Exhibit 10.1

 

UNITED STATES DISTRICT COURT FOR THE

EASTERN DISTRICT OF VIRGINIA

 

(Newport News Division)

 

 

In re LUMBER LIQUIDATORS HOLDINGS, INC. SECURITIES LITIGATION,

 

 

This Document Relates To:

 

Lead Case No. 4:15cv16 and Consolidated

Case Nos. 4:15cv25 and 4:15cv30

 

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Master No. 4:13-cv-00157-AWA-DEM

Hon. Arenda L. Wright Allen

 

 

 

STIPULATION OF SETTLEMENT

 

This Stipulation of Settlement, dated July 18, 2016 (“Stipulation” or
“Settlement”), is made and entered into by and among the following parties, and
by and through their respective counsel: (i) Lead Plaintiff Amalgamated Bank, as
Trustee for the Longview 600 Small Cap Index Fund in the action captioned
Amalgamated Bank, as Trustee for the Longview 600 Small Cap Index Fund v. Macon
F. Brock, Jr., et al., Civil Action No. 4:15-cv-30; Plaintiff R. Andre Klein in
the action captioned R. Andre Klein v. Macon F. Brock, Jr., et al., Civil Action
No. 4:15-cv-16; and Plaintiff Phuc Doan in the action captioned Phuc Doan v.
Macon F. Brock, Jr., et al., Civil Action No. 4:15-cv-25 (on behalf of
themselves and derivatively on behalf of Lumber Liquidators Holdings, Inc.)
(“Lumber Liquidators” or the “Company”) (collectively, the “Actions”); (ii)
Defendants Thomas D. Sullivan, Douglas T. Moore, John M. Presley, Macon F.
Brock, Jr., Peter B. Robinson, Martin F. Roper, Jimmie L. Wade, Nancy M. Taylor,
Daniel E. Terrell, Carl R. Daniels, Robert M. Lynch, Jeffrey W. Griffiths, and
William K. Schlegel (the “Settling Defendants”); and (iii) Nominal Party Lumber
Liquidators Holdings, Inc. (Plaintiffs, Settling Defendants and Lumber
Liquidators collectively, the “Settling Parties”). The Stipulation is intended
by the Settling Parties to fully, finally and forever resolve, discharge and
settle the Released Claims (as defined below in ¶1.24) upon Court approval and
subject to the terms and conditions hereof.

 

 1. 

 

 

I.BRIEF OVERVIEW OF THE ACTIONS   

A.Commencement and Consolidation of the Federal Derivative Actions

 

On March 11, 2015, plaintiffs Amalgamated Bank, Doan and Klein filed shareholder
derivative actions on behalf of Lumber Liquidators for breach of fiduciary duty,
corporate waste, unjust enrichment and other relief in the United States
District Court for the Eastern District of Virginia. On May 27, 2015, the
District Court consolidated these actions into the In re Lumber Liquidators
Holdings, Inc. Shareholder Derivative Litigation, Civil Action No.
4:13-cv-00157-AWA-LRL and appointed Amalgamated Bank as Lead Plaintiff and
Robbins Geller Rudman & Dowd LLP as Lead Counsel for the Federal Derivative
Actions. See Dkt. No. 11.

 

On June 26, 2015, plaintiffs filed a Consolidated Shareholder Derivative
Complaint for Breach of Fiduciary Duty of Loyalty, Corporate Waste, Unjust
Enrichment and Conspiracy (“Consolidated Complaint”). See Dkt. No. 24. The
Consolidated Complaint alleges that defendants are liable to Lumber Liquidators
for causing the Company to violate the law by selling wood containing toxic
levels of formaldehyde in violation of the California Air Resources Board’s
Regulations (“CARB Regulations”), and wood sourced from the Russian Far East, a
protected habitat, in violation of the Lacey Act. Id., ¶¶64-121. The
Consolidated Complaint further alleges that a pre-suit demand upon the Board of
Directors of Lumber Liquidators (the “Board”) is unnecessary because a majority
of the directors face a substantial likelihood of liability for knowingly
causing the Company to seek profits in violations of the law as described above.
Id., ¶¶148-187.

 

B.Defendants’ Motions to Dismiss

 

On July 24, 2015, the Company filed a motion to dismiss the Consolidated
Complaint on the grounds that a pre-suit demand upon the Lumber Liquidators’
Board would not have been a useless and futile act, and therefore, is not
excused. See Dkt. No. 45. Defendants also filed a motion to dismiss the
Consolidated Complaint, arguing, among other things, that defendants did not
breach their fiduciary duties owed to Lumber Liquidators and its shareholders
but instead acted in good faith and in the best interest of Lumber Liquidators.
Dkt. No. 42.

 

 2. 

 

 

On the same day, the Demand Review Committee filed a separate motion to stay the
Federal Derivative Actions until such time the Demand Review Committee was able
to “complete its work and the Board may act on the [Demand Review] Committee’s
recommendation.” See Dkt. No. 37.

 

Plaintiffs filed their Oppositions to the Company and defendants’ motions to
dismiss the Consolidated Complaint on August 14, 2015. See Dkt. Nos. 69, 71. In
the Oppositions, plaintiffs argued, among other things, that demand futility
existed because a majority of the Lumber Liquidators’ Board suffer from
conflicts that render them unable to fairly and objectively consider a pre-suit
demand. Id. The Oppositions argued that each defendant is liable to Lumber
Liquidators for breach of fiduciary duty of loyalty, corporate waste, unjust
enrichment, and conspiracy. Id.

 

On December 21, 2015, the District Court entered an Order in the related In re
Lumber Liquidators Holdings, Inc. Securities Litigation, Civil Action No.
4:13-cv-157 denying the motion to dismiss filed by defendants in that action.

 

Thereafter, on February 29, 2016, the District Court denied the Company and
defendants’ motions to dismiss the derivative claims in the Actions without
prejudice. See Dkt. No. 155 at 4.

 

C.Settlement Negotiations

 

On March 29, 2016, the parties engaged in mediation, overseen by the Hon. Daniel
Weinstein (Ret.). The mediation involved the parties’ extended effort to settle
the claims through extensive negotiations and consultation with experienced
legal counsel who were fully competent to assess the strengths and weaknesses of
their respective clients’ claims or defenses. The parties exchanged substantial
mediation statements prior to participating in the mediation session with Judge
Weinstein. Following lengthy, arm’s-length, and mediated negotiations, on May
16, 2016, the parties reached an agreement-in-principle to settle the Actions
that was memorialized in a Memorandum of Understanding (the “MOU”) executed that
day.

 

II.CLAIMS OF PLAINTIFFS AND BENEFITS OF SETTLEMENT

 

Plaintiffs and Plaintiffs’ Counsel believe that the claims asserted in the
Actions have merit. However, Plaintiffs and Plaintiffs’ Counsel recognize and
acknowledge the expense and length of continued proceedings necessary to
prosecute the Actions against the Settling Defendants through trial and
potential appeals. Plaintiffs and Plaintiffs’ Counsel also have taken into
account the uncertain outcome and the risk of any litigation, especially in
complex actions such as the Actions, as well as the difficulties and delays
inherent in such litigation. Plaintiffs and Plaintiffs’ Counsel also are mindful
of the inherent problems of proof of, and possible defenses to, the claims
asserted in the Actions. Based on their evaluation, Plaintiffs and Plaintiffs’
Counsel have determined that the Settlement set forth in this Stipulation is in
the best interests of Lumber Liquidators and its stockholders.

 

 3. 

 

 

III.THE SETTLING DEFENDANTS’ DENIALS OF WRONGDOING AND LIABILITY

 

The Settling Defendants have denied and continue to deny each and every one of
the claims and contentions alleged by the Plaintiffs in the Actions. The
Settling Defendants expressly have denied and continue to deny all allegations
of wrongdoing or liability against them or any of them arising out of, based
upon, or related to, any of the conduct, statements, acts or omissions alleged,
or that could have been alleged, in the Actions. Without limiting the foregoing,
the Settling Defendants have denied and continue to deny, among other things,
that they breached their fiduciary duties or any other duty owed to Lumber
Liquidators or its stockholders, or that Plaintiffs, Lumber Liquidators, or its
stockholders suffered any damage or were harmed as a result of any conduct
alleged in the Actions or otherwise. The Settling Defendants have further
asserted and continue to assert that at all relevant times, they acted in good
faith and in a manner they reasonably believed to be in the best interests of
Lumber Liquidators and its stockholders.

 

Nonetheless, the Settling Defendants also have taken into account the expense,
uncertainty and risks inherent in any litigation, especially in complex cases
like the Actions, and that the proposed Settlement would, among other things:
(a) bring to an end the expenses, burdens and uncertainties associated with
continued litigation of the claims asserted in the Actions, (b) finally put to
rest those claims and the underlying matters, and (c) confer benefits upon them,
including further avoidance of disruption of their businesses and lives due to
the pendency and defense of the Actions. Therefore, the Settling Defendants have
determined that it is desirable and beneficial that the Actions, and all of the
Settling Parties’ disputes related thereto, be fully and finally settled in the
manner and upon the terms and conditions set forth in this Stipulation. Pursuant
to the terms set forth below, this Stipulation (including all of the Exhibits
hereto) shall in no event be construed as or deemed to be evidence of an
admission or concession by the Settling Defendants with respect to any claim of
fault, liability, wrongdoing, or damage whatsoever.

 

 4. 

 

 

IV.BOARD APPROVAL OF THE SETTLEMENT

 

On April 27, 2016, the Demand Review Committee of the Board of Directors of the
Company, assisted by independent counsel, reviewed the Federal Derivative
Actions, the State Derivative Actions, and the claims of the Demanding
Stockholder and determined that pursuit of any of these claims was not in the
best interests of the Company and its stockholders. On April 28, 2016, the
Demand Review Committee of the Board of Directors of the Company, through its
independent counsel, recommended that the full Board reach the same conclusion.
On May 6, 2016, the full Board, advised by the Demand Review Committee's
independent counsel, reviewed the report of the Demand Review Committee, and
exercising its business judgment and mindful of its duties to stockholders,
adopted the report of the Demand Review Committee. The full Board also reviewed
the derivative settlement parameters, and exercising its business judgment and
mindful of its duties to stockholders, approved the settlement. The full Board
further resolved that the President and Chief Executive Officer, Chief
Compliance and Legal Officer and any Senior Vice President of the Company were
authorized and directed, in the name and on behalf of the Company, to negotiate
and execute and deliver, or caused to be executed and delivered, any and all
documents, agreements, certificates and instruments that may be necessary to or
in furtherance of a settlement or final resolution of the Derivative Actions
within the settlement parameters presented to the Board, and resolved that any
such documents, agreements, certificates and instruments should be provided to
the Chair of the Board prior to execution and delivery thereof. On July 11,
2016, Jill Witter, Chief Compliance and Legal Officer of the Company, confirmed
that the Settlement set forth by the Stipulation is within the derivative
settlement parameters approved by the Board. Before the Stipulation was executed
or delivered, Nancy M. Taylor, Chair of the Board, received a copy of the
Stipulation.

 

 5. 

 

 

V.TERMS OF STIPULATION AND AGREEMENT OF SETTLEMENT

 

NOW, THEREFORE, IT IS HEREBY STIPULATED AND AGREED by and among the Plaintiffs
(for themselves and derivatively on behalf of Lumber Liquidators), by and
through their respective attorneys of record, the Settling Defendants and Lumber
Liquidators, by and through their respective attorneys of record, that in
exchange for the consideration set forth below, the Actions and Released Claims
shall be fully, finally and forever compromised, settled, discharged,
relinquished and released, and the Actions shall be dismissed with prejudice as
to the Settling Defendants, upon and subject to the terms and conditions of this
Stipulation, as follows:

 

1.Definitions

 

As used in this Stipulation the following terms have the meanings specified
below:

 

1.1      “Actions” means, collectively, the Federal Derivative Actions.

 

1.2      “Approval Date” means the date on which the Court enters the Judgment.

 

1.3      “Cash” means the cash payment of twenty-six million dollars
($26,000,000.00) to Lumber Liquidators, subject to the release by the Court of
that amount of funds as the result of the Interpleader Action brought by the
Insurers (described below in ¶1.14), to be used in the resolution of the Federal
Class Action.

 

1.4      “Court” means the United States District Court for the Eastern District
of Virginia.

 

1.5      “Defendants’ Counsel” means any counsel that has appeared of record or
rendered legal services to any of the Settling Defendants in connection with any
of the Actions.

 

1.6      “Demand Review Committee” means the independent Demand Review Committee
established by Lumber Liquidators, consisting of Lumber Liquidators’ Directors
Martin F. Roper, Nancy M. Taylor and Jimmie L. Wade.

 

1.7      “District Court Approval Order” means the Order Approving Derivative
Settlement and Order of Dismissal with Prejudice, substantially in the form
attached as Exhibit B hereto.

 

 6. 

 

 

1.8      “Effective Date” means the first date by which all of the events and
conditions specified in ¶7.1 of this Stipulation have been met and have
occurred.

 

1.9      “Federal Class Action” means the related securities class action
captioned In re Lumber Liquidators Holdings, Inc. Securities Litigation, No.
4:13-cv-00157-AWA-DEM pending in the United States District Court for the
Eastern District of Virginia, Newport News Division.

 

1.10      “Federal Derivative Actions” means the consolidated proceedings
entitled Amalgamated Bank, as Trustee for the Longview 600 Small Cap Index Fund
v. Macon F. Brock, Jr., et al., Civil Action No. 4:15-cv-30; R. Andre Klein v.
Macon F. Brock, Jr., et al., Civil Action No. 4:15-cv-16; Phuc Doan v. Macon F.
Brock, Jr., et al., Civil Action No. 4:15-cv-25, pending in the United States
District Court for the Eastern District of Virginia, Newport News Division.

 

1.11      “Final,” with respect to the Judgment, means the time when the
Judgment has not been reversed, vacated, or modified in any way and is no longer
subject to appellate review, either because of disposition on appeal and
conclusion of the appellate process or because of passage, without action, of
time for seeking appellate review. More specifically, it is that situation when:
(1) either no appeal has been filed and the time has passed for any notice of
appeal to be timely filed in the Actions; or (2) an appeal has been filed and
the court(s) of appeal has/have either affirmed the Judgment or dismissed that
appeal and the time for any reconsideration or further appellate review has
passed and the appellate court mandate(s) has/have issued; or (3) a higher court
has granted further appellate review and that court has either affirmed the
underlying Judgment or affirmed the court of appeal’s decision affirming the
Judgment or dismissing the appeal. However, any appeal or proceeding seeking
subsequent review pertaining solely to an order issued with respect to
attorneys’ fees, costs or expenses shall not in any way delay or preclude the
Judgment from becoming Final.

 

1.12      “Insurance Policies” means the insurance policies issued by the
Insurers to Lumber Liquidators described in the Interpleader Action.

 

1.13      “Insurance Proceeds” means $26,000,000, which constitutes the
remaining limits of liability under the Insurance Policies.

 

 7. 

 

 

1.14      “Insurers” means, collectively, Star Indemnity & Liability Co.,
Travelers Casualty and Surety Company of America, Liberty Insurance
Underwriters, Inc., ACE American Insurance Company, Continental Casualty
Company, and Aspen American Insurance Company.

 

1.15      “Interpleader Action” means the action to be filed by the Insurers as
described in ¶¶4.5-4.6.

 

1.16      “Judgment” means a judgment, substantially in the form and substance
attached as Exhibit C hereto, rendered by the Court in the Actions upon its
final approval of the Settlement.

