Lumber Liquidators 2008 Annual Report Download - page 29

with the terms of the Variable Plan, we determined and certified that 853,853 shares of common stock had vested
(the “Vested Shares”) and were exercisable under the Variable Plan. Pursuant to the terms of the Variable Plan,
the Founder had previously placed 1.5 million shares of common stock in escrow (the “Escrowed Shares”) for
purposes of satisfying his obligations thereunder, which we had generally guaranteed. We were not a party to the
escrow arrangement between the Founder and Kevin.
On or about May 29, 2008, Kevin filed an Amended Statement of Claim in the arbitration in which he
maintained that he was entitled to more than the Vested Shares. He asserted claims against the Founder and us
for breach of contract, fraud and a violation of the Massachusetts Weekly Wage Act (the “Wage Act”). He
sought transfer of the number of shares owed to him under the Variable Plan as well as treble damages,
attorney’s fees and costs under the Wage Act.
In November 2008, the parties completed the arbitration proceeding. Thereafter, in a ruling dated
December 1, 2008, the arbitrator determined that Kevin was entitled only to the Vested Shares and denied his
breach of contract, fraud and Wage Act claims against the Founder and us. The arbitrator ordered the escrow
agent to release the Escrowed Shares to the Founder and Kevin in amounts consistent with the arbitrator’s ruling.
The arbitrator did not award costs or attorney’s fees to any party. The Escrowed Shares were subsequently
released to Kevin and the Founder in accordance with the arbitrator’s award.
Vazilia Corporation
In July 2006, we entered into a purchase agreement with Vazilia Corporation (“Vazilia”) pursuant to which
we would purchase a total of approximately 27 million square feet of Vazilia’s assorted products over a four-year
period, with the unit prices set at the time a purchase order was created/accepted (the “Purchase Agreement”).
After entering into the Purchase Agreement, certain products ordered from Vazilia were not delivered and certain
products that were delivered did not meet the applicable specifications. As a result, we have purchased these or
similar products from other suppliers. We are not currently receiving product under the Purchase Agreement.
On or about October 3, 2008, Vazilia filed a demand for arbitration in which it alleges that we breached the
Purchase Agreement. Vazilia is seeking damages of approximately $1.6 million, plus costs of the arbitration
proceeding. In addition, Vazilia is requesting a declaration terminating the Purchase Agreement and awarding
liquidated damages provided thereunder.
In response to the demand for arbitration, we filed a counterclaim against Vazilia, which was subsequently
amended. We are seeking damages of approximately $1.5 million, plus interest, attorney’s fees and costs, as well
as a declaration that the Purchase Agreement is terminated. We deny the claims asserted by Vazilia and intend to
defend this matter and pursue our counterclaim vigorously. While there is a reasonable possibility that a material
loss may be incurred, we cannot estimate the loss, if any, therefore no provision for losses has been provided.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of our security holders during the fourth quarter of 2008.
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