Tiscali 2007 Annual Report Download - page 103

3Value of non-competition agreements equalling EUR 7.3 million.
The goodwill is attributable to the valuation of the current and
future value of the Pipex broadband and voice division, with
a view to it as a going-concern, a value which will be enhan-
ced by the synergies which can be realized following integra-
tion with the Group.
The Pipex Division was consolidated as from 13 September
2007, contributing EUR 114.6 million in revenues and EUR
10.2 million to the pre-tax result of the Group between the
acquisition date and the closing date of the Annual Financial
Statements 2007.
The negative result of the division depends on the imputation
of EUR 21.2 million of restructuring charges, EUR 14.2 of
which relating to the fourth quarter of 2007, and EUR 6.9 mil-
lion for the restructuring provision.
40. Derivative instruments
In order to hedge the interest rate risk on loans, Tiscali has set
up a partial hedge, for a portion of EUR 112.5 million of the
debt, of the interest risk by means of an Interest Rate Swap
(“IRS”) setting the reference rate at a maximum of 4.11%.
The IRS has been structured so as to provide the coverage of
the outgoing cash flows.
At 31 December 2007, the value of the IRS presented a posi-
tive balance of EUR 1.3 million. This amount has been recor-
ded in the income statement under financial income in accor-
dance with the IRS’s accounting nature of trading instrument
in the absence of the drawing up of the formal documentation
envisaged by IAS 39 for its accounting classification as a hed-
ging instrument.
41. Stock Options
Upon the proposal of the Board of Directors, on 3 May 2007
the shareholders’ meeting approved a stock option plan in
favour of the Chief Executive Officer and key employees of the
Company and its Italian subsidiaries, with the aim of aligning
management’s interests with the creation of value for the Tisca-
li Group and its shareholders, encouraging the achievement
of the strategic objectives. With regards to the Chief Executi-
ve Officer, the implementation of the plan, besides represen-
ting a valid incentive tool in line with market practices, repre-
sents the execution of a precise contractual obligation under-
taken by the Company at the time of the formation of the mana-
gement relationship.
The plan envisages the allocation:
3to the Chief Executive Officer, of 3,593,143 options for the
purchase of the same amount of ordinary shares in the Com-
pany, deriving from purchases of own shares which the Com-
pany will carry out on the market in compliance with Article
2357 of the Italian Civil Code and on the basis of the autho-
rization of the shareholders’ meeting. The exercise of these
options is dependent on the achievement of the performan-
ce objectives linked to the budget established by the Board
of Directors, involving 40% with reference to the objectives
established for 2006, which are understood to have been
achieved, and the remaining 60% with reference to the objec-
tives established for 2007.
3to the employees, of up to a maximum of 4,244,131 options
for the subscription of the same amount of newly-issued
ordinary shares in the Company, deriving from a share capi-
tal increase reserved in accordance with Article 2441.8 of
the Italian Civil Code resolved by the shareholders’ meeting.
By way of implementing the afore-mentioned plan, the Board of
Directors:
3on 10 May 2007, assigned the Chief Executive Officer all
the options due him in a single tranche; it will be possible
to exercise the options in several tranches as well, between
4 May 2010 and 3 November 2010, at a price of EUR 2.763,
adjusted to €2.477 following capital increase;
3on 28 June 2007, assigned 23
managers a total of 3,330,000
options; it will be possible to exercise the options, in several
tranches as well, between 29 June 2010 and 28 December
2010, at an exercise price of EUR 2.378, adjusted to EUR
2.132 following capital increase.
The beneficiaries of the options are obliged not to sell, for a period
of at least five years as from the exercise date, a quantity of shares
whose total value is no lower than the difference between the nor-
mal value of the shares as of the exercise date and the amount paid
by the beneficiaries, in compliance with applicable tax legislation.
For further information, with particular reference to the effects -
on the rights assigned - of the possible termination of the employ-
ment relationship of the beneficiaries or a change in the man-
agement of the Company, please refer to the disclosure docu-
ment drawn up in accordance with Article 84
bis of Regulation
No. 11971 approved by Consob under resolution dated 14 May
1999, available on the Company’s website (www.tiscali.com).
The plan described above, intended for the Italian
management
of the Tiscali Group, runs alongside the plan of payments based
on shares resolved last October for the UK
management of the
Group. This plan envisages the allocation to 20 UK
managers of
a number of options
, convertible into shares of the subsidiary
Tiscali UK Ltd., not exceeding 5% of the share capital of said
company, net of dilution. The exercise price of the options has
been established on the basis of the
equity value of the UK sub-
sidiary at the time of their allocation. Such options mature in a
three-year period from the allocation, and may be exercised for
10 years, still from the date of allocation.
CONSOLIDATED FINANCIAL STATEMENTS AND EXPLANATORY NOTES AT 31 DECEMBER 2007
102