 

1.17      “Lead Plaintiff” means Amalgamated Bank, as Trustee for the Longview
600 Small Cap Index Fund.

 

1.18      “Lumber Liquidators” or the “Company” means Lumber Liquidators
Holdings, Inc., including, but not limited to, its predecessors, successors,
partners, joint ventures, subsidiaries, affiliates, divisions, and assigns.

 

1.19      “Lumber Liquidators’ Counsel” means any counsel that has appeared of
record or rendered legal services to Lumber Liquidators in connection with any
of the Actions.

 

1.20      “Person” or “Persons” means an individual, corporation, limited
liability company, professional corporation, limited liability partnership,
partnership, limited partnership, association, joint venture, joint stock
company, estate, legal representative, trust, unincorporated association,
government or any political subdivision or agency thereof, and any other
business or legal entity, and each of their spouses, heirs, predecessors,
successors, representatives, or assignees.

 

1.21      “Plaintiffs” means, collectively, Amalgamated Bank, as Trustee for the
Longview 600 Small Cap Index Fund, R. Andre Klein, and Phuc Doan.

 

1.22      “Plaintiffs’ Counsel” means any counsel that has appeared of record or
rendered legal services to any of the Plaintiffs in connection with any of the
Actions.

 

 8. 

 

 

1.23      “Related Parties” means: (i) as to Lumber Liquidators, each and every
one of Lumber Liquidators’ past or present directors, officers, managers,
employees, partners, agents, representatives, attorneys (including Lumber
Liquidators’ Counsel), accountants, advisors, administrators, auditors, banks,
insurers, co-insurers, re-insurers, fiduciaries, consultants, experts,
successors, subsidiaries, predecessors, affiliates, divisions, joint ventures,
assigns, assignees, general or limited partners or partnerships, limited
liability companies, any entity in which Lumber Liquidators has a controlling
interest, and all officers, directors and employees of Lumber Liquidators’
current and former subsidiaries, and (ii) as to the Settling Defendants, for
each of them (1) each spouse, immediate family member, heir, executor, estate,
beneficiary, administrator, agent, attorney (including Defendants’ counsel),
accountant, auditor, bank, insurer, co-insurer, re-insurer, advisor, consultant,
expert, or affiliate of any of them, (2) any trust in respect of which any
Settling Defendant, or any spouse or family member thereof serves as a settlor,
beneficiary or trustee, and (3) any entity in which a Settling Defendant, or any
spouse or immediate family member thereof, holds a controlling interest or for
which a Settling Defendant has served as an employee, director, officer,
managing director, advisor, general partner, limited partner, or member and any
collective investment vehicle which is advised or managed by any of them.

 

1.24      “Released Claims” means all claims, demands, rights, liabilities and
claims for relief of every nature and description whatsoever, known or Unknown
(as set forth in ¶1.32), whether arising under federal, state, common or foreign
law brought by Plaintiffs, Lumber Liquidators, or any Lumber Liquidators
stockholder derivatively on behalf of Lumber Liquidators, (i) that were asserted
in any of the complaints in the Actions, or (ii) that could have been asserted
in the Actions by Plaintiffs, Lumber Liquidators, or any Lumber Liquidators
stockholder derivatively on behalf of Lumber Liquidators against the Settling
Defendants in any forum that arise out of or are based upon the allegations,
transactions, facts, matters or occurrence, representations or omissions, or
circumstances set forth, or referred to in the complaints in the Actions.

 

1.25      “Released Persons” means the Settling Defendants, Lumber Liquidators
and their respective Related Parties.

 

1.26      “Securities Holders” means any and all individuals or entities that
hold or beneficially own, directly or indirectly, common stock of Lumber
Liquidators on or before the Approval Date.

 

1.27      “Settlement” means the terms and conditions contained in this
Stipulation.

 

 9. 

 

 

1.28      “Settling Defendants” means Defendants Thomas D. Sullivan, Douglas T.
Moore, John M. Presley, Macon F. Brock, Jr., Peter B. Robinson, Martin F. Roper,
Jimmie L. Wade, Nancy M. Taylor, Daniel E. Terrell, Carl R. Daniels, Robert M.
Lynch, Jeffrey W. Griffiths, and William K. Schlegel.

 

1.29      “Settling Parties” means, collectively, each of the Plaintiffs, the
Settling Defendants and Lumber Liquidators.

 

1.30      “State Derivative Actions” refers to the following purported
derivative matters filed in the Virginia and Delaware state courts alleging
claims similar or identical to those made in the Actions and based upon the same
facts and circumstances alleged in the Actions: McBride v. Sullivan, et al.,
Case No. LCL15-000453-00 (Va. Cir. Ct.) and Costello v. Sullivan, et al., Case
No. CA10764 (Del. Ch.).

 

1.31      “Stipulation” means this Stipulation of Settlement dated July 18, 2016
and its Exhibits.

 

1.32      “Unknown Claims” means any and all Released Claims that any Plaintiff,
Lumber Liquidators or any Lumber Liquidators stockholder does not know or
suspect to exist in his, her or its favor at the time of the release of the
Released Persons, including claims which, if known by him, her or it, might have
affected his, her or its settlement with, and release of the Released Persons,
or 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, Lumber
Liquidators, and its 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 §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.

 

 10. 

 

 

Further, with respect to any and all claims released pursuant to ¶¶5.1, 5.3
below, the Settling Parties stipulate and agree that, upon the Effective Date,
each of the Released Persons shall expressly waive, 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 § 1542. Plaintiffs, Lumber Liquidators, and
each Lumber Liquidators stockholder 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, known or unknown,
suspected or unsuspected, contingent or non-contingent, whether or not concealed
or hidden, 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, and the Lumber Liquidators stockholders shall be deemed by
operation of the Judgment to have acknowledged, that the foregoing waiver was
separately bargained for and is a key element of the Settlement of which this
release is a part.

 

2.Consideration

 

2.1      The Settlement will provide for the payment of $26,000,000 (the “Cash”)
to Lumber Liquidators, for the resolution of the Federal Class Action, pending
in the Court, subject to the release by the Court of that amount of funds as the
result of the Interpleader Action (described in ¶4.5 below) brought by the
Insurers. Settling Defendants and the Company agree that in no event shall any
Lumber Liquidators’ cash or Settling Defendants’ cash (beyond the net insurance
proceeds Settling Defendants and Lumber Liquidators receive from the Insurers)
be paid to resolve the Federal Class Action.

 

2.2      The Cash is to be paid to Lumber Liquidators by the registry of the
Court. The Company will use the Cash for the resolution of the Federal Class
Action. Subject to the release of the funds from the registry of the Court, the
amount is due and payable no later than ten (10) calendar days after preliminary
approval of the Settlement and shall be paid to Lumber Liquidators no later than
five (5) calendar days after final decision of the Interpleader Action pursuant
to ¶4.5 below.

 

 11. 

 

 

2.3      The Settling Defendants shall have no obligation for any portion of the
Cash payments, which shall be paid solely by the Insurers. The Settling Parties
agree that the total monetary value of the Settlement, payable as set forth
above, is $26,000,000.

 

2.4      Plaintiffs and Lumber Liquidators have conducted extensive negotiations
over an extended period of time regarding certain corporate governance policies
related to, among other things, the Company’s compliance with the Lacey Act,
CARB Regulations, and other applicable laws, rules and regulations regarding
formaldehyde emissions. Lumber Liquidators shall, based upon those negotiations
and in connection with the prosecution and settlement of the Actions, within 60
days following final approval of the Settlement by the Court, adopt and keep in
place for a period of at least five (5) years the corporate governance policies
in ¶3 below.

 

2.5      Lumber Liquidators acknowledges and agrees that the Cash and corporate
governance policies set forth in ¶¶2.1 and 3 confer substantial benefits upon
Lumber Liquidators and its stockholders. Lumber Liquidators also acknowledges
that the commencement, prosecution, and settlement of the Actions were material
and substantial factors for the Company’s decision to use the $26,000,000 in
insurance proceeds (and no money from the Company) for the resolution of the
Federal Class Action and to adopt, implement, and maintain the corporate
governance reforms set forth in in ¶3 below.

 

3.Corporate Governance Policies    

a.Board Composition and Practices

 

3.1      Modified Plurality Voting. The Company will adopt a “modified
plurality” approach to shareholder voting for directors. Under this approach, a
director who does not receive a majority vote would agree to submit his/her
resignation. However, the Board is not legally obligated to accept, and can take
other factors into consideration, including (but not limited to) the
individual’s history on the Board, relevant outside work experience, knowledge
of industry, and knowledge of regulatory requirements, and choose to retain the
director if the director otherwise received the highest number of shares voted.

 

 12. 

 

 

3.2      Separate Chairman and Chief Executive Officer (“CEO”). The Board shall
include a provision in the Company’s Bylaws which requires the separation of the
roles of CEO and Chairman of the Board and that the Chairman must be a fully
independent director of the Board.

 

3.3      In addition to the duties of all Board members (which shall not be
limited or diminished by the Chairman’s role), the Chairman shall be responsible
for the following functions: (i) timing and agendas for Board meetings; (ii)
nature, quantity and timing of information provided to the independent directors
by the Company’s management; (iii) retention of counsel or consultants who
report directly to the Board; (iv) implementation of corporate governance
policies and procedures, including assisting the chair of the various Board
committees as requested; (v) receiving reports from the Nominating and Corporate
Governance Committee regarding compliance with and implementation of corporate
governance policies; (vi) receiving reports from the Nominating and Corporate
Governance Committee regarding governance policies; and (vii) evaluating, along
with the Compensation Committee, CEO performance. The Chairman should share any
reports received by Board committees with the full Board as appropriate.

 

3.4      Limitation on Other Boards. The Board shall include a provision in the
Company’s Bylaws which requires that independent directors may sit on no more
than two other public boards, including Chairman. The CEO may sit on no more
than one other public board. Directors and officers may not serve as Board
members for companies that directly compete with Lumber Liquidators.

 

3.5      Authorization to Retain Counsel. The Board’s committees shall have
standing authorizations, at their discretion, to obtain legal or other advisors
of their choice, who shall report directly to the Board or the committee.

 

3.6      Charters. Each standing committee of the Board should have a written
charter, which is made available to the public on Lumber Liquidators’ website,
and requires that the committee meet no fewer than three times per year.

 

 13. 

 

 

3.7      Director Education. Current directors shall attend a program
specifically designed as directors’ education no later than the end of their
current term (if standing for reelection). New directors must attend within six
(6) months of joining the Board. Thereafter, the Nominating and Corporate
Governance Committee in coordination with the Chief Compliance Officer (“CCO”)
and Chief Legal Officer (“CLO”) will develop and implement an ongoing annual
education program for directors.

 

3.8      New Director. The Company shall agree to the one-time appointment to
the Board of Directors of a candidate agreeable to Lead Plaintiff and the
Company. The candidate shall meet the criteria for a Lumber Liquidators’
director as set forth in the Company’s Corporate Governance Guidelines. If at
least one of the candidate(s) already proffered by Lead Plaintiff are not agreed
to by Lumber Liquidators or, should all candidates decline to serve, the
Company, utilizing mutually agreed upon search criteria, shall in good faith
conduct a search for new director candidate(s) through the following process:

 

(a)Employ a nationally recognized search firm to work together with Lead
Plaintiff’s corporate governance expert to engage in a general search for a
slate of at least five (5) candidates. Lead Plaintiff, in consultation with its
corporate governance expert and Lumber Liquidators’ shareholders, as
appropriate, shall propose a slate of at least five (5) additional candidates.
All candidates selected shall meet the qualifications identified by Lead
Plaintiff’s corporate governance expert and Lumber Liquidators.    

(b)If Lead Plaintiff and Lumber Liquidators are unable to, in good faith,
mutually agree upon the selection of one of these candidates, the selection
shall be made by Judge Weinstein or Jed Melnick as the mediators of the
settlement of the Federal Derivative Actions.    

(c)At the conclusion of the search process, but in no event later than six (6)
months after final approval of this Settlement, Lumber Liquidators shall, in
good faith, appoint a director candidate to the Lumber Liquidators’ Board
identified pursuant to this process to serve for at least one (1) term.

 

 14. 

 

 

3.9      Board Evaluation of Stockholder Proposals. The Board shall include a
provision in the Company’s Bylaws which requires that stockholder proposals be
evaluated by the directors as follows:

 

(a)The Company shall distribute to the entire Board all proposals received by
the Company. After the distribution to the Board, and before the making of any
recommendation to the Board or any of its members concerning a response,
approval or disapproval, Lumber Liquidators’ law department and senior
management shall discuss with the Chair of any Board committee responsible for
oversight of the subject matter of the proposal, if applicable, the financial,
legal, practical and social implications of approval and implementation of the
proposal;    

(b)Where a stockholder proposal has been made by any stockholder holding at
least 2% of the Company’s outstanding shares as of the Company’s last-filed Form
10-Q or 10-K, the Company shall timely contact the proponent of the proposal to
arrange a teleconference or an in-person meeting to discuss the proposal and its
financial, legal, social and practical implications. If the proponent agrees to
a meeting or teleconference, the Chair of any Board committee responsible for
the oversight of the subject matter of the proposal shall attend;    

(c)Lumber Liquidators’ law department and senior management, shall make a
recommendation to the Board committee responsible for oversight of the subject
matter of the proposal concerning whether to include or exclude the shareholder
proposal in the proxy and/or to submit a no-action request to the SEC pursuant
to Securities Exchange Act of 1934 §14(a), and SEC Rule 14a-8, promulgated
thereunder;

 

 15. 

 

   

(d)Before the filing of a proxy statement, which makes a recommendation
concerning any stockholder proposal, a draft of the recommendation shall be
reviewed and approved by the Board; and    

(e)The Board is authorized at its discretion to engage outside counsel or other
advisors to assist in their review of any shareholder proposal at the expense of
the Company.

 

3.10      Stockholder Meetings. Each member of the Board shall be expected to
attend each annual stockholder meeting in person.

 

3.11      Stockholders shall have the right in general meetings to ask
questions, both orally and in writing and receive answers and discussion from
the CEO and Board. Such discussion shall take place regardless of whether
questions have been submitted in advance.

 

3.12      Polls should remain open at the annual meeting until all agenda items
have been discussed.

 

b.Regulatory Affairs Committee

 

3.13      The Board shall establish a Regulatory Affairs Committee focused on
overseeing the regulatory affairs specific to Lumber Liquidators. The Committee
shall familiarize itself with all aspects of the applicable industry law.

 

3.14      The Regulatory Affairs Committee shall oversee the processes by which
Lumber Liquidators conducts its business so that the Company shall do so in a
manner that complies with laws and regulations and reflects the highest
standards of integrity. The Committee shall review and make recommendations
regarding policies, practices, and procedures for compliance with industry laws.

 

3.15      The Regulatory Affairs Committee shall review Company policy for
contracts with contractors, suppliers, vendors and similarly situated persons
and the financial arrangements provided to ensure that such persons are not
incentivized in a way that would cause Lumber Liquidators to violate any
applicable environmental laws, rules and/or regulations. The Board will have the
authority to grant additional authority/oversight to this Committee.

 

 16. 

 

 

c.Compensation Reforms

 

3.16      Ban on Stock Pledges. The Board shall establish a ban on stock hedging
and/or pledging prohibiting a director from hedging and/or pledging any of the
equity securities in connection with a margin or similar loan transaction.

