Exhibit 17(C)(2)
MEMORANDUM OF UNDERSTANDING
This MEMORANDUM OF UNDERSTANDING is entered into as of April 26, 1999
among the plaintiffs ("Plaintiffs") in the Actions (as defined herein), Xxxxxxx
International Group Inc. ("Xxxxxxx"), the members of Xxxxxxx'x Board of
Directors (the "Xxxxxxx Board"), Hay Island Holding Corporation ("Hay Island")
and SIGI Acquisition Corporation ("SIGI"), by their undersigned attorneys.
Except as otherwise stated in this Memorandum of Understanding, capitalized
terms herein have the meaning given them in the Agreement and Plan of Merger
dated as of December 9, 1998 among Xxxxxxx, XXXX and Hay Island (the "Merger
Agreement"}.
WHEREAS, there are now pending six actions in the Court of Chancery of
the State of Delaware (the "Court"), styled Xxxxxx Xxxxxx v. Xxxxxxx X.
Brighton, et al., Civil Action No. 16834NC; Xxx Xxxx x. Xxxxxxx Xxxxxxx, III, et
al., Civil Action No. 16839NC; Xxxx Xxxxxxx Xxxxxx v. Xxxxxxx X. Brighton, et
al., Civil Action No. 16837NC; Harbor Finance Partners v. Xxxxxxx Xxxxxxx, III,
et al., Civil Action No. 16838NC; Xxxxxx Xxxxxxx v. Xxxxxxx X. Brighton, et al.,
Civil Action No. 16842NC; and Xxxxxx Xxxxx v. Xxxxxxx Xxxxxxx, III, et al.,
Civil Action No. 16861NC (collectively and, if hereafter consolidated, "the
Actions"); and
WHEREAS, the Actions were filed as putative class actions on behalf of
a class of public holders of Xxxxxxx common stock (the "Class"), relating to the
proposed merger (the "Transaction") of Xxxxxxx and SIGI, as set forth in the
Merger Agreement; and
WHEREAS, collectively the Actions name as defendants Xxxxxxx, the
members of the Xxxxxxx Board and SIGI; and
WHEREAS, the Actions seek declaratory and injunctive relief, monetary
damages and/or rescission with respect to the Transaction based upon the
allegation, inter alia,
that the conduct of the members of the Xxxxxxx Board in connection with the
Transaction constitutes a breach of their fiduciary duties; and
WHEREAS, the defendants deny that they have committed or have attempted
to commit any violation of law or breach of duty, including breach of any duty
to any Swisher shareholders, or have otherwise acted in any improper manner; and
WHEREAS, following negotiations between the parties, counsel for the
parties have reached an agreement in principle providing for the proposed
settlement of the Actions on the terms and conditions set forth below (the
"Settlement"); and
WHEREAS, counsel for the plaintiffs believe that the proposed
Settlement is in the best interests of the public shareholders of Xxxxxxx;
NOW, THEREFORE, IT IS HEREBY AGREED IN PRINCIPLE AS FOLLOWS:
1. Principal Terms of Settlement. Subject to the additional conditions,
terms and limitations described herein, as a result of the bringing of the
Actions, the parties agree in principle as follows:
x. Xxxxxxx agrees that prior to dissemination to its shareholders
of a proxy statement seeking shareholder approval of the Transaction
(the "Proxy Statement"), it shall provide a non-public draft or drafts
of such Proxy Statement to co-lead counsel for Plaintiffs for review
and comment. Notwithstanding the foregoing, Plaintiffs recognize that
Xxxxxxx shall be under no obligation to include comments provided by
Plaintiffs' counsel in the Proxy Statement. Plaintiffs further agree
that any drafts of the Proxy Statement received by Plaintiffs' counsel
hereunder shall be used solely for the purposes described in this
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subparagraph and for no other purpose, and shall be held strictly
confidential and shall not be disclosed by Plaintiffs or Plaintiffs'
counsel.
b.(i) Prior to the dissemination to Xxxxxxx shareholders of the
Proxy Statement, Xxxxxxx shall, to the extent not already in the
possession of Plaintiffs' counsel, provide Plaintiffs' counsel
Xxxxxxx'x Annual Report on Form 10-K for the year ended December 31,
1998, together with preliminary summary information concerning
Xxxxxxx'x earnings for the quarter ended March 31, 1999 (the
"Information"). Plaintiffs understand and agree that the Information is
provided solely to enable Plaintiffs to form a belief as to the
fairness of the Merger Consideration to the members of the Class as of
the present time and for no other purpose, and the Information shall be
held strictly confidential and shall not be disclosed by Plaintiffs or
Plaintiffs' counsel except to a single independent expert retained or
to be retained by Plaintiffs to assist Plaintiffs in evaluating
fairness as aforesaid. The identity of Plaintiffs' independent expert
shall be disclosed to Xxxxxxx at or before the time any Information is
disclosed to such independent expert. Plaintiffs, Plaintiffs' counsel
and such expert hereby covenant and agree that they will not, while
in possession of such Information and for such time as such Information
is not publicly available, trade in any securities of Xxxxxxx.
