Exhibit 99.1
IN THE SIXTEENTH JUDICIAL CIRCUIT COURT
OF JACKSON COUNTY, MISSOURI
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)
MICHAEL HAAG, Derivatively on Behalf of AMERICAN ITALIAN )
PASTA COMPANY, )
)
Plaintiff, )
)
vs. ) Case No. 0516-0CV-33137 )
)
TIMOTHY S. WEBSTER, et al., ) Division 18
)
Defendants, )
)
and )
)
AMERICAN ITALIAN PASTA COMPANY, )
)
Nominal Defendant. )
)
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NOTICE OF SETTLEMENT OF SHAREHOLDER DERIVATIVE LITIGATION
TO: ALL RECORD AND BENEFICIAL OWNERS OF AMERICAN ITALIAN PASTA COMPANY COMMON
STOCK AS OF AUGUST 13, 2008 ("CURRENT AIPC STOCKHOLDERS")
THIS NOTICE IS GIVEN pursuant to an Order of the Sixteenth Judicial Circuit
Court of Jackson County, Missouri (the "State Court") in the above-captioned
derivative action (the "State Action"). State Plaintiff brought claims in the
State Action and sought to pursue them derivatively on behalf of American
Italian Pasta Company ("AIPC" or the "Company").
This Notice is given to advise you that a hearing (the "Final Hearing")
will be held for the State Action on December 5, 2008 at 2:00 p.m. before the
Hon. Brian C. Wimes at the Sixteenth Judicial Circuit Court of Jackson County,
415 East 12th Street, Kansas City, MO 64106, to: (a) determine the fairness,
reasonableness, and adequacy of the terms and conditions
of a proposed stipulated settlement between certain parties to the State Action
and related actions pending in the United States District Court for the Western
District of Missouri and the Court of Chancery for the State of Delaware in and
for New Castle County (the "Settlement") and whether the State Court should
finally approve the Settlement and enter a Final Judgment and Order of Dismissal
thereon; and (b) rule upon the agreed-to Fee Award for Plaintiffs' Counsel.
Because this is a shareholders' derivative action brought for the benefit of
AIPC, no individual AIPC shareholder has the right to receive any individual
compensation as a result of the settlement of this action.
THE FOLLOWING RECITATION DOES NOT CONSTITUTE FINDINGS OF THE COURT. IT IS
BASED ON THE STATEMENTS OF THE PARTIES AND SHOULD NOT BE UNDERSTOOD AS AN
EXPRESSION OF ANY OPINION OF THE COURT AS TO THE MERITS OF ANY OF THE
CLAIMS OR DEFENSES RAISED BY ANY OF THE PARTIES OR THE FAIRNESS OR ADEQUACY
OF THE PROPOSED SETTLEMENT.
I. DEFINITIONS
A. "Actions" means the Federal Action, the State Action and the
Delaware Action.
B. "AIPC's Counsel" means the law firms of Davis Polk & Wardwell and
Husch Blackwell Sanders LLP.
C. "AIPC" or the "Company" means American Italian Pasta Company, a
Delaware company with corporate headquarters located at 4100
North Mulberry Drive, Suite 200, Kansas City, Missouri 64116.
D. "Audit Committee" means the Audit Committee of the Board.
E. "Board" means the AIPC Board of Directors.
F. "Compensation Committee" means the Compensation Committee of the
Board.
G. "Delaware Action" means the action styled Zaleon v. American
Italian Pasta Company, C.A. No. 2775-N, currently pending in the
Delaware Court.
H. "Delaware Court" means the Court of Chancery for the State of
Delaware in and for New Castle County.
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I. "Delaware Judgment" means the Stipulation and Order of Dismissal
With Prejudice to be rendered by the Delaware Court.
J. "Delaware Plaintiff" means Marilyn Zaleon.
K. "Delaware Plaintiff's Counsel" means the law firm of Schiffrin
Barroway Topaz & Kessler, LLP.
L. "Document Demand Letter" means the letter dated May 18, 2007 sent
by Federal Plaintiff's Counsel to AIPC's Counsel in which Federal
Plaintiff demanded that Federal Defendants produce certain
documents relating to the claims in the Federal Action.
