(Against All Defendants for Violation of Section 14(e) of the Exchange Act and 17 C.F.R. §  244.100 Promulgated Thereunder)   (Against the Individual Defendants for Violations of Section 20(a)  of the Exchange Act)   (Against all Defendants for Violations of Section 14(d)(4) of the Exchange Act and   SEC Rule 14d-9,17 C.F.R. § 240.14d-9)   24.  Plaintiff brings this action as a class action pursuant to Rule 23 of the Federal  Rules of Civil Procedure on behalf of all persons and entities that own Kate Spade common  stock (the “Class”). Excluded from the Class are defendants and their affiliates, immediate  families, legal representatives, heirs, successors or assigns and any entity in which defendants  have or had a controlling interest.   25.  Plaintiff’s claims are properly maintainable as a class action under Rule 23 of the  Federal Rules of Civil Procedure.   27.  Questions of law and fact are common to the Class and predominate over  questions affecting any individual Class member, including, inter alia:  (a)  Whether defendants have violated Section 14(d)(4) of the Exchange Act  and Rule 14d-9 promulgated thereunder;  (b)  Whether the Individual Defendants have violated Section 14(e) of the  Exchange Act;  (c)  Whether the Individual Defendants have violated Section 20(a) of the  Exchange Act; and  (d)  Whether Plaintiff and the other members of the Class would suffer  irreparable injury were the Proposed Transaction consummated.   28.  Plaintiff will fairly and adequately protect the interests of the Class, and has no  interests contrary to or in conflict with those of the Class that Plaintiff seeks to represent.   Plaintiff has retained competent counsel experienced in litigation of this nature.   29.  A class action is superior to all other available methods for the fair and efficient  adjudication of this controversy. Plaintiff knows of no difficulty to be encountered in the  management of this action that would preclude its maintenance as a class action.   30.  Defendants have acted on grounds generally applicable to the Class with respect  to the matters complained of herein, thereby making appropriate the relief sought herein with  respect to the Class as a whole.  32.  The Company’s Kate Spade New York brand offers fashion products for women  and children and home products. The Kate Spade New York brand product line includes  handbags, small leather goods, jewelry and apparel, along with a variety of licensed products  including footwear, fragrances, swimwear and watches, among other items. The Company’s  Jack Spade brand offers fashion products for men, including briefcases, travel bags, small  leather goods, fashion accessories and apparel.   34.  On April 18, 2017, Kate Spade reported its first quarter 2017 financial results.  Though the Company’s net sales slightly declined to $271 million, compared to $274 million in  the first quarter of 2016, defendant Leavitt and Carrara remained positive and pleased with the  quarter’s results.  Defendant Leavitt noted:  Despite a challenging retail environment and the later Easter  holiday, we achieved yet another quarter of double-digit  eCommerce comparable sales growth, which helped offset softness  in bricks and mortar stores. Against this backdrop, we delivered  strong gross margin expansion while working to drive profitable  growth across our categories and channels.  Carrara added:  We delivered over 140 basis points of gross margin expansion in the  first quarter driven by operational efficiencies and our continued  focus on quality of sale amidst a highly promotional environment.  In addition, we continued to generate robust cash flow over the past  twelve months and ended the quarter with $422 million in cash. We  delivered these solid results despite the factors that negatively  impacted our first quarter performance.  The Process Leading Up to the Proposed Transaction   35.  On February 1, 2016, defendant Leavitt and Carrara met with Coach’s CEO and  President to discuss a potential business combination.   37.  On March 22, 2016, the Board formally engaged Perella as the Company’s  financial advisor in connection with an acquisition of Kate Spade.   38.  On November 14, 2016, Caerus Investors, a Company stockholder, released a  public letter to the Board recommending a sale of Kate Spade.   39.  On June 6, 2016, Carrara met with Coach’s President to discuss the retail industry  generally.   40.  On November 14 and December 1, 2016, defendant Leavitt met with Coach’s  CEO regarding a potential transaction.   41.  On December 5, 2016, at the Board’s direction, Perella contacted fifteen  prospective counterparties, including ten strategic entities and five financial sponsor entities.  