UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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Date of Report (Date of Earliest Event Reported):
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September 16, 2014
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SKECHERS U.S.A., INC.
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(Exact name of registrant as specified in its charter)
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Delaware
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001-14429
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95-4376145
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(State or other jurisdiction
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(Commission
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(I.R.S. Employer
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of incorporation)
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File Number)
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Identification No.)
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228 Manhattan Beach Boulevard, Manhattan Beach, California
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90266
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(Address of principal executive offices)
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(Zip Code)
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Registrants telephone number, including area code:
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(310) 318-3100
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Not Applicable
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Former name or former address, if changed since last report
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any
of the following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 8.01 Other Events.
On May 30, 2014, Skechers U.S.A., (the "Company") entered into a Stipulation of Settlement (the "Stipulation") for the settlement (the "Settlement") of a pending shareholder derivative action, entitled Basaraba v. Greenberg, et al., Case No. 13-CV-05061-PSG (SHx). The Settlement was preliminarily approved by the United States District Court, Central District of California, Western Division (the "Court") on September 16, 2014. A hearing to determine whether the Settlement, upon the terms set forth in the Stipulation, should be finally approved has been scheduled for November 10, 2014 at 1:30 p.m. in Courtroom 880 at the United States Courthouse, Edward R. Roybal Federal Building, 255 East Temple Street, Los Angeles, California 90012. Pursuant to the Court’s order, any objections to the Settlement must be filed in writing with the Clerk of the Court by October 27, 2014.
Additional information concerning the terms of the proposed Settlement, the November 10, 2014 hearing and the requirements for objections can be found in the Notice of Pendency and Settlement of Derivative Action (the "Notice"), which is attached hereto as Exhibit 99.1. The Stipulation has also been attached hereto as Exhibit 99.2.
Item 9.01 Financial Statements and Exhibits.
(d)
The following exhibits are furnished as part of this report:
99.1 Notice of Pendency and Settlement of Derivative Action.
99.2 Stipulation of Settlement dated May 30, 2014.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
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SKECHERS U.S.A., INC.
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September 19, 2014
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By:
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David Weinberg
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Name: David Weinberg
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Title: Chief Operating Officer
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Exhibit Index
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Exhibit No.
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Description
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99.1
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Notice of Pendency and Settlement of Derivative Action.
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99.2
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Stipulation of Settlement dated May 30, 2014.
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
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GLORIA BASARABA, Derivatively on Behalf of Nominal
Defendant SKECHERS U.S.A., INC.,
Plaintiff,
v.
ROBERT GREENBERG, MICHAEL GREENBERG, JEFFREY GREENBERG,
DAVID WEINBERG, RICHARD SISKIND, GEYER KOSINSKI, MORTON
ERLICH, RICHARD A. RAPPAPORT, and THOMAS WALSH,
Defendants,
-and-
SKECHERS U.S.A., INC.,
Nominal Defendant.
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Case No. 13-CV-05061-PSG (SHx)
NOTICE OF PENDENCY AND SETTLEMENT OF
DERIVATIVE ACTION
Courtroom: 880
Judge: Hon. Philip S. Gutierrez
Complaint Filed: September 5, 2013
Trial Date: N/A |
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TO: ANY OWNER OF SKECHERS U.S.A., INC.S COMMON STOCK. |
PLEASE READ THIS NOTICE CAREFULLY
THIS NOTICE RELATES TO THE PENDENCY AND PROPOSED SETTLEMENT OF THIS SHAREHOLDER DERIVATIVE
LITIGATION
YOU ARE HEREBY NOTIFIED, pursuant to Federal Rule of Civil Procedure 23.1 and an Order of the
United States District Court for the Central District of California, Western Division (the
Court), that a proposed settlement (the Settlement) has been reached between Plaintiff, on
behalf of nominal defendant Skechers U.S.A., Inc. (Skechers or the Company), and the Individual
Defendants and Skechers in the above-captioned derivative litigation (the Derivative Action).
The Individual Defendants are Robert Greenberg, Michael Greenberg, Jeffrey Greenberg, David
Weinberg, Richard Siskind, Geyer Kosinski, Morton Erlich, Richard A. Rappaport, and Thomas Walsh.
The Derivative Action has been brought derivatively on behalf of Skechers to remedy the harm
allegedly caused to the Company by the Individual Defendants alleged breach of their fiduciary
duties and other alleged violations under state law.
The benefits to the Company of the proposed Settlement, which is subject to Court approval,
include Skechers adoption of certain corporate governance measures, as set forth in the
Stipulation of Settlement (Stipulation).
A hearing (the Settlement Hearing) will be held by the Court at the United States
Courthouse, Courtroom 880, Edward R. Roybal Federal Building, 255 East Temple Street, Los Angeles,
CA, 90012 to determine: (a) whether the Settlement of this action on the terms and conditions
provided for in the Stipulation is fair, reasonable, and adequate to current Skechers shareholders
and to Skechers and should be approved by the Court; (b) whether the proposed Final Judgment should
be entered herein, including its following provisions: (i) approving the Settlement, including the
release of all Released Claims against the Released Persons, as fair, reasonable, adequate, and in
the best interest of Skechers; (ii) dismissing the Derivative Action with prejudice; (iii)
authorizing payment of Fees and Expenses not exceeding $350,000.00 in total; and (iv) authorizing
payment of an Incentive Award to Plaintiff not exceeding $1,000.00 to be paid from the Fees and
Expenses sought by Plaintiffs Counsel.
The Individual Defendants have denied, and continue to deny, and have contested and continue
to contest each and every allegation of liability and wrongdoing on their part, and assert that
they have strong factual and legal defenses to all claims alleged against them in the Verified
Shareholder Derivative Complaint (the Complaint) and that such claims are without merit. Without
admitting any wrongdoing or liability on their part whatsoever, the Individual Defendants
nevertheless are willing to enter into the Settlement provided for herein in order fully and
finally to settle and dispose Derivative Action and to avoid the continuing burden, expense,
inconvenience, and distraction of this protracted litigation of all claims that have been or could
have been asserted against them in this
A. Background
On June 12, 2012, Plaintiffs Counsel initiated an investigation concerning the claims
asserted in the Litigation. Plaintiffs factual investigation has included reviewing corporate
documents obtained pursuant to a request for books and records under section 220 of the Delaware
Corporate Law, the organization and analysis of public filings by Skechers with the Securities and
Exchange Commission (the SEC), and press releases issued by Skechers and other public statements
about Skechers issued by third parties. Plaintiffs legal investigation has included researching
applicable law to allege and prove her claims.
On July 15, 2013, Plaintiff moved to file under seal a verified shareholder derivative
complaint against Skechers, the Individual Defendants, and a former employee. The complaint
included allegations of breach of fiduciary duties, gross mismanagement, waste of corporate assets,
and unjust enrichment based on the development of Skechers toning footwear products, advertising
and marketing activities relating thereto, and subsequent litigation involving those issues. The
complaint sought compensatory damages, a court order directing Skechers to reform and improve their
corporate governance and internal procedures, and attorneys fees, costs and expenses. On August
26, 2013, the Court denied plaintiffs motion to seal and ordered that she file an operative
complaint. On September 5, 2013, plaintiff filed the operative Complaint against the same
defendants, except for the former employee. The Complaint seeks to recover under the same causes
of action as in the prior complaint on the basis of many of the same allegations. The Individual
Defendants deny all allegations of wrongdoing.