M. "Effective Date" means the first date by which all of the events
and conditions specified in Section XI of the Stipulation have
been met and have occurred.
N. "Ernst & Young" means Ernst & Young, LLP.
O. "Federal Action" means the action styled Chaiet v. Allen, et al.,
Case No. 06-744-CV-W-ODS, currently pending in the Federal Court.
P. "Federal Court" means the United States District Court for the
Western District of Missouri.
Q. "Federal Defendants" means the Individual Federal Defendants and
AIPC.
R. "Federal Judgment" means the Final Judgment and Order of
Dismissal to be rendered by the Federal Court.
S. "Federal Plaintiff" means Barbara Chaiet.
T. "Federal Plaintiff's Counsel" means the law firm of Schiffrin
Barroway Topaz & Kessler, LLP.
U. "Fee Award" means the total attorneys' fees and expenses awarded
to Plaintiffs' Counsel by the State Court at the Final Hearing,
regardless of how such fees and expenses are to be paid or
divided.
V. "Final Hearing" means the hearing, after Notice and preliminary
approval, held by the State Court to determine whether to approve
(a) the settlement of the State Action on the terms as set forth
in the Stipulation; and (b) the Fee Award.
W. "Final" means: (a) if an appeal is filed and if the Judgment is
upheld on appeal, the date of final affirmance on an appeal of
the Judgment, the expiration of the time for a petition for or a
denial of a petition for review of the Judgment and, if review is
granted, the date of final affirmance of the Judgment following
review pursuant to that grant; or (b) the date of final
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dismissal of any appeal from the Judgment, including the
expiration of time for requesting rehearing and, if a petition
for review of Judgment is sought, the final dismissal of any
proceeding on petition to review the Judgment; or (c) if no
appeal is filed, the expiration date of the time for the filing
or noticing of any appeal from the Judgment.
X. "Individual Defendants" means Individual Federal Defendants and
Individual State Defendants.
Y. "Individual Federal Defendants" means David Allen, Jonathan E.
Baum, Mark C. Demetree, James A. Heeter, Ronald Kesselman, Robert
H. Niehaus, Terence C. O'Brien, William R. Patterson, Tim M.
Pollack, Warren B. Schmidgall, Horst W. Schroeder, Raymond P.
Silcock, Richard C. Thompson, and Timothy S. Webster.
Z. "Individual State Defendants" means Jonathan E. Baum, Jerry H.
Dear, Mark C. Demetree, James A. Heeter, Robert H. Niehaus, John
P. O'Brien, Terence C. O'Brien, William R. Patterson, David B.
Potter, Tim M. Pollack, Warren B. Schmidgall, Horst W. Schroeder,
George D. Shadid, Richard C. Thompson, and Timothy S. Webster.
AA. "Judgment" means the State Judgment or the Federal Judgment or
the Delaware Judgment.
BB. "Judgment Date" means the date the State Judgment is entered by
the State Court.
CC. "Litigation Demand Letter" means the letter dated August 26, 2005
sent by Federal Plaintiff's Counsel to the Chairman of the Board
in which Federal Plaintiff demanded that the Board commence a
civil action against certain of the Company's directors and
officers.
DD. "Notice" means this Notice of Settlement of Shareholder
Derivative Litigation.
EE. "Person" means an individual, corporation, limited liability
corporation, professional corporation, limited liability
partnership, 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, and/or assignees.
FF. "Plaintiffs' Counsel" means Federal Plaintiff's Counsel, State
Plaintiff's Counsel, and Delaware Plaintiff's Counsel.
GG. "Plaintiffs" means Federal Plaintiff, State Plaintiff, and
Delaware Plaintiff.
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HH. "Released Claims" means, collectively, all claims (including
Unknown Claims), demands, rights, liabilities and causes of
action of every nature and description whatsoever, whether known
or unknown, suspected or unsuspected, contingent or
non-contingent, accrued or unaccrued, including, without
limitation, violations of any local, state, federal, or foreign
statutes, rules, regulations, common law or other law, for
damages, injunctive relief, or any other remedy whether at law or
equity, that have been asserted, or could have been asserted,
against the Released Parties in the Actions by AIPC or by AIPC's
stockholders derivatively on behalf of AIPC, which are in any way
based upon, arise from, or are related in any way to the facts,
transactions, events, occurrences, acts, failures to act,
disclosures, statements, omissions or matters set forth, referred
to, or that could have been asserted in the Actions. Released
Claims specifically do not include claims alleged in the State
Action against Ernst & Young.
