<strong>IT</strong> HOLDING S.p.A. Notes to the consolidated financial statements for the year ended December 31, 2004 • An attorney summoned <strong>IT</strong> HOLDING S.p.A. and <strong>IT</strong>TIERRE S.p.A., together with Diners Club Italia S.p.A., claiming he had been engaged to prepare a draft contract for certain financial agreements which would have involved these three companies and that, although the contracts had turned out to be impracticable, he was owed a fee of Euro 3.3 million. The claim is not supported by the opinion of the Council of Attorneys, normally obtained. However, <strong>IT</strong> HOLDING S.p.A. and <strong>IT</strong>TIERRE S.p.A. appeared in Court within the terms of law and argued that they had never engaged the claimant and that, in any case, had the claimant actually been engaged to draw up the contracts as alleged, the correctly quantified fees would not have exceeded Euro 25,000.00. Accordingly, management do not expect the dispute will result in adverse judgement. • On August 5, 2002, Mr. Luigi Giribaldi served <strong>IT</strong> HOLDING S.p.A. a writ of summons before the Isernia Court. He requested that the Court judge the inaccuracy of the two third-party appraisals on the basis of which the acquisition of GIANFRANCO FERRÉ S.p.A. was finalized. However, the claims are considered unfounded and, on the basis of the examination carried out by experts engaged by the Company, there are significant doubts as to the admissibility of the claims, which could lead the Court to decide not to act on the above-mentioned summons. A decision by the Court is expected in the first semester 2005. • On August 9, 2004 certain companies, including <strong>IT</strong> HOLDING S.p.A. and SERVIZI MODA S.r.l., were served a petition for urgent relief put forth by Mr. Romeo Gigli and Romeo Gigli S.a.s.. Mr. Gigli claims he is owed at least Euro 41 million for future amounts receivable, compensation for damage for alleged breach of contract, and fees accrued and not received. Accordingly, he requested the Court to order provisional remedies to protect his current and future claim with respect to all companies involved, including <strong>IT</strong> HOLDING S.p.A. and SERVIZI MODA S.r.l.. On September 8, 2004, the Tribunal of Milan rejected all the requests made by the petitioners. The petitioners appealed this decision and on December 13, 2004 the Tribunal of Milan rejected this appeal. In January 2005 Mr. Gigli and Romeo Gigli S.a.s commenced proceedings against <strong>IT</strong> HOLDING S.p.A. before the Tribunal of Milan, asking for damages of approximately Euro 47 million, in connection with essentially the same claims described above. Management do not expect the dispute will result in adverse judgement. On the basis of certain contractual obligations assumed by the Company, management believes it appropriate to give information on the following litigation that does not involve it directly: • At the end of April 2004, <strong>IT</strong> HOLDING S.p.A. disposed of its entire share holding in GIGLI S.p.A.. At that date, an action was pending against GIGLI S.p.A. brought by a licensee, alleging that the licensing and agency agreements between the two were void or voidable, and requesting reimbursement for all royalties, advertising contributions, and commissions paid, amounting to Euro 5.2 million in addition to compensation for damages amounting to Euro 2 million. GIGLI S.p.A. had appeared in Court and disputed such Court’s jurisdiction, as well as the inadmissibility and lack of grounds of the claims, making a counterclaim for damages. The agreements with the purchaser of the shares in GIGLI S.p.A. provide that <strong>IT</strong> HOLDING S.p.A. indemnify the purchaser in the event that losses or liabilities arise in relation to this litigation. Management believe an unfavourable outcome to be unlikely. • On October 5, 2004, <strong>IT</strong> HOLDING S.p.A. disposed of its entire share holding in ALLISON S.p.A.. At that date Allison S.p.A. was involved in arbitration proceedings with a supplier with which it had signed a contract scheduled to expire in February 2006. The supplier disputed termination of the contract, claiming wilful misconduct on the part of ALLISON S.p.A., from which it requested damages of approximately Euro 7 million. In connection with the sale and purchase agreement, <strong>IT</strong> HOLDING S.p.A. has agreed to indemnify the purchaser against any losses arising from litigation including this arbitral proceeding. In agreement with the opinion of lawyers engaged by ALLISON S.p.A., management believes it unlikely that the outcome of this litigation will be unfavourable. <strong>IT</strong> HOLDING S.p.A. and its subsidiaries still benefit from the effects of the hold harmless obligation taken on by its parent company, PA Investments S.A. on April 28, 1997. The agreement indemnifies <strong>IT</strong> HOLDING S.p.A. from damages, costs, liabilities, and contingent liabilities arising from civil, criminal, administrative, and tax court proceedings referring to events, acts or omissions occurring up to December 31, 1996 for which it was held liable and of which PA Investments S.A. was informed within five years from the date of the agreement ie within April F- 45
<strong>IT</strong> HOLDING S.p.A. Notes to the consolidated financial statements for the year ended December 31, 2004 28, 2002. The agreement is still valid for tax and social security matters up to the relevant statute of limitations. Furthermore, <strong>IT</strong> HOLDING S.p.A. benefits from the guarantee which the parent company PA Investments S.A. took on when it signed the sales contract for FINANCIÈRE MELPAR HOLDING S.A. shares, with regard to prior year expenses not recorded in the FERRÉ group consolidated financial statements at December 31, 2001 which could arise also as a result of judicial, arbitration and/or administrative proceedings pending on the date in which the consolidated financial statements were approved. For the reasons described management has deemed it not necessary to provide for any of the contingent liabilities described above. F- 46
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