 

3.17      Clawback Policy. To the extent permitted by law, if the Board, or a
Committee thereof, determines that any bonus, incentive payment, equity award or
other compensation has been awarded or received by an executive officer of the
Company, as defined by Rule 16a-1(f) of the Securities Exchange Act of 1934, as
amended, and that such compensation was based on any financial results or
operating metrics that were satisfied as a result of such officer’s knowing or
intentional fraudulent or illegal conduct, then the Board or a Committee thereof
shall recover from the officer such compensation (in whole or in part) as it
deems appropriate under the circumstances. Further, following a restatement of
the Company’s financial statements, the Company shall recover any compensation
received by the CEO and CFO that is required to be recovered by Section 304 of
Sarbanes-Oxley Act of 2002. In determining whether to recover a payment, the
Board shall take into account such considerations as it deems appropriate,
including whether the assertion of a claim may violate applicable law or
prejudice the interests of the Company in any related proceeding or
investigation. The Board shall have sole discretion in determining whether an
officer’s conduct has or has not met any particular standard of conduct under
law or Company policy.

 

3.18      Stock Holdings Guidelines. The Board shall adopt a policy regarding
stock holding guidelines for certain executives and directors with the following
provisions:

 

(a)      Company personnel will be required to maintain the following minimum
stock holdings: (i) CEO – 5 times base salary, (ii) Founder – 2.5 times base
salary, (iii) Non-employee directors – 2.5 times annual cash retainer, and (iv)
Executive officers – 1 times base salary.

 

(b)      Shares can be owned directly or indirectly through immediate family
members in the same household or a trust. The shares can include vested shares
of restricted stock, shares underlying in-the-money options, or shares held in
the outside director deferral plan.

 

 17. 

 

 

(c)      The time period for implementing compliance is 5 years after adoption
of policy or assuming a relevant position.

 

(d)      Once the required level is reached, the individual must continuously
own the shares. If the individual falls below the required holdings solely due
to a decline in the value of the shares, then they may be granted a hardship
exemption at the discretion of the Board.

 

(e)      The Board shall disclose in its annual Proxy statement filed with the
SEC when an individual falls out of compliance with the stock holding provision
and when those individuals regain compliance with these provisions.

 

d.Corporate Discipline, Termination and Whistleblowers

 

3.19      Chief Compliance Officer. The Chief Compliance Officer shall be
responsible for promoting Lumber Liquidators’ worldwide compliance with
applicable laws and rules and with Lumber Liquidators’ Code of Business Conduct
and Ethics. The Chief Compliance Officer shall be responsible for overseeing
development of a comprehensive legal compliance and ethics program designed to
evaluate, to maintain and, when needed, to correct compliance with federal and
state rules and regulations and the Code of Conduct. The Chief Compliance
Officer shall be responsible for reviewing and suggesting improvements to Lumber
Liquidators’ existing procedures for receipt, retention and consideration of
reports or evidence of violations of applicable federal or state law or the Code
of Business Conduct and Ethics, in consultation with the Audit Committee.

 

3.20      Except as would be deemed the responsibility of the internal audit
function, the Chief Compliance Officer shall be responsible for internal
investigations into violations of Lumber Liquidators’ policies or applicable
laws. When a violation of federal or state law or the Code of Business Conduct
and Ethics appears to have occurred, the Chief Compliance Officer shall be
responsible for determining whether an investigation is necessary.

 

3.21      The Chief Compliance Officer shall notify the Audit Committee of all
material investigations that have been initiated and shall retain such
assistance as he/she deems necessary to conduct the investigation.

 

 18. 

 

 

3.22      At the conclusion of any investigation, the Chief Compliance Officer
(in consultation with the Audit Committee) shall:

 

(a)      Determine whether a violation has occurred, is ongoing or is about to
occur;

 

(b)      Recommend (as necessary) that Lumber Liquidators implement appropriate
responses to any violation; and

 

(c)      Inform the Audit Committee of the results of any such material
investigation and any recommended remedial measures.

 

3.23      The Chief Compliance Officer will make quarterly reports to the Audit
Committee (or other committee as directed by the Board) and annual reports to
the full Board.

 

3.24      The Chief Compliance Officer shall be responsible for reviewing every
situation in which a Lumber Liquidators’ employee is adjudicated by a court of
law to have violated a U.S. federal or state statute in connection with his/her
employment by Lumber Liquidators. Presumptively, any employee adjudicated to
have violated a U.S. federal or state criminal statute in connection with
his/her employment by Lumber Liquidators shall be terminated for cause and
receive no severance payments in connection with the termination. If the Chief
Compliance Officer determines that such termination is not warranted, he/she
shall so recommend to the Audit Committee, which will act upon his/her
recommendation in its discretion.

 

3.25      Code of Conduct. The Board shall cause the following clause to be
inserted into the Company’s Code of Business Conduct and Ethics:

 

You are expected to be familiar with all legal and regulatory provisions that
relate to the performance of your job, and you must follow the spirit as well as
the letter of such laws and regulations in your business dealings. No officer,
employee and/or director of Lumber Liquidators has any authority to engage in
conduct inconsistent with applicable U.S. laws and regulations, or to authorize,
direct or condone such conduct by any other person.

 

3.26      The Audit Committee shall, within the next 3 years, review the current
version of the Code of Business Conduct and Ethics and shall consider amendments
thereto that provide recipients with more detailed discussions of those laws and
regulations that have a material effect on Lumber Liquidators’ business and
operations.

 

 19. 

 

 

3.27      Confidential Whistleblower Program. The Board shall require management
to adopt written policies protecting whistleblowers, and include such policy on
the Company’s website. The Company’s Whistleblower Policy shall:

 

(a)Encourage interested parties to bring forward ethical and legal violations
and/or a reasonable belief that ethical and legal violations have occurred to
the Audit Committee and the Chief Compliance Officer so that action may be taken
to resolve the problem. Material complaints shall be reviewed by the Audit
Committee.    

(b)The policy shall communicate effectively that Lumber Liquidators is serious
about adherence to its codes of conduct and that whistleblowing is an important
tool in achieving this goal.

 

3.28      The Whistleblower Program – with the endorsement of the Board and the
most senior management of the Company – must adequately notify employees,
independent contractors and vendors of Lumber Liquidators of the following:

 

(a)executives may be subject to criminal penalties, including imprisonment, for
retaliation against whistleblowers;    

(b)whistleblower complaints may be directed to both the Audit Committee and the
Chief Compliance Officer, and the complaints will be handled by these parties
anonymously and, to the extent possible, in confidence, unless requested by the
whistleblower;    

(c)if a whistleblower brings his or her complaint to an outside regulator or
other governmental entity, he or she will be protected by the terms of the
Whistleblower Program just as if he or she directed the complaint to the Audit
Committee and/or the Chief Compliance Officer;    

(d)if an employee is subject to an adverse employment decision as a result of
whistleblowing, the employee must file a complaint with the Department of Labor
within 90 days of the alleged violation (a failure to report such claims within
the 90 day window do not foreclose any other available legal remedy); and

 

 20. 

 

   

(e)it is both illegal and against Lumber Liquidators’ policy to discharge,
demote, suspend, threaten, intimidate, harass or in any manner discriminate
against an individual for engaging in the act of whistleblowing.

 

3.29      The Company shall provide a Whistleblower Telephone Hotline to assist
on matters pertaining to corruption, fraud or similar unlawful activities at
Lumber Liquidators, with alternative reporting mechanisms including suggestion
boxes or email address.

 

3.30      The Company will remind employees of whistleblowing options and
whistleblower protections in employee communications provided at least twice a
year on the Company’s intranet.

 

e.Policy on Lobbying and Political Contributions

 

3.31      The Board shall include a provision in the Company’s Bylaws which
limits the use of corporate funds and other assets for governmental lobbying and
political campaigns as follows:

 

3.32      The Board shall insure that any Company lobbying or political activity
is conducted solely for promoting the commercial interests of Lumber Liquidators
as a whole and is in the interests of its stockholders. The Board shall insure
that lobbying and political spending do not reflect narrow political preferences
of the Company’s executives that have little or no bearing on Lumber
Liquidators’ own commercial performance.

 

4.Settlement Procedures    

a.The Federal Derivative Actions

 

4.1      After execution of this Stipulation, Lead Plaintiff shall submit the
Stipulation together with its Exhibits to the Court and shall move for entry of
an order substantially in the form of Exhibit A hereto (the “Preliminary
Approval Order”), requesting, among other things, the preliminary approval of
the Settlement set forth in the Stipulation, and approval for the filing and
publication of the Settlement Notice, substantially in the forms attached hereto
as Exhibits A-1 (“Long-Form Notice”) and A-2 (“Short-Form Notice”; the Long-Form
Notice and Short-Form Notice collectively, the “Settlement Notice”), which shall
include the general terms of the Settlement set forth in the Stipulation and the
date of the Settlement Hearing as described below.

 

 21. 

 

 

4.2      Within five (5) business days following the Court’s entry of the
Preliminary Approval Order, Lumber Liquidators shall cause the Stipulation and
Long-Form Notice to be filed with the SEC via a Form 8-K or other appropriate
filing, and publish the Short-Form Notice one time in Investor’s Business Daily.
The SEC filing will be accessible via a link on the “Investor Relations” page of
http://investors.LumberLiquidators.com, the address of which shall be contained
in the Settlement Notice.

 

4.3      Plaintiffs will also request that on November 17, 2016, the Court hold
a hearing in the Actions (the “Settlement Hearing”) to consider and determine
whether the District Court Approval Order and the Judgment, substantially in the
forms of Exhibits B and C hereto, should be entered: (a) approving the terms of
the Settlement as fair, reasonable and adequate; and (b) dismissing with
prejudice the Actions against the Settling Defendants.

 

4.4      Pending the Effective Date, all proceedings and discovery in the
Actions shall be stayed except as otherwise provided herein, and the Settling
Parties shall not file or prosecute any other actions or proceedings relating to
the Settlement. To the extent necessary, the Settling Parties will take all
reasonable steps to maintain the stay of proceedings in the State Derivative
Actions as well.

 

b.The Interpleader Action

 

4.5      The Insurers shall deposit into the registry of the Court the Insurance
Proceeds as soon as practicable following the entry of an Order by the Court in
the Interpleader Action granting the Insurers’ Motion to Deposit the Insurance
Proceeds and authorizing the Clerk of the Court to accept the Insurance Proceeds
(the “Motion to Deposit”). The Insurers shall file the Motion to Deposit
simultaneously with the filing of the Interpleader Action. The Insurance
Proceeds shall be disbursed by the Clerk of the Court to the escrow account
established pursuant to the Federal Class Action settlement if and to the extent
a Final decision in the Interpleader Action authorizes such disbursement.

 

 22. 

 

 

4.6      In connection with the Settlement of the Actions, within seven (7)
business days of Lead Plaintiff’s filing the Stipulation with the Court, the
Insurers will file the Interpleader Action with the Court, provided that the
Settling Parties notify the Insurers ten (10) business days in advance of the
date on which they intend to file the Stipulation with the Court. The Insurers
will designate the Interpleader Action as related to the Federal Derivative
Actions and the Federal Class Action. The Insurers will submit to the registry
of the Court the remaining limits of the Insurance Proceeds, as required
pursuant to the Interpleader Action and as provided in ¶4.5 above, and will seek
a complete discharge of their obligations under their respective Insurance
Policies and at law. The Insurers are and will remain neutral regarding an
appropriate allocation of the Insurance Proceeds and the Settling Parties will
not oppose or otherwise object to the Insurers’ efforts to obtain a judicial
discharge of their obligations under the Insurance Policies and at law. The
Settling Parties will request and advocate to the Court for payment of the
Insurance Proceeds to the Company subject to its use in settling the Federal
Class Action. Lumber Liquidators will seek, in good faith and using best
efforts, releases from all persons or entities that might have a claim or
entitlement to the Insurance Proceeds prior to the filing of the Interpleader
Action. Defendants and the Federal Class Action defendants will provide standard
claims and policy releases to the Insurers with respect to the Federal
Derivative Actions, the Federal Class Action, the facts and matters alleged in
or underlying the Federal Derivative Actions or the Federal Class Action and the
Insurance Policies.

 

4.7      Lead Plaintiff, and all Insurers acting in unison, will each have the
right to terminate the Settlement and this Stipulation if the Insurers do not
obtain in the Interpleader Action a full allocation of the $26,000,000 to the
Company and a complete, final judicial discharge of their obligations under the
policies. Should the Insurers choose to terminate the settlement agreement
pursuant to the terms of this paragraph, they must simultaneously terminate the
settlement agreement in both the Federal Class Action and the Federal Derivative
Actions.

 

5.Releases

 

5.1      Upon the Effective Date, as defined in ¶7.1, Plaintiffs (acting on
their own behalf and derivatively on behalf of Lumber Liquidators and its
stockholders), Lumber Liquidators, all other Securities Holders, and the
Company, for good and sufficient consideration, the receipt and adequacy of
which are hereby acknowledged, shall be deemed to have, and by operation of law
and of the Judgment shall have, fully, finally, and forever compromised,
settled, released, resolved, relinquished, waived and discharged and dismissed
with prejudice each and every one of the Released Claims against the Released
Persons.

 

 23. 

 

 

5.2      Upon the Effective Date, as defined in ¶7.1, Plaintiffs (acting on
their own behalf and derivatively on behalf of Lumber Liquidators and its
stockholders), Lumber Liquidators and any Person acting on behalf of Lumber
Liquidators, all other Securities Holders, and the Company, for good and
sufficient consideration, the receipt and adequacy of which are hereby
acknowledged, shall be forever barred and enjoined from commencing, instituting
or prosecuting any of the Released Claims against any of the Released Persons.
Nothing herein shall in any way impair or restrict the rights of any Settling
Party to enforce the terms of the Stipulation.

 

5.3      Upon the Effective Date, as defined in ¶7.1, each of the Released
Persons, for good and sufficient consideration, the receipt and adequacy of
which are hereby acknowledged, shall be deemed to have, and by operation of law
and of the Judgment shall have, fully, finally, and forever compromised,
settled, released, resolved, relinquished, waived and discharged each and all of
the Plaintiffs and Plaintiffs’ Counsel and all current Lumber Liquidators
stockholders (solely in their capacity as Lumber Liquidators stockholders) from
all claims (including Unknown Claims) arising out of, relating to, or in
connection with the institution, prosecution, assertion, settlement or
resolution of the Actions or the Released Claims. Nothing herein shall in any
way impair or restrict the rights of any Settling Party to enforce the terms of
the Stipulation.

 

 24. 

 

 

5.4      Upon the Effective Date, as defined in ¶7.1, Plaintiffs (acting on
their own behalf and derivatively on behalf of Lumber Liquidators and its
stockholders), Lumber Liquidators and any Person acting on behalf of Lumber
Liquidators additionally release and discharge the Settling Defendants from any
and all claims by the Plaintiffs (acting on their own behalf and derivatively on
behalf of Lumber Liquidators and its stockholders), Lumber Liquidators and any
Person acting on behalf of Lumber Liquidators for: (a) the clawback of any
monies that have or will be advanced to the Settling Defendants for legal fees
and expenses incurred through the date of this Stipulation (subject to the
Company’s right to seek a clawback of up to $50,000 in legal fees and expenses
per Settling Defendant incurred prior to such date and related to any
governmental proceedings), and (b) the clawback of any monies that will be
advanced to the Settling Defendants for legal fees and expenses incurred after
the date of this Stipulation to the extent such legal fees and expenses are
incurred in connection with or related to the Federal Derivative Actions or the
Federal Class Action (but not (i) any governmental proceedings, or (ii)
proceedings unrelated to the facts and circumstances at issue in the Federal
Derivative Action or the Federal Class Action). Notwithstanding the release of
the clawback rights set forth above, Lumber Liquidators or anyone acting on
behalf of the Company, including stockholders, do not release any right or
claim, including derivative claims, against the Settling Defendants or any other
Person for the clawback of any other advancement for legal fees or expenses
incurred after the date of this Stipulation in the event circumstances arise
where the payment of such legal fees or expenses by the Company, or the
Company’s failure to clawback such legal fees or expenses, would be illegal or
impermissible under Delaware law.

