairman of the board of directors of Newco and to the other shareholders holding Class A shares, specifying the number of Class A shares, the price, and the other economic and contractual conditions of the transfer and the personal particulars of the Person Bidding for Class A Shares (the "Transferring Notice"). Within 30 days of the date of receipt of the Transferring Notice (the "Term of Exercise"), the shareholders holding Class A shares who intend to avail themselves of the Right of Pre-emption must give the appropriate written communication to the chairman of the board of directors and to the Shareholder Transferring Class A shares (the "Acceptance Notice"). The shareholders holding Class A shares who exercise the Right of Pre-emption, provided that they make a contextual request in the Notice of Acceptance, will have the right (hereinafter, the "Right of Increase") to acquire the Class A shares remaining on sale once all the Notices of Acceptances have been received (the "Remaining Class A Shares"). Any Notice of Acceptance shall specify the number of Remaining Class A Shares in relation to which the relevant shareholder holding Class A shares wishes to exercise the Right of Increase. The Remaining Class A Shares shall be divided among the shareholders who have exercised the Right of Increase in proportion to the number of Class A shares held by each of them, provided that after the exercise of the above mentioned rights any shareholder holding Class A shares will not be entitled to acquire a number of Class A shares higher than the aggregate number indicated into the Acceptance Notice. (ii) if after the carrying out of the procedure in the preceding point (i) there still remain any Remaining Class A Shares, each holder of Class A shares other than the Shareholder Transferring Class A shares will have the right to procure within 30 days after the expiry of the Term of Exercise (the "Further Term") the Acquisition of the Remaining Class A shares by one or more Italian Qualified Investors, provided that the Shareholder Transferring Class A shares will not have such right in the case that (aa) the Person Bidding for Class A shares is a Telecom Operator and (bb) as a consequence of such transfer of Class A shares, the aggregate percentage of the share capital held by the Class A shareholders as at the date of this Shareholders' Agreement is reduced below 35% of the share capital; it being understood that the loss of such right shall refer exclusively to the portion of the transferred Shares falling below the 35% threshold. If on the date the Further Term expires, there are still any Remaining Class A shares or if Italian Qualified Investors do not have the right to acquire Class A shares as referred to above, such Remaining Class A shares shall be offered without delay to the shareholders holding Class B shares by means of a communication made in the form specified in the preceding paragraph (i) of this Article 8.2.2. The Remaining Class A shares which become pre-empted by the shareholders holding Class B shares must be divided among the holders of Class B shares who pre-empted them - in proportion to the number of Class B shares held by each of them, provided that the Right of Increase included in Article 8.2.2(i) above shall apply mutatis mutandis - subject to the automatic conversion of the aforesaid Class A shares subject to pre-emption at the rate of one newly issued Class B share (having the same characteristics as the Class B shares in circulation) for each Class A share subject to pre-emption. The exercise of the Right of Pre-emption by the shareholders holding Class B shares, potentially exercised in accordance with this article 8.2.2 (ii), must be carried out within 15 days of the receipt of the notice of offering in pre-emption by means of an appropriate written communication to the chairman of the board of directors and the Shareholder Transferring Class A shares, specifying the number of shares requested in pre-emption. The conversion of Class A shares into Class B shares takes effect upon the recording of the decision of the board of directors (which for this purpose must be convened within 5 days of the expiry of the term for the exercise of the Right of Pre-emption specified in the present article 8.2.2 (ii)) resulting from the minutes drawn up by the notary - subject to the condition precedent that the event described under Article 8.2.2(iv) did not occur - who must proceed to carry out all the necessary formalities for the issuance of Class B shares as well as the necessary registrations in the register of companies, also bringing about the necessary and consequent modifications to the relevant article of the Newco's By-laws, making the numerical expressions and the text in the necessary parts adequate for all legal purposes, providing, moreover, for deposit, according to article 2346 of the civil code, the text of the Newco's By-laws updated in that sense, as well as carrying out all other formalities provided by the current legal standards. (iii) Should remain any Class A shares subject to the bid not acquired by Class A shareholders or by Italian Qualified Investors or by Class B shareholders in the sense of the foregoing (the "Shares A not Purchased") and the Person Bidding for Class A shares is accepting to buy the Shares not Purchased, the Shares not Purchased may be transferred from the Shareholder Transferring Class A shares to the Person Bidding for Class A shares, within but not later than 15 days, if the transfer in favour of the Person Bidding for Class A shares has not occurred within the aforesaid term, any later transfer of Class A shares and of the rights related thereto shall be subject again to the procedure specified in the present article 8.2.2; any act of transfer carried out in violation of the provisions of the present Article 8.2.2 shall be invalid and not opposable to Newco. (iv) Should remain any Share A not Purchased and the Person Bidding for Class A shares is not accepting to buy only the Shares A not Purchased pursuant to the previous Article 8.2.2 (iii), the Shareholder Transferring Class A shares shall be entitled to sell all the Class A shares object of the Class A Transferring Notice to the Person Bidding for Class A shares. 8.2.3 The shareholder who intends to transfer Class B shares (hereinafter, the "Shareholder Transferring Class B shares") to a potential third-party acquirer as well as to a shareholder of Newco ("Person Bidding for Class B shares") must offer these shares in advance to all the other shareholders holding Class A and Class B shares with regard to the following procedure: (i) the Shareholder Transferring Class B shares must transmit a communication, by registered or certified mail with return receipt requested to the chairman of the board of directors and other shareholders, specifying the number of Class B shares, the price, and the other economic and contractual conditions of the transfer and the personal particulars of the Person Bidding for Class B shares (the "Class B Transferring Notice"). Within 30 days of the date of receipt of the notice, the shareholders who intend to avail themselves of the Right of Pre-emption must give the appropriate written communication to the chairman of the board of directors and the Shareholder Transferring Class B shares, specifying the number of shares requested in pre-emption; (ii) (a) Should the offer be accepted in its totality by the shareholders, the Class B shares subject to bidding shall be divided among the aforesaid shareholders, in proportion to the number of shares held by each of them compared to the total number of shares (of Class A and Class B) issued by Newco; (b) should the offer be accepted only in part by the shareholders, the Class B shares offered and acquired must be divided among the aforesaid shareholders in proportion to the number of shares held by each of them compared to the total number of shares (of Class A and Class B); The Class B shares pre-empted by the holders of Class A shares will be transferred to them pursuant to the present Article 8.2.3 subject to the automatic conversion of the aforesaid pre-empted Class B shares at the rate of one newly issued Class A share (having the same characteristics as the Class A shares in circulation) for each Class B share subject to pre-emption. The conversion of the Class B shares into Class A shares will be executed in compliance with the procedure set forth in Article 8.2.2 (ii) above. (iii) Should remain any Class B shares subject to the bid not acquired by Class B shareholders or by Class A shareholders (the "Shares B not Purchased") and the Person Bidding for Class B shares is accepting to buy the Shares not Purchased, the Shares B not Purchased may be transferred from the Shareholder Transferring Class B shares to the Person Bidding for Class B shares, within but not later than 15 days, if the transfer in favour of the Person Bidding for Class B shares has not occurred within the aforesaid term, any later transfer of Class B shares and of the rights related thereto shall be subject again to the procedure specified in the present Article 8.2.3; any act of transfer carried out in violation of the provisions of the present Article 8.2.3 shall be invalid and not opposable to Newco. (iv) Should remain any Share B not Purchased and the Person Bidding for Class B shares is not accepting to buy only the Share B not Purchased, the Shareholder Transferring Class B shares shall be entitled to sell all the Class B shares object of the Class B Transferring Notice to the Person Bidding for Class B shares. 8.2.4 In the event that the transfer of shares does not provide a corresponding amount, or rather if it does not provide it entirely in cash (for example, in the event of donation, barter, or transfer through amalgamation, splitting) the price at which the shareholders in Newco shall be able to acquire the shares offered to them in pre-emption shall be determined by mutual agreement of the shareholder who intends to transfer and the shareholder or shareholders who have exercised the pre-emption (the "Interested Shareholders"). If the Interested Shareholders have not reached an agreement within 30 workdays, elapsing from the moment when the shareholder who intends to transfer has received the communication of the shareholders who intend to exercise the Right of Pre-emption, the price for each share shall be calculated on the basis of the adjusted net worth of Newco to be determined taking into account the price of the shares held in TI calculating by means of the arithmetic average of the official stock exchange prices within 30 days preceding the date of the offer in pre-emption divided by the number of shares issued) and, in case of disputes, the calculation, to be carried out on the basis of the criteria indicated above, shall be remitted to an expert appointed by the President of the Court of Milan, upon application by the most diligent shareholder. 8.2.5 All transfers provided under this Article 8.2 shall be subject to the applicable Antitrust and/or regulatory provisions and shall occur not later than 10 days after obtaining any applicable Antitrust and/or regulatory clearance, if needed, and in any case not later than six months from the completion of the binding agreement in relation to the transfer of the shares. 8.2.6 Transfers made in violation of the provisions of the present article 8.2 and the following article 8.3 shall be invalid and unenforceable with regard to Newco. 