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LAZARE KAPLAN ENTERS INTO SETTLEMENT AGREEMENTS WITH INSURANCE COMPANIES

Insurance Agreement

LAZARE KAPLAN ENTERS INTO SETTLEMENT AGREEMENTS WITH INSURANCE COMPANIES | Document Parties: LAZARE KAPLAN INTERNATIONAL INC You are currently viewing:
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LAZARE KAPLAN INTERNATIONAL INC

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Title: LAZARE KAPLAN ENTERS INTO SETTLEMENT AGREEMENTS WITH INSURANCE COMPANIES
Date: 7/6/2011
Industry: Recreational Products     Sector: Consumer Cyclical

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EXHIBIT 99.1

 

LAZARE KAPLAN ENTERS INTO SETTLEMENT AGREEMENTS WITH INSURANCE COMPANIES

 

New York, New York - July 6, 2011 - Lazare Kaplan International Inc. (LKII.PK) (the “Company”) today announced that in connection with its efforts to resolve the Material Uncertainties, described below, which have  prevented it from timely filing its periodic reports under the Securities Exchange Act of 1934, on July 1, 2011, the Company and certain of its affiliates entered into a Confidential U.S. Release and Settlement Agreement with the underwriters (the “U.S. Underwriters”) of their United States “All Risks” insurance policies, and a Confidential U.K. Release and Settlement Agreement with the underwriters of their United Kingdom “All Risks” insurance policies. Pursuant to the Release and Settlement Agreements, the Company is to be paid $32,000,000, in addition to $28 million previously paid by the U.S. Underwriters pursuant to an interim payment agreement (i.e., $60 million total), to settle its claims under the policies, dismiss all pending litigation and execute mutual releases. The Company retains all of its rights to pursue recovery of its assets against third parties.

 

As previously disclosed by the Company in its Form 8-K filed with the Securities and Exchange Commission on April 14, 2011, among other public filings, the Company has been unable to resolve a material uncertainty concerning (a) the collectability and recovery of certain assets, and (b) the Company’s potential obligations under certain lines of credit and a guaranty (all of which, the “Material Uncertainties”). As the Company has been unable to assess the potential effect the ultimate resolution of these matters will have on the financial position and results of operation of the Company, the Company had been unable to finalize its financial statements for any of the fiscal quarters ended February 28, 2011, November 30, 2010, August 31, 2010, February 28, 2010, November 30, 2009 or August 31, 2009, or file its Form 10-Q for any of those periods. Additionally, for the same reasons, the Company has been unable to finalize its audited financial statements for the fiscal years ended May 31, 2010 and May 31, 2009 or file its Form 10-K for either of those periods.

 

In an effort to resolve the Material Uncertainties, the Company, among other things:

 

·  

entered into discussions with various financial institutions related to these matters regarding resolution of the Company’s potential claims and repayment of amounts which were asserted as being owed by the Company to these institutions;

 

·  

pursued recovery of its assets through a series of actions, including litigation in the courts of Belgium; and

 

·  

 filed claims for indemnification under the U.S. insurance policies and the U.K. insurance policies.

 

In furtherance of the foregoing, the Company has taken the following steps and the following events have occurred.

 

 

 


 

 

Insurance

 

Effective December 2009, the Company entered into an interim payment agreement with the U.S. Underwriters pursuant to which the Company received a non-refundable payment of $28 million (the “Interim Payment”), and the U.S. Underwriters agreed to reimburse certain costs incurred by the Company in connection with the investigation of its claims. In addition, the U.S. Underwriters agreed to provide the Company with a coverage opinion regarding all claims made under the U.S. insurance policies by May 3, 2010.

 

On April 30 and May 3, 2010, the U.K. Underwriters and the U.S. Underwriters, respectively, notified the Company that they were denying coverage of the Company’s claims. The U.K. Underwriters further advised the Company that they had initiated litigation in the courts of England for a declaratory judgment confirming that the Company’s losses were not covered under the U.K. insurance policies. The Company answered by asserting various counter claims and asking that coverage for the Company’s claimed losses be confirmed by the court.

 

On May 17, 2010, the Company filed suit in the Federal District Court of New York asserting claims for, among other things, the non-payment of covered losses under the U.S. insurance policies, unpaid sue and labor costs and consequential damages.

 

On July 1, 2011, the Company entered into the Release and Settlement Agreements, as described above, pursuant to which, among other things, the Company will be paid an additional $32 million and, together with the Interim Payment, an aggregate of $60 million.

 

Settlement With Certain Financial Institutions

 

On October 26, 2010, the Company and its affiliates, Lazare Kaplan Japan Inc. (“LK Japan”), Lazare Kaplan Europe Inc. (“LK Europe”) and Lazare Kaplan Africa Inc. (“LK Africa” and, collectively with LK Japan and LK Euro


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