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W2007 Grace Enters Into a Memorandum of Understanding Proposing to Settle the Preferred Shareholder Class Action

MEMPHIS, Tenn., Aug. 22, 2014 /PRNewswire/ -- Chimicles & Tikellis LLP of Haverford, PA today announced that W2007 Grace Acquisition I, Inc. (OTCBB: WGCBP and WGCCP) ("W2007 Grace") and its affiliates have entered into a memorandum of understanding ("MOU") with respect to a proposed settlement of a class action lawsuit brought by W2007 Grace preferred shareholders David Johnson, Patrick Lynch, Roberto Verthelyi and Frederick Shearin against W2007 Grace and other defendants ("Action") and pending in the United States District Court for the Western District of Tennessee ("Court"), Civil Action No. 2:13-cv-02777.

The plaintiffs allege that the defendants breached, or aided and abetted the breach of, fiduciary and contractual obligations to W2007 Grace's preferred shareholders and sought to recover damages on behalf of preferred shareholders who held W2007 Grace Series B and C preferred stock ("Preferred Stock") at any time from October 25, 2007 to the present.

The defendants maintain that the Action has no merit and have moved to dismiss the Action in its entirety.  On August 20, 2014, taking into account the litigation risks and costs and the benefits of avoiding those risks or prolonging the costs, the defendants entered into the MOU with the plaintiffs to resolve the Action.  For the settlement to become binding, it requires the drafting and execution of a definitive Stipulation of Settlement ("Stipulation") and Court approval. The MOU contemplates the following key settlement terms:

  • The parties will seek certification of two settlement classes comprised of: (1) persons who hold Preferred Stock as of August 22, 2014 and through the date of the closing of the merger described below; and (2) persons who hold or held Preferred Stock and sold some or all of their Preferred Stock on or after October 25, 2007 and suffered a loss. Both settlement classes are subject to certain requirements and exclusions.
  • W2007 Grace will be merged with and into a new company, and holders of Preferred Stock at the time of merger will receive $26.00 per share upon surrender of their shares of Preferred Stock. If the Court preliminarily approves the Stipulation, W2007 Grace will distribute a proxy statement seeking the preferred shareholders' approval of the merger and certain amendments to the W2007 Grace charter, which will be described in the proxy statement. W2007 Grace will consummate the merger only if it obtains the requisite shareholder and Court approvals.
  • W2007 Grace will pay $6.0 million into a settlement fund which, following the deduction of certain expenses, will be distributed in accordance with a plan of allocation prepared by plaintiffs to persons who sold W2007 Grace Preferred Stock on or after October 25, 2007 and suffered a recognized loss. Defendants and their affiliates will not be eligible to receive a settlement fund distribution. Private sales to defendant PFD Holdings, LLC are also excluded.
  • Any balance remaining in the settlement fund will be distributed pro rata to persons who hold Preferred Stock as of August 22, 2014 and continue to hold their Preferred Stock at the time of the merger. 
  • Subject to Court approval, W2007 Grace will pay plaintiffs' attorneys' fees and certain litigation expenses separately so as not to diminish the settlement consideration being paid to class members.

In addition, the Stipulation and consummation of any settlement will be subject to customary conditions, including: that notice of the proposed settlement will be sent to class members only if the Court grants preliminary approval of the Stipulation; and, final approval of the proposed settlement by the Court.

There can be no assurance that the parties will ultimately enter into a Stipulation, or that the Court will approve the Stipulation or the proposed settlement even if the parties were to enter into such Stipulation. In such event, the proposed settlement and benefits as contemplated by the MOU may be terminated. 

Plaintiffs and the proposed settlement classes are represented by Chimicles & Tikellis LLP and Hagler Bruce & Turner, PLLC.

Nicholas E. Chimicles
Kimberly Donaldson Smith ([email protected])
Catherine Pratsinakis ([email protected])
One Haverford Centre
361 West Lancaster Avenue
Haverford, PA 19041
Telephone: (610) 642-8500/(888) 805-7848
Fax: (610) 649-3633

For over 30 years Chimicles & Tikellis has pursued hundreds of securities, consumer and shareholder rights cases and recovered billions of dollars for their clients.  The firm is nationally recognized, and their litigators hold many professional honors and distinctions. 

Van D. Turner, Jr. ([email protected])
2650 Thousand Oaks Boulevard, Suite 2140
Memphis, Tennessee 38118
Telephone: (901) 290-6610
Fax: (901) 522-9168

Hagler Bruce & Turner practices primarily in Tennessee and Mississippi and concentrates its practice on business litigation, business transactions, government relations, municipal law, and estate planning.

SOURCE Chimicles & Tikellis LLP

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