8.3 Right of Co-Sale (Tag-Along) 8.3.1 Without prejudice to the provisions of the foregoing article 8.2, in the event that one or more shareholders of Newco (hereinafter called jointly the "Considerable Shareholder") (i) intend to transfer, also one or more times, of a number of shares of Newco that represent a share equal to at least 30% of the share capital of Newco (the "Considerable Share") to a potential third-party acquirer or to one or more potential acquirers belonging to the same group, connected by a relationship of control or linkage among them in the meaning of article 2359 of the civil code, or who in any case act in concert pursuant to article 109, Consolidated Financial Act, for the purchase of the Considerable Share, and (ii) none of the other shareholders exercises the Right of Pre-emption at the end of the respective term of exercise, or notwithstanding the exercise of the Right of Pre-emption by one or more of the other shareholders a bid by the third party is still pending for a share equal to at least the Considerable Share, the shareholder (or shareholders) who did not exercise the Right of Pre-emption to which they were entitled (hereinafter the "Non-Opting Shareholder") shall have the right to transfer to the potential third-party acquirer his own shares (the "Right of Co-Sale" or "Tag-Along Right") at the same terms and conditions of the transfer of the Considerable Shareholder pursuant to this Article 8.3. If the transfer from the Considerable Shareholder does not comprise the entire stake held but only a part of such stake, the Tag Along Right shall be allocated to the Non-Opting Shareholder in the same proportion existing between the number of Shares to be sold and all the shares held by the Considerable Shareholder. 8.3.2 If the Non-Opting Shareholder intends to exercise its Tag-Along Right, he must, under penalty of forfeiture, give a written communication to the Considerable Shareholder - and a copy to Newco - by the means and under the terms provided for the exercise of the Right of Pre-emption discussed in the foregoing Article 8.2. Once the express request has been made by the Non-Opting Shareholder to avail himself of the Tag-Along Right (hereinafter the "Proposal of Sale"), the aforesaid Non-Opting Shareholder shall be obliged to sell all or the different pro rata quantities established above of his own shares, free from every encumbrance, lien or right in favour of third parties, to the potential third-party acquirer, in accordance with the following procedure: (i) The Considerable Shareholder must, as a condition for the efficacy of the transfer of his own shares, see to it that the potential third-party acquirer (a) accepts unconditionally the Proposal of Sale mentioned in this Article 8.3.2, having for its purpose the sale of all (or the different pro rata quantities established above) the shares owned by each Non-Opting Shareholder who has made the Proposal of Sale, without the potential third-party acquirer being able to require with regard thereto any declaration and/or guarantee, with the exception of the guarantees pertaining to (ai) the entitlement to the shares owned by the Non-Opting Shareholder, in the absence of commitments regarding these and the capacity to freely dispose of them, and (aii) the fact that the shares are free from every encumbrance, lien or right in favour of third parties; and (b) acquires all (or the different pro rata quantities established above) the shares owned by each Non-Opting Shareholder who made the Proposal of Sale; (ii) The transfer of the shares by the Considerable Shareholder and the other Non-Opting Shareholders must arrive in one single setting, with contextual payment of the price within and not later than 15 days of the date of receipt of the Proposal of Sale by the Considerable Shareholder; (iii) If no shareholder has exercised the Right of Pre-emption in the sense of Article 8.2 nor the Tag-Along right in the sense of the present article, the Considerable Shareholder may transfer the shares belonging to him to a relevant third-party acquirer on condition that (a) the transfer occurs under the same conditions indicated in his own communication to the other shareholders, here including the same price and (b) the transfer shall occur within 15 days of the expiry of the different term of exercise mentioned in the foregoing Article 8.2, it remaining understood that the aforesaid term shall be reasonably extended, as referred below, if the transfer of the shares is subject to obligations of communication in advance or authorization by an authority; it remains the intention that the aforesaid term of 15 days be considered respected if within the appropriate deadline the Considerable Shareholder has executed with the potential third-party acquirer a purchase and sale contract with deferred efficacy (but not more than 6 months) or conditional solely upon the obtaining of the authorizations required by law or regulation (provided that such agreement shall terminate if such authorizations have not been obtained within six months following execution of such purchase and sale contract), at a price per share and, in general, on the terms and conditions indicated by the potential third party acquirer in his own bid. If the transfer to the potential third party acquirer has not taken place in conformity with what is indicated in this paragraph and in the terms provided here, the Considerable Shareholder shall not be able to transfer his own shares unless subject to the experiencing of the procedures discussed in articles 8.2 and 8.3 and the transfer shall not be valid and enforceable against Newco. 8.4 Redemption Right The Parties acknowledge that the Newco's By-Laws contains inter alia also a redemption right (i.e. riscatto) in case of public tender offers on the TI shares (i.e. offerta pubblica di acquisto su azioni di TI). 8.5 Call Option In partial derogation of Article 1.2 (cc) above, in the event that a decision todispose, directly or indirectly in any form of manner (including throughmeasures with equivalent effect, such as mergers or demergers of Newco or O) orencumber TI shares or O shares or any rights attached thereto (including but notlimited to voting rights) is taken by the Board of Directors of Newco by simplemajority as provided for in Article 1.2(bb) above and TE is a Dissenting Partyin accordance with Article 1.2(cc), then TE shall have any of the followingoptions, at its exclusive discretion, which shall be exercised in writing, bymeans of a notice to be sent to the Chairman of the board of directors of Newco,within thirty days following the date of the relevant board of directors ofNewco: (a) the right to buy from Newco or O (as the case may be) the O or TI shares at the same price and conditions offered by the third party offering to acquire such TI or O shares (the "Call Option"), in which case the Parties shall be bound to cause Newco or O (as the case may be) to sell the relevant O or TI shares to TE pursuant to the Call Option. Such acquisition by TE of the O or TI shares shall be completed within 15 business days following the relevant written request sent by TE to the chairman of the board of directors of Newco or, if the transaction is subject to any authorization by law or contract, within 15 business days following the obtaining of such authorization. In this connection, as soon as possible following closing (as defined in the relevant offer), the Partieshall cause Newco and O to enter into a call option agreement with TE under terms and conditions referred to in this article 8.5(a); (b) the right to proceed with the De-merger, as provided for in Article 1.2 (cc) above. In such case the other Parties shall implement, adopt and vote, and cause their directors designated by them to implement, adopt and vote, all and any actions, documents and resolutions necessary to complete the De-merger within a reasonably short timeframe, but in any case no later than 6 months following the De-merger Notice or, if the transaction is subject to any authorizations by law or contract, within 6 months following the obtaining of such authorizations. 8.6. Each Party undertakes to include as a condition precedent: (i) to closing any transfer of Newcos' shares, to be executed by such Party with any Italian Qualified Investor or with any third party acquiring shares of Newco (in both cases, in accordance with the procedures included in the bylaws), and (ii) to subscribe any Newcos' shares by any Fifth Share Capital Investors or Italian Qualified Investor, as the case may be (in accordance with procedures included in the Newco's By-Laws), the execution of a deed of adherence of such Fifth Share Capital Investors or Italian Qualified Investor or such third party to this Shareholders Agreement. 8.7 In any case MB, AG, IS and SI undertake, for the duration of this Agreement, neither to solicit, nor to respond positively to, any interest or approach from Telecom Operators, as defined above, for the potential acquisition or subscription of Newco's shares, O shares and TI shares and/or for the acquisition of TI's Foreign Material Assets and/or for the entering into strategic alliances with TI (the "Non Solicited Offer"). MB, AG, IS and SI also undertake to inform TE to the extent possible about any Non Solicted Offer they may receive. MB and IS shall also refrain, for the duration of this Agreement, to provide any advisory services or financing in favour of Telecom Operators, in connection with the acquisition or subscription by any such Telecom Operators of Newco's shares, O shares and TI shares and/or the acquisition by any Telecom Operators of TI's Foreign Material Assets and /or the entering into strategic alliances between TI and any Telecom Operators. 8.8 It is agreed and understood among the Parties that no shareholder will be granted additional or special rights, unless granted to the relevant Class of Shares under the Shareholders' Agreement, the Co-investment Agreement and the By-Laws. 9. Newco's by-laws The Newco's By-Laws incorporates most of the principles referred to in thisShareholders' Agreement in connection with the governance of Newco and all theprinciples referred to in this Shareholders' Agreement in connection with thetransfer of the Newco's shares. As regards the governance of Newco, this Shareholders' Agreement contains theprinciples (such as the solution of the deadlocks on certain items) which hasnot been possible to introduce in the Newco's By-Laws. The Parties acknowledge and agree that Newco shall adopt the By-Laws in the textattached hereto in both Italian and English version as Annex 9. It is understoodthat the Italian version will prevail and that the Parties will implement theamendments, if any, which will be requested by the Notary Public to comply withmandatory provisions of Italian law, subject to the principle of fullestimplementation of the principles of this Shareholders' Agreement. It is agreed among the Parties that, in case of conflict, the provisions of thisShareholders' Agreement will prevail on the provisions of the By-Laws and theParties shall conform their acting so as to implement such provisions. 10. Accounting principles The Parties agree that, as soon as practicable, Newco and O shall move to anduse going forward IFRS principles for their financial statements. 