Stipulation of Settlement (2013)Full Document 

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UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF GEORGIA

ATLANTA DIVISION

In re SYNOVUS FINANCIAL CORP.

: Civil Action No. 1:09-CV-01811-JOF

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This Document Relates To: :
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Miller v. Anthony, et al. :
Derivative Action :

Civil Action No. 1:09-CV-03069-JOF

STIPULATION OF SETTLEMENT

This Stipulation of Settlement dated as of November 14, 2012 (the "Stipulation") is made and entered into by and among the following: (i) Plaintiff (as defined in ¶ 19(l)), on behalf of himself and derivatively on behalf of Synovus Financial Corp. ("Synovus" or "the Company"), Plaintiff’s Counsel (as defined in ¶ 19(m)), and (ii) the Defendants (as defined in ¶ 19(d)), by and through their respective counsel of record in the above-captioned shareholder derivative action (the "Action"). The Stipulation is intended by the Settling Parties (as defined in ¶ 19(p)) to fully, finally, and forever resolve, discharge, and settle the Released Claims (as defined in ¶ 19(n)), upon and subject to the terms and conditions hereof. The proposed settlement contemplated by this Stipulation is referred to herein as the "Settlement."


FACTUAL BACKGROUND

1. The Action is a shareholder derivative action in which Plaintiff asserts claims on behalf of nominal corporate defendant Synovus, a Georgia corporation, against certain of its current and former directors and executive officers arising out of the directors’ and officers’ alleged breaches of fiduciary duty and unjust enrichment. The misconduct alleged in the Action primarily relates to the Company’s lending relationship with one of its largest customers, the Sea Island Company ("Sea Island"), and assertions that Defendants failed to fully disclose what they knew regarding Sea Island’s financial condition and the Company’s lending exposure regarding Sea Island.

2. On August 4, 2009, Charles K. Miller ("Plaintiff") issued a litigation demand pursuant to Georgia law on Synovus’ Board of Directors (the "Board") demanding that the Board investigate and commence an action against certain of the Company’s current and former directors and officers ("the Demand"). On or about October 26, 2009, Plaintiff’s Counsel received a letter from Synovus’ General Counsel informing Plaintiff that the Board "refused" the Demand.

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3. On November 4, 2009, Plaintiff, by and through his attorneys, initiated the Action by filing a complaint on behalf of Synovus in the United States District Court for the Northern District of Georgia (Civil Action No. 1:09-cv-03069-JOF) against Defendants alleging claims for breach of fiduciary duty, unjust enrichment, abuse of control, gross mismanagement, and waste of corporate assets in connection with the Company’s lending relationship with Sea Island. Plaintiff further alleged that the Demand was wrongfully refused.

4. On December 1, 2009, the Court issued an order consolidating the Action (for discovery purposes only) with a putative federal securities class action that had also been filed in the United States District Court for the Northern District of Georgia against Synovus and certain of its present and former officers and directors by the City of Pompano Beach General Employees’ Retirement System (Civil Action No. 1:09-cv-01811-JOF), which asserted similar claims regarding the Company’s alleged failure to disclose the full extent of its lending exposure to Sea Island and what Synovus purportedly knew about Sea Island’s financial condition ("the Securities Action").

5. On December 21, 2009, another putative shareholder derivative action styled Hubert Laux v. Richard E. Anthony et al., Civil Action No. 2009CV179215, was filed in the Superior Court of Fulton County, State of Georgia, which was based on the same facts and asserted similar breach of fiduciary duty claims as set forth in the Action. On July 17, 2010, the Superior Court stayed the State Court Action pending resolution of this Action.

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6. On February 2, 2010, the Court issued an order appointing Plaintiff as "Lead Plaintiff" in the Action and The Weiser Law Firm, P.C. and Holzer, Holzer & Fistel, P.C. as "Lead Plaintiff’s Counsel" ("Plaintiff’s Counsel"). On April 6, 2010, the Court entered an agreed-upon scheduling order in the Action, which provided that the Defendants did not have an obligation to answer, move or otherwise respond to the Plaintiff’s initial complaint filed on November 4, 2009 until such time as the Court entered an order resolving any motions to dismiss filed in the Securities Action.