II. "Released Parties" means each and every one of the following:
Settling Defendants and all entities owned, affiliated or
controlled by them, all current and former AIPC directors or
officers, and each of their respective agents, employees,
consultants, insurers, attorneys, advisors, successors, heirs,
assigns, executors, personal representatives, marital communities
and immediate families, except that Released Parties does not
include Ernst & Young.
JJ. "SEC" means the United States Securities and Exchange Commission.
KK. "Settlement Demand Letter" means the letter dated June 26, 2007
sent by Federal Plaintiff's Counsel to AIPC's Counsel in which
Federal Plaintiff identified certain corporate governance changes
that Federal Plaintiff demanded the Board implement on behalf of
AIPC.
LL. "Settling Defendants" means AIPC and the Individual Defendants.
MM. "Settling Parties" means Plaintiffs and Settling Defendants.
NN. "State Action" means the action styled Haag v. Webster, et al.,
Case No. 05-cv-33137, currently pending in the State Court.
OO. "State Defendants" means Individual State Defendants, AIPC, and
Ernst & Young.
PP. "State Judgment" means the Final Judgment and Order of Dismissal
to be rendered by the State Court.
QQ. "State Plaintiff" means Michael Haag.
RR. "State Plaintiff's Counsel" means the law firms of Barrett,
Johnston & Parsley, LLC and Coughlin Stoia Geller Rudman &
Robbins LLP.
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SS. "Stipulation Date" means August 13, 2008.
TT. "Stipulation" means this Stipulation of Settlement, dated as of
the Stipulation Date.
UU. "Unknown Claims" means any Released Claims that Plaintiffs, AIPC,
or AIPC stockholders do not know or suspect to exist in his, her
or its favor at the time of the release of the Released Parties,
or that 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, Plaintiffs and AIPC shall expressly waive and
each of AIPC's stockholders shall be deemed to have, and by
operation of the Judgment shall have, expressly waived the
provisions, rights and benefits of California Civil Code ss.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.
Upon the Effective Date, Plaintiffs and AIPC shall expressly
waive, and each of AIPC's stockholders shall be deemed to have,
and by operation of the Judgment shall have, expressly waived any
and all provisions, rights and benefits conferred by any law of
any jurisdiction or any state or territory of the United States,
or principle of common law, which is similar, comparable or
equivalent to California Civil Code ss.1542. Plaintiffs, AIPC and
AIPC stockholders 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, upon the Effective Date, Plaintiffs and AIPC shall
expressly settle and release, and each AIPC stockholder, shall be
deemed to have, and by operation of the 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, 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. The Settling Parties acknowledge that the foregoing waiver
was bargained for and a key element of the Settlement of which
this release is a part.
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II. BACKGROUND
A. Background and Procedural Posture of the State Action
On October 27, 2005, State Plaintiff commenced the State Action on behalf
of nominal defendant AIPC against certain of AIPC's current and former directors
and officers alleging breaches of fiduciary duties and other violations of state
law in connection with the Company's financial accounting and reporting
irregularities. The State Action also included a derivative claim against Ernst
& Young, AIPC's auditor, for professional negligence and accounting malpractice.
On January 5, 2006, defendants Schroeder and Schmidgall removed the State Action
to the Federal Court. The rest of the State Defendants subsequently consented to
the removal. On January 17, 2006, State Plaintiff filed a motion to remand the
State Action back to the State Court. On February 1, 2006, the Individual State
Defendants filed oppositions to the motion to remand, and on February 13, 2006,
State Plaintiff filed his reply in further support of his motion to remand. On
March 30, 2006, State Plaintiff's Counsel sent to AIPC's Counsel a demand letter
which demanded, inter alia, that the Company adopt certain corporate governance
measures specifically relating to the operation of the Board and the committees
of the Board, as well as other extensive corporate governance reforms. On June
21, 2006, the Federal Court issued an Order remanding the State Action back to
the State Court.
