IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN RE J.CREW GROUP, INC.
SHAREHOLDERS LITIGATION
C.A. No. 6043-CS
STIPULATION AND AGREEMENT OF COMPROMISE AND SETTLEMENT
This Stipulation and Agreement of Compromise and Settlement (the “Stipulation”), dated
August 30, 2011, which is entered into by and among (i) New Orleans Employees’ Retirement
System, Local 542 International Union of Operating Engineers Pension Fund of Eastern
Pennsylvania and Delaware, City of Orlando Police Pension Fund, Southeastern Pennsylvania
Transportation Authority, City of Orlando Firefighters’ Pension Fund and Martin Vogel
(collectively, “Lead Plaintiffs”), on their own behalf and on behalf of the Settlement Class (as
defined herein); and (ii) J.Crew Group, Inc. (hereafter, “J.Crew” or the “Company”), Millard
Drexler (“Drexler”), James Coulter (“Coulter”), David House (“House”), Heather Reisman
(“Reisman”), Stuart Sloan (“Sloan”), Mary Ann Casati (“Casati”), Josh Weston (“Weston”),
Steven Grand-Jean (“Grand-Jean”), Stephen Squeri (“Squeri”), James Scully (“Scully”), TPG
Capital, L.P., TPG Partners, VI, L.P. (together with TPG Capital, L.P., “TPG”), Leonard Green &
Partners, L.P. (“Leonard Green”), Chinos Holdings, Inc. (“Chinos Holdings”) and Chinos
Acquisition Corporation (“Chinos Acquisition”) (collectively, “Defendants”), by and through their
undersigned attorneys, states all of the terms of the settlement and resolution of this matter and is
intended by the Parties to fully and finally release, resolve, remise, compromise, settle and
discharge the Released Plaintiffs’ Claims (as defined herein) against the Released Defendant
Parties (as defined herein) and the Released Defendants’ Claims (as defined herein) against the
Released Plaintiff Parties (as defined herein), subject to the approval of the Court of Chancery of
the State of Delaware (the “Court”). All undefined terms below with initial capitalization shall
have the meanings ascribed to them in paragraph 1 below.
WHEREAS:
A.
On August 23, 2010, Drexler had an introductory meeting with a representative of
Leonard Green.
B.
On September 1, 2010, Drexler had a dinner meeting with Coulter at which, among
other things, Coulter raised with Drexler TPG’s potential interest in exploring an acquisition of the
Company.
C.
Between October 7, 2010 and October 11, 2010, Drexler contacted each other
member of the board of directors of J.Crew (the “J.Crew Board”) to inform them of TPG’s
potential interest in a transaction involving a sale of the Company. During the course of these
conversations, Drexler informed members of the J.Crew Board that he might be interested in
participating with TPG in a transaction of this nature. Coulter also called each other member of
the J.Crew Board to confirm TPG’s potential interest in a transaction involving the Company.
D.
On October 15, 2010 and October 22, 2010, the J.Crew Board formed and
mandated a special committee comprised of Casati, House, Squeri and Weston (the “Special
Committee”) to consider strategic alternatives available to the Company and to respond to and
negotiate the terms of any potential strategic proposal.
E.
Following extensive negotiations between November 1, 2010, and November 22,
2010, the Special Committee and the Buyout Group reached an agreement as to price and other
terms of the Merger (defined herein), which terms were approved by the J.Crew Board.
2
F.
On November 23, 2010, J.Crew and the Buyout Group entered into an agreement
and plan of merger (the “Merger Agreement”) whereby the Buyout Group would acquire J.Crew
for $43.50 per share in cash (the “Merger”).
G.
Between November 24, 2010, and December 8, 2010, the following actions were
commenced before the Court on behalf of shareholders of J.Crew, challenging the Merger as a
product of breaches of fiduciary duties by the J.Crew Board (the “Actions”):
H.
i.
New Orleans Employees’ Retirement System v. J.Crew Group, Inc.,
et al., C.A. No. 6016-VCS;
ii.
Local 542 International Union of Operating Engineers Pension
Fund of Eastern Pennsylvania and Delaware v. J.Crew Group, Inc.,
et al., C.A. No. 6035-VCS;
iii.
City of Orlando Police Pension Fund v. J.Crew Group, Inc., et al.,
C.A. No. 6038-VCS;
iv.
Southeastern Pennsylvania Transportation Authority, v. Mary Ann Casati, et
al., C.A. No. 6043-VCS;
v.
Martin Vogel v. J.Crew Group, Inc., et al., C.A. No. 6045-VCS;
vi.
City Of Orlando Firefighters Pension Fund v. Millard S. Drexler, et al.,
C.A. No. 6052-VCS; and
vii.
Westco Fruit & Nuts Inc. v. J.Crew Group Inc., et al., C.A. No. 6057-VCS.
On December 6, 2010, J.Crew filed a Schedule 14A Preliminary Proxy Statement
and Schedule 13E-3 (together, the “Preliminary Proxy Statement”) with the United States
Securities and Exchange Commission (the “SEC”) regarding the Merger.
I.
On December 10, 2010, Lead Plaintiffs filed a Stipulation and [Proposed] Order for
Consolidation and Appointment of Co-Lead Plaintiffs, Co-Lead Counsel and Plaintiffs’ Executive
Committee, which sought the consolidation of the Actions into the above-captioned action styled
In re J.Crew Group, Inc. Shareholders Litigation, C.A. No. 6043-VCS (the “Action”), the
appointment of Lead Plaintiffs as Co-Lead Plaintiffs, the appointment of Bernstein Litowitz Berger
3
& Grossmann LLP, Grant & Eisenhofer, P.A., Labaton Sucharow LLP, and Chimicles & Tikellis
LLP as Co-Lead Counsel, and the appointment of Abraham Fruchter & Twersky, LLP, as
Chairman of an Executive Committee also consisting of the firms of Stull, Stull & Brody and
Rigrodsky & Long P.A. (the “Consolidation Motion”).
J.
By Order dated December 14, 2010, the Court granted the Lead Plaintiffs’
Consolidation Motion.
K.
On December 17, 2010, the parties to the Action filed a [Proposed] Interim Order
Regarding Case Schedule, setting forth a proposed schedule for expedited discovery and, if
necessary, briefing and a hearing on Lead Plaintiffs’ motion for a preliminary injunction.
L.
On December 22, 2010, the Court granted the Interim Order Regarding Case
Schedule, ordering the parties before it to engage in expedited discovery, and scheduling a hearing
on Lead Plaintiffs’ motion for a preliminary injunction, if necessary, for February 24, 2011.
M.
Between December 17, 2010 and January 17, 2011, the Parties engaged in
expedited discovery including the production of over 72,000 pages of documents by Defendants
and certain third parties. In addition, the Parties negotiated, and the Court entered, a Stipulation
and Order Governing the Production and Exchange of Confidential Material on December 21,
2010, and a Stipulation and Order regarding Expert Discovery on January 11, 2011. The Parties
began scheduling approximately a dozen depositions, which were to commence on January 21,
2011.
N.
On December 29, 2010, J.Crew filed an amendment to the Preliminary Proxy
Statement.
4
O.
On January 14, 2011, Lead Plaintiffs filed their Verified Consolidated Amended
Class Action Complaint (the “Complaint”) asserting additional allegations, including that the
Preliminary Proxy Statement was materially false or misleading.
P.
Following extensive, arm’s-length negotiations, the Parties reached an agreement in
principle to settle the Action, memorialized in a Memorandum of Understanding (“MOU”) on
January 16, 2011.
Q.
On January 18, 2011, the J.Crew Board approved an amendment to the Merger
Agreement implementing certain terms of the MOU (the “Merger Agreement Amendment”).
J.Crew and the Buyout Group thereafter executed the Merger Agreement Amendment (the Merger
Agreement, as amended by the Merger Agreement Amendment, referred to herein as the
“Amended Merger Agreement”).
The Merger Agreement Amendment is attached hereto as
Appendix 1.
R.
On January 18, 2011, the Company issued a press release publicly disclosing the
terms of the MOU and the results of the go-shop process through January 18, 2011, and also filed a
Form 8-K describing the MOU in greater detail, including by attaching the Merger Agreement
Amendment as an exhibit thereto.
S.
On January 25, 2011, J.Crew filed a Definitive Proxy Statement (the “Definitive
Proxy Statement”) and an amended Schedule 13E-3 with the SEC regarding the Merger.
T.
On January 31, 2011, Plaintiffs’ Counsel informed the Court that they were “no
longer in a position to support or pursue the settlement.” Plaintiffs’ Counsel informed the Court
that they believed that by issuing the press release on January 18, 2011 and setting a record date
for the Merger and mailing the Definitive Proxy Statement prior to the expiration of the extended
5
go-shop period, Defendants had undermined key intended benefits of the MOU and breached the
terms thereof.
U.
Defendants informed the Court that they disagreed with Plaintiffs’ Counsel’s claims
of breach and intended to act to enforce the terms of the proposed settlement as memorialized in
the MOU.
V.
On March 1, 2011, J.Crew stockholders voted to adopt the Amended Merger
Agreement. Of the 63,907,720 shares of the Company’s outstanding common stock entitled to
vote, the Merger was approved by holders of 41,058,215 shares (64.2%). In addition, of the
59,234,720 outstanding shares of the Company’s outstanding common stock not owned by J.Crew
officers or directors or their affiliates, the Merger was approved by holders of approximately
36,385,251 shares (61.4%), satisfying the majority of the unaffiliated stockholder voting condition
described herein.
W.
On March 7, 2011, the Merger closed.
X.
On May 12, 2011, J.Crew, TPG and Leonard Green filed an action captioned
J.Crew Group, Inc., et al. v. New Orleans Employees’ Retirement System, et al., C.A. No. 6479
(the “MOU Enforcement Action”), seeking specific enforcement of the parties’ agreement to settle
the Action as memorialized in the MOU (or, only in the alternative, money damages).
Y.
On June 9, 2011, the Court entered a Scheduling Order governing the MOU
Enforcement Action, which called for a trial on the merits on October 27-28, 2011.
Z.
On July 10, 2011, Lead Plaintiffs filed a motion to dismiss the MOU Enforcement
Action.
6
AA.
Between late July 2011 and August 30, the Parties engaged in extensive, arm’s-
length negotiations and reached an agreement to finally and fully settle the Action, which is
memorialized in this Stipulation.
BB.
The Parties have engaged in confirmatory discovery into the fairness,
reasonableness and adequacy of the Settlement, including production of documents and taking the
deposition of Andrew Bednar, financial advisor to the Special Committee.
CC.
The entry by Lead Plaintiffs and Defendants into this Stipulation is not an
admission as to the merit or lack of merit of any claims or defenses asserted in the Action or the
MOU Enforcement Action.
DD.
Plaintiffs’ Counsel have conducted an investigation and pursued discovery relating
to the claims and the underlying events and transactions alleged in the Action. Plaintiffs’ Counsel
have analyzed the evidence adduced during their investigation and through discovery, and have
researched the applicable law with respect to Lead Plaintiffs and the Settlement Class.
In
negotiating and evaluating the terms of this Stipulation, Plaintiffs’ Counsel considered the
significant legal and factual defenses to Lead Plaintiffs’ claims. Plaintiffs’ Counsel have received
sufficient information to evaluate the merits of this proposed Settlement.
Based upon their
evaluation, Plaintiffs’ Counsel have determined that the Settlement set forth in this Stipulation is
fair, reasonable and adequate and in the best interests of all Class Members, and that it confers
substantial benefits upon the Class Members.
EE.
Defendants deny any and all allegations of wrongdoing, fault, liability or damage to
Lead Plaintiffs in the Action or to other Class Members; deny that they engaged in, committed or
aided or abetted the commission of any breach of duty, wrongdoing or violation of law; deny that
Lead Plaintiffs or any of the other Class Members suffered any damage whatsoever; deny that they
7
acted improperly in any way; believe that they acted properly at all times; maintain that they
complied with their fiduciary duties; maintain that they have complied with federal and state
securities laws; and maintain that they have committed no disclosure violations or any other breach
of duty or wrongdoing whatsoever in connection with the Merger or the MOU.
FF.
Defendants enter into this Stipulation solely to eliminate the uncertainties, burden
and expense of further litigation. Nothing in this Stipulation shall be construed as any admission
by any of the Defendants of wrongdoing, fault, liability, or damages whatsoever.
NOW, THEREFORE, IT IS HEREBY STIPULATED, CONSENTED TO AND
AGREED, by Lead Plaintiffs, for themselves and on behalf of the Settlement Class, and
Defendants that, subject to the approval of the Court and pursuant to Delaware Court of Chancery
Rule 23 and the other conditions set forth in Clause F, for the good and valuable consideration set
forth herein and conferred on Lead Plaintiffs and the Settlement Class, the Action shall be finally
and fully settled, compromised and dismissed, on the merits and with prejudice, and that the
Released Plaintiffs’ Claims shall be finally and fully compromised, settled, released, discharged
and dismissed with prejudice as against the Released Defendant Parties, and that the Released
Defendants’ Claims shall be finally and fully compromised, settled, released, discharged and
dismissed with prejudice as against the Released Plaintiff Parties, in the manner set forth herein.
A.
Definitions
1.
In addition to the terms defined above, the following capitalized terms, used in this
Stipulation, shall have the meanings specified below:
(a)
“Alternative Transaction” means any actual, contemplated or proposed
(i) leveraged buyout, (ii) stock buyback, (iii) recapitalization, (iv) acquisition, (v) merger,
(vi) consolidation, (vii) tender offer, (viii) change in control, (ix) dividend or (x) other strategic
alternative (other than the Merger) involving J.Crew or its subsidiaries.
8
(b)
“Buyout Group” means Chinos Holdings, Chinos Acquisition, TPG and
Leonard Green.
(c)
“Claims” mean any and all manner of claims, demands, rights, liabilities,
losses, obligations, duties, damages, costs, debts, expenses, interest, penalties, fines, sanctions,
fees, attorneys’ fees, expert or consulting fees, actions, potential actions, causes of action, suits,
agreements, judgments, decrees, matters, issues and controversies of any kind, nature or
description whatsoever, whether disclosed or undisclosed, accrued or unaccrued, apparent or not
apparent, foreseen or unforeseen, matured or not matured, suspected or unsuspected, liquidated or
not liquidated, fixed or contingent, which now exist, or heretofore or previously existed, or may
hereafter exist, including known claims and Unknown Claims, whether direct, derivative,
individual, class, representative, legal, equitable or of any other type, or in any other capacity,
whether based on state, local, foreign, federal, statutory, regulatory, common or other law or rule
(including but not limited to any claims under federal or state securities law, federal or state
antitrust law, or under state disclosure law or any claims that could be asserted derivatively on
behalf of the Company).
(d)
“Closing” means the consummation of the Merger on March 7, 2011,
pursuant to which J.Crew merged with and into Chinos Acquisition Corporation, a Delaware
corporation (“Merger Sub”) and a wholly owned indirect subsidiary of Chinos Holdings, which is
controlled by affiliates of TPG and Leonard Green.
(e)
“Defendants’ Counsel” means the law firms of Abrams & Bayliss LLP;
Cleary Gottlieb Steen & Hamilton LLP; Cravath, Swaine & Moore LLP; Latham & Watkins LLP;
Morris, Nichols, Arsht & Tunnell LLP; Potter Anderson & Corroon LLP; Richards, Layton &
Finger LLP; Ropes & Gray LLP; and Willkie Farr & Gallagher LLP.
9
(f)
“Effective Date” means the first business day following the date the
Judgment becomes Final.
(g)
“Final,” when referring to the Judgment, means entry of the Judgment, the
expiration of any time for appeal or review of the Judgment, or, if any appeal is filed and not
dismissed or withdrawn, after the Judgment is upheld on appeal in all material respects and is no
longer subject to review upon appeal or other review, and the time for any petition for reargument,
appeal or review of the Judgment or any order affirming the Judgment has expired; or, in the event
that the Court enters a judgment in a form other than the form attached hereto as Exhibit D
(“Alternative Judgment”) and none of the Parties hereto elects to terminate this Stipulation, the
expiration of any time for appeal or review of the Alternative Judgment, or if an appeal is filed and
not dismissed or withdrawn, after the Alternative Judgment is upheld on appeal in all material
respects and is no longer subject to review upon appeal or other review, and the time for any
petition for reargument, appeal or review of the Alternative Judgment or any order affirming the
Alternative Judgment has expired; provided, however, that any disputes or appeals relating solely
to the amount, payment or allocation of attorneys’ fees and expenses shall have no effect on
finality for purposes of determining the date on which the Judgment or an Alternative Judgment
becomes Final and shall not otherwise prevent, limit or otherwise affect the Judgment or an
Alternative Judgment or prevent, limit, delay or hinder entry of the Judgment or an Alternative
Judgment.
(h)
“Immediate Family” means an individual’s spouse, parents, siblings,
children, grandparents, grandchildren; the spouses of his or her parents, siblings and children; and
the parents and siblings of his or her spouse, and includes step and adoptive relationships. In this
paragraph, “spouse” shall mean a husband, a wife, or a partner in a state-recognized domestic
10
partnership or civil union.
(i)
“Individual Defendants” means Drexler, Coulter, House, Reisman, Sloan
Casati, Weston, Grand-Jean, Squeri, and Scully.
(j)
“Judgment” means the Order and Final Judgment to be entered in the Action
substantially in the form attached as Exhibit D hereto.
(k)
“Lead Counsel” means the law firms of Bernstein Litowitz Berger &
Grossmann LLP; Grant & Eisenhofer, P.A.; Labaton Sucharow LLP; and Chimicles & Tikellis
LLP.
(l)
“MD Trusts” means The Drexler Family Revocable Trust, The Millard S.
Drexler 2009 Grantor Retained Annuity Trust #1 and The Millard S. Drexler 2009 Grantor
Retained Annuity Trust #2.
(m)
“Party” means any one of, and “Parties” means all of, the parties to this
Stipulation, namely, Defendants and Lead Plaintiffs, on behalf of themselves and the Settlement
Class.
(n)
“Plaintiffs’ Counsel” means Lead Counsel and the Plaintiffs’ Executive
(o)
“Plaintiffs’ Executive Committee” means the law firms of Stull, Stull &
Committee.
Brody; Abraham Fruchter & Twersky, LLP; and Rigrodsky & Long P.A.
(p)
“Released Defendant Parties” means (i) any and all of the Defendants; (ii)
the MD Trusts; (iii) the Defendants’ respective past or present Immediate Family members, or
direct or indirect affiliates, associates, members, partners, partnerships, investment funds,
subsidiaries, parents, predecessors, successors, officers (including, those executive officers of
J.Crew listed in paragraphs 100 and 101 of the Complaint), directors, employees, agents, advisors,
11
financial or investment advisors, insurers, and attorneys (including Defendants’ Counsel); (iv) any
person, firm, trust, corporation, officer, director or other individual or entity in which any of the
Defendants or their respective past or present Immediate Family Members, direct or indirect
affiliates, partnerships, investment funds, predecessors, successors, officers, directors or employees
has a financial interest; (v) the Buyout Group and each and every one of their respective affiliated
investment funds, investment vehicles, investment advisers, management companies, partners,
general partners, managing members, members, limited partners, trusts, principals, investment
professionals, directors, officers, employees and affiliates; and (vi) the legal representatives, heirs,
executors, administrators, predecessors, successors, predecessors-in-interest, successors-in-interest
and assigns of any of the foregoing.
