Attached files
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| 8-K - JAKKS PACIFIC INC | v195408_8k.htm |
UNITED
STATES DISTRICT COURT
SOUTHERN
DISTRICT OF NEW YORK
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IN
RE JAKKS PACIFIC, INC. DERIVATIVE ACTION
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Case
No. 04 Civ. 9441 (RJS)
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NOTICE
OF PENDENCY OF CONSOLIDATED DERIVATIVE ACTION AND PROPOSED SETTLEMENT AND
SETTLEMENT FINAL HEARING
TO: ALL
CURRENT STOCKHOLDERS OF JAKKS PACIFIC, INC. ("JAKKS" OR THE "COMPANY") AS OF
JUNE 29, 2010:
YOU ARE
HEREBY NOTIFIED, pursuant to an order of the United States District Court for
the Southern District of New York (the "Court") and Federal Rule of Civil
Procedure 23.1, that a proposed settlement has been reached, subject to Court
approval, between the parties in the above-captioned consolidated shareholder’s
derivative action (the "Consolidated Derivative Action"). The terms of the
proposed settlement of the Consolidated Derivative Action (the "Settlement") are
set forth in a Stipulation and Agreement of Settlement dated as of November 16,
2009 (the "Stipulation").
NO
PAYMENT WILL BE PAID TO YOU IN THIS SETTLEMENT AND THERE ARE NO CLAIM FORMS TO
COMPLETE.
All
capitalized terms herein have the same meanings as set forth in the
Stipulation.
The Final
Hearing
On
October 19, 2010, at 10:00 a.m., a hearing (the "Final Hearing") will be held
before the Honorable Richard J. Sullivan, at the Daniel Patrick Moynihan United
States Courthouse, 500 Pearl St., Courtroom 21C, New York, NY 10007-1312, to
determine: (1) whether the terms of the Settlement should be approved as fair,
reasonable and adequate, including the Fee and Expense Award; and (2) whether
the Consolidated Derivative Action should be dismissed with prejudice as to the
Released Persons.
Background of the
Action
On and
after November 5, 2004, a number of securities class action complaints were
filed in the United States District Court for the Southern District of New York
on behalf of purchasers of JAKKS common stock between December 3, 1999 and
October 19, 2004, inclusive, alleging violations of the Securities Exchange Act
of 1934 (the “Exchange Act”), and those securities class actions were later
consolidated and captioned In
re JAKKS Pacific, Inc. Shareholders Class Action Litigation, 04 Civ. 8807
(RJS) in the Southern District of New York (the “Class Action”).
On July
11, 2005, the lead plaintiffs in the Class Action filed a consolidated complaint
against JAKKS, Jack Friedman, Steven G. Berman and Joel M. Bennett alleging that
in order to procure valuable international license agreements to manufacture and
market World Wrestling Entertainment, Inc. (“WWE”) products, JAKKS allegedly
bribed a senior WWE executive (James Bell (“Bell”)) and WWE’s licensing agent,
Stanley Shenker & Associates, Inc. (“SSAI”). In exchange for the
alleged bribes from JAKKS, which were allegedly laundered through foreign
corporations, Bell and SSAI allegedly agreed to assist JAKKS in securing a WWE
videogame license and favorable amendments to the toy
licenses. During the Class Period, JAKKS publicly reported positive
financial results which it attributed, in material part, to its WWE product
line.
On
December 2, 2004, Freeport commenced a derivative action styled Freeport Partners, LLC v.
Friedman, et al, 04
Civ. 9441 (RJS), in the United States
District Court for the Southern District of New York, seeking relief based upon
allegations, inter alia,
that Defendants Jack Friedman, Stephen G. Berman, and Joel M. Bennett
violated Section 10(b) of the Exchange Act, 15 U.S.C. §§ 78j(b), Section 21(D)
of the Exchange Act, 15 U.S.C. § 78u(d), were unjustly enriched, and breached
their fiduciary duties owed to JAKKS by engaging in conduct that harmed the
Company, including exposing JAKKS to potential liability in the Class
Action.
