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EXHIBIT 10.27
IN RE XXXXX MEDICAL CORPORATION SECURITIES LITIGATION
MEMORANDUM OF UNDERSTANDING
This Memorandum of Understanding ("MOU") contains the principal terms
of a settlement (the "Settlement") between Xxxxx Medical Corporation
(Delaware), its wholly-owned subsidiary Xxxxx Medical Corporation, a California
corporation, Xxxxxx X. Xxxxxx, Xxxxx X. Xxxxxxxxx, and Xxxxxxxx X. Xxxxx
(collectively, "Defendants") and plaintiffs in the Xxxxx Medical Corporation
Securities Litigation, United States District Court for the Central District of
California (Santa Xxx), Master File No. SACV-92-791-GLT ("the Action").
1. This Settlement is conditioned upon the approval by the Xxxxx
Board of Directors, which approval or lack thereof will be determined on or
before July 26, 1995.
2. On or before August 10, 1995, Defendants will pay or cause to
be paid $5.0 million into an escrow account established by Xxxxxxx, Xxxxx,
Bershad, Xxxxx & Xxxxxx (the "Fund"), and subject to the jurisdiction of the
Court. If the amount is not deposited into the Fund by August 10, 1995, then
the $5.0 million will bear interest from July 26, 1995 at the rate of 7.25% per
annum until the date deposited. All interest accruing on the Fund shall become
part of the Fund from which the plaintiffs' and class claims, costs and
attorneys' fees are to be paid and shall enure to the benefit of plaintiffs,
the class and their counsel. The Settlement proceeds shall be allocated among
plaintiffs and the class pursuant to a plan of allocation determined by
plaintiffs' co-lead counsel, subject to the approval of the Court.
3. Additionally, except as otherwise provided below, Defendants
shall cause to be distributed, through Xxxxx' Transfer Agent, to plaintiffs and
the class at a date to be determined by the parties (the "Date of
Distribution") 689,655 shares of Xxxxx common stock. These shares shall have a
minimum trading value of $7.25 per share (the "Value")
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calculated as the average closing price of Xxxxx common stock for the twenty
(20) trading days immediately prior to the 10th day preceding the Date of
Distribution. In the event that the Value is less than $7.25, Defendants shall
contribute additional shares such that the aggregate Value is $5,000,000. If
the Value is between $7.25 and $9.25, Defendants shall distribute to plaintiffs
and the class 689,655 shares. If the Value exceeds $9.25, then the number of
shares will be reduced so that the number of shares multiplied by the Value
equals $6,379,308.75. Notwithstanding anything else set forth herein, in lieu
of the shares to be contributed by Defendants under this paragraph, Defendants
may at their sole discretion choose to contribute to the Fund $5.0 million plus
interest calculated at 7.25% per annum from July 26, 1995 to the date of
payment of this amount.
The costs associated with the printing and mailing of share
certificates by Xxxxx' Transfer Agent (but not including costs of its labor)
shall be "costs" within the meaning of paragraph 2 hereof and shall, therefore,
be paid out of the Fund.
4. Any attorneys' fees and costs awarded plaintiffs' counsel by
the Court shall be paid to plaintiffs' counsel immediately upon award,
notwithstanding the existence of any timely filed objection thereto, or
potential for appeal therefrom, or collateral attack on the Settlement or any
part thereof, subject to plaintiffs' counsel's several obligation to make
appropriate refunds or repayments to the Settlement Fund plus interest at a
rate to be agreed upon between the parties if, and when, as a result of any
appeal and/or further proceedings on remand, or successful collateral attack,
the fee or cost award is lowered.