State Plaintiff subsequently served his first requests for production of
documents on all State Defendants on July 3, 2006. On or about August 2, 2006,
the State Defendants filed various objections and responses to State Plaintiff's
first request for production of documents. Also on July 3, 2006, the parties to
the State Action filed a joint motion for the entry of a stipulation providing
for a schedule for the filing of an amended petition and a time for the State
Defendants to respond. Pursuant thereto, on September 11, 2006, State Plaintiff
filed his Amended Verified Shareholder Derivative Petition (the "Amended
Petition"). On October 5,
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2006, the parties to the State Action filed another joint motion to enter a
stipulation providing for a revised schedule for State Defendants to respond to
the Amended Petition. Pursuant thereto, on November 1, 2006, various motions to
dismiss were filed by the State Defendants. On December 11, 2006, State
Plaintiff filed an Omnibus Opposition in response to all of the motions to
dismiss, and on January 8, 2007, the State Defendants filed their replies in
further support of their motions to dismiss.
B. Background and Procedural Posture of the Federal Action
On August 26, 2005, Federal Plaintiff sent to the Chairman of the Board the
Litigation Demand Letter. In the Litigation Demand Letter, Federal Plaintiff
demanded that the Board commence a civil action against certain of the Company's
directors and officers to recover for the benefit of the Company the amount of
damages sustained by the Company as a result of those individuals' allegedly:
(i) knowingly approving certain accounting and financial reporting
improprieties; and/or (ii) abdicating their fiduciary responsibility to make a
good faith effort to oversee the Company's operations and accounting and
financial reporting practices. On September 12, 2005, AIPC's Counsel sent to
Federal Plaintiff's Counsel a letter in response to the Litigation Demand Letter
in which AIPC's Counsel indicated that the Board desired to wait until the
conclusion of an ongoing internal investigation by the Audit Committee into
certain accounting procedures, practices and other matters (the "Audit Committee
Investigation") before responding to the Litigation Demand Letter.
On August 10, 2006, Federal Plaintiff delivered to AIPC's Counsel a letter
in which Federal Plaintiff stated that the Board had waited more than a
reasonable amount of time to consider and provide a definitive response to the
Litigation Demand Letter, yet had failed to do so. Accordingly, Federal
Plaintiff indicated that she intended to commence a derivative action on behalf
of AIPC. On August 25, 2006, AIPC's Counsel sent to Federal Plaintiff's Counsel
a
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letter in which AIPC's Counsel again stated that the Board desired to wait until
the conclusion of the Audit Committee Investigation before determining its
response to the Litigation Demand Letter.
On August 26, 2006, Federal Plaintiff commenced the Federal Action on
behalf of nominal defendant AIPC. On or about November 8, 2006, defendants
Thompson, Schmidgall, and Webster each filed separate motions to dismiss the
Federal Action; defendant Schroeder filed a motion to dismiss the Federal
Action, or in the alternative, to stay the Federal Action pending the outcome of
the Audit Committee Investigation. Also on November 8, 2006, the remaining
Federal Defendants together filed a motion to dismiss the Federal Action, or in
the alternative to stay the Federal Action pending the outcome of the Audit
Committee Investigation. Federal Plaintiff filed her opposition to the Federal
Defendants' motions to dismiss on December 15, 2006; in response, defendants
Thompson, Schmidgall, Schroeder, and Webster, and the remaining Federal
Defendants, each filed a reply on January 16, 2007.
On February 12, 2007, the Federal Court denied the motions to dismiss, but
granted the motions to stay the Federal Action pending the outcome of the Audit
Committee Investigation. As part of its Order staying the Federal Action, the
Federal Court ordered that AIPC provide monthly updates to the Federal Court
regarding the status of the Audit Committee Investigation.
Beginning on or about April 2007, AIPC's Counsel and Federal Plaintiff's
Counsel engaged in discussions concerning a potential settlement of the Federal
Action. Thereafter, on May 18, 2007, Federal Plaintiff's Counsel sent to AIPC's
Counsel the Document Demand Letter, pursuant to which Federal Plaintiff's
Counsel demanded that Federal Defendants produce certain documents relating to
the claims in the Federal Action. On or about June 5, 2007, AIPC's Counsel and
Federal Plaintiff's Counsel entered into a confidentiality agreement pursuant to
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which Federal Defendants produced to Federal Plaintiff certain documents
responsive to the Document Demand Letter. These documents included, inter alia,
minutes of meetings of the Board, the Audit Committee, and the Compensation
Committee, and additional non-public Company documents.
