MEMORANDUM OF UNDERSTANDING
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This Memorandum of Understanding ("Memorandum") is entered into as of
December 4, 2003, by and among (i) The A. Xxxxx Xxxxxx and Xxxxxx X. Xxxxxx
Rollover XXX and Xxxxx, Inc. ("Plaintiffs"); and (ii) Westerbeke
Corporation ("Westerbeke" or the "Company") and the Westerbeke directors
named as individual defendants (the "Individual Defendants") (collectively,
the "Defendants") in the action captioned The A. Xxxxx Xxxxxx and Xxxxxx X.
Xxxxxx Rollover XXX and Xxxxx, Inc. v. Xxxx X. Xxxxxxxxxx, Xx., Xxxxxx X.
Xxxxxx, Xxxxxx Bench, Xxxxx X. Xxxxxx and Westerbeke Corporation, C.A. No.
20291-NC, pending before the Court of Chancery of the State of Delaware in
and for New Castle County (respectively, the "Action" and the "Court").
WHEREAS:
A. Plaintiffs are and have been the beneficial owners of shares of
common stock of the Company at all times as of and since the date of the
filing of the complaint in the Action (the "Complaint").
B. On May 5, 2003, following extensive negotiation by a special
committee of independent directors, Westerbeke announced that it had
entered into a definitive merger agreement (the "Merger Agreement") with
Westerbeke Acquisition Corporation ("Acquisition") pursuant to which each
of the approximately 850,000 shares of Westerbeke common stock not owned by
Acquisition would be converted into the right to receive $3.00 per share in
cash (the "Merger").
C. On May 5, 2003, the Complaint was filed on behalf of a putative
class consisting of all stockholders of the Company, other than Defendants
and any person, firm, trust, corporation, or other entity related to or
affiliated with Defendants. The Complaint generally alleges that, in
connection with the Merger, the Individual Defendants breached their
fiduciary duties to the Company's public stockholders. The Action seeks,
among other things, to enjoin the consummation of the Merger.
D. After months of discussions, counsel for Plaintiffs and
Defendants reached an oral agreement-in-principle concerning the proposed
settlement of the Action which would result in the public stockholders of
the Company receiving higher consideration per share than proposed under
the Merger Agreement.
E. Because counsel for Plaintiffs and Defendants in the Action
have concluded that the terms contained in this Memorandum are fair and
adequate to both the Company and its stockholders and that it is reasonable
to pursue a settlement of the Action based upon the procedures outlined
herein and the substantial benefits and protections offered herein, the
parties wish to document their agreement-in-principle in this Memorandum.
NOW, THEREFORE, the parties to the Action have reached an agreement-
in-principle providing for the settlement of the Action on the terms and
subject to the conditions set forth below (the "Settlement"):
1. The purpose of this Memorandum is to set forth the agreement-
in-principle of the parties to the Action with respect to the matters
addressed below. However, the obligations of the parties pursuant to this
Memorandum are subject to modifications, if necessary, to ensure that the
terms thereof will not generate any adverse tax, accounting or other
consequences to the parties (including to enable the Company to obtain any
necessary third party consents). Any necessary adjustments will be made on
a mutually agreeable basis so as to preserve the economic, operational and
other objectives of the parties in reaching this agreement-in-principle.
2. In consideration for the full settlement and release of all
Settled Claims (as defined below), and subject in all respects to all terms
and conditions of the Merger Agreement, the Merger Agreement shall be
amended to increase the Merger Consideration, as defined in Section 2.01(a)
of the Merger Agreement, from a right to receive $3.00 per share in cash to
a right to receive $3.26 per share in cash.