5. In consideration for the payments and/or contributed shares to
the Fund described in paragraphs 2 and 3 above plaintiffs agree to the full and
complete settlement of the Action, dismissal of the Action with prejudice and
release of all claims against all Defendants in the Action (or their current
and former employees, agents, attorneys,
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accountants, officers, directors, affiliates, insurers, or any of them) arising
out of or relating in any way to the Action or any matter which could have been
raised therein, including without limitation, claims under any federal
securities laws, state securities laws and common law claims, known and
unknown, that have been or could have been made in the Action based on or
related to both (i) the purchase of Xxxxx common stock during the Class Period
and (ii) any statements, actions or omissions of Defendants (or their current
and former employees, agents, attorneys, accountants, officers, directors,
affiliates, insurers or any of them) occurring during the Class Period. The
release contemplated hereunder shall expressly waive and relinquish all rights
and benefits afforded by Section 1542 of the California Civil Code or other
statutes or common law principles of similar effect. The Defendants will
provide a release of all class members and their counsel. Despite the fact
that there has been extensive discovery in the Action, each party to this
Settlement understands that the actual facts pertaining to the events alleged
in the Action or otherwise relevant to the making of this Settlement may be
different from what each Party believes to be true, and each Party hereby
accepts and assumes the risk of the facts and assumptions turning out to be
different and agrees that this Settlement shall be and remain in all respects
effective and not subject to termination or rescission by virtue of any such
difference.
6. The Settlement will not be conditioned upon the obtaining of
or any judicial approval of any releases between or among the Defendants and/or
any third parties. No such releases will be contained in the Stipulation or
referred to in the Final Judgment approving the Settlement, provided, however,
that the Stipulation of Settlement shall require that the parties obtain an
order barring claims for contribution or indemnity by or among all or any of
the Defendants to the full extent permitted by the law including, without
limitation, the
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decision in Xxxxxxxx x. Xxxxxx, 884 F.2d 1222 (9th Cir. 1989), cert. denied,
498 U.S. 890 (1990).
7. While retaining their right to deny liability, Defendants
agree they will not assert in any public forum that the litigation was brought
in bad faith. Similarly, plaintiffs agree not to assert in any public forum
that any defense raised by the Defendants was raised in bad faith. The
settling parties agree that the settlement payments (both cash and stock) and
other terms of the Settlement were negotiated in good faith by the settling
parties and reflect a Settlement that was reached voluntarily after
consultation with experienced legal counsel.
A breach of this paragraph 7 shall not be a material breach
for the purposes of paragraph 8.
8. The Settlement will be non-recapture, i.e., it is not a
claims-made settlement; provided, however, if class members holding more than
10% of the settlement eligible shares opt out of the Settlement, Defendants
shall have the unilateral right to rescind the Settlement. The parties will
execute a Supplemental Agreement (separate from the Stipulation of Settlement
to be negotiated) providing this right to rescind to the Defendants. The
Supplemental Agreement will not be filed with the Court unless a dispute arises
concerning its interpretation and, in that event, it shall be filed and
maintained with the Court under seal. The defendants have no ability to get
back any of the settlement monies, except in the event the Court fails to
approve the Settlement or the Defendants choose to rescind the Settlement as
set forth above. In either event, the settlement funds plus interest accrued
shall be returned to the respective payors of those funds, less the reasonable
administrative costs incurred in sending notices to class members. Conversely,
plaintiffs will have no right to withdraw from the Settlement, unless the
Defendants (or any of them) breach a material term
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of the Settlement. The settlement claims process will be administered by
Xxxxxxx and Company and the defendants will have no involvement in reviewing or
challenging claims.
9. The parties will promptly memorialize the Settlement in a
Stipulation of Settlement, and will jointly seek preliminary approval of the
Settlement and approval of notice as soon as practicable.
10. All costs of notice and expenses related to printing and
mailing of all required notices to the members of the Class will be paid from
the cash portion of the Settlement Fund.
11. This MOU may be executed in separate counterparts.
AGREED TO ON THIS __ DAY OF JULY, 1995.
Dated: July 31, 1995 /s/ Xxxxx Xxxxx Xxxxx
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XXXX XXXXXXXX
XXXXXXX XXXXX XXXXXXX
XXXXX & XXXXXX
Dated: July 31, 1995 /s/ Xxxxxx X. Xxxx
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XXXXXX X. XXXX
XXXXX, XXXXXXXX, XXXXXXXX
& TOLL
Co-Lead Counsel for Plaintiffs
Dated: July 31, 1995 /s/ Xxxxxx Xxxxxxx
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XXXXXX X. XXXXXX
XXXXXX & XXXXXXX
Counsel for the Defendants
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