Upon review of the documents provided by AIPC's Counsel, on June 26, 2007,
Federal Plaintiff's Counsel sent to AIPC's Counsel the Settlement Demand Letter
which demanded, inter alia, that the Company adopt certain corporate governance
measures specifically relating to the operation of the Board and the committees
of the Board. Thereafter, AIPC's Counsel and Federal Plaintiff's Counsel engaged
in additional discussions concerning a potential settlement of the Federal
Action.
C. Background and Procedural Posture of the Delaware Action
On March 7, 2007, Delaware Plaintiff's Counsel commenced the Delaware
Action on behalf of Delaware Plaintiff against AIPC in order to compel AIPC to
hold an annual meeting of AIPC's stockholders in accordance with Delaware law.
On April 23, 2007, the parties to the Delaware Action, by their respective
counsel, stipulated to stay that action. The Delaware Action is still stayed.
D. Collaborative Settlement Efforts of the Actions
Beginning in or around October 2007, State Plaintiff's Counsel, Federal
Plaintiff's Counsel, and AIPC's Counsel engaged in further discussions
concerning a potential resolution of both the State Action and Federal Action.
Following numerous discussions and lengthy negotiations, the Settling Parties
reached an agreement in principle to settle the Actions, which agreement is
embodied in the Stipulation.
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III. DISCOVERY, INVESTIGATION, AND RESEARCH BY PLAINTIFF'S COUNSEL
Plaintiffs' Counsel has conducted extensive discovery and investigation
during the development and prosecution of the Actions. This discovery and
investigation has included, inter alia; (i) reviewing AIPC's SEC filings, media
reports, and other public documents, as well as certain non-public information
produced by Settling Defendants, including minutes of meetings of the Board, the
Audit Committee, and the Compensation Committee, and additional non-public
Company documents; (ii) participating in numerous conferences with AIPC's
Counsel; and (iii) researching the applicable law with respect to the claims
asserted in the Actions and the potential defenses thereto.
IV. THE PARTIES' POSITIONS REGARDING THE DESIRABILITY OF THE PROPOSED
SETTLEMENT
The Settling Defendants dispute that Plaintiffs would prevail at trial in
the Actions on the claims asserted. Nonetheless, Settling Defendants have
devoted substantial time, energy and resources to investigate and defend against
the claims in the Actions and believe that further litigation could be
protracted and expensive. Settling Defendants also consider there to be
uncertainty and risks inherent in litigation, especially in complex shareholder
litigation like the Actions. As a result, Settling Defendants have determined
that it is desirable and beneficial that the Actions be finally and fully
settled in the manner and upon the terms and conditions set forth in the
Stipulation.
Based on their investigation of the facts and their legal analysis,
Plaintiffs' Counsel believe that the claims asserted in the Actions have merit.
However, the expense and length of continued proceedings necessary to prosecute
the Actions against the Settling Defendants through trial and inevitable appeals
presents substantial risk to the successful resolution of any litigation,
especially in complex shareholder litigation such as the Actions. There also
exist
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inherent problems of proof concerning, and the possible defenses to, the alleged
violations asserted in the Actions, which present added risk to the successful
litigation of the Actions. Accordingly, and in light of these risks, Plaintiffs
believe that the Settlement, which confers substantial benefits upon AIPC and
Current AIPC Stockholders, is advantageous for the Company. Based on their
evaluation and their substantial experience in this area of the law, Plaintiffs'
Counsel have determined that the Settlement is in the best interests of AIPC and
Current AIPC Stockholders.
V. TERMS OF THE SETTLEMENT
In accordance with the terms of the Stipulation, the Actions and the
Released Claims shall be finally and fully compromised, settled and released,
and the Actions shall be dismissed with prejudice, as to all Settling Parties,
upon and subject to the terms and conditions of the Stipulation, as follows. The
Board, on behalf of AIPC, has implemented or has agreed to implement remedial
measures and corporate governance reforms designed to improve the Company's
corporate governance and internal controls, as follows:
A. The entire Board, other than the Company's Chief Executive
Officer, shall be comprised of "independent directors" (as
defined below).