(q)
“Released Defendants’ Claims” means any Claims that have been or could
have been asserted in the Action, the MOU Enforcement Action, or in any court, tribunal, forum or
proceeding by Defendants or any of them or their respective successors and assigns against any of
the Released Plaintiff Parties, which arise out of or relate in any way to the institution, prosecution,
settlement or dismissal of the Action or the MOU Enforcement Action; provided, however, that the
Released Defendants’ Claims shall not include claims to enforce the Stipulation.
(r)
“Released Plaintiff Parties” means Lead Plaintiffs, all other Class Members,
and their respective counsel (including Plaintiffs’ Counsel).
(s)
“Released Plaintiffs’ Claims” means any and all Claims which are based
upon, arise out of, or involve or previously were based upon, arose out of or involved, directly or
indirectly, any of the actual, alleged or attempted actions, transactions, occurrences, statements,
representations, misrepresentations, omissions, allegations, facts, practices, events, claims or any
other matters, things or causes whatsoever, or any series thereof, that (i) were alleged, asserted, set
12
forth, or claimed in the Action or the Complaint against the Released Defendant Parties; or
(ii) could have been alleged, asserted, set forth or claimed in the Action, in the Complaint or in any
other court, tribunal, forum or proceeding by any or all Lead Plaintiffs or any or all of the other
Class Members, and which arise out of the Class Members’ J.Crew stockholdings or the Class
Members’ status as J.Crew stockholders during the Settlement Class Period, including any and all
Claims which are based upon, arise out of, relate in any way to, or involve, directly or indirectly,
(a) the Merger or any element, term, condition or circumstance of the Merger, (b) any actions,
deliberations, negotiations, discussions, offers, inquiries, solicitations of interest, indications of
interest, bids, due diligence or any act or omission in connection with the review of strategic
alternatives available to J.Crew, the Merger or any Alternative Transaction, including the process
of deliberation or negotiation by J.Crew, the Special Committee, TPG, Drexler, the MD Trusts,
Leonard Green, Parent, and/or Merger Sub and any of their respective officers, directors or
advisors, (c) the consideration received by Class Members in connection with the Merger, (d) the
Preliminary Proxy Statement and any amendments thereto, the Definitive Proxy Statement and any
amendments thereto, the Schedule 13e-3 and any amendments thereto, or any other disclosures,
SEC filings, public filings, periodic reports, press releases, proxy statements or other statements
issued, made available, or filed or otherwise disclosed or communicated relating, directly or
indirectly, to the Merger, including claims under any and all federal or state securities laws or
federal or state antitrust laws (including those within the exclusive jurisdiction of the federal
courts), (e) any employment, compensation, equity rollover, voting or support agreement between
Drexler, employees of J.Crew or their respective affiliates, on the one hand, and Chinos Holdings,
Chinos Acquisition or the Buyout Group or any of their respective affiliates, on the other hand, (f)
the fiduciary duties or obligations of the Released Defendant Parties in connection with the review
13
of strategic alternatives available to J.Crew, the Merger, or any Alternative Transaction, (g) the
vesting of stock options owned by any or all Released Defendant Parties in connection with the
Merger, or the granting of stock options or restricted stock of J.Crew to any or all Released
Defendant Parties; (h) the March 1 vote of J.Crew stockholders approving the Merger; (i) proxy
solicitation efforts in connection with the March 1 vote of the J.Crew stockholders on the Merger;
(j) the go shop, including the extended go shop; (k) the Merger Agreement Amendment; (l) the
Amended Merger Agreement; (m) the MOU; (n) the January 18, 2011 press release issued by
J.Crew announcing the MOU and the extension of the Go Shop period; (o) the setting of the record
date for the Merger and the mailing of the Definitive Proxy Statement; or (p) the fees, expenses or
costs incurred in prosecuting, defending, or settling the Action, except to the extent of an
attorneys’ fees award made pursuant to Clause G hereof; provided, however, that the Released
Plaintiffs’ Claims shall not include (1) the right to enforce the Stipulation; or (2) any claims solely
for statutory appraisal with respect to the Merger pursuant to Section 262 of the Delaware General
Corporation Law by J.Crew shareholders who properly perfected such claims for appraisal and do
not otherwise waive their appraisal rights.
(t)
“Settlement” means the settlement contemplated by this Stipulation.
(u)
“Settlement Class” means any and all J.Crew stockholders who were record
holders or beneficial owners of J.Crew common stock at any time between and including August 1,
2010 and the Closing of the Merger (regardless of the date of purchase of J.Crew stock), and any
person or entity acting for or on behalf of, or claiming under, any of them, and each of them, but
excluding Defendants and the MD Trusts (and their trustees in their capacities as such); the
Immediate Family members of the Individual Defendants; the parents, subsidiaries and affiliates of
J.Crew, TPG, Leonard Green, Chinos Holdings, Chinos Acquisition and each of their current or
14
former directors, executive officers1, partners and members; any person, firm, trust, corporation or
other entity in which any Defendant or the MD Trusts has, or had during the Settlement Class
Period, a controlling interest; and the legal representatives, heirs, executors, administrators,
predecessors, successors, predecessors-in-interest, successors-in-interest and assigns of any such
excluded party.
(v)
“Settlement Class Member” or “Class Member” means a member of the
Settlement Class.
(w)
“Settlement Class Period” means the period between and including August
1, 2010 and the Closing of the Merger.
(x)
“Settlement Hearing” means the hearing to be held by the Court to
determine whether to certify the Settlement Class as a non opt-out class pursuant to Court of
Chancery Rules 23(a), 23(b)(1) and 23(b)(2); whether the proposed Settlement should be approved
as fair, reasonable and adequate; whether Lead Plaintiffs and Lead Counsel have adequately
represented the Class; whether any objections to the Settlement should be overruled; whether the
Action should be dismissed with prejudice as against the Released Defendant Parties; whether a
Judgment approving the Settlement should be entered in accordance with the terms of this
Stipulation; and whether and in what amount any award of attorneys’ fees and reimbursement of
expenses should be paid to Plaintiffs’ Counsel.
(y)
“Settlement Payment Recipients” means all Settlement Class Members who
were shareholders of record of J.Crew common stock at the Closing of the Merger and who would
be entitled to a pro rata distribution of the Settlement Amount (as defined herein).
1
For J.Crew, the executive officers are those employees listed in paragraphs 100 and 101 of the
Complaint.
15
(z)
“Unknown Claims” means any and all Released Plaintiffs’ Claims which
Lead Plaintiffs or any other Class Member does not know or suspect to exist in his, her, or its favor
at the time of the release of the Released Plaintiffs’ Claims against the Released Defendant Parties,
which if known by him, her or it, might have affected his, her or its decision(s) with respect to the
Settlement, and any and all Released Defendants’ Claims which any Defendant or any other
Released Party does not know or suspect to exist in his, her, or its favor at the time of the release of
the Released Defendants’ Claims against the Released Plaintiff Parties, which if known by him,
her, or it might have affected his, her, or its decision(s) with respect to the Settlement. With
respect to any and all Released Plaintiffs’ Claims and Released Defendants’ Claims, the Parties
stipulate and agree that upon the Effective Date, Lead Plaintiffs and Defendants shall expressly
waive, and each of the Class Members shall be deemed to have, and by operation of the Judgment
shall have expressly, waived, relinquished and released any and all provisions, rights and benefits
conferred by any law of any state or territory of the United States or other jurisdiction, or principle
of common law or foreign law, which is similar, comparable, or equivalent to Cal. Civ. Code §
1542, which provides:
A general release does not extend to claims which the creditor does not know or
suspect to exist in his or her favor at the time of executing the release, which if
known by him or her must have materially affected his or her settlement with the
debtor.
Lead Plaintiffs and Defendants acknowledge, and the other Class Members by operation of law
shall be deemed to have acknowledged, that they may discover facts in addition to or different
from those now known or believed to be true with respect to the Released Plaintiffs’ Claims and
the Released Defendants’ Claims, but that it is the intention of Lead Plaintiffs and Defendants, and
by operation of law the other Class Members, to completely, fully, finally and forever extinguish
any and all Released Plaintiffs’ Claims and Released Defendants’ Claims, known or unknown,
16
suspected or unsuspected, which now exist, or heretofore existed, or may hereafter exist, and
without regard to the subsequent discovery of additional or different facts. Lead Plaintiffs and
Defendants acknowledge, and the other Class Members by operation of law shall be deemed to
have acknowledged, that the inclusion of “Unknown Claims” in the definition of Released
Plaintiffs’ Claims and Released Defendants’ Claims was separately bargained for and was a key
element of the Settlement.
B.
Settlement Consideration
2.
In consideration for the full and final release, settlement and discharge of any and
all Released Plaintiffs’ Claims against the Released Defendant Parties, the parties have agreed to
the following consideration:
(a)
Implemented Settlement Consideration
i.
Merger Agreement Amendment
Certain Defendants entered into the Merger Agreement Amendment, which
included the following changes:
(A)
Go-Shop Extension: Section 5.2(a) of the Merger Agreement was amended to
delete the reference to “January 15, 2011” and to replace it with “February 15,
2011.” Section 5.2(b) of the Merger Agreement was amended to delete the
reference to “January 16, 2011” and to replace it with “February 16, 2011.”
(B)
Notification Rights: As a result of the change to Section 5.2(b) of the Merger
Agreement to delete the reference to “January 16, 2011” and to replace it with
“February 16, 2011,” the Buyout Group’s contractual information rights set
forth in Section 5.2 of the Merger Agreement relating to the results of the goshop and certain other aspects of the go-shop process did not become effective
until the second business day after the go-shop period (as extended by Section
2(a)(i) of the Merger Agreement Amendment) expired.
(C)
Termination Fee: The second to last sentence of Section 7.3(a) was deleted in its
entirety and replaced with the following: “As used herein, ‘Termination Fee’
shall mean a cash amount equal to $20.0 million.”
17
(D)
Elimination of Matching Rights in Certain Circumstances and Reimbursement
of Third Party Bidder Expenses in Certain Circumstances: The following
language was added to the end of Section 5.2(e) of the Merger Agreement:
“Notwithstanding the foregoing, if (X) the Company receives any Takeover
Proposal pursuant to which the stockholders of the Company would be entitled
to receive consideration having a value of $45.50 or more, and (Y) the Board of
Directors of the Company (acting upon recommendation of the Special
Committee) determines, acting in good faith and after consultation with its
financial advisor and outside legal counsel, that such Takeover Proposal
constitutes a Superior Proposal, then the rights and obligations of the parties
pursuant to the immediately preceding clauses (1) through (4) of this Section
5.2(e) shall not apply. For the avoidance of doubt, nothing in this Section 5.2(e)
shall prevent or preclude Parent from proposing to revise the terms of this
Agreement or taking any actions relating thereto. In addition, and
notwithstanding anything in this Agreement to the contrary, to the extent that
(x) any Person submits, and does not subsequently withdraw, a Takeover
Proposal that the Board of Directors of the Company (acting upon
recommendation of the Special Committee) determines, acting in good faith and
after consultation with its financial advisor and outside legal counsel, constitutes
a Superior Proposal, (y) the Takeover Proposal described in clause (x) above
would entitle the stockholders of the Company to receive consideration having a
value of between $44.00 and $45.49, and (z) such Takeover Proposal is not
consummated as a result of the Company entering into an alternative acquisition
agreement (whether pursuant to the rights and obligations of the parties in
preceding clauses (1) through (4) or otherwise), then the Company will
reimburse the Person making such Takeover Proposal for up to $3 million of
documented and reasonable actual out-of-pocket expenses incurred by such
Person in conducting diligence in connection with and presenting such
Takeover Proposal (including documented and reasonable legal and financial
advisory fees).”
(E)
Approval of the Merger by Unaffiliated Stockholders:
(1) Throughout the Merger Agreement, the defined term “Company Stockholder
Approval” was deleted in its entirety and replaced with the defined term
“Company Stockholder Approvals” (mutatis mutandis with respect to the
grammatical changes resulting from such term being plural), except for
references to the defined term “Company Stockholder Approval” in Sections
3.3(d) and 8.12.
(2) The following definitions were added to Section 8.12:
“Company Stockholder Approvals” means each of the Company Stockholder
Approval and the Unaffiliated Stockholder Approval.”
18
“Unaffiliated Stockholder Approval” means the approval and adoption of this
Agreement by the holders of a majority of the then-outstanding shares of
Company Common Stock not owned, directly or indirectly, by Parent, Merger
Sub, the Rollover Investors, any other officers and directors of the Company or
any of their respective Affiliates or “associates” (as defined in Section 12b-2 of
the Exchange Act).
(3) Section 3.3(d) of the Merger Agreement was deleted in its entirety and replaced
with the following: “(d) The affirmative vote (in person or by proxy) of the
holders of a majority of the outstanding shares of Company Common Stock at
the Company Stockholders Meeting, or any adjournment or postponement
thereof, in favor of the adoption of this Agreement (the ‘Company Stockholder
Approval’) and the Unaffiliated Stockholder Approval are the only votes or
approvals of the holders of any class or series of capital stock of the Company
or any of its Subsidiaries which are necessary to adopt this Agreement and
approve the Transactions.”
(4) Section 6.1 of the Merger Agreement (but, for the avoidance of doubt, not
subclauses (a), (b) or (c) of Section 6.1) was deleted in its entirety and replaced
with the following: “6.1 Conditions to Each Party’s Obligation to Effect the
Merger. The respective obligations of each party hereto to effect the Merger
shall be subject to the satisfaction (or, except with respect to the Unaffiliated
Stockholder Approval, waiver if permissible under applicable Law) on or prior
to the Closing Date of the following conditions:”.
ii.
Drexler Non-Compete
Drexler agreed that (1) in the event a bidder other than the Buyout Group acquired
the Company (hereinafter “Potential Third Party Aquiror”), (2) such Potential Third Party
Acquiror offered Mr. Drexler employment on the same or better terms and conditions
(including with respect to equity grants) than the terms and conditions contemplated in
connection with the Merger, and (3) Mr. Drexler elected not to enter into an employment
relationship with the Potential Third Party Acquiror, then for a two year period following
the termination of his employment with the Company he would not compete with J.Crew
(other than as a holder of a passive investment not in excess of 5% of the outstanding
voting shares of any publicly traded company).
19
iii.
Confidentiality Agreements
The Special Committee amended the confidentiality agreement that was provided to
any parties potentially interested in acquiring the Company (the “Confidentiality
Agreement”). The Special Committee also informed any parties potentially interested in
acquiring the Company that previously had executed a confidentiality agreement with the
Company and expressed continued or renewed interest in considering acquiring the
Company that it would amend the Confidentiality Agreement as described above.
iv.
Representation Regarding Access to Non-Public Information
J.Crew represented and confirmed that any parties potentially interested in
acquiring the Company who signed the Confidentiality Agreement (each a “Potential
Bidder”) would have access to the same information that the Buyout Group received,
except that J.Crew was entitled to provide a more limited set of information to any
Potential Bidder if J.Crew reasonably determined that such Potential Bidder or any of its
affiliates competes, directly or indirectly, with J.Crew.
(b)
Initial Settlement Payment
At the Closing, J.Crew, on behalf of itself and the Individual Defendants, deposited
a one-time settlement payment of $10 million into the custody of a paying agent (the
“Paying Agent”) for the subsequent disbursement to the Settlement Payment Recipients
(the “Initial Settlement Payment”).
(c)
Additional Settlement Payment
Within ten (10) business days after approval of the Settlement by the Court, an
additional one-time settlement payment of $6 million (the “Additional Settlement
Payment” and together with the Initial Settlement Payment, the “Settlement Amount”) will
be deposited by J.Crew (or its insurers) on behalf of J.Crew and the Individual Defendants,
20
and by TPG and Leonard Green (or their insurers) on behalf of the Buyout Group, into the
custody of the Paying Agent.
(d)
Distribution of the Settlement Amount
Upon the Effective Date, the Settlement Amount will be disbursed by the Paying
Agent to the Settlement Payment Recipients and will be allocated on a per-share basis
amongst the Settlement Payment Recipients based on the number of shares of J.Crew
common stock, shares of restricted stock and shares of common stock represented by inthe-money options held by the applicable Settlement Payment Recipient upon the Closing
of the Merger (provided that if a Settlement Payment Recipient held shares of J.Crew
common stock in registered form and has not submitted a letter of transmittal as of the
Effective Date, such payment shall be allocated to such Settlement Payment Recipient but
will not be remitted until such Settlement Payment Recipient has submitted its letter of
transmittal and its share certificates for exchange). If, after J.Crew has made reasonable
efforts to have Settlement Payment Recipients claim their payments, the amount of the
Settlement Amount that remains unclaimed by the Settlement Payment Recipients (the
“Unclaimed Amount”) exceeds $500,000 after a period of six (6) months after the initial
disbursement, then the Unclaimed Amount will be re-disbursed by the Paying Agent for
payment to all Settlement Payment Recipients on a pro rata basis. If, however, after a
period of six (6) months after the initial disbursement, the amount of the Unclaimed
Amount is equal to or less than $500,000, or if any of the Unclaimed Amount remains
unclaimed after the re-disbursement described in the preceding sentence, then any such
unclaimed amount of the Settlement Amount shall be donated to the Delaware Combined
Campaign for Justice as a charitable donation.
21
(e)
Costs of Distribution and Reservation of Rights
J.Crew (or its insurers) on behalf of J.Crew and the Individual Defendants, and TPG
and Leonard Green (or their insurers) on behalf of the Buyout Group, shall be responsible
for paying any and all costs associated with the allocation and distribution of the Settlement
Amount (including the costs of any re-distribution of the Settlement Amount and the costs
associated with any charitable donation); provided, however, that any costs associated with
allocating and distributing the Settlement Amount shall not be paid from or otherwise
dilute that consideration. The Settlement Amount and the costs associated with allocating
and distributing the Settlement Amount shall be paid without waiver of J.Crew’s and/or the
Individual Defendants’ right to pursue claims against their insurance carriers for this sum
and without waiver of TPG and Leonard Green’s rights to pursue claims against their
respective insurance carriers for this sum.
C.
Scope of the Settlement
3.
Upon the entry of the Judgment, the Action shall be dismissed with prejudice, on
the merits and without costs (except as provided herein).
4.
Upon the Effective Date, Lead Plaintiffs and all Class Members, on behalf of
themselves, their legal representatives, heirs, executors, administrators, estates, predecessors,
successors, predecessors-in-interest, successors-in-interest and assigns, and any person or entity
acting for or on behalf of, or claiming under, any of them, and each of them, shall thereupon fully,
finally and forever, release, settle and discharge the Released Defendant Parties from and with
respect to every one of the Released Plaintiffs’ Claims, and shall thereupon be forever barred and
enjoined from commencing, instituting or prosecuting any Released Plaintiffs’ Claims against any
of the Released Defendant Parties.
22
5.
Upon the Effective Date, each of Defendants, on behalf of themselves, the other
Released Defendant Parties and any person or entity acting for or on behalf of, or claiming under,
any of them, and each of them, shall thereupon fully, finally and forever, release, settle and
discharge the Released Plaintiff Parties from and with respect to every one of the Released
Defendants’ Claims, and shall thereupon be forever barred and enjoined from commencing,
instituting or prosecuting any of the Released Defendants’ Claims against any of the Released
Plaintiff Parties.
