LensCrafters 2006 Annual Report Download - page 158

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>158 | ANNUAL REPORT 2006
litigation incurred for the year ended December 31, 2006 were approximately Euro 137,000. There
were no related amounts recorded as liabilities reflected in the consolidated balance sheet as of
December 31, 2006, as the liability was not reasonably estimable and probable.
Cole SEC investigation
Following Cole’s announcement in November 2002 of the restatement of Cole’s financial
statements, the Securities and Exchange Commission (“SEC”) began an investigation into Cole’s
previous accounting. The SEC subpoenaed various documents from Cole and deposed numerous
former officers, Directors and employees of Cole. During the course of this investigation, the SEC
staff had indicated that it intended to recommend that a civil enforcement action be commenced
against certain former officers and Directors of Cole but not against Cole. Cole was obligated to
advance reasonable attorneys’ fees incurred by current and former officers and Directors who
were involved in the SEC investigation subject to undertakings provided by such individuals. Cole
had insurance available with respect to a portion of these indemnification obligations. In March
2006, the SEC staff indicated that it had concluded its investigation and that, contrary to its earlier
indication, it would not be recommending that an enforcement action be commenced against
anyone in connection with the investigation. Costs associated with the Cole SEC investigation
incurred for the years ended December 31, 2004, 2005 and 2006, were approximately Euro
55,000, Euro 1,225,000 and Euro 325,000, respectively. There were no related amounts recorded
as liabilities reflected in the consolidated balance sheets as of December 31, 2004 and 2005, as
the liability was not reasonably estimable and probable.
RayBan Indian Holdings review by Supreme Court of India
On August 29, 2003, the Securities Appellate Tribunal (“SAT”) in India upheld the decision to
require a subsidiary of the Company to make a public offering to acquire up to an additional 20%
of the outstanding shares of RayBan Sun Optics India Ltd. On October 30, 2003, the Company
announced that it intended to comply with the SAT’s decision and that the Company, through its
subsidiary,RayBan Indian Holdings Inc., would launch a public offer to purchase an additional
20% of the outstanding shares of RayBan Sun Optics India Ltd. In accordance with applicable
Indian regulation, the Company placed in escrow with the manager of the offer Rs. 226 million
(Euro 3.8 million). On November 17, 2003, the Supreme Court of India stayed the SAT’s order and
directed that the matter be further reviewed at the end of January 2004, provided that the
Company issue a letter of credit in favor of the Indian securities regulatory agency within the
following four week period of Rs. 630.6 million (Euro 10.8 million). The Supreme Court of India
finally disposed of the appeal by an order dated December 12, 2006, directing the Company and
RayBan Indian Holdings Inc. to make a public offer within 45 days of the order, using April 28, 1999
as the reference date for calculating the offer price. The Supreme Court also directed that interest
be paid at the rate of 10% per annum for the period between August 27, 1999 and the closing date
to all persons who were shareholders of RayBan Sun Optics India Ltd. throughout such period.
The Company expects the aggregate cost of the offer to be approximately Euro 11.0 million,
including stipulated interest increments and assuming the offer is fully accepted. The offer is
expected to close during the second quarter 2007. Costs associated with the Supreme Court of
India review incurred for the years ended December 31, 2006 and 2005 were immaterial.
Cole shareholder class action lawsuit
On July 14, 2004, in Pfeiffer vs. Cole National Corp., et al., Civil Action no. 569-N, a shareholder of
Cole filed a shareholders’ class action complaint against Cole, its Directors and the Company in
the Delaware Chancery Court. The complaint alleged, among other things, that the individual