B. The Board shall continue to have either an independent Chairman,
or if the Chairman is an employee of the Company (i.e., an
Executive Chairman), the Board shall elect a Lead Independent
Director who shall be reaffirmed annually by a majority vote of
the independent directors. The Lead Independent Director shall
advise the Executive Chairman on the scheduling and agendas of
Board meetings and on the nature and content of information
relating to the Company which shall be provided to the
independent directors to ensure that they are able to fulfill
their responsibilities.
C. To be deemed "independent," a director would have to satisfy the
following qualifications. He or she:
1. Must not have been employed by the Company or its
subsidiaries in an executive capacity within the last five
calendar years;
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2. Must not have received, during the current calendar year or
any of the three immediately preceding calendar years,
remuneration, directly or indirectly, other than de minimis
remuneration,(1) as a result of service as, or being
affiliated with, an entity that serves as (a) an advisor,
consultant, or legal counsel to the company or to an
executive officer of the Company; (b) a significant supplier
of the Company; or (c) a significant customer of the
Company;
3. Does not have any personal service contract(s) with the
Company, or any member of the Company's senior management;
4. Is not an employee or officer with a not-for-profit entity
that receives significant contributions from the Company;
5. During the current calendar year or any of the three
immediately preceding calendar years, has not had any
business relationship with the Company for which the Company
has been required to make a disclosure under Regulation S-K
of the Securities and Exchange Commission ("SEC"), other
than for service as a director or for any business
relationship for which no more than de minimis remuneration
was received in any one such year;
6. Is not employed at a public company at which an executive
officer of the Company serves as a director;
7. Has not had any of the relationships described in paragraphs
1-6 above, with the Company or any of its subsidiaries;
8. Is not a member of the immediate family of any person
described in paragraphs 1-4 above;
9. Is not employed as an executive of another entity at which
any of the Company's executives serves on the compensation
committee thereof; and
10. Does not have beneficial ownership interest of five percent
or more in an entity that receives remuneration, other than
de minimis remuneration, from the Company or its
subsidiaries.
D. Since the filing of the first of the derivative actions, the
Board expanded by adding two new independent directors.
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(1) De minimis remuneration is defined as (a) direct remuneration of
$50,000 or less received from the Company, its subsidiaries, or affiliates
during a calendar year (other than compensation); or (b) indirect remuneration
paid to an entity if such remuneration does not exceed the lesser of $5 million
or one percent of the gross revenues of the entity and did not directly result
in an increase in the compensation received by the director from that entity.
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E. The Board shall meet at least four times per year. The Audit
Committee shall meet independently and in separate session from
the Board's regular meetings at least four times per year.
F. Board Committees shall have standing authorization to retain
legal or other advisors of their choice who shall report directly
to them.
G. The Board and Board Committees shall keep typed meeting minutes
from their regular and special meetings and circulate the minutes
for review and approval. The minutes shall be kept for ten years.
H. Since the filing of the first of the derivative actions, the
charters for each of the existing Board Committees (Audit,
Compensation, and Governance and Nominating) were reviewed and
revised as deemed appropriate with the assistance of counsel.
I. Since the filing of the first of the derivative actions, the
meeting timetables and responsibilities for each of the existing
Board Committees (Audit, Compensation, and Governance and
Nominating) were reviewed and revised as deemed appropriate with
the assistance of counsel.
J. Directors serving on the Audit Committee shall not serve on more
than three other audit committees of public companies.
K. Directors shall participate in an initial orientation upon
election to the Board and in regular continuing education
thereafter. Directors serving on Board Committees shall
participate in regular continuing education on an annual basis
focusing on the duties and responsibilities of the Committee(s)
on which they serve.
L. The Audit Committee shall confer with the Company's Compliance
Officer at least annually to review the procedures relating to
and compliance with the Company's Policy on Compliance with
Ethical and Legal Mandates ("Code of Conduct") and to ensure
appropriate reporting or disposition of matters arising
thereunder.
M. Since the filing of the first of the derivative actions, the
Company has created and implemented the Code of Conduct. The
Company, under the direction of the Audit Committee, shall
undertake comprehensive employee training program in connection
with its Code of Conduct, which shall be completed within the
next six months.
