Hollywood to Settle Shareholder Suit12 Jul, 2004 By: Erik Gruenwedel
Hollywood Entertainment Corp. has signed a tentative settlement agreement with plaintiffs in a class action lawsuit filed in April against the company, its board of directors, CEO Mark Wattles and a Los Angeles-based mergers and acquisition company, the company disclosed in financial filings with the Securities and Exchange Commission (SEC).
Shareholders sought to block Hollywood's merger with Carso Holdings, claiming the $14 per share they would receive when the company goes private was not enough. The suit claimed, among other things, that the company's board and Wattles “breached their fiduciary duties” when proposing the deal with investors worth $890 million.
Hollywood, which did not admit any wrongdoing, would decrease by $5.3 million, to $21.2 million, the termination fee it has agreed to pay to Carso Holdings should the merger fail.
Shareholders of 50 percent of the total outstanding shares of common stock plus one share must vote in agreement with the merger — excluding shares owned by Wattles, which will only be used in determining whether a quorum is present — must approve the planned merger with Carso Holdings.
The proposed settlement also includes a provision that Carso would not sell the chain to outsiders for at least nine months after it goes private.
Hollywood would assume about $1 million in legal fees associated with the lawsuit.
The proposed settlement, if approved, is expected to dispense with all eight lawsuits filed to block the merger. The company expects to “diligently negotiate” the terms of a final settlement agreement, but could not guarantee a final result, the filing states.