in re enron corporation securities litigation 01-cv...
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UNITED STATES DISTRICT COURTSOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
In re ENRON CORPORATION SECURITIESLITIGATION
This Document Relates To :
MARK NEWBY, et al ., Individually and OnBehalf of All Others Similarly Situated,
Plaintiffs ,
vs.
ENRON CORP ., et al .,
Defendants .
THE REGENTS OF THE UNIVERSITY OFCALIFORNIA, et al ., Individually and On Behalfof All Others Similarly Situated ,
Plaintiffs ,
vs .
KENNETH L. LAY, et al .,
Defendants
[Caption continued on following page .]
Civil Action No. H-01-3624(Consolidated )
CLASS ACTION
STIPULATION OF SETTLEMENT
WASHINGTON STATE INVESTMENTBOARD, et al ., On Behalf of Themselves and AllOthers Similarly Situated,
Plaintiffs ,
vs .
KENNETH L. LAY, et al .,
Defendants
NATHANIEL PULSIFER, TRUSTEE OF THESHOOTERS HILL REVOCABLE TRUST,INDIVIDUALLY AND ON BEHALF OF ALLOTHERS SIMILARLY SITUATED ,
Plaintiffs,
vs .
KENNETH L. LAY, et al .,
Defendants .
OFFICIAL COMMITTEE OF UNSECUREDCREDITORS OF ENRON CORP . ,
Plaintiffs ,
vs .
ANDREW S. FASTOW, et al . ,
Defendants .
§ Civil Action No. H-02-3401
§ CLASS ACTIO N
§ Civil Action No. 02-3010
§ CLASS ACTION
§ Civil Action No . H-04-0091
[Caption continued on following page .]
PIRELLI ARMSTRONG TIRE CORPORATIONRETIREE MEDICAL BENEFITS TRUST,DERIVATIVELY ON BEHALF OF ENRONCORPORATION, et al .
Plaintiffs ,
vs .
KENNETH L. LAY, et al .,
Civil Action No. H-01-3645
AND CONSOLIDATED ACTION S
Defendants .
This Stipulation of Settlement is dated as of January 12 2005 (the "Stipulation") (throughout
this Stipulation all capitalized terms used, but not immediately defined, are as defined in Part IV) .
The Stipulation memorializes two related settlements relating to certain insurance funds that will be
shared in accordance with this Stipulation. The first settlement (the "Newby Settlement") is made
and entered into by and among the following parties (the "Newby Settling Parties") : (i) the
Representative Plaintiffs (on behalf of themselves and each of their respective Settlement Class
Members), by and through their counsel of record ; (ii) the Outside Directors ; and (iii) Kenny L .
Harrison, a/k/a Ken L . Harrison ("Harrison") . The second settlement (the "CC Settlement") is made
and entered into by and among the following parties (the "CC Settling Parties") : (i) the Official
Committee of Unsecured Creditors of Enron Corporation (the "Creditors Committee") ; (ii) the
Outside Directors ; (iii) James Derrick ("Derrick") ; (iv) Harrison ; and (v) Richard Buy ("Buy") .
Derrick and Buy are settling with and being released by the Creditors Committee, but are not settling
with or being released by the Representative Plaintiffs . This Stipulation is intended by the foregoing
parties (the "Settling Parties") to fully, finally and forever resolve, discharge and settle the Released
Claims, upon and subject to the terms and conditions hereof .
1 . THE LITIGATIO N
The Released Defendants have been named as parties defendant in certain of the Actions .
The Outside Directors and Harrison moved to dismiss the Newby Action on the ground, among
others, that plaintiffs failed to adequately plead scienter . On March 12 and 25, 2003, the Court
granted the Outside Directors' motions to dismiss, inter alia, all claims made against them under the
Securities Exchange Act of 1934 (the "1934 Act Dismissed Claims") . The Outside Directors
contend that these rulings necessarily require dismissal of any 1934 Act claims that might be pursued
against them in the Newby Action. The Court denied Harrison's motion to dismiss . On April 24,
2003, the Court also granted the motion to dismiss of Derrick on all claims pending against Derrick .
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The Outside Directors and Harrison also moved to dismiss the Washington State Investmen t
Board Action on the ground, among others, that the statute of limitations had expired . At the time
the Newby Settlement was reached , their motions remained under submission .
The Creditors Committee was authorized by an order of the Bankruptcy Court dated Octobe r
1, 2002 to commence state law claims against certain former Enron officers and employees ,
including Derrick and Buy . The Creditors Committee thereafter commenced the Committee Action.
In addition, the Creditors Committee filed a motion on August 2, 2004, seeking to be substituted a s
real party in interest in the Derivative Actions in which the Outside Directors and Harrison ar e
named as defendants . The Court granted the motion on October 20, 2004 and substituted th e
Creditors Committee as the real party in interest for the Plaintiff in the Derivative Actions .
II. THE RELEASED DEFENDANTS' DENIALS OF WRONGDOING ANDLIABILITY
The Released Defendants have denied and continue to deny each and all of the claims and
allegations of wrongdoing made by Plaintiffs in the Actions and maintain furthermore that they have
meritorious defenses . The Released Defendants have expressly denied and continue to deny all
charges of wrongdoing or liability against them arising out of any of the conduct, statements, acts or
omissions alleged, or that could have been alleged, in the Actions, and the Released Defendants
vigorously contend that many of the factual allegations of the complaints relating to them were
materially inaccurate . The Released Defendants also have denied and continue to deny, inter alia ,
the allegations that the Plaintiffs or the Settlement Class Members were harmed by the Release d
Defendants' conduct alleged in the Actions . Pursuant to the terms of this Stipulation as set forth
below, this Stipulation shall in no event be construed or deemed to be evidence of or an admission o r
concession by the Released Defendants with respect to any claim of any fault or liability or
wrongdoing or damage whatsoever .
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Nonetheless, the Released Defendants have taken into account the uncertainty and risks
inherent in any litigation, especially in complex cases like the Actions . Accordingly, the Outside
Directors and Harrison have concluded that further conduct of the Actions would be protracted and
expensive, and that it is desirable that the Actions be fully and finally settled in the manner and upon
the terms and conditions set forth in this Stipulation . Derrick, Harrison and Buy have concluded that
further conduct of the Committee Action and the Derivative Actions would be protracted and
expensive, and that it is desirable that the Committee Action be fully and finally settled and that the
Derivative Actions be dismissed as to them in the manner and upon the terms and conditions set
forth in this Stipulation.
III. CLAIMS OF THE REPRESENTATIVE PLAINTIFFS AND BENEFITS OFSETTLEMENT
The Plaintiffs believe that the claims asserted in the Actions have merit . However, counse l
for the Plaintiffs recognize and acknowledge the expense, length and difficulty of continued
proceedings necessary to prosecute the Actions against the Released Defendants through appeals
and/or potential further trial court proceedings . Counsel for Plaintiffs have taken into account the
risk of any litigation, especially complex cases such as the Actions, as well as the difficulties and
delays inherent in such litigation . Counsel for the Representative Plaintiffs also have taken into
account the Court's dismissal of certain of the claims against the Outside Directors . Counsel for the
Plaintiffs also are mindful of the inherent problems of proof under, and possible defenses to, the
violations asserted in the Actions . Counsel for the Representative Plaintiffs believe that the
settlement set forth in this Stipulation confers substantial benefits upon the Settlement Class
Members. Based on their evaluation, counsel for the Representative Plaintiffs have determined that
the settlement set forth in this Stipulation is in the best interests of the Representative Plaintiffs and
the Settlement Class Members .
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IV. TERMS OF STIPULATION AND AGREEMENT OF SETTLEMEN T
NOW, THEREFORE, IT IS HEREBY STIPULATED AND AGREED by and among the
Representative Plaintiffs (by and through their respective counsel or attorneys of record on behalf o f
themselves and each of their respective Settlement Class Members), the Creditors Committee ,
Derrick, Harrison, Buy, and the Outside Directors as follows :
(a) the Actions and the Released Claims as against the Outside Directors and
Harrison shall be finally and fully compromised , settled and released , and the Actions shall be
dismissed with prejudice as to the Outside Directors and Harrison upon and subject to the terms an d
conditions of this Stipulation,
(b) the Committee Action and the Released Claims as against Derrick, Harriso n
and Buy shall be finally and fully compromised, settled and released, and the Committee Actio n
shall be dismissed with prejudice as to Derrick and Buy, upon and subject to the terms an d
conditions of this Stipulation .
(c) the Derivative Actions and the Released Claims as against the Outside
Directors, Derrick, Harrison and Buy shall be finally and fully compromised, settled and released ,
and the Derivative Actions shall be dismissed with prejudice as to the Outside Directors, Derrick ,
Harrison and Buy, upon and subject to the terms and conditions of this Stipulation .
1. Definitions
As used in this Stipulation the following terms have the meanings specified below . In the
event of any inconsistency between any definition set forth below and any definition set forth in any
other document related to the settlement set forth in this Stipulation, the definition set forth belo w
shall control .
1 .1 "Actions" means the Newby Action, Washington State Investment Board, et al . v .
Kenneth L. Lay, et al., Civil Action No . H-02-CV-3401 (S .D. Tex.) (the "WSIB Action") ; Nathanie l
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Pulsifer, Trustee of The Shooters Hill Revocable Trust , Individually and On Behalf of All Others
Similarly Situated v. Kenneth L. Lay, et al., Civil Action No . 02-3010 (S .D . Tex .); the Committee
Action and the Derivative Actions .
1 .2 "Authorized Claimant" means any Sett lement Class Member who is entitled to a
distribution from the Gross Settlement Fund pursuant to the terms of the Stipulation, any Plan of
Allocation, or any order of the Court .
1 .3 "Bankruptcy Court" means the United States Bankruptcy Court for the Souther n
District of New York , presiding over In re Enron Corp ., et. al., Case No. 01-16034 (AJG) .
1 .4 "CC Judgment" mean s a judgment substantially in the form attached hereto as Exhibit
"C" dismissing all claims in the Committee Action against Derrick and Buy .
1 .5 "CC Settling Parties" means the Creditors Committee, the Outside Directors, Derrick
Harrison and Buy .
1 .6 "Class Judgment" means a judgment substantially in the form attached hereto as
Exhibit "D" dismissing all claims in the Actions (other than the Committee Action and the
Derivative Actions) against the Outside Directors and Harrison .
1 .7 "Court" means the United States District Court for the Southern District of Texas ,
Houston Division .
1 .8 "Committee Action" means Official Committee of Unsecured Creditors of Enro n
Corp. v. Andrew S. Fastow, et al., Civil Action No. H-04-0091 (S .D . Tex.) .
1 .9 "Defendants" means each and all of the defendants that have been or may be name d
in any of the complaints in the Actions .
1 .10 "Derivative Actions" means the following cases pending in the United States Distric t
Court for the Southern District of Texas (Houston Division) : Pirelli Armstrong Tire Corporation
Retiree Medical Benefits Trust, Derivatively on Behalf of Enron Corporation, et al. v . Kenneth Lay,
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et al., Civil Action No . H-01-3645, in the United States District Court for the Southern District o f
Texas ; Detectives Endowment Association Annuity Fund, derivatively on behalf of Enron
Corporation v. Kenneth L. Lay et al., C.A. No . H-01-3892 ; Joseph E. Kassoway and Robert T
Kassoway Trust v . Andrew S. Fastow et al., C.A. No. H-01-3690 ; Fred Greenberg, derivatively o n
be half of Enron Corp. v. RobertA . Belfer et al., C.A. No . H-01-3998 ; Lynn Goffman et al. v. Robert
A. Belfer et al ., C.A. No . H-02-1838 ; David Trzebucki et al. v. Andrew S. Fastow et al., C.A. No. H-
02-1832 ; RickBarksy v. Arthur Andersen LLP et al., C.A. No . H-02-1922 ; Richard P. Bergsieker v.
Kenneth L. Lay et al., C .A. No. H-02-3427, and any other case assert ing derivative claims or claim s
that are the property of Enron .
1 .11 "Derivative Judgment" means the judgment substantially in the form attached heret o
as Exhibit "E" dismissing all claims against the Outside Directors, Derrick and Harrison in the
Derivative Actions .
1 .12 "Effective Date" means the first date by which all of the events and condition s
specified in ¶7 .1 of the Stipulation have occurred and have been met, respectively .
1 .13 "Enron" means Enron Corp ., a reorganized debtor .
1 .14 "Enron D&O Policies" means Associated Electric & Gas Insurance Services Limited
Insurance Policy No. D0079A1 A98 ; Energy Insurance Mutual Limited Excess Policy No . 900630-
OODO ; Federal Insurance Company Excess Policy No . 8142-05-47, 8179-41-03SWH , and 8181-43-
14; Hartford/Twin City Fire Insurance Company Excess Policy No. NDA 0131301-98H; Greenwich
Insurance Company Excess Policy No . ELU 82248-01 ; Lloyd's of London Insurance Certificate No.
90l/LK9802531 ; St. Paul Mercury Insurance Company Excess Policy No . 568CM0934 ; Federal
Insurance Company Excess Policy No. 8181-43-14 ; Royal Insurance Company of America Policy
No . P SF000633 ; ACE Bermuda Insurance Ltd . Excess Policy No. EC-AD01-001 ; and Kemper
Insurance Indemnity Co . as participating in Federal Quota Share Policy No . 8179-41-03 .
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1 .15 "Escrow Agent" means the law firm of Lerach Coughlin Stoia Geller Rudman &
Robbins LLP or its successor(s) .
1 .16 "Escrow Agreement" means the agreement attached hereto as Exhibit "A" appointin g
the Escrow Agent for the Gross Settlement Fund .
1 .17 "Expense Fund" means a principal amount not to exceed Sixteen Million Dollar s
($16,000,000), plus any interest that may accrue thereon . The Expense Fund shall be paid from, an d
not in addition to, the Gross Settlement Fund .
1 .18 "Final" means, with respect to any order of court, including, without limitation, th e
Judgment, that such order represents a final and binding determination of all issues within its scope
and is not subject to further review on appeal or otherwise. Without limitation, an order becomes
"Final" when : (a) where no appeal has been filed, the prescribed time for commencing any appeal
has expired; or (b) where an appeal has been filed, either (i) the appeal has been dismissed and the
prescribed time, if any, for commencing any further appeal has expired, or (ii) the order has bee n
affirmed in its entirety and the prescribed time, if any, for commencing any further appeal has
expired. For purposes of this paragraph, an "appeal" includes appeals as of right, discretionar y
appeals, interlocutory appeals, proceedings involving writs of certiorari or mandamus, and any othe r
proceedings of like kind. Any appeal pertaining solely to any Plan of Allocation, or to an y
application for attorneys' fees and expenses pursuant to ¶¶6 .1 and 6.2, below, shall not in any way
delay or preclude the Judgment from becoming Final .
1 .19 "Funding Date" means the date fifteen days after the date that the Court grant s
preliminary approval of the Newby Settlement .
1 .20 "Gross Settlement Fund" means the Settlement Amount plus any interest that ma y
accrue thereon. For the avoidance of doubt, the term "Gross Settlement Fund" shall always include
the Expense Fund .
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1 .21 In this Stipulation the term "Harrison" means Ken L . Harrison and his attorneys ,
insurers, and each and all of the heirs, executors, administrators, spouses, assigns and/or bankruptcy
estates of such persons, in each instance only in their capacity as such, but excluding the Non-
Settling Defendants in the Actions. "Harrison Payment" means the sum of $ 100,000 to be paid by
Harrison to the Creditors Committee in exchange for the release and dismissal of claims against him
in the Derivative Actions .
1 .22 "Insurance Agreement" means the Agreement Regarding Insurance Proceeds an d
Interpleader Action attached hereto as Exhibit "B."
1 .23 "Insurance Proceeds" means the sum of $200 million dollars which represents the
remaining limits of coverage under the Enron D&O Policies written by those insurance carrier s
above the layer of insurance provided by Hartford/Twin Cities Insurance Company (the "Insuranc e
Carriers") .
1 .24 "Interpleader Action" means the First Amended Third Party Counterclaim fo r
Interpleader filed by the Insurance Carriers and other insurance carriers in the Newby Action on
October 22, 2004, related to disposition of the Insurance Proceeds , pending in the Court .
1 .25 "Interpleader Judgment" means the judgment to be sought in the Interpleader Actio n
in accordance with the Insurance Agreement and in the form attached as Exhibit C to the Insurance
Agreement .
1 .26 "Lead Plaintiff' means The Regents of the University of California .
1 .27 "Newby Action" means the action brought on behalf of all purchasers (and thei r
beneficiaries) of any publicly traded equity and debt securities of Enron, including without limitation
the securities listed in footnote 1 of this Stipulation, from October 19, 1998 through November 27 ,
2001, inclusive (excluding Defendants, the officers and directors of Enron, and members of thei r
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immediate families or their successors, heirs, and legal representatives), proceeding as a consolidate d
action captioned Newby, et al. v . Enron Corp., et al., No. H-01-CV-3624 (S .D . Tex.) .
1 .28 "Newby Settling Parties" means, collectively, the Representative Plaintiffs (on behal f
of themselves and the Settlement Class Members) and each of the Outside Directors and Harrison .
1 .29 "Non-Outside Director Defendants" means the defendants other than the Outsid e
Directors that have been named as defendants in the complaints in the Actions .
1 .30 "Non-Settling Defendants" means each and all of the current Defendants except th e
Outside Directors and Harrison .
1 .31 "Notice and Claims Administrator" means Gilardi & Co . LLC or its successors .
1 .32 "Outside Directors" means Robert Belfer, Norman Blake, Ronnie Chan, Joh n
Duncan, Paulo Ferraz Pereira, Joe Foy, Wendy Gramm, Robert Jaedicke, Charles LeMaistre ,
Rebecca Mark-Jusbasche, John Mendelsohn, Jerome Meyer, Frank Savage, John Urquhart, Joh n
Wakeham, Charls Walker, Bruce Willison and Herbert Winokur and their attorneys, insurers, an d
each and all of the heirs, executors, administrators, spouses, assigns and/or bankruptcy estates o f
such persons, in each instance only in their capacity as such, but excluding the Non-Settlin g
Defendants in the Actions .
1 .33 "Person" means an individual, corporation, limited liability corporation, professiona l
corporation, limited liability partnership, partnership, limited partnership, association, joint stoc k
company, estate, legal representative, trust, unincorporated association, government or any politica l
subdivision or agency thereof, and any business or legal entity and any spouses, heirs, predecessors ,
successors , representatives , or assignees of any of the foregoing .
1 .34 "Plaintiffs" means Lead Plaintiff, the Representative Plaintiffs (on behalf of
themselves and the Settlement Class Members), and the Creditors Committee (representing th e
interests of Enron) .
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1 .35 "Plaintiffs' Settlement Counsel" means Lerach Coughlin Stoia Geller Rudman &
Robbins LLP (and any successors thereof), William S . Lerach, Keith F . Park, Helen J . Hodges, 40 1
B Street, Suite 1600, San Diego, California 92101, Telephone (619) 231-1058 .
1 .36 "Plan of Allocation" means any plan or formula of allocation of the Gross Settlement
Fund, to be approved by the Court upon further notice to the Settlement Class, whereby the Ne t
Settlement Fund (as defined in ¶5 .1, below) shall in the future be distributed to Authorize d
Claimants. Any Plan of Allocation is not part of the Stipulation and the Outside Directors shall hav e
no responsibility or liability with respect thereto .
1 .37 "Preliminary Approval Order" means the order giving preliminary approval to the
Newby Settlement substantially in the form attached hereto as Exhibit "F ."
1 .38 "Proof of Claim and Release" means the form to be sent to Settlement Class
Members, upon further order(s) of the Court, by which Settlement Class Members may make claims
against the Settlement Class' portion of the Gross Settlement Fund for damages allegedly incurre d
by reason of their investment(s) in Publicly Traded Securities .
1 .39 "Released Claims " means: (1) with respect to the Newby Se tt lement, any and all
claims, demands, rights, liabilities and causes of action including "Unknown Claims" of any natur e
whatsoever (excluding claims under ERISA), asserted under the Securities Act of 1933, that
Representative Plaintiffs and/or any Settlement Class Member have, had, or may have against the
Outside Directors or Harrison based on, arising out of, or related to, directly or indirectly, bot h
purchases or other acquisitions of any Publicly Traded Securities, including stock, notes and foreign
debt securities, during the Settlement Class Period and all acts, facts, statements, or omissions that
were or could have been alleged in the Actions and (2) with respect to the CC Settlement, any and al l
claims, demands, rights, liabilities and causes of action (including "Unknown Claims") of any natur e
whatsoever that the Creditors Committee or Enron has, had, or may have against the Outside
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Directors, Derrick, Harrison and Buy that were or could have been alleged in the Committee Actio n
or the Derivative Actions .
1 .40 "Released Defendants" means the Outside Directors, Derrick, Harrison and Buy .
1 .41 "Representative Plaintiffs" means the Lead Plaintiff in the Newby Action and th e
named plaintiffs in the Actions (other than the Committee Action and the Derivative Actions) .
1 .42 "Settlement Amount" means: (1) the Insurance Proceeds, (2) the Stock Sales Gai n
Amount, and (3) the Harrison Payment .
1 .43 "Settlement Class" means all Persons (and their beneficiaries) who purchased o r
acquired any publicly traded equity or debt securities of Enron between September 9, 1997 and
November 27, 2001, inclusive, and including purchasers of all securities issued by Enron-relate d
entities during the Settlement Class Period, the value or repayment of which was dependent on the
credit, financial condition, or ability to pay of Enron Corp . (collectively, the "Publicly Trade d
Securities") .1 Excluded from the Settlement Class are Defendants, the officers and directors o f
Enron, and members of their immediate families or their successors, heirs, and legal representatives .
1 The Publicly Traded Securities include without limitation Enron's publicly traded debt andequity securities (including without limitation Enron's common stock, 6 .40% Notes, 6 .95% Notes,7 .875% Notes, 6 .95% Notes, 7% Exchangeable Notes, 6 .625% Notes, 7 .375% Notes, 8 .375%Medium Term Notes, Floating Rate Notes due March 30, 2000, and Zero Coupon Convertible SeniorNotes) as well as preferred securities issued by Enron, Enron Capital LLC 8% CumulativeGuaranteed Monthly Income Preferred Shares, Enron Capital Trust I Trust Originated PreferredSecurities, Enron Capital Trust II Trust Originated Preferred Securities and Enron Capital Resources,L.P. 9% Cumulative Preferred Securities (collectively, the "Preferred Securities"), and Osprey$1,400,000,000 8 .31% Senior Secured Notes due 03, Yosemite $750,000,000 8 .25% Series 1999-ALinked Enron Obligations due 11/15/04, Yosemite £200,000,000 8 .75% Series 2000-A LinkedEnron Obligations due 07, Enron Credit Linked Notes $500,000,000 8% due 05, Osprey$750,000,000 7 .797% Senior Secured Notes due 03 and €315,000,000 6 .375% Senior Secured Notesdue 03, Enron Credit Linked Notes II $500,000,000 7.375% due 06, Enron Euro Credit LinkedNotes Trust €200,000,000 6 .5% due 06, Enron Sterling Credit Linked Notes Trust £125,000,0007 .25% due 06, and Marlin Water Trust II and Marlin Water Capital Corp. II $475,000,000 6 .31 %Senior Secured Notes and €515,000,000 6 .19% Senior Secured Notes (collectively, the "ForeignDebt Securities") .
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Also excluded from the Settlement Class are those Persons who timely and validly request exclusio n
from the Settlement Class, to the extent that they are permitted to do so under Rule 23 of the Federa l
Rules of Civil Procedure, pursuant to the Mailed Notice (as defined in ¶3 .1, below) .
1 .44 "Settlement Class Member" or "Member of the Settlement Class" means a Person
who falls within the definition of the Settlement Class .
1 .45 "Settlement Class Period" means the period commencing on September 9, 1997
through November 27, 2001, inclusive .
1 .46 "Settling Parties" means, collectively, the Representative Plaintiffs (on behalf o f
themselves and the Settlement Class) and each of the Outside Directors and Harrison with respect to
the Newby Settlement, and the Creditors Committee, each of the Outside Directors, Derrick,
Harrison and Buy with respect to the CC Settlement. The Representative Plaintiffs (on behalf of
themselves and the Settlement Class Members) are not settling with or releasing Derrick and Buy .
1 .47 "Stock Sales Gain Amount" means ten percent (10%) of each of the Outside
Director's and Harrison's net gain on sales of Enron stock as recited in the Newby Action ("Sales of
Enron Stock") . The Stock Sales Gain Amount is limited to stock or stock options granted to th e
Outside Directors and Harrison during the Class Period as compensation for their services a s
directors or officers of Enron. For purposes of the calculation and payment of the Stock Sales Gai n
Amount, "Sales of Enron Stock" shall include sales of stock, exchange fund transactions and
cashless exercises of stock options, but shall not include collar transactions from which the Outsid e
Directors or Harrison received no proceeds during the Class Period. Until deposited in the Stock
Sales Escrow Account pursuant to the terms of this Stipulation, the Stock Sales Gain Amount shal l
bear interest at the rate of 5% per annum (i) from November 8, 2004, in the case of each of th e
Outside Directors, and (ii) from December 15, 2004, in the case of Harrison . All provisions in thi s
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Stipulation relating to the Stock Sales Gain Amount are several, and not joint, as to each of the
Outside Directors and Harrison .
1 .48 "Termination Event" means any of the following : (a) with respect to the Newby
Settlement, such settlement does not receive approval from the Court in all material respects i n
accordance with the Stipulation, the approval does not become Final, or the Class Judgment is no t
entered substantially in the form attached hereto as Exhibit D ; (2) with respect to the CC Settlement ,
such settlement does not receive approval from the Bankruptcy Court in all material respects i n
accordance with the Stipulation, the approval does not become Final, the CC Judgment is not entered
substantially in the form attached hereto as Exhibit C, or the Derivative Judgment is not entere d
substantially in the form attached hereto as Exhibit E ; (3) the Interpleader Judgment is not entered in
the Interpleader Action substantially in the form attached as Exhibit C to the Insurance Agreement or
the Interpleader Judgment does not become Final, or (4) this Stipulation, or any material par t
thereof, is terminated in accordance with its terms .
1 .49 "Unknown Claims" means any Released Claim that any Plaintiff or any of th e
Settlement Class Members does not know or suspect to exist in his, her or its favor at the time of th e
release of the Released Defendants that if known by him, her or it, might have affected his, her or it s
settlement with and release of the Released Defendants, or might have affected his, her or it s
decision not to object to this settlement or not to exclude himself, herself or itself from th e
Sett lement Class. With respect to any and all Released Claims , the Settling Parties stipulate an d
agree that, upon the Effective Date, the Plaintiffs shall expressly waive, and each of the Settlemen t
Class Members shall be deemed to have waived and by operation of the Judgment shall have waived,
the provisions, rights and benefits of California Civil Code § 1542, which provides :
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THECREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR ATTHE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM
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MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THEDEBTOR .
The Plaintiffs shall expressly waive , and each of the Settlement Class Members shall be deemed t o
have waived and by operation of the Judgment shall have waived, any and all provisions, rights an d
benefits conferred by any law of any state or territory of the United States , or principle of common
law, that is similar, comparable or equivalent to California Civil Code § 1542 . The Plaintiffs and
Settlement Class Members may hereafter discover facts in addition to or different from those that
any of them now knows or believes to be true with respect to the subject matter of the Release d
Claims, but each Plaintiff shall expressly have, and each Settlement Class Member shall be deeme d
to have and by operation of the Judgment shall have, fully, finally, and forever settled and release d
any and all Released Claims, known or unknown, suspected or unsuspected, contingent or non-
contingent, whether or not concealed or hidden, that now exist, or heretofore have existed upon an y
theory of law or equity now existing or coming into existence in the future, including, but not limite d
to, conduct that is negligent, reckless, 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 additiona l
facts. The Plaintiffs acknowledge, and the Settlement Class Members shall be deemed to have
acknowledged, and by operation of the Judgment shall have acknowledged, that the foregoing
waiver was separately bargained for and a key element of the settlement of which this release is a
part .
1 .50 "WSIB Action" means the action brought on behalf of all purchasers of the Publicl y
Traded Securities from September 9, 1997 through October 18, 1998, inclusive (excludin g
Defendants, the officers and directors of Enron, and members of their immediate families or thei r
successors, heirs, and legal representatives), captioned Washington State Investment Board, et al . v.
Kenneth L. Lay, et al., Civil Action No. H-02-3401 (S .D. Tex.) .
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2. The Settlement
a. The Gross Settlement Fund
2 .1 The Settlement Amount (plus any interest that may accrue thereon as provided fo r
herein) shall constitute the Gross Settlement Fund . The Outside Directors, Derrick, Harrison an d
Buy shall cause the Insurance Proceeds to be paid to the Escrow Agent pursuant to the Transfe r
Order (as defined in the Insurance Agreement) . The Outside Directors and Harrison shall pay th e
Stock Sales Gain Amount to the Escrow Agent, subject to Court oversight as of the Funding Date .
Harrison shall pay the Harrison Payment to the Escrow Agent, subject to Court oversight, as of th e
Funding Date . The Settlement Amount shall be managed and controlled by the Escrow Agent i n
accordance with the Escrow Agreement through the creation of three separate interest bearing
accounts : (a) the Insurance Proceeds Escrow Account into which the Insurance Proceeds shall b e
deposited, (b) the Stock Sales Gain Escrow Account into which the Stock Sales Gain Amount shal l
be deposited, and the (c) Harrison Escrow Account into which the Harrison Payment shall b e
deposited . Payments to the Escrow Agent shall be made in the form of a wire transfer into th e
appropriate escrow account . If the full Settlement Amount is not timely transferred to the Escrow
Agent, Lead Plaintiff and the Creditors Committee shall have the option to terminate this Stipulation .