Three responded that they were interested in further discussions, including Coach, a strategic  entity referred to in the Recommendation Statement as “Party A” and a financial sponsor  referred to in the Recommendation Statement as “Party B.    42.  On January 7, 2017, Kate Spade entered into a confidentiality agreement with  Coach.   43.  On January 17 and January 26, 2017, the Company executed confidentiality  agreements with Party A and Party B, respectively. The Recommendation Statement fails to  disclose whether these confidentiality agreements contain standstill provisions that operate to  preclude either party from submitting a topping bid for the Company.   44.  Party B subsequently informed Perella it would not be submitting a bid for the  Company.   46.  That same day, Party A submitted a preliminary indication of interest to acquire  Kate Spade in an all cash transaction in the range of $20.00 – $22.00 per share.   47.  Between February 16 and March 21, 2017, Company management participated  in meetings with the management of each of Coach and Party A.   48.  On February 27, 2017, Perella provided Coach and Party A with a bid instruction  letter, indicating that the submission deadline for final round bids was March 27, 2017.   49.  On March 8, 2017, Party A informed Perella it would not be submitting a bid for  the Company.   50.  On March 21, 2017, Coach informed Perella it would not be submitting a bid by  the March 27, 2017 deadline and the Board agreed to extend the bid deadline date.   51.  On April 29, 2017, Coach submitted a proposal to acquire the Company for $18.00  per share in cash. Coach included a mark-up of the draft merger agreement, which included a  condition that certain key senior Kate Spade management execute retention agreements prior to  signing the Merger Agreement.   52.  At a May 1, 2017 Board meeting, the Board reviewed and discussed Coach’s  offer, the Company’s preliminary projections for 2017 through 2019 (the “Projections”), Kate  Spade’s first quarter results and the underlying trend in the Company’s business performance  reflected in the first quarter results, including sensitivity analysis related thereto. Following  discussion, the Board determined to reject Coach’s offer.   54.  At a May 3, 2017 meeting, the Board again discussed the Projections, including  the sensitivity analysis related to the Company’s first quarter results. The Board then authorized  management and its advisors to proceed with negotiating a transaction. The Board also authorized  certain members of the Company’s senior management team to initiate negotiation on their  respective post-closing retention arrangements with Coach in accordance with the terms previously  discussed with the Board, which they negotiated until the parties signed the Merger Agreement on  May 7, 2017. The Recommendation Statement completely omits any of the employment related  discussions and negotiations that occurred between Coach and the members of Kate Spade’s senior  management team.   55.  On May 7, 2017, Perella rendered its fairness opinion and the Company’s legal  advisors reviewed the terms of the arrangements with certain of Kate Spade’s senior  management team.  The Board then approved and executed the Merger Agreement.  The Proposed Transaction   57.  Coach and Kate Spade insiders are the primary beneficiaries of the Proposed  Transaction, not the Company’s public stockholders. The Board and the Company’s executive  officers are conflicted because they will have secured unique benefits for themselves from the  Proposed Transaction not available to Plaintiff and the public stockholders of Kate Spade.   58.  Company insiders stand to reap a substantial financial windfall for securing the  deal with Coach. Notably, Kate Spade entered into letter agreements (the “Deal Completion  Bonus Letters”) with each of Carrara and Thomas Linko (“Linko”), the Company’s Senior Vice  President and Chief Financial Officer (“CFO”), pursuant to which each executive will receive a  special one-time cash deal completion bonus following each executive’s termination of  employment with the Company in the amount of $750,000 and $500,000, respectively.   60.  Moreover, pursuant to the Merger Agreement, each outstanding Company  option, restricted stock unit award, performance share unit award and market share unit  award will be converted into the right to receive cash payments.    61.  Further, if they are terminated in connection with the Proposed Transaction, Kate  Spade’s named executive officers are set to receive substantial cash payments in the form of  golden parachute compensation. Defendants Leavitt and Lloyd each stand to receive over $24  million in severance payments.   The Recommendation Statement Contains Material Misstatements or Omissions   62.  