On November 12, 2013, and November 15, 2013, the Individual Defendants and Skechers
respectively moved to dismiss the Complaint. The parties stipulated to a briefing schedule, which
permitted Plaintiff to either oppose Defendants motions to dismiss or amend the Complaint.
On November 19, 2013, in an attempt to resolve the matter, the parties participated in a
mediation presided by the Hon. Dickran M. Tevrizian (Ret.), who was assisted by the Hon. Irma E.
Gonzalez (Ret.). Subsequently, the parties engaged in additional mediation sessions. For the past
seven months, the parties engaged in extensive negotiations regarding a potential settlement of
this Derivative Action. As a result of the mediation sessions and settlement discussions, the
parties have ultimately agreed to the terms contained herein.
B. The Individual Defendants Denial of Wrongdoing
The Individual Defendants deny any wrongdoing, and nothing in the Stipulation shall be
construed or deemed to be evidence of, or an admission or concession on the part of Skechers or any
Individual Defendant, or as evidence, of the truth or validity of any of the allegations in this
Action, or of any liability, fault, or wrongdoing of any kind or any infirmity in the defenses that
the Defendants could have asserted. Each of the Individual Defendants has further asserted and
continues to assert that at all material times, he has acted in good faith and in a manner he
reasonably believed to be in the best interest of Skechers and its shareholders. The Individual
Defendants deny that they have committed any act or omitted to perform any act that gives rise to
any liability or violation of securities law or breach of fiduciary duties. The Defendants have
also taken into consideration the risks and uncertainty inherent in any litigation, especially in
complex cases like this Derivative Action.
The Defendants therefore have determined that it is desirable and beneficial that the
Litigation be settled in the manner and upon the terms and conditions set forth in this
Stipulation, to eliminate the burden, inconvenience, and expense of litigation, and to permit the
operation of Skechers business without the distraction and diversion of Skechers executive
personnel and Board of Directors as to matters at issue in this Derivative Action. The Defendants
do not dispute that this Derivative Action is being voluntarily settled upon the advice of counsel,
and that the terms of the Settlement are fair, adequate, and reasonable. The Stipulation shall not
be construed or deemed to be a concession by any party of any infirmity in, or validity of, the
claims asserted in this Derivative Action.
C. Plaintiffs and Plaintiffs Counsels Position
Plaintiff and Plaintiffs Counsel believe that the claims asserted in the Litigation have
merit. However, in light of the uncertain outcome and risk of litigation, particularly complex
derivative actions such as this Litigation, as well as the relevant facts, allegations, defenses,
and controlling legal principles, Plaintiff and Plaintiffs Counsel believe the Settlement provides
a good outcome for Skechers. The Settlement provides for corporate governance reform that will
benefit Skechers and its shareholders. Based on the benefits that the Company and its shareholders
will receive from the Settlement, the risks involved with continued litigation and the difficulties
and delays inherent in the litigation, and the desirability of permitting the Settlement to be
consummated, as provided by the terms of the Stipulation, Plaintiffs Counsel has determined that
the Settlement is in the best interests of Plaintiff, Skechers, and its shareholders.
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TERMS OF THE PROPOSED SETTLEMENT |
The full terms and conditions of the Settlement are embodied in the Stipulation, which is on
file with the Court. The following identifies the corporate governance provisions adopted in the
Settlement for a period of three years. These corporate governance provisions are designed to
assure the independence of the Board and several of its principal committees and improve its
policies and procedures. The provisions are the result of arms-length negotiation between
Plaintiff and Defendants by their respective counsel. The Individual Defendants have acknowledged
that they were aware of and considered Plaintiffs allegations and demands in connection with the
Boards decision to adopt the provisions described below:
(a) The establishment of written guidelines for the future selection of vacancies on the Board
of Directors, including guidelines for defining independence for independent Board Members.
(b) A requirement that at least 50% of Board Members be independent as defined by SEC and New
York Stock Exchange rules, with annual certification by the Board that this is the case.
(c) An expectation that all Board Members attend the annual meeting of shareholders either in
person or via telephonic conference.
(d) An expectation that each Board Member will attend at least 75% of all meetings of the
Board and of any Committee on which the Board Member sits either in person or via telephone
conference.
(e) A requirement that the position of Lead Independent Director rotate to another independent
Board Member five years from the date of this Stipulation, after which the position shall rotate
among the independent Board Members every five years.
(f) A requirement that the Head of Internal Audit, who is responsible for reviewing Skechers
internal controls on an ongoing, real time basis, shall report to the Chair of the Audit Committee.
(g) A requirement that each of the Boards three committees, the Audit Committee, Compensation
Committee, and Nominating and Governance Committee, be made up of three independent directors, and
that each director be chair of no more than two committees at any given time.
(h) An expectation that the Board Members shall maintain ownership of a minimum of 1,000
shares of Skechers common stock during the time that they are a director.
(i) An expectation that the classified Board structure be eliminated over time so that from
and after the 2015 annual meeting all Members shall be subject to an annual election.
(j) An expectation that the Boards outside directors shall periodically attend a governance
program such as the Stanford Directors College or similar educational program or other ISS
accredited program, including a program that pertains to a Board Members Committee duties.
(k) A requirement that Board membership and biographies, Board Committee membership and
charters, the Corporate Governance Guidelines, and the Corporate By-laws be made available to the
public through the Skechers website.
In addition, as part of the Settlement, Skechers agrees to the following measures:
(a) Skechers will maintain its code of business ethics as required by the rules of the New
York Stock Exchange and rules and regulations promulgated by the Securities and Exchange Commission
under the direction of its General Counsel with the assistance of Human Resources Department and
continue to provide periodic business ethics and code of conduct training to its employees and
additional training to managers with functions that require the approval, preparation, execution,
or dating of documents.
(b) All significant advertising campaigns will be reviewed by the legal department or outside
legal counsel for appropriateness and legal conformity. These reviews will be confidential and
protected by the attorney-client privilege.
(c) Skechers will continue to abide by all measures described in the settlement with the
Federal Trade Commission in the Stipulated Final Judgment and Order for Permanent Injunction and
Other Equitable Relief in the case Federal Trade Commission v. Skechers U.S.A., Inc., 1:12-cv-01214
(N.D. Ohio May 16, 2012).
Finally, the Board of Directors will be permitted to review and amend these corporate
governance measures within their business judgment after three years from the time such measures
are implemented.
The full terms of the Dismissal and Release of Claims are set forth in the Stipulation. The
following is only a summary.
Upon the Effective Date of the Settlement, Skechers and Plaintiff will be deemed to have
released the Released Claims against the Released Persons, both as defined below. Moreover, the
judgment to be entered upon approval of the Settlement will preclude the filing of any action
purporting to litigate the Released Claims against the Released Persons. Upon the Effective Date,
each of the Individual Defendants will be deemed to have released claims against Skechers,
Plaintiff, and Plaintiffs Counsel from all claims relating to or arising out of, or connected with
the institution, prosecution, assertion, settlement, or resolution of this Derivative Action or the
Released Claims.