2 .2 The Settling Parties agree and acknowledge that the Insurance Proceeds will b e
allocated in accordance with ¶2 of the Insurance Agreement. The Se tt ling Part ies further
acknowledge that this allocation is subject to the approval of the Court and the Bankruptcy Court . To
the extent that any amounts are disbursed from the Insurance Escrow Account for items in ¶¶2 .3(b) ,
(c), (d) and (f) below prior to the Effective Date, such amounts shall be treated as part of the 82 .8%
allocation to the Lead Plaintiff under ¶2 of the Insurance Agreement. For purposes of suc h
allocation, the Creditors Committee shall be entitled to interest on its 17 .2% share of the Insuranc e
Escrow Account at the rate earned by the Insurance Escrow Account during the relevant perio d
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(even though such interest will amount to more than 17 .2% of the interest earned by the Insuranc e
Escrow Account if amounts are disbursed to the Representative Plaintiffs prior to the Effectiv e
Date) .
2 .3 No amount may be disbursed from the Gross Settlement Fund unless and until th e
Effective Date, except that, subject to Court approval : (a) amounts maybe disbursed pursuant to th e
Insurance Agreement ; (b) the Expense Fund shall be available to the Representative Plaintiffs for th e
payment of expenses, excluding attorneys' fees, associated with the prosecution of the Actions (othe r
than the Committee Action or the Derivative Actions) ; (c) Representative Plaintiffs' Counsel shall b e
entitled to provisional reimbursement of 75% of their out-of-pocket costs (not to exceed 10% of th e
Settlement Amount), (d) reasonable costs of the notice ("Notice and Administrative Costs" )
described in ¶3 .1 may be paid from the Gross Settlement Fund as they become due ; (e) Taxes and
Tax Expenses (as defined in the Escrow Agreement) may be paid from the Gross Settlement Fund a s
they become due ; and (f) any Fee and Expense Award that is allowed by the Court pursuant to 6 . 1
and 6.2, below, may be paid from the Gross Settlement Fund in accordance with the provisions o f
¶¶6.1 through 6.2, below .
2.4 The Outside Directors will not be obligated to personally pay more than the Stock
Sales Gain Amount, nor will Harrison be required to pay more than the Harrison Payment and th e
Stock Sales Gain Amount pursuant to this Stipulation and the settlement set forth herein, but a
condition of the Newby Settlement and the CC Settlement is that the Insurance Proceeds be paid to
the Escrow Agent .
b. Other Settlement Term s
2 .5 The Outside Directors and Harrison will be subject as non-parties to discover y
requests from Lead Plaintiff and will provide reasonable cooperation to Lead Plaintiff. The Outside
Directors and Harrison shall provide sworn statements to Lead Plaintiff.
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c. The Escrow Agent
2.6 The Escrow Agent shall invest and disburse the Gross Settlement Fund in accordance
with the Escrow Agreement attached hereto as Exhibit A .
2.7 The Escrow Agent shall be authorized to execute only such tr ansactions as are
consistent with the terms of the Escrow Agreement, this Stipulation and order(s) of the Court .
3 . Preliminary Approval Order, Notice Order, Settlement Hearing andBankruptcy Court Approval
3 .1 After execution of this Stipulation and on or prior to J anuary 12, 2005, the Newby
Settling Parties shall submit this Stipulation together with its Exhibits to the Court, and th e
Representative Plaintiffs shall apply for entry of the Preliminary Approval Order substantially in the
form and content of Exhibit F attached hereto, requesting, inter alia, the preliminary approval of th e
settlement set forth in this Stipulation, and final approval of forms of notice to be mailed to al l
Settlement Class Members who can be identified with reasonable effort (the "Mailed Notice") and t o
be published (the "Summary Notice"), substantially in the forms and contents of Exhibits F- 1 and F-
2 hereto, respectively . The Mailed Notice shall include the general terms of the settlement set forth
in this Stipulation and shall set forth the procedure by which Persons who otherwise would b e
Members of the Settlement Class may request to be excluded from the Settlement Class . The date
and time of the Settlement Hearing shall be added to the Mailed Notice before it is mailed t o
Settlement Class Members .
3 .2 The Settling Parties, after the Mailed Notice and Summary Notice have been maile d
and published, respectively, in accordance with 3 .1, above, shall proceed with the final settlement
hearing (the "Settlement Hearing") in accordance with the Scheduling Order entered by the Court o n
December 22, 2004 .
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3 .3 The Outside Directors and Harrison hereby stipulate to certification of the Settlement
Class, pursuant to Rule 23(b)(3) of the Federal Rules of Civil Procedure, solely for purposes of thi s
Stipulation and the settlement set forth herein .
3 .4 The Creditors Committee and Enron shall present this Stipulation of Settlement to th e
Bankruptcy Court under Rule 9019 of the Federal Rules of Bankruptcy Procedure, seeking approva l
of the settlement of the Committee Action and the dismissal of all claims against the Released
Defendants .
3 .5 As a part of the Settlement Hearing, the Creditors Committee shall request the Court
to dismiss all claims against the Released Defendants alleged in the Derivative Actions i n
accordance with Rule 23 .1 .
4. Releases
4.1 Upon the Effective Date, the Representative Plaintiffs and each of the Settlement
Class Members, on behalf of themselves, their successors and assigns, and any other Person claiming
(now or in the future) through or on behalf of them, and regardless of whether any suc h
Representative Plaintiff or Settlement Class Member ever seeks or obtains by any means, including ,
without limitation, by submitting a Proof of Claim and Release, any distribution from the Gros s
Settlement Fund, shall be deemed to have, and by operation of the Judgment shall have, fully ,
finally, and forever released, relinquished, and discharged all Released Claims against the Outsid e
Directors and Harrison, and shall have covenanted not to sue the Outside Directors or Harrison with
respect to all such Released Claims, and shall be permanently barred and enjoined from instituting ,
commencing, or prosecuting any such Released Claim against the Outside Directors or Harrison.
4.2 Upon the Effective Date, Derrick and Buy shall each be deemed to have, and by
operation of the Judgment shall have, fully, finally and forever released, relinquished and discharge d
Enron, the Creditors Committee and counsel to each of the foregoing persons from all claims, arising
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out of, in any way relating to, or in connection with the institution, prosecution, assertion, settlement
or resolution of the Actions, or the Released Claims, or their participation or involvement a s
directors or officers of Enron or its predecessors or affiliates (including claims of indemnity), excep t
to enforce the releases and other terms and conditions contained in this Stipulation .
4.3 Upon the Effective Date, the Creditors Committee and Enron, on behalf o f
themselves , their successors and assigns , and any other Person claiming (now or in the future )
through or on behalf of them, shall be deemed to have, and by operation of the CC Judgment and th e
Derivative Judgment shall have, fully, finally, and forever released, relinquished, and discharged al l
Released Claims against the Released Defendants, and shall have covenanted not to sue the Release d
Defendants with respect to all such Released Claims, and shall be permanently barred and enjoine d
from instituting, commencing, or prosecuting any such Released Claim against the Release d
Defendants . Notwithstanding the foregoing release or any other provision in the Stipulation, nothin g
in the Stipulation is intended, nor shall it be construed to release or discharge Harrison from an y
matter that might be alleged as a defense to, avoidance of, or defensive counterclaim against
Harrison's claims asserted as Claim No . 2390500 (a/k/a Claim No. 0000023905) in the matter In re
Portland General Holdings, Inc., S .D.N.Y. Bankr. Case No. 03-14331C95(AJG) (the "Harrison
Proof of Claim") ; provided, however, that any net affirmative recovery against Harrison shall have
been released, discharged, and barred .
4.4 Upon the Effective Date, the Outside Directors and Harrison shall each be deemed t o
have, and by operation of the Judgment shall have, fully, finally, and forever released, relinquishe d
and discharged each and all of the Settlement Class Members, Enron, the Creditors Committee an d
counsel to each of the foregoing persons from all claims , arising out of, in any way relating to, or in
connection with the institution, prosecution, assertion, settlement or resolution of the Actions, or th e
Released Claims, or their participation or involvement as a director of Enron or its predecessors o r
-19-
affiliates (including claims of indemnity), except to enforce the releases and other terms and
conditions contained in this Stipulation . Notwithstanding the foregoing release or any other
provision in the Stipulation, nothing in the Stipulation is intended, nor shall it be construed to release
or discharge any Person from the Harrison Proof of Claim or any matter Harrison might allege as a
defense to, avoidance of, or defensive counterclaim against any matter that might be alleged as a
defense to, avoidance of, or defensive counterclaim against the Harrison Proof of Claim ; provided,
however, that any recovery by Harrison other than a recovery on the Proof of Claim shall have been
released, discharged, and barred .
4.5 The Released Defendants agree that, if there are any Non-Settling Defendant(s) who
may in the future reach a settlement with the Plaintiffs (the "Later-Settling Defendant(s)"), the
Released Defendants will provide a release to such Later-Settling Defendant(s), its (their) partners,
principals, officer or directors, commensurate with any releases given by Plaintiffs to those Later-
Settling Defendant(s), to the extent that such releases are among the Released Claims and arise out
of the claims in the Actions . The release set forth in the foregoing sentence shall be conditioned on
Plaintiffs obtaining commensurate releases for the Released Defendants from the Later-Settling
Defendant(s) .
4.6 To the extent permitted by applicable law, all Persons shall be enjoined and barred
from commencing any action against the Outside Directors and Harrison seeking, as damages or
otherwise, the recovery of all or any part of any liability or settlement which they pay or are
obligated to pay or agree to pay to the Plaintiffs or the Settlement Class, as a result of such Persons '
participation in any acts, facts, statements or omissions that were or could have been alleged in the
Actions (whether under the Securities Act of 1933, the Securities Exchange Act of 1934, the Texas
Securities Act, common law, or other state or federal law) . Any Person so enjoined and barred shall
be entitled to an appropriate judgment reduction .
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4.7 Lead Plaintiff may, at its option, seek a ruling on the submission of propo rtionate
fault .
4.8 The Representative Plaintiffs agree that the Court's prior orders dismissing claim s
against the Released Defendants in the Actions will not be appealed, and that all orders dismissin g
any claims or causes of action against the Released Defendants will be treated as Final and will b e
allowed to become Final . The Representative Plaintiffs agree that they shall be permanently barre d
and enjoined from instituting, commencing, or prosecuting any such dismissed claim(s) against th e
Released Defendants .
4 .9 The Outside Directors, Derrick and Harrison agree that, in the absence of a
Termination Event, they shall not be entitled to any portion of the Insurance Proceeds or an y
payment or reimbursement from the proceeds of the Enron D&O Policies, and each of the m
expressly forever waives and relinquishes any and all such right, claim and interest . The Insurance
Carriers are intended to be direct beneficiaries of the waiver provided in this paragraph of this
Stipulation and, as such, shall be entitled to enforce it in an action before the Court . If this
Stipulation is terminated, the Outside Directors, Derrick and Harrison shall have all rights, claim s
and interests under the Enron D & 0 Policies that they had before the entry of the Stipulation .
5. Administration and Calculation of Claims, Final Awards andSupervision and Distribution of Gross Settlement Fund
5 .1 Within ten business days after the Effective Date, the Escrow Agent shall pay the ful l
amount in the Harrison Escrow Account and Creditor Committees' allocated portion of the Insurance
Escrow Account (pursuant to this Stipulation of Settlement and the Insurance Agreement) to Enron .
5 .2 Upon the Effective Date (or such other time as expressly authorized in thi s
Stipulation) and upon further notice to the Settlement Class and appropriate orders of the Court, the
Notice and Claims Administrator, subject to such supervision and direction of the Court and/or
Plaintiffs' Settlement Counsel as may be necessary or as circumstances may require, shall administe r
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and calculate the claims to be submitted by Settlement Class Members and shall oversee distributio n
of the Net Settlement Fund (as defined below) pursuant to the Plan of Allocation to Authorize d
Claimants . Subject to the terms of this Stipulation and any order(s) of the Court, the remainder of
the Gross Settlement Fund after the payment to Enron under ¶5 .1 shall be applied as follows :
(a) to pay all costs and expenses reasonably and actually incurred in connection
with locating Settlement Class Members and providing notice to them pursuant to ¶3 .1, above, in
connection with administering and distributing the Gross Settlement Fund to Authorized Claimants ,
and in connection with paying escrow fees and costs, if any ;
(b) to pay all costs and expenses, if any, reasonably and actually incurred i n
soliciting Settlement Class Members' claims and assisting with the filing and processing of suc h
claims ;
(c) to pay the Taxes and Tax Expenses described in the Escrow Agreement ;
(d) to pay any Fee and Expense Award that is allowed by the Court pursuant to
¶¶6.1 and 6.2, below, subject to and in accordance with the provisions of ¶¶6 .1 through 6 .4, below ;
(e) to distribute the balance of the Gross Settlement Fund after payment of item s
(a) through (d), above (the "Net Settlement Fund") to Authorized Claimants as allowed by the
Stipulation, any Plan of Allocation, or the Court .
5 .3 Upon the Effective Date and thereafter, and in accordance with the terms of the
Stipulation, the Plan of Allocation, or such further approval and further order(s) of the Court as may
be necessary or as circumstances may require, the Net Settlement Fund shall be distributed to
Authorized Claimants, subject to and in accordance with the following :
(a) Each Settlement Class Member who claims to be an Authorized Claiman t
shall be required to submit to the Notice and Claims Administrator a completed Proof of Claim an d
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Release signed under penalty of perjury and supported by such documents as specified in the Proo f
of Claim and Release and as are reasonably available to such Settlement Class Member .
(b) Except as otherwise ordered by the Court, all Settlement Class Members who
fail timely to submit a Proof of Claim and Release within such period as may be ordered by th e
Court, or otherwise allowed, shall be forever barred from receiving any payments pursuant to th e
Stipulation and the settlement set forth herein, but shall in all other respects be subject to and boun d
by the provisions of the Stipulation, the releases contained herein, and the Judgment .
(c) The Net Settlement Fund shall be distributed to Authorized Claimant s
substantially in accordance with a Plan of Allocation to be approved by the Court upon such furthe r
notice to the Settlement Class as may be required . Any such Plan of Allocation is not a part of thi s
Stipulation. No funds from the Net Settlement Fund shall be distributed to Authorized Claimants
until after all appeals from any order(s) of the Court approving the settlement as described herein
and from the Judgment and any further proceedings on remand have been resolved, or the time fo r
any such appeals has expired .
(d) All Persons who fall within the definition of the Settlement Class and who do
not timely and validly request to be excluded from the Settlement Class in accordance with the
instructions set forth in the Mailed Notice (as defined in ¶3 .1, above) shall be subject to and bound
by the provisions of the Stipulation, the releases contained herein, and the Judgment with respect to
all Released Claims, regardless of whether such Persons seek or obtain by any means, including ,
without limitation, by submitting a Proof of Claim and Release or any similar document, an y
distribution from the Gross Settlement Fund or the Net Settlement Fund .
5.4 Neither the Released Defendants nor their counsel shall have any responsibility for ,
interest in, or liability whatsoever with respect to the investment or distribution of the Gros s
Settlement Fund, the Plan of Allocation, the determination, administration, or calculation of claims ,
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the payment or withholding of Taxes, the distribution of the Net Settlement Fund, or any losses
incurred in connection with any such matters , and the Escrow Agent shall indemnify and hol d
harmless the Released Defendants and their counsel for any losses or liabilities arising in connection
with such matters .
5 .5 No Person shall have any claim against the Representative Plaintiffs, Plaintiffs '
Settlement Counsel, the Creditors Committee, Enron, or Notice and Claims Administrator, based on
distributions from the Gross Settlement Fund or the Net Settlement Fund made substantially in
accordance with the Stipulation and the settlement contained herein, any Plan of Allocation, o r
further orders of the Court . No Person shall have any claim against the Released Defendants o r
counsel for the Released Defendants based on distributions made from the Gross Settlement Fund o r
the Net Settlement Fund .
5.6 If there is any balance remaining in the Net Settlement Fund after six (6) months from
the date of distribution of the Net Settlement Fund (whether by reason of tax refunds, uncashe d
checks or otherwise), Plaintiffs' Settlement Counsel may reallocate such balance among Authorize d
Claimants in an equitable and economic fashion, subject to Court approval . Any balance remainin g
thereafter may be donated to an appropriate non-profit organization, subject to Court approval .
5.7 It is understood and agreed by the Newby Settling Parties that any Plan of Allocation
of the Net Settlement Fund including, but not limited to, any adjustments to any Authorize d
Claimant's claim, is not a part of the Stipulation and is to be considered by the Court separately fro m
the Court's consideration of the fairness, reasonableness and adequacy of the settlement set forth i n
the Stipulation, and any order or proceeding relating to the Plan of Allocation shall not operate t o
terminate or c ancel the Stipulation or affect the finality of the Court's Judgment approving the
Stipulation and the settlement set forth herein, or any other orders entered pursuant to th e
Stipulation .
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6. Representative Plaintiffs ' Counsel's Attorneys ' Fees andReimbursement of Expenses
6 .1 Counsel for the Representative Plaintiffs may, upon such further notice to th e
Settlement Class as may be required, submit an application or applications (the "Fee and Expens e
Application") for distributions to them from the Gross Settlement Fund, for: (a) an award of
attorneys' fees; plus (b) reimbursement of expenses incurred in connection with prosecuting th e
Actions and not otherwise reimbursed from the Expense Fund; plus (c) any interest on such
attorneys' fees and expenses (until paid) at the same rate and for the same periods as earned by the
Settlement Fund, as appropriate, as may be awarded by the Court . Plaintiffs' Settlement Counsel
reserve the right to make additional applications for fees and expenses incurred from the Gros s
Settlement Fund.
6.2 Any amounts that are awarded by the Court pursuant to ¶6 .1, above (the "Fee and
Expense Award") shall be paid to Plaintiffs' Settlement Counsel from the Representative Plaintiffs '
share of the Gross Settlement Fund, as ordered, immediately after the Court executes an order (o r
orders) awarding such fees and expenses and permitting such distribution . Plaintiffs' Settlement
Counsel's law firm, as a condition of receiving such fees and expenses, on behalf of itself and eac h
partner and/or shareholder of it, agrees that the law firm and its partners and/or shareholders are each
responsible to make any refund required under ¶7 .5 and are subject to the jurisdiction of the Cour t
for the purpose of enforcing the provisions of this paragraph .
6.3 The procedure for, and the allowance or disallowance by the Court of, the Fee an d
Expense Application are not part of the settlement set forth in this Stipulation, and are to be
considered by the Court separately from the Court' s consideration of the fairness , reasonableness
and adequacy of the settlement set forth in this Stipulation . Any order or proceeding relating to the
Fee and Expense Application, or any appeal from any Fee and Expense Award or any other order
relating thereto or reversal or modification thereof, shall not operate to terminate or cancel th e
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Stipulation, or affect or delay the finality of the Class Judgment and the settlement of the Actions a s
set forth herein .
6.4 The Creditors Committee , Enron, and the Released Defendants shall have no
responsibility for, and no liability whatsoever with respect to, any payment(s) to Plaintiffs '
Settlement Counsel pursuant to ¶¶6 .1 and 6 .2 above, and/or to any other Person who may assert
some claim thereto, or any Fee and Expense Award that the Court may make in the Actions .
7. Conditions of Settlement, Effect of Disapproval, Cancellation orTermination
7.1 The Effective Date of the Stipulation shall be conditioned on the occurrence of all o f
the following events :
(a) the Insurance Proceeds shall have been timely transferred to the Escrow Agen t
pursuant to the Transfer Order ;
(b) the Stock Sales Gain Amount shall have been paid to the Escrow Agent ;
(c) the Harrison Payment shall have been paid to the Escrow Agent ;
(d) the Newby Settlement has been approved by the Court in all material respects
in accordance with the Stipulation and such approval has become Final;
(e) the CC Settlement shall have been approved in all material respects in
accordance with the Stipulation and such approval has become Final ;
(f) the Class Judgment, the CC Judgment, the Derivative Judgment, and the
Interpleader Judgment have become Final ;
(g) the Court shall have entered a Bar Order substantially in the form of the Clas s
Judgment attached as Exhibit "D" hereto ; and
(h) no Termination Event has occurred at the time of the last to occur of th e
preceding events, and any remaining rights of termination under the Stipulation have been waived .
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7 .2 On the Effective Date, any and all remaining interest or right of the Released
Defendants in or to the Gross Settlement Fund, if any, shall be absolutely and forever extinguished .
7.3 If a Termination Event occurs, then the Stipulation shall be cancelled and terminated
without further action by the Settling Parties, unless counsel for all parties mutually agree in writin g
to proceed with the Stipulation.
7 .4 The Outside Directors and Harrison shall have the option to terminate the Stipulatio n
in its entirety in the event that purchasers who collectively purchased more than a certain amount o f
certain Publicly Traded Securities choose to exclude themselves from the Settlement Class, as set
forth in a separate agreement (the "Supplemental Agreement") executed among the Newby Settling
Parties .
7 .5 If the Stipulation is terminated in accordance with ¶7 .3, then
(a) unless otherwise ordered by the Court, within ten (10) business days afte r
written notification of such termination is sent by counsel for one or more of the Settling Parties t o
the Escrow Agent and the Settling Parties to the Escrow Agent and all other Settling Parties ,
Plaintiffs Settlement Counsel shall repay to the appropriate escrow account all amounts disburse d
from the Gross Settlement Fund pursuant to ¶ 12.3 (b), (c) and (f) and if said amount or any portio n
thereof is not returned within such ten (10) day period, then interest shall accrue thereon at th e
higher of the rate of five (5) percent per annum or the actual rate of interest ea rned on such funds ,
until the date that said amount is returned ;
(b) at the written request of counsel for any Settling Party, the Escrow Agent o r
its designee shall apply for any tax refund owed to the Gross Settlement Fund;
(c) the Escrow Agent shall pay the Gross Settlement Fund (less any amounts paid
pursuant to ¶¶2.3(d) and (e) of this Stipulation) in accordance with the direction of the Court in th e
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Interpleader Action or otherwise, and in particular the Escrow Agent shall pay the Insuranc e
Proceeds in accordance with the Escrow Agreement ;
(d) the Settling Parties shall be restored to their respective positions in the Action s
as of October 11, 2004, with all of their respective claims and defenses, preserved as they existed on
that date;
(e) the terms and provisions of the Stipulation, with the exception of ¶¶6 .2 and
7 .5 (which shall continue in full force and effect), shall be null and void and shall have no further
force or effect with respect to the Settling Parties, and neither the existence nor the terms of thi s
Stipulation (nor any negotiations preceding this Stipulation nor any acts performed pursuant to, or i n
furtherance of, this Stipulation) shall be used in the Actions or in any other action or proceeding fo r
any purpose (other than to enforce the terms remaining in effect) ;
(f) any judgment or order entered by the Court in accordance with the terms of
the Stipulation shall be treated as vacated, nunc pro tunc ; and
(g) the Settlement Class, if it has been certified, shall be decertified . No order o f
the Court or modification or reversal on appeal of any order of the Court concerning any Fee an d
Expense Award shall constitute grounds for cancellation or termination of the Stipulation .
8. No Admissions
8.1 The Newby Settling Parties intend this Stipulation to be a final and complet e
resolution of all disputes between the Newby Settling Parties with respect to the Actions . The CC
Settling Parties intend this Stipulation to be a final and complete resolution of all disputes betwee n
the CC Settling Parties with respect to the Committee Action and the Derivative Actions . The
Stipulation is intended to compromise claims that are contested and shall not be deemed a n
admission by any Settling Party as to the merits of any claim or defense or any allegation made i n
the Actions .
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8 .2 Neither the Stipulation, nor any act performed or document executed pursuant to or in
furtherance of the Stipulation : (a) is or may be deemed to be or may be used as an admission of, o r
evidence of, the validity of any Released Claim, of any allegation made in the Actions, or of an y
wrongdoing or liability of the Released Defendants; or (b) is or may be deemed to be or may be use d
as an admission of, or evidence of, any liability, fault or omission of the Released Defendants in any
civil, criminal or administrative proceeding in any court, administrative agency or other tribunal .
Neither the Stipulation, nor any act performed or document executed pursuant to or in furtherance o f
the Stipulation shall be admissible in any proceeding for any purpose, except to enforce the terms o f
the Stipulation, and except that the Released Defendants may file the Stipulation and/or th e
judgments in any action that may be brought against it in order to support a defense or counterclai m
based on principles ofresjudicata, collateral estoppel, release, good faith settlement, judgment bar
or reduction or any other theory of claim preclusion or issue preclusion or similar defense o r
counterclaim .
9. Miscellaneous Provisions
9.1 The Settling Parties: (a) acknowledge that it is their intent to consummate thi s
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 accomplis h
the foregoing terms and conditions of the Stipulation .
9.2 In the event that any amount paid for the benefit of the Plaintiffs or the Settlemen t
Class under 2 .3, above, is determined to be a preference, voidable transfer, fraudulent transfer, o r
similar transaction by a Final order of a court of competent jurisdiction and the Plaintiffs ar e
required to return the Settlement Amount, or any portion thereof, then the Plaintiffs have the right t o
bring, revive, or reinstate all claims against such Released Defendant(s), by refunding the amount s
pursuant to such Final order .
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9 .3 Each Released Defendant warrants that, as to herself or himself only, the payment o f
the Sett lement Amount to the Escrow Agent will not render him or her insolvent .
9 .4 While the Released Defendants deny that the claims advanced in the Actions were
meritorious, the Released Defendants will not assert in any statement to the Court that the Action s
were not filed in good faith and/or are not being settled voluntarily after consultation with competen t
legal counsel. The Class Judgment will contain a statement that the Settling Parties do not contend
that during the course of the Actions, the parties and their respective counsel at any time failed t o
comply with the requirements of Federal Rule of Civil Procedure 11 .
9.5 The Settling Parties agree that the Settlement Amount and the other terms of th e
settlement as described herein were negotiated in good faith by the Settling Parties . Each party
hereby expressly warrants and represents that : (i) such party is not relying upon any statements ,
understandings, representations, expectations, or agreements other than those expressly set forth i n
this Stipulation; (ii) such party is represented and has been advised by qualified legal counsel i n
connection with this Stipulation, which such party makes voluntarily and of its own choice and no t
under coercion or duress; (iii) such party has made his or her own investigation of the facts and i s
relying solely upon his or her own information and knowledge and the advice of its counsel ; (iv)
such party has no expectation that any other party will disclose to him, her or it facts material to thi s
Stipulation; and (v) such party knowingly waives any claim to rescind or avoid this Stipulation base d
upon undisclosed facts, known or unknown . The Settling Parties agree and stipulate that each part y
is relying upon the representations and warranties in this paragraph in entering into this Stipulation .
These representations and warranties shall survive the execution of this Stipulation . The Settling
Parties further warrant and represent that they have not relied on any promise, representation ,
conduct or consideration other than those expressly set forth in this Stipulation .
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9.6 The Settling Parties acknowledge that they are fully and completely informed of th e
facts relating to the subject matter of this Stipulation, and of their rights and liabilities ; that the
Settling Parties entered into this Stipulation voluntarily after having given careful consideration t o
the making of this Stipulation, that the Settling Parties have discussed the provisions of thi s
Stipulation with attorneys of their own choosing, and have executed it in reliance upon their ow n
judgment and the advice of their attorneys . No party makes any representation to or covenant with
any other party about the legal, tax or other consequences of this Stipulation . Each party has had
access to and separate representation by the legal, tax and other advisors of that party's ow n
choosing, and has freely and fully reviewed and negotiated the terms of this Stipulation .
Accordingly, no presumption shall apply that any party is the drafter of this Stipulation, nor shall an y
provision or ambiguity in a provision be construed against a party on the basis that the party i s
deemed to have drafted such provision .
9.7 Nothing in this Stipulation shall prohibit any comment on the accuracy of any publi c
description of the settlement .
9.8 All of the Exhibits to the Stipulation are material and integral parts hereof and ar e
fully incorporated herein by this reference.
9.9 The 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 .
9 .10 The Stipulation, the Exhibits attached hereto, and the Supplemental Agreemen t
constitute the entire agreement between Plaintiffs and the Released Defendants and n o
representations, warranties or inducements have been made to any party concerning the Stipulation
or its Exhibits or the Supplemental Agreement other than the representations, warranties an d
covenants contained and memorialized in such documents . It is understood by the parties hereto
that, except for the matters expressly represented herein, the facts or law with respect to which thi s
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Stipulation is entered into may turn out to be other than or different from the facts now known t o
each party or believed by such party to be true ; each party therefore expressly assumes the risk of th e
facts or law turning out to be so different, and agrees that this Stipulation shall be in all respect s
effective and not subject to termination by reason of any such different facts or law. Except as
otherwise provided herein, each party shall bear its own costs and attorneys fees .
9 .11 Plaintiffs' Settlement Counsel and Representative Plaintiffs represent and warrant tha t
Plaintiffs' Settlement Counsel, on behalf of the Settlement Class, are expressly authorized by th e
Representative Plaintiffs to take all appropriate action required or permitted to be taken by or o n
behalf of the Settlement Class pursuant to the Stipulation to effectuate its terms and also ar e
expressly authorized to enter into any modifications or amendments to the Stipulation on behalf of
the Settlement Class that they deem appropriate .
9 .12 Each counsel or other Person executing the Stipulation or any of its Exhibits on
behalf of any party hereto hereby warrants that such Person has the full authority to do so .
9 .13 The Stipulation may be executed by facsimile and in one or more counterparts . All
executed counterparts and each of them shall be deemed to be one and the same instrument . Counsel
for the parties to the Stipulation shall exchange among themselves original signed counterparts and a
complete set of executed counterparts shall be filed with the Court .
9 .14 The Stipulation shall be binding upon, and inure to the benefit of, the successors an d
assigns of the parties hereto, including any corporation or other entity into or with which any part y
merges, consolidates or reorganizes .
9 .15 The Court shall retain jurisdiction with respect to implementation and enforcement o f
the terms of the Stipulation .