3. Subject to such reasonable and appropriate confirmatory
discovery as Plaintiffs and Defendants agree, Plaintiffs and Defendants
agree to enter into a stipulation of settlement (and such other related
documentation as may be necessary) which will provide for the settlement of
the Action (the "Settlement Agreement"). Among other things, the
Settlement Agreement expressly will provide as follows:
a. for the conditional certification of the Action, for
settlement purposes only, as a class action pursuant to Court of Chancery
Rules 23(b)(1) and (b)(2) on behalf of a class consisting of all record and
beneficial holders of common stock of the Company (other than the
Defendants and any person, firm, trust, corporation or other entity related
or affiliated with any of the Defendants) for the period from and including
May 5, 2003 through and including the effective date of the Merger,
including any and all of their respective successors in interest,
predecessors, representatives, trustees, executors, administrators, heirs,
assigns or transferees, immediate and remote, and any person or entity
acting for or on behalf of, or claiming under any of them, and each of them
(the "Class");
b. for the complete discharge, dismissal with prejudice,
settlement and release of, and an injunction barring, any and all claims,
demands, rights, actions or causes of action, rights, liabilities, damages,
losses, obligations, judgments, suits, matters and issues of any kind or
nature whatsoever, whether known or unknown, contingent or absolute,
suspected or unsuspected, disclosed or undisclosed, that have been or could
have been asserted in the Action or in any court, tribunal or proceeding
(including, but not limited to, any claims arising under federal or state
law relating to alleged fraud, breach of any duty, negligence or violations
of the federal or state securities laws) by or on behalf of any and all of
the plaintiffs in the Action and any and all of the members of the Class,
whether individual, class, derivative, representative, legal, equitable or
any other type or in any other capacity against Defendants (including the
Individual Defendants), and/or any of their families, parent entities,
associates, affiliates (including, without limitation, Acquisition) or
subsidiaries and each and all of their respective past, present or future
officers, directors, stockholders, 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, administrators, predecessors, successors and
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assigns (collectively, the "Released Persons") which have arisen, could
have arisen, arise now, or relate in any manner to, the allegations, facts,
events, transactions, acts, occurrences, statements, representations,
misrepresentations, omissions or any other matter, thing or cause
whatsoever, or any series thereof, embraced, involved, set forth or
otherwise related, directly or indirectly, to the Complaint, the Action,
the Merger Agreement or the Merger (collectively, the "Settled Claims");
c. that Defendants have denied, and continue to deny, that
any of them has committed or has threatened to commit any wrongdoing,
violation of law or breach of duty to Plaintiffs, the Class or anyone;
d. that Defendants are entering into the Settlement
Agreement solely because the proposed Settlement would eliminate the
distraction, burden and expense of further litigation; and
e. subject to the Order of the Court, pending final
determination of whether the Settlement provided for in the Settlement
Agreement should be approved, that Plaintiffs and all members of the Class,
or any of them, are barred and enjoined from commencing, prosecuting,
instigating or in any way participating in the commencement or prosecution
of any action asserting any Settled Claims against any of the Released
Persons.
4. The parties to the Action will use their best efforts to
complete the discovery contemplated by this Memorandum and to agree upon,
execute and present to the Court, as soon as practicable, a formal
Settlement Agreement and such other documents as may be necessary and
appropriate in order to obtain the prompt approval by the Court of the
Settlement and the dismissal with prejudice of the Action in the manner
contemplated herein and by the Settlement Agreement. Pending the
negotiation and execution of the Settlement Agreement, all proceedings in
the Action, except for Settlement-related proceedings pursuant to this
Memorandum, shall be suspended.
5. The parties to the Action, through their counsel, (i) agree to
use their best efforts to pursue the Settlement in as expeditious and
comprehensive a manner as possible and acknowledge that time is of the
essence; and (ii) agree to cooperate in preparing any and all necessary
papers to define, pursue and effectuate the Settlement.
6. Pending negotiation, execution and Court approval of the
Settlement Agreement and Settlement, the Plaintiffs in the Action agree to
stay any discovery and to stay and not to initiate any and all other
proceedings other than those incident to the Settlement itself. The
parties also agree to use their best efforts to prevent, stay or seek
dismissal of or oppose entry of any interim or final relief in favor of any
member of the Class in any other litigation against any of the parties to
this Memorandum which challenges the Settlement, the Merger Agreement or
the Merger or otherwise involves a Settled Claim.