D.
Class Certification
6.
For purposes of settlement only, the parties agree that the Court shall certify a non
opt-out class, pursuant to Court of Chancery Rules 23(b)(1) and (b)(2) consisting of the Settlement
Class Members.
E.
Submission of the Settlement to the Court for Approval
7.
As soon as practicable after this Stipulation has been executed, Lead Plaintiffs and
Defendants shall (1) take all steps necessary to stay the Action and the MOU Enforcement Action
pending further order of the Court; (2) jointly apply to the Court for entry of an Order in the form
attached hereto as Exhibit A (the “Scheduling Order”), providing for, among other things: (a) the
dissemination of the Notice of Pendency and Proposed Settlement of Class Action (the “Notice”),
substantially in the form attached hereto as Exhibit B; (b) the publication of the Summary Notice
of Pendency and Proposed Settlement of Class Action (the “Summary Notice”), substantially in
the form attached hereto as Exhibit C; and (c) the scheduling of the Settlement Hearing to
consider: (i) the proposed Settlement, (ii) the joint request of the Parties that the Judgment be
entered substantially in the form attached hereto as Exhibit D, (iii) certification of the Settlement
Class as a non opt-out class pursuant to Court of Chancery Rules 23(b)(1) and (b)(2), and (iv) Lead
Counsel’s application (on behalf of all Plaintiffs’ Counsel) for an award of attorneys’ fees and
23
expenses, and any objections to any of the foregoing; and (3) take all reasonable and appropriate
steps to seek and obtain entry of the Scheduling Order. At the Settlement Hearing, the Parties shall
jointly request that the Judgment be entered and the Parties take all reasonable and appropriate
steps to obtain Final entry of the Judgment substantially in the form attached hereto as Exhibit D.
8.
Defendants shall be responsible for providing notice of the Settlement to the
Settlement Class. Defendants shall pay all costs and expenses incurred in providing notice of the
Settlement to the Settlement Class, and in no event shall Lead Plaintiffs, any Class Members, or
their counsel be responsible for any such costs and expenses, and in no event shall any such costs
and expenses be paid from or otherwise dilute the Settlement Amount.
F.
Conditions of Settlement.
9.
This Settlement shall be subject to the following conditions, which the Parties shall
use their best efforts to achieve:
(a)
the Court enters the Scheduling Order substantially in the form attached
hereto as Exhibit A;
(b)
the Court enters the Judgment substantially in the form attached hereto as
Exhibit D, or the Court has entered an Alternative Judgment and none of the Parties elect to
terminate the Settlement;
(c)
the Effective Date shall have occurred; and
(d)
Defendants have complied with their obligations regarding the Settlement
Amount set forth in Section 2 herein.
G.
Attorneys’ Fees and Expenses
10.
Lead Counsel will apply to the Court for a collective award of attorneys’ fees to
Plaintiffs’ Counsel which shall be no greater than the amount set forth in the Notice attached
hereto as Exhibit B (the “Fee Application”). Lead Counsel also will apply to the Court for
24
reimbursement of litigation expenses paid or incurred by Plaintiffs’ Counsel (the “Expense
Reimbursement Application”).
As of the execution of this Stipulation, the Parties have not
discussed the amount or mechanics of any application by Lead Counsel for an award of attorneys’
fees and expenses. Defendants agree that Plaintiffs’ Counsel have established a right to an award
of attorneys’ fees and expenses based on benefits provided to the Class Members.
Notwithstanding the foregoing or the provisions regarding the Released Defendants’ Claims,
Defendants reserve all rights and all grounds to object to, to oppose, to consent to, or to take no
position on the amount of fees and expenses sought by Lead Counsel in the Fee Application and
the Expense Reimbursement Application.
11.
Plaintiffs’ Counsel will make no other application for an award of attorneys’ fees or
expenses other than the Fee Application or the Expense Reimbursement Application.
12.
None of Lead Plaintiffs, nor Plaintiffs’ Counsel, shall make, or assist any other
counsel in making, any application for an award of fees or expenses in any other jurisdiction. The
Parties acknowledge and agree that any fees and expenses awarded by the Court to Plaintiffs’
Counsel shall be paid by J.Crew (or its insurers) on behalf of J.Crew and the Individual
Defendants, and by TPG and Leonard Green (or their insurers) on behalf of the Buyout Group,
pursuant to wire information and instructions provided by Lead Counsel no later than ten (10)
business days after the date of entry by the Court of an order awarding such attorneys’ fees or
expenses (the “Fee and Expense Award”), notwithstanding the existence of any timely filed
objections to the Fee and Expense Award, or potential for appeal therefrom, or collateral attack on
the Settlement or any part thereof; provided, however, that in the event that the Fee and Expense
Award is disapproved, reduced, reversed or otherwise modified, whether on appeal, further
proceedings on remand, successful collateral attack or otherwise, then Plaintiffs’ Counsel shall,
25
within ten (10) business days after Lead Counsel receives notice of any such disapproval,
reduction, reversal or other modification, return to J.Crew (or its insurers) the difference between
the attorneys’ fees and expenses awarded by the Court in the Fee and Expense Award on the one
hand, and any attorneys’ fees and expenses ultimately and finally awarded on appeal, further
proceedings on remand or otherwise on the other hand.
13.
The disposition of the Fee Application and the Expense Reimbursement
Application are not material terms of this Stipulation, and it is not a condition of this Stipulation
that such applications be granted.
The Fee Application and the Expense Reimbursement
Application may be considered separately from the proposed Stipulation. Any disapproval or
modification of the Fee Application and/or the Expense Reimbursement Application by the Court
or on appeal shall not affect or delay the enforceability of this Stipulation, provide any of the
Parties with the right to terminate the Settlement, or affect or delay the binding effect or finality of
the Judgment and the release of the Released Plaintiffs’ Claims. Final resolution of the Fee
Application and/or the Expense Reimbursement Application shall not be a condition to the
dismissal, with prejudice, of the Action or effectiveness of the releases of the Released Plaintiffs’
Claims. The payment of any Fee and Expense Award shall be made without waiver of J.Crew’s
and/or the Individual Defendants’ rights to pursue claims against its insurance carriers for such
sum and without waiver of TPG and Leonard Green’s rights to pursue claims against their
respective insurance carriers for such sum.
14.
Any failure of the Court to approve the Settlement shall have no impact on or
preclude Lead Counsel from applying to the Court for an award of attorneys’ fees and expenses on
grounds of mootness. Defendants reserve the right to oppose any such application, including on
the grounds that Defendants would not have provided any of the consideration contemplated by the
26
MOU absent an agreement from Lead Plaintiffs to provide, on their own behalf and on behalf of
the Settlement Class, a full and appropriate release of all claims that were asserted or that could
have been asserted in the Action.
15.
Lead Counsel warrant that no portion of any award of attorneys’ fees or expenses
shall be paid to any Lead Plaintiff or any Class Member, except as approved by the Court. Lead
Counsel shall allocate the Fee and Expense Award amongst Plaintiffs’ Counsel in a manner which
they, in good faith, believe reflects the contributions of such counsel to the prosecution and
settlement of the Action. Defendants and the Released Defendant Parties shall have no input into
or responsibility for the allocation by Lead Counsel of the Fee and Expense Award or for the
payment of any fees or expenses of Lead Counsel other than the Fee and Expense Award, and in
no event shall any Fee and Expense Award be paid from or otherwise dilute the Settlement
Amount.
H.
Stay Pending Court Approval
16.
Lead Plaintiffs and Defendants agree to stay the proceedings in the Action and to
stay and not to initiate any other proceedings other than those incident to the Settlement itself
pending the occurrence of the Effective Date. The Parties also agree to use their best efforts to
seek the stay and dismissal of, and to oppose entry of any interim or final relief in favor of any
Class Member in, any other proceedings against any of the Released Defendant Parties which
challenges the Settlement or otherwise involves, directly or indirectly, a Released Plaintiff Claim.
27
I.
Stay and Dismissal of the MOU Enforcement Action
17.
As soon as practicable after this Stipulation has been executed, Lead Plaintiffs and
Defendants shall take all steps necessary to stay the MOU Enforcement Action pending further
order of the Court.
18.
Upon the Effective Date, Defendants and Lead Plaintiffs shall dismiss the MOU
Enforcement Action on the merits, with prejudice and without costs.
J.
Termination of Settlement; Effect of Termination
19.
If either (a) the Court declines to enter the Scheduling Order in any material
respect; (b) the Court declines to enter the Judgment in any material respect, (c) the Court enters
the Judgment or an Alternative Judgment but on or following appellate review, remand, collateral
attack or other proceedings the Judgment or Alternative Judgment is modified or reversed in any
material respect, or (d) any of the other conditions of Paragraph 9 are not satisfied, this Stipulation
shall be cancelled and terminated, unless counsel for each of the Parties, within ten (10) business
days from receipt of such ruling or event, agrees in writing with counsel for the other Parties to
proceed with this Stipulation and the Settlement, including only with such modifications, if any, as
to which all other Parties in their sole judgment and discretion may agree. For purposes of this
Paragraph, an intent to proceed shall not be valid unless it is expressed in a signed writing. Neither
a modification nor a reversal on appeal of the amount of fees, costs and expenses awarded by the
Court to Plaintiffs’ Counsel shall be deemed a material modification of the Judgment or this
Stipulation.
20.
Notwithstanding anything to the contrary set forth above, in the event that the Court
approves the Stipulation and enters the Judgment, but J.Crew (or its insurers) and/or TPG and
Leonard Green (or their insurers) fail to pay the Settlement Amount, nothing herein shall be
construed to limit or prejudice in any way any of Lead Plaintiffs’ rights to seek enforcement of the
28
terms of the Settlement, including specifically, rights to sue for breach of contract and for specific
performance and/or to seek appropriate legal and/or equitable relief from the Court to enforce the
Settlement.
21.
If either: (a) the Effective Date does not occur, (b) this Stipulation is disapproved,
canceled or terminated pursuant to its terms, or (c) the Settlement otherwise does not become final
for any reason, then the Settlement Amount deposited into the custody of the Paying Agent shall
be refunded (pro rata as applicable) by the Paying Agent to J.Crew (or its insurers) and/or TPG
and Leonard Green (or their insurers) within ten (10) business days after such cancellation or
termination.
22.
If the Effective Date does not occur, or if this Stipulation is disapproved, canceled
or terminated pursuant to its terms, or the Settlement otherwise does not become final for any
reason, all of the Parties shall be deemed to have reverted to their respective litigation status
immediately prior to August 30, 2011, and they shall proceed in all respects as if the Stipulation
had not been executed and the related orders had not been entered, and in that event all of their
respective claims and defenses as to any issue in the Action or the MOU Enforcement Action shall
be preserved without prejudice; provided, however, that Section 27 shall remain in full effect. In
the event the Effective Date does not occur, or this Stipulation is disapproved, canceled or
terminated pursuant to its terms, or the Settlement otherwise does not become final for any reason,
Defendants reserve the right to pursue the MOU Enforcement Action or to oppose certification of
any plaintiff class in any future proceedings (including, but not limited to, in any proceedings in
the Action).
K.
Miscellaneous Provisions
23.
All of the Exhibits attached hereto are material and integral parts hereof and shall
be incorporated by reference as though fully set forth herein.
29
24.
This Stipulation may not be amended or modified, nor may any of its provisions be
waived, except by a written instrument signed by counsel for all Parties or their successors-ininterest.
25.
The headings herein are used for the purpose of convenience only and are not meant
to have legal effect.
26.
Lead Plaintiffs, on behalf of themselves and the Settlement Class, and Defendants,
on behalf of themselves and the other Released Defendant Parties, agree not to assert whether or
not for attribution that the Action was brought or prosecuted by Lead Plaintiffs or defended by
Defendants in bad faith or without a reasonable basis. Lead Plaintiffs, on behalf of themselves and
the Settlement Class, and Defendants, on behalf of themselves and the other Released Defendant
Parties, further agree not to assert whether or not for attribution that the MOU Enforcement Action
was brought or prosecuted by J.Crew, TPG and Leonard Green (or any of the other Defendants), or
defended by Lead Plaintiffs, in bad faith or without a reasonable basis. The Parties represent and
agree that the terms of the Settlement were negotiated at arm’s-length and in good faith by the
Parties, and reflect a settlement that was reached voluntarily based upon adequate information and
sufficient discovery and after consultation with experienced legal counsel.
27.
Each party denies any and all allegations of wrongdoing, fault, liability or damage
in the Action or the MOU Enforcement Action. The Parties covenant and agree that neither this
Stipulation, nor the fact or any terms of the Settlement, or any communications relating thereto, is
evidence, or an admission or concession by any Party or their counsel, Class Member, or any other
Released Defendant Party or Released Plaintiff Party, of any fault, liability or wrongdoing
whatsoever, as to any facts or claims alleged or asserted in the Action or the MOU Enforcement
Action, or any other actions or proceedings, or as to the validity or merit of any of the claims or
30
defenses alleged or asserted in any such action or proceeding. This Stipulation is not a finding or
evidence of the validity or invalidity of any claims or defenses in the Action or the MOU
Enforcement Action, any wrongdoing by any Party, Class Member or other Released Defendant
Party or Released Plaintiff Party, or any damages or injury to any Party, Class Member or other
Released Defendant Party or Released Plaintiff Party. Neither this Stipulation, nor any of the
terms and provisions of this Stipulation, nor any of the negotiations or proceedings in connection
therewith, nor any of the documents or statements referred to herein or therein, nor the Settlement,
nor the fact of the Settlement, nor the Settlement proceedings, nor any statements in connection
therewith, (a) shall (i) be argued to be, used or construed as, offered or received in evidence as, or
otherwise constitute an admission, concession, presumption, proof, evidence, or a finding of any
liability, fault, wrongdoing, injury or damages, or of any wrongful conduct, acts or omissions on
the part of any of the Released Defendant Parties or Released Plaintiff Parties, or of any infirmity
of any defense, or of any damage to Lead Plaintiffs or any other Class Member, or (ii) otherwise
be used to create or give rise to any inference or presumption against any of the Released
Defendant Parties or Released Plaintiff Parties concerning any fact or any purported liability, fault,
or wrongdoing of the Released Defendant Parties or Released Plaintiff Parties or any injury or
damages to any person or entity, or (b) shall otherwise be admissible, referred to or used in any
proceeding of any nature, for any purpose whatsoever; provided, however, that the Stipulation
and/or Judgment may be introduced in any proceeding, whether in the Court or otherwise, as may
be necessary to argue and establish that the Stipulation and/or Judgment has res judicata, collateral
estoppel or other issue or claim preclusion effect or to otherwise consummate or enforce the
Settlement and/or Judgment or to secure any insurance rights or proceeds of any of the Released
Defendant Parties or Released Plaintiff Parties.
31
28.
The consummation of the Settlement as embodied in this Stipulation shall be under
the authority of the Court, and the Court shall retain jurisdiction for the purpose of entering orders
providing for an award of attorneys’ fees and expenses to Plaintiffs’ Counsel and enforcing the
terms of this Stipulation.
29.
To the extent permitted by law, all agreements made and orders entered during the
course of the Action relating to the confidentiality of documents or information shall survive this
Stipulation.
30.
The waiver by any Party of any breach of this Stipulation by any other Party shall
not be deemed a waiver of any other prior or subsequent breach of any provision of this Stipulation
by any other Party.
31.
This Stipulation and the Exhibits constitute the entire agreement among the Parties
and supersede any prior agreements among the Parties with respect to the subject matter hereof.
No representations, warranties or inducements have been made to or relied upon by any Party
concerning this Stipulation or its Exhibits, other than the representations, warranties and covenants
expressly set forth in such documents. This Stipulation may be amended or any of its provisions
waived only by a writing executed by all the Parties.
32.
This Stipulation may be executed in one or more counterparts, including by
fascimile and electronic mail.
33.
The Parties and their respective counsel of record agree that they will use their
reasonable best efforts to obtain all necessary approvals of the Court required by this Stipulation
(including, but not limited to, using their reasonable best efforts to resolve any objections raised to
the Settlement).
32
34.
Plaintiffs’ Counsel and Defendants’ Counsel agree to cooperate fully with one
another and use best efforts in seeking Court approval of the Scheduling Order, the Stipulation and
the Settlement, and to promptly agree upon and execute all such other documentation as may be
reasonably required to obtain final approval by the Court of the Settlement.
35.
Lead Plaintiffs and Lead Counsel represent and warrant that Lead Plaintiffs are
members of the Settlement Class and that none of Lead Plaintiffs’ claims or causes of action
referred to in this Stipulation have been assigned, encumbered, or otherwise transferred in any
manner in whole or in part.
36.
Each counsel signing this Stipulation represents and warrants that such counsel has
been duly empowered and authorized to sign this Stipulation on behalf of his or her clients.
37.
This Stipulation shall not be construed more strictly against one Party than another
merely by virtue of the fact that it, or any part of it, may have been prepared by counsel for one of
the Parties, it being recognized that it is the result of arm’s-length negotiations between the Parties,
and all Parties have contributed substantially and materially to the preparation of this Stipulation.
38.
This Stipulation is and shall be binding upon and shall inure to the benefit of the
Released Defendant Parties and the Released Plaintiff Parties (including the Class Members) and
the respective legal representatives, heirs, executors, administrators, transferees, successors and
assigns of all such foregoing persons and entities and upon any corporation, partnership, or other
entity into or with which any party may merge, consolidate or reorganize.
39.
Except for attorney notes, attorney work product, attorney-client communications,
communications between or among counsel and their experts, pleadings, other court submissions
and transcripts of depositions, the Parties agree to destroy or to return all discovery obtained from
each other within thirty (30) days after the Effective Date.
33
40.
This Stipulation, the Settlement, and any and all disputes arising out of or relating
in any way to this Stipulation or Settlement, whether in contract, tort or otherwise, shall be
governed by and construed in accordance with the laws of the State of Delaware, without regard to
conflicts of law principles. Any action or proceeding arising out of or relating in any way to this
Stipulation or the Settlement, or to enforce any of the terms of the Stipulation or Settlement, shall
(i) be brought, heard and determined exclusively in the Court, which shall retain jurisdiction over
the Parties and all such disputes (provided that, in the event that subject matter jurisdiction is
unavailable in the Court, then any such action or proceeding shall be brought, heard and
determined exclusively in any other state or federal court sitting in Wilmington, Delaware) and (ii)
shall not be litigated or otherwise pursued in any forum or venue other than the Court (or, if
subject matter jurisdiction is unavailable in the Court, then in any forum or venue other than any
other state or federal court sitting in Wilmington, Delaware). Each party hereto (1) consents to
personal jurisdiction in any such action (but in no other action) brought in this Court; (2) consents
to service of process by registered mail upon such party and/or such party’s agent; (3) waives any
objection to venue in this Court and any claim that Delaware or this Court is an inconvenient
forum; and (4) EXPRESSLY WAIVES ANY RIGHT TO DEMAND A JURY TRIAL AS TO
ANY DISPUTE DESCRIBED IN THIS PARAGRAPH.