9.16 The Stipulation, the Exhibits hereto, and the Supplemental Agreement shall b e
considered to have been negotiated, executed and delivered, and to be wholly performed, in the State
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of Texas, and the rights and obligations of the parties to the Stipulation shall be construed an d
enforced in accordance with, and governed by, the internal, substantive laws of the State of Texa s
without giving effect to that State's choice of law principles . The Parties agree that the Honorabl e
Melinda Harmon, United States District Judge of the United States District Court for the Souther n
District of Texas shall be the exclusive forum and venue for the litigation of any and all dispute s
arising out of or relating to this Stipulation .
IN WITNESS WHEREOF, the parties hereto have caused the Stipulation to be executed, b y
their duly authorized attorneys, dated as of January 12, 2005 .
LERACH COUGHLIN STOIA GELLERRUDMAN & ROBBINS LLP
WILLIAM S. LERACHKEITH F. PARKDARREN J. ROBBINSHELEN J . HODGESBYRON S . GEORGIOUJAMES I . JACONETTEMICHELLE M . CICCARELLIJAMES R. HAILANNE L. BOXJOHN A. LOWTHERALEXANDRA S. BERNAYMATTHEW P . SIBENROBERT R. HENSSLER, JR .
/s/ Roger B . Greenberg * signed by permissionHELEN J . HODGE S
401 B Street , Suite 1600San Diego , CA 92101Telephone : 619/231-105 8
LERACH COUGHLIN STOIA GELLERRUDMAN & ROBBINS LLP
REGINA M. AME S9601 Wilshire Blvd., Suite 510Los Angeles , CA 90210Telephone : 310/859-3100310/278-2148 (fax )
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LERACH COUGHLIN STOIA GELLERRUDMAN & ROBBINS LLP
G. PAUL HOWESJERRILYN HARDAWAYTexas Bar No . 00788770Federal I .D. No . 309641111 Bagby, Suite 4850Houston , TX 77002Telephone : 713/571-091 1
Lead Counsel for Plaintiffs
SCHWARTZ, JUNELL, GREENBERG& OATHOUT, LLP
ROGER B . GREENBERGState Bar No . 08390000Federal I .D. No . 3932
/s/ Roger B . GreenbergROGER B. GREENBERG
Two Houston Center909 Fannin, Suite 2000Houston, TX 77010Telephone : 713/752-0017
HOEFFNER & BILEK, LLPTHOMAS E. BILEKFederal Bar No. 9338State Bar No . 023135251000 Louisiana Street , Suite 1302Houston, TX 77002Telephone : 713/227-7720
Attorneys in Charge
BERGER & MONTAGUE, P .C.SHERRIE R . SAVETT1622 Locust StreetPhiladelphia, PA 19103Telephone : 215/875-3000
Attorneys for Staro Asset Management
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WOLF POPPER LLPROBERT C . FINKEL845 Third AvenueNew York, NY 10022Telephone: 212/759-4600
Attorneys for Nathaniel Pulsifer
SCOTT + SCOTT, LLCDAVID R. SCOTT
NEIL ROTHSTEIN108 Norwich AvenueColchester, CT 06415Telephone: 860/537-381 8
Attorneys for the Archdiocese of MilwaukeeSupporting Fund, Inc .
CUNEO WALDMAN & GILBERT, LLPJONATHAN W . CUNEOMICHAEL G. LENETT317 Massachusetts Avenue, N.E.Suite 300Washington, D.C. 20002Telephone : 202/789-3960
Washington Counsel
GIBBS & BRUNS, L .L.P .ROBIN C. GIBBSKATHY D. PATRICKJEAN C. FRIZZELLMICHAEL K. OLDHAMAUNDREA K. FRIEDENBRIAN T. ROSS
KwvKATHY D. PATRICK
-35-
1100 Louisiana, Suite 5300Houston, TX 77002Telephone : 713/650-8805713/750-0903 (fax)
Attorneys for Defendants Robert A. Belfer,Norman P. Blake, Jr., Ronnie C. Chan, John H .Duncan , Joe H. Foy, Wendy L. Gramm, RobertK. Jaedicke, Charles A. LeMaistre, JohnMendelsohn, Jerome Meyer, Frank Savage, JohnUrquhart, Charls E . Walker, John Wakeham,and Herbert Winokur, Jr.
GRAVES DOUGHERTY, HEARON & MOODYJOHN MCKETTAHELEN FOSTER
LEN FOSTER
401 Congress Ave., Suite 2200Austin, TX 7870 1Telephone: 512/480-5600512/478-1976 (fax)
Attorneys for Defendant Rebecca Mark-Jusbasch e
McKOOL SMITH, P .C .
1L-twi--5- 16~
LEWIS T. LECI/AIR 4A~iyhlp
-36-
300 Crescent Court, Suite 1500Dallas, Texas 75201Telephone 214/978-4000Fax 214/978-401 4
Attorney for the Official Committee ofUnsecured Creditors of Enron Corp .
SUSMAN GODFREY L.L.P .
KENNET MARK
S Attorneyfor Enron Corp., a reorganized debtor
NICKENS, KEETON, LAWLESS & FLACK, LLP
tJ .C. NI KENS
Attorney for Richard Bu y
TONKON TORP LLP
WT11[ath M Sin .fr. ice,WILLIAM F . MARTSON, JR!~ I
1600 Pioneer Tower888 SW Fifth AvenuePortland OR 97204Telephone : 503/802-2041Fax : 503 /972-374 1
Attorney for Defendant Ken L . Harrison
MILLER & CHEVALIER, CHARTEREDMARK J . ROCHON
Mark J, O c' oil ~.,-37-
MARK J. RO HON127 "JP
655 Fifteenth Street, N .W., Suite 900Washington, D.C. 20005-5701Telephone: 202/626-581 9Fax: 202/628-085 8
Attorney for Paulo V. Ferraz Pereira
S:\Settlement\Enron .Set\Outside Directors Settlement\Settlement Agreement-Clean l .doc
-38-
CERTIFICATE OF SERVICE
I hereby cert ify that a copy of the foregoing STIPULATION OF SETTLEMENT documenthas been served by sending a copy via electronic mail to serve(ESL3624 .com on this 12th day ofJanuary, 2005 .
I further certify that a copy of the foregoing document has been served via overnight mail onthe following parties, who do not accept service by electronic mail on this 12th day of January, 2005 .
Carolyn S . SchwartzUnited States Trustee, Region 233 Whitehall Street, 21st FloorNew York, NY 10004
c~ta 1 t . ~tG 'cct~+.~ eq
DEBORAH S . GRANGER
EXHIBIT A
UNITED STATES DISTRICT COURTSOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
In re ENRON CORPORATION SECURITIESLITIGATION
This Document Relates To :
MARK NEWBY, et al ., Individually and OnBehalf of All Others Similarly Situated ,
Plaintiffs ,
vs .
ENRON CORP ., et al .,
Defendants .
OFFICIAL COMMITTEE OF UNSECUREDCREDITORS OF ENRON CORP . ,
Plaintiffs,
vs .
ANDREW S. FASTOW, et al .
Defendants .
Civil Action No. H-01-3624(Consolidated)
CLASS ACTION
Civil Action No. H-04-009 1
COURT APPROVED ESCROW AGREEMENT CONCERNING INTERPLEADERFUNDS
EXHIBIT A
THIS SETTLEMENT ESCROW AGREEMENT ( the "Escrow Agreement ") is made and
effective as of the th day of , 2005 (the "Execution Date"), in accordance with th e
order of the Court herein dated , 2005, with Lerach Coughlin Stoia Geller Rudman &
Robbins LLP as escrow agent (the "Escrow Agent") .
RECITAL S
WHEREAS, Associated Electric & Gas Services Limited, Energy Insurance Mutual Limited ,
Federal Insurance Company, Greenwich Insurance Company, certain Underwriters at Lloyd's ,
London subscribing to Insurance Certificate No. 901/LK9802531 ("Underwriters"), St. Paul
Mercury Insurance Company, Royal Insurance Company ofAmerica, ACE Bermuda Insurance Ltd . ,
and Kemper Indemnity Insurance Company (the "Excess Carriers") provided excess directors an d
officers liability insurance coverage to Enron Corp . in the aggregate amount of $200 million, excess
of $150 million in underlying insurance ;
WHEREAS, on or about October 21, 2004, the Excess Carriers filed an Answer to the Firs t
Amended Third-Party Complaint for Contract Enforcement and Injunctive Relief Regarding D& O
Policy Proceeds and Third-Party Complaint for Interpleader, which was amended on or about
October 22, 2004 (the "Interpleader Action") ;
WHEREAS, on or about January 5, 2005 and January 12, 2005 with respect to Underwriters ,
and in accordance with the order of December 22, 2004 by the Court in the Interpleader Action, the
Excess Carriers deposited the limit of liability of their respective policies (the "Interpleader
Policies") with the Clerk (the "Clerk") of the United States District Court of the Southern District o f
Texas, Houston Division in compliance with the requirements of 28 U.S.C. § 1335 and applicable
law (the "Interpleader Fund") ;
WHEREAS, on , 2005, the United States District Court for the Southern Distric t
of Texas, Houston Division, entered a Transfer Order in the above-entitled action authorizing th e
-1-
transfer of the Interpleader Fund to a private escrow in order to more efficiently handle the
Interpleader Fund, subject to the Court retaining exclusive jurisdiction and control over the
Interpleader Fund and the escrow contemplated thereby; and
WHEREAS, it is intended for the Interpleader Fund to be a qualified settlement fund under
Section 468B of the Internal Revenue Code, as amended (the "Code"), upon entry of the Preliminary
Approval Order by the Court ; and
NOW, THEREFORE, in consideration of the covenants and representations set forth herein,
and for other good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Escrow Agent hereby covenants and agrees as follows:
1 . Definitions; Conflicting Terms. For purposes of this Escrow Agreement (includin g
the Recitals), all initially capitalized terms used and not otherwise defined herein shall have the
meanings attributed to such terms in the Agreement Regarding Insurance Proceeds and Interpleader
Action filed in the above-captioned actions and dated as of (the "Insurance Proceeds
Agreement") or the Stipulation of Settlement dated January 12, 2005 . To the extent that terms of
this Escrow Agreement conflict with the terms of the Insurance Proceeds Agreement or the
Stipulation of Settlement, the terms of this Escrow Agreement shall be controlling as to the matters
set forth herein .
2. Appointment of EscrowAgent. Pursuant to the terms hereof, Lerach Coughlin Stoia
Geller Rudman & Robbins LLP is hereby appointed as the Escrow Agent, and Lerach Coughlin
Stoia Geller Rudman & Robbins LLP accepts the duties and obligations of the Escrow Agent set
forth herein .
3. Establishment of Escrow Account . The Escrow Agent will establish three escrow
accounts (collectively, the "Escrow Account"), which account shall constitute the Escrow Account
contemplated by the Transfer Order . The Escrow Account shall consist of three segregate d
-2-
accounts : (i) the "Insurance Proceeds Escrow Account"; (ii) the "Stock Sales Gain Escrow
Account" ; and (iii) the "Harrison Escrow Account ." At such time or times as is required by the
Transfer Order and in one or more payments, the Clerk shall transfer the Interpleader Fund as
required by the Transfer Order. The Escrow Agent agrees (x) to accept delivery of the Interpleader
Fund, (y) on the day ofreceipt thereof, to acknowledge receipt ofsame in writing to counsel for the
Excess Carriers, and (z) to hold the Interpleader Fund in the Insurance Proceeds Escrow Account i n
accordance with the terms and conditions of this Escrow Agreement and the Transfer Order . The
Stock Sales Gain Escrow Account and the Harrison Escrow Account shall be funded in accordanc e
with the terms of the Stipulation of Se tt lement .
4. Investment of Insurance Proceeds .
(a) The Escrow Agent shall invest the Interpleader Fund in instruments backed b y
the full faith and credit of the United States Government or fully insured by an agency thereof and
shall reinvest the proceeds of these instruments as they mature in similar instruments at their the n
current market rates . Any and all interest, dividends and other earnings on the Interpleader Fun d
following the delivery of such funds to the Escrow Agent (collectively, "Interest") shall become par t
of and be included in the Interpleader Fund .
(b) The Escrow Agent shall be autho rized to execute only such transactions as are
consistent with the terms of the Stipulation of Settlement and order(s) of the Court .
(c) All funds held by the Escrow Agent shall be deemed and considered to be in
custodia legis, and shall remain subject to the oversight and jurisdiction of the Court, until such tim e
as such funds shall be distributed pursuant to the Stipulation of Settlement and/or order(s) of th e
Court .
5 . Distribution of Proceeds . The Interpleader Fund, the Stock Sales Gain Escrow
Account and the Harrison Escrow Account shall be distributed by the Escrow Agent only at suc h
-3-
time or times and in such manner as is expressly set forth in orders of the Court pursuant to the terms
of the Stipulation of Settlement and the Insurance Proceeds Agreement, or as the Court may
otherwise direct. However, if a final and non-appealable order of this Court or any other court
dismisses the Interpleader Action without granting the relief requested by the Excess Carriers in the
Interpleader Action, then the Escrow Agent shall pay the then-remaining balance of the Interpleader
Fund to the Excess Carriers in the full amount of the limit of liability of their respective Excess
Policy unless and until there are insufficient amounts in the Interpleader Fund to do so, in the
following order: (i) the participants of the Quota Share Policy, (ii) ACE Bermuda, (iii) Royal,
(iv) Federal (policy no . 8181-43-14), (v) St. Paul ; (vi) Lloyd's, and (vii) Greenwich.
6. Taxes
6.1 The Settling Parties and the Escrow Agent agree to treat the Gross Settlement Fund as
being at all times a "qualified settlement fund" within the meaning of Treas . Reg . § 1 .468B-1 . The
Escrow Agent shall timely make such elections as necessary or advisable to carry out the provisions
of this ¶6 .1, including the "relation-back election" (as defined in Treas . Reg. § 1 .468B-1) back to the
earliest permitted date . Such elections shall be made in compliance with the procedures and
requirements contained in § 1 .468B-1 . It shall be the responsibility of the Escrow Agent timely and
properly to prepare and deliver the necessary documentation for signature by all necessary parties,
and thereafter to cause the appropriate filing to occur .
(a) For the purpose of §468B of the Internal Revenue Code of 1986, as amended ,
and the regulations promulgated thereunder, the "administrator" shall be the Escrow Agent . The
Escrow Agent shall satisfy the administrative requirements imposed by Treas . Reg . § 1 .468B-2 by,
e.g., (i) obtaining a taxpayer identification number, (ii) satisfying any information reporting or
withholding requirements imposed on distributions from the Gross Settlement Fund, and (iii) timely
and properly filing applicable federal, state and local tax returns necessary or advisable with respec t
-4-
to the Gross Settlement Fund (including, without limitation, the returns described in Treas . Reg .
§ 1 .468B-2(k)) and paying any taxes reported thereon . Such returns (as well as the election described
in this ¶6.1) shall be consistent with this ¶6 .1 and in all events shall reflect that all Taxes as defined
in subsection (b) below (including any estimated Taxes, interest or penalties) on the income earned
by the Gross Settlement Fund shall be paid out of the Gross Settlement Fund as provided in ¶6.1(b)
hereof.
(b) All (i) taxes (including any estimated taxes, interest or penalties) arising with
respect to the income earned by the Gross Settlement Fund, including, without limitation, any taxes
or tax detriments that may be imposed upon the Outside Directors or their counsel with respect to
any income earned by the Gross Settlement Fund for any period during which the Gross Settlement
Fund does not qualify as a "qualified settlement fund" for federal or state income tax purposes
(collectively, "Taxes"), and (ii) expenses and costs incurred in connection with the operation and
implementation of this ¶6 .1, including, without limitation, expenses of tax attorneys and/or
accountants and mailing and distribution costs and expenses relating to filing (or failing to file) the
returns described in this ¶6 .1 (collectively, "Tax Expenses"), shall be paid out of the Gross
Settlement Fund . In all events no person other than the Escrow Agent shall have any liability or
responsibility for the Taxes or the Tax Expenses . The Escrow Agent shall indemnify and hold
harmless the Settling Parties and their counsel for Taxes and Tax Expenses (including, without
limitation, Taxes payable by reason of any such indemnification) . Further, Taxes and Tax Expenses
shall be treated as, and considered to be, a cost of administration of the Gross Settlement Fund and
shall timely be paid by the Escrow Agent out of the Gross Settlement Fund without prior order from
the Court, and the Escrow Agent shall be obligated (notwithstanding anything herein to the contrary)
to withhold from distribution to Authorized Claimants any funds necessary to pay such amounts,
including the establishment of adequate reserves for any Taxes and Tax Expenses (as well as any
-5-
amounts that may be required to be withheld under Treas . Reg. § 1 .468B-2(1)(2)) ; neither the Settling
Parties nor their counsel are responsible therefor, nor shall they have any liability therefor . The
Settling Parties agree to cooperate with the Escrow Agent, each other, and their tax attorneys and
accountants to the extent reasonably necessary to carry out the provisions of this ¶6 .1 .
7. Termination of the Escrow Agreement. This Escrow Agreement shall terminate
upon the Escrow Agent's full and proper distribution of the Interpleader Fund, the Stock Sales Gain
Escrow Account and the Harrison Escrow Account in accordance with Orders of the Court and/or
this Escrow Agreement .
8. Concerning the Escrow Agent. The Escrow Agent further covenants and agrees that :
(a) To induce the Escrow Agent to act as such hereunder, the Escrow Agent shal l
be entitled to rely, if it is acting in good faith, upon any order, judgment, certification, demand,
notice, instrument or other writing delivered to it hereunder without being required to determine the
authenticity or the correctness of any fact stated therein or the propriety or validity or the service
thereof. The Escrow Agent may, if it is acting in good faith, act in reliance upon any instrument or
signature believed by it to be genuine and may assume that any person purporting to give receipt or
advice or make any statement or execute any document in connection with the provisions hereof has
been duly authorized to do so .
(b) The Escrow Agent is serving in the capacity of an escrow holder only and
having possession of the Interpleader Fund subject to the terms of this Escrow Agreement, the
Insurance Proceeds Agreement, the Settlement and/or orders of the Court .
(c) The Escrow Agent (and any successor Escrow Agent) may be removed or
may resign upon order of the Court . Upon entry of such an order in accordance with the foregoing
sentence, the Escrow Agent (and any successor Escrow Agent) shall deliver the entirety of the
Interpleader Fund, including all earnings thereon, in accordance with the order of the Court ,
-6-
whereupon the Escrow Agent shall be discharged of and from any and all further obligations arising
in connection with this Escrow Agreement .
(d) In the event of any disagreement resulting in adverse claims or demands being
made in connection with the Interpleader Fund, or in the event that the Escrow Agent in good faith is
in doubt as to what action it should take hereunder, the Escrow Agent shall be entitled to retain the
Interpleader Fund until the Escrow Agent has received an order of the Court directing delivery of the
Interpleader Fund .
(e) Any action or proceeding arising out of or relating to this Escrow Agreement
is related to the proceedings pending before this Court and, therefore, the sole and exclusive venue
for the resolution of any such claims in any such action or proceeding shall be in this Court .
(f) The Escrow Agent may not assign any of its rights or obligations hereunder
without the written consent of the Insurance Carriers, and any attempted transfer or assignment in
violation of this provision shall be null and void .
(g) This Escrow Agreement may only be modified by order of this Court .
(h) This Escrow Agreement shall be construed in accordance with and governed
by the laws of the State of Texas.
9. Notices.
(a) All notices, requests, demands and other communications hereunder
(including service ofprocess in any action or proceeding referred to in ¶8(e)) shall be in writing and
shall be deemed to have been duly given if personally delivered with a receipt therefor, delivered by
facsimile or overnight courier service, or after five (5) days from being mailed, certified mail, return
receipt, postage prepaid to the addresses set forth below :
If to the Escrow Agent :
Keith F . ParkLERACH COUGHLIN STOIA GELLER
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RUDMAN & ROBBINS LLP401 B Street , Suite 160 0San Diego, CA 9210 1
10 . Entire Agreement . This Escrow Agreement sets forth the entire agreement and
understanding of the part ies in respect of the transactions contemplated hereby .
11 . Headings . The headings of the sections and paragraphs in this Escrow Agreement
have been inserted for convenience of reference only and shall in no way restrict or otherwis e
modify any of the terms or provisions hereof .
IN WITNESS WHEREOF, the Escrow Agent has caused this Escrow Agreement to be dul y
executed as of the date first above written.
LERACH COUGHLIN STOIA GELLERRUDMAN & ROBBINS LLP
WILLIAM S. LERACHKEITH F. PARKDARREN J . ROBBINSHELEN J . HODGESBYRON S. GEORGIOUJAMES I. JACONETTEMICHELLE M. CICCARELLIJAMES R. HAILANNE L. BOXJOHN A. LOWTHERALEXANDRA S. BERNAYMATTHEW P. SIBENROBERT R . HENSSLER, JR .
KEITH F. PARK
401 B Street, Suite 1600San Diego , CA 92101Telephone : 619/231-105 8
-8-
LERACH COUGHLIN STOIA GELLERRUDMAN & ROBBINS LLP
REGINA M. AMES9601 Wilshire Blvd ., Suite 510Los Angeles , CA 90210Telephone : 310/859-3100310/278-2148 (fax )
LERACH COUGHLIN STOIA GELLERRUDMAN & ROBBINS LLP
G. PAUL HOWESJERRILYN HARDAWAYTexas Bar No . 00788770Federal I .D. No. 309641111 Bagby, Suite 4850Houston, TX 77002Telephone : 713/571-091 1
Escrow Agent
S :\Settlement\Enron .Set\Outside Directors Settlement\AGT000I6866-Clean .do c
-9-
EXHIBIT A-1
UNITED STATES DISTRICT COURTSOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
In re ENRON CORPORATION SECURITIESLITIGATION
Civil Action No . H-01-3624(Consolidated )
CLASS ACTIONThis Document Relates To :
MARK NEWBY, et al ., Individually and OnBehalf of All Others Similarly Situated,
Plaintiffs ,
vs .
ENRON CORP., et al .,
Defendants .
ORDER AUTHORIZING THE TRANSFER OF INSURANCE PROCEED S
EXHIBIT A-1
WHEREAS on December 22, 2004, the Court ordered the Excess Insurers to deposit the sum
of $200 million of interpleaded insurance proceeds into the registry of the Court in compliance wit h
the requirements of 28 U.S .C. § 1335 and applicable law ; and
WHEREAS after due consideration of theMotion for Preliminary Approval of the Sett lement
by and among the Representative Plaintiffs and the Outside Directors, the Court has grante d
preliminary approval, entered the Preliminary Approval Order and with good cause appearin g
therefor ;
NOW THEREFORE IT IS HEREBY ORDERED :
This Order (the "Transfer Order") incorporates by reference the definitions in the Stipulatio n
of Settlement dated as of January 12, 2005 (the "Stipulation") and the Agreement Regardin g
Insurance Proceeds and Interpleader Action ("Insurance Proceeds Agreement") and all capitalize d
terms used herein shall have the same meanings as set forth in the Stipulation and the Insuranc e
Proceeds Agreement.
The Clerk of the Court is ordered to transfer the Insurance Proceeds, which were deposite d
pursuant to the Order entered December 22, 2004 in compliance with the requirements of 28 U .S .C .
§ 1335 and applicable law, to an account which shall be styled "United States District Court for the
Southern District of Texas - Insurance Interpleader Account" and shall be controlled and
administered by Lerach Coughlin Stoia Geller Rudman & Robbins LLP as Escrow Agent . Within
one (1) business day from entry of this Order, the Escrow Agent shall provide the Clerk of the Cour t
with instructions for deposit .
IT IS SO ORDERED .
DATED:THE HONORABLE MELINDA HARMONUNITED STATES DISTRICT JUDG E
S:\Sett1ement\Enron .Set\0utside Directors Settlement\ORD Auth Transfer P ro ceeds.do c
-1-
EXHIBIT B
UNITED STATES DISTRICT COURTFOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
In Re ENRON CORPORATION SECURITIES,DERIVATIVE & "ERISA" LITIGATION ,
MARK NEWBY, ET AL. ,
Plaintiffs
vs .
ENRON CORPORATION, ET AL . ,
Defendant s
OFFICIAL COMMITTEE OF UNSECUREDCREDITORS OF ENRON CORP . ,
Plaintiff,
vs .
ANDREW S . FASTOW , ET AL. ,
Defendants . §
MDL 1446
CIVIL ACTION NO . H-01-3624AND CONSOLIDATED CASES
CIVIL ACTION NO. H-04-009 1
AGREEMENT REGARDING INSURANCE PROCEEDS AND INTERPLEADERACTION
This Agreement Regarding Insurance Proceeds and Interpleader Action (the "Agreement" )
is entered into between and among the Regents of the University of California, on behalf of the
Class in . Newby v. Enron , et al. ; the Official Committee of Unsecured Creditors of Enron Corp ., on
behalf of Enron Corp ., a reorganized debtor and its affiliated reorganized debtors; and Richard Buy,
604310v1 /007457
Richard Causey, Mark Frevert, Joseph Hirko, Kevin Howard, Michael Krautz, Kenneth Lay, Jeffrey
McMahon, Lou Pai, Rex Shelby, Jeffrey Skilling, Joseph Sutton, Greg Whalley and Scott Yeager .
DEFINITION OF TERM S
The following terms shall have the indicated mean ings in this Agreement:
1 . "Additional Distribution Date" means the date ten (10) calendar days after the
Interpleader Judgment is entered by the Court in substantially the form attached hereto as Exhibi t
«C„
2. "Arrearages" shall mean the unpaid invoices, or portions thereof, submitted to th e
Insurance Carriers by the Non-Settling Defendants for reimbursement of legal fees, expert fees ,
and/or other fees and expenses incurred in connection with their defense of the Cases .
3. "Bankruptcy Court" means the United States Bankruptcy Court for the Southern
District of New York presiding over In re Enron Corp., et al., Case No, 01-16034 (AJG) .
4. "Cases" means the NewbyAction and related civil cases (including those coordinated
for pretrial proceedings in MDL 1446), certain investigations and actions by the Securities &
Exchange Commission, investigations by Congress, the Enron Task Force and others related to
Enron , and criminal prosecutions including United States ofAmerica v. Richard A . Causey, Jeffrey
K Skilling, and Kenneth L. Lay ; Cr. No. H-04-25, and United States of America v. Kenneth Rice,
Joseph Hirko, Kevin Hannon , Kevin Howard, Scott Yeager, Rex Shelby, and Michael Krautz, Cr,
H-03-93-04 .
604310v1/007457 2
5. "Committee Action" means Official Committee of Unsecured Creditors of Enro n
Corp. v. Fastow, et al., Civil Action No. H-04-0091, in the United States District Court for the
Southern District of Texas, Houston Division .
6 . "Court" means the United States District Court for the Southern District of Texas ,
Houston Division, presiding over the Newby Action and related civil cases, including th e
coordinated pretrial proceedings in In re Enron Corporation Securities, Derivative & ERISA
Litigation, MDL No. 1446.
7. "Creditors' Committee" means the Official Committee of Unsecured Creditors of
Enron Corp .
8. "Deposit Order" means the Order Authorizing Deposit of Insurance Proceed s
Pursuant to Interpleader Statute entered by the Court in the Newby Action on December 22, 2004 .
9. "Derivative Actions" means Pirelli Armstrong Tire Corporation Retiree Medical
Benefits Trust, derivatively on behalf of Enron Corp . v. Lay, Civil Action No. H-01-3645, in the
United States District Court for the Southern District of Texas, Houston Division ; Detectives
Endowment Association Annuity Fund, derivatively on behalf of Enron Corp . v. Lay, Civil Action
No. H-01 -3892, in the United States District Court for the Southern District of Texas, Housto n
Division ; Kassoway v. Fastow, Civil Action No. H-01-3 690, in the United States District Court for
the SouthernDistrict of Texas , Houston Division ; Greenberg, derivatively on behalfofEnron Corp .
v. Belfer, Civil Action No. H-01 -3998, in the United States District Cou rt for the Southern District
of Texas, Houston Division ; Goffman v. Belfer, Civil Action No . H-02-1838, in the United States
District Court for the Southern District of Texas, Houston Division ; Trzebucki v. Fastow, Civil
604310v1/007457 3
Action No . H-02-1832, in the United States District Court for the Southern District of Texas,
Houston Division; Barsky v. ArthurAndersen LLP, Civil Action No. H-02-1922, in the United States
District Court for the Southern District of Texas, Houston Division ; and Bergsieker v. Lay, Civil
Action No . H-02-3427, in the United States District Court for the Southern District of Texas,
Houston Division .
10 . "Effective Date" means the date upon which the last signatory to this Agreement
executes this Agreement .
11. "Enron" means Enron Corp ., a reorganized debtor.
12. "Enron D&O Policies" means Associated Electric & Gas Insurance Services Limite d
Policy No. D0079A1A98; Energy Insurance Mutual, Limited Policy No . 900630-OODO ; Federal
Insurance Company Policy No . 8142-05-47, Policy No. 8181-43-14, and Policy No. 8179-41-03
SWH; Hartford/Twin City Insurance CompanyPolicyNo, NDA0131301-98H; Greenwich Insurance
Company Policy No . ELU 82248-01 ; Lloyds of London Insurance Certificate No . 901/LK980253 1 ;
St. Paul Mercury Insurance Company Policy No. 568CM0934; Royal Insurance Company of
America Policy No. P SF 000633 ; and ACE Bermuda Insurance Limited Policy No . EC ADO 1-001 .
13 . "Final Judgment" means the Interpleader Judgment, as of the time the Interpleader
Judgment has become final and is no longer subject to appellate review.
14. "Insurance Carriers" means Associated Electric & Gas Insurance Services Limited,
Energy Insurance Mutual Limited, Federal Insurance Company, Hartford/Twin City Insurance
Company, Greenwich Insurance Company, certain Underwriters at Lloyd's, London subscribing t o
60431Ovl/007457 4
insurance certificate no. 901/LK9802531, St . Paul Mercury Insurance Company, Royal Insurance
Company of America, ACE Bermuda Insurance Ltd., and Kemper Indemnity Insurance Company .