7. The Settlement contemplated by this Memorandum is subject to:
a. the completion by Plaintiffs in the Action of such
further documentary discovery and/or oral depositions or interviews as
reasonably are requested by them and agreed
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to by the respective party from whom discovery is requested (the scope of
such discovery having been discussed by counsel prior to the execution of
this Memorandum);
b. the execution of a formal Settlement Agreement (and such
other documentation as may be required to obtain final approval by the
Court of the Settlement) by counsel for the parties to the Action;
c. the consummation of the Merger; and
d. final approval by the Court of the Settlement (and the
exhaustion of possible appeals, if any) and the dismissal of the Action by
the Court with prejudice and without awarding costs to any party (except as
provided herein) having been obtained, and entry by the Court of a final
order and judgment containing such release language as is contained in the
Settlement Agreement.
8. This Memorandum shall be null and void and of no force and
effect should any of the conditions set forth herein not be met or should
Plaintiffs' counsel in the Action determine in good faith that, based upon
the discovery contemplated by this Memorandum, the proposed Settlement is
not fair, reasonable and adequate; in such event, this Memorandum shall not
be deemed to prejudice in any way the positions of the parties with respect
to the Action nor to entitle any party to the recovery of costs and
expenses incurred to implement this Memorandum (except as provided in
paragraph 10 hereof for the costs of notice of the Settlement).
9. The Effective Date of the Settlement shall be the date on which
the order of the Court approving the Settlement becomes final and no longer
subject to further appeal or review, whether by exhaustion of any possible
appeal, lapse of time or otherwise.
10. The Company shall be responsible for providing notice of the
Settlement to the members of the Class. The Company shall pay, on behalf
of and for the benefit of the Individual Defendants in the Action, all
reasonable costs and expenses incurred in providing notice of the
Settlement to the members of the Class and shall cooperate with Plaintiffs'
counsel in providing such information as is reasonably available to it.
11. Subject to the terms and conditions of this Memorandum and the
terms and conditions of the Settlement Agreement contemplated hereby, the
Company shall pay, on behalf of and for the benefit of the Individual
Defendants in the Action, such fees and expenses as may be awarded by the
Court to counsel for Plaintiffs in the Action, who agrees not to apply for
an aggregate award of fees and expenses that exceeds $100,000, which shall
be payable in accordance with the terms of the Settlement Agreement.
12. Except as provided herein, the Defendants in the Action shall
bear no other expenses, costs, damages or fees alleged or incurred by
Plaintiffs, by any member of the Class, or by any of their attorneys,
experts, advisors, agents or representatives.
13. The provisions contained in this Memorandum shall not be deemed
a presumption, concession or an admission by any Defendant in the Action of
any fault, liability or wrongdoing as to any facts or claims alleged or
asserted in the Action, or any other actions or
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proceedings, and shall not be interpreted, construed, deemed, invoked,
offered, or received in evidence or otherwise used by any person in the
Action, or in any other action or proceeding, whether civil, criminal or
administrative.
14. This Memorandum constitutes the entire agreement among the
parties with respect to the subject matter hereof, and may not be amended
nor any of its provisions waived except by a writing signed by all of the
parties hereto.
15. This Memorandum 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 conflict of laws principles.
16. This Memorandum will be executed by counsel for the parties to
the Action, each of whom represents and warrants that they have the
authority from their clients to enter into this Memorandum. This
Memorandum may be executed in one or more counterparts, each of which shall
be deemed to be an original, but all of which together shall constitute one
and the same instrument.
17. The Plaintiffs and their counsel in the Action represent and
warrant that none of Plaintiffs' claims or causes of action referred to in
any complaint in the Action or this Memorandum have been assigned,
encumbered or in any manner transferred in whole or in part.
18. This Memorandum shall be binding upon and shall inure to the
benefit of the parties and their respective agents, successors, executors,
heirs and assigns.
IN WITNESS WHEREOF, the parties have executed this Memorandum
effective as of the date set forth below.
/s/ Xxxxxxx X. Xxxxxxx
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Xxxxxxx X. Xxxxxxx
Wechsler Xxxxxxx LLP
000 Xxxxxxx Xxxxxx
0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
(000) 000-0000
Attorneys for Plaintiffs
/s/ Xxxxxxx X. XxXxxxxxx
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Xxxxxxx X. XxXxxxxxx
Xxxxxxxx, Xxxxxx & Finger, P.A.
Xxx Xxxxxx Xxxxxx, X.X. Xxx 000
Xxxxxxxxxx, Xxxxxxxx 00000
(000) 000-0000
Attorneys for Defendants
December 4, 2003
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