Dated: August 30, 2011
34
APPENDIX 1
AMENDMENT NO. 1
TO THE AGREEMENT AND PLAN OF MERGER
This AMENDMENT No. 1 (this “Amendment”) to the Agreement and Plan of Merger,
dated as of November 23, 2010 (the “Agreement”), by and among Chinos Holdings, Inc., Chinos
Acquisition Corporation and J. Crew Group, Inc., is entered into as of January 18, 2011.
WHEREAS, the parties hereto wish to amend the Agreement as hereinafter provided;
NOW, THEREFORE, in consideration of the foregoing and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
1. Definitions; References. Capitalized terms used but not defined herein shall have the
meanings assigned to them in the Agreement. References herein to “Sections” refer to
Sections of the Agreement.
2. Amendment of the Agreement.
a.
General Amendments. Throughout the Agreement, the defined term “Company
Stockholder Approval” shall be deleted in its entirety and replaced with the defined term
“Company Stockholder Approvals” (mutatis mutandis with respect to the grammatical changes
resulting from such term being plural), except for references to the defined term “Company
Stockholder Approval” in Sections 3.3(d) and 8.12.
b.
Amendment to Section 3.3(d). Section 3.3(d) shall be deleted in its entirety and
replaced with the following: “(d) The affirmative vote (in person or by proxy) of the holders of a
majority of the outstanding shares of Company Common Stock at the Company Stockholders
Meeting, or any adjournment or postponement thereof, in favor of the adoption of this
Agreement (the “Company Stockholder Approval”) and the Unaffiliated Stockholder Approval
are the only votes or approvals of the holders of any class or series of capital stock of the
Company or any of its Subsidiaries which are necessary to adopt this Agreement and approve the
Transactions.
c.
Amendment to Section 4.4. The first sentence of Section 4.4 shall be deleted in its
entirety and replaced with the following: “Parent directly or indirectly owns beneficially, and is
the direct or indirect record owner of, all of the outstanding capital stock of Merger Sub.”
d.
Amendment to Section 5.2(a). The Reference to “January 15, 2011” in Section
5.2(a) shall be deleted in its entirety and replaced with “February 15, 2011”.
e.
Amendment to Section 5.2(b). The Reference to “January 16, 2011” in Section
5.2(b) shall be deleted in its entirety and replaced with “February 16, 2011”.
f.
Amendment to Section 5.2(e). The following shall be added to the end of Section
5.2(e): "Notwithstanding the foregoing, if (X) the Company receives any Takeover Proposal
pursuant to which the stockholders of the Company would be entitled to receive consideration
having a value of $45.50 or more, and (Y) the Board of Directors of the Company (acting upon
recommendation of the Special Committee) determines, acting in good faith and after
1
consultation with its financial advisor and outside legal counsel, that such Takeover Proposal
constitutes a Superior Proposal, then the rights and obligations of the parties pursuant to the
immediately preceding clauses (1) through (4) of this Section 5.2(e) shall not apply. For the
avoidance of doubt, nothing in this Section 5.2(e) shall prevent or preclude Parent from
proposing to revise the terms of this Agreement or taking any actions relating thereto. In
addition, and notwithstanding anything in this Agreement to the contrary, to the extent that (x)
any Person submits, and does not subsequently withdraw, a Takeover Proposal that the Board of
Directors of the Company (acting upon recommendation of the Special Committee) determines,
acting in good faith and after consultation with its financial advisor and outside legal counsel,
constitutes a Superior Proposal, (y) the Takeover Proposal described in clause (x) above would
entitle the stockholders of the Company to receive consideration having a value of between
$44.00 and $45.49, and (z) such Takeover Proposal is not consummated as a result of the
Company entering into an alternative acquisition agreement (whether pursuant to the rights and
obligations of the parties in preceding clauses (1) through (4) or otherwise), then the Company
will reimburse the Person making such Takeover Proposal for up to $3 million of documented
and reasonable actual out-of-pocket expenses incurred by such Person in conducting diligence in
connection with and presenting such Takeover Proposal (including documented and reasonable
legal and financial advisory fees).”
g.
Amendment to Section 5.3(b). The phrase “; provided, that the Company shall be
under no obligation to mail the Proxy Statement to its stockholders prior to the No-Shop Period
Start Date” shall be deleted in its entirety from the first sentence of Section 5.3(b).
h.
Amendment to Section 6.1. Section 6.1 (but, for the avoidance of doubt, not
subclauses (a), (b) or (c) of Section 6.1) shall be deleted in its entirety and replaced with the
following: “6.1 Conditions to Each Party’s Obligation to Effect the Merger. The respective
obligations of each party hereto to effect the Merger shall be subject to the satisfaction (or,
except with respect to the Unaffiliated Stockholder Approval, waiver if permissible under
applicable Law) on or prior to the Closing Date of the following conditions:”.
i.
Amendment to Section 7.3(a). The second to last sentence of Section 7.3(a) shall
be deleted in its entirety and replaced with the following: “As used herein, “Termination Fee”
shall mean a cash amount equal to $20.0 million.”
j.
Amendments and Additions to Section 8.12.
i. The definition of “Excluded Party” in Section 8.12 shall be deleted in its
entirety and replaced with the following: “Excluded Party” means any
Person, group of Persons or group that includes any Person (so long as such
Person, together with all other members of such group, if any, who were
members of such group or another group that included such Person
immediately prior to the No-Shop Period Start Date, represent at least 50% of
the equity financing of such group at all times following the No-Shop Period
Start Date and prior to the termination of this Agreement) from whom the
Company or any of its Representatives has received, after the execution of this
Agreement and prior to the No-Shop Period Start Date, a Takeover Proposal
that the Special Committee determines, in good faith, prior to or as of the NoShop Period Start Date and after consultation with its financial advisor and
2
outside legal counsel, constitutes a Superior Proposal; provided, that any such
Person or group shall cease to be an “Excluded Party” at any time such Person
or group ceases to be actively pursuing efforts to acquire the Company.
ii. The following definition shall be added to Section 8.12: “Company
Stockholder Approvals” means each of the Company Stockholder Approval
and the Unaffiliated Stockholder Approval.”
iii. The definition of “Marketing Period” in Section 8.12 shall be deleted in its
entirety and replaced with the following: “Marketing Period” means the first
period of 16 consecutive business days after the date of this Agreement
beginning on the later of (a) the seventh business day following the date on
which Parent shall have the Required Information the Company is required to
provide pursuant to Section 5.5, and such Required Information is Compliant;
provided, that if the Company shall in good faith reasonably believe it has
provided the Required Information and such Required Information is
Compliant, it may deliver to Parent a written notice to that effect (stating
when it believes it completed such delivery), in which case the Company shall
be deemed to have complied with clause (a) above unless Parent in good faith
reasonably believes the Company has not completed the delivery of the
Required Information or that the Required Information is not Compliant and,
within four business days after the delivery of such notice by the Company,
delivers a written notice to the Company to that effect (stating with specificity
which Required Information the Company has not delivered or is not
Compliant) and (b) the first day on which all conditions set forth in Section
6.1 and Section 6.2 (other than (x) the conditions set forth in Section 6.1(a)
which need to be satisfied no later than five business days prior to the end of
the Marketing Period and (y) those conditions that by their terms are to be
satisfied at the Closing, which need only be satisfied at the Closing, as the
case may be) have been satisfied and nothing has occurred and no condition
exists that would cause any of such conditions not to be satisfied assuming
Closing, as the case may be, were to be scheduled for any time during such 16
consecutive business day period. Notwithstanding the foregoing, the
“Marketing Period” shall not commence and shall be deemed not to have
commenced (A) prior to the No-Shop Period Start Date, (B) prior to the
mailing of the Proxy Statement or (C) if, on or prior to the completion of such
16 business day period, (x) the Company shall have publicly announced any
intention to restate any material financial information included in the Required
Information or that any such restatement is under consideration, in which case
the Marketing Period shall be deemed not to commence unless and until such
restatement has been completed and the applicable Required Information has
been amended or the Company has announced that it has concluded that no
restatement shall be required, and the requirements in clauses (a) and (b)
above would be satisfied on the first day, throughout and on the last day of
during such new 16 business day period or (y) the Required Information
would not be Compliant at any time during such 16 business day period, in
which case a new 16 business day period shall commence upon Parent and its
3
financing sources receiving updated Required Information that would be
Compliant, and the requirements in clauses (a) and (b) above would be
satisfied on the first day, throughout and on the last day of such new 16
business day period (for the avoidance of doubt, it being understood that if at
any time during the Marketing Period the Required Information provided at
the initiation of the Marketing Period ceases to be Compliant, then the
Marketing Period shall be deemed not to have occurred). In addition, if the
Marketing Period would end after the last day prior to the filing of the
Company’s annual report on Form 10-K for the fiscal year ending January 29,
2011 on which the auditors would be willing to deliver comfort letters with
negative assurance and before the day that the Company files such Form 10K, then the Marketing Period will not begin prior to the filing of such Form
10-K.
iv. The following definition shall be added to Section 8.12: “Unaffiliated
Stockholder Approval” means the approval and adoption of this Agreement by
the holders of a majority of the then-outstanding shares of Company Common
Stock not owned, directly or indirectly, by Parent, Merger Sub, the Rollover
Investors, any other officers and directors of the Company or any of their
respective Affiliates or “associates” (as defined in Section 12b-2 of the
Exchange Act).
k.
Amendment to Section 8.14. The fifth sentence of Section 8.14(a) shall be deleted
in its entirety and replaced with the following: “The words ‘date hereof’ when used in this
Agreement shall refer to November 23, 2010.”
3. Representations and Warranties. Each of the parties hereto represents and warrants to the
other parties hereto that: (i) such party has all necessary corporate power and authority to
execute and deliver this Amendment; (ii) the execution and delivery by such party of this
Amendment has been duly authorized and approved by its board of directors (in the case of
the Company, acting upon recommendation of the Special Committee) in accordance with
Section 8.2, and no other corporate action on its part is necessary to authorize the execution
and delivery by such party of this Amendment; and (iii) this Amendment has been duly
executed and delivered by such party and, assuming due authorization, execution and
delivery hereof by the other parties hereto, constitutes a valid and binding obligation of such
party, enforceable against its in accordance with its terms, subject to the Bankruptcy and
Equity Exception.
4. No Other Amendments. Except as expressly amended by this Amendment, the Agreement
shall remain in full force and effect in accordance with its terms.
[remainder of the page intentionally left blank – signature page follows]
4
EXHIBIT A
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN RE J.CREW GROUP, INC.
SHAREHOLDERS LITIGATION
Consolidated
C.A. No. 6043-CS
SCHEDULING ORDER
The parties to the above-captioned action (the “Action”) having applied pursuant to
Delaware Court of Chancery Rule 23(e) for an order approving the settlement of the Action in
accordance with the Stipulation and Agreement of Compromise and Settlement entered into by
the parties on August 30, 2011 (the “Stipulation”), and for dismissal of the Action on the merits
with prejudice upon the terms and conditions set forth in the Stipulation (the “Settlement”); the
Stipulation contemplating certification by this Court of a Settlement Class in the Action; and the
Court having read and considered the Stipulation and accompanying documents; and all parties
having consented to the entry of this Order,
NOW, THEREFORE, this __ day of _________, 2011, upon application of the parties,
IT IS HEREBY ORDERED that:
1.
Except for terms defined herein, the Court adopts and incorporates the definitions
in the Stipulation for purposes of this Order.
2.
For purposes of settlement only, the Action shall be maintained as a non opt-out
class action under Court of Chancery Rules 23(a) and 23(b)(1) and (b)(2) on behalf of the
following class (the “Settlement Class”):
Any and all J.Crew stockholders who were record holders or beneficial owners of
J.Crew common stock at any time between and including August 1, 2010 and the
Closing of the Merger (regardless of the date of purchase of J.Crew stock), and
any person or entity acting for or on behalf of, or claiming under, any of them,
and each of them, but excluding Defendants and the MD Trusts (and their trustees
in their capacities as such); the Immediate Family members of the Individual
Defendants; the parents, subsidiaries and affiliates of J.Crew, TPG, Leonard
{A&B-00187991}
Green, Chinos Holdings, Chinos Acquisition and each of their current or former
directors, executive officers1, partners and members; any person, firm, trust,
corporation or other entity in which any Defendant or the MD Trusts has, or had
during the Settlement Class Period, a controlling interest; and the legal
representatives, heirs, executors, administrators, predecessors, successors,
predecessors-in-interest, successors-in-interest and assigns of any such excluded
party.
3.
The Court preliminarily reappoints Lead Plaintiffs as class representatives for the
Settlement Class. The Court preliminarily reappoints Plaintiffs’ Counsel as counsel for the
Settlement Class.
4.
A hearing (the “Settlement Hearing”) will be held on ______________ ___, 2011,
at __:__ _.m., in the Court of Chancery, New Castle County Courthouse, 500 North King Street,
Wilmington, Delaware, 19801, to: (a) determine whether to certify the Settlement Class as a non
opt-out class pursuant to Court of Chancery Rule 23(a), 23(b)(1) and 23(b)(2); (b) determine
whether the Court should approve the Settlement as fair, reasonable and adequate; (c) determine
whether Lead Plaintiffs and Plaintiffs’ Counsel have adequately represented the interests of the
Settlement Class in the Action; (d) determine whether final judgment should be entered
dismissing the Action and the Released Plaintiffs’ Claims as to the Released Defendant Parties
with prejudice as against Lead Plaintiffs and the Settlement Class, releasing the Released
Plaintiffs’ Claims, and barring and enjoining prosecution of any and all Released Plaintiffs’
Claims (as provided in the Stipulation); (e) hear and determine any objections to the Settlement
or the application of Plaintiffs’ Counsel for an award of attorneys’ fees and expenses;
(f) consider the application by Plaintiffs’ Counsel for attorneys’ fees and reimbursement of
expenses; and (g) rule on such other matters as the Court may deem appropriate.
1
For J.Crew, the executive officers are those employees listed in paragraphs 100 and 101 of the
Complaint.
{A&B-00187991}
-2-
5.
The Court may adjourn and reconvene the Settlement Hearing, including the
consideration of the application for attorneys’ fees, without further notice to Class Members
other than by oral announcement at the Settlement Hearing or any adjournment thereof.
6.
The Court may approve the Settlement, according to the terms and conditions of
the Stipulation, as it may be modified by the parties thereto, with or without further notice to
Class Members. Further, the Court may render its final judgment dismissing the Action and the
Released Plaintiffs’ Claims with prejudice (as provided in the Stipulation), approving releases by
Lead Plaintiffs and the Settlement Class of claims against the Released Defendant Parties, and
ordering the payment of attorneys’ fees and expenses, all without further notice.
7.
The Court approves, in form and substance, the Notice of Pendency and Proposed
Settlement of Class Action (the “Notice”) substantially in the form attached as Exhibit B to the
Stipulation, and the Summary Notice of Pendency and Proposed Settlement of Class Action (the
“Summary Notice”) substantially in the form attached as Exhibit C to the Stipulation. The Court
finds that the mailing of the Notice in substantially the manner set forth in paragraph 8 of this
Order and the publication of the Summary Notice in substantially the manner set forth in
paragraph 9 of this Order constitute the best notice practicable under the circumstances to all
persons entitled to such notice of the Settlement Hearing and the proposed Settlement, and meets
the requirements of Court of Chancery Rule 23 and of due process.
8.
No later than thirty (30) days from the date of this Order, and at least sixty (60)
days before the Settlement Hearing, Plaintiffs’ Counsel shall cause the Notice to be mailed by
United States mail, first class, postage pre-paid, to each person who is shown on the records of
J.Crew, its successors in interest or their respective transfer agents, to be a record owner of any
shares of common stock of J.Crew (the “Shares”) at any time between and including August 1,
{A&B-00187991}
-3-
2010 and March 7, 2011, at his, her or its last known address appearing in the stock transfer
records maintained by or on behalf of J.Crew. All record holders in the Settlement Class who
were not also the beneficial owners of any Shares held by them of record shall be requested in
the Notice to forward the Notice to such beneficial owners of those Shares. Plaintiffs’ Counsel
shall use reasonable efforts to give notice to such beneficial owners by causing additional copies
of the Notice (a) to be made available to any record holder who, prior to the Settlement Hearing,
requests the same for distribution to beneficial owners, or (b) to be mailed to beneficial owners
whose names and addresses are received from record owners.
9.
No later than forty (40) days from the date of this Order, Plaintiffs’ Counsel shall
cause the Summary Notice to be published once in the national edition of the Wall Street
Journal.
10.
At least twenty (20) business days prior to the Settlement Hearing, the parties
shall file any opening briefs in support of the proposed Settlement, and Plaintiffs’ Counsel shall
file their application for an award of attorneys’ fees and expenses, including any supporting
affidavits.
11.
At least ten (10) business days prior to the date of the Settlement Hearing, the
Defendants shall file any opposition to the application for an award of attorneys’ fees and
expenses filed by Plaintiffs’ Counsel, including any supporting affidavits.
12.
At least ten (10) business days prior to the date of the Settlement Hearing,
Plaintiffs’ Counsel shall file with the Court proof of mailing of the Notice and proof of
publication of the Summary Notice.
{A&B-00187991}
-4-
13.
At least five (5) business days prior to the date of the Settlement Hearing,
Plaintiffs’ Counsel shall file any reply in support of their application for an award of attorneys’
fees and expenses.
14.
At the Settlement Hearing, any Class Member who desires to do so may appear
personally or by counsel, and show cause, if any, why the Settlement Class should not be
permanently certified, pursuant to Court of Chancery Rules 23(a) and 23(b)(1) and (b)(2) as a
non opt-out settlement class; why the settlement of the Action in accordance with and as set forth
in the Stipulation should not be approved as fair, reasonable and adequate and in the best
interests of the Settlement Class; why the Judgment should not be entered in accordance with
and as set forth in the Stipulation; or why the Court should not grant an award of reasonable
attorneys’ fees and expenses to Plaintiffs’ Counsel for their services and actual expenses incurred
in the Action; provided, however, that unless the Court in its discretion otherwise directs, no
Class Member, or any other person, shall be entitled to contest the approval of the terms and
conditions of the Settlement or (if approved) the Judgment to be entered thereon, or the
allowance of fees and expenses to Plaintiffs’ Counsel, and no papers, briefs, pleadings or other
documents submitted by any Class Member or any other person (excluding a party to the
Stipulation) shall be received or considered, except by order of the Court for good cause shown,
unless, no later than fifteen (15) business days prior to the Settlement Hearing, such person files
with the Register in Chancery, Court of Chancery, 500 North King Street, Wilmington, DE,
19801, and serves upon the attorneys listed below: (a) a written notice of intention to appear;
(b) proof of membership in the Settlement Class; (c) a detailed statement of objections to any
matter before the Court; and (d) the grounds therefore or the reasons for wanting to appear and
be heard, as well as all documents or writings the Court shall be asked to consider. These
{A&B-00187991}
-5-
writings must also be served, on or before such filing with the Court, by hand or overnight mail
upon the following attorneys:
Stuart M. Grant, Esq.
Grant & Eisenhofer P.A.
1201 North Market Street
Wilmington, Delaware 19801
A. Thompson Bayliss, Esq.
Abrams & Bayliss LLP
20 Montchanin Road
Suite 200
Wilmington, Delaware 19807
Mark Lebovitch, Esq.