Released Claims means and includes any and all claims, causes of action, demands, rights or
liabilities, including but not limited to, claims for negligence, gross negligence, professional
negligence, breach of duty of care, breach of duty of loyalty, fraud, breach of fiduciary duty,
malpractice, breach of contract, negligent misrepresentation, waste of corporate assets, gross
mismanagement, unjust enrichment, violations of any state or federal statutes, rules or
regulations, and any Unknown Claims as defined below, that have been or that could have been
asserted in this or any other forum or proceeding by Skechers, by Plaintiff derivatively on behalf
of Skechers, or by or on behalf of any of Skechers stockholders derivatively on behalf of
Skechers, against the Released Persons arising out of, relating to or in connection with:
(a) Any of the facts, circumstances, allegations, claims, causes of action, representations,
statements, reports, disclosures, transactions, events, occurrences, acts, omissions, or failures
to act, of whatever kind or character whatsoever, irrespective of the state of mind of the actor
performing or omitting to perform the same that have been or could have been alleged in any
pleading, amended pleading, complaint, amended complaint, brief, motion, report, or filing in the
litigation; and
(b) Any claims for expenses, costs or fees incurred by Skechers for or on behalf of itself or
any of the Released Persons in connection with the investigation, defense, or settlement of the
Litigation, including, but not limited to, attorneys fees, costs and any settlement or other
expenses (collectively Defense Expenses), except to the extent that Skechers is entitled to
reimbursement under any policy of insurance for or of any such Defense Expenses advanced by it.
Released Persons means each and all of the Defendants and their Related Parties. Related
Parties means each of a Defendants past or present employees, partners, principals, agents,
underwriters, insurers, co-insurers, re-insurers, any entity in which the person has a controlling
interest, attorneys, accountants, auditors, advisors, personal or legal representatives,
predecessors, successors, parents, subsidiaries, divisions, joint ventures, assigns, spouses,
heirs, associates, related or affiliated entities, any members of their immediate families, or any
trust of which any Defendant is the settlor or which is for the benefit of any Defendant or
member(s) of his or her family.
Unknown Claims means any Released Claims that Skechers, Plaintiff, or any of Skechers
stockholders derivatively on behalf of Skechers do not know or suspect to exist in his, her, or its
favor at the time of the release of the Released Persons which, if known by him, her, or it, might
have affected his, her, or its settlement with and release of the Released Persons, or might have
affected his, her, or its decision not to object to this settlement. With respect to any and all
Released Claims, upon the Effective Date, the Settling Parties shall be deemed to have, and by
operation of the Final Order and Judgment shall have, expressly waived and relinquished, to the
fullest extent permitted by law, the provisions, rights and benefits of section 1542 of the
California Civil Code, 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.
Each of the parties, upon the Effective Date, shall be deemed to have, and by operation of the
Final Order and Judgment shall have, waived any and all provisions, rights, and benefits conferred
by any law of any state or territory of the United States, or principle of common law, which is
similar, comparable, or equivalent to section 1542 of the California Civil Code. The parties may
hereafter discover facts in addition to or different from those which he, she, or it now knows or
believes to be true with respect to the subject matter of the Released Claims, but the parties,
upon the Effective Date, shall be deemed to have, and by operation of the Final Order and Judgment
shall have, fully, finally and forever settled and released any and all Released Claims, known or
unknown, suspected or unsuspected, contingent or non-contingent, whether or not concealed or
hidden, which now exist or heretofore have existed upon any theory of law or equity now existing or
coming into existence in the future, including, but not limited to, conduct which is negligent,
intentional, with or without malice, or a breach of any duty, law or rule, without regard to the
subsequent discovery or existence of such different or additional facts.
Nothing herein shall in any way impair or restrict the rights of any party to enforce the
terms of this Stipulation.
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ATTORNEYS FEES AND EXPENSES |
After reaching agreement to take the actions set forth above, counsel for the parties reached
agreement concerning the attorneys fees, costs, and expenses (Fees and Expenses). Plaintiffs
Counsel intends to request Court approval of an award of Fees and Expenses, as well as an award to
be paid to Plaintiff for the additional time, effort, and risk associated with bearing the
fiduciary duties of a derivative plaintiff (Incentive Award). Plaintiffs Counsel intends to
seek Court approval of the settlement and an award of Fees and Expenses and Incentive Award in the
amounts of $350,000 and $1,000, respectively. The Incentive Award is to be paid from the Fees and
Expenses sought by Plaintiffs Counsel. Counsel for Defendants have agreed not to oppose an
application for Fees and Expenses and an Incentive Award, which collectively shall not exceed
$350,000.00 in total. The parties have agreed that subsequent to the Courts approval of the Fees
and Expenses and Incentive Award, Defendants, directly or through their insurer, will pay to
Plaintiffs Counsel the Fees and Expenses and Incentive Award approved by the Court. Defendants
shall not otherwise be required to pay Plaintiff or Plaintiffs Counsel for any fees, expenses,
costs, or other sums incurred in connection with the Action or otherwise. The Fees and Expenses
and Incentive Award shall be paid within ten business days after the later of (1) entry of the
Final Order and Judgment; (2) receipt by Skechers of the name of the payee(s) and their respective
W-9 forms; and (3) execution of the certificates referenced below.
In the event that the Effective Date does not occur, or the Final Order and Judgment is
reversed or modified on appeal, and in the event that Defendants have made any payments to the Fees
and Expenses and Incentive Award, then Plaintiff or Plaintiffs Counsel shall within ten (10)
business days from receiving notice from Defendants attorneys or from a court of appropriate
jurisdiction, refund to Defendants or their insurers the Fees and Expenses and Incentive Award
previously paid to them, in an amount consistent with such reversal or modification. Plaintiffs
Counsel, as a condition of receiving such Fees and Expenses and Incentive Award, on behalf of
itself and each partner or shareholder of it, agrees (and will execute a certificate evidencing its
agreement) that Plaintiffs Counsel and its partners or shareholders are subject to the
jurisdiction of the Court for the purpose of enforcing this section of the Stipulation. Without
limitation, Plaintiffs Counsel and its partners or shareholders agree (and will execute a
certificate evidencing its agreement) that the Court may, upon application by Skechers or the
Individual Defendants, summarily issue orders, including but not limited to, judgments and
attachment orders, and may make appropriate findings of or sanctions for contempt, against them or
any of them should Plaintiff or Plaintiffs Counsel fail timely to repay Fees and Expenses and
Incentive Award pursuant to this section of the Stipulation.
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THE HEARING AND YOUR RIGHTS AS SHAREHOLDERS |
A hearing will be held on November 10, 2014, at 1:30 p.m. before the Honorable Philip S.
Gutierrez, United States District Judge, at United States Courthouse, Courtroom 880, Edward R.
Roybal Federal Building, 255 East Temple Street, Los Angeles, CA, 90012, for the purpose of
determining: (a) whether the Settlement of this action on the terms and conditions provided for in
the Stipulation is fair, reasonable, and adequate to current Skechers shareholders and to Skechers
and should be approved by the Court; (b) whether the proposed Final Judgment should be entered
herein, including its following provisions: (i) approving the Settlement, including the release of
all Released Claims against the Released Persons, as fair, reasonable, adequate, and in the best
interest of Skechers; (ii) dismissing the Derivative Action with prejudice; (iii) authorizing
payment of Fees and Expenses not exceeding $350,000.00 in total; and (iv) authorizing payment of an
Incentive Award to Plaintiff not exceeding $1,000.00 to be paid from the Fees and Expenses sought
by Plaintiffs Counsel. The hearing may be adjourned from time to time by the Court at the hearing
or any adjourned session thereof without further notice other than by announcement of such
adjournment.