11. Duration and demerger This Agreement shall commence on the date hereof, and shall expire on the thirdanniversary thereof (the "Expiry Date"), provided however that, if so requiredin writing by one of or more of the Parties (the "Exiting Parties") not laterthan six months prior to the Expiry Date, the Parties shall be bound, to cause(a) the merger between Newco and O to occur (if not already occurred prior tosuch date), and (b) the non-proportional de-merger of the company resulting inthe attribution to a number of beneficiaries companies equal to the number ofthe Exiting Parties (each beneficiary company owned 100% by each of such ExitingParty) of a percentage of all the assets and liabilities of Newco after themerger with O, corresponding to the stake held in Newco after the merger with Oby such Exiting Party, provided that (i) the Parties shall implement, adopt andvote, and cause their directors designated by them to implement adopt and vote,all and any actions, documents and resolutions necessary to complete such mergerand de-merger within a reasonably short timeframe, but in any case no later than6 months following the Demerger Notice or, if the transaction is subject to anyauthorizations by law or contract, within 6 months following the obtaining ofsuch authorizations, and (ii) the Exiting Parties, to the extent the otherParties decide to execute a new shareholders agreement, shall be permitted toexecute a new shareholders agreement with the other Parties, to be negotiated ingood faith, provided that the De-merger has been completed and the Exiting Partycontributes the relevant shares to such new shareholders' agreement. The Partiesagree that if none of them becomes an Exiting Party, they shall negotiate ingood faith a new shareholders agreement in line, mutatis mutandis, with theterms and conditions of this Agreement, for a further three years period priorto the Expiry Date. 10. Confidentiality No Party shall make any announcement, communication or disclosure in relation tothis Shareholders' Agreement, or in relation to the ongoing negotiations betweenthe Parties, or in relation to the status of the same without the other Party'sprevious written consent, unless this is required by law and/or by the competentauthorities. In this case, the Parties undertake to provide with no delay, tothe extent feasible, to the other Parties notice and/or copy of theannouncement, communication or disclosure required by law and/or by thecompetent authorities. 11. Costs and expenses Each Party shall pay its own costs and expenses (including fees anddisbursements of any external legal or financial advisers and accountants)incurred in connection with the preparation, negotiation, and execution of thisShareholders' Agreement. Each Party represents and warrants that this Shareholders' Agreement has beenconcluded without the participation, assistance or intervention, direct orindirect, of any broker, intermediary, commission agent, business agent orsimilar party, who may claim any expenses, fees, royalties, commission or othercosts due to the preparation, negotiation, and execution of this Agreement fromthe other Party. 12. Notices Any notice, objection or other communication to be given by one Party to theother under, or in connection with, this Shareholders' Agreement shall be inwriting and signed by or on behalf of the Party giving it. It shall be served bysending it by fax to the number set out in this Article 11, or delivering it byhand, or sending it by pre-paid recorded delivery, special delivery orregistered post, to the address set out in this Article 11 and in each casemarked for the attention of the relevant Party set out in this Article 11 (or asotherwise notified from time to time in accordance with the provisions of thisArticle 11). Any notice so served by hand, fax, post or e-mail shall be deemedto have been duly given: (c) in the case of fax, at the time of transmission, with receipt of delivery; or (d) in the case of prepaid recorded delivery, special delivery or registered post, at the date indicated in the receipt of delivery, (e) in the case of e-mail delivery at the e-mail address indicated below, with receipt of delivery, provided that in each case where delivery by hand or by fax occurs after 6 p.m.on a Business Day or on a day which is not a Business Day, service shall bedeemed to occur at 9 a.m. on the following Business Day. Any references to timein this Article are to local time in the country of the addressee. The addresses and fax numbers of the Parties for the purpose of Article 11 areas follows:To TE: Telefonica S.A., Gran Via n. 38, Planta 9, 28013, Madrid, Spain To the attention of: the Group General Counsel (Ramiro Sanchez de Lerin), Ph: + 34 91 584 0207 Fax: + 34 91 531 3206 E-mail: secretaria.general@telefonica.esTo AG: ASSICURAZIONI GENERALI S.p.A., Piazza Duca degli Abruzzi n. 2, 34132, Trieste, Italy To the attention of: Mr. Giovanni Perissinotto Ph: + 39 040 671036 Fax: + 39 040 671260 E-mail: giovanni_perissinotto@generali.comTo SI: SINTONIA S.A. 1, Place d'Armes, L-1136 Luxembourg Luxembourg To the attention of: Mr. Gustave Stoffel Ph: + 352 26 266255 Fax: + 352 26 266256 E-mail: gustave.stoffel@pt.luTo IS: INTESA SANPAOLO S.p.A. Piazza Scala n. 6, 20121 Milano, Italy To the attention of Mr. Gaetano Micciche and Mr. Fabio Cane Ph: + 39 02 879 42650 Fax: + 39 02 879 43 540 E-mail: gaetano.micciche@intesasanpaolo.com, and Fabio.cane@intesasanpaolo.comTo MB: MEDIOBANCA S.p.A. Piazzetta Cuccia n. 1, 20121 Milano, Italy To the attention of: Mr. Clemente Rebecchini and Ms. Cristiana Vibaldi Ph: + 39 02 8829 202 and + 39 02 8829 455 Fax: + 39 02 8829 943 E-mail: clemente.rebecchini@mediobanca.it, cristiana.vibaldi@mediobanca.it A Party may notify the other Party of a change to its name, relevant addressee,address or fax number for the purposes of this Article 11, provided that, suchnotice shall only be effective on: (i) the date specified in the notice as the date on which the change is to take place; or (ii) if no date is specified or the date specified is less than five (5) Business Days after the date on which notice is given, the date following ten (10) Business Days after notice of any change has been given. 14. Variations No variation of this Shareholders' Agreement shall be valid unless it is inwriting and signed by or on behalf of each of the Parties. The expression"variation" shall include any variation, amendment, supplement, deletion orreplacement however effected. 15. Severability If any provision of this Agreement is held to be invalid or unenforceable, thensuch provision shall (so far as it is invalid or unenforceable) be given noeffect and shall be deemed not to be included in this Shareholders' Agreement,but without invalidating any of the remaining provisions of this Shareholders'Agreement. In any such event the Parties shall negotiate in good faith and agreeall those amendments to this Shareholders' Agreement which are consequentlynecessary to replace the invalid or unenforceable provision with terms having asnear as possible the same commercial effect with a view to maintain unalteredthe Parties' mutual interests as currently protected under this Shareholders'Agreement and in any case preserving a balance between their respective rightsand obligations in enabling them to fully perform their obligations ascontemplated hereunder. 16. Entirety of Agreement This Shareholders' Agreement constitutes the entire agreement and understandingof the Parties in relation to the transactions hereby contemplated andsupersedes any and all prior agreements and arrangements, whether written ororal, that may exist between the Parties with respect to the matterscontemplated therein. 17. No waiver and further assurances No failure or delay by any of the Parties in exercising any right or remedyprovided by law or pursuant to this Shareholders' Agreement shall impair suchright or remedy or operate or be construed as a waiver or variation of it orpreclude its exercise at any subsequent time and no single or partial exerciseof any such right or remedy shall preclude any other or further exercise of itor the exercise of any other right or remedy. Each of the Parties undertakes tothe others to perform (or procure the performance of) all further acts andthings, and execute and deliver (or procure the execution and delivery of) suchfurther documents (including without limitation any agreement or arrangementwhich shall be entered into between the Parties) as set forth in thisShareholders' Agreement, as may be required to implement and/or give effect tothis Shareholders' Agreement and the transactions contemplated hereunder. 18. Governing law/Exclusive Jurisdiction This Shareholders' Agreement shall be governed by, and interpreted in accordancewith, the laws of the Republic of Italy. Any disputes arising out of or inconnection with this Shareholders' Agreement shall be submitted by the Partiesto arbitration. The venue of the arbitration shall be Milan. The arbitrationshall be conducted in the English language and in accordance with ICC Rules. * * * * *TELEFONICA S.A. ASSICURAZIONI GENERALI S.P.A.__________________________________ __________________________________INTESA SANPAOLO S.P.A. MEDIOBANCA S.P.A. __________________________________ __________________________________ SINTONIA S.A. __________________________________ -------------------------------------------------------------------------------- BY-LAWS TITLE I NAME - REGISTERED OFFICE - PURPOSE - DURATION Article 1 (Name) 1.1 The name of the company shall be (•) (hereinafter "the Company"). Article 2 (Registered office) 2.1 The Company has its registered office in Milan. 2.2 Secondary offices, branches, administrative and technical offices,representations, agencies, and dependencies of all types, can be established,transferred, and abolished - in Italy and abroad - by way of resolution of theBoard of Directors; moreover, the transfer of the registered office of theCompany within the territory of Italy can be decided by way of resolution of theBoard of Directors. 2.3 The domicile of the shareholders, the directors, the auditors and accountant- for their relations with the Company - is that shown in the Company books. Article 3 (Purpose) 3.1 The Company has for its purpose: (a) The investment in, holding of, and disinvestment in shares, direct andindirect, in (•), only with the purpose of stable investments and not vis-a-visthe public; (b) the management and coordination of the activities of the controlledcompanies; (c) the provision of services for and the management, without territorial limit,of licensed telecommunication services for public use and use in the freemarket, as well as corporate or administrative organizational services in thepublishing, advertising, data processing, telecommunications and multimediasectors for the benefit of the participated companies, excluding any activitiesreserved to directors and those persons enrolled on the professional register; (d) any other transaction or activity instrumental - and not prevalent - to theforegoing activities, including the grant of loans, issue of bank guarantees,sureties and endorsements in favour of subsidiaries, expressly excluding theexercise of these activities and of any other financial activity vis a vis thepublic and the exercise of qualified professional activities, the offering ofsecurities to the public and the granting of consumer credit, including withregard to own shareholders, and in any event with the absolute exclusion ofactivities reserved under Laws 12/1979, 1966/1969, 1815/1939, and LegislativeDecrees 385/1993 (Article 106) and 58/1998. Article 4 (Duration) 4.1 The term of the Company is fixed for a period ending on thirty-one (31)December (12) two thousand and fifty (2050). TITLE II CAPITAL - SHARES - WITHDRAWAL - BONDS - FINANCING Article 5 (Capital and Shares) 5.1 The share capital is equal to Euro (•) and is divided into (•) ((•)) shares(hereinafter, the "Shares"), with a nominal value of Euro (•) ((•)) each, ofwhich (•) ((•)) Shares belong to Class A (hereinafter "Class A Shares") and (•)((•)) Shares belong to Class B (hereinafter "Class B Shares"); Class A Sharesand Class B Shares confer upon their holders equal economic and administrativerights, except as indicated in this Article 5, and in Articles 7, 8, 15 and 22of the By-laws. 5.2 (Note: to be completed with the description of the first share capitalincrease) 5.3 (Note: to be completed with the description of the second share capitalincrease) 5.3-bis (Note: to be completed with the description of the third share capitalincrease) 5.4 (Note: to be completed with the description of the fourth share capitalincrease) 5.5 (Note: to be completed with the description of the fifth share capitalincrease) 5.6 (For the purposes of Article 5.5, "Fifth Share Capital Investors" shall meanany company or person, other than a Telecom Operator (as defined below), whichis a reputable qualified Italian institutional or private investor to beselected by Class A shareholders and subsequently submitted for acceptance tothe Class B shareholders, acceptance which cannot be unreasonably denied. For the purposes of these by-laws, "Telecom Operator" shall mean any company orperson operating in the telecom sector and any company or person holding (a) acontrolling stake in any non-listed company operating in the telecom sector or(b) a stake in a listed company operating in the telecom sector which exceeds10% of the share capital or which, even though is below 10% of the sharecapital, enables the holder to appoint one or more members of the board ofdirectors of the listed company. For the purposes of these by-laws, "Founding Class A shareholders" indicates theClass A shareholders who have subscribed Class A shares within the share capitalincreases provided under paragraphs 5.2, 5.3-bis e 5.4 above. 