On
February 10, 2005, Oppenheim commenced a derivative action styled Oppenheim v. Friedman, et al.,
05 Civ. 2046 (RJS), in the United States
District Court for the Southern District of New York, seeking relief based upon
similar allegations, asserting that Defendants Jack Friedman, Joel M. Bennett,
Stephen G. Berman, David C. Blatte, Robert E. Glick, Michael G. Miller, and
Murray L. Skala breached various fiduciary duties owed to JAKKS by engaging in
conduct that harmed the Company.
On March
17, 2005, Tony Warr commenced a derivative action styled Warr v. Friedman, et al.,
Case No. BCC330477, in the Superior Court of the State of California, County of
Los Angeles (the “State Derivative Action”), against Defendants Jack Friedman,
Stephen G. Berman, Joel M. Bennett, David C. Blatte, Robert E. Glick, Michael G.
Miller, Murray L. Skala, and Does 1-25, seeking relief based upon similar
allegations, asserting that Defendants violated California Corporations Code §
25402, breached various fiduciary duties owed to JAKKS by engaging in conduct
that harmed the Company, abused their control of the Company, grossly mismanaged
the Company, wasted corporate assets, and were unjustly
enriched. That action has been voluntarily dismissed without
prejudice.
Plaintiffs’
overriding purpose in filing the derivative actions was to ensure that if JAKKS
was held liable for violations of the federal securities laws, or if such
litigation resulted in a settlement, the individual defendants (or their
insurers) would pay a fair portion of any judgment or settlement.
On
February 24, 2009, after the district court granted in part and denied in part
the defendants’ motion to dismiss the complaint in the Class Action, and after
the lead plaintiffs filed a second amended complaint, which the defendants in
the action also moved to dismiss, the parties reached an agreement-in-principle
to settle the Class Action.
Terms of the
Settlement
The terms
of the Settlement set forth in the Stipulation include: (1) the Individual
Defendants shall cause their directors and officers liability insurance carrier
to pay to JAKKS the sum of $4,090,000, which amount JAKKS shall cause to be
applied to (a) settle the Securities Class Action; and (b) to pay the
Plaintiffs’ attorneys fees and the reimbursement of expenses up to $165,000 as
approved by the Court. If the Settlement is approved, the Court will
enter a Judgment providing that all claims have been released against the
Released Persons and the Consolidated Derivative Action will be
dismissed.
Reasons For the
Settlement
Before
the Actions were initiated, Plaintiffs’ Counsel performed an investigation
concerning the facts and claims alleged in the Consolidated Derivative Action.
After the Consolidated Derivative Action was initiated, Plaintiffs’ Counsel
continued their investigation including: (i) conducting a private investigation
related to the allegations of the Consolidated Derivative Action; (ii)
inspecting, analyzing and reviewing JAKKS’ filings with the U.S. Securities and
Exchange Commission (“SEC”), press releases, announcements, and transcripts of
conference calls; and (iii) monitoring and reviewing the pleadings, briefs and
accompanying exhibits, and the opinions and orders filed in the Class Action,
and in certain litigation brought against JAKKS by WWE.
Plaintiffs'
Counsel has concluded that their investigation and their efforts are sufficient
for them to reach a conclusion regarding settlement. In addition to
fully considering the arguments made by plaintiffs in those actions, the
defenses asserted, and the various courts' rulings, and in addition to
considering the agreement in principle reached to settle the Class Action,
Plaintiffs also recognize and acknowledge the expense and length of continued
proceedings necessary to prosecute the Consolidated Derivative Action against
Defendants through trial and appeals. Plaintiffs have also taken into
account the uncertain outcome and the risk of any litigation, especially in
complex shareholder litigation such as the Consolidated Derivative Action, as
well as the difficulties and delays inherent in such
litigation. Plaintiffs’ Counsel are also mindful of the inherent
problems of proof under, and possible defenses to, the violations asserted in
the Consolidated Derivative Action. Based on these considerations,
among others, and the significant payment to JAKKS as referenced herein,
Plaintiffs believe that the Settlement confers substantial benefits upon JAKKS
and is in the best interests of JAKKS.