Any current Skechers shareholder may object to the Settlement, Plaintiffs Counsels request
for attorneys fees and expenses, or Plaintiffs request for an incentive award, provided, however,
that he, she, or it files with the Court and sends to the parties counsel a signed letter or other
written submission saying that he, she, or it objects to the Settlement in Basaraba v. Greenberg,
et al., Case NO. CV-13-05061-PSG (SHx), and includes: (i) his, her, or its name, address, email
address and telephone number; (ii) how many Skechers shares he, she, or it owned as of January 1,
2008, whether he, she, or it still owns those shares, and the initial purchase date of those
shares; (iii) a detailed description of his, her, or its specific objections to any matter before
the Court, and all the grounds for his, her, or its objections to the Settlement, including any
documents he, she, or it wishes the Court to consider; and (iv) his, her, or its most recent
brokerage account statement evidencing current ownership of shares of Skechers common stock and
account statements evidencing continuing ownership from January 1, 2008, through the date of the
Settlement Hearing. If such shareholder also intends to appear at the Settlement Hearing, such
shareholder must also state his, her, or its intention to appear and provide the names of all
witnesses he, she, or it wishes to present at the hearing, along with a statement of the matters on
which such witnesses will testify and a summary of their proposed testimony. The objection and any
supporting papers must be filed with the Court, by hand, mail, or overnight delivery, and received
by Plaintiffs Counsel and Individual Defendants and Skechers Counsel, by hand, mail, overnight
delivery, fax, or email, at the addresses provided below no later than October 27, 2014.
FARUQI & FARUQI, LLP
DAVID E. BOWER
10866 Wilshire Boulevard, Suite 1470
Los Angeles, CA 90024
Fax: (310) 461-1427
dbower@faruqilaw.com
HYNES KELLER & HERNANDEZ, LLC
MICHAEL J. HYNES
1150 First Avenue, Suite 501
King of Prussia, PA 19406
Fax: (914) 752-3041
mhynes@hkh-lawfirm.com
Attorneys for Plaintiff Gloria Basaraba
OMELVENY & MYERS LLP
SETH ARONSON
400 South Hope Street
Los Angeles, CA 90071
Fax: (213) 430-6407
saronson@omm.com
Attorney for Defendants Robert Greenberg, Michael Greenberg,
Jeffrey Greenberg, David Weinberg, Richard Siskind, Geyer
Kosinski, Morton Erlich, Richard A. Rappaport, and Thomas
Walsh
SHEPPARD MULLIN RICHTER & HAMPTON, LLP
KENNETH A. OBRIEN, JR.
333 South Hope Street, 43rd Floor
Los Angeles, CA 90071
Fax: (213) 620-1398
kobrien@sheppardmullin.com
Attorney for Nominal Defendant Skechers U.S.A., Inc.
CLERK OF THE COURT
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
WESTERN DIVISION
255 East Temple Street
Los Angeles, CA 90012
Any current Skechers shareholder who does not make his, her, or its objection in the manner
provided herein shall be deemed to have waived such objection and shall forever be foreclosed from
making any objection to the fairness, reasonableness, or adequacy of the Settlement as incorporated
in the Stipulation in this or any other action or proceeding relating to the aforementioned
Settlement, but shall otherwise be bound by the Judgment to be entered.
VI. DISMISSAL AND RELEASE
Should the Settlement be approved by the Court following the Settlement Hearing, the Court
will enter a Final Order and Judgment that:
1. Finds that the publication of the Notice, as described in the Stipulation, has been
accomplished as directed and has provided the best notice practicable under the circumstances and
has met the requirements of due process;
2. Approves the Settlement, including the Releases of the Released Persons, as fair,
reasonable, and adequate to Skechers and its shareholders; and
3. Permanently bars any action asserting or relating in any way to the Released Claims.
VII. EXAMINATION OF PAPERS AND INQUIRIES
For a more detailed statement of the matters involved in this Derivative Action, reference is
made to the pleadings, to the Stipulation, and to all other papers publicly filed in this Action,
which may be inspected at the Office of the Clerk for the United States District Court for the
Central District of California, Western Division, 312 North Spring Street, Los Angeles, CA, 90012,
during regular business hours of each business day or at any time via the internet through the
Public Access to Court Electronic Records (PACER) public access service.
If you have any questions about this case, you should contact Plaintiffs Counsel by writing:
FARUQI & FARUQI, LLP
DAVID E. BOWER
10866 Wilshire Boulevard, Suite 1470
Los Angeles, CA 90024
Fax: (310) 461-1427
dbower@faruqilaw.com
HYNES KELLER & HERNANDEZ, LLC
MICHAEL J. HYNES
1150 First Avenue, Suite 501
King of Prussia, PA 19406
Fax: (914) 752-3041
mhynes@hkh-lawfirm.com
PLEASE DO NOT ADDRESS INQUIRIES TO THE COURT
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DAVID E. BOWER, Cal. Bar No. 119546
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dbower@faruqilaw.com |
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FARUQI & FARUQI, llp
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10866 Wilshire Boulevard, Suite 1470
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Los Angeles, California 90024
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Telephone: |
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310.461.1426 |
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Facsimile: |
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310.461.1427 |
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MICHAEL J. HYNES (Pro Hac Vice)
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mhynes@hkh-lawfirm.com
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HYNES KELLER & HERNANDEZ, LLC
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1150 First Avenue, Suite 501
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King of Prussia, PA 19406
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Telephone: |
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610.994.0292 |
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Facsimile: |
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914.752.3041 |
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Attorneys for Plaintiff Gloria Basaraba
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SETH ARONSON, Cal. Bar No. 100153
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saronson@omm.com |
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OMELVENY & MYERS llp
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400 South Hope Street
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Los Angeles, California 90071-2899
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Telephone: |
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213.430.6000 |
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Facsimile: |
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213.430.6407 |
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Attorneys for Defendants Robert Greenberg,
Michael Greenberg, Jeffrey Greenberg,
David Weinberg, Richard Siskind, Geyer Kosinski,
Morton Erlich, Richard A. Rappaport, and Thomas Walsh
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KENNETH A. OBRIEN, JR., Cal. Bar No. 160171
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kobrien@sheppardmullin.com
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SHEPPARD MULLIN RICHTER & HAMPTON llp
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333 South Hope Street, 43rd Floor
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Los Angeles, California 90071-1422
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Telephone: |
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213.620.1780 |
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Facsimile: |
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213.620.1398 |
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Attorneys for Nominal Defendant Skechers U.S.A.,
Inc.
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA, WESTERN DIVISION
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GLORIA BASARABA, Derivatively on Behalf of
Nominal Defendant SKECHERS, U.S.A., INC.,
Plaintiff,
v.
ROBERT GREENBERG, MICHAEL GREENBERG,
JEFFREY GREENBERG, DAVID WEINBERG, RICHARD
SISKIND, GEYER KOSINSKI, MORTON ERLICH,
RICHARD A. RAPPAPORT and THOMAS WALSH,
Defendants,
-and-
SKECHERS U.S.A., INC.,
Nominal Defendant.