N. Since the filing of the first of the derivative actions, the
Company has created a Disclosure Committee consisting of senior
officers who are integral to the process of creating the
Company's public filings under the Securities Exchange Act of
1934 (the "Act"). The Disclosure Committee, with the assistance
of the Audit Committee, shall create procedures pursuant to which
it will review, discuss and comment on the Company's filings
under the Act and will report to the
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Company's Chief Executive Officer and Chief Financial Officer
such matters as the Disclosure Committee deems necessary in
connection with the Company's public filings under the Act.
O. Since the filing of the first of the derivative actions, the
Company has hired a General Counsel and Compliance Officer.
P. Since the filing of the first of the derivative actions, the
Company has hired a Director of Internal Audit who shall oversee
an Internal Audit Department. The Director of Internal Audit
shall report on a dual basis to the Chief Financial Officer of
the Company and the Audit Committee of the Board and shall meet
with the Audit Committee at least two times per year. The Company
shall implement policies and procedures governing the Internal
Audit Department and its responsibilities and its functioning,
including those of the Director of Internal Audit.
Q. Each year the Audit Committee of the Board (i) shall meet at
least quarterly with representatives of the independent
accounting firm engaged to audit the Company's financial
statements to discuss the filing of the Company's financial
statements, earnings releases, communications with analysts and
key disclosures; (ii) shall review the performance of the
accounting firm and the lead audit partner assigned to the
engagement team and solicit the views of other members of the
Board and management of the Company in this process; (iii) shall
review and determine whether, with respect to the upcoming fiscal
year, the Company should reengage the accounting firm or solicit
and review proposals from other suitable accounting firms; (iv)
shall receive and review the reports of the auditors on the
results of their peer review report and on their internal quality
control procedures; (v) shall review the accounting firm's
independence; (vi) shall review and approve the accounting firm's
fees; (vii) shall review and pre-approve any non-audit services
to be performed by the accounting firm; and (viii) shall meet at
least twice annually with the accounting firm outside the
presence of management of the Company to facilitate open
communication between the accounting firm and management.
The provisions of the Settlement shall remain in effect until the sooner of
(i) the Company ceasing to be a public company; (ii) a change of control of the
Company; or (iii) five years from the Judgment Date.
VI. PLAINTIFFS' COUNSEL'S FEES AND REIMBURSEMENT OF EXPENSES
At the Final Hearing, Plaintiffs' Counsel will request that the State Court
approve the agreed-to Fee Award in the amount of $1,500,000.00 for Plaintiffs'
Counsel's efforts in filing,
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prosecuting and settling the Actions. Defendants or their insurance carriers
have agreed to pay the Fee Award subject to the State Court's approval.
Plaintiffs' Counsel have not received any fees to date, nor have they been
reimbursed for their substantial out-of-pocket expenses. The Fee Award would
compensate Plaintiffs' Counsel for undertaking the prosecution of the Actions on
a wholly contingent basis.
VII. YOUR RIGHT TO BE HEARD AT THE HEARING
If you are a Current AIPC Stockholder, your rights may be affected by the
Settlement. Any Current AIPC Stockholder who objects to the: (a) Settlement or
any of its terms; (b) dismissal of the Actions; (c) State Judgment or Federal
Judgment to be entered approving the Settlement; or (d) application by
Plaintiffs' Counsel for the Fee Award, or who otherwise wishes to be heard, may
appear in person or through counsel at the Final Hearing and present evidence or
argument that may be proper and relevant; provided, however, that no person
other than Plaintiffs' Counsel and Defendants' Counsel shall be heard and no
papers, briefs, pleadings or other documents submitted by any such Person shall
be received and considered by the State Court (unless the State Court in its
discretion shall thereafter otherwise direct, upon application of such person
and for good cause shown), unless not later than fourteen (14) days prior to the
Final Hearing such Person:
A. files with the Clerk of the State Court, Sixteenth Judicial
Circuit Court of Jackson County, 415 East 12th Street, Kansas
City, MO 64106, a written objection containing (1) the name of
the case and case number; (2) the Person's name, address, and
telephone number; (3) the number of shares of AIPC common stock
the Person owns; (4) the date(s) of purchase of such shares, and
a statement as to whether the Person will own such shares as of
the date of the Final Hearing; (5) a detailed statement of the
basis for the Person's objections to or comments upon the
Settlement, Plaintiffs' Counsels' request for attorneys' fees and
reimbursement of expenses, or any other matter before the State
Court; (6) any supporting papers, including all documents and
writings that the person desires the State Court to consider; (7)
a representation as to whether the Person intends to appear the
Final Hearing; (8) a representation as to whether the Person
plans on calling any witness(es)
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at the Final Hearing; and (9) the identities of any witness(es)
the Person plans to call at the Final Hearing; and
B. on or before the date of such filing, serves the same documents
by first class mail upon the following counsel of record:
STATE PLAINTIFF'S COUNSEL AIPC'S COUNSEL
COUGHLIN STOIA GELLER RUDMAN & ROBBINS LLP DAVIS POLK & WARDWELL
Jeffrey D. Light, Esq. James H.R. Windels, Esq.