5.7 The share capital may also be increased by contribution of credits andcontribution in kind, pursuant to article 2440 of the Italian Civil Code. 5.8 In the event of an increase of capital, without consideration or withconsideration without exclusion of the option right, the shareholders who holdClass A Shares shall have the right to receive and subscribe Class A Shares andthe shareholders who hold Class B Shares shall have the right to receive andsubscribe for Class B Shares. In the event that any holders of Class A Shareshave not fully exercised their pre-emption right, the other holders of Class AShares shall have the preferred right to exercise the pre-emption on the unoptedClass A Shares. In the same manner, in the event that any holders of Class BShares have not fully exercised their pre-emption right, the other holders ofClass B Shares shall have the preferred right to exercise the pre-emption on theunopted Class B Shares. In the event that after the exercise of the option andpre-emption rights by the holders of Class A Shares remain Class A Shares notsubscribed, such shares may be subscribed, by means of the exercise of theoption and pre-emption right, by the holders of Class B shares in proportion totheir stakeholding on the total number of Class B shares issued by the Company,subject to the automatic conversion of the aforesaid Class A shares at the rateof one newly issued Class B share (having the same characteristics as the ClassB shares in circulation) for each Class A share subscribed. In the event thatafter the exercise of the option and pre-emption rights by the holders of ClassB Shares remain Class B Shares not subscribed, such shares may be subscribed, bymeans of the exercise of the option and pre-emption right, by the holders ofClass A shares in proportion to their stakeholding on the total number of ClassA shares issued by the Company, subject to the automatic conversion of theaforesaid Class B shares at the rate of one newly issued Class A share (havingthe same characteristics as the Class A shares in circulation) for each Class Bshare subscribed. 5.9 Without prejudice to the provisions set forth in article 5.7 above, theshare capital increases not fully subscribed by Class A and by Class Bshareholders after the exercise of the option and pre-emption rights as the casemay be, will be deemed subscribed up to the amount actually subscribed. 5.10 The shares are represented by share certificates. 5.11 The shares are registered; their conversion into bearer shares is notallowed. Article 6 (Withdrawal) The right of withdrawal does not belong to the shareholders who have notparticipated in the decisions regarding: - the extension of the term of the Company's duration, and - the introduction or removal of commitments to the circulation of stock certificates. Article 7 (Transfer of Shares) 7.1 Within the limits provided by this article 7 and by article 8, the sharesare transferable to shareholders and to third parties, whether by a deed betweenliving people or by reason of death. The provisions of this article 7 and of article 8 apply not only to the transferof Shares, but to the transfer of any right whatsoever relating to them,including, by way of example, (i) all shares or potential financial instrumentsof the Company (including those provided for in article 2346 of the civil code)having voting rights or convertible into shares having voting rights, (ii) allbonds or other financial instruments convertible into, exchangeable with, orconferring to the relevant owner the right to subscription or to acquisition ofshares or financial instruments with voting rights of the Company, as well asshares originating in the respective conversion or the exercise of theabovementioned rights, (iii) any other right, title, and/or financial instrument(including rights of option and/or warrant and/or equity swap) that gives aright to the acquisition of and/or subscription to shares and/or financialinstruments and/or bonds convertible into/ or exchangeable with, shares orfinancial instruments having voting rights or convertible into shares havingvoting rights in the Company, and/or the shares and/or financial instrumentsacquired on the basis of their exercise. The provisions of this article 7 andarticle 8 regard - in addition - not only the transfer of full ownership of theShares and the rights relating thereto, but also the transfer of the bareownership and whatsoever real rights of enjoyment, exclusive of the real rightsof guarantee. For the purposes of this article 7 and article 8, by act of transfer is meantany transfer by deed between living people, in whatever manner (such as, forpurely illustrative purposes, sale, barter, contango, fiduciary transfer, andthe modification of the entitlement to the relationship underlying a possiblefiduciary commission, the conferring or borrowing of titles, or rather titledeeds, gratis or out of generosity, amalgamation, splitting) able to beaccomplished, directly or indirectly, in whole or part, including in atransitory manner, the ownership or availability of the Shares and whateverrights, interests, including of a non-property nature, deriving from orconnected to the entitlement to the Shares. For the purposes of this Article 7, "Italian Qualified Investors" shall mean anycompany or person, other than a Telecom Operator, which is a reputable qualifiedItalian institutional or private investor previously accepted in writing by theholders of Class B shares, provided that simultaneously with the acquiring ofany stake in the Company shall adhere to any agreement executed by the othershareholders of the Company in relation to the Shares of the Company to betransferred. The provisions of the present article 7 and article 8 do not apply with regardto transfers in favour of companies entirely owned or controlled or controllingpursuant to Article 2359, first paragraph No. 1 of the Civil Code, or operationsof partial non-proportional de-merger of the Company, merger by incorporation ofentirely owned companies, and merger between companies entirely owned orcontrolled or controlling pursuant to Article 2359, first paragraph No. 1 of theCivil Code by the same shareholder, provided that the transfer shall be subjectto a condition subsequent whereby in case of subsequent change of control ofsaid companies, the Shares shall be deemed not having been transferred and shallhave to be returned back to the original Shareholder Transferring Class A Sharesor Shareholder Transferring Class B Shares (as defined below), as the case maybe.To the extent it does not prevent any of the shareholders from exercising theredemption rights provided for in Articole 28 below, and any right provided forin this By-laws, the provisions of the present article 7 and article 8 do notapply also to transfers through derivative transactions or borrowing of titlesaccording to which the original Shareholder Transferring Class A Shares (being abank, financial company or insurance company), as the case may be (i) shall havethe full title and ownership of the Shares upon termination of the relevanttransaction, and, in any case, (ii) shall maintain medio tempore alladministrative and economic rights on the Shares under the derivativetransaction or being object of the borrowing of titles; failure of suchconditions will entail the immediate application of this article 7 and followingarticle 8. 7.2 The shareholder who intends to transfer Class A shares (hereinafter the"Shareholder Transferring Class A shares") to a potential third party acquirer,including a shareholder of the Company (hereinafter, a "Person Bidding for ClassA shares") must offer them in advance on equal terms to the other shareholderswho hold Class A shares and subsequently, under the circumstances set forth bythe following point (ii), to the shareholders who hold Class B shares; theholders of Class A shares may acquire the shares offered in pre-emption inproportion to the number of Class A shares held by each of them compared withthe total number of Class A shares issued by the Company; the holders of Class Bshares may acquire the shares offered in pre-emption , under the circumstancesset forth in the following point (ii) below and in proportion to the number ofClass B shares held by each of them compared with the total number of Class Bshares; the above mentioned procedure shall occur in compliance with thefollowing mechanisms: (hereinafter the "Right of Pre-emption"): (i) The Shareholder Transferring Class A shares must transmit a communication,by registered or certified mail with return receipt requested to the Chairman ofthe Board of Directors and to the other shareholders holding Class A shares,specifying the number of Class A shares, the price, and the other economic andcontractual conditions of the transfer and the personal particulars of thePerson Bidding for Class A Shares (the "Transferring Notice"). Within 30 days ofthe date of receipt of the Transferring Notice (the "Term of Exercise"), theshareholders holding Class A shares who intend to avail themselves of the Rightof Pre-emption must give the appropriate written communication to the Chairmanof the Board of Directors and to the Shareholder Transferring Class A shares(the "Acceptance Notice"). The shareholders holding Class A shares who exercisethe Right of Pre-emption, provided that they make a contextual request in theNotice of Acceptance, will have the right (hereinafter, the "Right of Increase")to acquire the Class A shares remaining on sale once all the Notices ofAcceptances have been received (the "Remaining Class A Shares"). Any Notice ofAcceptance shall specify the number of Remaining Class A Shares in relation towhich the relevant shareholder holding Class A shares wishes to exercise theRight of Increase. The Remaining Class A Shares shall be divided among theshareholders who have exercised the Right of Increase in proportion to thenumber of Class A shares held by each of them, provided that after the exerciseof the above mentioned rights any shareholder holding Class A shares will not beentitled to acquire a number of Class A shares higher than the aggregate numberindicated into the Acceptance Notice. (ii) if after the carrying out of the procedure in the preceding point (i) therestill remain any Remaining Class A Shares, each holder of Class A shares otherthan the Shareholder Transferring Class A shares will have the right to procurewithin 30 days after the expiry of the Term of Exercise (the "Further Term") theacquisition of the Remaining Class A shares by one or more Italian QualifiedInvestors, provided that the Shareholder Transferring Class A shares will nothave such right in the case that (aa) the Person Bidding for Class A shares is aTelecom Operator and (bb) as a consequence of such transfer of Class A sharesthe aggregate percentage of the share capital held by the Founding Class Ashareholders is reduced below 35% of the share capital; it being understood thatthe loss of such right shall refer exclusively to the portion of transfer ofShares falling below such threshold. If on the date the Further Term expires there are still any Remaining Class Ashares or the Italian Qualified Investors do not have the right to acquire ClassA