Release
If the
Settlement is approved, the claims being settled will be
released. The releases state as follows:
The
obligations incurred pursuant to this Stipulation shall be in full and final
disposition of the Consolidated Derivative Action with respect to the Released
Persons and any and all Settled Claims. Upon the Effective Date of
the Settlement, the Settled Claims against each and all of the Released Persons
shall be dismissed with prejudice. The Release shall extend to
Unknown Claims that the Parties do not know or suspect to exist at the time of
the Release that are related in any way to the Consolidated Derivative Action or
the Settled Claims, which, if known, might have affected their decision to enter
into the Release. Plaintiffs shall be deemed to relinquish, to the
extent it is applicable, and to the full extent permitted by law, the
provisions, rights and benefits of § 1542 of the California Civil
Code. Plaintiffs shall be deemed to waive 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 California Civil Code § 1542.
As of the
Effective Date of this Settlement, each of the Released Persons shall be deemed
to have, and by operation of the judgment in the Consolidated Derivative Action
shall have, fully, finally, and forever released, relinquished and discharged
Plaintiffs and Plaintiffs’ 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 Consolidated Derivative
Action or the Settled Claims.
The
Stipulation contains certain definitions of key terms involving the releases
which are set forth below:
“Released
Persons” means Defendants and JAKKS and their respective parent entities,
affiliates, subsidiaries, predecessors, successors or assigns, and each of their
past, present, or future officers and directors, associates, stockholders,
controlling persons, representatives, employees, attorneys, accountants,
underwriters, financial or investment advisors or agents, heirs, executors,
trustees, general or limited partnerships, personal representatives, estates or
administrators.
“Settled
Claims” shall collectively mean all claims, demands, rights, liabilities and
causes of action, whether known or unknown, which have been or could have been
asserted by Plaintiffs derivatively on behalf of JAKKS against Defendants,
arising out of, based upon or related to the allegations, facts, circumstances,
transactions, events, matters, disclosures, occurrences, acts, failures to act,
representations or omissions involved, pled, set forth, or referred to in the
Complaints.
“Unknown
Claims” means any Settled Claim which any Party does 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 Settled Claims, the Parties stipulate and agree that, upon the
Effective Date, the Parties each shall expressly waive, and by operation of the
Judgment shall be deemed to have expressly waived, the provisions, rights and
benefits of California Civil Code section 1542, which provides:
A general
release does not extend to claims which the creditor does not know or suspect to
exist in his or her favor at the time of executing the release, which if known
by him or her must have materially affected his or her settlement with the
debtor.
The
Parties each shall expressly waive, and by operation of the Judgment shall be
deemed to have expressly 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
California Civil Code section 1542. The Parties each 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 Settled Claims,
but, upon the Effective Date, the Parties each shall expressly have, and by
operation of the Judgment shall be deemed to have, fully, finally, and forever
settled and released any and all Settled 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 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. The
Parties acknowledge that the foregoing waiver was separately bargained for and a
material element of the Settlement of which this release is a Part.
Attorneys’ Fees And
Expenses
Plaintiffs'
Counsel shall make application to the Court for an award of attorneys’ fees and
the reimbursement of expenses in an amount of up to $165,000 to be paid from the
insurance payment described above. Defendants have agreed not to
object to this application.