(ii)(a) If Plaintiffs shall conclude, upon review of the
Information, that the Merger Consideration is not fair to the members
of the Class, then the settlement agreed to in principle herein shall
he void and of no effect, and each party hereto shall immediately
return all information (including the Information)
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received from any other party and any copies, notes, extracts or other
information derived therefrom to the party originally providing such
information, and no parties hereto shall have any obligation to any
other party hereto arising out of this Memorandum of Understanding
except with respect to the agreements concerning confidentiality,
non-disclosure, and securities trading contained herein.
(b) If Plaintiffs shall conclude, upon review of the Information,
that the Merger Consideration is fair, then that fact may, at Xxxxxxx'x
option, be disclosed in the Proxy Statement or any supplement thereto
as Xxxxxxx shall in its sole discretion determine.
x. Xxxxxxx, the Xxxxxxx Board, and SIGI agree that pending
consideration of the settlement provided for herein by the Court and,
if the Court shall approve the terms of the settlement provided for
herein, thereafter they will not:
(i) prior to the earlier of effectiveness of the Transaction or
termination thereof pursuant to the Merger Agreement, disband the
Special Committee or restrict the current scope of its authority
relating to the Transaction, or
(ii) for a period of twelve months following the date hereof,
without consultation and negotiation with the Special Committee,
cause Xxxxxxx to engage in any freeze-out merger other than the
Transaction pursuant to which the shares of stock of Xxxxxxx held
by the public are converted into cash without their consent;
provided, however, that it is
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expressly understood and agreed that the foregoing shall not be
deemed to limit in any respect the right of Xxxxxxx, XXXX, Hay
Island or any other person or entity to purchase shares of Xxxxxxx
stock on the open market, in privately negotiated transactions, by
tender offer or otherwise except as expressly restricted above.
2. Stipulation of Settlement. The parties to the Actions will attempt
in good faith to agree upon and execute an appropriate Stipulation of Settlement
(the "Stipulation") and such other documentation as may be required in order to
obtain Final Court Approval (as defined below) of the Settlement and the
dismissal of the Actions upon the terms set forth in this Memorandum of
Understanding (collectively, the "Settlement Documents"). The Stipulation will
expressly provide, inter alia, for certification of a non-opt out settlement
class pursuant to Delaware Court of Chancery Rules 23(b)(1) and (b)(2) of
holders of Class A common stock of Xxxxxxx and their successors in interest and
transferees, immediate and remote, from December 9, 1998 through and including
the Effective Time (the "Class"); for entry of a judgment dismissing the Actions
with prejudice; for a complete release and settlement of all claims, whether
asserted directly, derivatively or otherwise, against defendants or any of their
families, parent entities, affiliates, subsidiaries, predecessors, successors
or assigns, and each and all of their respective past, present or future
officers, directors, associates, stockholders, controlling persons,
representatives, employees, attorneys, financial or investment advisors,
consultants, accountants, investment bankers, commercial bankers, engineers,
advisors or agents, heirs, executors, trustees, general or limited partners or
partnerships, personal representatives, estates or administrators, which have
been, or could have been, asserted relating to the Transaction, the actions of
Xxxxxxx, the Xxxxxxx Board (including each member herein). Hay
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Island or SIGI relating to the Transaction, the related disclosure materials,
disclosures, facts and allegations that are or could (insofar as such
transactions, disclosures, facts and allegations relate to, or occurred in
connection with, the subject matter of the Actions) be the subject of the
Actions or of an action in any other forum; that defendants have denied and
continue to deny that they have committed or attempted to commit any violations
of law or breaches of duty of any kind; that defendants are entering into the
Stipulation solely because the proposed Settlement as described above would
eliminate the burden, risk and expense of further litigation, and is in the best
interests of Xxxxxxx and all its shareholders; and that any of the defendants
shall have the right to withdraw from the proposed Settlement in the event that
(x) any claims related to the Transactions or the subject matter of the Actions
(whether direct, derivative or otherwise) are commenced against any person in
any court prior to Final Court Approval of the Settlement, and such claims are
not dismissed or stayed in contemplation of dismissal or (y) any of the
additional conditions set forth in paragraph 5 below shall not have been
satisfied. The parties agree to use their good faith efforts to obtain the
dismissal or stay in contemplation of dismissal of any action covered by clause
(x) in the foregoing sentence and further agree that the defendants shall have
the right to withdraw from this Memorandum of Understanding if such efforts do
not result in the dismissal or stay in contemplation of dismissal of such an
action.