shares as referred to above, such Remaining Class A shares shall be offeredwithout delay to the shareholders holding Class B shares by means of acommunication made in the form specified in the preceding paragraph (i) of thisArticle 7.2. The Remaining Class A shares which become pre-empted by theshareholders holding Class B shares must be divided among the holders of Class Bshares who pre-empted them - in proportion to the number of Class B shares heldby each of them, provided that the Right of Increase included in Article 7.2(i)above shall apply mutatis mutandis - subject to the automatic conversion of theaforesaid Class A shares subject to pre-emption at the rate of one newly issuedClass B share (having the same characteristics as the Class B shares incirculation) for each Class A share subject to pre-emption. The exercise of theRight of Pre-emption by the shareholders holding Class B shares, potentiallyexercised in accordance with this article 7.2 (ii), must be carried out within15 days of the receipt of the notice of offering in pre-emption by means of anappropriate written communication to the Chairman of the Board of Directors andthe Shareholder Transferring Class A shares, specifying the number of sharesrequested in pre-emption. The conversion of Class A shares into Class B sharestakes effect upon the recording of the decision of the Board of Directors (whichfor this purpose must be convened within 5 days of the expiry of the term forthe exercise of the Right of Pre-emption specified in the present article 7.2(ii)) resulting from the minutes drawn up by the notary - subject to thecondition precedent that the event described under article 7.2(iv) did not occur-, who must proceed to carry out all the necessary formalities for the issuanceof Class B shares as well as the necessary registrations in the Register ofCompanies, also bringing about the necessary and consequent modifications toarticle 5 of the Company's By-laws, making the numerical expressions and thetext in the necessary parts adequate for all legal purposes, providing,moreover, for deposit, according to article 2346 of the civil code, the text ofthe By-laws updated in that sense, as well as carrying out all other formalitiesprovided by the current legal standards. (iii) Should remain any Class A shares subject to the bid not acquired by ClassA shareholders or by Italian Qualified Investors or by Class B shareholders inthe sense of the foregoing (the "Shares A not Purchased") and the Person Biddingfor Class A shares is accepting to buy the Shares not Purchased, the Shares notPurchased may be transferred from the Shareholder Transferring Class A shares tothe Person Bidding for Class A shares, within but not later than 15 days, if thetransfer in favour of the Person Bidding for Class A shares has not occurredwithin the aforesaid term, any later transfer of Class A shares and of therights related thereto shall be subject again to the procedure specified in thepresent article 7.2; any act of transfer carried out in violation of theprovisions of the present article 7.2 shall be invalid and not opposable to theCompany.(iv) Should remain any Share A not Purchased and the Person Bidding forClass A shares is not accepting to buy only the Shares A not Purchased pursuantto the previous paragraph 7.2(iii), the Shareholder Transferring Class A sharesshall be entitled to sell all the Class A shares object of the Class ATransferring Notice to the Person Bidding for Class A shares. 7.3 The shareholder who intends to transfer Class B shares (hereinafter, the"Shareholder Transferring Class B shares") to a potential third-party acquireras well as to a shareholder of the Company ("Person Bidding for Class B shares")must offer these shares in advance to all the other shareholders holding Class Aand Class B shares with regard to the following procedure: (i) the Shareholder Transferring Class B shares must transmit a communication,by registered or certified mail with return receipt requested to the Chairman ofthe Board of Directors and other shareholders, specifying the number of Class Bshares, the price, and the other economic and contractual conditions of thetransfer and the personal particulars of the Person Bidding for Class B shares(the "Class B Transferring Notice"). Within 30 days of the date of receipt ofthe notice, the shareholders who intend to avail themselves of the Right ofPre-emption must give the appropriate written communication to the Chairman ofthe Board of Directors and the Shareholder Transferring Class B shares,specifying the number of shares requested in pre-emption; (ii) (a) Should the offer be accepted in its totality by the shareholders, theClass B shares subject to bidding shall be divided among the aforesaidshareholders, in proportion to the number of shares held by each of themcompared to the total number of shares (of Class A and Class B) issued by theCompany; (b) should the offer be accepted only in part by the shareholders, theClass B shares offered and acquired must be divided among the aforesaidshareholders in proportion to the number of shares held by each of them comparedto the total number of shares (of Class A and Class B); The Class B sharespre-empted by the holders of Class A shares will be transferred to them pursuantto the present Article 7.3 subject to the automatic conversion of the aforesaidpre-empted Class B shares at the rate of one newly issued Class A share (havingthe same characteristics as the Class A shares in circulation) for each Class Bshare subject to pre-emption. The conversion of the Class B shares into Class Ashares will be executed in compliance with the procedure set forth in Article7.2 (ii) above. (iii) Should remain any Class B shares subject to the bid not acquired by ClassB shareholders or by Class A shareholders (the "Shares B not Purchased") and thePerson Bidding for Class B shares is accepting to buy the Shares not Purchased,the Shares B not Purchased may be transferred from the Shareholder TransferringClass B shares to the Person Bidding for Class B shares, within but not laterthan 15 days, if the transfer in favour of the Person Bidding for Class B shareshas not occurred within the aforesaid term, any later transfer of Class B sharesand of the rights related thereto shall be subject again to the procedurespecified in the present article 7.3; any act of transfer carried out inviolation of the provisions of the present article 7.3 shall be invalid and notopposable to the Company. (iv) Should remain any Share B not Purchased and the Person Bidding for Class Bshares is not accepting to buy only the Share B not Purchased, the ShareholderTransferring Class B shares shall be entitled to sell all the Class B sharesobject of the Class B Transferring Notice to the Person Bidding for Class Bshares. 7.4 In the event that the transfer of shares does not provide a correspondingamount, or rather if it does not provide it entirely in cash (for example, inthe event of donation, barter, or transfer through amalgamation, splitting) theprice at which the shareholders in the Company shall be able to acquire theshares offered to them in pre-emption shall be determined by mutual agreement ofthe shareholder who intends to transfer and the shareholder or shareholders whohave exercised the pre-emption (the "Interested Shareholders"). If theInterested Shareholders have not reached an agreement within 30 workdays,elapsing from the moment when the shareholder who intends to transfer hasreceived the communication of the shareholders who intend to exercise the Rightof Pre-emption, the price for each share shall be calculated on the basis of theadjusted net worth of the Company to be determined taking into account the priceof the shares held in TI calculating by means of the arithmetic average of theofficial stock exchange prices within 30 days preceding the date of the offer inpre-emption divided by the number of shares issued and, in case of disputes, thecalculation, to be carried out on the basis of the criteria indicated above,shall be remitted to an expert appointed by the President of the Court of Milan,upon application by the most diligent shareholder. 7.5 All transfers provided under this Article 7 shall be subject to theapplicable Antitrust and/or regulatory provisions and shall occur not later than10 days after obtaining any applicable Antitrust and/or regulatory clearance, ifneeded, and in any case not later than six months from the completion of thebinding agreement in relation to the transfer of the Shares. 7.6 Transfers made in violation of the provisions of the present article 7 andthe following article 8 shall be invalid and unenforceable with regard to theCompany. Article 8 (Right of Co-Sale (Tag-Along)) 8.1 Without prejudice to the provisions of the foregoing article 7, in the eventthat one or more shareholders (hereinafter called jointly the "ConsiderableShareholder") (i) intend to transfer, also one or more times, a number of sharesthat represent a share equal to at least 30% of the share capital of Company(the "Considerable Share") to a potential third-party acquirer or to one or morepotential acquirers belonging to the same group, connected by a relationship ofcontrol or linkage among them in the meaning of article 2359 of the civil code,or who in any case act in concert pursuant to article 109, ConsolidatedFinancial Act, for the purchase of the Considerable Share, and (ii) none of theother shareholders exercises the Right of Pre-emption at the end of therespective term of exercise, or notwithstanding the exercise of the Right ofPre-emption by one or more of the other shareholders a bid by the third party isstill pending for a share equal to at least the Considerable Share, theshareholder (or shareholders) who did not exercise the Right of Pre-emption towhich they were entitled (hereinafter the "Non-Opting Shareholder") shall havethe right to transfer to the potential third-party acquirer his own shares (the"Right of Co-Sale" or "Tag-Along Right") at the same terms and conditions of thetransfer of the Considerable Shareholder pursuant to this article 8. If thetransfer from the Considerable Shareholder does not comprise the entire stakeheld but only a part of such stake, the Tag Along Right shall be allocated tothe Non-Opting Shareholder in the same proportion existing between the number ofShares to be sold and all the shares held by the Considerable Shareholder. 