15. "Insurance Proceeds" means $200,000,000, which represents the remaining limits
of coverage under the Enron D&O Policies written by those Insurance Carriers above the layer of
insurance provided by Hartford/Twin City Insurance Company .
16 . "Interpleader Action" means the First Amended Third-Party Counterclaim fo r
Interpleader filed by the Insurance Carriers in the Newby Action on October 22, 2004, related to
disposition of the Insurance Proceeds, pending in the Court .
17. "Interpleader Judgment" means the judgment to be sought in the Interpleader Action
in accordance with this Agreement and in the form attached hereto as Exhibit "C" .
18. "Lead Plaintiff 'means the Regents of the University of California, on behalf of the
class in the Newby Action .
19 . "Non-Settling Defendants" means Richard Buy (who, although one of the Non-
Settling Defendants, also is a Settling Defendant with respect to the Creditors' Committee), Richar d
Causey, Mark Frevert, Joseph Hirko, Kevin Howard, Michael Krautz, Kenneth Lay, Jeffre y
McMahon, Lou Pai, Rex Shelby, Jeffrey Skilling, Joseph Sutton, Greg Whalley and Scott Yeager .
20. "Order Date" means the date upon which the Court enters the Preliminary Approva l
Order.
21 . "Outside Directors" means Robert A. Belfer, Norman P. Blake, Jr ., Ronnie C . Chan,
John H . Duncan, Paulo Ferraz Pereira, Joe H . Foy, Wendy L. Gramm, Robert K . Jaedicke, Charles
604310v1/007457 5
A. LeMaistre, John Mendelsohn, Jerome J . Meyer, Frank Savage, John Wakeham, Charls E . Walker,
Bruce G. Willison, Herbert S . Winokur, John A Urquhart, and Rebecca Mark-Jusbasehe .
22, "Parties" means the Plaintiffs and the Non-Settling Defendants .
23 . "Plaintiffs" means Lead Plaintiff and the Creditors' Committee .
24. "Preliminary Approval Order" means the Order Giving Preliminary Approval to the
Settlement substantially in the form attached hereto as Exhibit "D ."
25 . "Preliminary Distribution Date" means the date ten (10) calendar days after the Order
Date.
26. "Set Aside Amounts" means the amounts identified in Exhibit "A" attached hereto .
27. "Settlement" means the Stipulation of Settlement between Lead Plaintiff and th e
Outside Directors to settle all claims asserted against the Outside Directors and between th e
Creditors' Committee and the Outside Directors, James Derrick and Richard Buy to settle all claim s
asserted against the Outside Directors, James Derrick, and Richard Buy .
28 . "Settling Defendants" are Robert A. Belfer, Norman P . Blake, Jr., Ronnie C. Chan,
John H. Duncan, Paulo Ferraz Pereira, Joe H . Foy, Wendy L. Gramm, Robert K. Jaedicke, Charles
A. LeMaistre, John Mendelsohn, Jerome J. Meyer, Frank Savage, John Wakeham, Charls E . Walker,
Bruce G. Willison, Herbert S . Winokur, Jr ., Ken Harrison, John A . Urquhart, Rebecca P . Mark-
Jusbasche, and, as to the Creditors' Committee only, James Derrick and Richard Buy .
29 . "TRO and Preliminary Injunction" means the Temporary Restraining Order and
Preliminary Injunction issued by the Court in the Newby Action on October 18, 2004 (including al l
extensions thereof) and December 8, 2004, respectively .
604310v11007457 6
RECITALS
WHEREAS , Lead Plaintiff brought the Newby Action against, among others, the
Outside Directors .
WHEREAS, the Creditors' Committee brought the Committee Action against, among
others, James Derrick and Richard Buy, and the Creditors' Committee was substituted as th e
plaintiff and real party-in-interest in the Derivative Actions against, among others, the Outsid e
Directors .
WHEREAS, the Outside Directors, James Derrick and Richard Buy are insureds under
the Enron D&O Policies .
WHEREAS, Lead Plaintiff and the Creditors' Committee have entered into th e
Settlement with the Outside Directors, James Derrick and Richard Buy, pursuant to which th e
Outside Directors, James Derrick and Richard Buy have agreed to cause to be paid to Lead
Plaintiff and the Creditors ' Committee the Insurance Proceeds .
WHEREAS, payment of the Insurance Proceeds to Lead Plaintiff and the Creditors '
Committee in accordance with the Settlement will deplete all remaining proceeds under the
Enron D&O Policies.
WHEREAS, the Non-Settling Defendants are defendants in one or more of the Cases .
The Non-Settling Defendants also are insureds under the Enron D&O Policies . Until the
Settlement and the issuance of the TRO and Preliminary Injunction, the Non-Settling Defendant s
had their defense costs in the Cases reimbursed , in whole or in part, by the Insurance Carriers
under the Enron D&O Policies . By virtue of the Settlement, the Non-Settling Defendants will no
604310v1/007457 7
longer be able to have their defense costs'in the Cases reimbursed by the Insurance Carriers
under the Enron D&O Policies . But for this Agreement, the Non-Settling Defendants would
seek payment of unpaid past and future defense costs in the Cases from the Insurance Carriers
under the Enron D&O Policies, would object to the Settlement and would oppose entry of the
Interpleader Judgment , and would appeal any rulings unfavorable to them in connection with the
Settlement and the Interpleader Judgment. In addition, certain of the Non-Settling Defendants
would attempt to bring arbitration actions against the Insurance Carriers with respect to the
Settlement and the Enron D&O Policies .
WHEREAS , faced with demands from the Outside Directors and others with respect t o
the proceeds of the Enron D&O Policies, including the Insurance Proceeds, the Insuranc e
Carriers commenced the Interpleader Action, which seeks to determine to whom the Insuranc e
Proceeds should be paid.
WHEREAS, by the Deposit Order the Court directed those Insurance Carriers above the
Hartford/Twin Cities layer to deposit the Insurance Proceeds into the registry of the Court .
NOW THEREFORE, FOR AND IN CONSIDERATION OF THE MUTUA L
COVENANTS AND AGREEMENTS CONTAINED HEREIN, THE PARTIES AGREE TO
THE ALLOCATION OF THE INSURANCE PROCEEDS, THE RESOLUTION OF THE
INTERPLEADER ACTION, AND OTHER MATTERS DESCRIBED HEREIN ON TH E
FOLLOWING TERMS :
1 . Transfer of the Insurance Proceeds to an Escrow Account . The Parties jointly
will submit to the Court an Order Authorizing Transfer of Insurance Proceeds to Escrow Accoun t
604310v1/007457 8
(the "Transfer Order"), along with an Escrow Agreement, substantially in the form attached hereto
as Exhibit "E." Upon entry of the Transfer Order, and subject to the terms of the Escro w
Agreement, the Insurance Proceeds will be transferred from the registry of the Court to an escro w
account (the "Escrow Account") . At all times, the Insurance Proceeds in the Escrow Account will
be invested in securities of the United States Government bearing minimal risk of loss and with
durations consistent with the obligations for distribution of the Insurance Proceeds provided in this
Agreement . All earnings on the Insurance Proceeds while held both in the registry of the Court and
in the Escrow Account shall be held in the registry and/or the Escrow Account and shall be
distributed to Plaintiffs as provided in this Agreement .
2 . Allocation of the Insurance Proceeds . The Insurance Proceeds shall be allocated
as follows :
A. Set Aside Amounts . The Set Aside Amounts shall be paid from th e
Insurance Proceeds to those Non-Settling Defendants listed on Exhibit "A," severally and not
jointly, in the amounts provided on Exhibit "A ." Each Non-Settling Defendant listed on Exhibit "A"
shall be entitled to receive up to fifty percent (50%) of his Set Aside Amount on the Preliminary
Distribution Date . Each Non-Settling Defendant listed on Exhibit "A" shall be entitled to receive
up to the remaining fifty percent (50%) of his Set Aside Amount on the earlier of (1) the Additional
Distribution Date or (2) April 15, 2005 . No Set Aside Amount shall be paid to any Non-Settling
Defendant unless and until the Preliminary Approval Order is entered by the Court expressly
authorizing the payment from the Insurance Proceeds of the Set Aside Amounts to those Non-
Settling Defendants listed on Exhibit "A ." The Set Aside Amounts shall be paid to those Non-
604310v11007457 9
Settling Defendants listed on Exhibit "A" through their respective counsel of record. No interest
or other earnings shall accrue on any portion of the Insurance Proceeds, including the Set Aside
Amounts, for the benefit of the Non-Settling Defendants . The Set Aside Amounts shall be used by
those Non-Settling Defendants listed on Exhibit "A" exclusively to pay costs of defense, including
attorneys' fees and expert fees, in the Cases, regardless of when incurred, and for no other purpose .
B. Arrearage Payment. The total sum of three million five hundred thousan d
dollars ($3,500,000) shall be paid from the Insurance Proceeds to the Non-Settling Defendants, to
be allocated among them as they agree, in full satisfaction of the Arrearages (the "Arrearage
Payment") . The Non-Settling Defendants shall be entitled to receive up to fi fty percent (50%) of
the Arrearage Payment on the Preliminary Distribution Date . The Non-Settling Defendants shall
be entitled to receive up to the remaining fifty percent (50%) of the Arrearage Payment on the earlier
of (1) the Additional Distribution Date or (2) April 15, 2005 . No portion of the Arrearage Payment
shall be paid to any Non-Settling Defendant unless and until the Preliminary Approval Order is
entered by the Court expressly authorizing the payment from the Insurance Proceeds of the
Arrearage Payment to the Non-Settling Defendants . The Arrearage Payment shall be paid to the
Non-Settling Defendants through the trust account maintained by the law firm of Nickens, Keeton,
Lawless, Farrell & Flack LLP, and once paid to such trust account Plaintiffs shall have no obligation
or responsibility for allocating the Arrearage Payment among the Non-Settling Defendants . No
interest or other earnings shall accrue on any portion of the Insurance Proceeds, including the
Arrearage Payment, for the benefit of the Non-Settling Defendants .
60431Dv1/007457 10
C. Payment to Plaintiffs . With the exception of the Set Aside Amounts and th e
Arrearage Payment, the Insurance Proceeds, including all interest or other earnings thereon, shal l
be paid to Plaintiffs in the ratio of 82 .8% to Lead Plaintiff and 17 .2% to the Creditors' Committee .
The Insurance Proceeds shall be distributed to Plaintiffs from the Escrow Account as provided i n
the Stipulation of Settlement between Plaintiffs and the Settling Defendants .
3 . Settlement and/or Judgment Credit. In any settlement between Lead Plaintiff
and/or the Creditors' Committee, on the one hand, and those Non-Settling Defendants listed on
Exhibit "B," on the other hand, or in satisfaction of any judgment in favor of Lead Plaintiff and/or
the Creditors' Committee against those Non-Settling Defendants listed on Exhibit "B," the Non-
Settling Defendants listed on Exhibit `B" shall receive a credit towards such settlement(s) or
judgment(s), severally and not jointly, in the amount of defense costs, including attorneys' fees and
expert fees, actually paid by each of them on or after July 1, 2004 in the Cases from their personal
resources which has not been reimbursed by the Insurance Carriers, the Set Aside Amounts, or the
Arrearage Payment ; provided, however, that under no circumstances shall the total credit against
such settlement(s) or judgment(s) exceed the amount set forth for each Non-Settling Defendant
listed on Exhibit "B ."
4 . Right to Audit . Plaintiffs shall be entitled to audit the use of the Set Aside Amount s
by the Non-Settling Defendants listed on Exhibit "A" to determine that the Set Aside Amounts were
used to pay costs of defense, including attorneys' fees and expert fees, in the Cases . In the event
that any Non-Settling Defendant listed on Exhibit "B" attempts to seek the settlement or judgment
credit provided in paragraph 3 of this Agreement, Lead Plaintiff and/or the Creditors' Committee ,
6043100/007457 11
as applicable, shall be entitled to audit his payment of defense costs from personal resources to
verify that the amounts were actually paid for defense costs and were not reimbursed by the
Insurance Carriers, the Set Aside Amounts, or the Arrearage Payment . Any dispute between
Plaintiffs and any of the Non-Settling Defendants over use of the Set Aside Amounts or amounts
for which a settlement or judgment credit is sought shall be brought before and decided by the Court
sitting without a jury. Notwithstanding the foregoing, nothing in this paragraph shall be deemed a
waiver of any applicable privilege relating to the documents evidencing any Non-Settling
Defendant's payment of defense costs .
5 . Support for the Interpleader Judgment and the Settlement . The Parties agre e
to entry of the Interpleader Judgment in the form attached hereto as Exhibit "C" and to have their
respective counsel cooperate to file pleadings and appear at hearings as necessary to obtain entry
of the Interpleader Judgment . The Non-Settling Defendants shall not file or otherwise make an
objection to the Settlement in either the Court or the Bankruptcy Court or in any court to which an
appeal is taken, nor shall the Non-Settling Defendants provide support to any other person who does
object to the Settlement.
6 . Access to Document Database . The Settling Defendants and the Non-Settlin g
Defendants shall provide Plaintiffs with access to the document database maintained by such
defendants in accordance with a protocol to be negotiated no later than fifteen (15) days after entry
of the Preliminary Approval Order . Plaintiffs shall not have access to those portions of the
document database containing attorney comments or reflecting attorney mental impressions .
Plaintiffs acknowledge and agree that the access to the Settling Defendants' and Non-Settling
604310v1/007457 12
Defendants' document database shall not constitute in any respect grounds to assert waiver by eithe r
the Settling Defendants or the Non-Settling Defendants of the attorney-client privilege, the work
product doctrine, or any other applicable privilege.
7 . No _lease of Non-Settling Defendants. Notwithstanding anything to the contrar y
in this Agreement, this Agreement is not intended to, nor does it, release any claims against any o f
the Non-Settling Defendants, and nothing in this Agreement shall be deemed to operate as a releas e
or settlement of any such claims .
8 . No Further Claim to Insurance Proceeds or the Enron D&O Policies . With the
exception of the Set Aside Amounts and the Arrearage Payment, the Non-Settling Defendants shall
not be entitled to any portion of the Insurance Proceeds or any payment or reimbursement from the
Insurance Carriers under the Enron D&O Policies, and each Non-Settling Defendant expressly
forever waives and relinquishes any and all right, claim and interest in and to the Enron D&O
Policies . The Non-Settling Defendants covenant and agree not to make any claim or file or
prosecute any suits, arbitrations, or other proceedings against the Insurance Carriers with respect to
the Insurance Proceeds . The Insurance Carriers are intended to be direct beneficiaries of the waiver
and covenant not to sue provided in this paragraph of this Agreement and, as such, shall be entitled
to enforce it in an action before the Court . Notwithstanding the foregoing, the releases, waivers, and
covenant not to sue in this paragraph do not apply to (a) any liability or responsibility of the
Insurance Carriers pursuant to any discovery period or extended reporting period purchased by
Enron under any of the Enron D&O Policies if and to the extent that a new and separate Limit of
liability applies to claims first made during such discovery period or extended reporting period ,
604310v11007457 13
and/or (b) any potential liability of any of the Insurance Carriers under policies of insurance issue d
to Portland General Corporation (including without limitation AEGIS Policy No . DOI 19A1 A96 and
EIM Policy No . 9003 5 3-96DO) .
9 . Dismissal of the Krantz Action . Promptly after the Preliminary Distribution Date,
Non-Settling Defendants Michael Krautz, Scott Yeager, and Kevin Howard shall take all action
necessary to cause the dismissal of the action styled Krautz v. Greenwich Insurance Company, No.
04-CV-83 89 , in the United States District Court for the Southern District ofNew York (the "Krautz
Action") .
10 . Termination of this Agreement, In the event that (a) the Settlement is not finally
approved in all material respects by the Court and the Bankruptcy Court and the time for appeals
has expired or, if any appeals are taken, the Settlement is not approved by any court to which an
appeal is taken; (b) the Interpleader Judgment is not entered in the Interpleader Action in the form
attached hereto as Exhibit "C" or does not become aFinal Judgement; or (c) the Settlement, or any
material part thereof, is terminated in accordance with its terms (the foregoing are "Termination
Events"), this Agreement shall automatically terminate and become null and void and each party
hereto shall have restored to it all of the rights and obligations existing before the Effective Date .
In addition, upon a Termination Event, each Non-Settling Defendant listed on Exhibit "A" shall
promptly return to the Escrow Account his Set Aside Amount, and each Non-Settling Defendant
who received any portion of the Arrearage Payment shall promptly return to the Escrow Account
any amount received as an Arrearage Payment .
604310v1/007457 14
11 . Breach of Agreement. Any disputes or controversies arising out of or related to this
Agreement shall be brought exclusively in and shall be heard by the Court sitting without a j ury, the
Parties expressly waiving all rights to a trial by jury .
12. Informed Agreement, Construction , and Absence of Presump tions. The Parties
acknowledge that they are fully and completely informed of the facts relating to the subject matter
of this Agreement, and of their rights and liabilities ; that the Parties entered into this Agreement
voluntarily after having given careful consideration to the making of this Agreement ; that the Parties
have discussed the provisions of this Agreement with attorneys of their own choosing, and have
executed it in reliance upon their own judgment and the advice of their attorneys. No party makes
any representation to or covenant with any other party about the legal, tax or other consequences of
this Agreement. Each party has had access to and separate representation by the legal, tax and other
advisors of that party's own choosing, and has freely and fully reviewed and negotiated the terms
of this Agreement . Accordingly, no presumption shall apply that any party is the drafter of this
Agreement, nor shall any provision or ambiguity in a provision be construed against a party on the
basis that the party is deemed to have drafted such provision . Nothing in this Agreement shall be
deemed to constitute an admission, concession or waiver by any party as to the interpretation of the
Enron D&O Policies or any other insurance policies at issue in this or any other action .
13 . Modification of Agreement . This Agreement may not be modified or amended,
and there shall be no waiver of its provisions, except by a written instrument executed by the Parties .
14. No Reliance on Other Parties. Each party hereby expresslywarrants and represents
that: (i) he or it is not relying upon any statements, understandings, representations, expectations ,
604310v1J007457 is
or agreements other than those expressly set forth in this Agreement ; (ii) he or it is represented and
has been advised by qualified legal counsel in connection with this Agreement, which such party
makes voluntarily and of its own choice and not under coercion or duress ; (iii) he or it has made his
or its own investigation of the facts and is relying solely upon his or its own information and
knowledge and the advice of its counsel ; (iv) he or it has no expectation that any other party will
disclose to him or it facts material to this Agreement; and (v) he or it knowingly waives any claim
to rescind or avoid this Agreement based upon undisclosed facts, known or unknown . The Parties
agree and stipulate that each party is relying upon the representations and warranties in this
paragraph in entering into this Agreement. These representations and warranties shall survive the
execution of this Agreement . The Parties further warrant and represent that they have not relied on
any promise, representation, conduct or consideration other than those expressly set forth in this
Agreement.
15 . Governing Law. This Agreement shall be interpreted by, governed by, and
enforced under the substantive law of the State of Texas (without regard for its rules concerning
conflicts of law), except insofar as federal law may provide that the Bankruptcy Code or the Federal
Rules of Bankruptcy Procedure supply the governing law .
16. Counterparts. This Agreement may be executed in multiple counterparts, which
shall constitute and be construed as one and the same instrument . Signatures by facsimile may be
deemed executed .
604310v1 /007457 16
Dated :II i
(f C?S Regents of the University of Califo rnia, LeadPlaintiff
"! AIVYID 6 {~M~~~i:;~ T1 it • %4
Dated : LERACH COUGHLIN STOIA GELLERRUDMAN & ROBBINS LLP
_.O.r
William S. LerachCounsel for Lead Plaintiff
Dated : OFFICIAL COMMITTEE OF UNSECUREDCREDITORS OF ENRON CORP .
Dated : McKOOL SMITH, P .C .
Lewis T. LeClairCounsel for the Creditors' Committe e
Dated : RICHARD B . BUY
604310vlro07457 17
Dated: RICHARD A. CAUSE Y
Dated; MARK A. FREVERT
Dated: JEFFREY MCMAHON
Dated: LAWRENCE GREGORY WHALLEY
Dated: NICKENS, KEETON, LAWLESS, FARRELL &FLACK, LLP
Jacks C. NickensAttorney-in-charge for DefendantsRichard B . Buy, Richard A. Causey, Mark A.Frevert, Jeffrey Mcmahon ,and Lawrence Gregory Whalle y
Dated: JEFFREY K. SKILLING
60431 0VI/007457 18
Dated : O'MELVENY & MYERS LLP
Jeffrey W. KilduffAttorney-in-Charge for DefendantJeffrey K. Skilling
Dated :
Dated :
KENNETH L. LAY
CARRINGTON, COLEMAN, SLOMAN &BLUMENTAL, LLP
James E. Coleman, Jr.Attorney-in-Charge for DefendantKenneth L. Lay
Dated :
Dated:
JOSEPH M . HIRKO
STOEL RIVES LLP
David H . AngeliAttorney-in-Charge for DefendantJoseph M. Hirko
604310v11007457 19
Dated :
Dated:
LOU L. PAI
ZUCKERMAN SPAEDER, LLP
Roger ZuckermanAttorney-in-Charge for DefendantLou L. Pai
Dated :
Dated :
MICHAEL KRAUTZ
COLLIER SHANNON SCOTT , PLLC
Barry J. PollackAttorney-in-Charge forMichael Kraut z
Dated : KEVIN HOWARD
604310V 1 07457 20
Dated : ZIMMERMAN & LEVINE, PC
Jim E. LavineAttorney-in-Charge forKevin Howard
Dated :
Dated :
Dated :
SCOTT YEAGER
HAMEL BOWERS & CLARK, LLP
Lee HamelAttorney-in-Charge forScott Yeager
Dated :
Dated:
REX SHELB Y
MCMANEMIN & SMITH, P .C .
Edwin J . TomkoAttorney-in-Charge forRex Shelby
604310v1/007457 21
EXHIBIT "A"
EXHIBIT "A"
SET ASIDE AMOUNTS
Non-Settling Defendant Amount
Richard Buy $50,00 0
Richard Causey $500,000
Mark Frevert $500,000
Kevin Howard $500,000
Michael Krautz $500,000
Kenneth Lay $2,500,000
Jeffrey McMahon $200,000
Jeffrey Skilling $2,500,000
Rex Shelby $1,000,00 0
Greg Whalley $250,000
Scott Yeager $1,000,000
605896v1/007457
EXHIBIT "B"
EXHIBIT "B"
CREDIT FOR NON-SETTLING DEFENDANTS AGAINSTSETTLEMENT OR JUDGMENT
Non-Settling Defendant Amount
Richard Buy $50,000
Richard Causey $1,000,000
Mark Frevert $1,500,00 0
Joseph Hirko $3,500,000
Kenneth Lay $1,000,000
Jeffrey McMahon $200,000
Lou Pai $6,000,000
Jeffrey Skilling $1,000,000
Joseph Sutton $5,000,000
Greg Whalley $250,000
605899v1 /007457
EXHIBIT "C"
UNITED STATES DISTRICT COURTSOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
In re ENRON CORPORATION SECURITIESLITIGATION
This Document Relates To :
MARK NEWBY, et al ., Individually and OnBehalf of All Others Similarly Situated,
Plaintiffs ,
vs .
ENRON CORP ., et al .,
Defendants .
THE REGENTS OF THE UNIVERSITY OFCALIFORNIA, et al ., Individually and On Behalfof All Others Similarly Situated ,
Plaintiffs ,
vs.
KENNETH L. LAY, et al .,
Defendant s
[Caption continued on following page .]
§ Civil Action No . H-O1-3624§ (Consolidated)
§ CLASS ACTION
FINAL JUDGMENT
EXHIBIT C
WASHINGTON STATE INVESTMENTBOARD, et al ., On Behalf of Themselves and AllOthers Similarly Situated,
Plaintiffs,
vs.
KENNETH L. LAY, et al .,
Defendant s
OFFICIAL COMMITTEE OF UNSECUREDCREDITORS OF ENRON CORP . ,
Plaintiffs ,
vs.
ANDREW S. FASTOW, et al .,
Civil Action No . H-02-340 1
CLASS ACTION
Civil Action No . H-04-009 1
Defendants .
The Court has considered the Motions for Judgment on the Pleadings and Motions for
Summa ry Judgment that have been filed concerning whether the relief sought in the First Amended
Third-Party Counterclaim for Interpleader filed by Associated Electric & Gas Insurance Services
("AEGIS"), Energy Insurance Mutual, Limited ("EIM"), Federal Insurance Comp any, Greenwich
Insurance Comp any, ce rtain Underwriters at Lloyd's, London subsc ribing to insurance cert ificate
No. 901 /LK980253 1, St. Paul Mercury Insurance Company, Royal Insurance Company of America,
ACE Bermuda Insurance Ltd ., and Kemper Indemnity Insurance Comp any (the "Excess Insurers"),
who issued excess policies of Directors and Officers Liability Insurance to Enron that are the subject
of the Interpleader Action ("Excess Policies"),' should be granted and whether the $200 mil lion in
insurance proceeds deposited into the Court regist ry pursuant to 28 U .S .C. § 1335 (the "Excess
Insurance Proceeds ") may be used to fund the proposed se ttlement of the Newby and Official
Creditors ' Committee actions.
The Court finds that the interpleader relief sought by the Excess Insurers pursu ant to 28
U.S.C. §§1335, 1397, 2361 and Fed. R. Civ . P . 22 should be gr anted . The Court further finds that
the claims being settled in the Newby and Official Creditors' Committee actions are covered by the
Excess Policies, and the terms of the Se ttlement are fair and reasonable .
Accordingly, the Motions for Summary Judgment and for Judgment on the Pleadings are
GRANTED in their entirety. It is ADJUDGED, ORDERED AND DECREED as follows :
The Excess Policies are : Greenwich Insurance Company Excess Policy No . ELU 82248-01 ;Lloyd's of London Insurance Certificate No. 901/LK9802531 ; St . Paul Mercury Insurance CompanyExcess Policy No . 568CM0934; Federal Insurance Company Excess Policy No . 8181-43-14; RoyalInsurance Company of America Policy No . P SF000633 ; ACE Bermuda Insurance Ltd . ExcessPolicy No . EC-AD01-001 ; Federal Insurance Company Excess Policy No . 8179-41-03SWH, and8181-43-14 and Kemper Excess Policy No . 3DP-00-1003-00 .
-1-
1 . The interpleaded Excess Insurance Proceeds shall be used to fund the pending Newby
and Official Creditors' Committee settlements .
2 . The Excess Insurers and any and all of their current and former agents,
representatives or related companies (including but not limited to, subsidiaries and parent
companies) are hereby discharged from any further liability or responsibility under or with respect t o
the Excess Policies ; provided, however, this discharge does not apply to any liability or
responsibility of the Excess Insurers pursuant to any discovery period or extended reporting period
purchased by Enron under any of the Excess Policies if and to the extent that a new and separate
limit of liability applies to claims first made during such discovery period or extended reporting
period .
3 . The Excess Insurers and any and all of their current and former agents ,
representatives or related companies (including but not limited to, subsidiaries and parent
companies) are hereby discharged from any further liability or responsibility under or with respect to
the Enron D&O Policies relating to (i) the actions that have been consolidated as part of MDL 1446,
including the Newby and Official Creditors Committee litigation and the claims identified in the
Interpleader Action, or (ii) the same or interrelated Wrongful Acts (as defined in the Enron D&O
Policies) alleged in such actions ; provided, however, that no liability of any Excess Insurer under
policies of insurance issued to Portland General Corporation (including without limitation AEGIS
Policy No . DO119AIA96 and EIM Policy No. 900353-96DO) is discharged .
4. Pursuant to 28 U .S.C. § 2361, this Court finds good cause to make permanent an
injunction precluding claims against the Excess Insurers under or with respect to the Excess Policies .
Accordingly, all defendants to the First Amended Complaint in Interpleader filed by the Excess
-2-
Insurers, and any others claiming rights under the Excess Policies and/or the Excess Insurance
Proceeds, and receiving notice of this Final Judgment, are hereby barred and enjoined from :
(a) asserting any claims, rights, causes of action, or demands of whatever nature,
whether known or unknown, foreseen or unforeseen, under the Excess Policies against the Excess
Insurers and each of their parents, subsidiaries, affiliates, insurers, reinsurers, directors, officers,
employees, agents, representatives, attorneys, and their respective heirs, executors, administrators,
successors and assigns ; and
(b) instituting, commencing or prosecuting any arbitration proceeding, or an y
legal proceeding in any state or federal court, against the Excess Insurers and each of their parents,
subsidiaries, affiliates, insurers, reinsurers, directors, officers, employees, agents, representatives,
attorneys, heirs, executors, administrators, successors and assigns, with respect to or for any claims,
causes of action, rights, attorneys' fees, costs, expenses, judgments, settlements, liabilities and
damages, of whatever nature, whether known or unknown, foreseen or unforeseen, that have been,
could have been, or could be asserted in any form, either directly or indirectly, based upon, arising
out of, relating to, concerning, resulting from or in consequence of, or in connection with :
(i) the Excess Policies and/or the Excess Insurance Proceeds ;
(ii) liability under the Enron D&O Policies that relates to actions that hav e
been consolidated as part of MDL 1446, including the Newby and Official Creditors Committee
litigation and the claims identified in the Interpleader Action ; provided , however, that no liabi lity of
any Excess Insurer under policies of insurance issued to Port land General Corporation (including
without limitation AEGIS Policy No. . DOI19AIA96 and EIM Policy No. 900353-96D0) is
discharged ;
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(iii) any past, present or future notice of claim or notice of potential clai m
under the Excess Policies;
(iv) any claim for coverage for "Loss" under the Excess Policies ,
including, but not limited to costs, defense, indemnity or any other payments, services or benefit s
under the Excess Policies or which otherwise relate to the Excess Policies ;
(v) any aspect of the Excess Insurers ' performance (or lack o f
performance) of any duties or obligations under the Excess Policies, whether such duties or
obligations are contractual, extra-contractual, tort, or otherwise, including without limitation any
claims, demands or causes of action relating to any alleged claims handling, claims adjustment,
payments, exhaustion, negligence, breach of contract, breach of duty or duties, breach of good faith
and fair dealing, bad faith, interference with contractual relationships, deceptive trade practices,
conduct in violation of any insurance code or any other alleged misconduct, omission or wrongdoin g
of any kind ;
(vi) any alleged right to recover any payments of any defense fees, costs ,
charges or expenses made by the Insureds under the Excess Policies; o r
(vii) any and all duties, liabilities and obligations under the Excess Policies .
