7. Legal disputes

1.  The Claims of the following creditors have not been settled and are
    still pending (“Pending Claims”):

    Under the Plan, most Claims by creditors have been settled and the
    Company’s liabilities will be limited to the amount stated in the
    Plan approved by the Bankruptcy Court. However, certain Claims as
    summarised below have not been settled in respect of the amount of
    Claims and are still pending (“Pending Claims”), for which NSM may
    be financially liable.

    If the final decision of the official receiver or the Court results
    in a substantial increase in the amount of the Company’s
    indebtedness, the increase would have serious impact on its cash
    flow, its ability to service debts, its financial condition and the
    shareholders’ equity.

  The Company’s creditors were required to submit claims to the Official
  Receiver for outstanding debts on May 8, 2000. As of December 31,
  2005, total claims filed by the creditors against the Company amounted
  to Baht 434.99 million. The Company believes that these claims exceed
  the amounts rightly payable by the Company. The Company has,
  therefore, brought the dispute to the Rehabilitation Court for
  adjudication.

  The Company has, however, recorded liabilities totaling of Baht 362.75
  million for such claims equal to the amounts claimed by the creditors
  adjusted for the proportional rate approved in the rehabilitation
  plan. As a result, the recorded liability is Baht 72.24 million less
  than the amount claimed by the creditors to the Rehabilitation Court.
  However, such difference of liabilities will be subjected to the
  limitation provided under treatment of each creditor class in
  accordance with the approved rehabilitation plan.

  As of December 31, 2005, the matter has not been settled by the court
  and it is not possible to determine what adjustments, if any, would be
  required to be made by the Company when this matter is finally settled
  by the Court.

2.  Litigation issues

  There were six cases filed against NSM in the Civil Court of Southern
  Bangkok and two cases filed in the Intellectual Property and
  International Trade Court. The approximate amount claimed in those
  cases was Baht 53.37 million. Those court cases were subject to an
  automatic stay under Section 90/12 of the Bankruptcy Act. Creditors in
  the court cases applied for debt repayment in the rehabilitation
  process of NSM and were classified as Class 13 Creditors.

A group of investors who purchased the Senior Notes, Senior Subordinated
Notes and Debentures have filed lawsuits against the Company’s
subsidiaries and several of the underwriters of the Company’s Notes in
courts in the US. The Company has provided guarantee for the Senior
Notes, Senior Subordinated Notes and Debentures. The Company’s
subsidiaries have decided not to defend themselves against these claims.

A default judgment was issued against the Company’s subsidiaries by a US
court in one such case. The plaintiff in this case is seeking damages of
approximately US$ 42.10 million. The US court has not assessed the value
of the claim against the Company’s subsidiaries and such value cannot be
determined at this time. Also, the outcome of the case against the
Company’s advisers is uncertain, and the amount of any potential related
indemnification claims cannot be determined. Therefore, the Company has
established no provision for these potential liabilities. Currently, the
Company is not aware of any change in position in connection with the
aforesaid case.

  An insurance company filed a claim against the Company through the
  South Bangkok Civil Court in respect of unpaid insurance expenses for
  the year 2001 in the amount of Baht 5.43 million. The Company’s lawyer
  held a brief to such Court that the Company is in the process of
  restructuring and the Company was watched over in case of any claim
  which had occurred before the Court approved date without the approval
  of the Central Bankruptcy Court. The said expenses had occurred before
  the Central Bankruptcy Court approved the plan and the said company
  sued the Company without the Central Bankruptcy Court’s permission.
  The claim is, therefore, prohibited according to the Bankruptcy Act.

  The South Bangkok Civil Court ordered to temporary dispose of the case
  and passed the case to the President of the Supreme Court to consider
  whether the case was under the jurisdiction of the South Bangkok Civil
  Court. On September 13, 2004, the President of the Supreme Court
  considered that this case was under the jurisdiction of the South
  Bangkok Civil Court. Presently, the aforesaid insurance company had
  withdrawn such case on March 4, 2005.

  Several former employees have filed lawsuits against the Company
  alleging that they were wrongfully terminated in violation of their
  employment agreements and claiming damages of approximately Baht 53.32
  million which is in part of Central Bankruptcy Court. The Company is
  defending itself against these claims and believes it will prevail.
  Therefore, no provision has been made for those claims.

  Several lawsuits have been filed against the Company by vendors
  seeking payment of overdue amounts totaling Baht 54.25 million which
  is in part of Central Bankruptcy Court. This amount is included in the
  Company’s accounts payable. Additional lawsuits have been filed by
  vendors seeking Baht 0.54 million for interest on late payments and
  reimbursement of costs associated with the termination of a contract
  by the Company. Further, a suit has been brought against the Company
  by an insurance company seeking Baht 16.46 million in compensation for
  damage to equipment owned by a third party insured.

  These cases are being tried in court and the Company is defending
  itself against these claims. The Company believes it will prevail in
  these cases, therefore no provision has been established for these
  claims. All litigation filed against the Company in Thai courts has
  been suspended pursuant to the automatic stay provisions of Thailand’s
  bankruptcy law.

  During 2005, the Central Bankruptcy Court passed a final order in
  respect of 3 employee creditors, referred to above, who had claimed a
  total of Baht 36.03 million from the Company. These claims were
  ordered to be settled at Baht 17.89 million.

  The Company accounted for these claims in accordance with the Court
  order and the Rehabilitation Plan at 23% of the principal claim amount
  of Baht 4.11 million, out of which Baht 100,000 for each creditors has
  already been paid in 2005.

3.  Central Intellectual Property and International Trade Court

  Maharaj Planner Company, Limited, in the capacity of the planner of
  the Company, is the plaintiff who has sued a domestic financial
  institution and a foreign financial institution (collectively called
  "Defendant"), in the Central Intellectual Property and International
  Trade Court according to the Black Case No.Kor.Kaw. 5/2548 dated
  January 21, 2005, in respect of a letter of credit. The defendant has
  committed an act of breach of conditions under the letter of credit,
  which caused damage to the Company.  The defendant had made payment to
  a foreign seller by a letter of credit covering the cost of goods
  amounting to US$ 4.92 million (equivalent to Baht 201.58 million)
  without delaying payment till the fulfillment of conditions under the
  letter of credit as instructed by the Company. The defendant had
  deducted the said sum from the Company's account.  The Company has not
  yet received the said goods. 

  Therefore, the Company has sued the defendant for damages, including
  interest cost and other estimated damages, amounting to Baht 8,593.72
  million. Currently, the case is still under the consideration of the
  court. As at December 31, 2005, the Company accounted for the amount
  deducted from the Company’s account by the Defendant as a part of
  “Advance to Supplier” and classified as “Non-Current Assets” in the
  balance sheets amounting to Baht 201.58 million.