8.2 If the Non-Opting Shareholder intends to exercise its Tag-Along Right, hemust, under penalty of forfeiture, give a written communication to theConsiderable Shareholder - and a copy to the Company - by the means and underthe terms provided for the exercise of the Right of Pre-emption discussed in theforegoing article 7. Once the express request has been made by the Non-OptingShareholder to avail himself of the Tag-Along Right (hereinafter the "Proposalof Sale"), the aforesaid Non-Opting Shareholder shall be obliged to sell all orthe different pro rata quantities established above of his own shares, free fromevery encumbrance, lien or right in favour of third parties, to the potentialthird-party acquirer, in accordance with the following procedure: (i) The Considerable Shareholder must, as a condition for the efficacy of thetransfer of his own shares, see to it that the potential third-party acquirer(a) accepts unconditionally the Proposal of Sale mentioned in this article 8.2,having for its purpose the sale of all (or the different pro rata quantitiesestablished above) the shares owned by each Non-Opting Shareholder who has madethe Proposal of Sale, without the potential third-party acquirer being able torequire with regard thereto any declaration and/or guarantee, with the exceptionof the guarantees pertaining to (ai) the entitlement to the shares owned by theNon-Opting Shareholder, in the absence of commitments regarding these and thecapacity to freely dispose of them, and (aii) the fact that the shares are freefrom every encumbrance, lien or right in favour of third parties; and (b)acquires all (or the different pro rata quantities established above)the sharesowned by each Non-Opting Shareholder who made the Proposal of Sale; (ii) The transfer of the shares by the Considerable Shareholder and the otherNon-Opting Shareholders must arrive in one single setting, with contextualpayment of the price within and not later than 15days of the date of receipt ofthe Proposal of Sale by the Considerable Shareholder; (iii) If no shareholder has exercised the Right of Pre-emption in the sense ofarticle 7 nor the Tag-Along right in the sense of the present article, theConsiderable Shareholder may transfer the shares belonging to him to therelevant third-party acquirer on condition that (a) the transfer occurs underthe same conditions indicated in his own communication to the othershareholders, here including the same price. and (b) the transfer shall occurwithin 15 days of the expiry of the different term of exercise mentioned in theforegoing article 7, it remaining firm that the aforesaid term shall bereasonably extended, as referred below, if the transfer of the shares is subjectto obligations of communication in advance or authorization by an authority; itremains the intention that the aforesaid term of 15 days be considered respectedif within the appropriate deadline the Considerable Shareholder has executedwith the potential third-party acquirer a purchase and sale contract withdeferred efficacy (but not more than 6 months) or conditional solely upon theobtaining of the authorizations required by law or regulation (provided thatsuch agreement shall terminate if such authorizations have not been obtainedwithin six months following execution of such purchase and sale contract), at aprice per share and, in general, on the terms and conditions indicated by thepotential third party acquirer in his own bid. If the transfer to the potentialthird party acquirer has not taken place in conformity with what is indicated inthis paragraph and in the terms provided here, the Considerable Shareholdershall not be able to transfer his own shares unless subject to the experiencingof the procedures discussed in articles 7 and 8 and the transfer shall not bevalid and enforceable against the Company. Article 9 (Bonds and Financing) 9.1 The Company may issue convertible and non-convertible bonds, take loans fromshareholders, with interest or interest-free, with or without reimbursementobligation, in compliance with the applicable laws and regulations and itsby-laws. SECTION III SHAREHOLDERS' MEETING Article 10 (Ordinary Shareholders' Meeting) 10.1 The Ordinary Shareholders' Meeting shall decide upon matters reserved to itby law. Furthermore, the Ordinary Shareholders' Meeting authorises, within themeaning of Article 2364 (1)(5) of the Civil Code, subject to theresponsibilities of the Board of Directors, (i) with the majority provided inthe following Article 12, paragraph 3, the carrying out by the Company of theactivities discussed in Article 3.1, letter (c) and (ii) the Company'sacceptance ( or company's instruction to its subsidiaries, pursuant to itsactivity of direction and coordination, to accept )to any tender offers havingas their subject the shares of TI, provided that in such a case the efficacy ofthe authorization resolved by the meeting is subject to the condition precedentof the failed exercise of the Redemption discussed in the following Article 28.2potentially carried out - with respect to the prerequisites and procedurediscussed in the following Article 28.2 - by the shareholders authorised to doso, provided that if the said Redemption is exercised, the aforesaid resolutionof the Meeting is intended to be definitively revoked at the moment of thetransfer of the shares subject to Redemption and the TI shares directly orindirectly held by the Company shall be rendered unavailable within the meaningof the following Article 28.2 (iii). Article 11 Call 11.1 The Shareholders' Meeting may also be convened in a place other theregistered office, provided that it is held in Milan. 11.2 The Meeting may be convened, subject to resolution of the Board ofDirectors, by the Chairman of the Board of Directors by means of a notice atleast eight days prior to the date fixed for the meetingto be send by means of:(i) A letter or telegram sent to all the shareholders entered in theshareholders' register, to the directors and statutory auditors by postalservice or an equivalent; with notice of receipt; or alternatively; (ii) a faxor e-mail message sent and received by all the persons indicated above, whomust, within the date established for the meeting, confirm in writing, alsousing the same means, receipt of the notice, specifying the date of receiptwhenever the delivery means used do not provide for notification - evenelectronic - of receipt by the addressee. 11.3 In the notice of call a second meeting may be set for another day, if thepreceding Meeting was not legally constituted. 11.4 In the absence of formal call, the Meeting is regularly constituted whenthe entire share capital of the Company is represented and the majority of themembers of the Board of Directors and of the members of the managerial body takepart; in that case, each of the participants may object to the discussion ofissues for which he is not sufficiently informed. 11.5 Except as provided by the last paragraph of Article 2367 of the Civil Code,the Board of Directors must convene the Meeting without delay when a request ismade by as many shareholders representing at least one tenth of the sharecapital of the Company and the issues to be discussed are set out in therequest. 11.6 The Ordinary Shareholders' Meeting must be convened by the Board ofDirectors at least once a year, within one hundred and twenty days of the closeof the Company's fiscal year; the Meeting may be convened within one hundred andeighty days of the close of the Company's fiscal year should the Company berequired to prepare consolidated financial statements or when this is requiredby particular resons connected to the structure and the purpose of the Company. Article 12 (Resolutions) 12.1 Without prejudice to the provisions of paragraph 12.3 below, the OrdinaryShareholders' Meeting - in first call - is regularly convened with theparticipation of such shareholders as represent at least half of the sharecapital and - in second call - is regularly convened with the participation ofsuch shareholders as represent at least one fifth of the share capital, exceptfor the approval of the financial statements and the appointment and removal ofcorporate officers, for which it is regularly convened whatever the proportionof the share capital represented by the shareholders taking part. 12.2 Without prejudice to the provisions of paragraph 12.3 below, the OrdinaryShareholders' Meeting - in first and second call - resolves with the vote of theabsolute majority of the capital present. 12.3 The Meeting convened to resolve on the authorization of activities oroperations in pursuit of the corporate purposes indicated in Article 3,paragraph 3.1, letter (c) of the By-laws is validly constituted and decides by avote of such shareholders as represent at least 95% of the share capital. The Ordinary Meeting convened to resolve on the distribution of dividends isvalidly constituted and decides by a vote of such shareholders as constitute atleast 65% of the capital stock, it remaining firm that if one or moreshareholders who, even altogether, represent a share of the Company greater than30% of the capital stock, should abstain or be absent from the decision of theMeeting, it may be adopted by a vote of such shareholders as represent theabsolute majority of the capital stock. 12.4 The Extraordinary Shareholders' Meeting - in first and second call - isregularly constituted and resolves with the vote of such shareholders asrepresent at least (i) 75% of the share capital with regard to the resolutions(x) approving share capital increase with the exclusion of the option rightpursuant to article 2441, par. 4 and 5, of the Italian civil code, (y) approvingmergers or de-mergers causing a dilution of the stakeholding held by theshareholders in the Company except the mergers provided under Article 18.2(i);and (z) approving amendments to articles 12, 15, 18 and 22 of the presentby-laws, and (ii) with regard to the remaining other resolutions, 65% of theshare capital (with the exception of resolutions under Articles 2446 and 2447 ofthe Civil Code, which are decided by the applicable majorities), provided that,in the cases above mentioned under letters (i) e (ii), if one or moreshareholders who, even together, hold an interest in the company that exceeds30% of the share capital should abstain from such a Shareholders' Meetingresolution or be absent, it may be adopted by a vote of such shareholders asrepresent at least the absolute majority of the share capital. In the event the quorums to convene the Extraordinary Shareholders' Meeting andresolve upon the issues set out in the first paragraph of this paragraph 12.4are not met, the Extraordinary Shareholders' Meeting may be convened anew toresolve on the same issues, provided at least 30 days have elapsed from thepreceding call. In such a case the meeting - in first call and in second call -is regularly convened and resolves by the vote of such shareholders as representthe absolute majority of the share capital. Article 13 (Right of participation and vote) 13.1 Participation in the shareholders' meeting is allowed to those shareholdershaving the right to vote or the financial instruments giving the right to voteon at least one of the topics listed on the agenda as well as to thoseindividuals who have been granted the right of participation either by law or byvirtue of these By-laws. Each share has attached the right to issue one vote.The Company guarantees the provision of translation services in favour ofshareholders who do not speak Italian. 13.2 For participation in the shareholders' meeting, it is not necessary to havepreviously lodged (i) shares or the relative certificates thereof, and (ii)financial instruments incorporated in securities or documented by certificates. 13.3 The shareholders' meeting can also be held in a number of places, eithercontiguous or distance from each other, connected by audio and/or video, as longas the collective assembly method is used, principles of good faith are upheld,and all shareholders are treated equally. In particular, it is necessary that: (i) the president of the shareholders' meeting and the person taking record ofthe shareholders' meeting be in the same place; they will write up and sign theminutes and for the purposes of record the meeting will be considered as havingtaken place at that location; (ii) the president of the shareholders' meeting be allowed, including throughthe office of the president, to verify the identity and legitimacy of theparticipants, control the meeting process, verify and announce the results ofvoting; (iii) the person taking down the minutes be allowed to properly observe theshareholders' meeting events he or she is required to record; (iv) the participants be allowed to take part in the discussion andsimultaneously vote on the items of the agenda, as well as view, receive andtransmit documents; (v) the audio and/or video locations to which the Society is responsible forallowing the participants to connect to be indicated in the notice to call theshareholders' meeting. Article 14 (President and secretary) 14.1 The shareholders' meeting shall be chaired by the Chairman of the Board ofDirectors or by a person elected with the majority vote of those present. 14.2 The shareholders' meeting shall appoint a secretary,not necessarily havingto be a shareholder, and if need be also one or more observers,, not necessarilyhaving to be shareholders. The attendance of the secretary is not necessary whenthe minutes are recorded by a notary. SECTION IV ADMINISTRATION Article 15 (Appointment of the Board of Directors) 15.1 The Company is administered by a board of directors of 10 directors. 