7. After the April 6, 2010 Order was entered, the Settling Parties began informally discussing the possibility of resolving the Action through settlement. These intermittent settlement discussions occurred throughout 2010 and 2011.

8. On March 23, 2012, the Court issued an order granting in part and denying in part the motions to dismiss filed in the Securities Action. As a result of this ruling, the parties to the Action submitted to the Court a proposed scheduling order, which was entered by the Court on April 18, 2012 and which provided for the submission of an amended complaint by Plaintiff.

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9. On June 5, 2012, Plaintiff, by and through his attorneys, filed a Verified Amended Shareholder Derivative Complaint ("the Complaint"), alleging claims against Defendants for breach of fiduciary duty, unjust enrichment, abuse of control, and gross mismanagement in connection with the Company’s lending relationship with Sea Island and for breach of fiduciary duty with respect to the resignation of the Company’s former President and Chief Operating Officer ("COO"), Mr. Frederick L. Green III.

10. After the Complaint was filed, the Settling Parties continued their settlement discussions.

11. On July 25, 2012, the Defendants in the Action filed motions to dismiss Plaintiff’s Complaint for, among other things, failure to state a claim for relief and failure to make a pre-suit demand on the Board regarding certain of Plaintiff’s claims asserted in the Complaint.

12. Beginning in July 2012, Plaintiff’s Counsel received and reviewed tens of thousands of pages of documents produced by the Defendants. Then, over a period of approximately three months, the Settling Parties engaged in arm’s-length settlement negotiations, including numerous face-to-face and telephonic discussions, aimed at reaching a full and final Settlement of the claims asserted in the Action and the Demand.

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13. On October 4, 2012, the Settling Parties participated in an in-person mediation session with Oscar N. Persons, Esq. of Burr & Forman LLP (the "Mediation"), who had been selected by counsel to serve as mediator for purposes of their ongoing settlement discussions. After the Mediation, the Settling Parties continued their discussions and worked together to memorialize the principal terms of the Settlement as set forth in the Stipulation.

14. Prior to issuing the Demand and initiating the Action, and during the pendency of the Action, Plaintiff’s Counsel conducted an investigation into the substance of the allegations and claims asserted, including reviewing tens of thousands of pages of paper and electronic documents produced by the Defendants, analyzing documents obtained through publicly available sources, and analyzing applicable case law and other authorities. Based on this investigation, an analysis of applicable law, the facts developed prior to and in discovery, and other events, Plaintiff’s Counsel and Plaintiff have concluded that the terms and conditions of the Settlement are fair, reasonable, adequate, and in the best interests of the Settling Parties, Synovus, and Current Synovus Shareholders.

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15. Synovus acknowledges that the issuance of the Demand and the initiation, prosecution, and Settlement of the Action were factors in the Company’s overall decision to enhance its corporate governance provisions, which resulted in the internal control process improvements summarized in Paragraph 20 below and in Exhibit A to this Stipulation, which have or will confer substantial benefits upon the Company and Current Synovus Shareholders.

16. Plaintiff has entered into the Stipulation and Settlement after taking into account, among other things: (a) the substantial benefits of the Settlement to Synovus and Current Synovus Shareholders, including the corporate governance reforms that Synovus has implemented and/or agreed to maintain as a result of the issuance of the Demand and the initiation, prosecution, and Settlement of the Action; (b) the risks of continued litigation; and (c) the conclusion of Plaintiff’s Counsel that the terms and conditions of the Settlement are fair, reasonable, adequate, and in the best interests of Plaintiff, Synovus, and Current Synovus Shareholders.

17. The Settling Parties recognize that the Demand was issued and the Action was filed by Plaintiff and defended by the Defendants in good faith and that the Action is being voluntarily settled after advice of counsel. The Settling Parties believe that the terms of the Settlement are fair, reasonable, and adequate have benefited or will materially benefit Synovus and Current Synovus Shareholders. The Stipulation shall not be construed or deemed to be a concession by Plaintiff of any infirmity of any of the allegations or claims

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asserted in the Demand or the Action, nor shall it be construed or deemed to be evidence of or an admission or concession on the part of the Defendants with respect to any claim or of any fault, liability, wrongdoing, or damage whatsoever, or any infirmity in the defenses that the Defendants have or could have asserted.

