Cutter & Buck Inc. has reached an agreement with plaintiffs to settle the shareholder lawsuits relating to the company’s restatement of its financial results for fiscal years 2000 and 2001.
Cutter & Buck agreed to pay $4 million in cash, plus up to an additional $3 million based on a formula applied to any recovery of funds from its ongoing suit against Genesis Insurance Company. Cutter & Buck also agreed to certain corporate governance policies and practices, including periodic reviews of compliance with shipping procedures and meetings with employees to discuss ethical expectations. These practices have already been instituted. The settlement does not reflect any admission of liability by the company or its current or former directors or officers. The settlement is subject to final court approval.
“This settlement puts all the shareholder litigation behind us,” said Cutter & Buck’s Chief Executive Officer, Fran Conley. “By resolving these legacy issues, we can eliminate distraction and uncertainty and continue to rebuild shareholder confidence in Cutter & Buck.”
The settlement agreement resolves the two sets of lawsuits that the company has faced: a consolidated securities class-action lawsuit in federal court, whose lead plaintiff is the shareholder Tilson Growth Fund with the firm of Milberg Weiss as attorneys; and a derivative lawsuit in state court, whose plaintiff is shareholder Haimowitz with the San Diego firm of Robbins Umeda & Fink, LLP as attorneys.
Cutter & Buck will continue to pursue its lawsuit against Genesis Insurance Company, which carried the company’s directors and officers liability insurance at the time of the restatement. Genesis has attempted to rescind the company’s directors and officers liability insurance policies. The company believes that Genesis is not entitled to rescind the policies and is seeking to establish coverage.
Cutter & Buck expects to record a pretax charge in the fourth quarter of fiscal 2003 of $4 million related to the settlement. The charge may be adjusted in future quarters if Cutter & Buck is able to recover all or any portion of this settlement from Genesis Insurance Company.