 

5.5      Lumber Liquidators acknowledges that it has pre-existing
indemnification and advancement obligations to its current and former officers,
directors and employees, including everyone who has filed claims under the
policies. Following payment of the Cash into the escrow account, Lumber
Liquidators will continue to honor its pre-existing indemnification/advancement
obligations for its directors, officers and employees in all pending securities
and derivative litigation, as well as all pending regulatory and government
investigations; and will pay legal costs incurred by its directors, officers and
employees in all pending securities and derivative litigation, as well as all
pending regulatory and government investigations, consistent with its
indemnification/advancement obligations and/or authority under Lumber
Liquidators’ Bylaws and the Delaware General Corporation Law. Nothing in this
Stipulation should be construed to limit the pre-existing indemnification and
advancement obligations that Lumber Liquidators has to its current and former
officers, directors, and employees.

 

 25. 

 

 

6.Plaintiffs’ Counsel’s Separately Negotiated Attorneys’ Fees and Expenses

 

6.1      After negotiating the principal terms of the Settlement, counsel for
Lead Plaintiff and Lumber Liquidators, acting by and through its counsel, with
the assistance of the Honorable Daniel Weinstein (Ret.), separately negotiated
the attorneys’ fees and expenses the Company would pay to Plaintiffs’ Counsel
based on the substantial benefits conferred upon Lumber Liquidators by the
Settlement. In light of the substantial benefits conferred by Plaintiffs’
Counsel’s efforts, Lumber Liquidators, acting by and through its Board of
Directors, has agreed to pay $5,000,000 in attorneys’ fees and expenses, subject
to Court approval (the “Fee and Expense Amount”). The Company and its primary
Side A only insurer shall each contribute half of the Fee and Expense Amount.

 

6.2      Upon final approval by the Court, the separately negotiated Fee and
Expense Amount shall be paid to Robbins Geller Rudman & Dowd LLP, as receiving
agent for Plaintiffs’ Counsel, within five (5) business days after final
approval of the Settlement by the Court, notwithstanding the existence of any
timely filed objections thereto, or potential for appeal therefrom, or
collateral attack on the Settlement or any part thereof, subject to Plaintiffs’
Counsel’s several obligation to make appropriate refunds or repayments if, and
when, as a result of any appeal and/or further proceedings on remand, or
successful collateral attack, approval of the Settlement is denied or
overturned. Neither Lumber Liquidators nor any other Released Persons shall have
any obligations with respect to Plaintiffs’ Counsel’s fees and/or expenses
beyond the Fee and Expense Amount.

 

7.Conditions of Settlement; Effect of Disapproval, Cancellation or Termination

 

7.1      The Effective Date shall be conditioned on the occurrence of all of the
following events:

 

(a) the Lumber Liquidators Board of Directors has approved the Settlement and
each of its terms, including the separately negotiated Fee and Expense Amount;

 

 26. 

 

 

(b)      $26,000,000 has been transferred from the registry of the Court to via
the Interpleader Action to the escrow account established pursuant to the
Federal Class Action settlement for payment in the Federal Class Action;

 

 (c)      the Court has entered the District Court Approval Order, substantially
in the form of Exhibit B attached hereto; and the Court has entered the
Judgment, substantially in the form of Exhibit C attached hereto; and

 

(d)      the Judgment has become Final.

 

7.2      If any of the conditions specified in ¶7.1 are not met, then the
Stipulation shall be canceled and terminated subject to the provisions of ¶7.4,
unless counsel for the Settling Parties mutually agree in writing to proceed
with an alternative or modified Stipulation and submit it for Court approval.

 

7.3      The Settling Parties shall each have the right to terminate the
Settlement and this Stipulation, by providing written notice of their election
to do so (“Termination Notice”) to the other parties to this Stipulation within
thirty (30) days of: (a) the Court’s final refusal to enter the District Court
Approval Order in any material respect; (b) the Court’s final refusal to enter
the Judgment in any material respect as to the Settlement; or (c) the date upon
which the Judgment is modified or reversed in any material respect by the United
States Court of Appeals for the Fourth Circuit or the United States Supreme
Court. The provisions of ¶7.4 below shall apply to any termination under this
paragraph. However, any decision or proceeding, whether in this Court or any
appellate court, with respect to an application for attorneys’ fees or payment
of litigation expenses shall not affect the finality of any Judgment and shall
not be grounds for termination of the Settlement.

 

7.4      If for any reason this Stipulation is terminated, or is cancelled, or
otherwise fails to become effective for any reason:

 

(a)      The Settling Parties, Released Persons and Related Parties shall be
restored to their respective positions that existed immediately prior to the
date of execution of this Stipulation;

 

 27. 

 

 

(b)      All negotiations, proceedings, documents prepared and statements made
in connection with this Stipulation shall be without prejudice to the Settling
Parties, shall not be deemed or construed to be an admission by a Settling Party
of any act, matter, or proposition and shall not be used in any manner for any
purpose (other than to enforce the terms remaining in effect) in any subsequent
proceeding in the Actions or in any other action or proceeding; and

 

(c)      The terms and provisions of the Stipulation, with the exception of the
provisions of ¶6.2, shall have no further force and effect with respect to the
Settling Parties and shall not be used in the Actions or in any other proceeding
for any purpose, and any judgment or orders entered by the Court in accordance
with the terms of the Stipulation shall be treated as vacated, nunc pro tunc.

 

7.5      No order of the Court or modification or reversal on appeal of any
order of the Court concerning the amount of attorneys’ fees, costs, expenses and
interest awarded by the Court to Plaintiffs’ Counsel shall constitute grounds
for cancellation or termination of the Stipulation, affect the enforceability of
the Stipulation, or delay or preclude the Judgment or Alternate Judgment, if
applicable, from becoming Final.

 

8.Miscellaneous Provisions

 

8.1      The Settling Parties: (a) acknowledge that it is their intent to
consummate the terms and conditions of this Stipulation; and (b) agree to
cooperate to the extent reasonably necessary to effectuate and implement all
terms and conditions of the Stipulation and to exercise their best efforts to
accomplish the foregoing terms and conditions of the Stipulation.

 

8.2      Lead Plaintiff agrees to use its best efforts, acting in good faith, to
resolve as part of this Settlement the pending, related derivative actions in
Delaware Chancery Court and Virginia state court (the “State Derivative
Actions”) and the formal demand letter sent by stockholder Timothy Horton on May
20, 2015 to the Chairman of the Company’s Board of Directors (the “Demanding
Stockholder”). Should Lead Plaintiff be unable to resolve these related matters
despite its best efforts, Lead Plaintiff agrees to cooperate with the Company to
seek the dismissal of the related derivative actions and any other derivative
actions (including any action later instituted by the Demanding Stockholder).

 

 28. 

 

 

8.3      The Settling Parties intend this Settlement to be a final and complete
resolution of all disputes between Plaintiffs and Lumber Liquidators and its
stockholders, on the one hand, and the Released Persons, on the other hand,
arising out of, based upon, or related to, the Released Claims. The Settlement
compromises claims that are contested and shall not be deemed an admission by
any Settling Party or Released Person as to the merits of any claim, allegation
or defense. The District Court Approval Order shall contain a finding that
during the course of the litigation, the parties and their respective counsel at
all times complied with the requirements of Rule 11 of the Federal Rules of
Civil Procedure and all other similar laws relating to the institution,
prosecution, defense or settlement of the Actions. No party or Related Party
shall assert any claims for violation of Rule 11 of the Rules of Civil Procedure
on any similar laws relating to the institution, prosecution, defense or
settlement of the Actions. The Settling Parties agree that the Released Claims
are being settled voluntarily after consultation with an experienced mediator
and competent legal counsel who were fully competent to assess the strengths and
weaknesses of their respective clients’ claims of defenses.

 

8.4      Pending the Effective Date, the Settling Parties agree not to initiate
any proceedings concerning the Released Claims other than those incident to the
settlement itself; provided, however, that Lumber Liquidators and the Settling
Defendants may seek to prevent or stay any other action or claims brought
seeking to assert any Released Claims.

 

8.5      Neither the Stipulation nor the Settlement, including any Exhibits
attached hereto, nor any act performed or document executed pursuant to or in
furtherance of the Stipulation or the Settlement: (a) is or may be deemed to be
or may be offered, attempted to be offered or used in any way as a concession,
admission or evidence of the validity of any Released Claims, or of any fault,
wrongdoing or liability of the Released Persons or Lumber Liquidators; or (b) is
or may be deemed to be or may be used as a presumption, admission or evidence
of, any liability, fault or omission of any of the Released Persons or Lumber
Liquidators in any civil, criminal, administrative, or other proceeding in any
court, administrative agency, tribunal or other forum. Neither this Stipulation
nor the Settlement shall be admissible in any proceeding for any purpose, except
to enforce the terms of the Settlement, and except that the Released Persons may
file or use the Stipulation, the District Court Approval Order and/or the
Judgment, in any action that may be brought against them in order to support a
defense or counterclaim based on principles of res judicata, collateral
estoppel, full faith and credit, release, good faith settlement, standing,
judgment bar or reduction or any other theory of claim preclusion or issue
preclusion or similar defense or counterclaim.

 

 29. 

 

 

8.6      All designations and agreements made (other than the MOU) and orders
entered during the course of the Actions relating to the confidentiality of
documents or information shall survive this Settlement; provided that the terms
of this Stipulation shall supersede the terms of the MOU.

 

8.7      All Exhibits to this Stipulation are material and integral parts hereof
and are fully incorporated herein by this reference.

 

8.8      This Stipulation may be amended or modified only by a written
instrument signed by or on behalf of all Settling Parties or their respective
successors-in-interest.

 

8.9      This Stipulation and the Exhibits attached hereto constitute the entire
agreement among the Settling Parties and no representations, warranties or
inducements have been made to any Settling Party concerning the Stipulation
and/or any of its Exhibits, other than the representations, warranties and
covenants contained and memorialized in such documents. The Stipulation
supersedes and replaces any prior or contemporaneous writing, statement or
understanding pertaining to the Actions and no parole or other evidence may be
offered to explain, construe, contradict or clarify its terms, the intent of the
Settling Parties or their counsel, or the circumstances under which the
Stipulation was made or executed. It is understood by the Settling Parties that,
except for matters expressly represented herein, the facts or law with respect
to which this Stipulation is entered into may turn out to be other than or
different from the facts now known to each party or believed by such party to be
true; each party therefore expressly assumes the risk of facts or law turning
out to be different, and agrees that this Stipulation shall be in all respects
effective and not subject to termination by reason of any such different facts
or law.

 

 30. 

 

 

8.10      Except as otherwise expressly provided herein, all parties, including
all Settling Defendants, their counsel, Lumber Liquidators and its counsel, and
Plaintiffs and Plaintiffs’ Counsel, shall bear their own fees, costs, and
expenses.

 

8.11      Counsel for the Settling Parties are expressly authorized by their
respective clients to take all appropriate actions required or permitted to be
taken pursuant to the Stipulation to effectuate its terms and conditions.

 

8.12      Plaintiffs represent and warrant they have not assigned or
transferred, or attempted to assign or transfer, to any Person any Released
Claim or any portion thereof or interest therein.

 

8.13      Each counsel or other Person executing this Stipulation or any of its
Exhibits on behalf of any party hereto hereby warrants that such Person has the
full authority to do so.

 

8.14      Any failure by any party to this Stipulation to insist upon the strict
performance by any other party of any of the provisions of the Stipulation shall
not be deemed a waiver of any of the provisions, and such party, notwithstanding
such failure, shall have the right thereafter to insist upon the strict
performance of any and all of the provisions of the Stipulation to be performed
by such other party.

 

8.15      The Stipulation and Exhibits may be executed in one or more
counterparts. A faxed or PDF signature shall be deemed an original signature for
purposes of this Stipulation. All executed counterparts including facsimile
and/or PDF counterparts shall be deemed to be one and the same instrument. A
complete set of counterparts, either originally executed or copies thereof,
shall be filed with the Court.

 

8.16      This Stipulation shall be binding upon, and inure to the benefit of,
the Settling Parties and the Released Persons and their respective successors,
assigns, heirs, spouses, marital communities, executors, administrators,
trustees in bankruptcy and legal representatives.

 

8.17      Without affecting the finality of the Judgment, entered in accordance
with this Stipulation, the Court shall retain jurisdiction with respect to
implementation and enforcement of the terms of the Stipulation, the District
Court Approval Order, and the Judgment, and the Settling Parties hereto submit
to the jurisdiction of the Court for purposes of implementing and enforcing the
Settlement embodied in the Stipulation, the District Court Approval Order, and
the Judgment, and for matters arising out of, concerning or relating thereto.

 

 31. 

 

 

8.18      This Stipulation and the Exhibits hereto shall be considered to have
been negotiated, executed and delivered, and to be wholly performed, in the
State of Virginia, and the rights and obligations of the Settling Parties to the
Stipulation shall be construed and enforced in accordance with, and governed by,
the internal substantive laws of the State of Virginia without giving effect to
Virginia’s choice-of-law principles.

 

8.19      The headings herein are used for the purpose of convenience only and
are not meant to have legal effect.

 

8.20      Nothing in this Stipulation, or the negotiations relating thereto, is
intended to or shall be deemed to constitute a waiver of any applicable
privilege or immunity, including, without limitation, the attorney-client
privilege, the joint defense privilege, or work product protection.

 

8.21      Without further order of the Court, the parties may agree to
reasonable extensions of time to carry out any of the provisions of this
Stipulation.

 

 32. 

 

 

IN WITNESS WHEREOF, the Settling Parties have caused the Stipulation to be
executed, by themselves and/or by their duly authorized attorneys, dated July
18, 2016.

 

 

 

/s/ Benny C. Goodman
III                                                            

Darren J. Robbins

Benny C. Goodman III (admitted pro hac vice)

Erik W. Luedeke (admitted pro hac vice)

ROBBINS GELLER RUDMAN & DOWD LLP

655 West Broadway, Suite 1900

San Diego, CA 92101

Telephone: 619/231-1058

Facsimile 619/231-7423

darrenr@rgrdlaw.com

bennyg@rgrdlaw.com

eluedeke@rgrdlaw.com

 

Brett A. Spain (Va. Bar No. 44567),

WILLCOX & SAVAGE, P.C.

440 Monticello Avenue, Suite 2200

Norfolk, Virginia 23510

Telephone: (757) 628-5500

Facsimile: (757) 628-5569

bspain@wilsav.com

 

Attorneys for Lead Plaintiff Amalgamated Bank, as
Trustee for the Longview 600 Small Cap Index Fund

 

 33. 