(c) Notwithstanding the foregoing, the injunction pursuant to this Paragraph 4
does not apply to any liability or responsibility of the Excess Insurers pursuant to any discovery
period or extended reporting period purchased by Enron under any ofthe Enron D&O Policies if an d
to the extent that a new and separate limit of liability applies to claims first made during suc h
discovery period or extended reporting period .
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5 . If they have not already done so, defendants Ken L. Harrison, Michael Krautz, Scott
Yeager, Kevin Howard shall immediately dismiss with prejudice the actions they filed against th e
Excess Insurers in the United States Dist rict Court for the Southern District of New York .
6. The complaints filed against the Excess Insurers by Robert A . Belfer, Norman P .
Blake, Jr ., Ronnie Chan, John H . Duncan, Paulo Ferraz Pereira, Joe H. Foy, Wendy L . Gramm,
Robert K. Jaedicke, Charles A . LeMaistre, John Mendelsohn, Jerome J . Meyer, Frank Savage, Joh n
Wakeham, Charls E . Walker , Bruce G. Willison, Herbert S. Winokur, John A. Urquhart, and
Rebecca Mark-Jubasche are hereby dismissed with prejudice, with each party to bear its ow n
attorneys' fees and costs .
7. The Escrow Agent is directed to disburse the Excess Insurance Proceeds in
accordance with the Stipulation of Settlement .
Signed this day of , 2005.
MELINDA HARMONUNITED STATES DISTRICT JUDG E
S :\Scttlement\Enron .Set\Outside Directors Settlement\Interpleader Judge .doc
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EXHIBIT "D"
UNITED STATES DISTRICT COURTSOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
In re ENRON CORPORATION SECURITIES
LITIGATION
This Document Relates To :
MARK NEWBY, et al ., Individually and OnBehalf of All Others Similarly Situated,
Plaintiffs ,
vs .
ENRON CORP ., et al .,
Defendants .
THE REGENTS OF THE UNIVERSITY OFCALIFORNIA, et al ., Individually and On Behalfof All Others Similarly Situated,
Plaintiffs,
vs .
KENNETH L. LAY, et al .,
Defendants
[Caption continued on following page.]
Civil Action No. H-01-3624(Consolidated )
CLASS ACTION
ORDER PRELIMINARILY APPROVING SETTLEMEN T
EXHIBIT D
WASHINGTON STATE INVESTMENT § Civil Action No. H-02-3401BOARD, et al ., On Behalf of Themselves and All §Others Similarly Situated , § CLASS ACTION
Plaintiffs, §
VS . §
KENNETH L. LAY, et al., §
Defendants . §
NATHANIEL PULSIFER, TRUSTEE OF THE § Civil Action No. 02-301 0
§SHOOTERS HILL REVOCABLE TRUST,§ CLASS ACTIONINDIVIDUALLY AND ON BEHALF OF ALL§OTHERS SIMILARLY SITUATED ,
Plaintiffs, §
vs . §
KENNETH L. LAY, et al ., §
Defendants . §
WHEREAS, consolidated class actions are pending before this Court, including In re Enron
Corporation Securities Litigation, Civil Action No . H-0 1-3624, which includes, among others, case s
entitled Newby, et al. v. Enron Corp., et al. ; The Regents of the University of California, et al. v.
Kenneth L. Lay, et al. ; Washington State Investment Board and Employer- Teamsters Local Nos. 175
and 505 Pension Trust Fund, et al. v. Kenneth L. Lay, et al . ; and Nathaniel Pulsifer, Trustee of The
Shooters Hill Revocable Trust, Individually and On Behalf of All Others Similarly Situated v.
Kenneth L. Lay, et al. ; and
WHEREAS, the Settling Parties have applied to the Court, pursuant to Rule 23 of the Federal
Rules of Civil Procedure, for an order approving the settlement of the Actions as to them in
accordance with the Stipulation of Settlement among them dated as of January 12, 2005 (th e
"Stipulation"), which, together with the Exhibits annexed thereto, sets forth the terms and conditions
for a proposed settlement of the Actions as to the Outside Directors and Harrison (the "Settlement" )
and for dismissal of the Actions with prejudice as to the Outside Directors and Harrison ;
WHEREAS, the Stipulation provides for the conditional ce rtification of the Settlement Clas s
solely for purposes of the Settlement; and
WHEREAS, the Court has read and considered the Stipulation and the Exhibits annexe d
thereto and has read and considered all other papers filed and proceedings had herein, and i s
otherwise fully informed in the premises , and with good cause appearing therefore ;
NOW, THEREFORE, IT IS HEREBY ORDERED :
1 . This Order (the "Preliminary Approval Order") incorporates by reference th e
definitions in the Stipulation and the Agreement Regarding Insurance Proceeds and Interpleade r
Action ("Insurance Proceeds Agreement"), and all capitalized terms used herein shall have the same
meanings set forth in the Stipulation and the Insurance Proceeds Agreement .
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2. The Court preliminarily approves the Stipulation, including the releases contained
therein, and the Settlement as being fair, reasonable, and adequate to the Settlement Class .
3 . The Court approves the distribution from the Insurance Proceeds to those Non-
Settling Defendants listed on Exhibit A to the Insurance Proceeds Agreement, severally and not
jointly, of the amounts provided on Exhibit A . Each Non-Settling Defendant listed on Exhibit A
shall be entitled to receive up to fifty percent (50%) of his Set Aside Amount ten (10) calendar days
from the date of this Preliminary Approval Order . Each Non-Settling Defendant listed on Exhibit A
shall be entitled to receive up to the remaining fifty percent (50%) of his Set Aside Amount on th e
earlier of (a) ten (10) calendar days after the entry of the Interpleader Judgment by this Court
substantially in the form attached to the Insurance Proceeds Agreement as Exhibit C or (b) April 15,
2005. Further, the Court approves the distribution from the Insurance Proceeds to the Non-Settling
Defendants (as defined in the Insurance Proceeds Agreement) of the total sum of three million, fiv e
hundred thousand dollars ($3,500,000) . The Non-Settling Defendants (as defined in the Insurance
Proceeds Agreement) shall be entitled to receive up to fifty percent (50%) of the Arrearage Payment
ten (10) calendar days from the date of this Preliminary Approval Order . The Non-Settling
Defendants (as defined in the Insurance Proceeds Agreement) shall be entitled to receive up to the
remaining fifty percent (50%) of the Arrearage Payment on the earlier of (a) ten (10) calendar days
after entry of the Interpleader Judgment by this Court substantially in the form attached to the
Insurance Proceeds Agreement as Exhibit C or (b) April 15, 2005 .
4. Solely for purposes of the Stipulation and the Settlement, the Court now finds and
concludes that :
(a) With respect to all Released Claims, particularly in light of the Settlement : (1)
the members of the Settlement Class are so numerous that joinder of all class members in the
Actions is impracticable ; (2) there are questions of law and fact common to the Settlement Class ; (3 )
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the claims of the Representative Plaintiffs are typical of the claims of the Settlement Class ; and (4) in
negotiating and entering into the Stipulation, the Representative Plaintiffs and their counsel hav e
fairly and adequately represented and protected the interests of all Settlement Class Members ; and
(b) With respect to all Released Claims : (1) the questions of law and fact that ar e
common to the Settlement Class predominate over any individual questions ; and (2) a class action is
superior to other available methods for the fair and efficient adjudication of this controversy ,
considering (i) the interests of the Settlement Class Members in individually controlling th e
prosecution of separate actions, (ii) the extent and nature of any litigation concerning the controvers y
already commenced by Settlement Class Members, (iii) the desirability or undesirability o f
concentrating the litigation of these claims in this particular forum , and (iv) the difficulties likely t o
be encountered in the management of the Actions .
5. Solely for the purposes of the Stipulation and the Settlement, the Settlement Class i s
hereby certified pursuant to Rule 23 of the Federal Rules of Civil Procedure in accordance with the
following definitions as set forth in the Stipulation :
"Settlement Class" means all Persons (and their beneficiaries) who purchased or acquired
any publicly traded equity or debt securities of Enron between September 9,1997 and November 27,
2001, inclusive, and including purchasers of all securities issued by Enron-related entities during the
Settlement Class Period, the value or repayment of which was dependent on the credit, financial
condition, or ability to pay of Enron Corporation (collectively, the "Publicly Traded Securities") . '
' The Publicly Traded Securities include without limitation Enron's publicly traded debt andequity securities (including without limitation Enron's common stock, 6 .40% Notes, 6 .95% Notes,7.875% Notes, 6 .95% Notes, 7% Exchangeable Notes, 6 .625% Notes, 7 .375% Notes, 8 .375%Medium Term Notes, Floating Rate Notes due March 30, 2000, and Zero Coupon Convertible SeniorNotes) as well as preferred securities issued by Enron, Enron Capital LLC 8% CumulativeGuaranteed Monthly Income Preferred Shares, Enron Capital Trust I Trust Originated PreferredSecurities, Enron Capital Trust II Trust Originated Preferred Securities and Enron Capital Resources ,
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Excluded from the Settlement Class are Defendants, the officers and directors of Enron, and
members of their immediate families or their successors, heirs, and legal representatives . Also
excluded from the Settlement Class are those Persons who timely and validly request exclusion fro m
the Settlement Class, to the extent that they are able to do so under Rule 23 of the Federal Rules o f
Civil Procedure, pursuant to the Mailed Notice .
6. Solely for purposes of the Stipulation and the Sett lement, the Representative Plaintiffs
are hereby certified as the class representatives pursuant to Rule 23 of the Federal Rules of Civi l
Procedure .
7. The Court approves , as to form and content , the Notice of Pendency and Partial
Settlement of Class Action annexed hereto as Exhibit F-1 (the "Mailed Notice") .
8 . The Court approves, as to form and content, the Summary Notice for Publication
annexed hereto as Exhibit F-2 (the "Summary Notice") .
9 . The date and time of the Settlement Hearing shall be added to the Mailed Notice and
the Summary Notice before they are mailed and published, respectively, in accordance wit h
paragraph 10, below .
10 . The Court finds that the mailing, publication and distribution of the Mailed Notic e
and Summary Notice substantially in the manner and form set forth in paragraph 10, below ,
L.P. 9% Cumulative Preferred Securities (collectively, the "Preferred Securities"), and Osprey$1,400,000,000 8 .31 % Senior Secured Notes due 03, Yosemite $750,000,000 8 .25% Series 1999-ALinked Enron Obligations due 11/15/04, Yosemite £200,000,000 8.75% Series 2000-A LinkedEnron Obligations due 07, Enron Credit Linked Notes $500,000,000 8% due 05, Osprey$750,000,000 7 .797% Senior Secured Notes due 03 and £315,000,000 6 .375% Senior Secured Notesdue 03, Enron Credit Linked Notes II $500,000,000 7 .375% due 06, Enron Euro Credit LinkedNotes Trust €200,000,000 6 .5% due 06, Enron Sterling Credit Linked Notes Trust £125,000,0007.25% due 06, and Marlin Water Trust II and Marlin Water Capital Corp . II $475,000,000 6 .31 %Senior Secured Notes and €515,000,000 6 .19% Senior Secured Notes (collectively, the "ForeignDebt Securities") .
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constitutes the best notice practicable under the circumstances, including individual notice to all
Settlement Class Members who can be identified through reasonable effort, and constitutes valid,
due and sufficient notice to all persons entitled thereto, complying fully with the requirements of
Rule 23 of the Federal Rules of Civil Procedure and due process .
11 . The Notice and Claims Administrator is empowered to supervise and administer the
notice procedure, as set forth below :
(a) Commencing on or before , 2005, the Notice and Claims
Administrator shall mail or cause to be mailed, by first class mail, postage prepaid, copies of the
Mailed Notice to all Settlement Class Members who can be identified by Plaintiffs' Settlement
Counsel with reasonable effort at each such Settlement Class Member's last known address ; and
(b) On or before , 2005, the Notice and Claims Administrator
shall cause the Summary Notice to be published twice in the Investor's Business Daily and twice in
the Houston Chronicle .
12. At or prior to the Settlement Hearing (as defined below), Plaintiffs' Settlement
Counsel shall file with the Court and serve on counsel for the Outside Directors and Harrison proof
by declaration or affidavit of the mailing and publication described in paragraph 10, above .
13. Settlement Class Members who wish to exclude themselves from the Settlement
Class must do so in accordance with the instructions contained in the Mailed Notice .
14. All Persons who fall within the definition of the Settlement Class and who do not
timely and validly request to be excluded from the Settlement Class in accordance with the
instructions set forth in the Mailed Notice shall be subject to and bound by the provisions of the
Stipulation, the releases contained therein, and the Judgment with respect to all Released Claims,
regardless of whether such Persons seek or obtain by any means, including, without limitation, b y
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submitting a Proof of Claim and Release or any similar document, any distribution from the Gross
Settlement Fund or the Net Settlement Fund .
15. A hearing (the "Settlement Hearing") shall be held on , 2005 at
a.m ./p.m., before the Honorable Melinda Harmon , United States Dist rict Judge, at the United States
District Court for the Southern District of Texas, Bob Casey United States Courthouse, 515 Rusk
Avenue, Houston, Texas 77002, to determine : (a) whether the proposed Sett lement as set forth in the
Stipulation is fair, reasonable and adequate and should be approved by the Court; (b) whether an
Order of Final Judgment and Dismissal, substantially in the form of Exhibit B to the Stipulation,
should be entered herein ; (c) whether the establishment of the Expense Fund should be approved ;
and (d) whether the allocation of the Gross Settlement Fund between the Newby Action and the
WSIB Action, on the one hand, and the Creditors Commi ttee Action, on the other, should be
approved.
16. All papers in suppo rt of the Settlement shall be fi led at least seven (7) days prior to
the Settlement Hearing .
17. Any Settlement Class Member may appear and show cause (if he, she or it has any)
why the Court should or should not : (a) approve the proposed Settlement as set forth in the
Stipulation as fair, reasonable and adequate ; (b) enter the Order of Final Judgment and Dismissal
substantially in the form annexed as Exhibit B to the Stipulation ; (c) approve the establishment of
the Expense Fund ; or (d) approve the allocation of the Gross Settlement Fund between the Newby
Action, the Pulsifer Action and the WSIB Action, on the one hand, and the Creditors Committee
Action, on the other; provided, however that no person shall be heard with respect to, or shall be
entitled to contest, the foregoing matters unless on or before , 2005, that person
has served by hand or by first class mail notice of his, her or its intention to appear, setting forth
briefly each objection and the basis therefor, together with copies of any papers and briefs in suppor t
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of said objections and proof of membership in the Settlement Class, upon Keith F . Park, Lerach
Coughlin Stoia Geller Rudman & Robbins LLP, 401 B Street, Suite 1600, San Diego, California
92101 (on behalf of Lead Plaintiff in the Newby Action and plaintiffs in the WSIB Action), upon
Lew LeClair, McKool Smith PC, 300 Crescent Court, Suite 1500, Dallas, Texas 75201(on behalf of
the Creditors Committee); and upon Kathy Patrick, Gibbs & Bruns, L .L.P., 1100 Louisiana, Suite
5300, Houston, Texas 77002 (on behalf of the Outside Directors) ; and upon William F. Martson, Jr. ,
Tonkon Torp LLP, 888 SW Fifth Avenue, Suite 1600, Portland, Oregon 97204 (on behalf of
Harrison) and has filed said objections, papers and briefs with the Court . Unless otherwise ordered
by the Court, any Settlement Class Member who does not make his, her, or its objection in the
manner provided for herein shall be deemed to have waived such objection and shall forever be
foreclosed from making any objection to the foregoing matters .
18. The Court may adjourn the Settlement Hearing from time to time and without further
notice to the Settlement Class . The Court reserves the right to approve the Settlement at or after the
Settlement Hearing with such modifications as may be consented to by the Settling Parties and
without further notice to the Settlement Class . The Court further reserves the right to enter the Order
of Final Judgment and Dismissal, inter alia, dismissing the Actions with prejudice as to the Settling
Defendants and against Representative Plaintiffs and the Settlement Class at or after the Settlement
Hearing and without further notice to the Settlement Class .
19. Upon the Effective Date, the Representative Plaintiffs and each of the Settlement
Class Members, on behalf of themselves, their successors and assigns, and any other Person claiming
(now or in the future) through or on behalf of them, and regardless of whether any such
Representative Plaintiff or Settlement Class Member ever seeks ; or obtains by any means, including,
without limitation, by submitting a Proof of Claim and Release or any similar document, any
distribution from the Gross Settlement Fund, shall be deemed to have, and by operation of th e
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Judgment shall have, fully, finally, and forever released, relinquished, and discharged all Released
Claims against the Outside Directors and Harrison and shall have covenanted not to sue the Outside
Directors or Harrison with respect to all such Released Claims, and shall be permanently barred and
enjoined from instituting , commencing, or prosecuting any such Released Claim against the Outside
Directors or Harrison.
20. Except as otherwise provided in the Stipulation no person who is not a Settlement
Class Member or counsel for one or more of the Representative Plaintiffs shall have any rights to
any port ion of the Gross Settlement Fund .
21 . Banks, brokerage firms, institutions , and other Persons who are nominees that
purchased Publicly Traded Securities of Enron for the beneficial interest of other Persons during the
Settlement Class Period shall, within ten (10) calendar days of receiving the Mailed Notice (a) send
the Mailed Notice to all such beneficial owners, or (b) if they have not already done so in connection
with the settlement with Andersen Worldwide Societe Cooperative ("AWSC"), send a list of the
names and addresses of such beneficial owners to the Notice and Claims Administrator, in which
event the Notice and Claims Administrator shall promptly mail the Mailed Notice to such beneficial
owners . The Mailed Notice will advise such nominees that their reasonable costs in providing the
Mailed Notice to such beneficial owners, to the extent not already reimbursed in connection with the
prior settlement with AWSC, will be reimbursed by Plaintiffs' Settlement Counsel from the Gross
Settlement Fund.
22 . All reasonable costs and expenses incurred in identifying and providing notice to
Settlement Class Members and in administering the Gross Settlement Fund shall be paid as set forth
in the Stipulation .
23 . The Court retains jurisdiction over all proceedings arising out of or related to the
Stipulation and/or the Settlement.
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24. If for any reason the Settlement does not become effective in accordance with the
terms of the Stipulation, this Preliminary Approval Order shall be rendered null and void and shal l
be vacated nunc pro tunc, and the provisions of ¶¶6 .2 and 7 .5 of the Stipulation shall apply .
25 . Without further order of the Court, the Settling Parties may agree to reasonabl e
extensions of time to carry out any of the provisions of this Preliminary Approval Order or th e
Stipulation.
26. Pending final determination as to whether the Settlement as set forth in the Stipulation
should be approved, no Settlement Class Member shall commence, prosecute, pursue or litigate any
Released Claim against the Outside Directors or Harrison, whether directly, representatively or in
any other capacity, and regardless of whether or not any such Settlement Class Member has
appeared in the Actions.
IT IS SO ORDERED .
DATED :THE HONORABLE MELINDA HARMONUNITED STATES DISTRICT JUDGE
S :\Settlement\Enron .Set\Outside Directors Settlement\preliminary app ord-Clean .do c
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EXHIBIT 0-1
UNITED STATES DISTRICT COURTSOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
In re ENRON CORPORATION SECURITIESLITIGATION
Civil Action No. H-O1-3624(Consolidated )
This Document Relates To :
MARK NEWBY, et al ., Individually and OnBehalf of All Others Similarly Situated,
Plaintiffs ,
vs .
ENRON CORP ., et al .,
Defendants.
THE REGENTS OF THE UNIVERSITY OFCALIFORNIA, et al ., Individually and On Behalfof All Others Similarly Situated,
Plaintiffs ,
vs.
KENNETH L. LAY, et al .,
Defendants .
[Caption continued on following page .]
CLASS ACTION
NOTICE OF PENDENCY AND PARTIAL SETTLE MENT OF CLASS ACTION
EXHIBIT D-1
WASHINGTON STATE INVESTMENTBOARD, et al., On Behalf of Themselves andAll Others Similarly Situated,
Plaintiffs ,vs .
KENNETH L. LAY, et al .,
Defendants .
NATHANIEL PULSIFER, TRUSTEE OFTHE SHOOTERS HILL REVOCABLETRUST, INDIVIDUALLY AND ONBEHALF OF ALL OTHERS SIMILARLYSITUATED,
Plaintiffs,
vs.
KENNETH L. LAY, et al .,
Defendants
§
Civil Action No. H-02-340 1
CLASS ACTION
Civil Action No . 02-301 0
CLASS ACTION
TO: (1) ALL PERSONS WHO PURCHASED OR ACQUIRED PUBLICLY TRADED EQUITYOR DEBT SECURITIES OF ENRON CORPORATION (INCLUDING ALL SECURITIESISSUED BY ENRON-RELATED ENTITIES, THE VALUE OR REPAYMENT OFWHICH WAS DEPENDENT ON THE CREDIT, FINANCIAL CONDITION, ORABILITY TO PAY OF ENRON CORPORATION) ("PUBLICLY TRADED SECURITIES"AS FURTHER DEFINED BELOW) DURING THE PERIOD FROM SEPTEMBER 9,1997THROUGH AND INCLUDING NOVEMBER 27, 200 1
This Notice of Pendency and Partial Settlement of Class Action (the "Notice") is given
pursuant to Rule 23 of the Federal Rules of Civil Procedure to inform you of the proposed partial
settlement of these Actions (the "Settlement") and the hearing (the "Settlement Hearing") to be held
by the United States District Court for the Southern District of Texas (the "Court") to consider the
fairness, reasonableness and adequacy of the Settlement as set forth in the Stipulation of Settlement
among the Representative Plaintiffs and the Outside Directors (as further defined below) and Ken
Harrison ("Harrison"), dated as of January 12, 2005 (the "Stipulation"), on file with the Court . All
capitalized terms not defined prior to their use in this Notice have the meanings set forth in Section
VIII, below .
1 . STATEMENT OF PLAINTIFFS' RECOVERY
The Settlement will result in the creation of a cash settlement fund consisting of tw o
components . The first component is the remaining amount of available proceeds from Enron's
directors and officers liability insurance policies which amount is Two Hundred Million Dollars .
Subject to the approval of the Court, this amount will be reduced by $13 million (the "Set Aside
Amount") and the remainder allocated 82 .8% to the Settlement Class and 17 .2% to the Official
Committee of Unsecured Creditors of Enron Corp . The second component consists of the individual
contributions of the Outside Directors and Harrison in the approximate aggregate amount of $13
million . The total amount available to the Settlement Class by reason of this settlement is estimated
to be $168 million and, subject to deduction for costs of notice and administration and certain taxes
and tax related expenses and for attorneys' fees, costs and expenses as approved by the Court, wil l
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be available for distribution to Settlement Class Members (as defined below). As described more
fully below, the amount of any distribution to Settlement Class Members on a per share basis will
depend on future Court proceedings and it is therefore not possible to estimate the amount of any
such distribution at the present time . See Section XI .
II. STATEMENT OF POTENTIAL OUTCOM E
Representative Plaintiffs, the Outside Directors and Harrison do not agree on the averag e
amount of damages per share that would have been recoverable from the Outside Directors or
Harrison if Representative Plaintiffs were to have prevailed on each claim asserted . The issues on
which the parties disagree include: (1) whether the Outside Directors or Harrison engaged in conduct
that would give rise to any liability to the Settlement Class under the federal or Texas securities
laws, Texas common law, or any other laws ; (2) whether the Outside Directors or Harrison have
valid defenses to any such claims of liability ; (3) the appropriate economic model for determining
the amount by which the Publicly Traded Securities were allegedly artificially inflated (if at all)
during the Settlement Class Period ; (4) the amount by which the Publicly Traded Securities were
allegedly artificially inflated (if at all) during the Settlement Class Period ; (5) the effect of various
market forces influencing the trading price of Publicly Traded Securities at various times during the
Settlement Class Period; (6) the extent to which external factors, such as general market conditions,
influenced the trading price of Publicly Traded Securities at various times during the Settlement
Class Period ; (7) the extent to which the various matters that Representative Plaintiffs alleged were
materially false or misleading influenced (if at all) the trading price of Publicly Traded Securities at
various times during the Settlement Class Period ; (8) the extent to which the various allegedly
adverse material facts that Representative Plaintiffs alleged were omitted influenced (if at all) the
trading price of the Publicly Traded Securities at various times during the Settlement Class Period ;
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(9) whether the statements made or facts allegedly omitted were false, material or otherwise
actionable under the federal securities or other laws .
III. STATEMENT OF ATTORNEYS' FEES AND EXPENSES SOUGH T
At a future date, upon further notice to the Settlement Class, counsel for the Representativ e
Plaintiffs will apply to the Court for an award of attorneys' fees from the Gross Settlement Fund . No
attorneys' fees are being sought at this time . However, the Stipulation provides for the allocation of
Sixteen Million Dollars ($16,000,000) (the "Expense Fund") of the settlement fund for
reimbursement of expenses incurred and expected to be incurred by Plaintiffs' Settlement Counsel in
prosecuting the Actions. The Court will be asked to approve the establishment of the Expense Fund
at the Settlement Hearing .
IV. REASONS FOR SETTLEMENT
The Representative Plaintiffs and their counsel believe that this Settlement is fair, reasonable ,
and adequate to the Members of the Settlement Class . The Representative Plaintiffs and their
counsel have reached this conclusion after investigating and considering, among other things, the
strengths and weaknesses of the Representative Plaintiffs' claims against the Outside Directors and
Harrison and the Outside Directors' and Harrison's defenses to those claims, the fact that certain of
the claims asserted against the Outside Directors have been dismissed by Court Order dated March
12 and March 25, 2003, the uncertainties of this complex litigation, and the benefit provided by the
Settlement to the Members of the Settlement Class . See Section VII .
V. IDENTIFICATION OF ATTORNEYS' REPRESENTATIVES
Any questions regarding the Settlement should be directed to Plaintiffs' Settlement Counsel
or their staff-
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RICK NELSONLERACH COUGHLIN STOIA GELLER RUDMAN & ROBBINS LLP401 B Street, Suite 1600San Diego, CA 92101-4297Telephone: (800) 449-4900
PLEASE READ THIS NOTICE CAREFULLY. THIS NOTICE RELATES TO A
PROPOSED PARTIAL SETTLEMENT OF THESE ACTIONS AND, IF YOU ARE A
SETTLEMENT CLASS MEMBER, CONTAINS IMPORTANT INFORMATION AS TO YOU R
RIGHTS CONCERNING THE SETTLEMENT AS FURTHER DESCRIBED BELOW .
EXCLUSION DEADLINE : REQUESTS FOR EXCLUSION MUST BE FILED SO AS T O
BE RECEIVED NO LATER THAN , 2005 . SECURITIES BROKERS AND
OTHER NOMINEES: PLEASE SEE THE INSTRUCTIONS ON PAGE BELOW .
VI. BACKGROUND OF THE LITIGATION
The Outside Directors have been named as defendants in the Newby Action . They moved to
dismiss the Newby Action on the ground that the complaint failed to state a claim upon which relie f
could be granted because plaintiffs failed to adequately plead the Outside Directors' scienter . On
March 12 and 25, 2003, the Court granted the Outside Directors' motion to dismiss all claims agains t
them asse rted under the Securities Exchange Act of 1934 (the "1934 Act") and under the Texas
Securities Act. The Outside Directors contend that this ruling necessari ly requires dismissal of any
1934 Act or Texas Securities Act claims that might be pursued against the Outside Directors in the
Newby Action, The Outside Directors were also named as defend ants in the Washington State
Investment Board case . Their motion to dismiss was under submission when the settlement wa s
reached. Harrison's motion to dismiss the Newby Action was denied and his motion to dismiss th e
Washington State Investment Board case was under submission when the settlement was reached .
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VII. BACKGROUND OF THE SETTLEMENT
Counsel for the Representative Plaintiffs have conducted an investigation relating to the
claims and underlying events alleged in the complaints . Counsel for the Representative Plaintiffs
also have conducted considerable formal and informal discovery in the Actions and in related
litigation and have analyzed the evidence obtained therein, and have researched the applicable law
with respect to the claims alleged in the complaints and the potential defenses thereto .
The Representative Plaintiffs, by their counsel, have conducted arm's-length negotiations
with counsel for the Outside Directors and Harrison with a view toward settling the issues in dispute
and achieving the best result possible consistent with the interests of the Settlement Class .
Based upon their investigation, counsel for the Representative Plaintiffs have concluded that
the terms of the Settlement as set forth in the Stipulation are fair, reasonable, and adequate to the
Representative Plaintiffs and the Settlement Class, and in the best interest of the Representative
Plaintiffs and the Settlement Class, and have agreed to settle the Actions as to the Outside Directors
and Harrison pursuant to the terms and provisions of the Stipulation, after considering (i) the benefits
that the Representative Plaintiffs and the Settlement Class will receive from the Settlement ; (ii) the
attendant risks of litigation ; and (iii) the desirability of permitting the Settlement to be consummated
as provided by the terms of the Stipulation .
The Outside Directors and Harrison have denied and continue to deny each and all of the
claims and allegations of wrongdoing made by the Representative Plaintiffs in the Actions and
maintain furthermore that they have meritorious defenses . The Outside Directors and Harrison have
expressly denied and continue to deny all charges of wrongdoing or liability against them arising out
of any of the conduct, statements, acts or omissions alleged, or that could have been alleged, in the
Actions . The Outside Directors and Harrison also have denied and continue to deny, inter alia, the
allegations that the Representative Plaintiffs or the Settlement Class Members were harmed by th e
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Outside Directors' and Harrison's conduct alleged in the Actions . Pursuant to the terms of the
Stipulation, the Stipulation shall in no event be construed or deemed to be evidence of or an
admission or concession by the Outside Directors and Harrison with respect to any claim of any faul t
or liability or wrongdoing or damage whatsoever.