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Case No. CV-13-05061-PSG (SHx)
STIPULATION OF SETTLEMENT
Courtroom: 880
Judge: Hon. Philip S. Gutierrez
Complaint Filed: September 5, 2013
Trial Date: N/A
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STIPULATION OF SETTLEMENT
This Stipulation of Settlement (the Stipulation), dated as of May 30, 2014, is made and
entered into by and among the following parties (as defined further in Section IV hereof) to the
above-entitled Litigation1: (i) Plaintiff (on behalf of herself and derivatively on
behalf of Nominal Defendant Skechers U.S.A., Inc. (Skechers)), by and through her counsel; (ii)
the Individual Defendants, by and through their counsel; and (iii) Nominal Defendant Skechers, by
and through its counsel. The Stipulation is intended by the Settling Parties to resolve,
discharge, and settle, fully, finally and forever, the Released Claims (as defined herein), upon
and subject to the terms and conditions hereof (the Settlement).
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I. |
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INVESTIGATION AND RESEARCH CONDUCTED BY PLAINTIFF |
Plaintiffs Counsel has conducted an investigation concerning the claims asserted in the
Litigation. Plaintiffs factual investigation has included the review of corporate documents
obtained pursuant to a request for books and records under section 220 of the Delaware Corporate
Law (the 220 Demand); the organization and analysis of public filings by Skechers with the
Securities and Exchange Commission (the SEC); and the review of press releases issued by Skechers
and other public statements about Skechers issued by third parties. Plaintiffs legal
investigation has included research of applicable law to allege and prove her claims.
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II. |
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FILING OF THE LITIGATION |
Under the confidentiality agreement entered into between Plaintiff and Skechers in connection
with Plaintiffs 220 Demand, any complaint filed by Plaintiff containing confidential information
received in response to the 220 Demand must be filed under seal. In conformity with the
confidentiality agreement, on July 15, 2013, Plaintiff filed an application to file her verified
shareholder derivative complaint under seal (the Complaint), along with a copy of the Complaint.
On August 26, 2013, the Court denied Plaintiffs application to file under seal and ordered
Plaintiff to file an operative complaint within ten days. On September 5, 2013, Plaintiff filed
the operative complaint (the Complaint).
On November 12, 2013, and November 15, 2013, the Individual Defendants and Skechers
respectively moved to dismiss the Complaint. The parties stipulated to a briefing schedule, which
permitted Plaintiff to oppose Defendants motions to dismiss or amend the Complaint.
On November 19, 2013, in an attempt to resolve the matter, the parties participated in a
mediation presided by the Hon. Dickran M. Tevrizian (Ret.), who was assisted by the Hon. Irma E.
Gonzalez (Ret.). Before the mediation, counsel for the parties participated in arms-length
settlement discussions in an effort to establish a framework for a possible settlement. As a
result of the mediation, the parties agreed to further discuss a number of corporate governance
measures. The parties continued to work towards resolution of the matter, but were unable to reach
agreement. On February 14, 2014, the parties had a follow-up call with Judge Tevrizian to try and
work through the outstanding issues, as a result of which they reached agreement as to the terms of
settlement. On May 8, 2014, the parties participated in a further mediation before Judge Tevrizian
at which time they reached a resolution on the matter of Plaintiffs attorneys fees and expenses.
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IV. |
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INDIVIDUAL DEFENDANTS STATEMENT AND DENIALS OF |
WRONGDOING AND LIABILITY
Each of the Individual Defendants denies each and every claim and contention alleged by
Plaintiff in this Litigation. Each of the Individual Defendants expressly denies all charges of
wrongdoing or liability against him arising out of any of the conduct, statements, acts, or
omissions alleged, or that could have been alleged, in the Litigation. Each of the Individual
Defendants has further asserted and continues to assert that at all material times, he has acted in
good faith and in a manner he reasonably believed to be in the best interests of Skechers and its
shareholders.
Nonetheless, the Individual Defendants have concluded that the continuation of the Litigation
would be distracting, protracted and expensive, and that it is desirable that the Litigation be
fully and finally settled in the manner and upon the terms and conditions set forth in this
Stipulation in order to limit further expense, inconvenience and distraction, to dispose of
distracting, burdensome, and protracted litigation, and to permit the operation of Skechers
business without further expensive litigation and the distraction and diversion of Skechers
executive personnel with respect to matters at issue in the Litigation. The Individual Defendants
have also taken into consideration the risks and uncertainty inherent in any litigation, especially
in complex cases like this Litigation.
The Individual Defendants therefore have determined that it is desirable and beneficial that
the Litigation be settled in the manner and upon the terms and conditions set forth in this
Stipulation. There has been no adverse determination by any court against any of the Individual
Defendants on the merits of the claims asserted by Plaintiff.
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V. |
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PLAINTIFFS CLAIMS AND BENEFITS OF SETTLEMENT |
Plaintiff believes that the claims asserted in the Litigation have merit. Plaintiff and
Plaintiffs Counsel, however, recognize and acknowledge the expense and length of continued
proceedings necessary to prosecute the Litigation against the Individual Defendants through trial
and appeals. Counsel for Plaintiff also has taken into account the uncertain outcome and the risk
of any litigation, especially in complex derivative actions such as this Litigation, as well as the
difficulties and delays inherent in such litigation. Counsel for Plaintiff also is mindful of the
inherent problems of proof and possible defenses to the violations asserted in the Complaint,
including the defenses asserted by Defendants both orally in discussions with counsel and in papers
filed in the Litigation.
In light of the foregoing, and based on Plaintiffs Counsels thorough review and analysis of
the relevant facts, allegations, defenses, and controlling legal principles, Plaintiffs Counsel
believes that the Settlement set forth in this Stipulation is fair, reasonable, and adequate, and
confers substantial benefits upon Skechers and its shareholders. Based on Plaintiffs Counsels
evaluation, Plaintiff has determined that the Settlement set forth in the Stipulation is in the
best interests of Plaintiff, Skechers and its shareholders.
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VI. |
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TERMS OF STIPULATION AND AGREEMENT OF SETTLEMENT |
NOW, THEREFORE, IT IS HEREBY STIPULATED AND AGREED by and among Plaintiff (for herself,
derivatively on behalf of Skechers and by or on behalf of any of Skechers stockholders
derivatively on behalf of Skechers), Nominal Defendant Skechers, and each of the Individual
Defendants, by and through their respective attorneys, that, subject to the approval of the Court,
the Litigation and the Released Claims shall be finally and fully compromised, settled and
released, and the Litigation shall be dismissed on the merits and with prejudice, as to all
Settling Parties, upon and subject to the terms and conditions of the Stipulation, as follows:
As used in the Stipulation the following terms have the meanings specified:
1.1 Plaintiff means Gloria Basaraba.
1.2 Nominal Defendant means Skechers, U.S.A., Inc., a Delaware corporation, and all its
predecessors and successors, and all present and former parents, subsidiaries, divisions and
related or affiliated entities.
1.3 Defendants means, as the context requires, Robert Greenberg, Michael Greenberg, Jeffrey
Greenberg, David Weinberg, Geyer Kosinski, Morton Erlich, Richard A. Rappaport, Thomas Walsh and
Richard Siskind, as well as dismissed defendant Jennifer Weiderman and Nominal Defendant Skechers.