 

  

/s/ Lyle Roberts                                                            

Lyle Roberts (VSB No. 45808)

George E. Anhang

COOLEY LLP

1299 Pennsylvania Avenue, NW

Suite 700

Washington, DC 20004

Telephone: 202/842-7800

202/842-7899 (fax)

lroberts@cooley.com

ganhang@cooley.com

       -and-

COOLEY LLP

Jonathan P. Bach

1114 Avenue of the Americas

New York, NY 10036-7798

Telephone: 212/479-6000

212/479-6275

 

Attorneys for Defendants Lumber Liquidators Holdings, Inc.,
Macon F. Brock, Jr., Douglas T. Moore, John M. Presley,
Peter B. Robinson, Martin F. Roper, Jeffrey W. Griffith,
and Nancy M. Taylor and Jimmie L. Wade

 

 

 

/s/ Brian L. Whisler                                                            

Brian L. Whisler (Va. Bar No. 30435)

Jennifer Ancona Semko

BAKER & MCKENZIE LLP

815 Connecticut Avenue, N.W.

Washington, DC 20006

Telephone: (202) 452-7019

Facsimile: (202) 416-6937 brian.whisler@bakermckenzie.com
jennifer.semko@bakermckenzie.com

 

Counsel for Thomas D. Sullivan

 

 34. 

 

 

/s/ Jonathan R.
Tuttle                                                            

Jonathan R. Tuttle (Va. Bar No. 34465)

DEBEVOISE & PLIMPTON LLP

801 Pennsylvania Ave., N.W.

Washington, DC 20004

Telephone: (202) 383-8124

Facsimile: (202) 383-8118

jrtuttle@debevoise.com

 

Counsel for Daniel E. Terrell

 

  

/s/ Elizabeth C.
Solander                                                            

Elizabeth C. Solander (Va. Bar No. 73335)

Kevin T. Abikoff

John F. Wood

HUGHES HUBBARD & REED LLP

1775 I Street, N.W., Suite 600

Washington, DC 20006-2401

Telephone: (202) 721-4600

Facsimile. (202) 721-4646

solander@hugheshubbard.com
kevin.abikoff@hugheshubbard.com

john.wood@hugheshubbard.com

 

Counsel for William K. Schlegel

 

 35. 

 

  

/s/ Ann M. Ashton                                                            

Connie N. Bertram (Va. Bar No. 31713)

Ralph C. Ferrara

Ann M. Ashton

PROSKAUER ROSE LLP

1001 Pennsylvania Avenue, N.W.

Suite 600 South

Washington, DC 20004

Telephone: (202) 416-6810

Facsimile: (202) 416-6899

cbertram@proskauer.com

rferrara@proskauer.com

aashton@proskauer.com

       -and-

Jonathan Richman

PROSKAUER ROSE LLP

11 Times Square

New York, NY 10036

Telephone: (212) 969-3000

Facsimile: (212) 969-2900

jerichman@proskauer.com

 

Counsel for Robert M. Lynch

 

 36. 

 

 

/s/ Dallas Kaplan                                                            

Dallas Kaplan (Va. Bar No. 80537)

MORGAN, LEWIS & BOCKIUS LLP

1111 Pennsylvania Ave., N.W.

Washington, DC 20004

Telephone: 202/739-5407

Fax: 202/739-3001

dkaplan@morganlewis.com

       -and-

MORGAN, LEWIS & BOCKIUS LLP

Laura Hughes McNally

Marc J. Sonnenfeld

1701 Market St.

Philadelphia, PA 19103

Telephone: 215/963-5000

Fax: 215/963-5001

lmcnally@morganlewis.com

msonnenfeld@morganlewis.com

 

Counsel for Carl R. Daniels, Jr.

 

 37. 

 

 

 

EXHIBIT A

 

 

 

 

 

UNITED STATES DISTRICT COURT FOR THE

EASTERN DISTRICT OF VIRGINIA

(Newport News Division)

 

 

In re LUMBER LIQUIDATORS HOLDINGS,
INC. SECURITIES LITIGATION

 

 

This Document Relates To:

 

Lead Case No. 4:15cv16 and Consolidated
Case Nos. 4:15cv25 and 4:15cv30 

 

Master No. 4:13-cv-00157-AWA-DEM

 

Hon. Arenda L. Wright Allen

 

 

 

[PROPOSED] ORDER PRELIMINARILY APPROVING DERIVATIVE SETTLEMENT AND
PROVIDING FOR NOTICE

 

EXHIBIT A

 

WHEREAS, a consolidated derivative action is pending in the Court entitled In re
Lumber Liquidators Holdings, Inc. Shareholder Derivative Litigation, Lead Case
No. 4:13-cv-00157-AWA-DEM (the “Actions”);

 

WHEREAS, the Plaintiffs having moved, pursuant to Federal Rule of Civil
Procedure 23.1, for an order: (i) preliminarily approving the proposed
settlement of the derivative Actions, in accordance with a Stipulation of
Settlement, dated July 18, 2016 (the “Stipulation” or “Settlement”), which,
together with the Exhibits annexed thereto, set forth the terms and conditions
for a proposed Settlement and dismissal of the Actions with prejudice; and (ii)
approving the dissemination of the Notice of Proposed Derivative Settlement and
Summary Notice of Proposed Derivative Settlement;

 

WHEREAS, all capitalized terms contained herein shall have the same meanings as
set forth in the Stipulation (in addition to those capitalized terms defined
herein); and

 

WHEREAS, this Court, having considered the Stipulation and the Exhibits annexed
thereto and having heard the arguments of the Settling Parties at the
preliminary approval hearing:

 

 - 1 - 

 

 

NOW, THEREFORE, IT IS HEREBY ORDERED:

 

1.           This Court does hereby preliminarily approve, subject to further
consideration at the Settlement Hearing described below, the Stipulation and the
Settlement set forth therein, including the terms and conditions for settlement
and dismissal with prejudice of the Actions.

 

2.           A hearing (the “Settlement Hearing”) shall be held before this
Court on ________________, 2016, at ___: _.m., at 600 Granby Street, Norfolk, VA
23510, to determine whether the Settlement of the Actions on the terms and
conditions provided for in the Stipulation is fair, reasonable and adequate to
Lumber Liquidators Holdings, Inc. (“Lumber Liquidators” or the “Company”) and
its Securities Holders and should be approved by the Court; whether the District
Court Approval Order and a Judgment as provided in ¶¶1.7 and 1.16 of the
Stipulation should be entered herein; and whether to award attorneys’ fees and
expenses to Plaintiffs’ Counsel.

 

3.           The Court approves, as to form and content, the Notice of Proposed
Derivative Settlement annexed as Exhibit A-1 hereto (the “Long-Form Notice”) and
the Summary Notice of Proposed Derivative Settlement annexed as Exhibit A-2
hereto (the “Summary Notice”), and finds that the publication of the Long-Form
Notice, Summary Notice and Stipulation, substantially in the manner and form set
forth in this Order, meets the requirements of Federal Rule of Civil Procedure
23.1 and due process, is the best notice practicable under the circumstances,
and shall constitute due and sufficient notice to all Persons entitled thereto.

 

4.           Not later than five (5) business days following entry of this
Order, Lumber Liquidators shall: (a) cause a copy of the Long-Form Notice,
substantially in the form annexed as Exhibit A-1 hereto, and the Stipulation to
be filed with the U.S. Securities and Exchange Commission (“SEC”) along with an
SEC Form 8-K or other appropriate filing; (b) create a link to the SEC filing on
the Company’s “Investor Relations” page of
http://investors.LumberLiquidators.com, the address of which shall be contained
in the Long-Form Notice and Summary Notice; and (c) cause a copy of the Summary
Notice, substantially in the form annexed as Exhibit A-2 hereto, to be published
once in Investor’s Business Daily.

 

 - 2 - 

 

 

5.           All costs incurred in the filing, publishing and posting of the
Long Form Notice and Summary Notice shall be paid by Lumber Liquidators and
Lumber Liquidators shall undertake all administrative responsibility for such
filing, publication and posting.

 

6.           Not later than thirty-five (35) days before the Settlement Hearing,
Lumber Liquidators’ Counsel shall serve on Plaintiffs’ Counsel and file with the
Court proof, by affidavit or declaration, that it has complied with ¶4 above.

 

7.           All Lumber Liquidators Securities Holders shall be bound by all
orders, determinations and judgments of the Court in the Actions concerning the
Settlement, whether favorable or unfavorable to Lumber Liquidators Securities
Holders.

 

8.           Pending final determination by the Court of whether the Settlement
should be approved, this Court preliminarily bars and enjoins Plaintiffs, all
other Securities Holders, and the Company, on behalf of themselves, from
commencing, instituting, filing, intervening in, participating in (as a nominal
defendant or otherwise), receiving any benefit from, or prosecuting any of the
Released Claims against any of the Released Persons. All proceedings and
discovery in the Actions shall be stayed except as otherwise provided for in the
Stipulation, and no party to the Actions or any Lumber Liquidators Securities
Holder shall file or prosecute any action or proceeding in any court or tribunal
relating to the Settlement or asserting any of the Released Claims against the
Released Persons.

 

9.           All papers in support of the Settlement and the separately
negotiated attorneys’ fees and expenses shall be filed with the Court and served
on or before ____________, 2016 and any reply briefs shall be filed with the
Court on or before _____________, 2016.

 

 - 3 - 

 

 

10.           Any current Lumber Liquidators Securities Holder may appear and
show cause, if he, she or it has any reason why the terms of the Settlement of
the Actions, including the negotiated amount of attorneys’ fees and expenses,
should not be approved as fair, reasonable and adequate, or why the District
Court Approval Order and Judgment should not be entered thereon, provided,
however, that, unless otherwise ordered by the Court, no current Lumber
Liquidators Securities Holder shall be heard or entitled to contest the approval
of all or any of the terms and conditions of the Settlement, or, if approved,
the District Court Approval Order and the Judgment to be entered thereon
approving the same, unless that Person has, at least twenty-one (21) calendar
days before the Settlement Hearing, filed with the Clerk of the Court
appropriate proof of Lumber Liquidators stock ownership, along with written
objections, including the basis therefore, and copies of any papers and briefs
in support thereof. All written objections and supporting papers must be
submitted to the Court either by mailing them to:

 

Clerk of the Court 

UNITED STATES DISTRICT COURT 

EASTERN DISTRICT OF VIRGINIA 

600 Granby Street 

Norfolk, VA 23510

 

OR by filing them in person at any location of the United States District Court
for the Eastern District of Virginia. Any current Lumber Liquidators Securities
Holder who does not make an objection in the manner provided herein shall be
deemed to have waived such objection and shall forever be foreclosed from making
any objection to the fairness, reasonableness or adequacy of the Settlement as
incorporated in the Stipulation and to the award of attorneys’ fees and expenses
to Plaintiffs’ Counsel, unless otherwise ordered by the Court, but shall
otherwise be bound by the District Court Approval Order and the Judgment to be
entered and the releases to be given.

 

11.           Any attorney hired by a Securities Holder for the purpose of
objecting to the Settlement must file a notice of appearance with the Clerk of
the Court no later than twenty-one (21) calendar days before the Settlement
Hearing.

 

12.           Plaintiffs’ Counsel and Defendants’ Counsel are directed to
promptly furnish each other with copies of any and all objections that are
served upon them or otherwise come into their possession.

 

 - 4 - 

 

 

13.           Neither the Stipulation nor the Settlement, including the Exhibits
attached thereto, nor any act performed or document executed pursuant to or in
furtherance of the Stipulation or the Settlement: (a) is or may be deemed to be
or may be offered, attempted to be offered or used in any way as a concession,
admission, or evidence of the validity of any Released Claims or any fault,
wrongdoing or liability of the Released Persons or Lumber Liquidators; or (b) is
or may be deemed to be or may be used as a presumption, admission, or evidence
of any liability, fault or omission of any of the Released Persons or Lumber
Liquidators in any civil, criminal or administrative or other proceeding in any
court, administrative agency, tribunal or other forum. Neither the Stipulation
nor the Settlement, nor any act performed or document executed pursuant to or in
furtherance of the Stipulation or the Settlement, shall be admissible in any
proceeding for any purpose, except to enforce the terms of the Settlement, and
except that the Released Persons may file or use the Stipulation, the District
Court Approval Order and/or the Judgment in any action that may be brought
against them in order to support a defense or counterclaim based on principles
of res judicata, collateral estoppel, full faith and credit, release, standing,
judgment bar or reduction or any other theory of claim preclusion or issue
preclusion or similar defense or counterclaim.

 

14.           The Court reserves the right to adjourn the date of the Settlement
Hearing or modify any other dates set forth herein without further notice to
Lumber Liquidators Securities Holders, and retains exclusive jurisdiction to
consider all further applications arising out of or connected with the
Settlement. The Court may approve the Settlement, with such modifications as may
be agreed to by the Settling Parties, if appropriate, without further notice to
Lumber Liquidators Securities Holders.

 

IT IS SO ORDERED.

 

DATED:             THE HONORABLE ARENDA WRIGHT ALLEN       UNITED STATES
DISTRICT JUDGE

 

 

 

 - 5 - 

 

 

 

 

 

EXHIBIT A-1

 

 

 

 

 

 

 

 

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF VIRGINIA

(Newport News Division)

 

 

In re LUMBER LIQUIDATORS HOLDINGS, INC. SECURITIES LITIGATION,

 

 

  

This Document Relates To:

 

Lead Case No. 4:15cv16 and Consolidated

Case Nos. 4:15cv25 and 4:15cv30

 

 

 

)

)

)

)

)

)

)

)

)

 

Master No. 4:13-cv-00157-AWA-DEM

Hon. Arenda L. Wright Allen

 

NOTICE OF PROPOSED DERIVATIVE SETTLEMENT

 

EXHIBIT A-1

 

TO:ALL RECORD HOLDERS AND BENEFICIAL OWNERS OF THE COMMON STOCK OF LUMBER
LIQUIDATORS HOLDINGS, INC. (“LUMBER LIQUIDATORS” OR THE “COMPANY”) AS OF JULY
18, 2016 (THE “RECORD DATE”)

 

PLEASE READ THIS NOTICE CAREFULLY AND IN ITS ENTIRETY. THIS NOTICE RELATES TO A
PROPOSED SETTLEMENT AND DISMISSAL OF THE ABOVE-CAPTIONED CONSOLIDATED DERIVATIVE
ACTION (THE “ACTIONS”) AND CONTAINS IMPORTANT INFORMATION REGARDING YOUR RIGHTS.
YOUR RIGHTS MAY BE AFFECTED BY THESE LEGAL PROCEEDINGS. IF THE COURT APPROVES
THE SETTLEMENT, YOU WILL BE FOREVER BARRED FROM CONTESTING THE APPROVAL OF THE
PROPOSED SETTLEMENT AND FROM PURSUING THE RELEASED CLAIMS.

 

IF YOU HOLD LUMBER LIQUIDATORS COMMON STOCK FOR THE BENEFIT OF ANOTHER, PLEASE
PROMPTLY TRANSMIT THIS DOCUMENT TO SUCH BENEFICIAL OWNER.

 

Notice is hereby provided to you of the proposed settlement (the “Settlement”)
of this stockholder derivative litigation. This Notice is provided by Order of
the United States District Court for the Eastern District of Virginia (the
“Court”). It is not an expression of any opinion by the Court with respect to
the truth of the allegations in the litigation or merits of the claims or
defenses asserted by or against any party. It is solely to notify you of the
terms of the proposed Settlement, and your rights related thereto. The terms of
the proposed Settlement are set forth in a written Stipulation of Settlement
dated July 18, 2016 (“Stipulation”).[1] A link to the Form 8-K filed with the
SEC containing the text of the Stipulation may be found on Lumber Liquidators’
website at the Investor Relations page at
http://investors.LumberLiquidators.com.

 

 1. 