18. The Defendants have denied, and continue to deny, any liability or wrongdoing with respect to any and all claims and contentions alleged in the Action, the Demand, the State Court Action, or otherwise by Plaintiff or Plaintiff’s counsel. The Defendants also have denied and continue to deny, inter alia, allegations that Plaintiff, Synovus, or its shareholders have suffered damages, or that Plaintiff, Synovus or its shareholders were harmed by the conduct alleged in the Action, in the Demand, or in the State Court Action. While maintaining their innocence of any fault or wrongdoing, and without conceding any infirmity in their defenses against the claims alleged in the Action, in the Demand, and in the State Court Action, the Defendants consider it desirable that this Action and the State Court Action be dismissed, subject to the terms and conditions specified herein, because the Settlement will eliminate the substantial burden, expense, inconvenience, and distraction of continued litigation and will dispel any uncertainty that may exist as a result of the pendency of the Action or the State Court Action.

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TERMS OF THE STIPULATION AND

AGREEMENT OF SETTLEMENT

NOW, THEREFORE, IT IS HEREBY STIPULATED AND AGREED, by Plaintiff (for himself and derivatively on behalf of Synovus) and the Defendants, by and through their respective counsel or attorneys of record, that, subject to approval of the Court pursuant to Fed. R. Civ. P. 23.1(c), the Released Claims (as defined in ¶ 19(n)) shall be completely, fully, finally, and forever compromised, settled and released, and the Action shall be dismissed with prejudice upon and subject to the terms and conditions set forth herein.

19. For purposes of this Stipulation:

a. The "Action" means Civil Action No. 1:09-cv-03069-JOF, styled as Miller v. Anthony, et al., which has been consolidated as In re Synovus Financial Corp., Civil Action No. 1:09-cv-1811-JOF, in the United States District Court for the Northern District of Georgia.

b. The "Court" means the United States District Court for the Northern District of Georgia, the Honorable J. Owen Forrester presiding.

c. "Current Synovus Shareholders" means all record and beneficial owners of Synovus common stock as of November 14, 2012 who continue to hold their shares through the date the Judgment is entered.

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d. "Defendants" mean nominal corporate defendant Synovus (and any of its subsidiaries, affiliates, agents, successors and assigns) and the Individual Defendants (defined below).

e. "Defendants’ Counsel" means (i) Alston & Bird LLP and (ii) Chilivis, Cochran, Larkins & Beyer LLP.

f. "Effective Date" means the first date by which all of the events and conditions specified in Paragraph 29 below have occurred or have been satisfied.

g. "Fee Award" means the agreed-to sum to be paid to Plaintiff’s Counsel for their attorneys’ fees and expenses, the terms of which are detailed in Paragraphs 32 through 38, subject to Court approval, in recognition of the substantial benefits conferred upon Synovus and Current Synovus Shareholders by the issuance of the Demand and the filing, prosecution, and Settlement of the Action.

h. "Individual Defendants" means Richard E. Anthony, Daniel P. Amos, Gardiner W. Garrard, Jr., J. Neal Purcell, T. Michael Goodrich, Melvin T. Stith, James H. Blanchard, V. Nathaniel Hansford, Phillip W. Tomlinson, Richard Y. Bradley, Mason H. Lampton, William B. Turner, Jr., Frank W. Brumley, Elizabeth C. Ogie, James D. Yancey, Elizabeth W. Camp, H. Lynn Page, Frederick L. Green III, Thomas J. Prescott, Mark G. Holladay, and Alfred W. Jones III.

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i. "Judgment" means the Order and Final Judgment to be rendered by the Court, substantially in the form attached hereto as Exhibit D.

j. "Notice to Current Synovus Shareholders" or "Notice" means the Notice of Pendency and Proposed Settlement of Shareholder Action, substantially in the form of Exhibit C attached hereto.

k. "Person" means an individual, corporation, limited liability corporation, professional corporation, partnership, limited partnership, limited liability 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, or assignees.

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