1.4 Individual Defendants means Defendants Robert Greenberg, Michael Greenberg, Jeffrey
Greenberg, David Weinberg, Geyer Kosinski, Morton Erlich, Richard A. Rappaport, Thomas Walsh, and
Richard Siskind.
1.5 Effective Date means: the first business day after the following have occurred: (1) The
Court has approved this Stipulation; and (2) the Final Order and Judgment becomes final as a matter
of law and is no longer subject to appellate review, either by the expiration of the time to appeal
therefrom without any appeal having been taken pursuant to Federal Rules of Civil Procedure 3 and
4, or, if an appeal is taken, by the final determination of the appeal by the highest court to
which such an appeal may be taken. Any proceeding or order, or any appeal pertaining solely to any
application for attorneys fees, costs, or expenses shall not in any way delay or preclude the
Final Order and Judgment from becoming final.
1.6 Final Order and Judgment means the judgment to be rendered by the Court dismissing the
Action with prejudice, substantially in the form attached as Exhibit B.
1.7 Person means an individual, corporation, partnership, limited partnership, association,
joint stock company, estate, legal representative, trust, unincorporated association, government or
any political subdivision or agency thereof, and any business or legal entity and their spouses,
heirs, predecessors, successors, representatives or assignees.
1.8 Counsel for Plaintiff or Plaintiffs Counsel are Hynes Keller & Hernandez, LLC, 1150
First Avenue, Suite 501, King of Prussia, PA 19406 and Faruqi & Faruqi, LLP, 10866 Wilshire
Boulevard, Suite 1470, Los Angeles, CA 90024.
1.9 Counsel for the Individual Defendants is OMelveny & Myers LLP, 400 South Hope Street,
Los Angeles, CA 90071.
1.10 Counsel for Nominal Defendant Skechers U.S.A., Inc. is Sheppard Mullin Richter &
Hampton LLP, 333 South Hope Street, 43rd Floor, Los Angeles, CA 90071.
1.11 Litigation means Basaraba v. Greenberg, et al., Case No. CV-13-05061-PSG (SHx), filed
in the United States District Court for the Central District of California.
1.12 Related Parties means each of a Defendants past or present employees, partners,
principals, agents, underwriters, insurers, co-insurers, re-insurers, any entity in which the
Person has a controlling interest, attorneys, accountants, auditors, advisors, personal or legal
representatives, predecessors, successors, parents, subsidiaries, divisions, joint ventures,
assigns, spouses, heirs, associates, related or affiliated entities, any members of their immediate
families, or any trust of which any Defendant is the settlor or which is for the benefit of any
Defendant or member(s) of his or her family.
1.13 Released Claims means and includes any and all claims, causes of action, demands,
rights or liabilities, including but not limited to, claims for negligence, gross negligence,
professional negligence, breach of duty of care, breach of duty of loyalty, fraud, breach of
fiduciary duty, malpractice, breach of contract, negligent misrepresentation, waste of corporate
assets, gross mismanagement, unjust enrichment, violations of any state or federal statutes, rules
or regulations, and any Unknown Claims as defined in paragraph 1.16 herein, that have been or that
could have been asserted in this or any other forum or proceeding by Skechers, by Plaintiff
derivatively on behalf of Skechers, or by or on behalf of any of Skechers stockholders
derivatively on behalf of Skechers, against the Released Persons arising out of, relating to or in
connection with:
1.13.1 Any of the facts, circumstances, allegations, claims, causes of action,
representations, statements, reports, disclosures, transactions, events, occurrences, acts,
omissions, or failures to act, of whatever kind or character whatsoever, irrespective of the state
of mind of the actor performing or omitting to perform the same that have been or could have been
alleged in any pleading, amended pleading, complaint, amended complaint, brief, motion, report, or
filing in the Litigation; and
1.13.2 Any claims for expenses, costs or fees incurred by Skechers for or on behalf of itself
or any of the Released Persons in connection with the investigation, defense, or settlement of the
Litigation, including, but not limited to, attorneys fees, costs and any settlement or other
expenses (collectively Defense Expenses), except to the extent that Skechers is entitled to
reimbursement under any policy of insurance for or of any such Defense Expenses advanced by it.
1.13.3 Notwithstanding anything otherwise encompassed by subparagraphs 1.13.1 and 1.13.2,
above, this definition explicitly does not include, and the parties to this Stipulation expressly
reserve and do not release, any obligations, claims, or rights any of them may have under this
Stipulation. Nothing in this Stipulation releases any claim by Skechers, Defendants or any of them
for recovery of insurance proceeds or any other claim against any insurer under any policy of
insurance.
1.13.4 Upon the Effective Date, each of the Released Persons shall be deemed to have, and by
operation of the Judgment shall have fully, finally, and forever released, relinquished, and
discharged Plaintiff and her counsel from all claims (including unknown claims arising out of,
relating to or in connection with the institution, prosecution, assertion, settlement or resolution
of the Litigation or Released Claims).
1.14 Released Persons means each and all of the Defendants and their Related Parties.
1.15 Settling Parties means, collectively, each of the Individual Defendants, Skechers, and
Plaintiff on behalf of herself, derivatively on behalf of Skechers and by or on behalf of any of
Skechers stockholders derivatively on behalf of Skechers.
1.16 Unknown Claims means any Released Claims that Skechers, Plaintiff, or any of Skechers
stockholders derivatively on behalf of Skechers do not know or suspect to exist in his, her, or its
favor at the time of the release of the Released Persons which, if known by him, her, or it, might
have affected his, her, or its settlement with and release of the Released Persons, or might have
affected his, her, or its decision not to object to this settlement. With respect to any and all
Released Claims, the Settling Parties stipulate and agree that, upon the Effective Date, the
Settling Parties shall be deemed to have, and by operation of the Final Order and Judgment shall
have, expressly waived and relinquished, to the fullest extent permitted by law, the provisions,
rights and benefits of section 1542 of the California Civil Code, 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.
Each of the Settling Parties, upon the Effective Date, shall be deemed to have, and by operation of
the Final Order and Judgment shall have, waived any and all provisions, rights, and benefits
conferred by any law of any state or territory of the United States, or principle of common law,
which is similar, comparable, or equivalent to section 1542 of the California Civil Code. The
Settling Parties may hereafter discover facts in addition to or different from those which he, she,
or it now knows or believes to be true with respect to the subject matter of the Released Claims,
but the Settling Parties, upon the Effective Date, shall be deemed to have, and by operation of the
Final Order and Judgment shall have, fully, finally and forever settled and released any and all
Released Claims, known or unknown, suspected or unsuspected, contingent or non-contingent, whether
or not concealed or hidden, which now exist or heretofore have existed upon any theory of law or
equity now existing or coming into existence in the future, including, but not limited to, conduct
which is negligent, intentional, with or without malice, or a breach of any duty, law or rule,
without regard to the subsequent discovery or existence of such different or additional facts.