Nonetheless, the Outside Directors and Harrison have concluded that further conduct of the
Actions would be protracted and expensive, and that it is desirable that the Actions be fully and
finally settled in the manner and upon the terms and conditions set forth in the Stipulation . The
Outside Directors and Harrison also have taken into account the uncertainty and risks inherent in any
litigation, especially in complex cases like the Actions . The Outside Directors and Harrison have,
therefore, determined that it is desirable and beneficial to them that the Actions be settled in th e
manner and upon the terms and conditions set forth in the Stipulation .
THIS NOTICE IS NOT INTENDED TO BE, AND SHOULD NOT BE CONSTRUED AS ,
AN EXPRESSION OF ANY OPINION BY THE COURT WITH RESPECT TO THE TRUTH O F
THE ALLEGATIONS IN THE ACTIONS OR THE MERITS OF THE CLAIMS OR DEFENSE S
ASSERTED. THIS NOTICE IS SOLELY TO ADVISE YOU OF THE PENDENCY OF THE
ACTION AND THE PROPOSED PARTIAL SETTLEMENT THEREOF AND OF YOUR
RIGHTS IN CONNECTION THEREWITH .
VIII. DEFINITIONS
As used in this Notice, the following terms have the meanings specified below . Any
capitalized terms not specifically defined in this Notice shall have the mean ings set forth for such
terms in the Stipulation .
"Actions" means, for purposes of this notice , the Newby Action, Washington State
Investment Board, et al. v. Kenneth L. Lay, et al., Civil Action No. H-02-3401 (S .D. Tex.) (the
"WSIB Action") ; Nathaniel Pulsifer, Trustee of The Shooters Hill Revocable Trust, Individually an d
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On Behalf ofAll Others Similarly Situated v . Kenneth L. Lay, et al ., Civil Action No . 02-3010 (S .D .
Tex.).
2. "Authorized Claimant" means any Settlement Class Member who is entitled to a
distribution from the Gross Settlement Fund pursuant to the terms of the Stipulation, any Plan of
Allocation, or any order of the Court .
3 . "Bankruptcy Court" means the United States District Court for the Southern District
of New York, presiding over In re Enron Corp., et. al., Case No. 01-16034 (AJG) .
4. "Court" means the United States District Court for the Southern District of Texas,
Houston Division .
5. "Defendants" means each and all of the defendants that have been or may be named
in any of the complaints in the Actions .
6 . "Committee Action" means Official Committee of Unsecured Creditors of Enron
Corp. v. Andrew S. Fastow, et al., Civil Action No. H-04-0091 (S .D. Tex.) .
7. "Derivative Actions" means Pirelli Armstrong Tire Corporation Retiree Medica l
Benefits Trust, Derivatively on Behalf of Enron Corporation, et al. v. Kenneth Lay, et al., Civil
Action No. H-01-3645, in the United States District Court for the Southern District of Texas ;
Detectives Endowment Association Annuity Fund, derivatively on behalf of Enron Corporation v .
Kenneth L. Lay et al., C .A. No. H-01-3892; Joseph E. Kassoway and Robert T. Kassoway Trust v.
Andrew S. Fastow et al., C.A. No. H-01-3690 ; Fred Greenberg, derivatively on behalf of Enron
Corp. v. Robert A. Belfer et al., C.A. No. H-01-3998; Lynn Goffman et al. v. Robert A . Belfer et al.,
C.A. No. H-02-1838; David Trzebucki et al. v. Andrew S. Fastow et al., C.A. No. H-02-1832; Rick
Barksy v. ArthurAndersen LLP et al., C.A. No. H-02-1922; Richard P. Bergsieker v. Kenneth L . Lay
et al., C.A. No. H-02-3427 and any other case asserting derivative claims or claims that are the
property of Enron .
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8. "Effective Date" means the first date by which all of the events and condition s
specified in paragraph 7 .1 of the Stipulation have occurred and have been met, respectively .
9. "Enron" means Enron Corp ., a reorganized debtor .
10. "Enron D&O Policies" means Associated Electric & Gas Insurance Services Limited
Insurance Policy No. D0079A1 A98; Energy Insurance Mutual Limited Excess Policy No . 900630-
OODO; Federal Insurance Company Excess Policy No . 8142-05-47; Hartford/Twin City Fir e
Insurance Company Excess Policy No. NDA 0131301-98H; Greenwich Insurance Company Exces s
Policy No. ELU 82248-01 ; Lloyd's of London Insurance Certificate No . 901/LK9802531 ; St . Pau l
Mercury Insurance Company Excess Policy No . 568CM0934; Federal Insurance Company Excess
Policy No. 8181-43-14; Royal Insurance Company of America Policy No . P SF000633 ; ACE
Bermuda Insurance Ltd . Excess Policy No . EC-ADO 1-001 ; and Kemper Insurance Indemnity Co . as
participating in Federal Quota Share Policy No . 8179-41-03 .
11 . "Expense Fund" means a principal amount not to exceed Sixteen Million Dollar s
($16,000,000), plus any interest that may accrue thereon . The Expense Fund shall be paid from, and
not in addition to, the Gross Settlement Fund .
12. The term "Harrison" means Ken L. Harrison and his attorneys, insurers, and each and
all of the heirs, executors, administrators, spouses, assigns and/or bankruptcy estates of such persons ,
in each instance only in their capacity as such, but excluding the Non-Settling Defendants in the
Actions .
13. "Judgment " means, for purposes of this notice, a judgment to be rendered by the
Court, substantially in the form attached to the Stipulation as Exhibit D .
14 . "Lead Plaintiff means The Regents of the University of California .
15 . "Newby Action" means the actions brought on behalf of all purchasers (and their
beneficiaries) of any publicly traded equity and debt securities of Enron Corporation, as defined i n
-8-
that action, from October 19, 1998 through November 27, 2001, inclusive (excluding Defendants ,
the officers and directors of Enron, and members of their immediate families or their successors ,
heirs, and legal representatives ), proceeding as a consolidated action captioned Newby, et al. v .
Enron Corp., et al., No . H-01-3624 (S .D. Tex .) .
16. "Insurance Proceeds" means the sum of $200 million dollars which represents th e
remaining limits of coverage under the Enron D&O Policies written by those insurance carrier s
above the layer of insurance provided by Hartford/Twin Cities Insurance Company (the "Insurance
Carriers").
17. "Interpleader Action" means the First Amended Third Party Counterclaim fo r
Interpleader filed by the Insurance Carriers in the Newby Action on October 22, 2004, related to
disposition of the Insurance Proceeds, pending in the Court .
18. "Non-Outside Director Defendants" means the defendants other than the Outsid e
Directors that have been named in the complaints in the Actions .
19. "Non-Settling Defendants" means each and all of the current Defendants except th e
Outside Directors and Harrison .
20. "Notice and Claims Administrator" mean s Gilardi & Co. LLC or its successors.
21 . "Outside Directors" means Robert Belfer, Norman Blake, Ronnie Chan, Joh n
Duncan, Paulo Ferraz Pereira, Joe Foy, Wendy Gramm, Robert Jaedicke, Charles LeMaistre ,
Rebecca Mark-Jusbasche, John Mendelsohn, Jerome Meyer, Frank Savage, John Urquhart, John
Wakeham, Charls Walker, Bruce Willison and Herbert Winokur and their attorneys, insurers, and
each and all of the heirs, executors, administrators, spouses, assigns and/or bankruptcy estates of
such persons, in each instance only in their capacity as such, and any person or entity in which an y
of the above has or had a controlling interest or which is or was related to or affiliated with any o f
the above, but excluding the Non-Settling Defendants in the Actions .
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22. "Person" means an individual, corporation, limited liability corporation, professional
corporation, limited liability partnership, partnership, limited partnership, association, joint stock
company, estate, legal representative, trust, unincorporated association, government or any political
subdivision or agency thereof, and any business or legal entity and any spouses, heirs, predecessors,
successors, representatives, or assignees of any of the foregoing .
23. "Plaintiffs' Settlement Counsel" means Lerach Coughlin Stoia Geller Rudman &
Robbins LLP (and any successors thereof), William S . Lerach, Keith F . Park, Helen J . Hodges, 401
B Street, Suite 1600, San Diego, California 92101 .
24. "Plan of Allocation" means any plan or formula of allocation of the Gross Settlement
Fund, to be approved by the Court upon further notice to the Settlement Class, whereby the Net
Settlement Fund shall in the future be distributed to Authorized Claimants . Any Plan of Allocation
is not part of the Stipulation and the Outside Directors and Harrison shall have no responsibility or
liability with respect thereto .
25. "Proof of Claim and Release" means the form to be sent to Settlement Class
Members, upon further order(s) of the Court, by which Settlement Class Members may make claims
against the Settlement Fund for damages allegedly incurred by reason of their investment(s) in the
Publicly Traded Securities .
26. "Released Claims" means : any and all claims, demands, rights, liabilities and causes
of action (including "Unknown Claims" as defined in ¶33, below) of any nature whatsoever
(excluding claims under ERISA), asserted under the Securities Act of 1933, that Representative
Plaintiffs and/or any Settlement Class Member have, had, or may have against the Outside Directors
or Harrison based on, arising out of, or related to, directly or indirectly, both purchases or other
acquisitions of any Publicly Traded Securities, including stock, notes and foreign debt securities ,
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during the Settlement Class Period and all acts, facts, statements, or omissions that were or coul d
have been alleged in the Actions .
27. "Representative Plaintiffs" means the Lead Plaintiff in the Newby Action and the
named plaintiffs in the Actions.
28. "Settlement Amount" means: (1) the Insurance Proceeds and (2) the Stock Sales Gai n
Amount .
29. "Settlement Class" means all Persons (and their beneficiaries) who purchased or
acquired any publicly traded equity or debt securities of Enron between September 9, 1997 and
November 27, 2001, inclusive, and including purchasers of all securities issued by Enron-related
entities during the Settlement Class Period, the value or repayment of which was dependent on the
credit, financial condition, or ability to pay of Enron Corporation (collectively, the "Publicly Traded
Securities").' Excluded from the Settlement Class are Defendants, the officers and directors of
Enron, and members of their immediate families or their successors, heirs, and legal representatives .
Also excluded from the Settlement Class are those Persons who timely and validly request exclusio n
I The Publicly Traded Securities include without limitation Enron's publicly traded debt andequity securities (including without limitation Enron's common stock, 6 .40% Notes, 6 .95% Notes,7 .875% Notes, 6 .95% Notes, 7% Exchangeable Notes, 6 .625% Notes, 7 .375% Notes, 8 .375%Medium Term Notes, Floating Rate Notes due March 30, 2000, and Zero Coupon Convertible SeniorNotes) as well as preferred securities issued by Enron, Enron Capital LLC 8% CumulativeGuaranteed Monthly Income Preferred Shares, Enron Capital Trust I Trust Originated PreferredSecurities, Enron Capital Trust II Trust Originated Preferred Securities and Enron Capital Resources,L.P. 9% Cumulative Preferred Securities (collectively, the "Preferred Securities"), and Osprey$1,400,000,000 8 .31 % Senior Secured Notes due 03, Yosemite $750,000,000 8 .25% Series 1999-ALinked Enron Obligations due 11/15/04, Yosemite £200,000,000 8 .75% Series 2000-A LinkedEnron Obligations due 07, Enron Credit Linked Notes $500,000,000 8% due 05, Osprey$750,000,000 7 .797% Senior Secured Notes due 03 and €315,000,000 6 .375% Senior Secured Notesdue 03, Enron Credit Linked Notes II $500,000,000 7 .375% due 06, Enron Euro Credit LinkedNotes Trust €200,000,000 6 .5% due 06, Enron Sterling Credit Linked Notes Trust £125,000,0007.25% due 06, and Marlin Water Trust II and Marlin Water Capital Corp . II $475,000,000 6.31%Senior Secured Notes and @515,000,000 6 .19% Senior Secured Notes (collectively, the "ForeignDebt Securities") .
-11-
from the Settlement Class, to the extent that they are permitted to do so under Rule 23 of the Federal
Rules of Civil Procedure, pursuant to this notice .
30 . "Settlement Class Member" or "Member of the Settlement Class" mean a Person who
falls within the definition of the Settlement Class .
31 . "Settlement Class Period" means the period commencing on September 9, 1997
through November 27, 2001, inclusive .
32. "Settling Parties" means, collectively, the Representative Plaintiffs (on behalf of
themselves and the Settlement Class Members) and each of the Outside Directors and Harrison .
33. "Stock Sales Gain Amount" means ten percent (10%) of each of the Outside
Director's and Harrison's net gain on sales of Enron stock as recited in the Newby Action ("Sales of
Enron Stock") . The Stock Sales Gain Amount is limited to stock or stock options granted to th e
Outside Directors and Harrison during the Class Period as compensation for their services as
directors or officers of Enron . For purposes of the calculation and payment of the Stock Sales Gain
Amount, "Sales of Enron Stock" shall include sales of stock, . exchange fund transactions and
cashless exercises of stock options, but shall not include collar transactions from which the Outside
Directors or Harrison received no proceeds during the Class Period . Until deposited in the Stock
Sales Escrow Account pursuant to the terms of the Stipulation, the Stock Sales Gain Amount shall
bear interest at the rate of 5% per annum (i) from November 8, 2004, in the case of each of the
Outside Directors, and (ii) from December 15, 2004, in the case of Harrison . All provisions in the
Stipulation relating to the Stock Sales Gain Amount are several, and not joint, as to each of the
Outside Directors and Harrison .
34. "Unknown Claims" means any Released Claim that any Plaintiff or Settlement Class
Member does not know or suspect to exist in his, her or its favor at the time of the release of the
Released Defendants that if known by him, her or it, might have affected his, her or its settlemen t
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with and release of the Released Defendants, or might have affected his, her or its decision not to
object to this settlement or not to exclude himself, herself or itself from the Settlement Class . With
respect to any and all Released Claims, the Settling Parties stipulate and agree that, upon th e
Effective Date, the Plaintiffs shall expressly waive, and each of the Settlement Class Members shal l
be deemed to have waived and by operation of the Judgment shall have waived, the provisions ,
rights and bene fits of Californ ia Civil Code § 1542, which provides :
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH TH E
CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR A T
THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM
MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH TH E
DEBTOR.
The Plaintiffs shall expressly waive, and each of the Settlement Class Members shall be deemed t o
have waived and by operation of the Judgment shall have waived , any and all provisions , rights and
benefits conferred by any law of any state or territory of the United States, or p rinciple of common
law, that is similar , comparable or equivalent to Californ ia Civil Code § 1542 . The Plaintiffs and
Settlement Class Members may hereafter discover facts in addition to or different from those that
any of them now knows or believes to be true with respect to the subject matter of the Release d
Claims, but each Plaintiff shall expressly have, and each Settlement Class Member shall be deeme d
to have and by operation of the Judgment shall have, fully, finally, and forever settled and release d
any and all Released Claims, known or unknown, suspected or unsuspected, contingent or non-
contingent, whether or not concealed or hidden, that now exist, or heretofore have existed upon an y
theory of law or equity now existing or coming into existence in the future, including, but not limite d
to, conduct that is negligent, reckless, 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 additiona l
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facts . The Plaintiffs acknowledge, and the Sett lement Class Members shall be deemed to have
acknowledged, and by operation of the Judgment shall have acknowledged, that the foregoin g
waiver was separately bargained for and a key element of the settlement of which this release is a
part .
35. "WSIB Action" means the action brought on behalf of all purchasers of the Publicl y
Traded Securities from September 9, 1997 through October 18, 1998, inclusive (excluding
Defendants, the officers and directors of Enron, and members of their immediate families or thei r
successors, heirs, and legal representatives), captioned Washington State Investment Board, et al . v.
Kenneth L . Lay, et al., Civil Action No . H-02-3401 (S .D. Tex.) .
IX. THE SETTLEMENT CLAS S
By Order dated , 2005, the Court certified the Settlement Clas s
pursuant to Rule 23(b)(3) of the Federal Rules of Civil Procedure, for the purpose of the Settlement
only, and directed that this Notice be given to Members of the Settlement Class . If you fall within
the definition of the Settlement Class set forth above at Section VIII then you are a Settlement Class
Member.
X. THE RIGHTS OF SETTLEMENT CLASS MEMBERS
If you are a Settlement Class Member, you may receive the benefit of, and you will be bound
by, the terms of the proposed Settlement described in Section XI of this Notice, upon approval ofthe
proposed Settlement by the Court .
If you are a Member of the Settlement Class and if you do not wish to be included in th e
Settlement Class and do not wish to participate in the proposed Settlement described in this Notice ,
you may request to be excluded with respect to all Released Claims.
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To request to be excluded in accordance with the preceding paragraph, you must send a
signed, written request to be excluded, postmarked no later than , 2005, and addressed
as follows :
In re Enron Corporation Securities Litigationc/o Gilardi & Co. LLCP.O. Box 5100Larkspur, CA 94977-510 0
You must set forth the name of this Action (In re Enron Corporation Securities Litigation,
Civil Action No . H-01-3624 (Consolidated)), your name, address and telephone number, and state
that you "request exclusion from the Settlement Class in In re Enron Corporation Securities
Litigation, Civil Action No. H-01-3624 (Consolidated) ." You must also set forth the number and
type of Publicly Traded Enron securities that you purchased and sold during the Settlement Class
Period and the prices at which the shares were purchased and sold, along with the name and address
of the record owner of such shares if different from your own. NO PERSON OR ENTITY MAY
EXCLUDE HIMSELF, HERSELF, OR ITSELF FROM THE SETTLEMENT CLASS AFTER
, 2005 .
If you validly request exclusion from the Settlement Class (a) you will be excluded from the
Settlement Class, (b) you will not share in the proceeds of the Settlement described herein, (c) you
will not be bound by any judgment entered in the Actions insofar as such judgment relates to the
Actions, and (d) you will not be precluded, by reason of your decision to request exclusion from the
Settlement Class, from otherwise prosecuting an individual claim, if timely and otherwise valid,
against the Outside Directors based on the matters complained of in the Actions . If you are a
Settlement Class Member, you may, but are not required to, enter an appearance through counsel of
your own choosing at your own expense, provided that such counsel must file an appearance on your
behalf on or before , 2005, and must serve copies of such appearance on the
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attorneys listed in Section XIV below . If you do not enter an appearance through counsel of your
own choosing, you will be represented by Plaintiffs' Settlement Counsel .
XI. TERMS OF THE PROPOSED SETTLEMEN T
A settlement has been reached in the Actions between the Representative Plaintiffs and the
Outside Directors, the terms and conditions of which are set forth in the Stipulation and the Exhibits
thereto. The following description of the proposed Settlement is only a summary, and reference is
made to the text of the Stipulation, on file with the Court, for a full statement of its provisions .
A. The Settlement Fun d
The entire settlement fund (the "Gross Settlement Fund") consists of the aggregate principa l
amount of Two Hundred Thirteen Million Dollars ($213,000,000) in cash, plus interest thereon, that
has been placed into an interest-bearing account pursuant to the terms of the Stipulation . The
Stipulation provides for the establishment of an Expense Fund in the amount of Sixteen Million
Dollars ($16,000,000), which shall be paid from, and not in addition to, the Gross Settlement Fund .
At the Settlement Hearing, the Court will be asked to approve the establishment of the Expense
Fund. The Expense Fund will be used, subject to the Court's approval(s), to reimburse Plaintiffs'
Settlement Counsel for the expenses that they have incurred and expect to incur in the prosecution of
the Actions. A portion of the Gross Settlement Fund will also be used to pay for this Notice as well
as taxes and tax return preparation expenses regarding the interest earned on the Gross Settlement
Fund .
The Court will be asked to allocate the insurance Proceeds (after deduction of the Set Aside
Amount) 82 .5% to the Settlement Class and 17 .5% to the settlement of the Committee Action and
the Derivative Actions.
After further notice to the Settlement Class and an opportunity to be heard, Plaintiffs'
Settlement Counsel will seek approval by the Court of a Plan of Allocation that will govern th e
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calculation of Settlement Class Members' claims . In the future, Settlement Class Members will be
sent a Proof of Claim and Release form to establish their claims against the Gross Settlement Fund .
Plaintiffs' Settlement Counsel anticipate that distributions to the Settlement Class will occur
in connection with additional recoveries against the remaining Defendants in the Actions .
B. Releases
If the proposed Settlement is approved by the Court, the Court will enter an order (the "Order
of Final Judgment and Dismissal") that will dismiss the Actions with prejudice as to the Outside
Directors and Harrison . In addition, upon the Effective Date, the Representative Plaintiffs and each
of the Settlement Class Members, on behalf of themselves, their successors and assigns, and any
other Person claiming (now or in the future) through or on behalf of them, and regardless ofwhether
any such Representative Plaintiff or Settlement Class Member ever seeks or obtains by any means,
including, without limitation, by submitting a Proof of Claim and Release, any distribution from that
portion of the Gross Settlement Fund allocated to the Settlement Class, shall be deemed to have, an d
by operation of the Judgment shall have, fully, finally, and forever released, relinquished, and
discharged all Released Claims against the Outside Directors and Harrison and shall have covenanted
not to sue the Outside Directors or Harrison with respect to all such Released Claims, and shall be
permanently barred and enjoined from instituting, commencing, or prosecuting any such Released
Claim against the Outside Directors or Harrison . In addition, subject to certain limitations set forth
in the Stipulation, the Outside Directors and Harrison will release the Representative Plaintiffs, the
Settlement Class Members and Plaintiffs' Settlement Counsel from any claims relating to the
prosecution of the Actions . The Court shall retain jurisdiction over these Actions, including, without
limitation, all matters with respect to implementation and enforcement of the terms of the
Stipulation .
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XII. NOTICE TO BANKS, BROKERS AND OTHER NOMINEE S
Banks, brokerage firms, institutions, and other persons who are nominees that purchase d
Enron Publicly Traded Securities for the beneficial interest of other persons as of any date from
September 9, 1997 through and including November 27, 2001 are requested to, within ten (10)
calendar days of receipt of this Notice, (1) provide the Notice and Claims Administrator with th e
names and addresses of such beneficial purchasers (IF YOU HAVE NOT ALREADY DONE SO IN
CONNECTION WITH THE NOTICE TO SETTLEMENT CLASS MEMBERS SENT IN TH E
FALL OF 2003 REGARDING THE PARTIAL SETTLEMENT WITH ANDERSEN
WORLDWIDE SOCIETE COOPERATIVE ("AWSC")), or (2) forward a copy of this Notice to
each such beneficial purchaser and provide Plaintiffs' Settlement Counsel with written confirmatio n
that the Notice has been so forwarded . Upon submission of appropriate documentation, Plaintiffs '
Sett lement Counsel will reimburse your reasonable costs and expenses of complying with this
provision (to the extent you have not already been reimbursed for providing a list of beneficial
purchasers in connection with the previous partial settlement with AWSC) . Additional copies of this
Notice may be obtained from the Notice and Claims Administrator by writing to :
In re Enron Corporation Securities Litigationc/o Gilardi & Co. LLCP.O. Box 5100Larkspur, CA 94977-5100
Correspondence to Plaintiffs' Settlement Counsel should be addressed as follows :
WILLIAM S . LERACHKEITH F . PARKHELEN J. HODGESLERACH COUGHLIN STOIA GELLERRUDMAN & ROBBINS LLP
401 B Street , Suite 1600San Diego , CA 92101-4297
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XIII. APPLICATION FOR ATTORNEYS' FEES AND EXPENSES
Plaintiffs' Settlement Counsel do not intend to apply for an award of attorneys' fees at thi s
time. As noted above, however, Plaintiffs' Settlement Counsel will ask the Court at the Settlement
Hearing to approve the establishment of the Expense Fund in the amount of $16,000,000.
Reimbursement of expenses from the Expense Fund will only occur upon further Court order . Any
application for attorneys' fees and reimbursement of expenses not otherwise recovered from th e
Expense Fund will only occur after notice of that application has been given to the Settlement Clas s
and an opportunity to be heard . Any such sums as awarded by the Court will be paid from the Gross
Settlement Fund .
XIV. THE SETTLEMENT HEARING
A hearing (the "Settlement Hearing") will be held on , 2005 a t
m., before the Honorable Melinda Harmon, United States District Judge, at the United
States District Court for the Southern District of Texas, Bob Casey United States Courthouse, 515
Rusk Avenue, Houston, Texas 77002, for the purpose of determining (a) whether the proposed
Settlement as set forth in the Stipulation is fair, reasonable and adequate and should be approved by
the Court; (b) whether an Order of Final Judgment and Dismissal, substantially in the form o f
Exhibit B to the Stipulation, should be entered herein; and (c) whether the establishment of th e
Expense Fund should be approved . The Court may adjourn the Settlement Hearing from time t o
time and without further notice to the Settlement Class .
Any Settlement Class Member who has not requested exclusion may appear at the Settlement
Hearing and be heard on any of the foregoing matters ; provided, however, that no such person shall
be heard unless his, her or its objection is made in writing and is filed, together with proof o f
membership in the Settlement Class and copies of all other papers and briefs to be submitted by him ,
-19-
her or it to the Court at the Settlement Hearing, with the Court no later than ,
2005, and showing due proof of service on Plaintiffs' Settlement Counsel :
WILLIAM S. LERACHKEITH F. PARKHELEN J . HODGES
LERACH COUGHLIN STOIA GELLERRUDMAN & ROBBINS LLP
401 B Street, Suite 1600San Diego , CA 92101-4297
and upon the following counsel for the Outside Directors :
GIBBS & BRUNS, L.L.P .ROBIN C . G1BBSKATHY D. PATRICKJEAN C. FRIZZELLMICHAEL K. OLDHAMAUNDREA K. FRIEDENBRIAN T. ROSS1100 Louisiana, Suite 5300Houston, TX 77002
Attorneys for certain Outside Directors Defendants Robert A . Belfer, Norman P .Blake, Jr., Ronnie C . Chan, John H . Duncan, Joe H. Foy, Wendy L. Gramm,Robert K . Jaedicke, Charles A . LeMaistre, John Mendelsohn, Jerome Meyer,Frank Savage, John Urquhart, Charls E . Walker, John Wakeham, and' HerbertWinokur, Jr.
GRAVES DOUGHERTY HEARON & MOODY PCJOHN J . MCKETTA IIIHELEN CURRIE FOSTER401 Congress Ave., Suite 2200Austin, TX 78701
Attorneys for Rebecca Mark-Jusbasch e
TONKON TORP LLPWILLIAM F . MARTSON, JR .1600 Pioneer Tower888 SW Fifth AvenuePortland OR 9720 4
Attorney-in-charge for Defendant Ken L. Harrison
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MILLER & CHEVALIER, CHARTEREDMARK J . ROCHON655 Fifteenth Street, N.W ., Suite 900Washington, D.C. 20005-570 1
Counsel for Paulo V . Ferraz Pereira
Unless otherwise ordered by the Court, any Settlement Class Member who does not make his, her o r
its objection in the manner provided shall be deemed to have waived all objections to the foregoin g
matters .
XV. EXAMINATION OF PAPERS AND INQUIRIES
This Notice contains only a summary of the terms of the proposed Se ttlement . For a more
detailed statement of the matters involved in the Actions, reference is made to the pleadings, to the
Stipulation and to other papers filed in this action, which may be inspected at the Office of the Clerk
of the United States District Court, Bob Casey United States Courthouse, 515 Rusk Avenue,
Houston, Texas 77002, during business hours of any business day .
Inquiries regarding the Actions should be addressed to Plaintiffs' Settlement Counsel at th e
address set forth above .
DO NOT CONTACT THE COURT REGARDING THIS NOTICE.
DATED : 12005 BY ORDER OF THE COUR TUNITED STATES DISTRICT COURTSOUTHERN DISTRICT OF TEXAS
S:\Settlement\Enron .Set\Outside Directors Settlement\F1-00017104 .doc
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EXHIBIT D-2
UNITED STATES DISTRICT COURTSOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
In re ENRON CORPORATION SECURITIESLITIGATION
This Document Relates To :
MARK NEWBY, et al ., Individually and OnBehalf of All Others Similarly Situated,
Plaintiffs ,
vs .
ENRON CORP ., et al .,
Defendants .
THE REGENTS OF THE UNIVERSITY OFCALIFORNIA, et al ., Individually and On Behalfof All Others Similarly Situated,
Plaintiffs,
vs .
KENNETH L. LAY, et al .,
Defendants .
[Caption continued on following page.]
Civil Action No . H-O1-3624
(Consolidated)
CLASS ACTION
SUMMARY NOTICE FOR PUBLICATION
EXHIBIT D-2
WASHINGTON STATE INVESTMENTBOARD , et al ., On Behalf of Themselves andAll Others Similarly Situated,
Plaintiffs,vs .
KENNETH L . LAY, et at .,
Defendants .
NATHANIEL PULSIFER, TRUSTEE OFTHE SHOOTERS HILL REVOCABLETRUST, INDIVIDUALLY AND ONBEHALF OF ALL OTHERS SIMILARLYSITUATED,
Plaintiffs ,
vs .
KENNETH L. LAY, et al .,
Civil Action No . H-02-340 1
CLASS ACTION
Civil Action No . 02-301 0
CLASS ACTION
Defendants .