What You May
Do
If you
like the Settlement you need to do nothing. Any shareholder may
object to the Settlement. A shareholder who objects to the Settlement
of the Consolidated Derivative Action shall have a right to appear and to be
heard at the Final Hearing, provided that he, she, or it was a beneficial
shareholder or shareholder of record as of June 29, 2010. Any
shareholder of JAKKS who satisfies this requirement may enter an appearance
through counsel of such shareholder's own choosing and at such shareholder's own
expense or may appear on his, her, or its own. However, no
shareholder of JAKKS shall be heard at the Final Hearing unless no later than 21
days prior to the date of the Final Hearing, such shareholder has satisfied the
following procedures:
Filed a
written objection or opposition, together with copies of all other papers
(including proof of ownership of JAKKS common stock) and briefs, with the
Clerk's Office at Daniel Patrick Moynihan United States Courthouse, 500 Pearl
St., New York, NY 10007-1312, no later than 21 days prior to the date of the
Final Hearing. You must also serve the papers on the following
counsel no later than 21 days prior to the date of the Final
Hearing:
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Plaintiffs’
Counsel:
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Defendants’
Counsel:
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Laurence
Paskowitz
PASKOWITZ
& ASSOCIATES
60
East 42nd
Street, 46th
Floor
New
York, NY 10165
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Elliot
Schaeffer
SCHAEFFER
& KRONGOLD LLP
450
Seventh Avenue
New
York, NY 10123
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JAKKS’
Counsel:
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Michael
H. Gruenglas
SKADDEN
ARPS SLATE
MEAGHER
& FLOM LLP
Four
Times Square
New
York, NY 10036
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The
filing must demonstrate your ownership of JAKKS common stock, including the
dates of ownership, and must state the basis for your objection.
You may
file a written objection without having to appear at the Final Hearing. You may
not appear at the Final Hearing to present your objection, however, unless you
first filed and served a written objection in accordance with the procedures
described above, unless the Court orders otherwise.
If you
wish to be heard orally at the hearing in opposition to the approval of the
Settlement, including the Fee and Expense Award, and if you have filed and
served a timely written objection as described above, you must also notify the
above counsel in your written objection concerning your intention to
appear. Persons who intend to object and desire to present evidence
at the Final Hearing must include in their written objection the identity of any
witnesses they may call to testify and exhibits they intend to introduce into
evidence at the hearing.
As stated
above, you are not required to hire an attorney to represent you in making
written objections or in appearing at the Final Hearing. If you
decide to hire an attorney, which will be at your own expense, however, he or
she must file a notice of appearance with the Court and serve it on Plaintiffs'
and Defendants' Counsel so that the notice is received no later than 14 days
prior to the date of the Final Hearing.
The Final
Hearing may be adjourned by the Court without further written
notice. If you intend to attend the Final Hearing, you should confirm
the date and time with Plaintiffs' Counsel.
Unless
the Court orders otherwise, any shareholder who does not object in the manner
described above will be deemed to have waived any objection and shall be forever
foreclosed from making any objection to the proposed Settlement, including the
Fee and Expense Award. Shareholders do not need to appear at the
Final Hearing or take any other action to indicate their approval.
Interim Stay and
Injunction
Pending
the Settlement Hearing, all proceedings in the Action involving the Parties, as
defined in the Stipulation of Settlement, other than those proceedings necessary
to carry out or enforce the terms and conditions of the Stipulation are
stayed.
Pending
final determination of whether the Settlement should be approved, Plaintiffs and
the JAKKS shareholders, and each of them, and anyone who acts or purports to act
on their behalf, shall not institute, commence or prosecute any action which
asserts Released Claims against any Released Person, as defined in the
Stipulation.
Scope of the
Notice
This
Notice is a summary description of the Derivative Actions, the complaints, the
terms of the Settlement and the Settlement Hearing. For a more
detailed statement of the matters involved in the Derivative Actions, reference
is made to the Stipulation, a copy of which may be reviewed in the Court’s
files.
DO
NOT CALL OR WRITE THE COURT OR THE OFFICE OF
CLERK
OF THE COURT REGARDING THIS NOTICE.
Dated
this 29th day of June, 2010
By Order
of the Court