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In re Zhongpin Inc. Stockholders Litigation

Court of Chancery of Delaware

December 23, 2014

In re Zhongpin Inc. Stockholders Litigation

Date Submitted: December 18, 2014

Dear Counsel:

Defendants Raymond Leal, Yaoguo Pan, and Xiaosong Hu (collectively, the "Special Committee Defendants") seek certification of an interlocutory appeal of this Court's Memorandum Opinion[1] of November 26, 2014 (the "Memorandum Opinion") and its implementing order. The Special Committee Defendants had argued that claims against them should be denied because of the exculpatory provision in Zhongpin Inc.'s charter adopted pursuant to 8 Del. C. § 102(b)(7). The Court rejected that argument in the context of this entire fairness case and relied upon In re Cornerstone Therapeutics Inc. Stockholders Litigation.[2] The defendants in Cornerstone, who are in substantially the same position as the Special Committee Defendants, sought an interlocutory appeal, which this Court certified[3] and which the Supreme Court accepted.[4]

The trial court's decision to certify an interlocutory appeal is governed by Supreme Court Rule 42. The grounds for certifying Cornerstone I for appeal and for certifying the Memorandum Opinion for interlocutory appeal are substantially the same. Briefly, the decision not to dismiss the claims against the Special Committee Defendants determines a substantial issue because, if reversed, the Special Committee Defendants may extricate themselves from this litigation as parties. Second, the Memorandum Opinion establishes a legal right in that it requires the Special Committee Defendants to remain as parties to this litigation without the ability to assert currently their Section 102(b)(7) defense. Finally, the Memorandum Opinion satisfies the requirements of Supreme Court Rule 42(b)(i) by meeting the "conflicting decisions" criterion for certification of questions of law as provided in Supreme Court Rule 41(b)(ii).

In addition, as a practical matter, resolution of whether a 102(b)(7) defense is currently available would serve the considerations of justice[5] and, potentially, might significantly limit litigation costs and burdens for the Special Committee Defendants.[6] In sum, it is appropriate to certify the Special Committee

Defendants' interlocutory appeal, despite the fact that, even if the Special Committee Defendants are successful, this litigation will not be fully concluded.

An implementing order will be entered.[7]

Very truly yours,

John W. Noble, VICE CHANCELLOR


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