LensCrafters 2004 Annual Report Download - page 112

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
111
2. RELATED PARTY
TRANSACTIONS
FIXED ASSETS
In January 2002, a subsidiary of Luxottica Group
acquired certain assets for Euro 28.5 million and
assumed a bank loan from “Partimmo S.A.S.”, a
company owned by the Company’s Chairman. The
assets acquired were a building, including all
improvements thereto, for a total cost of Euro 42.0
million. The Company recorded these assets at their
historic cost. The Company’s headquarters are
located in this building. The bank loan acquired had
an outstanding balance of Euro 20.6 million on such
date. In November 2004, the loan was fully repaid. In
connection with the acquisition of this building the
Company’s subsidiary entered into an agreement with
the Company’s Chairman who leases a portion of this
building for Euro 0.5 million annually. The expiration
date of this lease is 2010.
INVESTMENT
On December 31, 2001, a U.S. subsidiary of the
Company held 1,205,000 of the Company’s ordinary
shares, which had been previously purchased at a
cost of US$ 3.1 million (Euro 2.4 million at historical
exchange rates). These shares were sold during 2002
for proceeds of US$ 8.8 million (Euro 9.3 million). The
after-tax net gain of US$ 6.5 million (Euro 6.9 million)
was recorded as an increase to the Company’s
additional paid-in capital balance. Approximately 63%
of these shares were sold to a related party with an
after-tax net gain of US$ 4.3 million (Euro 4.4 million).
LICENSE AGREEMENT
The Company has a worldwide exclusive license
agreement to manufacture and distribute
ophthalmic products under the name of Brooks
Brothers. The Brooks Brothers tradename is owned
by Retail Brand Alliance, Inc., which is controlled by
a Director of the Company. The license agreement
expired on March 31, 2003 and was renewed in
January 2005. For the fiscal year 2004 conditions
were not changed and royalties paid to Retail Brand
Alliance, Inc. for such agreement were Euro 1.4
million, Euro 1.1 million and Euro 0.9 million in the
years ended December 31, 2002, 2003 and 2004,
respectively.
In July 2004, the Company signed a worldwide
exclusive license agreement to manufacture and
distribute ophthalmic products under the name of
Adrienne Vittadini. The Adrienne Vittadini tradename is
owned by Retail Brand Alliance, Inc., which is
controlled by a Director of the Company. The license
agreement expires on December 31, 2007. For the
year ended December 31, 2004, royalties paid to
Retail Brand Alliance, Inc. for such agreement were
Euro 0.1 million.
STOCK INCENTIVE PLAN
On September 14, 2004, the Company’s Chairman
and majority shareholder, Mr. Leonardo Del Vecchio,
had allocated shares held through La Leonardo
Finanziaria S.r.l., an Italian holding company of the
Del Vecchio family, representing 2.11% (or 9.6
million shares) of the Company’s currently
authorized and issued share capital, to a stock
option plan for top management of the Company.
The stock options to be issued under the stock
option plan vest upon meeting certain economic
objectives. As such, compensation expense will be
recorded for the options issued to management
under this plan based on the market value of the
underlying ordinary shares only when the number of
shares to be vested and issued is known.