Bernstein Litowitz Berger &
Grossmann LLP
1285 Avenue of the Americas
New York, New York 10019
Gregory Williams, Esq.
Richards, Layton & Finger, P.A.
One Rodney Square
920 North King Street
Wilmington, Delaware 19801
13.
Any person who fails to object in the manner described above shall be deemed to
have waived the right to object (including any right of appeal) and shall be forever barred from
raising such objection in this or any other action or proceeding. Class Members who do not
object need not appear at the Settlement Hearing or take any other action to indicate their
approval.
14.
All proceedings in the Action, other than proceedings as may be necessary to
carry out the terms and conditions of the Stipulation, are hereby stayed and suspended until
further order of this Court.
________________________________
Chancellor
{A&B-00187991}
-6-
EXHIBIT B
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN RE J.CREW GROUP, INC.
SHAREHOLDERS LITIGATION
)
)
CONSOLIDATED
C.A. No. 6043-CS
NOTICE OF PENDENCY AND PROPOSED SETTLEMENT OF CLASS ACTION
TO:
ANY AND ALL PERSONS OR ENTITIES WHO WERE RECORD HOLDERS OR BENEFICIAL
OWNERS OF J.CREW COMMON STOCK AT ANY TIME BETWEEN AND INCLUDING AUGUST 1,
2010 AND MARCH 7, 2011 (REGARDLESS OF THE DATE OF PURCHASE OF J.CREW COMMON
STOCK), AND ANY PERSON OR ENTITY ACTING FOR OR ON BEHALF OF, OR CLAIMING
UNDER, ANY OF THEM, AND EACH OF THEM, EXCEPT FOR THOSE PERSONS AND ENTITIES
EXCLUDED FROM THE SETTLEMENT CLASS DEFINED BELOW.
PLEASE READ ALL OF THIS NOTICE CAREFULLY. YOUR RIGHTS WILL BE AFFECTED BY THE LEGAL
PROCEEDINGS IN THIS ACTION. IF THE COURT APPROVES THE PROPOSED SETTLEMENT DESCRIBED
BELOW, YOU WILL BE FOREVER BARRED FROM CONTESTING THE FAIRNESS OF THE PROPOSED
SETTLEMENT, OR PURSUING THE RELEASED PLAINTIFFS’ CLAIMS (AS DEFINED HEREIN) AGAINST
THE RELEASED DEFENDANT PARTIES (AS DEFINED HEREIN).
IF YOU HELD J.CREW COMMON STOCK FOR THE BENEFIT OF OTHERS, READ THE SECTION BELOW
ENTITLED “INSTRUCTIONS TO BROKERS AND OTHERS WHO HELD FOR THE BENEFIT OF OTHERS.”
I.
PURPOSE OF NOTICE
The purpose of this Notice is to inform you of the proposed settlement (the “Settlement”) of the abovecaptioned lawsuit (the “Action”) pending in the Court of Chancery of the State of Delaware (the “Court”).
Pursuant to the Settlement, New Orleans Employees’ Retirement System, Local 542 International Union of
Operating Engineers Pension Fund of Eastern Pennsylvania and Delaware, City of Orlando Police Pension
Fund, Southeastern Pennsylvania Transportation Authority, City of Orlando Firefighters’ Pension Fund and
Martin Vogel (collectively, the “Lead Plaintiffs”), on their own behalf and on behalf of all members of the
settlement class (the “Settlement Class”), have agreed to dismiss with prejudice their claims against J.Crew,
Millard Drexler (“Drexler”), James Coulter (“Coulter”), David House (“House”), Heather Reisman
(“Reisman”), Stuart Sloan (“Sloan”), Mary Ann Casati (“Casati”), Josh Weston (“Weston”), Steven GrandJean (“Grand-Jean”), Stephen Squeri (“Squeri”), James Scully (“Scully”), TPG Capital, L.P., TPG Partners,
VI, L.P. (together with TPG Capital, L.P., “TPG”), Leonard Green & Partners, L.P. (“Leonard Green”),
Chinos Holdings, Inc. (“Chinos Holdings” or “Parent”) and Chinos Acquisition Corporation (“Chinos
Acquisition” or “Merger Sub”) (collectively, the “Defendants”), which relate to the sale of J.Crew to Chinos
Holdings, Chinos Acqusition, TPG and Leonard Green (collectively, the “Buyout Group”) for $43.50 per share
in cash. In consideration of the Settlement, Defendants have amended the previously announced Agreement
and Plan of Merger dated November 23, 2010 (the “Merger Agreement”) among J.Crew, Chinos Holdings and
Chinos Acquisition (each of Chinos Holdings and Chinos Acqusition are beneficially owned by affiliates of
TPG and Leonard Green).
This Notice also informs you of the Court’s preliminary certification of the Settlement Class (as defined
below) for purposes of the Settlement, and notifies you of your right to participate in a hearing to be held on
________ __, 2011 at __:__ _.m., before the Court in the New Castle County Courthouse, 500 North King
Street, Wilmington, Delaware 19801 (the “Settlement Hearing”) to determine whether the Court should
approve the Settlement as fair, reasonable and adequate and in the best interests of the Settlement Class,
whether Lead Plaintiffs, the law firms of Bernstein Litowitz Berger & Grossmann LLP, Grant & Eisenhofer,
{A&B-00187815}
P.A., Labaton Sucharow LLP and Chimicles & Tikellis LLP (“Lead Counsel”) and the law firms of Stull, Stull
& Brody, Abraham Fruchter & Twersky, LLP and Rigrodsky & Long P.A. (“Plaintiffs’ Executive Committee”
and, together with Lead Counsel, “Plaintiffs’ Counsel”) have adequately represented the interests of the
Settlement Class in the Action, and to consider other matters, including a request by Plaintiffs’ Counsel for an
award of attorneys’ fees and reimbursement of expenses incurred in connection with the prosecution of the
Action.
The parties have agreed for purposes of this Settlement only that the Action shall be preliminarily maintained
as a non-opt-out class action under Court of Chancery Rules 23(a), 23(b)(1), and 23(b)(2), by Lead Plaintiffs
as Settlement Class representatives, on behalf of a Settlement Class consisting of:
Any and all J.Crew stockholders who were record holders or beneficial owners of J.Crew common
stock at any time between and including August 1, 2010 and the Closing of the Merger (regardless of
the date of purchase of J.Crew stock), and any person or entity acting for or on behalf of, or claiming
under, any of them, and each of them, but excluding Defendants and the MD Trusts (and their trustees
in their capacities as such); the Immediate Family members of the Individual Defendants1; the
parents, subsidiaries and affiliates of J.Crew, TPG, Leonard Green, Chinos Holdings, Chinos
Acquisition and each of their current or former directors, executive officers2, partners and members;
any person, firm, trust, corporation or other entity in which any Defendant or the MD Trusts has, or
had during the Settlement Class Period, a controlling interest; and the legal representatives, heirs,
executors, administrators, predecessors, successors, predecessors-in-interest, successors-in-interest
and assigns of any such excluded party.
At the Settlement Hearing, among other things, the Court will consider whether the Settlement Class should be
finally certified under Court of Chancery Rule 23 and whether Lead Plaintiffs and Plaintiffs’ Counsel have
adequately represented the Class.
This Notice describes the rights you may have under the Settlement and what steps you may, but are not
required to, take in relation to the Settlement.
If the Court approves the Settlement, the parties to the Action (the “Parties”) will ask the Court at the
Settlement Hearing to enter an Order dismissing all claims asserted in the Action with prejudice on the merits.
If you are a member of the Settlement Class (a “Class Member”), you will be bound by any judgment entered
in the Action whether or not you actually receive this Notice. You may not opt out of the Class.
THE FOLLOWING RECITATION DOES NOT CONSTITUTE FINDINGS OF THE COURT.
IT IS BASED ON STATEMENTS OF THE PARTIES AND SHOULD NOT BE
UNDERSTOOD AS AN EXPRESSION OF ANY OPINION OF THE COURT AS TO THE
MERITS OF ANY OF THE CLAIMS OR DEFENSES RAISED BY ANY OF THE PARTIES.
II.
BACKGROUND OF THE ACTION
On August 23, 2010, Drexler had an introductory meeting with a representative of Leonard Green.
1
The “Individual Defendants” means Drexler, Coulter, House, Reisman, Sloan, Casati, Weston, Grand-Jean,
Squeri and Scully.
2
For J.Crew, the executive officers are those employees listed in paragraphs 100 and 101 of the Verified
Consolidated Amended Class Complaint filed by Lead Plaintiffs in the Court on January 14, 2011.
2
{A&B-00187815}
On September 1, 2010, Drexler had a dinner meeting with Coulter at which, among other things, Coulter
raised with Drexler TPG’s potential interest in exploring an acquisition of the Company.
Between October 7, 2010 and October 11, 2010, Drexler contacted each other member of the board of
directors of J.Crew (the “J.Crew Board”) to inform them of TPG’s potential interest in a transaction involving
a sale of the Company. During the course of these conversations, Drexler informed members of the J.Crew
Board that he might be interested in participating with TPG in a transaction of this nature. Coulter also called
each other member of the J.Crew Board to confirm TPG’s potential interest in a transaction involving the
Company.
On October 15, 2010 and October 22, 2010, the J.Crew Board formed and mandated a special committee
comprised of Casati, House, Squeri and Weston (the “Special Committee”) to consider strategic alternatives
available to the Company and to respond to and negotiate the terms of any potential strategic proposal.
Following extensive negotiations between November 1, 2010, and November 22, 2010, the Special Committee
and the Buyout Group reached an agreement as to price and other terms of the Merger (defined herein), which
terms were approved by the J.Crew Board.
On November 23, 2010, J.Crew and the Buyout Group entered into an agreement and plan of merger (the
“Merger Agreement”) whereby the Buyout Group would acquire J.Crew for $43.50 per share in cash (the
“Merger”).
Between November 24, 2010, and December 8, 2010, the following actions were commenced before the Court
on behalf of shareholders of J.Crew, challenging the Merger as a product of breaches of fiduciary duties by the
J.Crew Board (the “Actions”):
i.
New Orleans Employees’ Retirement System v. J.Crew Group, Inc., et al., C.A. No.
6016-VCS;
ii.
Local 542 International Union of Operating Engineers Pension Fund of Eastern
Pennsylvania and Delaware v. J.Crew Group, Inc., et al., C.A. No. 6035-VCS;
iii.
City of Orlando Police Pension Fund v. J.Crew Group, Inc., et al., C.A. No. 6038VCS;
iv.
Southeastern Pennsylvania Transportation Authority, v. Mary Ann Casati, et al., C.A. No.
6043-VCS;
v.
Martin Vogel v. J.Crew Group, Inc., et al., C.A. No. 6045-VCS;
vi.
City Of Orlando Firefighters Pension Fund v. Millard S. Drexler, et al., C.A. No. 6052-VCS;
and
vii.
Westco Fruit & Nuts Inc. v. J.Crew Group Inc., et al., C.A. No. 6057-VCS.
On December 6, 2010, J.Crew filed a Schedule 14A Preliminary Proxy Statement and Schedule 13E-3
(together, the “Preliminary Proxy Statement”) with the United States Securities and Exchange Commission
(the “SEC”) regarding the Merger.
On December 10, 2010, Lead Plaintiffs filed a Stipulation and [Proposed] Order for Consolidation and
Appointment of Co-Lead Plaintiffs, Co-Lead Counsel and Plaintiffs’ Executive Committee, which sought the
3
{A&B-00187815}
consolidation of the Actions into the above-captioned action styled In re J.Crew Group, Inc. Shareholders
Litigation, C.A. No. 6043-VCS (the “Action”), the appointment of Lead Plaintiffs as Co-Lead Plaintiffs, the
appointment of Bernstein Litowitz Berger & Grossmann LLP, Grant & Eisenhofer, P.A., Labaton Sucharow
LLP, and Chimicles & Tikellis LLP as Co-Lead Counsel, and the appointment of Abraham Fruchter &
Twersky, LLP, as Chairman of an Executive Committee also consisting of the firms of Stull, Stull & Brody
and Rigrodsky & Long P.A. (the “Consolidation Motion”).
By Order dated December 14, 2010, the Court granted the Lead Plaintiffs’ Consolidation Motion.
On December 17, 2010, the parties to the Action filed a [Proposed] Interim Order Regarding Case Schedule,
setting forth a proposed schedule for expedited discovery and, if necessary, briefing and a hearing on Lead
Plaintiffs’ motion for a preliminary injunction.
On December 22, 2010, the Court granted the Interim Order Regarding Case Schedule, ordering the parties
before it to engage in expedited discovery, and scheduling a hearing on Lead Plaintiffs’ motion for a
preliminary injunction, if necessary, for February 24, 2011.
Between December 17, 2010 and January 17, 2011, the Parties engaged in expedited discovery, including the
production of over 72,000 pages of documents by Defendants and certain third parties. In addition, the Parties
negotiated, and the Court entered, a Stipulation and Order Governing the Production and Exchange of
Confidential Material on December 21, 2010, and a Stipulation and Order regarding Expert Discovery on
January 11, 2011. The Parties began scheduling approximately a dozen depositions, which were to commence
on January 21, 2011.
On December 29, 2010, J.Crew filed an amendment to the Preliminary Proxy Statement.
On January 14, 2011, Lead Plaintiffs filed their Verified Consolidated Amended Class Action Complaint (the
“Complaint”) asserting additional allegations, including that the Preliminary Proxy Statement was materially
false or misleading.
Following extensive, arm’s-length negotiations, the Parties reached an agreement in principle to settle the
Action, memorialized in a Memorandum of Understanding (“MOU”) on January 16, 2011.
On January 18, 2011, the J.Crew Board approved an amendment to the Merger Agreement implementing
certain terms of the MOU (the “Merger Agreement Amendment”). J.Crew and the Buyout Group thereafter
executed the Merger Agreement Amendment (the Merger Agreement, as amended by the Merger Agreement
Amendment, referred to herein as the “Amended Merger Agreement”). The Merger Agreement Amendment is
attached as Appendix 1 to the Stipulation (defined below).
On January 18, 2011, the Company issued a press release publicly disclosing the terms of the MOU and the
results of the go-shop process through January 18, 2011, and also filed a Form 8-K describing the MOU in
greater detail, including by attaching the Merger Agreement Amendment as an exhibit thereto.
On January 25, 2011, J.Crew filed a Definitive Proxy Statement (the “Definitive Proxy Statement”) and an
amended Schedule 13E-3 with the SEC regarding the Merger.
On January 31, 2011, Plaintiffs’ Counsel informed the Court that they were “no longer in a position to support
or pursue the settlement.” Plaintiffs’ Counsel informed the Court that they believed that by issuing the press
release on January 18, 2011 and setting a record date for the Merger and mailing the Definitive Proxy
Statement prior to the expiration of the extended go-shop period, Defendants had undermined key intended
benefits of the MOU and breached the terms thereof.
4
{A&B-00187815}
Defendants informed the Court that they disagreed with Plaintiffs’ Counsel’s claims of breach and intended to
act to enforce the terms of the proposed settlement as memorialized in the MOU.
On March 1, 2011, J.Crew stockholders voted to adopt the Amended Merger Agreement. Of the 63,907,720
shares of the Company’s outstanding common stock entitled to vote, the Merger was approved by holders of
41,058,215 shares (64.2%). In addition, of the 59,234,720 outstanding shares of the Company’s outstanding
common stock not owned by J.Crew officers or directors or their affiliates, the Merger was approved by
holders of approximately 36,385,251 shares (61.4%), satisfying the majority of the unaffiliated stockholder
voting condition described herein.
On March 7, 2011, the Merger closed.
On May 12, 2011, J.Crew, TPG and Leonard Green filed an action captioned J.Crew Group, Inc., et al. v. New
Orleans Employees’ Retirement System, et al., C.A. No. 6479 (the “MOU Enforcement Action”), seeking
specific enforcement of the parties’ agreement to settle the Action as memorialized in the MOU (or, only in
the alternative, money damages).
On June 9, 2011, the Court entered a Scheduling Order governing the MOU Enforcement Action, which called
for a trial on the merits on October 27-28, 2011.
On July 10, 2011, Lead Plaintiffs filed a motion to dismiss the MOU Enforcement Action.
Between late July 2011 and August 30, the Parties engaged in extensive, arm’s-length negotiations and
reached an agreement to finally and fully settle the Action, which is memorialized in the Stipulation and
Agreement of Compromise and Settlement (the “Stipulation”), dated August 30, 2011, by and among Lead
Plaintiffs, on their own behalf and on behalf of the Settlement Class, Drexler, Coulter, House, Casati, Weston,
Squeri, Reisman, Sloan, Grand-Jean, Scully, TPG, Leonard Green, Chinos Holdings and Chinos Acqusition.
The Parties have engaged in confirmatory discovery into the fairness, reasonableness and adequacy of the
Settlement, including production of documents and taking the deposition of Andrew Bednar, financial advisor
to the Special Committee.
III.
THE BENEFITS OF THE SETTLEMENT
In consideration of the Settlement, Defendants have implemented or have agreed to implement the following
actions with respect to the Merger:
a.
Implemented Settlement Consideration
i.
Merger Agreement Amendment
Certain Defendants entered into the Merger Agreement Amendment, which included the following changes:
(A)
Go-Shop Extension: Section 5.2(a) of the Merger Agreement was amended to delete the reference
to “January 15, 2011” and to replace it with “February 15, 2011.” Section 5.2(b) of the Merger
Agreement was amended to delete the reference to “January 16, 2011” and to replace it with
“February 16, 2011.”
(B)
Notification Rights: As a result of the change to Section 5.2(b) of the Merger Agreement to delete
the reference to “January 16, 2011” and to replace it with “February 16, 2011,” the Buyout
Group’s contractual information rights set forth in Section 5.2 of the Merger Agreement relating to
5
{A&B-00187815}
the results of the go-shop and certain other aspects of the go-shop process did not become
effective until the second business day after the go-shop period (as extended by Section 2(a)(i) of
the Merger Agreement Amendment) expired.
(C)
Termination Fee: The second to last sentence of Section 7.3(a) was deleted in its entirety and
replaced with the following: “As used herein, ‘Termination Fee’ shall mean a cash amount equal
to $20.0 million.”
(D)
Elimination of Matching Rights in Certain Circumstances and Reimbursement of Third Party
Bidder Expenses in Certain Circumstances: The following language was added to the end of
Section 5.2(e) of the Merger Agreement:
“Notwithstanding the foregoing, if (X) the Company receives any Takeover Proposal pursuant to
which the stockholders of the Company would be entitled to receive consideration having a value
of $45.50 or more, and (Y) the Board of Directors of the Company (acting upon recommendation
of the Special Committee) determines, acting in good faith and after consultation with its financial
advisor and outside legal counsel, that such Takeover Proposal constitutes a Superior Proposal,
then the rights and obligations of the parties pursuant to the immediately preceding clauses (1)
through (4) of this Section 5.2(e) shall not apply. For the avoidance of doubt, nothing in this
Section 5.2(e) shall prevent or preclude Parent from proposing to revise the terms of this
Agreement or taking any actions relating thereto. In addition, and notwithstanding anything in this
Agreement to the contrary, to the extent that (x) any Person submits, and does not subsequently
withdraw, a Takeover Proposal that the Board of Directors of the Company (acting upon
recommendation of the Special Committee) determines, acting in good faith and after consultation
with its financial advisor and outside legal counsel, constitutes a Superior Proposal, (y) the
Takeover Proposal described in clause (x) above would entitle the stockholders of the Company to
receive consideration having a value of between $44.00 and $45.49, and (z) such Takeover
Proposal is not consummated as a result of the Company entering into an alternative acquisition
agreement (whether pursuant to the rights and obligations of the parties in preceding clauses (1)
through (4) or otherwise), then the Company will reimburse the Person making such Takeover
Proposal for up to $3 million of documented and reasonable actual out-of-pocket expenses
incurred by such Person in conducting diligence in connection with and presenting such Takeover
Proposal (including documented and reasonable legal and financial advisory fees).”