15.2 The appointment of the board of directors shall take place on the basis ofon the lists submitted by shareholders holding Class A shares and Class B sharesin accordance with the paragraphs describing this process whereby the candidatesshall be listed using a sequential numbering scheme. Class A Shareholders who, either individually or collectively with other Class AShareholders represent a participation equal to at least 20% of the Company'sshare capital may submit or concur in the presentation of a list. Class Bshareholders who, individually or collectively with other Class B Shareholderhold a participation equal to at least 20% of the Company share capital maysubmit or concur in the presentation of a list. The lists submitted by the shareholder must be submitted to the Company'sregistered office at least seven days before the date set for the shareholders'meeting and each of them must contain the number of candidates equal to themaximum number of board members to be elected. Included with each list, and within the deadlines indicated above, there must benarrations with which the individual candidates irrevocably accept theircandidature and attest, under their own responsibility, that there are nopre-existing conditions of ineligibility or incompatibility, and that they do infact possess the requirements set out for the respective positions. Shareholders can submit or concur with a submission, and vote on a single list. The Class A shareholders will be entitled to vote exclusively lists submitted byone or more Class A shareholders. The Class B shareholders will be entitled tovote exclusively lists submitted by one or more Class B shareholders. 15.3 In the event that on the date of the general shareholders' meetingresolving upon the appointment of the board of directors, the Class A sharesrepresent in the aggregate the absolute majority of the share capital of theCompany, the following procedure is to be followed in the appointment of themembers of the Board: (a) from the list that may have been submitted by Class B shareholders, 4 boardmembers shall be chosen, the first of the directors elected shall be appointedas vice chairman; (b) the remaining board members to be elected will be taken from the listsubmitted by Class A shareholders, the first of the directors elected shall beappointed as chairman. On the contrary, in the event that on the date of the general shareholders'meeting resolving upon the appointment of the board of directors, the Class Bshares represent in the aggregate the absolute majority of the share capital ofhe Company, the following procedure is to be followed in the appointment of themembers of the Board: (x) from the list that may have been submitted by Class A shareholders, 4 boardmembers shall be chosen, the first of the directors elected shall be appointedas vice chairman; (y) the remaining board members to be elected will be taken from the listsubmitted by Class B shareholders, the first of the directors elected shall beappointed as chairman. When a single list has been submitted, the board members who appear on that listwill be elected. 15.4 If on the the date of the general shareholders' meeting resolving upon theappointment of the board of directors the Class B shares represent in theaggregate less than 30% and more than 20% of the Company's share capital, twodirectors shall be chosen from the list submitted by the Class B shareholderwhile the remaining directors shall be chosen by the list submitted by the ClassA shareholders. If on the the date of the general shareholders' meetingresolving upon the appointment of the board of directors the Class A sharesrepresent in the aggregate less than 30% and more than 20% of the Company'sshare capital, two directors shall be chosen from the list submitted by theClass A shareholder while the remaining directors shall be chosen by the listsubmitted by the Class B shareholders. 15.5 In the event that no list is submitted, the appointment of the boardmembers will not be carried out with the list vote system indicated above butrather by a resolution of the Shareholders' meeting taken with the legalmajorities present. 15.6 If in the course of this exercise a director has ceased to add his or herposition, he or she shall be replaced by the first non-elected candidate on thesame list to which the missing director belongs, or if there is an obstacle tothe first non-elected candidate stepping up in this manner, then the non-electedperson immediately below him or her on that same list will serve as thereplacement. If it is not possible for any reason to replace the missing boardmember with any of the non-elected candidates from that same list, then theprovisions of law shall be followed. If in the course of the exercise there fails to be a majority with regard to themembers who make up the board of directors, then the remaining board membersshall resign, with such resignation taking official effect from the moment theBoard is reconstituted by nomination of the shareholder's meeting A shareholders' meeting shall be called immediately by remaining board member,for the purposes of appointing the new board of directors. Should all board members resign or cease to hold their position for any reason,the shareholders' meeting for the purposes to appoint the new board ofdirectors, shall be called immediately by the board of statutory auditors, whichshall perform the ordinary administrative activity in the meantime. Article 16 (General provisions) 16.1 The administration of the Company may also be entrusted to non-members. 16.2 The directors shall hold their positions for a term established by theirdeed of appointment and therefore for a period not to exceed three financialyears. This term shall expire on the date of the shareholder meetings' called toapprove the balance sheet for the last financial period of their term. Article 17 (Chairman of the board of directors) 17.1 The board of directors elects from among its members - where ashareholders' meeting has not already been held -a chairman and the possible oneor more vice-chairman presidents in accordance with the provision of the presentBy-laws, establishing therein their powers save for the power provided by law. 17.2 The board of directors can further appoint a secretary, also in a permanentmanner, and who does not necessarily have to be a member of such board ofdirectors. Article 18 (Powers of the board of directors and representation) 18.1 The board of directors is vested with the broadest powers for ordinary andextraordinary management of the Company, without exception of any sort, andshall carry out all functions not reserved - by law or these By-laws- to thecompetence, including of an authoritative nature, of the shareholders' meeting e. 18.2 The board of directors shall be exclusively responsible for makingdecisions on the following: (i) mergers by incorporation of companies in which the Company holds at leastninety percent of the shares or stakes, merger by incorporation of the Companyinto another company which already holds at least ninety percent of theCompany's shares, as well as a de-merger of the Company; (ii) transactions for the of acquisition or transfer of - or encumbrance of -the Company's direct or indirect shareholdings in any form or manner in O or inTI or any rights attached to those shares including, but not limited to, votingrights, with the exception of shareholdings transferred to meet publicacquisition offers provided by law or regulation which shall occur once theauthorization of ordinary shareholders' meeting has been given; (iii) investments in companies other than investments in O and in TI; (iv) capital expenditures and financial structure decisions for amounts inexcess or Euro 75 million; (v) decisions on the vote to be exercised in the shareholders' meetings of O andTI; (vi) approval and amendments of the Company's budget; (vii) reduction of share capital in the event of a shareholder's withdrawal; (viii) the By-laws' compliance with legislative provisions; (ix) the setup, transfer or dissolution of branch offices. The resolutions regarding the matters mentioned above in (ii) to (vi) areapproved by way of the vote of at least 7 sitting board members of the board ofdirectors (the "Consolidated Quorum"). As a partial exception to the above,should there be resolutions of board members that require Consolidated Quorums,in the event that 3 or more board members have/has abstained or is/are absent,these resolutions shall be taken with the vote of the majority of only thoseboard members sitting. Subject to the above, in the event that the Consolidated Quorum is not achievedfor the resolutions relating to the areas cited in sections (ii) and (v) above,the board of directors can be called again to resolve on these same issues. Inthis case, the board of directors shall resolve with the vote of the majority ofonly those board members sitting. 18.3 The representation, including in legal proceedings (including therein theability to file lawsuits and initiate legal actions, including in Supreme Courtsand to appoint to that end attorneys and proxy attorney), is the responsibilityof: (i) the chairman of the board of directors; (ii) the vice-chairman; (iii) anyone not a member of the board of directors, designated thereby, withinthe scope of and in the exercise of the powers granted to them. Article 19 (Meetings of the board of directors) 19.1 The board of directors can also meet in a place other than the registeredoffice of the Company, provided that it occurs in Milan, any time that thechairman of the board of directors, or whoever is standing in for him, deems itsuitable and/or necessary or when he is asked to do so by at least one of hisdirectors or by the board of statutory auditors and at least once every quarter. 19.2 The board of directors is called to assembly by the chairman of the boardof directors or by whomsoever is standing for him, at least five business days -or in case of urgency, two business days - before the date set for the meeting,via registered letter, hand-delivered letter, telegram or fax, sent to alldirectors and statutory auditors at the addresses indicated in the companybooks; the date, place and time of the meeting, list of items on the agenda andpossible details relating to the audio and/or videoconferencing connectionsshould be included in the call to assembly. 19.3 In the absence of a formal call to assembly, the board of directors shallbe considered as having been validly constituted if all sitting board membersand statutory auditors are participating therein. 19.4 At the request of any Director, meetings of the board of directors can alsotake place in a number of places, either together or distant from each other,connected by audio and/or video, as long as : (i) the president of the assembly and the person taking record of the assemblyare in the same place; they will write up and sign the minutes and for thepurposes of record, the meeting will be considered as having taken place at thatlocation; (ii) the president of the assembly is allowed to verify the identity of theparticipants, control the meeting process, oversee and announce the results ofvoting; (iii) the person taking down the minutes is allowed to properly observe theevents of the meeting he or she is tasked with recording; (iv) the participants are allowed to take part in the discussion andsimultaneously vote on the items of the agenda, as well as look at, receive andtransmit documents; The Company guarantees the provision of translation services for directors'interventions and the translation of the relevant documents to be review by theBoard, which shall be provided with together with the corresponding call of themeeting. 19.5 Without prejudice to the provisions of article 18.2 above, the resolutionsof the board of directors shall be considered as having been validly made withthe majorities provided by law. 19.6 Meetings of the board of directors are presided over by the president ofthe board of directors or by the board member appointed by the participants. 