Coca Cola 2005 Annual Report Download - page 23

are substantial legal and factual arguments supporting the position that the insurance policies at issue provide
coverage for the asbestos-related claims against Aqua-Chem, and both the Company and Aqua-Chem have
asserted these arguments in response to the complaint. The Company also believes it has substantial legal and
factual defenses to the claims of the cross-claimant insurer.
The Company is discussing with the European Commission issues relating to parallel trade within the
European Union arising out of comments received by the European Commission from third parties. The
Company is fully cooperating with the European Commission and is providing information on these issues and
the measures taken and to be taken to address any issues raised. The Company is unable to predict at this time
with any reasonable degree of certainty what action, if any, the European Commission will take with respect to
these issues.
On June 18, 2004, Michael Hall filed what was purported to be a shareholder derivative suit on behalf of the
Company in the Superior Court of Fulton County, Georgia. The defendants in this action were the then-current
members of the Company’s Board of Directors (other than E. Neville Isdell and Donald R. Keough), and former
Company officers Douglas N. Daft and Steven J. Heyer. The Company was also named as a nominal defendant.
The complaint alleged, among other things, that in connection with certain alleged Company accounting and
business practices that were originally the subject of litigation brought by former employee Matthew Whitley in
2003; approvals of executive compensation and severance packages; and dealings between the Company and
entities with which the defendants are affiliated, the defendants breached their fiduciary duties to the Company
through gross mismanagement, waste of corporate assets, abuse of their positions of authority within the
Company, and by unjustly enriching themselves.
The plaintiff, on behalf of the Company, sought declaratory relief; a monetary judgment requiring the
defendants to pay the Company unspecified amounts by which the Company allegedly has been damaged by
reason of the conduct complained of; an award to the plaintiff of the costs and disbursements incurred in
connection with the action, including reasonable attorneys’ and experts’ fees; extraordinary equitable and/or
injunctive relief; and such other further relief as the Court may have deemed just and proper.
In early April 2005, after several weeks of informal settlement negotiations, the parties reached a settlement
of this matter that provides for certain nonmonetary undertakings by the Company and for payment of plaintiff’s
attorneys’ fees. By order of the court dated August 30, 2005, a final hearing on the approval of the settlement
was held on November 22, 2005, at which time the settlement was approved by order of the court, dated the
same day. This matter is now concluded.
In May and July 2005, two putative class action lawsuits (Selbst v. The Coca-Cola Company and Douglas N.
Daft and Amalgamated Bank, et al. v. The Coca-Cola Company, Douglas N. Daft, E. Neville Isdell, Steven J. Heyer
and Gary P. Fayard) alleging violations of the anti-fraud provisions of the federal securities laws were filed in the
United States District Court for the Northern District of Georgia against the Company and certain current and
former executive officers. These cases were subsequently consolidated, and an amended and consolidated
complaint was filed in September 2005. The purported class consists of persons, except the defendants, who
purchased Company stock between January 30, 2003, and September 15, 2004, and were damaged thereby. The
amended and consolidated complaint alleges, among other things, that during the class period the defendants
made false and misleading statements about (a) the Company’s new business strategy/model, (b) the Company’s
execution of its new business strategy/model, (c) the state of the Company’s critical bottler relationships, (d) the
Company’s North American business, (e) the Company’s European operations, with a particular emphasis on
Germany, (f) the Company’s marketing and introduction of new products, particularly Coca-Cola C2, and
(g) the Company’s forecast for growth going forward. The plaintiffs claim that as a result of these allegedly false
and misleading statements, the price of the Company stock increased dramatically during the purported class
period. The amended and consolidated complaint also alleges that in September and November of 2004, the
Company and E. Neville Isdell acknowledged that the Company’s performance had been below expectations,
that various corrective actions were needed, that the Company was lowering its forecasts, and that there would
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