2.1 As a result of the filing, prosecution, and settlement of the Litigation, the Skechers
Board of Directors has agreed to take up or maintain in place the corporate governance measures set
forth below (the Corporate Governance Measures) for a period of three years. The Corporate
Governance Measures constitute the consideration for the Settlement. Skechers acknowledges and
agrees that the Corporate Governance Measures are significant and confer a substantial benefit upon
Skechers and its shareholders. Skechers acknowledges and agrees that (i) the pendency and
prosecution of the Litigation were a material cause of Skechers agreement to implement or maintain
the Corporate Governance Measures and (ii) the institution of the Corporate Governance Measures
will be effective in preventing the occurrence of wrongdoing of the type alleged in the Litigation.
The Corporate Governance Measures are as follows:
(a) The establishment of written guidelines for the future selection of vacancies on the Board
of Directors, including guidelines for defining independence for independent Board Members.
(b) A requirement that a majority of Board Members be independent as defined by SEC and New
York Stock Exchange rules, with annual certification by the Board that this is the case.
(c) An expectation that all Board Members attend the annual meeting of shareholders either in
person or via telephonic conference.
(d) An expectation that each Board Member will attend at least 75% of all meetings of the
Board and of any Committee on which the Board Member sits either in person or via telephone
conference.
(e) A requirement that, beginning in two years, the position of Lead Independent Director
shall rotate among the independent Board Members at least every five years.
(f) A requirement that the Head of Internal Audit, who is responsible for reviewing Skechers
internal controls on an ongoing, real time basis, shall report to the Chair of the Audit Committee.
(g) A requirement that each of the Boards three committees, the Audit Committee, Compensation
Committee, and Nominating and Governance Committee, be made up of three independent directors, and
that a director be chair of only one committee at any given time.
(h) An expectation that as to Skechers common stock that Board Members receive in the future,
each Board Member shall maintain ownership of a minimum of 1,000 such shares during the time that
they are a director.
(i) An expectation that Independent Board Members shall periodically attend a governance
program such as the Stanford Directors College or similar educational program or other ISS
accredited program, including a program that pertains to a Board Members Committee duties.
(j) A requirement that Board membership and biographies, Board Committee membership and
charters, the Corporate Governance Guidelines and the Corporate By-laws be made available to the
public through the Skechers website.
2.2 In addition, as part of the Settlement, Skechers agrees to the following measures:
(a) Skechers will maintain its code of business ethics as required by the rules of the New
York Stock Exchange and rules and regulations promulgated by the SEC under the direction of its
General Counsel with the assistance of Human Resources Department and continue to provide periodic
business ethics and code of conduct training to its employees and additional training to managers
with functions that require the approval, preparation, execution, or dating of documents.
(b) All significant advertising campaigns will be reviewed by the legal department or outside
legal counsel for appropriateness and legal conformity. These reviews and all communications and
documents relating to these reviews will be confidential and strictly protected by the
attorney-client privilege, attorney work product doctrine and any other applicable privileges and
protections.
(c) Skechers will continue to abide by all measures described in the settlement with the
Federal Trade Commission in the Stipulated Final Judgment and Order for Permanent Injunction and
Other Equitable Relief in the case Federal Trade Commission v. Skechers U.S.A., Inc., 1:12-cv-01214
(N.D. Ohio May 16, 2012).
2.3 The required corporate governance measures shall be implemented within 120 days of the
effective date. The Board of Directors will be permitted to review and amend these measures within
their business judgment after 3 years.
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3. |
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Attorneys Fees, Expenses and Incentive Award |
3.1 Confirmation of the settlement is not contingent upon the Courts approval of the
attorneys fees, costs and expenses (Fees and Expenses) to be paid to Plaintiffs Counsel or a
modest award to be paid to Plaintiff for the additional time, effort and risk associated with
bearing the fiduciary duties of a derivative plaintiff (Incentive Award). Plaintiffs Counsel
intends to seek Court approval of the settlement and an award of Fees and Expenses and Incentive
Award in the amounts of $350,000 and $1,000, respectively. The Incentive Award is to be paid from
the Fees and Expenses sought by Plaintiffs Counsel. Defendants have agreed not to oppose an
application for Fees and Expenses and Incentive Award up to and not exceeding $350,000.00 in total.
Subsequent to the Courts approval of the Fees and Expenses and Incentive Award and entry of the
Final Order and Judgment in the Action, Defendants directly or through their insurer will pay to
Plaintiffs Counsel Fees and Expenses and the Incentive Award in the amount approved by the Court.
Defendants shall not otherwise be required to pay Plaintiff or Plaintiffs Counsel for any fees,
expenses, costs, or other sums incurred in connection with the Action or otherwise. The Fees and
Expenses and Incentive Award shall be paid within ten business days after the later of (1) entry of
the Final Order and Judgment; (2) receipt by Skechers of the name of the payee(s) and their
respective W-9 forms; and (3) execution of the certificates referenced in paragraph 3.2 below.
Plaintiffs Counsel shall distribute the Fees and Expenses among themselves based on their good
faith determination of what was each Plaintiffs Counsels contribution to the prosecution and
resolution of the Litigation. Defendants shall have no responsibility for the allocation of the
Fees and Expenses among Plaintiffs Counsel.
3.2 In the event that the Effective Date does not occur, or the Final Order and Judgment is
reversed or modified on appeal, and in the event that Defendants have made any payments pursuant to
paragraph 3.1 above, then Plaintiff or Plaintiffs Counsel shall within ten (10) business days from
receiving notice from Defendants attorneys or from a court of appropriate jurisdiction, refund to
Defendants or their insurers the Fees and Expenses and Incentive Award previously paid to them, in
an amount consistent with such reversal or modification. As a condition of receiving such Fees and
Expenses and Incentive Award, Plaintiffs Counsel agree to be jointly liable for the full amount of
the Fees and Expenses and Incentive Award paid by Defendants or their insurers. Plaintiffs
Counsel, as a condition of receiving such Fees and Expenses and Incentive Award, on behalf of
themselves and each partner and/or shareholder of them, agree (and will execute certificates
evidencing their agreement, which certificates shall be provided to Plaintiffs Counsel at least 10
days prior to any final approval hearing scheduled by the Court) that Plaintiffs Counsel and their
partners or shareholders are subject to the jurisdiction of the Court for the purpose of enforcing
this section of the Stipulation. Without limitation, Plaintiffs Counsel and their partners and/or
shareholders agree (and will execute a certificate evidencing their agreement) that the Court may,
upon application by Skechers or the Individual Defendants, summarily issue orders, including but
not limited to, judgments and attachment orders, and may make appropriate findings of or sanctions
for contempt, against them or any of them should Plaintiff or Plaintiffs Counsel fail timely to
repay Fees and Expenses and Incentive Award pursuant to this section of the Stipulation.
4.1 Promptly after execution of the Stipulation, and in any event within thirty days after
execution of the Stipulation, the Settling Parties shall submit this Stipulation together with its
exhibits to the Court and shall apply for entry of an order (the Notice Order), substantially in
the form attached as Exhibit A, requesting approval of the Notice of the Pendency and Settlement of
the Derivative Action (Notice), substantially in the form attached as Exhibit A-1, and the
publication of a Summary Notice of Proposed Settlement of Derivative Action (Summary Notice),
substantially in the form attached as Exhibit A-2. Skechers shall be responsible for all costs
associated with publishing the Summary Notice. The Settling Parties shall also request that after
notice is given, the Court hold a hearing (the Settlement Hearing) and approve the settlement of
the Litigation as set forth herein. The Final Order and Judgment in this Litigation shall provide
for the dismissal of the Litigation with prejudice upon final approval of the settlement, and shall
also provide for the mutual releases of all claims against all parties, as set forth in more detail
below.