The defendants filed a materially incomplete and misleading Recommendation  Statement with the SEC and disseminated it to Kate Spade’s stockholders. The  Recommendation Statement misrepresents or omits material information that is necessary for  the Company’s stockholders to make an informed decision whether to tender their shares in  connection with the Tender Offer.   63.  Specifically, as set forth below, the Recommendation Statement fails to provide  Company stockholders with material information or provides them with materially misleading  information concerning: (i) Kate Spade’s financial projections, relied upon by Kate Spade’s  financial advisor Perella; (ii) the data and inputs underlying the financial valuation analyses that  support the fairness opinion provided by Perella; (iii) Kate Spade insiders’ potential conflicts of  interest; and (iv) the background process leading to the Proposed Transaction.  Accordingly,  Kate Spade stockholders are being asked to make a decision whether to tender their shares in  connection with the Tender Offer without all material information at their disposal.  Material Omissions Concerning Kate Spade’s Financial Projections   65.  When a company discloses non-GAAP financial measures in a Recommendation  Statement, the Company must also disclose all projections and information necessary to make  the non-GAAP measures not misleading, and must provide a reconciliation (by schedule or other  clearly understandable method), of the differences between the non-GAAP financial measure  disclosed or released with the most comparable financial measure or measures calculated and  presented in accordance with GAAP.  17 C.F.R. § 244.100.   67.  In recent months, the SEC has repeatedly emphasized that disclosure of non- GAAP projections can be inherently misleading, and has therefore heightened its scrutiny of the  use of such projections.2  Indeed, on May 17, 2016, the SEC’s Division of Corporation Finance  released new and updated Compliance and Disclosure Interpretations (“C&DIs”) on the use of  non-GAAP financial measures that demonstrate the SEC’s tightening policy.3  One of the new  C&DIs regarding forward-looking information, such as financial projections, explicitly requires  companies to provide any reconciling metrics that are available without unreasonable efforts.   68.  In order to make the projections included on page 33 of the Recommendation  Statement materially complete and not misleading, Defendants must provide a reconciliation  table of the non-GAAP measures (EBITDA) to the most comparable GAAP measures.  Indeed,  the Company routinely provides such a reconciliation table in its quarterly financial results  releases, and it can therefore undoubtedly provide such a reconciliation table for the projections  included in the Recommendation Statement without unreasonable efforts.   69.  At the very least, the Company must disclose the line item projections for the  financial metrics that were used to calculated the non-GAAP measures.  Such projections are  necessary to make the non-GAAP projections included in the Recommendation Statement not  1 Mary Jo White, Keynote Address, International Corporate Governance Network Annual  Conference: Focusing the Lens of Disclosure to Set the Path Forward on Board Diversity, Non- GAAP, and Sustainability (June 27, 2016), https://www.sec.gov/news/speech/chair-white-icgn- speech.html.   2 See, e.g., Nicolas Grabar and Sandra Flow, Non-GAAP Financial Measures: The SEC’s Evolving  Views, Harvard Law School Forum on Corporate Governance and Financial Regulation (June 24,  2016),  https://corpgov.law.harvard.edu/2016/06/24/non-gaap-financial-measures-the-secs- evolving-views/; Gretchen Morgenson, Fantasy Math Is Helping Companies Spin Losses Into  Profits,  83.  Plaintiff incorporates each and every allegation set forth above as if fully set forth  herein.   84.  Section 14(e) of the Exchange Act provides that it is unlawful “for any person to  make any untrue statement of a material fact or omit to state any material fact necessary in order  to make the statements made, in the light of the circumstances under which they are made, not  misleading…”  15 U.S.C. §78n(e).    85.  SEC Regulation G has two requirements: (1) a general disclosure requirement; and  (2) a reconciliation requirement.  The general disclosure requirement prohibits “mak[ing] public a  non-GAAP financial measure that, taken together with the information accompanying that  measure, contains an untrue statement of a material fact or omits to state a material fact necessary  in order to make the presentation of the non-GAAP financial measure…not misleading.”  17 C.F.R.  § 244.100(b).  The reconciliation requirement requires an issuer that chooses to disclose a non- GAAP measure to provide a presentation of the “most directly comparable” GAAP measure, and  a reconciliation “by schedule or other clearly understandable method” of the non-GAAP measure  to the “most directly comparable” GAAP measure.  