19.7 Resolutions of the board of directors must be recorded in the minutessigned by the president of the meeting and by the individual who recorded themand must be transcribed into the book of assemblies and deliberations of theboard of directors. Article 20 (General Manager and attorneys) 20.1. The board of directors may appoint, replace and remove one or more chiefexecutive officers, deciding on their functions, assignments and faculties. 20.2 The board of directors may also appoint, replace and remove agents,attorneys and representatives - in general - for particular acts or categoriesof acts; the same can be done by any director vested with the power ofrepresentation, within the limits of the relative assignments. Article 21 (Compensation of directors) 21.1 Compensation for directors shall be determined in accordance with article2389 of the civil code. 21.2 The shareholders' meeting may determine a total amount for compensation ofall the directors, including those invested with particular offices. 21.3 In any case, the directors must be reimbursed for expenses incurred in theperformance of their duties. SECTION V BOARD OF STATUTORY AUDITORS AND ACCOUNTING CONTROL Article 22 (Board of Statutory Auditors) 22.1 The Board of Statutory Auditors is composed of three effective auditors andtwo alternate auditors. The Board of Statutory Auditors elects a Chairman bymajority vote from among its effective members. In the event of absence orimpediment of the Chairman, the auditor oldest in age will replace him. Appointment of the Board of Statutory Auditors shall be done on the basis oflists submitted by shareholders. Class A shareholders can submit or concur tosubmit a single list. Class B shareholders can submit or concur to submit asingle list. The lists submitted by the shareholders must be submitted to the Company'sregistered office at least than (ten) days before the date set for thefirst-call of the shareholders' meeting. Included with each list, and within the deadlines indicated above, there must bedeclarations with which the individual candidates irrevocably accept theircandidature and attest under, their own responsibility, that there are nopre-existing conditions of ineligibility or incompatibility, and that they do infact possess the requirements set out for the respective positions by law and bythe By-laws. The lists shall be divided into two sections: one for candidates for theposition of effective statutory auditor and the other for candidates for theposition of alternate auditor. Anyone with the right to vote can vote on a single list. The following procedure is to be followed in the election of the members of theBoard: (a) from the list that may have been submitted by Class B shareholders shall bechosen, per the sequential order in which they appear on this list, onealternate and one effective statutory auditor, acting as Chairman. (b) the remaining board members to be elected will be taken from the listsubmitted by Class A shareholders. 22.2 The effective statutory auditors will be compensated on the basis ofprofessional tariffs, where such compensation has not been determined by theshareholders' meeting. 22.3 Meetings of the board of statutory auditors may also be held usingtelematic methods in compliance with the rules set forth under Article 19.4above. Article 23 (Accounting control) 23.1 Until the Company is not obliged to consolidated its financial statement,the accounting control is exercised by the Board of Statutory Auditors, entirelyformed by accounting auditors registered under the national register kept by theMinistry of Justice; with resolution of the ordinary shareholders' meeting,accounting control may, however, be conferred on an accounting auditor or anauditing company registered under the national register kept by the Ministry ofJustice. SECTION VI FINANCIAL STATEMENTS AND PROFITS Article 24 (Company fiscal year) 24.1 The Company's fiscal years end on 31 December of every year. Article 25 (Balance sheet) 25.1 At the end of each of the Company's fiscal year, the board of directorsshall draw up the financial statement pursuant to law. Article 26. (Profits) 26.1 The profits resulting form the financial statement, minus an amount notless than 5% (five percent) intended for the legal reserve, up to the limitallowed by law, shall be distributed among the shareholders in a proportioncorresponding to the number of shares held by each shareholders, unless theshareholders' meeting decides on special allocations to extraordinary reservesor some other purpose or decides to carry it over - in whole or in part - to thenext fiscal year. 26.2 If the Company's financial statement has been subjected by law to auditingby an auditing company registered under the related professional register, thedistribution of accounts of dividends pursuant to article 2433-bis of the civilcode is allowed. SECTION VII DISSOLUTION Article 27 (Dissolution) 27.1 The Company shall be dissolved for the reasons established by law. 27.2 In the event the Company is dissolved, the procedure to be followed shallbe that set out in articles 2484 and subsequent of the civil code. SECTION VIII RULES FOR REDEMPTION Article 28 (Methods for exercising the right of redemption) 28.1 Any Company Share (either Class A or Class B) can be redeemed pursuant toand for the effects of article 2437-sexies of the civil code, if theprerequisites set out in this article have been satisfied. 28.2 If the ordinary shareholders' meeting has authorized the Company, pursuantto article 10.1(ii), to adhere to public tender offers to acquire theshareholdings directly or indirectly held by the Company in TI, any shareholder(or shareholders) who have caused to set down in writing their dissent theretoat this shareholders' meeting (hereafter, the "Dissenting Shareholder") shallhave the option of redeeming all - and not just part - of the Company Shares(hereafter, the "Redemption") held by the other shareholders, in accordance withthe following procedure: (i) The Dissenting Shareholder who wishes to exercise the Redemption must givewritten notification (the "Notice") thereof via registered letter with returnreceipt to all the other shareholders and to the Chairman of the board ofdirectors within five (5) working days after the date of the shareholders'meeting which decided to authorize the operation cited above, indicating, inthis notification, the Redemption price, determined pursuant to the followingpoint (iv); (ii) in the event that there are more Dissenting Shareholders, they shall havethe right to buy the Shares which are the object of the Redemption in proportionto their stake in the Company's share capital; (iii) as of the date of the Ordinary Shareholders Meeting which decided toauthorize the operation cited above, the TI shares directly or indirectly heldby the Company will be made unavailable by depositing them in an account held bythe Company or by a company controlled by it which owns a direct stake in TI,with a fiduciary company that has received binding and irrevocable instructions,in accordance with the provisions of this clause, and with the necessary powersto proceed to execute the transfer and endorsement of the shares to theDissenting Shareholder/s; (iv) the Redemption price per each Company share shall be the Company's adjustednet worth divided by the total number of issued Company Shares. The Company'sadjusted net worth is determined by taking into account the higher between (i)the consideration offered for the TI shares in the public tender offer; and (ii)the price of the shares held in TI calculated on the basis of the arithmeticaverage of the official stock exchange prices within 30 days preceding the dateof the Notice. (v) in case of dispute, on the part of one or more shareholders, as to the priceof Redemption within 10 days after receipt of the notification mentioned innumber (i) above, the determination thereof shall be handed over to an expertappointed, upon request of the most diligent shareholder, by the President ofthe Court of Milan. The expert must adhere to the criteria stated in thepreceding number (iv) above and must determine the Redemption price within 20working days after the appointment; (vi) the transfer of the shares and the payment of the Redemption Price shalloccur: (x) within 15 business days following the Notice, or (y) if thetransaction is subject to any authorization by law or contract, within 15business days following obtaining such authorization or (z) in case of dispute,within 15 business days following the final determination of the Redemptionprice, provided that transfer of the Shares which are the object of theRedemption shall only take effect from the time of the notification to theCompany that the Redemption price has been deposited - as indicated in theNotice if there are no disputes, or as determined by the expert appointedpursuant to number (v) above - with the Banks indicated by the transferringshareholders, being understood that simultaneously the Company will proceed tomake the consequent annotations in the shareholders' register. SECTION IX TRANSITORY RULES Upon the Founding Class A shareholders (as defined above) ceasing to hold in theaggregate at least 35% of the share capital, article 7.2(ii) above shall bereplaced as follows : "(ii) if after the carrying out of the procedure in the preceding point (i) there still remain any Remaining Class A Shares, such Remaining Class A shares must be offered without delay to the shareholders holding B shares by means of a communication made in the form specified in the preceding paragraph (i) of this Article 7.2; the Remaining Class A shares which become pre-empted by the shareholders holding Class B shares must be divided among the holders of Class B shares who pre-empted them - in proportion to the number of Class B shares held by each of them, provided that the Right of Increase included in Article 7.2(i) above shall apply mutatis mutandis - subject to the automatic conversion of the aforesaid Class A shares subject to pre-emption at the rate of one newly issued Class B share (having the same characteristics as the Class B shares in circulation) for each Class A share subject to pre-emption. The exercise of the Right of Pre-emption by the shareholders holding Class B shares , potentially exercise in the sense of what is provided in the present article 7.2 (ii), must be carried out within 30 days of the receipt of the notice of offering in pre-emption by means of an appropriate written communication to the Chairman of the Board of Directors and the Shareholder Transferring Class A shares, specifying the number of shares requested in pre-emption. The conversion of Class A shares to Class B shares takes effect upon the recording of the decision of the Board of Directors (which for this purpose must be convened within 5 days of the expiry of the term for the exercise of the Right of Pre-emption specified in the present article 7.2 (ii)) resulting from the minutes drawn up by the notary - subject to the condition precedent that the event described under article 7.2(iv) did not occur -, who must proceed to carry out all the necessary formalities for the issuance of Class B shares as well as the necessary registrations in the Register of Companies, also bringing about the necessary and consequent modifications to article 5 of the Company's By-laws, making the numerical expressions and the text in the necessary parts adequate for all legal purposes, providing, moreover, for deposit, according to article 2346 of the civil code, the text of the By-laws updated in that sense, as well as carrying out all other formalities provided by the current legal standards. This information is provided by RNS The company news service from the London Stock Exchange
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