3. Notice and Court Approval. Subject to prior Court approval of the
Stipulation and the form of the Settlement Documents, the parties to the
respective Actions will present the Settlement Documents to the Delaware Court
of Chancery for approval as soon as practicable following appropriate notice to
the Xxxxxxx shareholders of the proposed Settlement with the named Plaintiffs
and the shareholders of Xxxxxxx on whose behalf the Actions were brought of all
claims asserted in the Actions, with no right to opt out of the Settlement and
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without costs to any party except as provided herein. Xxxxxxx shall disseminate
the notice of proposed settlement approved by the Court to its shareholders and
shall pay the costs and expenses related thereto. As used herein, "Final Court
Approval" of the Settlement means that the Delaware Court of Chancery has
entered an order approving the Settlement and that such order is finally
affirmed on appeal or is no longer subject to appeal and the time for any
petition for reargument, appeal or review, by certiorari or otherwise, has
expired. Plaintiffs' counsel intend to apply to the Delaware Court of Chancery
for an award of attorneys' fees and reasonable out-of-pocket disbursements.
Subject to the terms and conditions of this Memorandum of Understanding and the
contemplated Stipulation of Settlement, Plaintiffs' counsel will apply for an
award of fees and expenses in an aggregate amount not exceeding $350,000, which
the defendants in the Actions will not oppose, to be paid by defendants within
10 days after Final Court Approval to Xxxxxxx Xxxxx Xxxxxxx Xxxxx & Xxxxxx LLP,
as receiving agent for Plaintiffs' counsel.
4. Other Conditions. The consummation of the Settlement is subject to:
(a) the drafting and execution of the Settlement Documents and the other
agreements necessary to effectuate the terms of the proposed Settlement; (b) the
completion by Plaintiffs of appropriate discovery in the Actions reasonably
satisfactory to Plaintiffs' counsel; and (c) Final Court Approval (as defined
above) of the Settlement and dismissal of the Actions with prejudice and
without awarding costs to any party, except as provided herein. This Memorandum
of Understanding shall be null and void and of no force and effect if (i) any of
these conditions all not met or (ii) Plaintiffs' counsel in the Actions
determine that the Settlement is not fair and reasonable. In such event, this
Memorandum of Understanding shall not be deemed to prejudice in any way the
positions of the parties with respect to the Actions, shall be subject to Rule
408 of
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the Delaware Rules of Evidence, and shall not entitle any party to recovery any
costs or expenses incurred in connection with the implementation of this
Memorandum of Understanding.
5. Interim Stay of the Actions. The parties to the Actions agree that
except as expressly provided herein, the Actions shall be stayed pending
submission of the proposed Settlement to the Court for its consideration.
Plaintiffs' counsel agrees that the defendants' time to answer or otherwise
respond to any complaint in the Actions is extended without date. Counsel shall
enter into such documentation as shall be required to effectuate the foregoing
agreements.
6. Miscellaneous. (a) This Memorandum of Understanding may be executed
in counterparts by any of the signatories hereto and as so executed shall
constitute one agreement; (b) this Memorandum of Understanding and the
Settlement contemplated by it shall be governed by and construed in accordance
with the laws of the State of Delaware without regard to that State's rules
concerning conflict of laws; (c) this Memorandum of Understanding shall be
binding upon and inure to the benefit of the parties and their respective
agents, executors, heirs, successors and assigns, subject to the conditions set
forth herein; (d) Plaintiffs and their counsel represent and warrant that none
of the claims or causes of action asserted in the Actions have been assigned,
encumbered or in any manner transferred, in whole or in part; (e) except as
provided herein, the defendants in the Actions shall bear no expenses, costs,
damages or fees alleged or incurred by any named Plaintiff, any member of the
Class or their respective attorneys, experts, advisors, agents or
representatives; and (f) the provisions contained in this Memorandum of
Understanding shall not be deemed a presumption, concession or admission by any
defendant in the Actions of any breach of duty, liability, default or wrongdoing
as to any facts or claims alleged or asserted in the Actions, or in any other
actions or proceedings, and
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shall not be interpreted, construed, deemed, invoked, offered or received in
evidence or otherwise used by any person in the Actions or in any other action
or proceeding of any nature whatsoever.
/s/ Xxxxxx X. Xxxxxxxxx
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Rosenthal, Monhait, Gross & Goddess, P.A.
Suite 1401, Mellon Bank Center
X.X. Xxx 0000
Xxxxxxxxxx, XX 00000-0000
(000) 000-0000
Attorneys for Plaintiffs
/s/ Xxxxxx X. Xxxxx
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Xxxxxxxx, Xxxxxx & Finger, P.A.
Xxx Xxxxxx Xxxxxx
X.X. Xxx 000
Xxxxxxxxxx, XX 00000
(000) 000-0000
Attorneys for Defendants
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