 

 

I.WHY THE COMPANY HAS ISSUED THIS NOTICE

 

Your rights may be affected by the settlement of the actions styled Amalgamated
Bank v. Brock, et al., Civil Action No. 4:15-cv-30 (E.D. Va.); Klein v. Brock,
et al., Civil Action No. 4:15-cv-16 (E.D. Va.); and Doan v. Brock, et al., Civil
Action No. 4:15-cv-25 (the “Actions”). Lead Plaintiff Amalgamated Bank, as
Trustee for the Longview 600 Small Cap Index Fund and Plaintiffs R. Andre Klein
and Phuc Doan (“Plaintiffs”) (on behalf of themselves and derivatively on behalf
of Lumber Liquidators); Defendants Thomas D. Sullivan, Douglas T. Moore, John M.
Presley, Macon F. Brock, Jr., Peter B. Robinson, Martin F. Roper, Jimmie L.
Wade, Nancy M. Taylor, Daniel E. Terrell, Carl R. Daniels, Robert M. Lynch,
Jeffrey W. Griffiths and William K. Schlegel (the “Settling Defendants”); and
Nominal Party Lumber Liquidators have agreed upon terms to settle the
above-referenced litigation and have signed the Stipulation setting forth those
settlement terms.

 

On ______________, 2016, at ___ _.m., the Court will hold a hearing (the
“Settlement Hearing”) in the Actions. The purpose of the Settlement Hearing is
to determine: (i) whether the Settlement is fair, reasonable and adequate,
including the separately negotiated amount of attorneys’ fees and expenses for
Plaintiffs’ Counsel, and should be finally approved; (ii) whether a final
judgment should be entered and the Actions dismissed with prejudice pursuant to
the Stipulation; and (iii) such other matters as may be necessary or proper
under the circumstances.

 

 

 

1 Capitalized terms not otherwise defined shall have the same meanings as set
forth in the Stipulation.

 

 2. 

 

 

II.THE LUMBER LIQUIDATORS DERIVATIVE LITIGATION

 

A.Commencement and Consolidation of the Federal Derivative Actions

 

On March 11, 2015, plaintiffs Amalgamated Bank, Doan and Klein filed shareholder
derivative actions on behalf of Lumber Liquidators for breach of fiduciary duty,
corporate waste, unjust enrichment and other relief in the United States
District Court for the Eastern District of Virginia. On May 27, 2015, the
District Court consolidated these actions into the In re Lumber Liquidators
Holdings, Inc. Shareholder Derivative Litigation, Civil Action No.
4:13-cv-00157-AWA-LRL and appointed Amalgamated Bank as Lead Plaintiff and
Robbins Geller Rudman & Dowd LLP as Lead Counsel for the Federal Derivative
Actions. See Dkt. No. 11.

 

On June 26, 2015, plaintiffs filed a Consolidated Shareholder Derivative
Complaint for Breach of Fiduciary Duty of Loyalty, Corporate Waste, Unjust
Enrichment and Conspiracy (“Consolidated Complaint”). See Dkt. No. 24. The
Consolidated Complaint alleges that defendants are liable to Lumber Liquidators
for causing the Company to violate the law by selling wood containing toxic
levels of formaldehyde in violation of California Air Resources Board’s
Regulations (“CARB Regulations”), and wood sourced from the Russian Far East, a
protected habitat, in violation of the Lacey Act. Id., ¶¶64-121. The
Consolidated Complaint further alleges that a pre-suit demand upon the Board of
Directors of Lumber Liquidators (the “Board”) is unnecessary because a majority
of the directors face a substantial likelihood of liability for knowingly
causing the Company to seek profits in violations of the law as described above.
Id., ¶¶148-187.

 

B.Defendants’ Motions to Dismiss

 

On July 24, 2015, the Company filed a motion to dismiss the Consolidated
Complaint on the grounds that a pre-suit demand upon the Lumber Liquidators’
Board would not have been a useless and futile act, and therefore, is not
excused. See Dkt. No. 45. Defendants also filed a motion to dismiss the
Consolidated Complaint, arguing, among other things, that defendants did not
breach their fiduciary duties owed to Lumber Liquidators and its stockholders
but instead acted in good faith and in the best interest of Lumber Liquidators.
Dkt. No. 42.

 

 3. 

 

 

On the same day, the Demand Review Committee filed a separate motion to stay the
Federal Derivative Actions until such time the Demand Review Committee was able
to “complete its work and the Board may act on the [Demand Review] Committee’s
recommendation.” See Dkt. No. 37.

 

Plaintiffs filed their Oppositions to the Company and defendants’ motions to
dismiss the Consolidated Complaint on August 14, 2015. See Dkt. Nos. 69, 71. In
the Oppositions, plaintiffs argued, among other things, that demand futility
existed because a majority of the Lumber Liquidators’ Board suffer from
conflicts that render them unable to fairly and objectively consider a pre-suit
demand. Id. The Oppositions argued that each defendant is liable to Lumber
Liquidators for breach of fiduciary duty of loyalty, corporate waste, unjust
enrichment, and conspiracy. Id.

 

On December 21, 2015, the District Court entered an Order in the related In re
Lumber Liquidators Holdings, Inc. Securities Litigation, Civil Action No.
4:13-cv-157 denying the motion to dismiss filed by defendants in that action.

 

Thereafter, on February 29, 2016, the District Court denied the Company and
defendants’ motions to dismiss the derivative claims in the Actions without
prejudice. See Dkt. No. 155 at 4.

 

C.Settlement Negotiations

 

On March 29, 2016, the parties engaged in mediation, overseen by Hon. Daniel
Weinstein (Ret.). The mediation involved the parties’ efforts to settle the
claims through extensive negotiations and consultation with experienced legal
counsel who were fully competent to assess the strengths and weaknesses of their
respective clients’ claims or defenses. The parties exchanged substantial
mediation statements prior to participating in the mediation session with Judge
Weinstein. Following lengthy, arm’s-length, and mediated negotiations, on May
16, 2016, the parties reached an agreement-in-principle to settle the Actions
that was memorialized in a Memorandum of Understanding (the “MOU”) executed that
day.

 

 4. 

 

 

III.TERMS OF THE PROPOSED DERIVATIVE SETTLEMENT

 

The principal terms, conditions and other matters that are part of the
Settlement, which is subject to approval by the Court, are summarized below.
This summary should be read in conjunction with, and is qualified in its
entirety by reference to, the text of the Stipulation, which has been filed with
the Court and is available at a link on Lumber Liquidators’ website at the
Investor Relations page at http://investors.LumberLiquidators.com.

 

In connection with the Settlement of the Actions, Lumber Liquidators shall
receive a $26,000,000 cash payment from its Director and Officer Insurance
policies, to be used to resolve a related securities class action (the “Federal
Class Action”) (subject to an interpleader action) with no other Company cash to
be used to settle the related securities class action, and the Lumber
Liquidators’ Board shall adopt and maintain the corporate governance measures
and funding requirements described below within sixty (60) days after the
Court’s approval of the proposed Settlement. The corporate governance reforms
and funding commitments shall remain in effect for not fewer than five (5) years
from that date and shall not be altered without a Court order.

 

Lumber Liquidators acknowledges and agrees that the cash and corporate
governance policies set forth below confer substantial benefits upon Lumber
Liquidators and its stockholders. Lumber Liquidators also acknowledges that the
commencement, prosecution, and settlement of the Actions were material and
substantial factors in the Company’s decision to use the $26,000,000 in
insurance proceeds (and no money from the Company) for the resolution of the
Federal Class Action and to adopt, implement, and maintain the corporate
governance reforms set forth below.

 

CORPORATE GOVERNANCE POLICIES

 

Board Composition and Practices

 

Modified Plurality Voting. The Company will adopt a “modified plurality”
approach to shareholder voting for directors. Under this approach, a director
who does not receive a majority vote would agree to submit his/her resignation.
However, the Board is not legally obligated to accept, and can take other
factors into consideration, including (but not limited to) the individual’s
history on the Board, relevant outside work experience, knowledge of industry,
and knowledge of regulatory requirements, and choose to retain the director if
the director otherwise received the highest number of shares voted.

 

 5. 

 

 

Separate Chairman and Chief Executive Officer (“CEO”). The Board shall include a
provision in the Company’s Bylaws which requires the separation of the roles of
CEO and Chairman of the Board and that the Chairman must be a fully independent
director of the Board.

 

In addition to the duties of all Board members (which shall not be limited or
diminished by the Chairman’s role), the Chairman shall be responsible for the
following functions: (i) timing and agendas for Board meetings; (ii) nature,
quantity and timing of information provided to the independent directors by the
Company’s management; (iii) retention of counsel or consultants who report
directly to the Board; (iv) implementation of corporate governance policies and
procedures, including assisting the chair of the various Board committees as
requested; (v) receiving reports from the Nominating and Corporate Governance
Committee regarding compliance with and implementation of corporate governance
policies; (vi) receiving reports from the Nominating and Corporate Governance
Committee regarding governance policies; and (vii) evaluating, along with
Compensation Committee, CEO performance. The Chairman should share any reports
received by Board committees with the full Board as appropriate.

 

Limitation on Other Boards. The Board shall include a provision in the Company’s
Bylaws which requires that independent directors may sit on no more than two
other public boards, including Chairman. The CEO may sit on no more than one
other public board. Directors and officers may not serve as Board members for
companies that directly compete with Lumber Liquidators.

 

Authorization to Retain Counsel. The Board’s committees shall have standing
authorizations, at their discretion, to obtain legal or other advisors of their
choice, who shall report directly to the Board or the committee.

 

 6. 

 

 

Charters. Each standing committee of the Board should have a written charter,
which is made available to the public on Lumber Liquidators’ website, and
requires that the committee meet no fewer than three times per year.

 

Director Education. Current directors shall attend a program specifically
designed as directors’ education no later than the end of their current term (if
standing for reelection). New directors must attend within six (6) months of
joining the Board. Thereafter, the Nominating and Corporate Governance Committee
in coordination with the Chief Compliance Officer (“CCO”) and Chief Legal
Officer (“CLO”) will develop and implement an ongoing annual education program
for directors.

 

New Director. The Company shall agree to the one-time appointment to the Board
of Directors of a candidate agreeable to Lead Plaintiff and the Company. The
candidate shall meet the criteria for a Lumber Liquidators’ director as set
forth in the Company’s Corporate Governance Guidelines. If at least one of the
candidate(s) already proffered by Lead Plaintiff are not agreed to by Lumber
Liquidators or, should all candidates decline to serve, the Company, utilizing
mutually agreed upon search criteria, shall in good faith conduct a search for
new director candidate(s) through the following process:

 

(a)Employ a nationally recognized search firm to work together with Lead
Plaintiff’s corporate governance expert to engage in a general search for a
slate of at least five (5) candidates. Lead Plaintiff, in consultation with its
corporate governance expert and Lumber Liquidators’ stockholders, as
appropriate, shall propose a slate of at least five (5) additional candidates.
All candidates selected shall meet the qualifications identified by Lead
Plaintiff’s corporate governance expert and Lumber Liquidators.

 

(b)If Lead Plaintiff and Lumber Liquidators are unable to, in good faith,
mutually agree upon the selection of one of these candidates, the selection
shall be made by Judge Weinstein or Jed Melnick as the mediators of the
settlement of the Federal Derivative Actions.

 

 7. 

 

 

(c)At the conclusion of the search process, but in no event later than six (6)
months after final approval of this Settlement, Lumber Liquidators shall, in
good faith, appoint a director candidate to the Lumber Liquidators’ Board
identified pursuant to this process to serve for at least one (1) term.

 

Board Evaluation of Stockholder Proposals. The Board shall include a provision
in the Company’s Bylaws which requires that stockholder proposals be evaluated
by the directors as follows:

 

(a)The Company shall distribute to the entire Board all proposals received by
the Company. After the distribution to the Board, and before the making of any
recommendation to the Board or any of its members concerning a response,
approval or disapproval, Lumber Liquidators’ law department and senior
management shall discuss with the Chair of any Board committee responsible for
oversight of the subject matter of the proposal, if applicable, the financial,
legal, practical and social implications of approval and implementation of the
proposal;

 

(b)Where a stockholder proposal has been made by any stockholder holding at
least 2% of the Company’s outstanding shares as of the Company’s last-filed Form
10-Q or 10-K, the Company shall timely contact the proponent of the proposal to
arrange a teleconference or an in-person meeting to discuss the proposal and its
financial, legal, social and practical implications. If the proponent agrees to
a meeting or teleconference, the Chair of any Board committee responsible for
the oversight of the subject matter of the proposal shall attend;

 

(c)Lumber Liquidators’ law department and senior management, shall make a
recommendation to the Board committee responsible for oversight of the subject
matter of the proposal concerning whether to include or exclude the shareholder
proposal in the proxy and/or to submit a no-action request to the SEC pursuant
to Securities Exchange Act of 1934 §14(a), and SEC Rule 14a-8, promulgated
thereunder;

 

 8. 

 

 

(d)Before the filing of a proxy statement, which makes a recommendation
concerning any stockholder proposal, a draft of the recommendation shall be
reviewed and approved by the Board; and

 

(e)The Board is authorized at its discretion to engage outside counsel or other
advisors to assist in their review of any shareholder proposal at the expense of
the Company.

 

Stockholder Meetings. Each member of the Board shall be expected to attend each
annual stockholder meeting in person.

 

Stockholders shall have the right in general meetings to ask questions, both
orally and in writing and receive answers and discussion from the CEO and Board.
Such discussion shall take place regardless of whether questions have been
submitted in advance.

 

Polls should remain open at the annual meeting until all agenda items have been
discussed.

 

Regulatory Affairs Committee

 

The Board shall establish a Regulatory Affairs Committee focused on overseeing
the regulatory affairs specific to Lumber Liquidators. The Committee shall
familiarize itself with all aspects of the applicable industry law.

 

The Regulatory Affairs Committee shall oversee the processes by which Lumber
Liquidators conducts its business so that the Company shall do so in a manner
that complies with laws and regulations and reflects the highest standards of
integrity. The Committee shall review and make recommendations regarding
policies, practices, and procedures for compliance with industry laws.

 

The Regulatory Affairs Committee shall review Company policy for contracts with
contractors, suppliers, vendors and similarly situated persons and the financial
arrangements provided to ensure that such persons are not incentivized in a way
that would cause Lumber Liquidators to violate any applicable environmental
laws, rules and/or regulations. The Board will have the authority to grant
additional authority/oversight to this Committee.

 

 9. 

 

 

Compensation Reforms

 

Ban on Stock Pledges. The Board shall establish a ban on stock hedging and/or
pledging prohibiting a director from hedging and/or pledging any of the equity
securities in connection with a margin or similar loan transaction.

 

Clawback Policy. To the extent permitted by law, if the Board, or a Committee
thereof, determines that any bonus, incentive payment, equity award or other
compensation has been awarded or received by an executive officer of the
Company, as defined by Rule 16a-1(f) of the Securities Exchange Act of 1934, as
amended, and that such compensation was based on any financial results or
operating metrics that were satisfied as a result of such officer’s knowing or
intentional fraudulent or illegal conduct, then the Board or a Committee thereof
shall recover from the officer such compensation (in whole or in part) as it
deems appropriate under the circumstances. Further, following a restatement of
the Company’s financial statements, the Company shall recover any compensation
received by the CEO and CFO that is required to be recovered by Section 304 of
Sarbanes-Oxley Act of 2002. In determining whether to recover a payment, the
Board shall take into account such considerations as it deems appropriate,
including whether the assertion of a claim may violate applicable law or
prejudice the interests of the Company in any related proceeding or
investigation. The Board shall have sole discretion in determining whether an
officer’s conduct has or has not met any particular standard of conduct under
law or Company policy.