17 C.F.R. § 244.100(a).  As set forth above,  the Recommendation Statement omits information required by SEC Regulation G, 17 C.F.R. §  244.100   87.  In so doing, Defendants made untrue statements of fact and/or omitted material  facts necessary to make the statements made not misleading.  Each of the Individual Defendants,  by virtue of their roles as officers and/or directors, were aware of the omitted information but failed  to disclose such information, in violation of Section 14(e).  The Individual Defendants were  therefore reckless, as they had reasonable grounds to believe material facts existed that were  misstated or omitted from the Recommendation Statement, but nonetheless failed to obtain and  disclose such information to shareholders although they could have done so without extraordinary  effort.    88.  The Individual Defendants were privy to and had knowledge of the projections for  the Company and the details concerning Credit Suisse’s valuation analyses. The Individual  Defendants were reckless in choosing to omit material information from the Recommendation  Statement, despite the fact that such information could have been disclosed without unreasonable  efforts.         89.  The misrepresentations and omissions in the Recommendation Statement are  material to Plaintiff and the Class, who will be deprived of their right to make an informed decision  regarding whether to tender their shares if such misrepresentations and omissions are not corrected  prior to the Expiration Date.  Plaintiff and the Class have no adequate remedy at law.  Only through  the exercise of this Court’s equitable powers can Plaintiff and the Class be fully protected from  the immediate and irreparable injury that Defendants’ actions threaten to inflict.  91.  Section 14(d)(4) of the Exchange Act and SEC Rule 14d-9 promulgated thereunder  require full and complete disclosure in connection with tender offers.  Specifically, Section  14(d)(4) provides that:  Any solicitation or recommendation to the holders of such a security  to accept or reject a tender offer or request or invitation for tenders  shall be made in accordance with such rules and regulations as the  Commission may prescribe as necessary or appropriate in the public  interest or for the protection of investors.   92.  SEC Rule 14d-9(d), which was adopted to implement Section 14(d)(4) of the  Exchange Act, provides that:  Information required in solicitation or recommendation. Any  solicitation or recommendation to holders of a class of securities  referred to in section 14(d)(1) of the Act with respect to a tender  offer for such securities shall include the name of the person making  such solicitation or recommendation and the information required  by Items 1 through 8 of Schedule 14D-9 (§ 240.14d-101) or a fair  and adequate summary thereof.   93.  In accordance with Rule 14d-9, Item 8 of a Schedule 14D-9 requires a Company’s  directors to:  Furnish such additional information, if any, as may be necessary to  make the required statements, in light of the circumstances under  which they are made, not materially misleading.   94.  The Recommendation Statement violates Section 14(d)(4) and Rule 14d-9 because  it omits material facts, including those set forth above, which omissions render the  Recommendation Statement false and/or misleading.   96.  The misrepresentations and omissions in the Recommendation Statement are  material to Plaintiff and the Class, who will be deprived of their right to make an informed decision  regarding whether to tender their shares if such misrepresentations and omissions are not corrected  prior to the Expiration Date.  Plaintiff and the Class have no adequate remedy at law.  Only through  the exercise of this Court’s equitable powers can Plaintiff and the Class be fully protected from  the immediate and irreparable injury that Defendants’ actions threaten to inflict.  97.  Plaintiff incorporates each and every allegation set forth above as if fully set forth  herein.   98.  The Individual Defendants acted as controlling persons of Kate Spade within the  meaning of Section 20(a) of the Exchange Act as alleged herein.  By virtue of their positions as  officers and/or directors of Kate Spade, and participation in and/or awareness of the Company’s  operations and/or intimate knowledge of the incomplete and misleading statements contained in  the Recommendation Statement, they had the power to influence and control and did influence and  control, directly or indirectly, the decision making of the Company, including the content and  dissemination of the various statements that Plaintiff contends are materially incomplete and  misleading.   Company Background and Strong Financial Outlook  