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JCPenneyShareholders <JCPenneyShareholders@okinadams.com>
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2:38 PM (6 minutes ago)
to JCPenneyShareholders, Matthew, David, Johnie, Bridget
All,
Attached is the proposed Stipulation and Agreed Order (the “Stipulation”) regarding the settlement of the AHEC’s motion to appoint an official committee. Also attached is a copy of Bankruptcy Code section 1103. Section 1103 sets out the powers and duties of an official committee – what we would win if we won on our motion. The primary terms of this Stipulation, from the AHEC’s point of view, are: (i) terms defining the scope and authority of the AHEC going forward; (ii) terms defining the scope of AHEC Professionals; (iii) terms establishing protocol for communications with shareholders; and (iv) the professional fee budget.
First, regarding the scope and authority of the AHEC, the Stipulation, clarifies that the AHEC has standing to represent the interests of shareholders. Further, as Mr. Okin stated yesterday during the hearing, the Stipulation provides the AHEC many of the same powers and duties of an official committee as set forth in Bankruptcy Code section 1103. In other words, upon entry of this Stipulation, the AHEC would be entitled to essentially function similarly to how an official committee would function in these Bankruptcy Cases. This clarification regarding scope and authority was significant to the AHEC; putting other parties in interest on notice that, rather than simply serving to distribute information to shareholders, the AHEC has the standing and authority to conduct discovery and participate in these Bankruptcy Cases on shareholders’ behalf.
Second, the Stipulation provides that professionals employed by the AHEC will be employed as if the AHEC were an official committee. Like the clarification regarding the scope and authority of the AHEC, this provision is significant because it allows the AHEC’s professionals to interact on equal footing with the other professionals employed in these cases.
Next, the Stipulation provides for the establishment of clear protocol for the sharing of information with shareholders. Those of you receiving this update directly have already registered at jcpshareholders.com (the “Website”). If you have not and are reading this message on a public message board or other reprinting, please register on the Website. This Website will be used to effectuate the Information Protocols set forth in the Stipulation. All updates from the AHEC will be distributed to shareholders that have registered on this site. Additionally, Okin Adams has established a dedicated email address for shareholders to email questions/concerns to the AHEC. That email address is JCPenneyShareholders@okinadams.com. Shareholders may also submit questions or concerns through the Website.
We understand that many of you have already expressed concerns or questions related to the AHEC’s specific legal strategies or discussions with the AHEC’s counsel or financial advisor. Please note that these cases involve active litigation against well-funded, aggressive counterparties. Further, access to the Debtors’ information has been granted to AHEC Professionals subject to strict confidentiality agreements that restrict disclosure. Under these circumstances, it is imperative that the AHEC is able to meet and confer with the AHEC Professionals in a confidential setting and to preserve the attorney-client and other important litigation privileges regarding the AHEC Professionals’ advice and work. As such, under the Information Protocol, the AHEC will not be sharing attorney-client communications or work product prepared by the AHEC Professionals. While the AHEC will not share attorney-client privileged discussions or information, we will provide regular updates and information so that the shareholders understand the current status of these Bankruptcy Cases and the AHEC’s views regarding the same.
Finally, the Stipulation also provides a significant increase in the budget for professional fees. This part of the agreement is both a give and a get. If the AHEC were successful in compelling the appointment of an official committee that committee may not be subject to a preset budget (though some courts have limited equity committee budgets upon formation). Thus, the AHEC is giving up the chance to obtain an unrestricted budget. This is also a get, however, because the original budget is simply not enough to fight the kind of fight that the AHEC expects. As many of you will recall, the limited budget originally approved by the Court ($250,000) was expressly set at an amount that limited the AHEC’s ability to fund litigation. The Court stated at the time that the original budget was not a “war chest.” The increased budget to $1m is significant, then, because that increase will allow the AHEC to mount a meaningful opposition to the currently proposed transaction – which, as Mr. Snyder’s report indicates, severely undervalues the Debtors’ business and assets.
The decision to settle any matter is always a difficult decision. The AHEC still firmly believes that the value of the Debtors’ assets is greater than that reflected so far by the Debtors’ actions in these Bankruptcy Cases. Through the motion to appoint an official committee and Mr. Snyder’s expert report, the AHEC was able to get this belief out to the general public and onto the Bankruptcy Court docket. Yet, value alone is insufficient to require the Court appointment of an official committee. Even if the Court accepted Mr. Snyder’s testimony on valuation, then, there remained a potentially significant risk that the Court would deny our motion and not appoint an official committee. Ultimately, the Stipulation will allow the AHEC to realize significant benefit from its motion – publicly disclosing the credible views of Mr. Snyder and obtaining clarification of the AHEC’s scope and purpose, which will now include significant overlap in AHEC powers with those of an official committee – without the ultimate risk of litigation. Weighing these risks against the benefits of the Stipulation, the AHEC recommends approval of the settlement.
After reviewing the attached Stipulation and explanation above, please reply to this email with the following:
Name:
Number of Shares Held:
Support the AHEC’s proposed Stipulation and Agreed Order: Yes or No