TO: (1) ALL PERSONS WHO PURCHASED OR ACQUIRED PUBLICLY TRADED EQUITYOR DEBT SECURITIES OF ENRON CORPORATION (INCLUDING ALL SECURITIESISSUED BY ENRON-RELATED ENTITIES, THE VALUE OR REPAYMENT OFWHICH WAS DEPENDENT ON THE CREDIT, FINANCIAL CONDITION, ORABILITY TO PAY OF ENRON CORPORATION) ("PUBLICLY TRADED SECURITIES"AS FURTHER DEFINED IN THE NOTICE OF PENDENCY AND PARTIALSETTLEMENT OF CLASS ACTION DESCRIBED BELOW) DURING THE PERIODFROM SEPTEMBER 9, 1997 THROUGH AND INCLUDING NOVEMBER 27, 200 1
YOU ARE HEREBY NOTIFIED that the Representative Plaintiffs in the above litigatio n
(the "Actions") have entered into a Stipulation of Settlement (the "Stipulation") with the Outsid e
Directors of Enron Corp . (the "Outside Directors"), Ken Harrison ("Harrison") and certain othe r
related entities or persons as further defined in the Stipulation to resolve the issues raised in th e
Actions as to the Outside Directors and Harrison .
PLEASE BE FURTHER ADVISED that pursuant to an Order of the United States Distric t
Court, dated , 2005, a hearing will be held on , 2005 at _.m . ,
before the Honorable Melinda Harmon, United States District Judge, at the United States Distric t
Court for the Southern District of Texas, Bob Casey United States Courthouse, 515 Rusk Avenue,
Houston, Texas 77002, for the purpose of determining whether, among other things : (1) the propose d
settlement of the Actions as to the Outside Directors and Harrison, allocation of $187 million : 82 .5%
to the Settlement Class and 17.5% to the Official Unsecured Creditors Committee of Enron and th e
payment individually by the Outside Directors and Harrison of $13 million and certain other
consideration should be approved by the Court as fair, reasonable and adequate ; (2) the Actions should
be dismissed with prejudice as to the Outside Directors and Harrison pursuant to the terms of the
Stipulation; and (3) a portion of the Gross Settlement Fund should be allocated for the payment of
expenses, excluding attorneys' fees, associated with the prosecution of the Actions . If you meet the
definition of the Settlement Class as set forth above and are not a defendant, an officer or director o f
Enron, or a member of their immediate families or their successors, heirs, and legal representatives ;
your rights may be affected by the settlement of the Actions . If you have not received a Notice of
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Pendency and Part ial Settlement of Class Action (the "Mailed Notice ") you may obtain a copy by
contacting: In re Enron Corporation Securities Litigation , c/o Gilardi & Co. LLC, P.O. Box 5100,
Larkspur , CA 94977-5100 .
You will be bound by any judgment rendered in the Actions with respect to the Outsid e
Directors and Harrison with respect to claims asserted in the actions identified above, and with
respect to other claims that you had, have, or may have against the Outside Directors and Harrison
(and certain persons and entities related to them) based on matters related to Enron Corporation,
unless you request to be excluded from the Settlement Class, in writing, in accordance with the
instructions set forth in the Mailed Notice, postmarked by , 2005 . Any objection to
the Settlement must be filed with the Court by , 2005, and must show due proof of
service on each of the counsel listed below:
LERACH COUGHLIN STOIA GELLERRUDMAN & ROBBINS LLP
KEITH F. PARKHELEN J. HODGES401 B Street, Suite 1600San Diego , CA 92101-429 7
GIBBS & BRUNS, L .L.P .ROBIN C. GIBBSKATHY D. PATRICKJEAN C. FRIZZELLMICHAEL K. OLDHAMA1,JNDREA K. FRIEDENBRIAN T. ROSS1100 Louisiana, Suite 5300Houston, TX 77002
Attorneys for certain Outside Directors Defendants Robert A . Belfer, Norman P .Blake, Jr ., Ronnie C . Chan, John H. Duncan, Joe H. Foy, Wendy L. Gramm,Robert K. Jaedicke, Charles A. LeMaistre, John Mendelsohn, Jerome Meyer,Frank Savage, John Urquhart, Charls E . Walker, John Wakeham, and HerbertWinokur, Jr .
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GRAVES DOUGHERTY HEARON & MOODY PCJOHN J . MCKETTA II IHELEN CURRIE FOSTER401 Congress Ave., Suite 2200Austin , TX 7870 1
Attorneys for Rebecca Mark-Jusbasche
TONKON TORP LLPWILLIAM F . MARTSON, JR .1600 Pioneer Tower888 SW Fifth AvenuePortland OR 9720 4
Attorney-in-charge for Defendant Ken L . Harrison
MILLER & CHEVALIER, CHARTEREDMARK J . ROCHON655 Fifteenth Street, N.W., Suite 900Washington , D.C. 20005-570 1
Counsel for Paulo V. Ferraz Pereira
PLEASE DO NOT CONTA CT THE COURT REGARDING THIS NOTICE.
DATED: , 2005 BY ORDER OF THE COURTUNITED STATES DISTRICT COURTSOUTHERN DISTRICT OF TEXAS
S :\Settlement\Enron,SeMutside Directors Settlement\F2-00017106 .doc
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EXHIBIT "E"
UNITED STATES DISTRICT COURTSOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
In re ENRON CORPORATION SECURITIESLITIGATION
This Document Relates To :
MARK NEWBY, et al ., Individually and OnBehalf of All Others Similarly Situated,
Plaintiffs,
vs .
ENRON CORP ., et al .,
Defendants .
Civil Action No . H-O1-3624(Consolidated)
CLASS ACTION
ORDER AUTHORIZING THE TRANSFER OF INSURANCE PROCEED S
EXHIBIT E
WHEREAS on December 22, 2004, the Court ordered the Excess Insurers to deposit the sum
of $200 million ofinterpleaded insurance proceeds into the registry of the Court in compliance with
the requirements of 28 U .S.C . §1335 and applicable law; and
WHEREAS after due consideration of the Motion for Preliminary Approval of the Settlement
by and among the Representative Plaintiffs and the Outside Directors, the Court has grante d
preliminary approval, entered the Preliminary Approval Order and with good cause appearin g
therefor ;
NOW THEREFORE IT IS HEREBY ORDERED :
This Order (the "Transfer Order") incorporates by reference the definitions in the Stipulation
of Settlement dated as of January 12, 2005 (the "Stipulation") and the Agreement Regardin g
Insurance Proceeds and Interpleader Action ("Insurance Proceeds Agreement") and all capitalize d
terms used herein shall have the same meanings as set forth in the Stipulation and the Insuranc e
Proceeds Agreement.
The Clerk of the Court is ordered to transfer the Insurance Proceeds, which were deposite d
pursuan t to the Order entered December 22, 2004 in compliance with the requirements of 28 U.S.C .
§ 1335 and applicable law, to an account which shall be styled "United States District Court for the
Southern District of Texas - Insurance Interpleader Account" and shall be controlled and
administered by Lerach Coughlin Stoia Geller Rudman & Robbins LLP as Escrow Agent . Within
one (1) business day from entry of this Order, the Escrow Agent shall provide the Clerk of the Court
with instructions for deposit.
IT IS SO ORDERED .
DATED :THE HONORABLE MELINDA HARMONUNITED STATES DISTRICT JUDG E
S :\Settlement\Enron .Set\Outside Directors Settlement\ORD Auth Transfer Proceeds .doc
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EXHIBIT E-1
UNITED STATES DISTRICT COURTSOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
In re ENRON CORPORATION SECURITIESLITIGATION
Civil Action No. H-01-3624(Consolidated)
This Document Relates To :
MARK NEWBY, et al ., Individually and OnBehalf of All Others Similarly Situated ,
Plaintiffs ,
vs .
ENRON CORP ., et al .,
Defendants .
OFFICIAL COMMITTEE OF UNSECUREDCREDITORS OF ENRON CORP . ,
Plaintiffs ,
vs .
ANDREW S. FASTOW, et al .
Defendants .
CLASS ACTION
Civil Action No . H-04-009 1
COURT APPROVED ESCROW AGREEMENT CONCERNING INTERPLEADERFUNDS
EXHIBIT E-1
THIS SETTLEMENT ESCROW AGREEMENT (the "Escrow Agreement") is made and
effective as of the _th day of , 2005 (the "Execution Date"), in accordance with the
order of the Court herein dated , 2005, with Lerach Coughlin Stoia Geller Rudman &
Robbins LLP as escrow agent (the "Escrow Agent") .
RECITAL S
WHEREAS, Associated Electric & Gas Services Limited, Energy Insurance Mutual Limited,
Federal Insurance Company, Greenwich Insurance Company, certain Underwriters at Lloyd's,
London subscribing to Insurance Certificate No . 901/LK9802531 ("Underwriters"), St . Paul
Mercury Insurance Company, Royal Insurance Company ofAmerica, ACE Bermuda Insurance Ltd .,
and Kemper Indemnity Insurance Company (the "Excess Carriers") provided excess directors and
officers liability insurance coverage to Enron Corp . in the aggregate amount of $200 million, excess
of $150 million in underlying insurance ;
WHEREAS, on or about October 21, 2004, the Excess Carriers filed an Answer to the First
Amended Third-Party Complaint for Contract Enforcement and Injunctive Relief Regarding D&O
Policy Proceeds and Third-Party Complaint for Interpleader, which was amended on or about
October 22, 2004 (the "Interpleader Action") ;
WHEREAS, on or about January 5, 2005 and January 12, 2005 with respect to Underwriters ,
and in accordance with the order of December 22, 2004 by the Court in the Interpleader Action, the
Excess Carriers deposited the limit of liability of their respective policies (the "Interpleader
Policies") with the Clerk (the "Clerk") of the United States District Court of the Southern District of
Texas, Houston Division in compliance with the requirements of 28 U .S.C. § 1335 and applicable
law (the "Interpleader Fund") ;
WHEREAS, on , 2005, the United States District Court for the Southern District
of Texas, Houston Division, entered a Transfer Order in the above-entitled action authorizing the
-1-
transfer of the Interpleader Fund to a private escrow in order to more efficiently handle th e
Interpleader Fund, subject to the Court retaining exclusive jurisdiction and control over th e
Interpleader Fund and the escrow contemplated thereby ; and
WHEREAS, it is intended for the Interpleader Fund to be a qualified settlement fund under
Section 468B of the Internal Revenue Code , as amended (the "Code"), upon entry of the Preliminary
Approval Order by the Court ; and
NOW, THEREFORE, in consideration of the coven ants and representations set forth herein ,
and for other good and valuable consideration , the receipt and sufficiency of which is hereby
acknowledged, the Escrow Agent hereby covenants and agrees as follows :
1 . Definitions; Conflicting Terms . Forpurposes of this Escrow Agreement (includin g
the Recitals), all initially capitalized terms used and not otherwise defined herein shall have the
meanings attributed to such terms in the Agreement Regarding Insurance Proceeds and Interpleader
Action filed in the above-captioned actions and dated as of (the "Insurance Proceeds
Agreement") or the Stipulation of Settlement dated January 12, 2005 . To the extent that terms of
this Escrow Agreement conflict with the terms of the Insurance Proceeds Agreement or the
Stipulation of Settlement, the terms of this Escrow Agreement shall be controlling as to the matters
set forth herein .
2. Appointment ofEscrowAgent . Pursuant to the terms hereof, Lerach Coughlin Stoia
Geller Rudman & Robbins LLP is hereby appointed as the Escrow Agent, and Lerach Coughli n
Stoia Geller Rudman & Robbins LLP accepts the duties and obligations of the Escrow Agent set
forth herein .
3. Establishment of Escrow Account . The Escrow Agent will establish three escrow
accounts (collectively, the "Escrow Account"), which account shall constitute the Escrow Account
contemplated by the Transfer Order. The Escrow Account shall consist of three segregated
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accounts: (i) the "Insurance Proceeds Escrow Account" ; (ii) the "Stock Sales Gain Escrow
Account" ; and (iii) the "Harrison Escrow Account ." At such time or times as is required by the
Transfer Order and in one or more payments, the Clerk shall transfer the Interpleader Fund as
required by the Transfer Order. The Escrow Agent agrees (x) to accept delivery of the Interpleader
Fund, (y) on the day of receipt thereof, to acknowledge receipt of same in writing to counsel for the
Excess Carriers, and (z) to hold the Interpleader Fund in the Insurance Proceeds Escrow Account in
accordance with the terms and conditions of this Escrow Agreement and the Transfer Order . The
Stock Sales Gain Escrow Account and the Harrison Escrow Account shall be funded in accordance
with the terms of the Stipulation of Settlement .
4. Investment of Insurance Proceeds .
(a) The Escrow Agent shall invest the Interpleader Fund in instruments backed by
the full faith and credit of the United States Government or fully insured by an agency thereof and
shall reinvest the proceeds of these instruments as they mature in similar instruments at their then
current market rates . Any and all interest, dividends and other earnings on the Interpleader Fund
following the delivery of such funds to the Escrow Agent (collectively, "Interest") shall become part
of and be included in the Interpleader Fund .
(b) The Escrow Agent shall be authorized to execute only such transactions as are
consistent with the terms of the Stipulation of Settlement and order(s) of the Court .
(c) All funds held by the Escrow Agent shall be deemed and considered to be in
custodia legis, and shall remain subject to the oversight and jurisdiction of the Court, until such time
as such funds shall be distributed pursuant to the Stipulation of Settlement and/or order(s) of the
Court .
5 . Distribution of Proceeds. The Interpleader Fund, the Stock Sales Gain Escrow
Account and the Harrison Escrow Account shall be distributed by the Escrow Agent only at such
-3-
time or times and in such manner as is expressly set forth in orders of the Court pursuant to the terms
of the Stipulation of Settlement and the Insurance Proceeds Agreement, or as the Court may
otherwise direct . However, if a final and non-appealable order of this Court or any other court
dismisses the Interpleader Action without granting the relief requested by the Excess Carriers in the
Interpleader Action, then the Escrow Agent shall pay the then-remaining balance of the Interpleader
Fund to the Excess Carriers in the full amount of the limit of liability of their respective Excess
Policy unless and until there are insufficient amounts in the Interpleader Fund to do so, in the
following order: (i) the participants of the Quota Share Policy, (ii) ACE Bermuda, (iii) Royal,
(iv) Federal (policy no . 8181-43-14), (v) St . Paul ; (vi) Lloyd's, and (vii) Greenwich .
6 . Taxes
6 .1 The Settling Parties and the Escrow Agent agree to treat the Gross Settlement Fund a s
being at all times a "qualified settlement fund" within the meaning of Treas . Reg . § 1 .468B-1 . The
Escrow Agent shall timely make such elections as necessary or advisable to carry out the provisions
of this ¶6 .1, including the "relation-back election" (as defined in Treas . Reg . § 1 .468B-1) back to the
earliest permitted date . Such elections shall be made in compliance with the procedures and
requirements contained in §1 .468B-1 . It shall be the responsibility of the Escrow Agent timely and
properly to prepare and deliver the necessary documentation for signature by all necessary parties,
and thereafter to cause the appropriate filing to occur .
(a) For the purpose of §468B of the Internal Revenue Code of 1986, as amended ,
and the regulations promulgated thereunder, the "administrator" shall be the Escrow Agent . The
Escrow Agent shall satisfy the administrative requirements imposed by Treas . Reg . § 1 .468B-2 by,
e.g., (i) obtaining a taxpayer identification number, (ii) satisfying any information reporting or
withholding requirements imposed on distributions from the Gross Settlement Fund, and (iii) timely
and properly filing applicable federal, state and local tax returns necessary or advisable with respect
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to the Gross Settlement Fund (including, without limitation, the returns described in Treas . Reg .
§ 1 .468B-2(k)) and paying any taxes reported thereon. Such returns (as well as the election described
in this ¶6 .1) shall be consistent with this ¶6 .1 and in all events shall reflect that all Taxes as defined
in subsection (b) below (including any estimated Taxes, interest or penalties) on the income earned
by the Gross Settlement Fund shall be paid out of the Gross Settlement Fund as provided in ¶6 .1(b)
hereof.
(b) All (i) taxes (including any estimated taxes, interest or penalties) arising with
respect to the income earned by the Gross Settlement Fund, including, without limitation, any taxes
or tax detriments that may be imposed upon the Outside Directors or their counsel with respect to
any income earned by the Gross Settlement Fund for any period during which the Gross Settlement
Fund does not qualify as a "qualified settlement fund" for federal or state income tax purposes
(collectively, "Taxes"), and (ii) expenses and costs incurred in connection with the operation and
implementation of this ¶6 .1, including, without limitation, expenses of tax attorneys and/or
accountants and mailing and distribution costs and expenses relating to filing (or failing to file) the
returns described in this ¶6 .1 (collectively, "Tax Expenses"), shall be paid out of the Gross
Settlement Fund . In all events no person other than the Escrow Agent shall have any liability or
responsibility for the Taxes or the Tax Expenses . The Escrow Agent shall indemnify and hold
harmless the Settling Parties and their counsel for Taxes and Tax Expenses (including, without
limitation, Taxes payable by reason of any such indemnification) . Further, Taxes and Tax Expenses
shall be treated as, and considered to be, a cost of administration of the Gross Settlement Fund an d
shall timely be paid by the Escrow Agent out of the Gross Settlement Fund without prior order from
the Court, and the Escrow Agent shall be obligated (notwithstanding anything herein to the contrary)
to withhold from distribution to Authorized Claimants any funds necessary to pay such amounts,
including the establishment of adequate reserves for any Taxes and Tax Expenses (as well as an y
-5-
amounts that maybe required to be withheld under Treas . Reg. §1,468B-2(l)(2)) ; neither the Settling
Parties nor their counsel are responsible therefor, nor shall they have any liability therefor. The
Settling Parties agree to cooperate with the Escrow Agent, each other, and their tax attorneys and
accountants to the extent reasonably necessary to carry out the provisions of this ¶6 .1 .
7. Termination of the Escrow Agreement. This Escrow Agreement shall terminate
upon the Escrow Agent's full and proper distribution of the Interpleader Fund, the Stock Sales Gai n
Escrow Account and the Harrison Escrow Account in accordance with Orders of the Court and/o r
this Escrow Agreement .
8. Concerning the Escrow Agent. The Escrow Agent further covenants and agrees that :
(a) To induce the Escrow Agent to act as such hereunder, the Escrow Agent shal l
be entitled to rely, if it is acting in good faith, upon any order, judgment, certification, demand ,
notice, instrument or other writing delivered to it hereunder without being required to determine th e
authenticity or the correctness of any fact stated therein or the propriety or validity or the servic e
thereof. The Escrow Agent may, if it is acting in good faith, act in reliance upon any instrument or
signature believed by it to be genuine and may assume that any person purporting to give receipt or
advice or make any statement or execute any document in connection with the provisions hereof has
been duly authorized to do so .
(b) The Escrow Agent is serving in the capacity of an escrow holder only an d
having possession of the Interpleader Fund subject to the terms of this Escrow Agreement, th e
Insurance Proceeds Agreement, the Settlement and/or orders of the Court .
(c) The Escrow Agent (and any successor Escrow Agent) may be removed o r
may resign upon order of the Court . Upon entry of such an order in accordance with the foregoing
sentence , the Escrow Agent (and any successor Escrow Agent) shall deliver the entirety of the
Interpleader Fund, including all earn ings thereon , in accordance with the order of the Court ,
-6-
whereupon the Escrow Agent shall be discharged of and from any and all further obligations arisin g
in connection with this Escrow Agreement .
(d) In the event of any disagreement resulting in adverse claims or demands bein g
made in connection with the Interpleader Fund, or in the event that the Escrow Agent in good faith i s
in doubt as to what action it should take hereunder, the Escrow Agent shall be entitled to retain th e
Interpleader Fund until the Escrow Agent has received an order ofthe Court directing delivery of the
Interpleader Fund .
(e) Any action or proceeding arising out of or relating to this Escrow Agreement
is related to the proceedings pending before this Court and, therefore, the sole and exclusive venu e
for the resolution of any such claims in any such action or proceeding shall be in this Court .
(f) The Escrow Agent may not assign any of its rights or obligations hereunder
without the written consent of the Insurance Carriers, and any attempted transfer or assignment i n
violation of this provision shall be null and void .
(g) This Escrow Agreement may only be modified by order of this Court .
(h) This Escrow Agreement shall be construed in accordance with and governe d
by the laws of the State of Texas .
9. Notices.
(a) All notices, requests, demands and other communications hereunder
(including service ofprocess in any action or proceeding referred to in ¶8(e)) shall be in writing and
shall be deemed to have been duly given if personally delivered with a receipt therefor, delivered by
facsimile or overnight courier service, or after five (5) days from being mailed, certified mail, return
receipt, postage prepaid to the addresses set forth below :
If to the Escrow Agent :
Keith F. ParkLERACH COUGHLIN STOIA GELLER
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RUDMAN & ROBBINS LLP401 B Street, Suite 1600San Diego, CA 92101
10 . Entire Agreement. This Escrow Agreement sets forth the entire agreement an d
understanding of the parties in respect of the transactions contemplated hereby .
11 . Headings . The headings of the sections and paragraphs in this Escrow Agreement
have been inserted for convenience of reference only and shall in no way restrict or otherwis e
modify any of the terms or provisions hereof.
IN WITNESS WHEREOF, the Escrow Agent has caused this Escrow Agreement to be duly
executed as of the date first above written .
LERACH COUGHLIN STOIA GELLERRUDMAN & ROBBINS LLP
WILLIAM S . LERACHKEITH F . PARKDARREN J . ROBBINSHELEN J . HODGESBYRON S. GEORGIOUJAMES I . JACONETTEMICHELLE M. CICCARELLIJAMES R . HAILANNE L. BOXJOHN A. LOWTHERALEXANDRA S . BERNAYMATTHEW P. SIBENROBERT R . HENSSLER, JR .
5KEITH F. PARK
401 B Street, Suite 1600San Diego, CA 92101Telephone : 619/231-105 8
-8-
LERACH COUGHLIN STOIA GELLERRUDMAN & ROBBINS LLP
REGINA M. AMES
9601 Wilshire Blvd ., Suite 510Los Angeles, CA 90210Telephone : 310/859-3100310/278-2148 (fax )
LERACH COUGHLIN STOIA GELLERRUDMAN & ROBBINS LLP
G. PAUL HOWESJERRILYN HAR,DAWAYTexas Bar No. 00788770Federal I.D. No . 309641111 Bagby, Suite 4850Houston , TX 77002Telephone : 713/571-091 1
Escrow Agent
S :\Settlement\Enron .Set\0utside Directors Settlement \AGT00016866 -Clean .doc
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EXHIBIT C
UNITED STATES DISTRICT COURTFOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
In Re ENRON CORPORATIONSECURITIES, DERIVATIVE & ` ERISA"LITIGATION,
MARK NEWBY, ET AL. ,
vs .
Plaintiffs
ENRON CORPORATION , ET AL . ,
Defendant s
OFFICIAL COMMITTEE OFUNSECURED CREDITORS OF ENRONCORP.,
Plaintiff,
vs. §
ANDREW S . FASTOW, ET AL., §
Defendants .
CIVIL ACTION NO. H-01-3624AND CONSOLIDATED CASE S
CIVIL ACTION NO. H-04-009 1
EXHIBIT C TO STIPULATION OF SETTLEMEN T(PROPOSED) ORDER AND JUDGMENT DISMISSING CLAIMS AGAINST JAMES
DERRICK AND RICHARD BUY
The Court having been presented with the Stipulation of Settlement and having been
advised that the Official Committee of Unsecured Creditors of Enron Corp . has settled all claims
asserted in civil action No. H-04-0091 (the "Action") against James Derrick and Richard Bu y
and that such claims should be dismissed with prejudice :
MDL 1446
Dallas 185301 v1
It is hereby ORDERED, ADJUDGED AND DECREED that all claims in the Action
asserted against James Derrick and Richard Buy are hereby dismissed with prejudice, but that the
Action shall proceed against all remaining defendants .
In the event that the Effective Date under the parties Stipulation of Settlement (th e
"Stipulation") does not occur, this Order and Judgment and Dismissal shall be rendered null an d
void and shall be vacated nunc pro tunc, and the provisions of 7 .5 of the Stipulation shall apply .
DATED :THE HONORABLE MELINDA HARMONUNITED STATES DISTRICT JUDGE
S :\Settlement\Enron . Set\Outside Directors Settlement \Ex C-CC Judgment.doc
Dallas 185301v1
EXHIBIT D
UNITED STATES DISTRICT COURTSOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISIO N
In re ENRON CORPORATION SECURITIESLITIGATION
This Document Relates To :
MARK NEWBY, et al ., Individually and OnBehalf of All Others Similarly Situated,
Plaintiffs,
vs .
ENRON CORP ., et al .,
Defendants .
THE REGENTS OF THE UNIVERSITY OFCALIFORNIA, et al ., Individually and On Behalfof All Others Similarly Situated ,
Plaintiffs ,
vs .
KENNETH L. LAY, et al .,
Defendants .
[Caption continued on following page .]
§
§
§
Civil Action No. H-O1-3624(Consolidated)
CLASS ACTION
[PROPOSED] ORDER OF FINAL JUDGMENT AND DISMISSAL
EXHIBIT D
WASHINGTON STATE INVESTMENT
BOARD, et al ., On Behalf of Themselves andAll Others Similarly Situated,
Plaintiffs ,vs .
KENNETH L. LAY, et al .,
Defendant s
NATHANIEL PULSIFER, TRUSTEE OFTHE SHOOTERS HILL REVOCABLETRUST, INDIVIDUALLY AND ONBEHALF OF ALL OTHERS SIMILARLYSITUATED,
Plaintiffs,
vs .
KENNETH L. LAY, et al .,
Civil Action No. H-02-340 1
CLASS ACTION
Civil Action No. 02-301 0
CLASS ACTION
Defendants.
This matter having come before the Court for hearing, pursuant to the Order of this Court,
dated , 2005, on the application of the Settling Parties for approval of the settlement
(the "Settlement") set forth in the Stipulation of Settlement dated as of January 12, 2005 (the
"Stipulation"), and due and adequate notice having been given to the Settlement Class (as defined in
the Stipulation) 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 therefore, IT IS HEREBY ORDERED, ADJUDGED AND DECREED that :
1 . This 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 .
2. This Court has jurisdiction over the subject matter of the Actions and over all
Members of the Settlement Class .
3 . The notice given to the Settlement Class of the Settlement and the other matters se t
forth in the Stipulation was the best notice practicable under the circumstances, including individual
notice to all Members of the Settlement Class who could be identified through reasonable effort .
Said notice provided due and adequate notice of these proceedings and of the matters set forth in the
Stipulation, including the proposed Settlement, to all persons entitled to such notice, and said notice
fully satisfied the requirements of Rule 23 of the Federal Rules of Civil Procedure and due process .
4. Nothing in the Stipulation, the Order Preliminarily Approving Settlement, entered on
, 2005, or this Order of Final Judgment and Dismissal is to be construed as precludin g
any Person who remains a Settlement Class Member or who requests exclusion from the Settlement
Class from either being a member of any other classes, subclasses or settlement classes which have
been or may be certified by the Court in the Actions or opting out of or seeking exclusion from
membership in any such other classes .
5. Pursuant to Rule 23 of the Federal Rules of Civil Procedure, this Court hereby
approves the Settlement as set forth in the Stipulation, finds that said Settlement is, in all respects ,
fair, reasonable and adequate with respect to the Settlement Class, and directs that the Settlement be
consummated in accordance with the terms and conditions set forth in the Stipulation .
6. This Court hereby dismisses the Actions in their entirety as to the Outside Director s
and Harrison and against the Representative Plaintiffs and the Settlement Class, with prejudice an d
without costs (except as otherwise provided in the Stipulation) .
7. Upon the Effective Date, the Representative Plaintiffs and each of the Settlemen t
Class Members, on behalf of themselves, their successors and assigns, and any other Person claimin g
(now or in the future) through or on behalf of them, and regardless of whether any such
Representative Plaintiff or Settlement Class Member ever seeks or obtains by any means, including ,
without limitation, by submitting a Proof of Claim and Release, any distribution from the Gros s
Settlement Fund, shall be deemed to have, and by operation of this Order of Final Judgment and
Dismissal shall have, fully, finally, and forever released, relinquished, and discharged all Released
Claims against the Outside Directors and Harrison and shall have covenanted not to sue the Outside
Directors or Harrison with respect to all such Released Claims, and shal I be permanently barred an d
enjoined from instituting, commencing, or prosecuting any such Released Claim against the Outsid e
Directors or Harrison .
8 . All Persons, including without limitation the other Defendants in the Actions and any
other persons or entities later named as Defendants in the Actions, are hereby permanently enjoined ,
barred and restrained from commencing, prosecuting or asserting any action, for contribution ,
indemnity or otherwise, against the Outside Directors or Harrison, seeking, as damages or otherwise ,
the recovery of all or any part of any liability or any settlement which they pay or are obligated to
pay or agree to pay to the Settlement Class, as a result of such persons' participation in any acts ,
-2-
facts, statements or omissions that were or could have been alleged in the Actions (whether under the
Securities Act of 1933 or the Securities Exchange Act of 1934, state law, foreign law or otherwise)
as claims, cross-claims, counterclaims, third-party claims or otherwise . Any person so enjoined and
barred shall be entitled to appropriate judgment reduction .
9. Upon the Effective Date, all obligations of the Outside Directors and Harrison to th e
Representative Plaintiffs and the Settlement Class Members arising out of, based upon, or otherwise
related to the transactions and occurrences that were alleged, or could have been alleged, on behalf
of the Representative Plaintiffs and the Settlement Class Members in the complaints in the Actions
shall be fully, finally, and forever discharged, and all Persons shall be permanently barred and
enjoined from instituting, prosecuting, pursuing or litigating in any manner (regardless of whether
such Persons purport to act individually, representatively, or in any other capacity and regardless of
whether such Persons purport to allege direct claims, claims for contribution, indemnification, or
reimbursement, or any other claims) any such obligations .
10. Upon the Effective Date, the Outside Directors and Harrison shall be deemed to have,
and by operation of this Order of Final Judgment and Dismissal shall have, fully, finally and forever
released, relinquished and discharged each and all of the Settlement Class Members and counsel to
the Representative Plaintiffs from all claims, arising out of, in any way relating to, or in connection
with the institution, prosecution, assertion, settlement or resolution of the Actions or the Released
Claims except to enforce the releases and other terms and conditions contained in the Stipulation .