(E)
Approval of the Merger by Unaffiliated Stockholders:
(1) Throughout the Merger Agreement, the defined term “Company Stockholder Approval” was
deleted in its entirety and replaced with the defined term “Company Stockholder Approvals”
(mutatis mutandis with respect to the grammatical changes resulting from such term being plural),
except for references to the defined term “Company Stockholder Approval” in Sections 3.3(d) and
8.12.
(2) The following definitions were added to Section 8.12:
“Company Stockholder Approvals” means each of the Company Stockholder Approval and the
Unaffiliated Stockholder Approval.”
“Unaffiliated Stockholder Approval” means the approval and adoption of this Agreement by the
holders of a majority of the then-outstanding shares of Company Common Stock not owned,
directly or indirectly, by Parent, Merger Sub, the Rollover Investors, any other officers and
6
{A&B-00187815}
directors of the Company or any of their respective Affiliates or “associates” (as defined in
Section 12b-2 of the Exchange Act).
(3) Section 3.3(d) of the Merger Agreement was deleted in its entirety and replaced with the
following: “(d) The affirmative vote (in person or by proxy) of the holders of a majority of the
outstanding shares of Company Common Stock at the Company Stockholders Meeting, or any
adjournment or postponement thereof, in favor of the adoption of this Agreement (the ‘Company
Stockholder Approval’) and the Unaffiliated Stockholder Approval are the only votes or approvals
of the holders of any class or series of capital stock of the Company or any of its Subsidiaries
which are necessary to adopt this Agreement and approve the Transactions.”
(4) Section 6.1 of the Merger Agreement (but, for the avoidance of doubt, not subclauses (a), (b) or
(c) of Section 6.1) was deleted in its entirety and replaced with the following: “6.1 Conditions to
Each Party’s Obligation to Effect the Merger. The respective obligations of each party hereto to
effect the Merger shall be subject to the satisfaction (or, except with respect to the Unaffiliated
Stockholder Approval, waiver if permissible under applicable Law) on or prior to the Closing Date
of the following conditions:”.
ii.
Drexler Non-Compete
Drexler agreed that (1) in the event a bidder other than the Buyout Group acquired the Company (hereinafter
“Potential Third Party Aquiror”), (2) such Potential Third Party Acquiror offered Mr. Drexler employment on
the same or better terms and conditions (including with respect to equity grants) than the terms and conditions
contemplated in connection with the Merger, and (3) Mr. Drexler elected not to enter into an employment
relationship with the Potential Third Party Acquiror, then for a two year period following the termination of
his employment with the Company he would not compete with J.Crew (other than as a holder of a passive
investment not in excess of 5% of the outstanding voting shares of any publicly traded company).
iii.
Confidentiality Agreements
The Special Committee amended the confidentiality agreement that was provided to any parties potentially
interested in acquiring the Company (the “Confidentiality Agreement”). The Special Committee also
informed any parties potentially interested in acquiring the Company that previously had executed a
confidentiality agreement with the Company and expressed continued or renewed interest in considering
acquiring the Company that it would amend the Confidentiality Agreement as described above.
iv.
Representation Regarding Access to Non-Public Information
J.Crew represented and confirmed that any parties potentially interested in acquiring the Company who signed
the Confidentiality Agreement (each a “Potential Bidder”) would have access to the same information that the
Buyout Group received, except that J.Crew was entitled to provide a more limited set of information to any
Potential Bidder if J.Crew reasonably determined that such Potential Bidder or any of its affiliates competes,
directly or indirectly, with J.Crew.
7
{A&B-00187815}
b.
Initial Settlement Payment
At the Closing, J.Crew, on behalf of itself and the Individual Defendants, deposited a one-time settlement
payment of $10 million into the custody of a paying agent (the “Paying Agent”) for the subsequent
disbursement to the Settlement Payment Recipients3 (the “Initial Settlement Payment”).
c.
Additional Settlement Payment
Within ten (10) business days after approval of the Settlement by the Court, an additional one-time settlement
payment of $6 million (the “Additional Settlement Payment” and together with the Initial Settlement Payment,
the “Settlement Amount”) will be deposited by J.Crew (or its insurers) on behalf of J.Crew and the Individual
Defendants, and by TPG and Leonard Green (or their insurers) on behalf of the Buyout Group, into the
custody of the Paying Agent.
(d)
Distribution of the Settlement Amount
Upon the Effective Date, the Settlement Amount will be disbursed by the Paying Agent to the Settlement
Payment Recipients and will be allocated on a per-share basis amongst the Settlement Payment Recipients
based on the number of shares of J.Crew common stock, shares of restricted stock and shares of common stock
represented by in-the-money options held by the applicable Settlement Payment Recipient upon the Closing of
the Merger (provided that if a Settlement Payment Recipient held shares of J.Crew common stock in registered
form and has not submitted a letter of transmittal as of the Effective Date, such payment shall be allocated to
such Settlement Payment Recipient but will not be remitted until such Settlement Payment Recipient has
submitted its letter of transmittal and its share certificates for exchange). If, after J.Crew has made reasonable
efforts to have the Settlement Payment Recipients claim their payments, the amount of the Settlement Amount
that remains unclaimed by the Settlement Payment Recipients (the “Unclaimed Amount”) exceeds $500,000
after a period of six (6) months after the initial disbursement, then the Unclaimed Amount will be re-disbursed
by the Paying Agent for payment to all Settlement Payment Recipients on a pro rata basis. If, however, after a
period of six (6) months after the initial disbursement, the amount of the Unclaimed Amount is equal to or less
than $500,000, or if any of the Unclaimed Amount remains unclaimed after the re-disbursement described in
the preceding sentence, then any such unclaimed amount of the Settlement Amount shall be donated to the
Delaware Combined Campaign for Justice as a charitable donation.
(e)
Costs of Distribution and Reservation of Rights
J.Crew (or its insurers) on behalf of J.Crew and the Individual Defendants, and TPG and Leonard Green (or
their insurers) on behalf of the Buyout Group, shall be responsible for paying any and all costs associated with
the allocation and distribution of the Settlement Amount (including the costs of any re-distribution of the
Settlement Amount and the costs associated with escheating any funds to the State of Delaware); provided,
however, that any costs associated with allocating and distributing the Settlement Amount shall not be paid
from or otherwise dilute that consideration. The Settlement Amount and the costs associated with allocating
and distributing the Settlement Amount shall be paid without waiver of J.Crew’s and/or the Individual
Defendants’ right to pursue claims against their insurance carriers for this sum and without waiver of TPG’s
and Leonard Green’s rights to pursue claims against their respective insurance carriers for this sum.
3
“Settlement Payment Recipients” means all Settlement Class Members who were shareholders of record of
J.Crew common stock at the Closing of the Merger and who would be entitled to a pro rata distribution of the
Settlement Amount (defined below).
8
{A&B-00187815}
IV.
RELEASES
The Stipulation provides that upon the Effective Date (defined below), Lead Plaintiffs and all Class Members,
on behalf of themselves, their legal representatives, heirs, executors, administrators, estates, predecessors,
successors, predecessors-in-interest, successors-in-interest and assigns, and any person or entity acting for or
on behalf of, or claiming under, any of them, and each of them, shall thereupon fully, finally and forever,
release, settle and discharge the Released Defendant Parties (defined below) from and with respect to every
one of the Released Plaintiffs’ Claims (defined below), and shall thereupon be forever barred and enjoined
from commencing, instituting or prosecuting any Released Plaintiffs’ Claims against any of the Released
Defendant Parties.
As set forth in the Stipulation:
1. “Effective Date” means the first business day following the date the Judgment (defined below) becomes
Final (defined below).
2. “Judgment” means the Order and Final Judgment to be entered in the Action substantially in the form
attached as Exhibit D to the Stipulation.
3.
“Final,” when referring to the Judgment, means entry of the Judgment, the expiration of any time for
appeal or review of the Judgment, or, if any appeal is filed and not dismissed or withdrawn, after the
Judgment is upheld on appeal in all material respects and is no longer subject to review upon appeal or
other review, and the time for any petition for reargument, appeal or review of the Judgment or any order
affirming the Judgment has expired; or, in the event that the Court enters a judgment in a form other than
the form attached as Exhibit D to the Stipulation (“Alternative Judgment”) and none of the Parties to the
Stipulation elects to terminate the Stipulation, the expiration of any time for appeal or review of the
Alternative Judgment, or if an appeal is filed and not dismissed or withdrawn, after the Alternative
Judgment is upheld on appeal in all material respects and is no longer subject to review upon appeal or
other review, and the time for any petition for reargument, appeal or review of the Alternative Judgment or
any order affirming the Alternative Judgment has expired; provided, however, that any disputes or appeals
relating solely to the amount, payment or allocation of attorneys’ fees and expenses shall have no effect on
finality for purposes of determining the date on which the Judgment or an Alternative Judgment becomes
Final and shall not otherwise prevent, limit or otherwise affect the Judgment or an Alternative Judgment or
prevent, limit, delay or hinder entry of the Judgment or an Alternative Judgment.
4. “Released Defendant Parties” means (i) any and all of the Defendants; (ii) the MD Trusts (defined below);
(iii) the Defendants’ respective past or present Immediate Family members (defined below), or direct or
indirect affiliates, associates, members, partners, partnerships, investment funds, subsidiaries, parents,
predecessors, successors, officers (including those executive officers of J.Crew listed in paragraphs 100
and 101 of the Complaint), directors, employees, agents, advisors, financial or investment advisors,
insurers, and attorneys (including Defendants’ Counsel) (defined below); (iv) any person, firm, trust,
corporation, officer, director or other individual or entity in which any of the Defendants or their
respective past or present Immediate Family Members, direct or indirect affiliates, partnerships,
investment funds, predecessors, successors, officers, directors or employees has a financial interest; (v) the
Buyout Group and each and every one of their respective affiliated investment funds, investment vehicles,
investment advisers, management companies, partners, general partners, managing members, members,
limited partners, trusts, principals, investment professionals, directors, officers, employees and affiliates;
and (vi) the legal representatives, heirs, executors, administrators, predecessors, successors, predecessorsin-interest, successors-in-interest and assigns of any of the foregoing.
9
{A&B-00187815}
2. “MD Trusts” means The Drexler Family Revocable Trust, The Millard S. Drexler 2009 Grantor Retained
Annuity Trust #1 and The Millard S. Drexler 2009 Grantor Retained Annuity Trust #2.
3. “Immediate Family” means an individual’s spouse, parents, siblings, children, grandparents, grandchildren;
the spouses of his or her parents, siblings and children; and the parents and siblings of his or her spouse,
and includes step and adoptive relationships. In this paragraph, “spouse” shall mean a husband, a wife, or
a partner in a state-recognized domestic partnership or civil union.
4. “Defendants’ Counsel” means the law firms of Abrams & Bayliss LLP; Cleary Gottlieb Steen & Hamilton
LLP; Cravath, Swaine & Moore LLP; Latham & Watkins LLP; Morris, Nichols, Arsht & Tunnell LLP;
Potter Anderson & Corroon LLP; Richards, Layton & Finger LLP; Ropes & Gray LLP; and Willkie Farr
& Gallagher LLP.
5. “Released Plaintiffs’ Claims” means any and all Claims (defined below) which are based upon, arise out
of, or involve or previously were based upon, arose out of or involved, directly or indirectly, any of the
actual, alleged or attempted actions, transactions, occurrences, statements, representations,
misrepresentations, omissions, allegations, facts, practices, events, claims or any other matters, things or
causes whatsoever, or any series thereof, that (i) were alleged, asserted, set forth, or claimed in the Action
or the Complaint against the Released Defendant Parties; or (ii) could have been alleged, asserted, set forth
or claimed in the Action, in the Complaint or in any other court, tribunal, forum or proceeding by any or
all Lead Plaintiffs or any or all of the other Class Members, and which arise out of the Class Members’
J.Crew stockholdings or the Class Members’ status as J.Crew stockholders during the Settlement Class
Period (defined below), including any and all Claims which are based upon, arise out of, relate in any way
to, or involve, directly or indirectly, (a) the Merger or any element, term, condition or circumstance of the
Merger, (b) any actions, deliberations, negotiations, discussions, offers, inquiries, solicitations of interest,
indications of interest, bids, due diligence or any act or omission in connection with the review of strategic
alternatives available to J.Crew, the Merger or any Alternative Transaction (defined below), including the
process of deliberation or negotiation by J.Crew, the Special Committee, TPG, Drexler, the MD Trusts,
Leonard Green, Parent, and/or Merger Sub and any of their respective officers, directors or advisors, (c)
the consideration received by Class Members in connection with the Merger, (d) the Preliminary Proxy
Statement and any amendments thereto, the Definitive Proxy Statement and any amendments thereto, the
Schedule 13e-3 and any amendments thereto, or any other disclosures, SEC filings, public filings, periodic
reports, press releases, proxy statements or other statements issued, made available, or filed or otherwise
disclosed or communicated relating, directly or indirectly, to the Merger, including claims under any and
all federal or state securities laws or federal or state antitrust laws (including those within the exclusive
jurisdiction of the federal courts), (e) any employment, compensation, equity rollover, voting or support
agreement between Drexler, employees of J.Crew or their respective affiliates, on the one hand, and
Chinos Holdings, Chinos Acquisition or the Buyout Group or any of their respective affiliates, on the other
hand, (f) the fiduciary duties or obligations of the Released Defendant Parties in connection with the
review of strategic alternatives available to J.Crew, the Merger, or any Alternative Transaction, (g) the
vesting of stock options owned by any or all Released Defendant Parties in connection with the Merger, or
the granting of stock options or restricted stock of J.Crew to any or all Released Defendant Parties; (h) the
March 1 vote of J.Crew stockholders approving the Merger; (i) proxy solicitation efforts in connection
with the March 1 vote of the J.Crew stockholders on the Merger; (j) the go shop, including the extended go
shop; (k) the Merger Agreement Amendment; (l) the Amended Merger Agreement; (m) the MOU; (n) the
January 18, 2011 press release issued by J.Crew announcing the MOU and the extension of the Go Shop
period; (o) the setting of the record date for the Merger and the mailing of the Definitive Proxy Statement;
or (p) the fees, expenses or costs incurred in prosecuting, defending, or settling the Action, except to the
extent of an attorneys’ fees award made pursuant to Clause G of the Stipulation; provided, however, that
the Released Plaintiffs’ Claims shall not include (1) the right to enforce the Stipulation; or (2) any claims
solely for statutory appraisal with respect to the Merger pursuant to Section 262 of the Delaware General
10
{A&B-00187815}
Corporation Law by J.Crew shareholders who properly perfected such claims for appraisal and do not
otherwise waive their appraisal rights.
6. “Claims” mean any and all manner of claims, demands, rights, liabilities, losses, obligations, duties,
damages, costs, debts, expenses, interest, penalties, fines, sanctions, fees, attorneys’ fees, expert or
consulting fees, actions, potential actions, causes of action, suits, agreements, judgments, decrees, matters,
issues and controversies of any kind, nature or description whatsoever, whether disclosed or undisclosed,
accrued or unaccrued, apparent or not apparent, foreseen or unforeseen, matured or not matured, suspected
or unsuspected, liquidated or not liquidated, fixed or contingent, which now exist, or heretofore or
previously existed, or may hereafter exist, including known claims and Unknown Claims (defined below),
whether direct, derivative, individual, class, representative, legal, equitable or of any other type, or in any
other capacity, whether based on state, local, foreign, federal, statutory, regulatory, common or other law
or rule (including but not limited to any claims under federal or state securities law, federal or state
antitrust law, or under state disclosure law or any claims that could be asserted derivatively on behalf of
the Company).
7. “Settlement Class Period” means the period between and including August 1, 2010 and the Closing
(defined below) of the Merger.
8. “Closing” means the consummation of the Merger on March 7, 2011, pursuant to which J.Crew merged
with and into Chinos Acquisition.
9. “Alternative Transaction” means any actual, contemplated or proposed (i) leveraged buyout, (ii) stock
buyback, (iii) recapitalization, (iv) acquisition, (v) merger, (vi) consolidation, (vii) tender offer, (viii)
change in control, (ix) dividend or (x) other strategic alternative (other than the Merger) involving J.Crew
or its subsidiaries.
10. “Unknown Claims” means any and all Released Plaintiffs’ Claims which Lead Plaintiffs or any other
Class Member does not know or suspect to exist in his, her, or its favor at the time of the release of the
Released Plaintiffs’ Claims against the Released Defendant Parties, which if known by him, her or it,
might have affected his, her or its decision(s) with respect to the Settlement, and any and all Released
Defendants’ Claims which any Defendant or any other Released Party does not know or suspect to exist in
his, her, or its favor at the time of the release of the Released Defendants’ Claims against the Released
Plaintiff Parties, which if known by him, her, or it might have affected his, her, or its decision(s) with
respect to the Settlement. With respect to any and all Released Plaintiffs’ Claims and Released
Defendants’ Claims, the Parties stipulate and agree that upon the Effective Date, Lead Plaintiffs and
Defendants shall expressly waive, and each of the Class Members shall be deemed to have, and by
operation of the Judgment shall have expressly, waived, relinquished and released any and all provisions,
rights and benefits conferred by any law of any state or territory of the United States or other jurisdiction,
or principle of common law or foreign law, which is similar, comparable, or equivalent to Cal. Civ. Code §
1542, which provides:
A general release does not extend to claims which the creditor does not know or
suspect to exist in his or her favor at the time of executing the release, which if
known by him or her must have materially affected his or her settlement with the
debtor.
Lead Plaintiffs and Defendants acknowledge, and the other Class Members by operation of law shall be
deemed to have acknowledged, that they may discover facts in addition to or different from those now
known or believed to be true with respect to the Released Plaintiffs’ Claims and the Released Defendants’
Claims, but that it is the intention of Lead Plaintiffs and Defendants, and by operation of law the other
11
{A&B-00187815}
Class Members, to completely, fully, finally and forever extinguish any and all Released Plaintiffs’ Claims
and Released Defendants’ Claims, known or unknown, suspected or unsuspected, which now exist, or
heretofore existed, or may hereafter exist, and without regard to the subsequent discovery of additional or
different facts. Lead Plaintiffs and Defendants acknowledge, and the other Class Members by operation of
law shall be deemed to have acknowledged, that the inclusion of “Unknown Claims” in the definition of
Released Plaintiffs’ Claims and Released Defendants’ Claims was separately bargained for and was a key
element of the Settlement.