4.2 The Notice Order shall specifically include provisions that will:
(a) preliminarily approve the settlement of the Litigation set forth in this Stipulation;
(b) approve as to form and content the Notice and Summary Notice;
(c) direct Skechers to cause a copy of the Notice to be filed with the SEC via a form 8-K and
Plaintiff to post the Notice and Stipulation on Hynes Keller & Hernandez, LLCs and Faruqi &
Faruqi, LLPs websites;
(d) direct Skechers to publish the Summary Notice once on the PR Newswire and direct
shareholders to the SEC website to view the Notice and to the website of Hynes Keller & Hernandez,
LLC or Faruqi & Faruqi, LLP to view the Notice and Stipulation;
(e) find that the notice set forth in subparagraphs 4.2(d) and (e) constitutes the best notice
practicable and meets the requirements of applicable law and due process under the United States
Constitution;
(f) schedule the Settlement Hearing to be held by the Court to determine whether the proposed
Settlement contained in this Stipulation should be approved as fair, just, reasonable, and
adequate, and whether the proposed Final Judgment should be entered; and
(g) provide that any objections to the proposed Settlement contained in this Stipulation shall
be heard and any papers considered by the Court at the Settlement Hearing only if, on or before the
date specified in the Notice Order and Notice, any shareholders who object shall file and serve
notice of their intent to appear and objections as set forth in the Notice Order and Notice.
5.1 Upon the Effective Date, as defined in paragraph 1.5 above, Skechers shall be deemed to
have, and by operation of the Final Order and Judgment shall have, fully, finally, and forever
released, relinquished, and discharged all Released Claims against the Released Persons.
5.2 Upon the Effective Date, the Released Persons shall be deemed to have, and by operation of
the Judgment shall have, fully, finally, and forever released, relinquished, and discharged
Plaintiff and Plaintiffs Counsel from all claims arising out of, relating to, or in connection
with their institution, prosecution, assertion, settlement, or resolution of the Litigation or the
Released Claims. Nothing herein shall in any way impair or restrict the rights of any Settling
Party to enforce the terms of this Stipulation.
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6. |
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Effect of Disapproval, Cancellation or Termination |
In the event that the Stipulation is not approved by the Court or the settlement set forth in
this Stipulation is terminated, or for any reason fails to become effective in accordance with its
terms, the Settling Parties shall be restored to their respective positions in the Litigation as if
the Stipulation had not been entered into. In such event, the terms and provisions of the
Stipulation shall have no further force and effect with respect to the Settling Parties and shall
not be used in this Litigation or in any proceeding for any purpose, and any judgment or other
order entered by the Court in accordance with the terms of the Stipulation shall be treated as
vacated.
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7. |
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Miscellaneous Provisions |
7.1 The Settling Parties (a) acknowledge that it is their intent to consummate this agreement;
and (b) agree to cooperate to the extent necessary to effectuate and implement all terms and
conditions of the Stipulation and to exercise their best efforts to accomplish the terms and
conditions of the Stipulation.
7.2 Neither the Stipulation, nor any act performed or document executed pursuant to or in
furtherance of the Stipulation: (i) is or may be deemed to be or may be used as an admission of,
or evidence of, the validity of any Released Claim or of any wrongdoing or liability of Defendants;
or (ii) is or may be deemed to be or may be used as an admission of, or evidence of, any fault or
omission of any of Defendants in any civil, criminal, or administrative proceeding in any court,
administrative agency or other tribunal, other than in such proceedings as may be necessary to
consummate or enforce the Stipulation or the Final Order and Judgment, except that Defendants may
file the Stipulation and Final Order and Judgment in any action that may be brought against them in
order to support a defense or counterclaim based on principles of res judicata, collateral
estoppel, release, good faith settlement, judgment ban or reduction, or any other theory of claim
preclusion or issue preclusion or similar defense or counterclaim. Defendants have denied and
continue to deny each and all of the claims alleged in the Litigation.
7.3 The Settling Parties and their counsel, and each of them, agree, to the extent permitted
by law, that all agreements made before and during the course of the Litigation relating to the
confidentiality of information shall survive this Stipulation.
7.4 All of the Exhibits to the Stipulation are material and integral parts hereof and are
fully incorporated herein by this reference.
7.5 The Stipulation may be amended or modified only by a written instrument signed by or on
behalf of all Settling Parties or their respective successors-in-interest.
7.6 This is a fully integrated agreement. The Stipulation and the Exhibits attached hereto
constitute the entire agreement among the parties hereto and no representations, warranties, or
inducements have been made to any party concerning the Stipulation or its Exhibits other than the
representations, warranties, and covenants contained and memorialized in such documents.
7.7 Each party has cooperated in the drafting and preparation of the Stipulation.
Consequently, any interpretation of the Stipulation shall not be construed against any Settling
Party on the basis that such party was the drafter.
7.8 Each counsel or other Person executing the Stipulation or any of its exhibits on behalf of
any Settling Party hereto hereby warrants that such Person has the full authority to do so.
7.9 The Stipulation may be executed in one or more counterparts. All executed counterparts
and each of them shall be deemed to be one and the same instrument. Counsel for the parties to the
Stipulation shall exchange among themselves original signed counterparts and a complete set of
original executed counterparts shall be filed with the Court. Each signed counterpart shall be
deemed an original.
7.10 The Stipulation shall be binding upon, and inure to the benefit of, the successors and
assigns of the parties hereto.
7.11 The Court shall retain jurisdiction over the implementation and enforcement of the terms
of the Stipulation, and all parties hereto submit to the jurisdiction of the Court for purposes of
implementing and enforcing the settlement embodied in the Stipulation.
7.12 The rights and obligations of the parties to the Stipulation shall be construed and
enforced in accordance with, and governed by, the internal, substantive laws of the State of
Delaware without giving effect to that States choice of law principles.
7.13 The Settling Parties agree that the settlement provided for herein reflects a good-faith,
arms-length settlement of Plaintiffs claims, reached voluntarily after consultation with
experienced legal counsel.
IN WITNESS WHEREOF, the parties hereto have caused the Stipulation to be executed, by their
duly authorized attorneys, as of the date set forth above.
|
/s/ Michael J. Hynes |
|
MICHAEL J. HYNES
HYNES KELLER & HERNANDEZ, LLC
/s/ David E. Bower |
|
DAVID E. BOWER
FARUQI & FARUQI, LLP
Attorneys for Plaintiff Gloria Basaraba |
/s/ Seth Aronson |
|
SETH ARONSON
OMELVENY & MYERS LLP
Attorneys for Defendants Robert Greenberg,
Michael Greenberg, Jeffrey Greenberg, David
Weinberg, Richard Siskind, Geyer Kosinski,
Morton Erlich, Richard A. Rappaport
and Thomas Walsh |
|
1 Capitalized terms used herein are defined in
Section VI.1 below, unless otherwise noted. |
1
|
/s/ Kenneth A. OBrien, Jr. |
|
KENNETH A. OBRIEN, Jr.
SHEPPARD, MULLIN, RICHTER & HAMPTON LLP
Attorneys for Nominal Defendant
Skechers U.S.A., Inc. |
2
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