Tiscali 2008 Annual Report Download - page 98

The plan described above, intended for the Italian management
of the Tiscali Group, runs alongside the plan of payments based
on shares resolved in October 2007 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
subsidiary. During August, the options assigned to UK
management have been converted into a cash bonus recorded
under other payables at 31 December 2008.
Ongoing disputes, contingent liabilities
and commitments
During the normal course of its business, the Tiscali Group is
involved in a number of legal and arbitration proceedings, as
well as being subject to tax assessments.
A summary of the main proceedings to which the Group is a
party, is presented below.
On-going disputes
Vereniging van Effectenbezitters/ Stichting Van der Goen WOL
Claims dispute
In July 2001, the Dutch association Vereniging van Effectenbezitters
and the Stichting VEB-Actie WOL foundation, which represent a
group of around 10,000 former minority shareholders of World Online
International NV, summonsed World Online International NV (currently
99.5% owned by Tiscali) and the financial institutions tasked with
the stock market listing of the Dutch subsidiary, disputing, in particular,
the incomplete and incorrect nature, as per Dutch law, of certain
information contained in the listing prospectus and of certain public
statements made, immediately prior to and after the listing (on 17
March 2000), by the company and by its chairman.
By means of provision dated 17 December 2003, the first level
Dutch court deemed that in certain press releases issued by World
Online International NV prior to 3 April 2000, sufficient clarity was
not provided regarding the declarations made public by its former
chairman at the time of listing relating to his shareholding.
Consequently, World Online International N.V was held responsible
vis-à-vis the parties who had subscribed the shares of the company
at the time of the IPO on 17 March 2000 (start date of trading) and
who acquired shares on the secondary market up to 3 April 2000
(date on which the press release was issued, specifying the effective
shareholding held by the former chairman of World Online
International NV). World Online International NV appealed against
this decision, deeming that it was not necessary to provide further
clarification, citing the correctness of the information prospectus.
On 3 May 2007, the Amsterdam Court of Appeal partially amended
the decision of the first level court, deeming that the prospectus
used at the time of listing was incomplete in some of its parts and
that World Online International NV should have corrected certain
information relating to the shareholding held by its former chairman,
reported by the media before said listing; furthermore, it was deemed
that the company had created optimist expectations regarding the
activities of World Online International NV. The sentence restricts
itself to ascertaining the company’s responsibility and that of the
financial institutions tasked with the stock market listing, but does
not pass judgement with regards to any damages, which will have
to form the subject matter of new and separate proceedings, as yet
not started up. On the basis of this verdict, the investors who became
shareholders of World Online International NV between 17 March
2000 and 3 April 2000, could undertake action for the compensation
of the related damages before the competent Court.
On 24 July 2007, the Dutch association and the foundation
mentioned above proposed an appeal before the Dutch
Supreme Court against the sentence of the Court of Appeal.
On 2 November 2007, World Online International NV and the
financial institutions tasked with the stock market listing filed
their counter-appeal. On 6 February 2009, the Director of Public
Prosecution expressed his opinion in an advisory role complying,
in part, with the appeal petitions. The Court sentence is
expected to be pronounced by the end of May 2009.
A dispute of a similar nature to that described above was forwarded
by another Dutch foundation, Stichting Van der Goen WOL Claims,
in August 2001, and letters were subsequently received from other
parties, in which the hypothesis of being able to proceed with similar
action is advanced, if the conditions should apply.
These disputes are potentially significant; however, at present
there are not enough sufficiently defined elements for
quantifying the potential liability. Therefore, no provision has
been made at the moment in the financial statements.
KPNQWest Bankruptcy dispute
The subsidiary Tiscali International Network BV is involved in a
dispute furthered by the receivership of the company KPNQWest
Bankruptcy, a joint venture formed between the Dutch KPN and
the US Qwest, currently in liquidation. The dispute, which arose
in previous years, concerns a 5-year IRU agreement entered into
between Tiscali International Network BV and KPNQWest, which
envisaged the payment by the former of an amount of EUR 3.1
million for the performance of services by the second. Following
the liquidation of KPNQWest, the provision of services was
interrupted after only 5 months and Tiscali International Network
BV received and recorded invoices for the sum of EUR 1.5 million.
KPNQWest has demanded payment of the entire amount
stipulated in the agreement.
Tiscali in turn objected to a demand for payment of this amount
given the damages sustained from interruption of the service. On
17 March 2006, Citybank (acting as liquidator of KPNQwest) filed
a precautionary attachment request for a value of around EUR
5 million on the bank current accounts of Tiscali International
Network BV which did not bring about any significant result.
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CONSOLIDATED FINANCIAL STATEMENTS AND EXPLANATORY NOTES