The Stipulation also provides that upon the Effective Date, each of Defendants, on behalf of themselves, the
other Released Defendant Parties and any person or entity acting for or on behalf of, or claiming under, any of
them, and each of them, shall thereupon fully, finally and forever, release, settle and discharge the Released
Plaintiff Parties (defined below) from and with respect to every one of the Released Defendants’ Claims
(defined below), and shall thereupon be forever barred and enjoined from commencing, instituting or
prosecuting any of the Released Defendants’ Claims against any of the Released Plaintiff Parties.
As set forth in the Stipulation:
V.
1.
“Released Plaintiff Parties” means Lead Plaintiffs, all other Class Members and their respective
counsel (including Plaintiffs’ Counsel).
2.
“Released Defendants’ Claims” means any Claims that have been or could have been asserted in the
Action, the MOU Enforcement Action, or in any court, tribunal, forum or proceeding by Defendants
or any of them or their respective successors and assigns against any of the Released Plaintiff Parties,
which arise out of or relate in any way to the institution, prosecution, settlement or dismissal of the
Action or the MOU Enforcement Action; provided, however, that the Released Defendants’ Claims
shall not include claims to enforce the Stipulation.
REASONS FOR THE SETTLEMENT
Plaintiffs and their counsel have reviewed and analyzed the facts and circumstances relating to the claims
asserted in the Action, as known by Plaintiffs to date. Plaintiffs have reviewed over 72,000 pages of
documents and have deposed Andrew Bednar, financial advisor to the Special Committee. Plaintiffs’ Counsel
believe that they have received sufficient information to evaluate the merits of the proposed Settlement.
Plaintiffs’ Counsel have analyzed the evidence adduced during their investigation and pre-trial discovery and
have researched the applicable law with respect to the claims of Lead Plaintiffs and the Settlement Class
against Defendants and the potential defenses thereto. Based on this investigation and pre-trial discovery,
Lead Plaintiffs have decided to enter into the Stipulation and settle the Action, after taking into account,
among other things, (1) the substantial benefits to members of the Settlement Class from the litigation of the
Action and the Settlement; (2) the risks of continued litigation in the Action; and (3) the conclusion reached by
Lead Plaintiffs and Plaintiffs’ Counsel that the Settlement upon the terms and provisions set forth in the
Stipulation is fair, reasonable, adequate, and in the best interests of the Settlement Class and will result in a
material benefit to them.
The entry by Lead Plaintiffs and Defendants into the Stipulation is not an admission as to the merit or lack of
merit of any claims or defenses asserted in the Action or the MOU Enforcement Action.
Defendants have denied, and continue to deny, that they have committed or aided and abetted in the
commission of any violation of law or engaged in any of the wrongful acts alleged in the Action, and expressly
maintain that they complied with their fiduciary and other legal duties, and are entering into the Stipulation
solely because the Settlement will eliminate the burden and expense of further litigation.
12
{A&B-00187815}
Defendants deny any and all allegations of wrongdoing, fault, liability or damage to Lead Plaintiffs in the
Action or to other Class Members; deny that they engaged in, committed or aided or abetted the commission
of any breach of duty, wrongdoing or violation of law; deny that Lead Plaintiffs or any of the other Class
Members suffered any damage whatsoever; deny that they acted improperly in any way; believe that they
acted properly at all times; maintain that they complied with their fiduciary duties; maintain that they have
complied with federal and state securities laws; and maintain that they have committed no disclosure
violations or any other breach of duty or wrongdoing whatsoever in connection with the Merger or the MOU.
Defendants entered into the Stipulation solely to eliminate the uncertainties, burden and expense of further
litigation.
The Parties have covenanted and agreed that the fact of and provisions contained in the MOU, the Stipulation,
the Settlement and this Notice, and all negotiations, discussions, actions and proceedings in connection with
any of the foregoing shall not be deemed or constitute a presumption, concession or an admission by any Party
or any Released Defendant Party of any fault, liability or wrongdoing, or lack of any fault, liability or
wrongdoing, as to any facts or claims alleged or asserted in the Action or any other actions or proceedings, and
shall not be interpreted, construed, deemed, involved, invoked, offered or received in evidence or otherwise
used by any person in the Action or any other action or proceeding, whether civil, criminal or administrative;
provided, however, that the Stipulation and the Order and Final Judgment may be introduced in any
proceeding, whether in the Delaware Court or otherwise, as may be necessary to argue that the Stipulation
and/or Judgment has res judicata, collateral estoppel or other issue or claim preclusion effect or to otherwise
consummate or enforce the Settlement and the Order and Final Judgment.
VI.
APPLICATION FOR ATTORNEYS’ FEES AND EXPENSES
Concurrent with seeking final approval of the Settlement, Lead Counsel intend to petition the Court for an
award for attorneys’ fees to Plaintiffs’ Counsel of up to [INSERT] plus reimbursement of Plaintiffs’ Counsel’s
actual out-of-pocket expenses of up to [INSERT]. Lead Counsel will make this petition not less than twenty
business days prior to the Settlement Hearing.
Defendants reserve all rights to object to, to oppose, to consent to, or to take no position on Lead Counsel’s fee
and expense application. J.Crew (or its insurers), on behalf of J.Crew and the Individual Defendants, and TPG
and Leonard Green (or their insurers), on behalf of the Buyout Group, will pay any attorneys’ fees and
expenses awarded by the Court to Plaintiffs’ Counsel no later than ten (10) business days after the date of
entry by the Court of an order awarding such attorneys’ fees or expenses (the “Fee and Expense Award”),
notwithstanding the existence of any timely filed objections to the Fee and Expense Award, or potential for
appeal therefrom, or collateral attack on the Settlement or any part thereof; provided, however, that in the
event that the Fee and Expense Award is disapproved, reduced, reversed or otherwise modified, whether on
appeal, further proceedings on remand, successful collateral attack or otherwise, then Plaintiffs’ Counsel shall,
within ten (10) business days after Lead Counsel receives notice of any such disapproval, reduction, reversal
or other modification, return to J.Crew (or its insurers) the difference between the attorneys’ fees and expenses
awarded by the Court in the Fee and Expense Award on the one hand, and any attorneys’ fees and expenses
ultimately and finally awarded on appeal, further proceedings on remand or otherwise on the other hand.
VII.
CLASS ACTION DETERMINATION
For purposes of this Settlement, the Court has ordered that the Action shall be preliminarily maintained as a
non opt-out class action by the named Lead Plaintiffs as Class representatives under Chancery Court Rules
23(a), 23(b)(1), and 23(b)(2), on behalf of the Settlement Class defined above.
VIII.
SETTLEMENT HEARING
13
{A&B-00187815}
The Court has scheduled a Settlement Hearing, which will be held on _________ __, 2011 at_:00 _.m. (the
“Settlement Hearing Date”), in the Court of Chancery, New Castle County Courthouse, 500 North King Street,
Wilmington, Delaware 19801 to: (a) determine whether to certify a Settlement Class consisting of the persons
and entities described above as a non opt-out class pursuant to Court of Chancery Rules 23(a), 23(b)(1) and
23(b)(2); (b) determine whether the Court should approve the Settlement as fair, reasonable and adequate and
in the best interests of the Settlement Class; (c) determine whether Lead Plaintiffs and Plaintiffs’ Counsel have
adequately represented the interests of the Settlement Class in the Action; (d) determine whether final
judgment should be entered dismissing the Action and the Released Plaintiffs’ Claims as to the Released
Defendant Parties with prejudice as against Lead Plaintiffs and the Settlement Class, releasing the Released
Plaintiffs’ Claims and barring and enjoining prosecution of any and all Released Plaintiffs’ Claims (as
provided in the Stipulation of Settlement); (e) hear and determine any objections to the Settlement or the
application of Plaintiffs’ Counsel for an award of attorneys’ fees and expenses; (f) consider the application by
Plaintiffs’ Counsel for attorneys’ fees and reimbursement of expenses; and (g) rule on such other matters as
the Court may deem appropriate.
The Court has reserved the right to adjourn and reconvene the Settlement Hearing, including the hearing on the
application for attorneys’ fees and expenses, without further notice to Class Members other than oral
announcement at the Settlement Hearing. The Court has also reserved the right to approve the Settlement at or
after the Settlement Hearing with such modification(s) as may be consented to by the parties to the Stipulation
and without further notice to the Settlement Class.
IX.
RIGHT TO APPEAR AND OBJECT
Any member of the Settlement Class who objects to the Settlement and/or the Order and Final Judgment to be
entered by the Court, and/or Plaintiffs’ Counsel’s application for attorneys’ fees and expenses, or otherwise
wishes to be heard, may appear personally or by counsel at the Settlement Hearing and present any evidence or
argument that may be proper and relevant; provided, however, that no member of the Settlement Class may be
heard and no papers or briefs submitted by or on behalf of any member of the Settlement Class shall be
received and considered, except by Order of the Court for good cause shown, unless, no later than fifteen (15)
business days prior to the Settlement Hearing, such person files with the Register in Chancery, Court of
Chancery, 500 North King Street, Wilmington, DE, 19801, and serves upon the attorneys listed below: (a) a
written notice of intention to appear; (b) proof of membership in the Settlement Class; (c) a detailed statement
of objections to any matter before the Court; and (d) the grounds therefore or the reasons for wanting to appear
and be heard, as well as all documents or writings the Court shall be asked to consider. These writings must
also be served, on or before such filing with the Court, by hand or overnight mail upon the following
attorneys:
Stuart M. Grant, Esq.
Grant & Eisenhofer P.A.
1201 North Market Street
Wilmington, Delaware 19801
A. Thompson Bayliss, Esq.
Abrams & Bayliss LLP
20 Montchanin Road
Suite 200
Wilmington, Delaware 19807
Mark Lebovitch, Esq.
Bernstein Litowitz Berger &
Grossmann LLP
1285 Avenue of the Americas
New York, New York 10019
Gregory Williams, Esq.
Richards, Layton & Finger, P.A.
One Rodney Square
920 North King Street
Wilmington, Delaware 19801
14
{A&B-00187815}
Any Class Member who does not object to the Settlement or the request by Plaintiffs’ Counsel for an award of
attorneys’ fees and expenses need not take any action with respect to this Notice or this Settlement.
Unless the Court otherwise directs, no person will be entitled to object to the approval of the Settlement, the
judgment to be entered in the Action, or the fee and expense application, nor will he, she or it otherwise be
entitled to be heard, except by serving and filing a written objection as described above.
Any person who fails to object in the manner described above shall be deemed to have waived the right to
object (including the right to appeal) and will be forever barred from raising such objection in this or any other
action or proceeding.
X.
INTERIM STAY
Pending the Court’s determination as to final approval of the Settlement, all proceedings in the Action, other
than proceedings as may be necessary to carry out the terms and conditions of the Stipulation, are stayed and
suspended. Lead Plaintiffs, on behalf of themselves and on behalf of all members of the Settlement Class, and
Defendants have agreed to stay and not to initiate any other proceedings other than those incident to the
Settlement itself pending the occurrence of the Effective Date. The Parties have also agreed to use their best
efforts to seek the stay and dismissal of, and to oppose entry of any interim or final relief in favor of any Class
Member in, any other proceedings against any of the Released Defendant Parties which challenges the
Settlement or otherwise involves, directly or indirectly, a Released Plaintiffs’ Claim.
XI.
ORDER AND JUDGMENT OF THE COURT
If the Court determines that the Settlement, as provided for in the Stipulation, is fair, reasonable, adequate and
in the best interests of the Settlement Class, the Court will enter an Order and Final Judgment, which will,
among other things:
a. Determine that the form and manner of notice of the Settlement was the best notice practicable
under the circumstances and fully complied with each of the requirements of due process,
Delaware Court of Chancery Rule 23 and applicable law;
b. Determine that, for settlement purposes only, the Action is a proper class action pursuant to
Delaware Court of Chancery Rules 23(a), 23(b)(1) and 23(b)(2), and finally certify the Settlement
Class;
c. Determine that all members of the Settlement Class are bound by the Order and Final Judgment;
d. Determine that the Settlement is fair, reasonable, adequate, and in the best interests of Lead
Plaintiffs and the Settlement Class;
e. Dismiss the Action with prejudice, on the merits and without costs (except as provided in the
Stipulation);
f.
Fully, finally and forever release, settle and discharge the Defendant Parties from and with
respect to every one of the Released Plaintiffs’ Claims;
g. Bar and enjoin Plaintiffs and any Class Members from instituting, commencing, or prosecuting
any and all Released Plaintiffs’ Claims against any Released Defendant Parties; and
15
{A&B-00187815}
h. Award Plaintiffs’ Counsel such attorneys’ fees and expenses as the Court deems fair and
reasonable.
i.
Provide that the Order and Final Judgment, including the release of all Released Plaintiffs’
Claims against all Released Defendant Parties, shall have res judicata and other preclusive effect
in all pending and future lawsuits, arbitrations or other proceedings maintained by or on behalf
the Lead Plaintiffs or any other Class Members, as well as any and all of their respective
successors-in-interest, successors, predecessors-in-interest, predecessors, representatives, trustees,
executors, administrators, estates, heirs, assigns or transferees, immediate and remote, and any
person or entity acting for or on behalf of, or claiming under, any of them.
If either: (a) the Effective Date does not occur, (b) the Stipulation is disapproved, canceled or terminated
pursuant to its terms, or (c) the Settlement otherwise does not become Final for any reason, then the Settlement
Amount deposited into the custody of the Paying Agent shall be refunded (pro rata as applicable) by the
Paying Agent to J.Crew (or its insurers) and/or TPG and Leonard Green (or their insurers) within ten (10)
business days after such cancellation or termination.
If the Effective Date does not occur, or if the Stipulation is disapproved, canceled or terminated pursuant to its
terms, or the Settlement otherwise does not become Final for any reason, all of the Parties shall be deemed to
have reverted to their respective litigation status immediately prior to August 30, 2011, and they shall proceed
in all respects as if the Stipulation had not been executed and the related orders had not been entered, and in
that event all of their respective claims and defenses as to any issue in the Action or the MOU Enforcement
Action shall be preserved without prejudice; provided, however, that Section 27 of the Stipulation shall remain
in full effect. In the event the Effective Date does not occur, or the Stipulation is disapproved, canceled or
terminated pursuant to its terms, or the Settlement otherwise does not become final for any reason, Defendants
reserve the right to pursue the MOU Enforcement Action or to oppose certification of any plaintiff class in any
future proceedings (including, but not limited to, in any proceedings in the Action).
XII.
INSTRUCTIONS TO BROKERS AND OTHERS WHO HELD FOR THE BENEFIT OF OTHERS
Brokerage firms, banks and/or other persons or entities who held shares of J.Crew common stock for the
benefit of others are requested to immediately send this Notice to all such beneficial owners. If additional
copies of the Notice are needed for forwarding to such beneficial owners, any requests for such additional
copies or provision of a list of names and mailing addresses of beneficial owners may be made to:
Meredith Kotler
CLEARY GOTTLIEB STEEN & HAMILTON, LLP
One Liberty Plaza,
New York, NY
XIII. SCOPE OF THE NOTICE
This Notice is not all-inclusive. The references in this Notice to the pleadings in the Action, the Stipulation,
and other papers and proceedings are only summaries and do not purport to be comprehensive. For the full
details of the Action, claims which have been asserted by the Parties and the terms and conditions of the
Settlement, including a complete copy of the Stipulation, members of the Settlement Class are referred to the
Court files in the Action.
You or your attorney may examine the Court files from the Action during regular business hours of each
business day at the office of the Register in Chancery, New Castle County Courthouse, 500 North King Street,
Wilmington, Delaware 19801.
16
{A&B-00187815}
Questions or comments may be directed to counsel for the Lead Plaintiffs:
John C. Kairis
GRANT & EISENHOFER P.A.
1201 N. Market Street
Wilmington, DE 19801
(302) 622-7000
Mark Lebovitch
BERNSTEIN LITOWITZ BERGER & GROSSMANN LLP
1285 Avenue of the Americas
New York, NY 10019
(212) 554-1400
DO NOT WRITE OR TELEPHONE THE COURT.
Dated: August 31, 2011
17
{A&B-00187815}
EXHIBIT C
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN RE J.CREW GROUP, INC.
SHAREHOLDERS LITIGATION
Consolidated
C.A. No. 6043-CS
SUMMARY NOTICE OF PENDENCY AND
PROPOSED SETTLEMENT OF CLASS ACTION
TO:
ANY AND ALL PERSONS OR ENTITIES WHO WERE RECORD
HOLDERS OR BENEFICIAL OWNERS OF COMMON STOCK OF
J.CREW GROUP, INC. AT ANY TIME BETWEEN AND
INCLUDING AUGUST 1, 2010 AND MARCH 7, 2011
(REGARDLESS OF THE DATE OF PURCHASE OF COMMON
STOCK OF J.CREW GROUP, INC.), AND ANY PERSON OR
ENTITY ACTING FOR OR ON BEHALF OF, OR CLAIMING
UNDER, ANY OF THEM, AND EACH OF THEM
PLEASE READ THIS NOTICE CAREFULLY. YOUR RIGHTS WILL BE
AFFECTED BY A CLASS ACTION LAWSUIT PENDING IN THE COURT OF
CHANCERY OF THE STATE OF DELAWARE.
YOU ARE HEREBY NOTIFIED, pursuant to an Order of the Court of Chancery
of the State of Delaware (the “Court”), dated _______________, that Lead Plaintiffs and
Defendants in the above-captioned class action lawsuit (the “Action”), challenging the
merger of J.Crew Group, Inc. with and into affiliates of TPG Capital, L.P. and Leonard
Green & Partners, L.P., have entered into a proposed settlement of the Action (the
“Settlement”). A settlement hearing will be held in the Court of Chancery, New Castle
County Courthouse, 500 North King Street, Wilmington, Delaware 19801, on
______________, 2011, at __:__ _.m. (the “Settlement Hearing”) to, among other things:
(a) determine whether to certify a Settlement Class consisting of the persons and entities
described above, except for certain persons and entities who are excluded from the
Settlement Class by definition, as a non opt-out class pursuant to Court of Chancery
Rules 23(a), 23(b)(1) and 23(b)(2); (b) determine whether the Court should approve the
Settlement as fair, reasonable and adequate and in the best interests of the Settlement
Class; (c) determine whether Lead Plaintiffs and Plaintiffs’ Counsel have adequately
represented the interests of the Settlement Class in the Action; (d) determine whether
final judgment should be entered dismissing the Action and the Released Plaintiffs’
Claims as to the Released Defendant Parties with prejudice as against Lead Plaintiffs and
the Settlement Class, releasing the Released Plaintiffs’ Claims and barring and enjoining
prosecution of any and all Released Plaintiffs’ Claims (as provided in the Stipulation of
Settlement); (e) hear and determine any objections to the Settlement or the application of
Plaintiffs’ Counsel for an award of attorneys’ fees and expenses; (f) consider the
application by Plaintiffs’ Counsel for attorneys’ fees and reimbursement of expenses; and
(g) rule on such other matters as the Court may deem appropriate.
{A&B-00187818}
IF YOU ARE A MEMBER OF THE SETTLEMENT CLASS DESCRIBED
ABOVE, YOUR RIGHTS WILL BE AFFECTED BY THE PENDING ACTION AND
THE SETTLEMENT. If you have not yet received the full printed Notice of Pendency
and Proposed Settlement of Class Action (the “Notice”), you may obtain a copy of the
Notice by contacting Plaintiffs’ Counsel:
Mark Lebovitch, Esq.