 

Stock Holdings Guidelines. The Board shall adopt a policy regarding stock
holding guidelines for certain executives and directors with the following
provisions:

 

(a)           Company personnel will be required to maintain the following
minimum stock holdings: (i) CEO – 5 times base salary, (ii) Founder – 2.5 times
base salary, (iii) Non-employee directors – 2.5 times annual cash retainer, and
(iv) Executive officers – 1 times base salary.

 

 10. 

 

 

(b)           Shares can be owned directly or indirectly through immediate
family members in the same household or a trust. The shares can include vested
shares of restricted stock, shares underlying in-the-money options, or shares
held in the outside director deferral plan.

 

(c)           The time period for implementing compliance is 5 years after
adoption of policy or assuming a relevant position.

 

(d)           Once the required level is reached, the individual must
continuously own the shares. If the individual falls below the required holdings
solely due to a decline in the value of the shares, then they may be granted a
hardship exemption at the discretion of the Board.

 

(e)           The Board shall disclose in its annual Proxy statement filed with
the SEC when an individual falls out of compliance with the stock holding
provision and when those individuals regain compliance with these provisions.

 

Corporate Discipline, Termination and Whistleblowers

 

Chief Compliance Officer. The Chief Compliance Officer shall be responsible for
promoting Lumber Liquidators’ worldwide compliance with applicable laws and
rules and with Lumber Liquidators’ Code of Business Conduct and Ethics. The
Chief Compliance Officer shall be responsible for overseeing development of a
comprehensive legal compliance and ethics program designed to evaluate, to
maintain and, when needed, to correct compliance with federal and state rules
and regulations and the Code of Conduct. The Chief Compliance Officer shall be
responsible for reviewing and suggesting improvements to Lumber Liquidators’
existing procedures for receipt, retention and consideration of reports or
evidence of violations of applicable federal or state law or the Code of
Business Conduct and Ethics, in consultation with the Audit Committee.

 

Except as would be deemed the responsibility of the internal audit function, the
Chief Compliance Officer shall be responsible for internal investigations into
violations of Lumber Liquidators’ policies or applicable laws. When a violation
of federal or state law or the Code of Business Conduct and Ethics appears to
have occurred, the Chief Compliance Officer shall be responsible for determining
whether an investigation is necessary.

 

 11. 

 

 

The Chief Compliance Officer shall notify the Audit Committee of all material
investigations that have been initiated and shall retain such assistance as
he/she deems necessary to conduct the investigation.

 

At the conclusion of any investigation, the Chief Compliance Officer (in
consultation with the Audit Committee) shall:

 

1.Determine whether a violation has occurred, is ongoing or is about to occur;

 

2.Recommend (as necessary) that Lumber Liquidators implement appropriate
responses to any violation; and

 

3.Inform the Audit Committee of the results of any such material investigation
and any recommended remedial measures.

 

The Chief Compliance Officer will make quarterly reports to the Audit Committee
(or other committee as directed by Board) and annual reports to the full Board.

 

The Chief Compliance Officer shall be responsible for reviewing every situation
in which a Lumber Liquidators’ employee is adjudicated by a court of law to have
violated a U.S. federal or state statute in connection with his/her employment
by Lumber Liquidators. Presumptively, any employee adjudicated to have violated
a U.S. federal or state criminal statute in connection with his/her employment
by Lumber Liquidators shall be terminated for cause and receive no severance
payments in connection with the termination. If the Chief Compliance Officer
determines that such termination is not warranted, he/she shall so recommend to
the Audit Committee, which will act upon his/her recommendation in its
discretion.

 

Code of Conduct. The Board shall cause the following clause to be inserted into
the Company’s Code of Business Conduct and Ethics:

 

You are expected to be familiar with all legal and regulatory provisions that
relate to the performance of your job, and you must follow the spirit as well as
the letter of such laws and regulations in your business dealings. No officer,
employee and/or director of Lumber Liquidators has any authority to engage in
conduct inconsistent with applicable U.S. laws and regulations, or to authorize,
direct or condone such conduct by any other person.

 

 12. 

 

 

The Audit Committee shall, within the next 3 years, review the current version
of the Code of Business Conduct and Ethics and shall consider amendments thereto
that provide recipients with more detailed discussions of those laws and
regulations that have a material effect on Lumber Liquidators’ business and
operations.

 

Confidential Whistleblower Program. The Board shall require management to adopt
written policies protecting whistleblowers, and include such policy on the
Company’s website. The Company’s Whistleblower Policy shall:

 

(a)Encourage interested parties to bring forward ethical and legal violations
and/or a reasonable belief that ethical and legal violations have occurred to
the Audit Committee and the Chief Compliance Officer so that action may be taken
to resolve the problem. Material complaints shall be reviewed by the Audit
Committee.

 

(b)The policy shall communicate effectively that Lumber Liquidators is serious
about adherence to its codes of conduct and that whistleblowing is an important
tool in achieving this goal.

 

The Whistleblower Program – with the endorsement of the Board and the most
senior management of the Company – must adequately notify employees, independent
contractors and vendors of Lumber Liquidators of the following:

 

(a)executives may be subject to criminal penalties, including imprisonment, for
retaliation against whistleblowers;

 

(b)whistleblower complaints may be directed to both the Audit Committee and the
Chief Compliance Officer, and the complaints will be handled by these parties
anonymously and, to the extent possible, in confidence, unless requested by the
whistleblower;

 

(c)if a whistleblower brings his or her complaint to an outside regulator or
other governmental entity, he or she will be protected by the terms of the
Whistleblower Program just as if he or she directed the complaint to the Audit
Committee and/or the Chief Compliance Officer;

 

 13. 

 

 

(d)if an employee is subject to an adverse employment decision as a result of
whistleblowing, the employee must file a complaint with the Department of Labor
within 90 days of the alleged violation (a failure to report such claims within
the 90 day window do not foreclose any other available legal remedy); and

 

(e)it is both illegal and against Lumber Liquidators’ policy to discharge,
demote, suspend, threaten, intimidate, harass or in any manner discriminate
against an individual for engaging in the act of whistleblowing.

 

The Company shall provide a Whistleblower Telephone Hotline to assist on matters
pertaining to corruption, fraud or similar unlawful activities at Lumber
Liquidators, with alternative reporting mechanisms including suggestion boxes or
email address.

 

The Company will remind employees of whistleblowing options and whistleblower
protections in employee communications provided at least twice a year on the
Company’s intranet.

 

Policy on Lobbying and Political Contributions

 

The Board shall include a provision in the Company’s Bylaws which limits the use
of corporate funds and other assets for governmental lobbying and political
campaigns as follows:

 

The Board shall insure that any Company lobbying or political activity is
conducted solely for promoting the commercial interests of Lumber Liquidators as
a whole and is in the interests of its stockholders. The Board shall insure that
lobbying and political spending do not reflect narrow political preferences of
the Company’s executives that have little or no bearing on Lumber Liquidators’
own commercial performance.

 

 14. 

 

 

IV.PLAINTIFFS’ COUNSEL’S SEPARATELY NEGOTIATED ATTORNEYS’ FEES AND EXPENSES

 

After negotiating the principal terms of the Settlement, counsel for Lead
Plaintiff and Lumber Liquidators, acting by and through its counsel, with the
assistance of the Honorable Daniel Weinstein (Ret.), separately negotiated the
attorneys’ fees and expenses the Company would pay to Plaintiffs’ Counsel based
on the substantial benefits conferred upon Lumber Liquidators by the Settlement.
In light of the substantial benefits conferred by Plaintiffs’ Counsel’s efforts,
Lumber Liquidators, acting by and through its Board of Directors, has agreed to
pay $5,000,000 in attorneys’ fees and expenses, subject to Court approval (the
“Fee and Expense Amount”). The Fee and Expense Amount includes fees and expenses
incurred by Plaintiffs’ Counsel in connection with the prosecution and
settlement of the Actions. To date, Plaintiffs’ Counsel have not received any
payments for their efforts on behalf of Lumber Liquidators stockholders. The Fee
and Expense Amount will compensate Plaintiffs’ Counsel for the results achieved
in the litigation.

 

V.REASONS FOR THE SETTLEMENT

 

The Settling Parties have determined that it is desirable and beneficial that
the Actions, and all of their disputes related thereto, be fully and finally
settled in the manner and upon the terms and conditions set forth in the
Stipulation and Plaintiffs’ Counsel believe that the Settlement is in the best
interests of the Settling Parties, Lumber Liquidators and its stockholders.

 

A.Why Did the Settling Defendants Agree to Settle?

 

The Settling Defendants have denied and continue to deny each and every one of
the claims and contentions alleged by the Plaintiffs in the Actions. The
Settling Defendants expressly have denied and continue to deny all allegations
of wrongdoing or liability against them or any of them arising out of, based
upon, or related to, any of the conduct, statements, acts or omissions alleged,
or that could have been alleged, in the Actions. Without limiting the foregoing,
the Settling Defendants have denied and continue to deny, among other things,
that they breached their fiduciary duties or any other duty owed to Lumber
Liquidators or its stockholders, or that Plaintiffs, Lumber Liquidators, or its
stockholders suffered any damage or were harmed as a result of any conduct
alleged in the Actions or otherwise. The Settling Defendants have further
asserted and continue to assert that at all relevant times, they acted in good
faith and in a manner they reasonably believed to be in the best interests of
Lumber Liquidators and its stockholders.

 

 15. 

 

 

Nonetheless, the Settling Defendants also have taken into account the expense,
uncertainty and risks inherent in any litigation, especially in complex cases
like the Actions, and that the proposed Settlement would, among other things:
(a) bring to an end the expenses, burdens and uncertainties associated with
continued litigation of the claims asserted in the Actions, (b) finally put to
rest those claims and the underlying matters, and (c) confer benefits upon them,
including further avoidance of disruption of their businesses and lives due to
the pendency and defense of the Actions. Therefore, the Settling Defendants have
determined that it is desirable and beneficial that the Actions, and all of the
Settling Parties’ disputes related thereto, be fully and finally settled in the
manner and upon the terms and conditions set forth in the Stipulation.

 

B.Why Did Plaintiffs Agree to Settle?

 

Plaintiffs and Plaintiffs’ Counsel believe that the claims asserted in the
Actions have merit. However, Plaintiffs and Plaintiffs’ Counsel recognize and
acknowledge the expense and length of continued proceedings necessary to
prosecute the Actions against the Settling Defendants through trial and
potential appeals. Plaintiffs and Plaintiffs’ Counsel also have taken into
account the uncertain outcome and the risk of any litigation, especially in
complex actions such as the Actions, as well as the difficulties and delays
inherent in such litigation. Plaintiffs and Plaintiffs’ Counsel also are mindful
of the inherent problems of proof of, and possible defenses to, the claims
asserted in the Actions. Based on their evaluation, Plaintiffs and Plaintiffs’
Counsel have determined that the Settlement set forth in the Stipulation is in
the best interests of Lumber Liquidators and its stockholders.

 

VI.SETTLEMENT HEARING

 

On _________________, at _____ _.m., the Court will hold the Settlement Hearing
at the United States District Court for the Eastern District of Virginia, 600
Granby Street, Norfolk, VA 23510. At the Settlement Hearing, the Court will
consider whether the terms of the Settlement are fair, reasonable and adequate
and thus should be finally approved, whether the separately negotiated Fee and
Expense Amount should be approved, and whether the Actions should be dismissed
with prejudice pursuant to the Stipulation.

 

 16. 

 

 

Pending determination of whether the Settlement should be approved, no Lumber
Liquidators stockholder, either directly, representatively, derivatively or in
any other capacity, shall commence or prosecute against any of the Released
Persons, any action or proceeding in any court, administrative agency or other
tribunal asserting any of the Released Claims.

 

VII.RIGHT TO ATTEND SETTLEMENT HEARING

 

Any current Lumber Liquidators stockholder may, but is not required to, appear
in person at the Settlement Hearing. If you want to be heard at the Settlement
Hearing, then you must first comply with the procedures for objecting, which are
set forth below. The Court has the right to change the hearing date or time
without further notice. Thus, if you are planning to attend the Settlement
Hearing, you should confirm the date and time before going to the Court. Current
Lumber Liquidators stockholders who have no objection to the Settlement do not
need to appear at the Settlement Hearing or take any other action.

 

VIII.RIGHT TO OBJECT TO THE PROPOSED DERIVATIVE SETTLEMENT AND PROCEDURES FOR
DOING SO

 

Any current Lumber Liquidators stockholder may appear and show cause, if he, she
or it has any reason why the Settlement of the Actions should not be approved as
fair, reasonable and adequate, or why a judgment should not be entered thereon,
or why the separately negotiated attorneys’ fees and expenses should not be
approved. You must object in writing, and you may request to be heard at the
Settlement Hearing. If you choose to object, then you must follow these
procedures.

 

A.You Must Make Detailed Objections in Writing

 

Any objections must be presented in writing and must contain the following
information:

 

1.           Your name, legal address, and telephone number;

 

2.           The case name and number (In re Lumber Liquidators Holdings, Inc.
Shareholder Derivative Litigation, Lead Case No. 4:13-cv-00157-AWA-DEM);

 

 17. 

 

 

3.           Proof of being a Lumber Liquidators stockholder as of the Record
Date, July 18, 2016;

 

4.           The date(s) you acquired your Lumber Liquidators shares;

 

5.            A statement of each objection being made;

 

6.           Notice of whether you intend to appear at the Settlement Hearing.
You are not required to appear; and

 

7.           Copies of any papers you intend to submit to the Court, along with
the names of any witness(es) you intend to call to testify at the Settlement
Hearing and the subject(s) of their testimony.

 

The Court may not consider any objection that does not substantially comply with
these requirements.

 

B.You Must Timely Deliver Written Objections to the Court

 

All written objections and supporting papers must be submitted to the Court
either by mailing them to:

 

Clerk of the Court 

United States District Court 

Eastern District of Virginia 

600 Granby Street Norfolk, VA 23510

 

OR by filing them in person at any location of the United States District Court
for the Eastern District of Virginia.

 

YOUR WRITTEN OBJECTIONS MUST BE POSTMARKED OR ON FILE WITH THE CLERK OF THE
COURT NO LATER THAN _________________________.

 

Unless the Court orders otherwise, your objection will not be considered unless
it is timely filed with the Court.

 

Any Person or entity who fails to object or otherwise request to be heard in the
manner prescribed above will be deemed to have waived the right to object to any
aspect of the Settlement as incorporated in the Stipulation or otherwise request
to be heard (including the right to appeal) and will be forever barred from
raising such objection or request to be heard in this or any other action or
proceeding, and, unless otherwise ordered by the Court, shall be bound by the
Judgment to be entered and the releases to be given.

 

 18. 

 

 

IX.HOW TO OBTAIN ADDITIONAL INFORMATION

 

This Notice summarizes the Stipulation. It is not a complete statement of the
events of the Actions or the Settlement contained in the Stipulation.

 

You may inspect the Stipulation and other papers in the Actions at the United
States District Clerk’s office at any time during regular business hours of each
business day. The Clerk’s office is located at the United States District Court
for the Eastern District of Virginia, 600 Granby Street, Norfolk, VA 23510.
However, you must appear in person to inspect these documents. The Clerk’s
office will not mail copies to you. You may also view and download the
Stipulation at http://investors.LumberLiquidators.com.

