LensCrafters 2006 Annual Report Download - page 155

NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS |155 <
maximum credit of Euro 98.5 million (US$ 130.0 million). These lines of credit are renewable
annually, can be cancelled at short notice and have no commitment fees. At December 31, 2006,
there were no borrowings outstanding and there were Euro 29.0 million in aggregate face amount
of standby letters of credit outstanding under these lines of credit (see below).
The blended average interest rate on these lines of credit is approximately Libor plus 0.25%.
Outstanding standby letters of credit
AU.S. subsidiary has obtained various standby letters of credit from banks that aggregated Euro
48.0 million and Euro 36.1 million as of December 31, 2005 and 2006, respectively. Most of these
letters of credit are used for security in risk management contracts or as security on store leases.
Most contain evergreen clauses under which the letter is automatically renewed unless the bank is
notified not to renew.Substantially all the fees associated with maintaining the letters of credit fall
within the range of 60 to 80 basis points annually.
Litigation
Sunglass Hut shareholder lawsuit
In May and June 2001, certain former stockholders of Sunglass Hut International, Inc. (“SGHI”)
commenced actions in the U.S. District Court for the Eastern District of New York against the
Company and its acquisition subsidiary formed to acquire SGHI on behalf of a purported class of
former SGHI stockholders. These actions were subsequently consolidated into a single amended
consolidated class action complaint, which alleged, among other claims, that the defendants
violated certain provisions of U.S. securities laws and the rules thereunder, in connection with the
acquisition of SGHI in a tender offer and second-step merger.The plaintiffs’ principal claim was
that certain payments to James Hauslein, the former Chairman of SGHI, under a consulting, non-
disclosure and non-competition agreement (the “Agreement”) violated the “Best Price Rule”
promulgated by the U.S. Securities and Exchange Commission by resulting in a payment for Mr.
Hauslein’s SGHI shares and his support of the tender offer that was higher than the price paid to
SGHI’s shareholders in the tender offer. The plaintiffs also alleged that the Company and Mr.
Leonardo Del Vecchio, the Company’s Chairman, violated Section 10(b) of the Securities
Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. The plaintiffs sought, among other
remedies, the payment of such higher consideration to all tendering shareholders, other than
Luxottica Group S.p.A. and its affiliates.
The Company and the other defendants filed a motion to dismiss the complaint in its entirety,
which, on November 26, 2003, the Court granted in part and denied in part. The Court granted the
Company’s motion to dismiss plaintiffs’ claims under Section 10(b) and Rule 10b-5, but denied the
Company’s motion to dismiss plaintiffs’ Best Price Rule claim, as well as the claim that the
Company aided and abetted Mr. Hauslein’s breach of his fiduciary duties. In so ruling, the Court
noted that it was obligated, for the purpose of rendering its decision on the motion to dismiss, to
treat all of the plaintiffs’ allegations in the complaint as true. On June 8, 2004, the consolidated
complaint was further amended to add Mr. Leonardo Del Vecchio, the Company’s Chairman, as a
defendant to the aiding and abetting claim. Plaintiffs also added a new claim against Mr.Del
Vecchio under Section 20(a) of the Securities Exchange Act.
On August 31, 2005, the Company agreed with the plaintiffs, without acknowledging any