655 West Broadway, Suite 1900 450 Lexington Avenue
San Diego, CA 92101 New York, NY 10017
-and-
BARRETT, JOHNSTON & PARSLEY, LLC
Timothy L. Miles
217 Second Avenue North
Nashville, TN 37201
Unless the State Court otherwise directs, no Person shall be entitled to
object to the approval of the Settlement, to any Judgment entered thereon, to
the Fee Award, or to otherwise to be heard, except by serving and filing a
written objection and supporting papers and documents as prescribed above. Any
Current AIPC Stockholder who fails to object in the manner and within the time
prescribed above shall be deemed to have waived the right to object (including
the right to appeal) and forever shall be barred, in this proceeding or in any
other proceeding, from raising such objection and will be barred for all time by
the Order and Final Judgment of the State Court.
VIII. DISMISSAL OF THE FEDERAL ACTION
The Federal Action is currently pending in the Federal Court. In accordance
with the terms of the Stipulation, within seven (7) days of the Judgment Date,
the parties to the Federal Action shall file in the Federal Court the Federal
Judgment, which shall seek final approval of the Settlement by the Federal Court
and dismissal, with prejudice, of the Federal Action. The Federal Court will not
hold a separate hearing to consider the Settlement.
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IX. DISMISSAL OF THE DELAWARE ACTION
There is currently pending in the Delaware Court the Delaware Action. In
accordance with the terms of the Stipulation, within seven (7) days of the
Judgment Date, the parties to the Delaware Action shall file in the Delaware
Court the Delaware Judgment, which shall seek dismissal, with prejudice, of the
Delaware Action. The Delaware Court will not hold a separate hearing to consider
the Settlement.
X. SCOPE OF THIS NOTICE
The foregoing descriptions of the Actions, the Final Hearing, the
proceedings to be held, the activities leading to the Settlement, the terms of
the Settlement, the conditions of Settlement, and other matters described herein
do not purport to be all inclusive. Accordingly, you are referred to the
complaints and the Stipulation, filed with the State Court Clerk, which may be
examined during regular business hours at the offices of the Sixteenth Judicial
Circuit Court of Jackson County, 415 East 12th Street, Kansas City, MO 64106.
XI. QUESTIONS AND ADDITIONAL INFORMATION REGARDING THE PROPOSED SETTLEMENT
If you are a Current AIPC Shareholder, your rights may be affected by the
Settlement. This Notice describing the Actions was published as a Company
Current Report on Form 8-K on September 19, 2008, and filed with the United
States Securities and Exchange Commission (the "SEC") on that date. You may
obtain a copy of this Notice by referring to the SEC's website at
http://www.sec.gov. This Notice has also been made accessible on the Company's
website at http://www.pastalabella.com.
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If you have questions regarding the proposed Settlement, please do not call
or write the State Court. Questions may be directed to:
STATE PLAINTIFF'S COUNSEL
COUGHLIN STOIA GELLER RUDMAN & ROBBINS LLP
Rick Nelson, Esq.
655 West Broadway, Suite 1900
San Diego, CA 92101
Tel: (619) 231-1058
- -and-
BARRETT, JOHNSTON & PARSLEY, LLC
Timothy L. Miles, Esq.
217 Second Avenue North
Nashville, TN 37201
Tel: (615) 244-2202
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