Varsity Brands, Inc. has reached an agreement to settle two purported class action lawsuits that were filed in Delaware and Tennessee against the company, its board of directors and Leonard Green & Partners, L.P. The lawsuits challenged the proposed merger pursuant to which the company is to be acquired by a wholly-owned subsidiary of an affiliate of Leonard Green & Partners, L.P. and members of the company's senior management. All defendants continued to deny any liability in the lawsuits, and the settlement is subject to court approval. On August 13, 2003, the company mailed a Proxy Statement to all holders of record of Varsity Brands common stock as of August 4, 2003, in connection with a special meeting of the company's stockholders to be held on September 15, 2003 in New York City for the purpose of approving the proposed merger.
On August 28, 2003, the parties to the lawsuits, through their respective attorneys, entered into a memorandum of understanding setting forth the terms of the settlement. The memorandum of understanding provides, among other things, that (i) the company will mail Supplemental Proxy Materials to its stockholders by September 3, 2003, (ii) the company and the acquisition subsidiaries formed by the affiliate of Leonard Green & Partners, L.P. will amend certain provisions of their merger agreement to (A) lower the fee payable by the company in the event the merger agreement is terminated under certain circumstances and (B) increase the aggregate percentage of shares that can be subject to an effective exercise of appraisal rights before the acquisition subsidiaries formed by the affiliate of Leonard Green & Partners, L.P. are able to exercise a right to terminate the merger agreement and (iii) the company will pay the legal fees of plaintiffs' attorneys in connection with the lawsuits.
The Supplemental Proxy Materials, which were mailed to stockholders earlier today, set forth additional disclosures concerning the proposed merger and other terms of the proposed settlement of the class action lawsuits.
Upon court approval of the settlement, the company, its board of directors and Leonard Green & Partners, L.P. will be released from any and all claims and liabilities related to the proposed merger, including all claims asserted in the lawsuits. The company, its board of directors and Leonard Green & Partners, L.P. deny all of the claims and contentions alleged by the plaintiffs and all charges of wrongdoing or liability arising out of the plaintiffs allegations.