 

If you have any questions about matters in this Notice you may contact by
telephone at 1-800-449-4900 or in writing Rick Nelson, c/o Shareholder
Relations, Robbins Geller Rudman & Dowd LLP, 655 West Broadway, Suite 1900, San
Diego, CA 92101.

 

PLEASE DO NOT CALL, WRITE, OR OTHERWISE DIRECT QUESTIONS TO EITHER THE COURT OR
THE CLERK’S OFFICE.

 

DATED: ______________, 2016 BY ORDER OF THE COURT   UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF VIRGINIA

 

 

 

 

 19. 

 

 

 

 

 

EXHIBIT A-2

 

 

 

 

UNITED STATES DISTRICT COURT FOR THE

EASTERN DISTRICT OF VIRGINIA

(Newport News Division)

In re LUMBER LIQUIDATORS HOLDINGS,
INC. SECURITIES LITIGATION

 

This Document Relates To:

Lead Case No. 4:15cv16 and Consolidated
Case Nos. 4:15cv25 and 4:15cv30

 

 

 

Master No. 4:13-cv-00157-AWA-DEM

Hon. Arenda L. Wright Allen

 SUMMARY NOTICE OF PROPOSED DERIVATIVE SETTLEMENT

EXHIBIT A-2

TO:ALL RECORD HOLDERS AND BENEFICIAL OWNERS OF THE COMMON STOCK OF LUMBER
LIQUIDATORS HOLDINGS, INC. (“LUMBER LIQUIDATORS” OR THE “COMPANY”) AS OF JULY
18, 2016 (THE “RECORD DATE”)

 

PLEASE TAKE NOTICE that the above-captioned shareholder derivative actions (the
“Actions”) are being settled on the terms set forth in a Stipulation of
Settlement, dated July 18, 2016 (the “Stipulation” or “Settlement”).[1] Under
the terms of the Stipulation, as a part of the proposed Settlement, Lumber
Liquidators shall receive a payment of $26,000,000 that it will use to resolve
the related securities class action (subject to an interpleader action) and will
adopt certain corporate governance enhancements. These reforms are designed to
address the claims asserted in the Actions and enhance Lumber Liquidators’
monitoring of, response to, and compliance with environmental, health and safety
laws, rules and regulations, as well as addressing stockholder concerns relating
to the Company’s compliance with such laws, rules and regulations.

 

 

 

1           This notice should be read in conjunction with, and is qualified in
its entirety by reference to, the text of the Stipulation, which has been filed
with the United States District Court for the Eastern District of Virginia. A
link to the Form 8-K filed with the SEC containing the text of the Stipulation
may be found on the Company’s website at the Investor Relations page at
http://investors.LumberLiquidators.com. All capitalized terms herein have the
same meanings as set forth in the Stipulation.

 

 - 1 - 

 

 

The full Board reviewed the derivative settlement parameters, and exercising its
business judgment and mindful of its duties to stockholders, approved the
settlement. The Settling Defendants agree and acknowledge that the $26 million
payment that will be used to resolve the related securities class action and the
corporate governance enhancements confer substantial benefits upon Lumber
Liquidators and its stockholders.

 

In light of the substantial benefits conferred upon Lumber Liquidators by
Plaintiffs’ Counsel’s efforts, the Company, by and through its Board of
Directors, in exercising its business judgment, has agreed to pay Plaintiffs’
Counsel $5 million in attorneys’ fees and expenses, subject to Court approval.

 

IF YOU WERE A RECORD OR BENEFICIAL OWNER OF LUMBER LIQUIDATORS COMMON STOCK AS
OF JULY 18, 2016, PLEASE READ THIS NOTICE CAREFULLY AND IN ITS ENTIRETY AS YOUR
RIGHTS MAY BE AFFECTED BY PROCEEDINGS IN THE ABOVE-REFERENCED LITIGATION.

 

On __________, 2016, at _____ _.m., a hearing (the “Settlement Hearing”) will be
held at the United States District Court for the Eastern District of Virginia,
600 Granby Street, Norfolk, VA 23510, before the Honorable Arenda Wright Allen,
to determine: (1) whether the terms of the proposed Settlement, including the
separately negotiated attorneys’ fees and expenses, should be approved as fair,
reasonable and adequate; and (2) whether the Actions should be dismissed on the
merits and with prejudice on the terms set forth in the Stipulation.

 

Any Lumber Liquidators stockholder that objects to the Settlement shall have a
right to appear and to be heard at the Settlement Hearing, provided that he, she
or it was a stockholder of record or beneficial owner as of July 18, 2016. Any
Lumber Liquidators stockholder who satisfies this requirement may enter an
appearance through counsel of such stockholder’s own choosing and at such
stockholder’s own expense, or may appear on their own. However, no stockholder
of Lumber Liquidators shall be heard at the Settlement Hearing unless, no later
than ____________, 2016, such stockholder has filed with the Court, a written
notice of objection containing the following information:

 

 - 2 - 

 

 

1.           Your name, legal address, and telephone number;

 

2.           The case name and number (In re Lumber Liquidators Holdings, Inc.
Shareholder Derivative Litigation, Lead Case No. 4:13-cv-00157-AWA-DEM);

 

3.           Proof of being a Lumber Liquidators stockholder as of the Record
Date;

 

4.           The date(s) you acquired your Lumber Liquidators shares;

 

5.           A statement of your position with respect to the matters to be
heard at the Settlement Hearing, including a statement of each objection being
made;

 

6.           Notice of whether you intend to appear at the Settlement Hearing
(this is not required if you have lodged your objection with the Court); and

 

7.           Copies of any papers you intend to submit to the Court, along with
the names of any witness(es) you intend to call to testify at the Settlement
Hearing and the subject(s) of their testimony.

 

Only stockholders who have filed and delivered valid and timely written notices
of objection will be entitled to be heard at the Settlement Hearing unless the
Court orders otherwise.

 

If you wish to object to the proposed Settlement, you must file the written
objection described above with the Court on or before ____________, 2016.

 

Any Lumber Liquidators stockholder as of July 18, 2016, who does not make his,
her or its objection in the manner provided herein shall be deemed to have
waived such objection and shall be forever foreclosed from making any objection
to the fairness, reasonableness or adequacy of the Settlement as incorporated in
the Stipulation and/or to the separately negotiated attorneys’ fees and expenses
to Plaintiffs’ Counsel, unless otherwise ordered by the Court, but shall
otherwise be bound by the Judgment to be entered and the releases to be given.

 

Inquiries may be made to Plaintiffs’ Counsel: Rick Nelson, c/o Shareholder
Relations, Robbins Geller Rudman & Dowd LLP, 655 West Broadway, Suite 1900, San
Diego, CA 92101; telephone 1-800-449-4900.

 

 - 3 - 

 

 

PLEASE DO NOT CONTACT THE COURT REGARDING THIS NOTICE

DATED: _________________, 2016 BY ORDER OF THE COURT   UNITED STATES DISTRICT
COURT   EASTERN DISTRICT OF VIRGINIA

 

 

 

 

 

 - 4 - 

 

 

 

 

 

EXHIBIT B

 

 

 

 

 

 

 

 

UNITED STATES DISTRICT COURT FOR THE

 

EASTERN DISTRICT OF VIRGINIA

 

(Newport News Division)

 

In re LUMBER LIQUIDATORS HOLDINGS, INC. SECURITIES LITIGATION,

 

 

This Document Relates To:

 

Lead Case No. 4:15cv16 and Consolidated

 

Case Nos. 4:15cv25 and 4:15cv30

 

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Master No. 4:13-cv-00157-AWA-DEM

Hon. Arenda L. Wright Allen

 

 

 

[PROPOSED] ORDER APPROVING DERIVATIVE SETTLEMENT AND ORDER OF
DISMISSAL WITH PREJUDICE

 

EXHIBIT B

 

This matter came before the Court for hearing pursuant to the Order of this
Court, dated _____________, 2016 (“Order”), on Plaintiffs’ motion for final
approval of the settlement (“Settlement”) set forth in the Stipulation of
Settlement, dated July 18, 2016 (the “Stipulation”). Due and adequate notice
having been given of the Settlement as required in said Order, and the Court
having considered all papers filed and proceedings had herein, and otherwise
being fully informed in the premises and good cause appearing therefor, IT IS
HEREBY ORDERED, ADJUDGED AND DECREED that:

 

1.           This District Court Approval Order incorporates by reference the
definitions in the Stipulation, and all capitalized terms used herein shall have
the same meanings as set forth in the Stipulation (in addition to those
capitalized terms defined herein).

 

2.           This Court has jurisdiction over the subject matter of the Actions,
including all matters necessary to effectuate the Settlement, and over all
parties to the Actions, including, but not limited to, the Plaintiffs, Lumber
Liquidators Holdings, Inc. (“Lumber Liquidators”), current Lumber Liquidators
Securities Holders, and the Settling Defendants.

 

 1. 

 

 

3.           The Court finds that the notice provided to Lumber Liquidators
stockholders was the best notice practicable under the circumstances of these
proceedings and of the matters set forth therein, including the Settlement set
forth in the Stipulation, to all Persons entitled to such notice. The notice
fully satisfied the requirements of Federal Rule of Civil Procedure 23.1 and due
process.

 

4.           The Actions and all claims contained therein, as well as all of the
Released Claims, are dismissed with prejudice. As among Plaintiffs, the Settling
Defendants and Lumber Liquidators, the parties are to bear their own costs,
except as otherwise provided in the Stipulation.

 

5.           The Court finds that the terms of the Stipulation and Settlement
are fair, reasonable and adequate as to each of the Settling Parties, and hereby
finally approves the Stipulation and Settlement in all respects, and orders the
Settling Parties to perform its terms to the extent the Settling Parties have
not already done so.

 

6.           Upon the Effective Date, Plaintiffs (acting on their own behalf and
derivatively on behalf of Lumber Liquidators and its stockholders), Lumber
Liquidators, all other Securities Holders, and the Company, for good and
sufficient consideration, the receipt and adequacy of which are hereby
acknowledged, shall be deemed to have, and by operation of law and of the
Judgment shall have, fully, finally, and forever compromised, settled, released,
resolved, relinquished, waived and discharged and dismissed with prejudice each
and every one of the Released Claims against the Released Persons.

 

7.           Upon the Effective Date, Plaintiffs (acting on their own behalf and
derivatively on behalf of Lumber Liquidators and its stockholders), Lumber
Liquidators and any Person acting on behalf of Lumber Liquidators, all other
Securities Holders, and the Company, for good and sufficient consideration, the
receipt and adequacy of which are hereby acknowledged, shall be forever barred
and enjoined from commencing, instituting or prosecuting any of the Released
Claims against any of the Released Persons. Nothing herein shall in any way
impair or restrict the rights of any Settling Party to enforce the terms of the
Stipulation.

 

 2. 

 

 

8.           Upon the Effective Date, each of the Released Persons, for good and
sufficient consideration, the receipt and adequacy of which are hereby
acknowledged, shall be deemed to have, and by operation of law and of the
Judgment shall have, fully, finally, and forever compromised, settled, released,
resolved, relinquished, waived and discharged each and all of the Plaintiffs and
Plaintiffs’ Counsel and all current Lumber Liquidators stockholders (solely in
their capacity as Lumber Liquidators stockholders) from all claims (including
Unknown Claims) arising out of, relating to, or in connection with the
institution, prosecution, assertion, settlement or resolution of the Actions or
the Released Claims. Nothing herein shall in any way impair or restrict the
rights of any Settling Party to enforce the terms of the Stipulation.

 

9.           The Court hereby approves the Fee and Expense Amount in accordance
with the Stipulation and finds that such fee is fair and reasonable in light of
the substantial benefits conferred upon Lumber Liquidators by the Settlement.

 

10.           Neither the Stipulation nor the Settlement, including the Exhibits
attached thereto, nor any act performed or document executed pursuant to or in
furtherance of the Stipulation or the Settlement: (a) is or may be deemed to be
or may be offered, attempt to be offered or used in any way as a concession,
admission, or evidence of the validity of any Released Claims or any fault,
wrongdoing or liability of the Released Persons or Lumber Liquidators; or (b) is
or may be deemed to be or may be used as a presumption, admission, or evidence
of any liability, fault or omission of any of the Released Persons or Lumber
Liquidators in any civil, criminal or administrative or other proceeding in any
court, administrative agency, tribunal or other forum. Neither the Stipulation
nor the Settlement, nor any act performed or document executed pursuant to or in
furtherance of the Stipulation or the Settlement, shall be admissible in any
proceeding for any purpose, except to enforce the terms of the Settlement and
Stipulation, and except that the Released Persons may file or use the
Stipulation, the District Court Approval Order and/or the Judgment in any action
in order to support a claim, defense or counterclaim based on principles of res
judicata, collateral estoppel, full faith and credit, release, standing,
judgment bar or reduction or any other theory of claim preclusion or issue
preclusion or similar claim defense or counterclaim.

 

 3. 

 

 

11.           During the course of the Actions, the parties and their respective
counsel at all times complied with the requirements of Federal Rule of Civil
Procedure 11, and all other similar laws relating to the institution,
prosecution, defense of, or settlement of the Actions.

 

12.           Without affecting the finality of this District Court Approval
Order and the Judgment in any way, this Court hereby retains continuing and
exclusive jurisdiction over the Actions and the parties to the Stipulation to
enter any further orders as may be necessary to effectuate, implement and
enforce the Stipulation and the Settlement provided for therein and the
provisions of this District Court Approval Order.

 

13.           This District Court Approval Order and the Judgment is a final and
appealable resolution in the Actions as to all claims and the Court directs
immediate entry of the Judgment forthwith by the Clerk in accordance with Rule
58, Federal Rules of Civil Procedure, dismissing the Actions with prejudice.

 

IT IS SO ORDERED.

 

 

 

DATED:             THE HONORABLE ARENDA WRIGHT ALLEN       UNITED STATES
DISTRICT JUDGE  

 

 4. 

 

 

  

 

 

 

EXHIBIT C

 

 

 

 

 

 

 

 

UNITED STATES DISTRICT COURT FOR THE

 

EASTERN DISTRICT OF VIRGINIA

 

(Newport News Division)

 

In re LUMBER LIQUIDATORS HOLDINGS, INC. SECURITIES LITIGATION,

 

 

 

This Document Relates To:

 

Lead Case No. 4:15cv16 and Consolidated

Case Nos. 4:15cv25 and 4:15cv30

 

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Master No. 4:13-cv-00157-AWA-DEM

Hon. Arenda L. Wright Allen

 

 

 

[PROPOSED] JUDGMENT

 

EXHIBIT C

 

Plaintiffs, having moved for final approval of the settlement set forth in the
Stipulation of Settlement, dated July 18, 2016 and the matter having come before
the Honorable Arenda Wright Allen, United States District Judge, and the Court,
on ___________, 2016, having issued its Order Approving Derivative Settlement
and Order of Dismissal with Prejudice, and having directed the Clerk of the
Court to enter judgment, it is

 

 

 

 

ORDERED, ADJUDGED AND DECREED:

 

1.           This Judgment incorporates by reference the Court’s Order Approving
Derivative Settlement and Order of Dismissal with Prejudice dated _____________,
2016; and

 

2.           That for the reasons stated in, and pursuant to the terms set forth
in, the Court’s Order Approving Derivative Settlement and Order of Dismissal
with Prejudice dated _____________, 2016, Plaintiffs’ Motion for Final Approval
of Derivative Settlement is granted; accordingly, this case, and all related
cases, are closed.

 

Dated: Norfolk, Virginia   BY:           ___________________, 2016          
Clerk of Court