Bernstein Litowitz Berger & Grossmann LLP
1285 Avenue of the Americas
New York, New York 10019
If you are a Settlement Class member you will be bound by any judgment entered
in the Action. Any objections to the Settlement and/or application for attorneys’ fees and
expenses must be filed with the Court and delivered to all counsel listed in the Notice
such that they are received no later than ______________, 2011, in accordance with the
instructions set forth in the Notice. Settlement Class members who do not object need
not appear at the Settlement Hearing or take any other action to indicate their approval.
PLEASE DO NOT CONTACT THE COURT OR THE CLERK’S OFFICE
REGARDING THIS NOTICE. Inquiries may be made to Plaintiffs’ Counsel:
John C. Kairis, Esq.
GRANT & EISENHOFER P.A.
1201 North Market Street
Wilmington, Delaware 19801
Mark Lebovitch, Esq.
Bernstein Litowitz Berger & Grossmann LLP
1285 Avenue of the Americas
New York, New York 10019
Dated: _________________, 2011
BY ORDER OF
CHANCERY OF
DELAWARE
2
THE
THE
COURT
STATE
OF
OF
EXHIBIT D
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN RE J.CREW GROUP, INC.
SHAREHOLDERS LITIGATION
Consolidated
C.A. No. 6043-CS
ORDER AND FINAL JUDGMENT
On this _____ day of _________, 2011, a hearing having been held before this Court to
determine whether the terms and conditions of the Stipulation and Agreement of Compromise
and Settlement, dated August 30, 2011 (the “Stipulation”), which is incorporated herein by
reference1, and the terms and conditions of the settlement proposed in the Stipulation (the
“Settlement”) are fair, reasonable and adequate for the settlement of all claims asserted herein;
and whether an Order and Final Judgment should be entered in the above-captioned consolidated
class action (the “Action”); and the Court having considered all matters submitted to it at the
hearing and otherwise;
NOW, THEREFORE, IT IS HEREBY ORDERED, ADJUDGED AND DECREED
THAT:
1.
The mailing of the Notice of Pendency and Proposed Settlement of Class Action
(the “Notice”) pursuant to and in the manner prescribed in the Scheduling Order entered on
_______________, 2011 (the “Scheduling Order”), which was mailed by first class mail on
_____________, 2011, combined with the publication of the Summary Notice of Pendency and
Proposed Settlement of Class Action (the “Summary Notice”) pursuant to and in the manner
prescribed in the Scheduling Order, which was published on ________________, 2011, is
1
Capitalized terms (other than proper nouns) that are not defined herein shall have the
meanings set forth in the Stipulation.
{A&B-00187816}
hereby determined to be the best notice practicable under the circumstances and in full
compliance with Court of Chancery Rule 23, the requirements of due process and applicable law.
It is further determined that all Class Members are bound by the Order and Final Judgment
herein.
2.
The Court finds that the Action is a proper class action pursuant to Court of
Chancery Rules 23(a) and 23(b)(1) and (b)(2) and hereby certifies a non opt-out Settlement Class
as consisting of:
Any and all J.Crew stockholders who were record holders or beneficial
owners of J.Crew common stock at any time between and including August 1,
2010 and the Closing of the Merger (regardless of the date of purchase of
J.Crew stock), and any person or entity acting for or on behalf of, or claiming
under, any of them, and each of them, but excluding Defendants and the MD
Trusts (and their trustees in their capacities as such); the Immediate Family
members of the Individual Defendants; the parents, subsidiaries and affiliates
of J.Crew, TPG, Leonard Green, Chinos Holdings, Chinos Acquisition and
each of their current or former directors, executive officers2, partners and
members; any person, firm, trust, corporation or other entity in which any
Defendant or the MD Trusts has, or had during the Settlement Class Period, a
controlling interest; and the legal representatives, heirs, executors,
administrators, predecessors, successors, predecessors-in-interest, successorsin-interest and assigns of any such excluded party.
3.
Specifically, the Court finds that the Settlement Class satisfies the numerosity
requirement of Rule 23(a)(1). As of January 21, 2011, there were over 63,907,720 shares of
common stock (“Shares”) of J.Crew Group, Inc. (“J.Crew”) issued and outstanding held by at
least 77 holders of record and many more beneficial owners. There are common issues of fact
and law in the Action sufficient to satisfy Rule 23(a)(2), including whether the disclosures made
by in connection with the Merger (as defined in the Stipulation) were adequate, whether the
Individual Defendants breached their fiduciary duties to Class Members (as defined in the
2
For J.Crew, the executive officers are those employees listed in paragraphs 100 and 101
of the Complaint.
{A&B-00187816}
2
Stipulation), whether the Buyout Group (as defined in the Stipulation) aided and abetted these
breaches, and whether the lead plaintiffs in this Action (“Lead Plaintiffs”) and Class Members
were injured as a consequence of Defendants’ actions. The claims of the Lead Plaintiffs’ in the
Action are typical of the claims of absent members of the Settlement Class in that they all arise
from the same allegedly wrongful course of conduct and are based on the same legal theories,
satisfying Rule 23(a)(3).
The Lead Plaintiffs’ and Plaintiffs’ Counsel (as defined in the
Stipulation) are adequate representatives of the Settlement Class, satisfying Rule 23(a)(4). The
prosecution of separate actions by individual members of the Settlement Class would create a
risk of inconsistent adjudications which would establish incompatible standards of conduct for
Defendants, and, as a practical matter, the disposition of this Action will influence the
disposition of any pending or future identical cases brought by other members of the Settlement
Class, satisfying Rule 23(b)(1); and there were allegations that Defendants acted or refused to act
on grounds generally applicable to the Class, satisfying Rule 23(b)(2).
4.
The Settlement of this Action as provided for in the Stipulation is approved as
fair, reasonable and adequate, and in the best interests of Lead Plaintiffs and the Settlement
Class.
5.
The Parties (as defined in the Stipulation) are hereby authorized and directed to
consummate the Settlement in accordance with the terms and provisions of the Stipulation, and
the Register in Chancery is directed to enter and docket this Order and Final Judgment.
6.
“Released Defendants’ Claims” means any Claims that have been or could have
been asserted in the Action, the MOU Enforcement Action, or in any court, tribunal, forum or
proceeding by Defendants or any of them or their respective successors and assigns against any
of the Released Plaintiff Parties, which arise out of or relate in any way to the institution,
{A&B-00187816}
3
prosecution, settlement or dismissal of the Action or the MOU Enforcement Action; provided,
however, that the Released Defendants’ Claims shall not include claims to enforce the
Stipulation.
7.
“Released Defendant Parties” means (i) any and all of the Defendants; (ii) the MD
Trusts; (iii) the Defendants’ respective past or present Immediate Family members, or direct or
indirect affiliates, associates, members, partners, partnerships, investment funds, subsidiaries,
parents, predecessors, successors, officers (including those executive officers of J.Crew listed in
paragraphs 100 and 101 of the Complaint), directors, employees, agents, advisors, financial or
investment advisors, insurers, and attorneys (including Defendants’ Counsel); (iv) any person,
firm, trust, corporation, officer, director or other individual or entity in which any of the
Defendants or their respective past or present Immediate Family Members, direct or indirect
affiliates, partnerships, investment funds, predecessors, successors, officers, directors or
employees has a financial interest; (v) the Buyout Group and each and every one of their
respective affiliated investment funds, investment vehicles, investment advisers, management
companies, partners, general partners, managing members, members, limited partners, trusts,
principals, investment professionals, directors, officers, employees and affiliates; and (vi) the
legal representatives, heirs, executors, administrators, predecessors, successors, predecessors-ininterest, successors-in-interest and assigns of any of the foregoing.
8.
“Released Plaintiffs’ Claims” means any and all Claims which are based upon,
arise out of, or involve or previously were based upon, arose out of or involved, directly or
indirectly, any of the actual, alleged or attempted actions, transactions, occurrences, statements,
representations, misrepresentations, omissions, allegations, facts, practices, events, claims or any
other matters, things or causes whatsoever, or any series thereof, that (i) were alleged, asserted,
{A&B-00187816}
4
set forth, or claimed in the Action or the Complaint against the Released Defendant Parties; or
(ii) could have been alleged, asserted, set forth or claimed in the Action, in the Complaint or in
any other court, tribunal, forum or proceeding by any or all Lead Plaintiffs or any or all of the
other Class Members, and which arise out of the Class Members’ J.Crew stockholdings or the
Class Members’ status as J.Crew stockholders during the Settlement Class Period, including any
and all Claims which are based upon, arise out of, relate in any way to, or involve, directly or
indirectly, (a) the Merger or any element, term, condition or circumstance of the Merger, (b) any
actions, deliberations, negotiations, discussions, offers, inquiries, solicitations of interest,
indications of interest, bids, due diligence or any act or omission in connection with the review
of strategic alternatives available to J.Crew, the Merger or any Alternative Transaction, including
the process of deliberation or negotiation by J.Crew, the Special Committee, TPG, Drexler, the
MD Trusts, Leonard Green, Parent, and/or Merger Sub and any of their respective officers,
directors or advisors, (c) the consideration received by Class Members in connection with the
Merger, (d) the Preliminary Proxy Statement and any amendments thereto, the Definitive Proxy
Statement and any amendments thereto, the Schedule 13e-3 and any amendments thereto, or any
other disclosures, SEC filings, public filings, periodic reports, press releases, proxy statements or
other statements issued, made available, or filed or otherwise disclosed or communicated
relating, directly or indirectly, to the Merger, including claims under any and all federal or state
securities laws or federal or state antitrust laws (including those within the exclusive jurisdiction
of the federal courts), (e) any employment, compensation, equity rollover, voting or support
agreement between Drexler, employees of J.Crew or their respective affiliates, on the one hand,
and Chinos Holdings, Chinos Acquisition or the Buyout Group or any of their respective
affiliates, on the other hand, (f) the fiduciary duties or obligations of the Released Defendant
{A&B-00187816}
5
Parties in connection with the review of strategic alternatives available to J.Crew, the Merger, or
any Alternative Transaction, (g) the vesting of stock options owned by any or all Released
Defendant Parties in connection with the Merger, or the granting of stock options or restricted
stock of J.Crew to any or all Released Defendant Parties; (h) the March 1 vote of J.Crew
stockholders approving the Merger; (i) proxy solicitation efforts in connection with the March 1
vote of the J.Crew stockholders on the Merger; (j) the go shop, including the extended go shop;
(k) the Merger Agreement Amendment; (l) the Amended Merger Agreement; (m) the MOU; (n)
the January 18, 2011 press release issued by J.Crew announcing the MOU and the extension of
the Go Shop period; (o) the setting of the record date for the Merger and the mailing of the
Definitive Proxy Statement; or (p) the fees, expenses or costs incurred in prosecuting, defending,
or settling the Action, except to the extent of an attorneys’ fees award made pursuant to Clause G
of the Stipulation; provided, however, that the Released Plaintiffs’ Claims shall not include
(1) the right to enforce the Stipulation; or (2) any claims solely for statutory appraisal with
respect to the Merger pursuant to Section 262 of the Delaware General Corporation Law by
J.Crew shareholders who properly perfected such claims for appraisal and do not otherwise
waive their appraisal rights.
9.
“Released Plaintiff Parties” means Lead Plaintiffs, all other Class Members, and
their respective counsel (including Plaintiffs’ Counsel).
10.
“Unknown Claims” means any and all Released Plaintiffs’ Claims which Lead
Plaintiffs or any other Class Member does not know or suspect to exist in his, her, or its favor at
the time of the release of the Released Plaintiffs’ Claims against the Released Defendant Parties,
which if known by him, her or it, might have affected his, her or its decision(s) with respect to
the Settlement, and any and all Released Defendants’ Claims which any Defendant or any other
{A&B-00187816}
6
Released Party does not know or suspect to exist in his, her, or its favor at the time of the release
of the Released Defendants’ Claims against the Released Plaintiff Parties, which if known by
him, her, or it might have affected his, her, or its decision(s) with respect to the Settlement. With
respect to any and all Released Plaintiffs’ Claims and Released Defendants’ Claims, the Parties
stipulate and agree that upon the Effective Date, Lead Plaintiffs and Defendants shall expressly
waive, and each of the Class Members shall be deemed to have, and by operation of the
Judgment shall have expressly, waived, relinquished and released any and all provisions, rights
and benefits conferred by any law of any state or territory of the United States or other
jurisdiction, or principle of common law or foreign law, which is similar, comparable, or
equivalent to Cal. Civ. Code § 1542, which provides:
A general release does not extend to claims which the creditor does not know or
suspect to exist in his or her favor at the time of executing the release, which if
known by him or her must have materially affected his or her settlement with the
debtor.
Lead Plaintiffs and Defendants acknowledge, and the other Class Members by operation of law
shall be deemed to have acknowledged, that they may discover facts in addition to or different
from those now known or believed to be true with respect to the Released Plaintiffs’ Claims and
the Released Defendants’ Claims, but that it is the intention of Lead Plaintiffs and Defendants,
and by operation of law the other Class Members, to completely, fully, finally and forever
extinguish any and all Released Plaintiffs’ Claims and Released Defendants’ Claims, known or
unknown, suspected or unsuspected, which now exist, or heretofore existed, or may hereafter
exist, and without regard to the subsequent discovery of additional or different facts. Lead
Plaintiffs and Defendants acknowledge, and the other Class Members by operation of law shall
be deemed to have acknowledged, that the inclusion of “Unknown Claims” in the definition of
{A&B-00187816}
7
Released Plaintiffs’ Claims and Released Defendants’ Claims was separately bargained for and
was a key element of the Settlement.
11.
This Action and the Released Plaintiffs’ Claims are hereby dismissed as to the
Released Defendant Parties on the merits and with prejudice, and without costs.
12.
Upon the Effective Date, Lead Plaintiffs and all Class Members, on behalf of
themselves, their legal representatives, heirs, executors, administrators, estates, predecessors,
successors, predecessors-in-interest, successors-in-interest and assigns, and any person or entity
acting for or on behalf of, or claiming under, any of them, and each of them, shall thereupon
fully, finally and forever, release, settle and discharge the Released Defendant Parties from and
with respect to every one of the Released Plaintiffs’ Claims, and shall thereupon be forever
barred and enjoined from commencing, instituting or prosecuting any Released Plaintiffs’ Claims
against any of the Released Defendant Parties.
13.
Upon the Effective Date, each of Defendants, on behalf of themselves and the
other Released Defendant Parties and any person or entity acting for or on behalf of, or claiming
under, any of them, and each of them, shall thereupon fully, finally and forever, release, settle
and discharge the Released Plaintiff Parties from and with respect to every one of the Released
Defendants’ Claims, and shall thereupon be forever barred and enjoined from commencing,
instituting or prosecuting any of the Released Defendants’ Claims against any of the Released
Plaintiff Parties.
14.
None of the Stipulation, nor the fact or any terms of the Settlement, or any
communications relating thereto, is evidence, or an admission or concession by any Party or their
counsel, Class Member, or any other Released Defendant Party or Released Plaintiff Party, of
any fault, liability or wrongdoing whatsoever, as to any facts or claims alleged or asserted in the
{A&B-00187816}
8
Action or the MOU Enforcement Action, or any other actions or proceedings, or as to the
validity or merit of any of the claims or defenses alleged or asserted in any such action or
proceeding. The Stipulation shall not be deemed a finding or evidence of the validity or
invalidity of any claims or defenses in the Action or the MOU Enforcement Action, any
wrongdoing by any Party, Class Member or other Released Defendant Party or Released Plaintiff
Party, or any damages or injury to any Party, Class Member or other Released Defendant Party
or Released Plaintiff Party. None of the Stipulation, nor any of the terms and provisions of the
Stipulation, nor any of the negotiations or proceedings in connection therewith, nor any of the
documents or statements referred to herein or therein, nor the Settlement, nor the fact of the
Settlement, nor the Settlement proceedings, nor any statements in connection therewith, (a) shall
(i) be argued to be, used or construed as, offered or received in evidence as, or otherwise
constitute an admission, concession, presumption, proof, evidence, or a finding of any liability,
fault, wrongdoing, injury or damages, or of any wrongful conduct, acts or omissions on the part
of any of the Released Defendant Parties or Released Plaintiff Parties, or of any infirmity of any
defense, or of any damage to Lead Plaintiffs or any other Class Member, or (ii) otherwise be
used to create or give rise to any inference or presumption against any of the Released Defendant
Parties or Released Plaintiff Parties concerning any fact or any purported liability, fault, or
wrongdoing of the Released Defendant Parties or Released Plaintiff Parties or any injury or
damages to any person or entity, or (b) shall otherwise be admissible, referred to or used in any
proceeding of any nature, for any purpose whatsoever; provided, however, that the Stipulation
and/or Judgment may be introduced in any proceeding, whether in this Court or otherwise, as
may be necessary to argue and establish that the Stipulation and/or Judgment has res judicata,
collateral estoppel or other issue or claim preclusion effect or to otherwise consummate or
{A&B-00187816}
9
enforce the Settlement and/or Judgment or to secure any insurance rights or proceeds of any of
the Released Defendant Parties or Released Plaintiff Parties.
15.
Plaintiffs’ Counsel are hereby awarded attorneys’ fees in the sum of
$______________ in connection with the Action, which sum the Court finds to be fair and
reasonable, and reimbursement of expenses in the amount of $__________. Such sums shall be
paid pursuant to the provisions of the Stipulation. No counsel representing any Class Member in
any of the Actions shall make any further or additional application for fees and expenses to the
Court or any other court.
16.
If the Effective Date does not occur, this Order and Final Judgment shall be
rendered null and void and shall be vacated and, in such event, all orders entered and releases
delivered in connection herewith shall be null and void; the Parties returned, without prejudice in
any way, to their respective litigation positions immediately prior to the execution of the
Stipulation.
17.
The binding effect of this Order and Final Judgment and the obligations of Lead
Plaintiffs, Class Members and Defendants under the Settlement shall not be conditioned upon or
subject to the resolution of any appeal from this Order and Final Judgment that relates solely to
the issue of Plaintiffs’ Counsel’s (or any other counsel’s) application for an award of attorneys’
fees and expenses.
18.
All Class Members shall be and are deemed bound by the Stipulation and this
Order and Final Judgment. This Order and Final Judgment, including the release of all Released
Plaintiffs’ Claims against all Released Defendant Parties, shall have res judicata and other
preclusive effect in all pending and future lawsuits, arbitrations or other proceedings maintained
by, or on behalf of, any of the Lead Plaintiffs or any Class Members, as well as their respective
{A&B-00187816}
10
heirs, executors, administrators, estates, predecessors-in-interest, predecessors, successors-ininterest, successors, and assigns and anyone claiming through or on behalf of any of them.
19.
Without further order of this Court, the Parties may agree in writing to reasonable
extensions of time to carry out any of the provisions of the Stipulation.
20.
Without affecting the finality of this Order and Final Judgment in any way, this
Court reserves jurisdiction over all matters relating to the administration and consummation of
the Settlement.
Dated: ______________, 2011
Chancellor
{A&B-00187816}
11