11 . This Order of Final Judgment and Dismissal is a final judgment in the Actions as to
all claims among the Outside Directors and Harrison, on the one hand, and the Representative
Plaintiffs and all Settlement Class Members, on the other . This Court finds, for purposes of Rule
54(b) of the Federal Rules of Civil Procedure, that there is no just reason for delay and expressly
directs entry of judgment as set forth herein .
-3-
12. Without affecting the finality of this Order of Final Judgment and Dismissal in any
way, this Court retains continuing jurisdiction over (a) implementation of the Settlement; (b) any
award or distribution of the Gross Settlement Fund, including interest earned thereon ; and (c) all
other proceedings related to the implementation and enforcement of the terms of the Stipulation
and/or the Settlement.
13. Pursuant to §21 D(c)(I) of the Private Securities Litigation Reform Act of 1995, th e
Court hereby finds that each Settling Party, and his, her, or its respective counsel, has complied with
each requirement of Rule 11(b) of the Federal Rules of Civil Procedure as to all complaints,
responsive pleadings, and dispositive motions related to the Released Claims, and that insofar as
they relate to the Released Claims, the Actions were not brought for any improper purpose and are
not unwarranted by existing law or legally frivolous .
14. In the event that the Effective Date does not occur, this Order of Final Judgment and
Dismissal shall be rendered null and void and shall be vacated nunc pro tune, and the provisions of
¶7.5 of the Stipulation shall apply .
15. Without further order of the Court, the parties may agree to reasonable extensions of
time to carry out any of the provisions of the Stipulation .
IT IS SO ORDERED .
DATED :THE HONORABLE MELINDA HARMONUNITED STATES DISTRICT JUDG E
S :1Settlement\Enron .Set\Outside Directors Settlement\Ex-D-00017 J 07.do e
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EXHIBIT E
IN THE UNITED STATES DISTRICT COURTFOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
In Re ENRON CORPORATIONSECURITIES , DERIVATIVE &"ERISA" LITIGATION,
This document relates to :
PIRELLI ARMSTRONG TIRECORPORATION RETIREE MEDICALBENEFITS TRUST, Derivativelyon behalf of EnronCorporation,
Plaintiff,
VS.
KENNETH L. LAY, ROBERT A .BELFER, NORMAN P . BLAKE, JR.,RONNIE C. CHAN, JOHN H .DUNCAN, WENDY L . GRAMM,ROBERT K. JAEDICKE, CHARLESA. LEMAISTRE ,JOHN MENDELSOHN, PAULO V .FERRAZ PEREIRA, FRANK SAVAGE,JOHN WAKEHAM, HERBERT S .WINOKUR, JR., ANDREW S .FASTOW, and ENRON CORPORATION,an Oregon corporation,
Defendants .
§
MDL 1446
CIVIL ACTION NO. H-O1-364 5LEAD CASE CONSOLIDATED WIT H
[CAPTION CONTINUED ON NEXT PAGE ]
EXHIBIT E TO STIPULATION OF SETTLEMEN T
[PROPOSED] ORDER AND JUDGMENT DISMISSING DERIVATIVE CLAIMSAGAINST THE OUTSIDE DIRECTORS, JAMES DERRICK, KEN L . HARRISON AND
RICHARD BUY
Dallas I85302v8
DETECTIVES ENDOWMENTASSOCIATION ANNUITY FUND,Derivatively on behalf ofEnron Corporation,
Plaintiff,
VS .
KENNETH L. LAY, JEFFREY K .SKILLING, ROBERT A. BELFER,NORMAN P. BLAKE, RONNIE C .CHAN, JOHN H. DUNCAN, WENDYL.GRAMM, KEN L . HARRISON,ROBERT K. JAEDICKE, CHARLESA. LEMAISTRE, JOHN MENDELSOHNJEROME J . MEYER, PAULO V .FERRAZ PEREIRA, FRANK SAVAGE,JOHN A. URQUHART, JOHNWAKEHAM, HERBERT WINOKUR,JR., ANDREW S. FASTOW ,MICHAEL KOPPER, MARK FREVERT,CLIFF BAXTER, KEN STEVENKEAN, STANLEY HORTON,RICHARD BUY, ARTHUR ANDERSENLLP, and ENRON CORPORATION,
CIVIL ACTION NO . H-01-3892
Defendants .
JOSEPH E. KASSOWAY, Trusteeof the Joseph E . Kassowayand Robert T. Kassoway Trust ,
Plaintiff,
VS .
ANDREW S. FASTOW, KENNETHLAY, JEFFREY K . SKILLING,ROBERT A . BELFER, NORMAN P.BLAKE, JR., RONNIE C . CHAN,JOHN H. DUNCAN, WENDY L .GRAMM, KEN L . HARRISON,
CIVIL ACTION NO. H-01-3690
[CAPTION CONTINUED ON NEXT PAGE ]
Dallas 185302v8
ROBERT K. JAEDICKE, CHARLES §A. LEMAISTRE, JOHN §MENDELSOHN,JEROME J . MEYER, §FRANK SAVAGE, JOHN R. §URQUHART, JOHN WAKEHAM, §HERBERT S . WINOKUR, JR., §and ENRON CORPORATION, §
Defendants . §
FRED GREENBERG, Derivativelyon behalf of EnronCorporation,
Plaintiff,
VS.
ROBERT A. BELFER, NORMAN P .BLAKE, JR ., RONNIE C . CHAN,JOHN H. DUNCAN, ANDREW S .FASTOW, WENDY L . GRAMM,ROBERT K. JAEDICKE, KENNETHL. LAY, CHARLES A . LEMAISTRE,JOHN MENDELSOHN, PAULO V .FERRAZ PEREIRA, FRANK SAVAGE,JEFFREY K. SKILLING, JOHNWAKEHAM,HERBERT S . WINOKUR,JR., and LJM2 CO-INVESTMENTLP,
Defendants .
LYNN GOFFMAN AND HARVEY L. §YOUNG, Derivatively and on §behalf of Enron Corporation, §
Plaintiff, §
VS. §
ROBERT A. BELFER, NORMAN P. §
[CAPTION CONTINUED ON NEXT PAGE]
CIVIL ACTION NO. H-01-3998
Dallas 185302v8
BLAKE, JR., RONNIE C . CHAN,JOHN H. DUNCAN, WENDY L.GRAMM, ROBERT K. JAEDICKE,KENNETH L. LAY, CHARLES A .LEMAISTRE, M .D., JOHNMENDELSOHN, PAULO V .FERRAZ PEREIRA, FRANK SAVAGE,JEFFREY SKILLING, JOHN A .URQUHART, JOHN WAKEHAM,HERBERT S . WINOKUR, JR. ,ENRON CORPORATION, andANDREW FASTOW,
Defendants .
CIVIL ACTION NO. H-02-183 8
DAVID TRZEBUCKI and CHERYLTRZEBUCKI, Individually andDe rivatively on behalf ofnominal defendant Enro nCorporation,
Plaintiff,
VS .
ANDREW S . FASTOW, KENNETHL. LAY, JEFFREY J . SKILLING,ROBERT A. BELFER, ROBERT P .BLAKE, JR., RONNIE C . CHAN,JOHN H. DUNCAN, JOHNMENDELSOHN, WENDY L. GRAMM,ROBERT K. JAEDICKE, CHARLESA. LEMAISTRE, FRANK SAVAGE,JOHN WAKEHAM, HERBERT S .WINOKUR, JR., ANDERSONWORLDWIDE SOCIETECOOPERATIVE, a SwissCooperative, DYNEGY INC .,MICHAEL KOPPER ,KATHY LYNN, ANNE YEAGER,KRISTINA MORDAUNT, ENRONCORPORATION, an Oregon
CIVIL ACTION NO . H-02-183 2
[CAPTION CONTINUED ON NEXT PAGE ]
Dallas 185302v8
corporation, PAULO FERRAZPEREIRA,
Defendants .
RICK BARSKY ,
Plaintiff,
VS .
ARTHUR ANDERSEN, LLP, D .STEPHEN GODDARD, JR. ,DAVID DUNCAN, KENNETH L . LAY,JEFFREY K. SKILLING, ANDREWS.FASTOW, RICHARD A . CAUSEY,JAMES V. DERRICK, JR. ,MICHAEL J. KOPPER, MARK A.FREVERT, STANLEY C . HORTON,KENNETH D. RICE, RICHARDB . BUY, LOU L . PAI, ROBERT A .BELFER, NORMAN P . BLAKE, JR.,RONNIE C. CHAN, JOHN H .DUNCAN, WENDY L . GRAMM,ROBERT K. JAEDICKE, CHARLESA. LEMAISTRE, JOE H . FOY,JOSEPH M. HIRKO, KEN L .HARRISON, MARK E . KOENIG,REBECCA P . MARK-JUSBASCHE,MICHAEL S. McCONNELL,JEFFREY McMAHON, CINDY K .OLSON, BRUCE WILLISON,FRANK SAVAGE, HERBERT S .WINOKUR, JR., JEROME J .MEYER, CHARLES E . WALKER,PAULO V. FERRAZ PEREIRA,JOHN WAKEHAM, JOSEPH W .SUTTON, BEN F . GLISAN,JR. and KRISTINA MORDAUNT ,
Defendants .
[CAPTION CONTINUED ON NEXT PAGE]
CIVIL ACTION NO. H-02-1922
Dallas I85302v8
RICHARD P. BERGSIKER,
Plaintiff,
vs.
KENNETH L. LAY, JEFFREY K .SKILLING, ANDREW S . FASTOW,LOU L. PAI, RICHARD B. BUY,RICHARD A . CAUSEY, KENNETHD. RICE, KEVIN HANNON, GREGWHALLEY, MICHAEL S .McCONNELL, MARK A. FREVERT,MARK E. HAEDICKE, CINDY OLSONand MARY K. JOYCE,
CIVIL ACTION NO. H-02-3427
Defendants .
Dallas 185302v8
This matter having come before the Court for hearing, pursuant to this Court's Scheduling
Order dated December 22, 2004, on the Notice and Motion of the Official Committee of Unsecured
Creditors of Enron Corp . (the "Creditors Committee") for the dismissal of all pending derivative
claims against the Outside Directors, James Derrick, Ken L . Harrison, and Richard Buy (the
"Released Defendants") as set forth in the Stipulation of Settlement dated as of January 12, 2005 (the
"Stipulation"), and due and adequate notice having been given to interested parties pursuant to the
procedures of Rule 9019 of the Federal Rules of Bankruptcy Procedure, and the Court having
participated in a joint hearing with the United States Bankruptcy Court for the Southern District o f
New York (the "Bankruptcy Court") on the settlement between the Creditors Committee, the
Outside Directors, James Derrick, Ken L. Harrison and Richard Buy (the "Settlement") and the
Court having considered all papers filed and proceedings had herein and otherwise being fully
informed in the premises and good cause appearing therefore, IT IS HEREBY ORDERED,
ADJUDGED AND DECREED that :
1 . This 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, unless
expressly defined herein .
2 . The notice given to interested parties of the Settlement and the matters set forth in th e
Stipulation, including the notice issued pursuant to Rule 9019 of the Federal Rules of Bankruptcy
Procedure and the notice given to the Settlement Class pursuant to this Court's order of January _,
2005 was the best notice practicable under the circumstances . Said notice provided due and
adequate notice of these proceedings and of the matters set forth in the Stipulation, including the
proposed Settlement, to all persons entitled to such notice, and to the extent that Rule 23 .1 is
applicable, said notice fully satisfied the requirements of Rule 23 .1 of the Federal Rules of Civil
Procedure and due process .
-1-
3. Pursuant to Rule 23 .1 of the Federal Rules of Civil Procedure, this Court directs that
all claims against the Released Defendants in the above referenced causes of action (the "Derivative
Claims") be dismissed with prejudice in accordance with the terms and conditions set forth in the
Stipulation .
4 . This Court hereby dismisses the Derivative Claims in their entirety as to the Released
Defendants and against Enron Corp . and the Creditors Committee, with prejudice and without costs
(except as otherwise provided in the Stipulation) .
5 . Upon the Effective Date, the Creditors Committee and Enron, on behalf of
themselves, their successors and assigns, and any other Person claiming (now or in the future)
through or on behalf of them, shall be deemed to have, and by operation of this Order and Judgment
shall have, fully, finally, and forever released, relinquished, and discharged all Released Claims
against the Released Defendants, and shall have covenanted not to sue the Released Defendants with
respect to all such Released Claims, and shall be permanently barred and enjoined from instituting,
commencing, or prosecuting any such Released Claim against the Released Defendants .
Notwithstanding the foregoing release, nothing in this Order and Judgment is intended, nor shall it
be construed to release or discharge Harrison from any matter that might be alleged as a defense to,
avoidance of, or defensive counterclaim against Harrison's claims asserted as Claim No . 2390500
(a/k/a Claim No . 0000023905) in the matter In re Portland General Holdings, Inc ., S .D.N.Y. Bankr.
Case No. 03-14331C95(AJG) (the "Harrison Proof of Claim") ; provided, however, that any net
affirmative recovery against . Harrison shall have been released, discharged, and barred . (The
foregoing sentence is referred to herein as the "Enron Defensive Proviso .")
6. Upon the Effective Date, all obligations of the Released Defendants to the Creditors
Committee or Enron Corp . arising out of, based upon, or otherwise related to the transactions and
occurrences that were alleged, or could have been alleged, on behalf of Enron Corp . or the Creditor s
-2-
Committee in the Derivative Actions shall be fully, finally, and forever discharged, with the
exception of the Enron Defensive Proviso, and all Persons shall be permanently barred and enjoined
from instituting, prosecuting, pursuing or litigating in any manner any such claims .
7 . Upon the Effective Date, the Outside Directors and Harrison shall each be deemed to
have, and by operation of this Order and Judgment shall have, fully, finally, and forever released,
relinquished and discharged Enron, the Creditors Committee and counsel to each of the foregoing
persons from all claims, arising out of, in any way relating to, or in connection with the institution,
prosecution, assertion, settlement or resolution of the Actions, or the Released Claims, or their
participation or involvement as a director of Enron or its predecessors or affiliates (including claims
of indemnity) . Notwithstanding the foregoing release or any other provision in this Order and
Judgment, nothing in this Order and Judgment is intended, nor shall it be construed to release or
discharge any Person from the Harrison Proof of Claim or any matter Harrison might allege as a
defense to, avoidance of, or defensive counterclaim against any matter that might be alleged as a
defense to, avoidance of, or defensive counterclaim against the Harrison Proof of Claim ; provided,
however, that any recovery by Harrison other than a recovery on the Proof of Claim shall have been
released, discharged, and barred . (The foregoing sentence is referred to herein as the "Harrison Proof
of Claim Proviso .")
8 . Upon the Effective Date, all obligations of the Creditors Committee or Enron Corp .
to the Released Defendants, arising out of, based upon, or otherwise related to the transactions and
occurrences that were alleged, or could have been alleged, on behalf of the plaintiffs, Enron Corp . or
the Creditors Committee in the Derivative Actions, or related to their participation or involvement as
an officer or director of Enron or its predecessors or affiliates (including claims of indemnity) shall
be fully, finally, and forever discharged, with the exception of the Harrison Proof of Claim Proviso ,
-3-
and all Persons shall be permanently barred and enjoined from instituting, prosecuting, pursuing o r
litigating in any manner any such claims .
9. This Order and Judgment Dismissing Derivative Claims is a final judgment in the
Derivative Actions as to the Released Claims among the Outside Directors, James Derrick, Ken L .
Harrison, and Richard Buy on the one hand, and Enron Corporation and the Creditors Committee, on
the other hand. This Court finds, for purposes of Rule 54(b) of the Federal Rules of Civil Procedure,
that there is no just reason for delay and expressly directs entry of judgment as set forth herein .
10 . In the event that the Effective Date does not occur, this Order of Final Judgment and
Dismissal shall be rendered null and void and shall be vacated nunc pro tunc, and the provisions o f
¶7.5 of the Stipulation shall apply .
IT IS SO ORDERED .
DATED :THE HONORABLE MELINDA HARMONUNITED STATES DISTRICT JUDG E
S :\Settlement\Enron .Set\Outside Directors Settlement\Ex-E-Judg Dismiss Deriv Claims.doc
-4-
EXHIBIT F
UNITED STATES DISTRICT COURTSOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
In re ENRON CORPORATION SECURITIESLITIGATION
This Document Relates To :
MARK NEWBY, et al ., Individually and OnBehalf of All Others Similarly Situated,
Plaintiffs,
vs .
ENRON CORP ., et al .,
Defendants .
THE REGENTS OF THE UNIVERSITY OFCALIFORNIA, et al ., Individually and On Behalfof All Others Similarly Situated,
Plaintiffs,
vs .
KENNETH L. LAY, et al .,
Defendants .
[Caption continued on following page .]
Civil Action No . H-O1-3624(Consolidated)
CLASS ACTION
ORDER PRELIMINARILY APPROVING SETTLEMENT
EXHIBIT F
WASHINGTON STATE INVESTMENTBOARD, et al ., On Behalf of Themselves and AllOthers Similarly Situated,
Plaintiffs ,
vs .
KENNETH L. LAY, et al .,
Defendants
NATHANIEL PULSIFER, TRUSTEE OF THESHOOTERS HILL REVOCABLE TRUST,INDIVIDUALLY AND ON BEHALF OF ALLOTHERS SIMILARLY SITUATED ,
Plaintiffs ,
vs.
KENNETH L. LAY, et al .,
Civil Action No. H-02-340 1
CLASS ACTION
Civil Action No. 02-301 0
CLASS ACTION
Defendants.
WHEREAS, consolidated class actions are pending before this Court, including In re Enron
Corporation Securities Litigation, Civil Action No. H-01-3624, which includes, among others, cases
entitled Newby, et al. v. Enron Corp., et al. ; The Regents of the University of California, et al . v.
Kenneth L . Lay, et al. ; Washington State Investment Board and Employer-Teamsters Local Nos . 175
and 505 Pension Trust Fund, et al. v. Kenneth L. Lay, et al. ; and Nathaniel Pulsifer, Trustee of The
Shooters Hill Revocable Trust, Individually and On Behalf of All Others Similarly Situated v .
Kenneth L. Lay, et al. ; and
WHEREAS, the Settling Parties have applied to the Court, pursuant to Rule 23 of the Federa l
Rules of Civil Procedure, for an order approving the settlement of the Actions as to them in
accordance with the Stipulation of Settlement among them dated as of January 12, 2005 (the
"Stipulation"), which, together with the Exhibits annexed thereto, sets forth the terms and conditions
for a proposed settlement of the Actions as to the Outside Directors and Harrison (the "Settlement")
and for dismissal of the Actions with prejudice as to the Outside Directors and Harrison ;
WHEREAS, the Stipulation provides for the conditional certification of the Settlement Class
solely for purposes of the Settlement ; and
WHEREAS, the Court has read and considered the Stipulation and the Exhibits annexed
thereto and has read and considered all other papers filed and proceedings had herein, and is
otherwise fully informed in the premises, and with good cause appearing therefore ;
NOW, THEREFORE, IT IS HEREBY ORDERED:
1 . This Order (the "Preliminary Approval Order") incorporates by reference the
definitions in the Stipulation and the Agreement Regarding Insurance Proceeds and Interpleader
Action ("Insurance Proceeds Agreement"), and all capitalized terms used herein shall have the same
meanings set forth in the Stipulation and the Insurance Proceeds Agreement .
-1-
2. The Court preliminarily approves the Stipulation, including the releases contained
therein, and the Settlement as being fair, reasonable, and adequate to the Settlement Class .
3 . The Court approves the distribution from the Insurance Proceeds to those Non-
Settling Defendants listed on Exhibit A to the Insurance Proceeds Agreement, severally and not
jointly, of the amounts provided on Exhibit A . Each Non-Settling Defendant listed on Exhibit A
shall be entitled to receive up to fifty percent (50%) of his Set Aside Amount ten (10) calendar days
from the date of this Preliminary Approval Order . Each Non-Settling Defendant listed on Exhibit A
shall be entitled to receive up to the remaining fifty percent (50%) of his Set Aside Amount on the
earlier of (a) ten (10) calendar days after the entry of the Interpleader Judgment by this Court
substantially in the form attached to the Insurance Proceeds Agreement as Exhibit C or (b) April 15,
2005. Further, the Court approves the distribution from the Insurance Proceeds to the Non-Settling
Defendants (as defined in the Insurance Proceeds Agreement) of the total sum of three million, five
hundred thousand dollars ($3,500,000) . The Non-Settling Defendants (as defined in the Insurance
Proceeds Agreement) shall be entitled to receive up to fifty percent (50%) of the Arrearage Payment
ten (10) calendar days from the date of this Preliminary Approval Order . The Non-Settling
Defendants (as defined in the Insurance Proceeds Agreement) shall be entitled to receive up to the
remaining fifty percent (50%) of the Arrearage Payment on the earlier of (a) ten (10) calendar days
after entry of the Interpleader Judgment by this Court substantially in the form attached to the
Insurance Proceeds Agreement as Exhibit C or (b) April 15, 2005 .
4. Solely for purposes of the Stipulation and the Settlement, the Court now finds and
concludes that :
(a) With respect to all Released Claims, particularly in light ofthe Settlement : (1)
the members of the Settlement Class are so numerous that joinder of all class members in the
Actions is impracticable ; (2) there are questions of law and fact common to the Settlement Class ; (3 )
-2-
the claims of the Representative Plaintiffs are typical of the claims of the Settlement Class ; and (4) in
negotiating and entering into the Stipulation, the Representative Plaintiffs and their counsel hav e
fairly and adequately represented and protected the interests of all Settlement Class Members ; and
(b) With respect to all Released Claims : ( 1) the questions of law and fact that are
common to the Settlement Class predominate over any individual questions ; and (2) a class action is
superior to other available methods for the fair and efficient adjudication of this controversy ,
considering (i) the interests of the Settlement Class Members in individually controlling th e
prosecution of separate actions, (ii) the extent and nature of any litigation concerning the controvers y
already commenced by Settlement Class Members, (iii) the desirability or undesirability o f
concentrating the litigation of these claims in this particular forum, and (iv) the difficulties likely t o
be encountered in the management of the Actions .
5 . Solely for the purposes of the Stipulation and the Se ttlement, the Settlement Class is
hereby certified pursuant to Rule 23 of the Federal Rules of Civil Procedure in accordance with the
following definitions as set forth in the Stipulation :
"Settlement Class" means all Persons (and their beneficiaries) who purchased or acquire d
any publicly traded equity or debt securities of Enron between September 9, 1997 and November 27 ,
2001, inclusive, and including purchasers of all securities issued by Enron-related entities during th e
Settlement Class Period, the value or repayment of which was dependent on the credit, financial
condition , or ability to pay of Enron Corporation (collectively, the "Publicly Traded Securities") . '
` The Publicly Traded Securities include without limitation Enron's publicly traded debt andequity securities (including without limitation Enron's common stock, 6 .40% Notes, 6 .95% Notes,7.875% Notes, 6 .95% Notes, 7% Exchangeable Notes, 6 .625% Notes, 7 .375% Notes, 8 .375%Medium Term Notes, Floating Rate Notes due March 30, 2000, and Zero Coupon Convertible SeniorNotes) as well as preferred securities issued by Enron, Enron Capital LLC 8% CumulativeGuaranteed Monthly Income Preferred Shares, Enron Capital Trust I Trust Originated PreferredSecurities, Enron Capital Trust IT Trust Originated Preferred Securities and Enron Capital Resources ,
-3-
Excluded from the Settlement Class are Defendants, the officers and directors of Enron, and
members of their immediate families or their successors, heirs, and legal representatives . Also
excluded from the Settlement Class are those Persons who timely and validly request exclusion from
the Settlement Class, to the extent that they are able to do so under Rule 23 of the Federal Rules o f
Civil Procedure, pursuant to the Mailed Notice .
6. Solely for purposes of the Stipulation and the Settlement, the Representative Plaintiffs
are hereby certified as the class representatives pursuant to Rule 23 of the Federal Rules of Civi l
Procedure .
7. The Court approves, as to form and content, the Notice of Pendency and Partia l
Settlement of Class Action annexed hereto as Exhibit F-I (the "Mailed Notice") .
8. The Court approves, as to form and content , the Summary Notice for Publication
annexed hereto as Exhibit F-2 (the "Summary Notice") .
9 . The date and time of the Settlement Hearing shall be added to the Mailed Notice and
the Summary Notice before they are mailed and published, respectively, in accordance wit h
paragraph 10, below .
10. The Court finds that the mailing, publication and distribution of the Mailed Notice
and Summary Notice substantially in the manner and form set forth in paragraph 10, below ,
L.P. 9% Cumulative Preferred Secu rities (collectively, the "Preferred Securities"), and Osprey$1,400,000,000 8 .31 % Senior Secured Notes due 03, Yosemite $750,000,000 8 .25% Series 1999-ALinked Enron Obligations due 11 /15/04, Yosemite £200,000,000 8 .75% Series 2000-A LinkedEnron Obligations due 07, Enron Credit Linked Notes $500,000,000 8% due 05, Osprey$750,000,000 7.797% Senior Secured Notes due 03 and £315,000,000 6.375% Senior Secured Notesdue 03, Enron Credit Linked Notes II $500 ,000,000 7 .375% due 06 , Enron Euro Credit LinkedNotes Trust £200 ,000,000 6 . 5% due 06, Enron Sterling Credit Linked Notes Trust £125,000,0007.25% due 06 , and Marlin Water Trust II and Marlin Water Capital Corp . II $475,000,000 6 .31 %Senior Secured Notes and £515,000 ,000 6 . 19% Senior Secured Notes (collectively , the "ForeignDebt Securities") .
-4-
constitutes the best notice practicable under the circumstances, including individual notice to al l
Settlement Class Members who can be identified through reasonable effort, and constitutes valid,
due and sufficient notice to all persons entitled thereto, complying fully with the requirements o f
Rule 23 of the Federal Rules of Civil Procedure and due process .
11 . The Notice and Claims Administrator is empowered to supervise and administer th e
notice procedure, as set forth below :
(a) Commencing on or before , 2005, the Notice and Claims
Administrator shall mail or cause to be mailed, by first class mail, postage prepaid, copies of th e
Mailed Notice to all Settlement Class Members who can be identified by Plaintiffs' Settlement
Counsel with reasonable effort at each such Settlement Class Member's last known address ; and
(b) On or before , 2005, the Notice and Claims Administrator
shall cause the Summary Notice to be published twice in the Investor 's Business Daily and twice i n
the Houston Chronicle .
12. At or prior to the Settlement Hearing (as defined below), Plaintiffs ' Settlement
Counsel shall file with the Court and serve on counsel for the Outside Directors and Harrison proo f
by declaration or affidavit of the mailing and publication described in paragraph 10, above .
13 . Settlement Class Members who wish to exclude themselves from the Settlement
Class must do so in accordance with the instructions contained in the Mailed Notice .
14. All Persons who fall within the definition of the Settlement Class and who do not
timely and validly request to be excluded from the Settlement Class in accordance with the
instructions set forth in the Mailed Notice shall be subject to and bound by the provisions of the
Stipulation, the releases contained therein, and the Judgment with respect to all Released Claims,
regardless of whether such Persons seek or obtain by any means, including, without limitation, b y
-5-
submitting a Proof of Claim and Release or any similar document, any distribution from the Gross
Settlement Fund or the Net Settlement Fund .
15. A hearing (the "Settlement Hearing") shall be held on , 2005 at
a.m./p.m., before the Honorable Melinda Harmon, United States District Judge, at the United States
District Court for the Southern District of Texas, Bob Casey United States Courthouse, 515 Rusk
Avenue, Houston, Texas 77002, to determine : (a) whether the proposed Settlement as set forth in the
Stipulation is fair, reasonable and adequate and should be approved by the Court ; (b) whether an
Order of Final Judgment and Dismissal, substantially in the form of Exhibit B to the Stipulation,
should be entered herein ; (c) whether the establishment of the Expense Fund should be approved ;
and (d) whether the allocation of the Gross Settlement Fund between the Newby Action and the
WSIB Action, on the one hand, and the Creditors Committee Action, on the other, should be
approved.
16. All papers in support of the Settlement shall be filed at least seven (7) days prior to
the Settlement Hearing .
17. Any Settlement Class Member may appear and show cause (if he, she or it has any )
why the Court should or should not : (a) approve the proposed Settlement as set forth in the
Stipulation as fair, reasonable and adequate ; (b) enter the Order of Final Judgment and Dismissal
substantially in the form annexed as Exhibit B to the Stipulation ; (c) approve the establishment of
the Expense Fund; or (d) approve the allocation of the Gross Settlement Fund between the Newby
Action, the Pulsifer Action and the WSIB Action, on the one hand, and the Creditors Committee
Action, on the other; provided, however that no person shall be heard with respect to, or shall be
entitled to contest, the foregoing matters unless on or before , 2005, that person
has served by hand or by first class mail notice of his, her or its intention to appear, setting forth
briefly each objection and the basis therefor, together with copies of any papers and briefs in suppor t
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of said objections and proof of membership in the Settlement Class, upon Keith F . Park, Lerach
Coughlin Stoia Geller Rudman & Robbins LLP, 401 B Street, Suite 1600, San Diego, California
92101 (on behalf of Lead Plaintiff in the Newby Action and plaintiffs in the WSIB Action), upon
Lew LeClair, McKool Smith PC, 300 Crescent Court, Suite 1500, Dallas, Texas 75201(onbehalfof
the Creditors Committee) ; and upon Kathy Patrick, Gibbs & Bruns, L .L.P., 1100 Louisiana, Suite
5300, Houston, Texas 77002 (on behalf of the Outside Directors) ; and upon William F . Martson, Jr .,
Tonkon Torp LLP, 888 SW Fifth Avenue, Suite 1600, Portland, Oregon 97204 (on behalf of
Harrison) and has filed said objections, papers and briefs with the Court . Unless otherwise ordered
by the Court, any Settlement Class Member who does not make his, her, or its objection in the
manner provided for herein shall be deemed to have waived such objection and shall forever be
foreclosed from making any objection to the foregoing matters .
18. The Court may adjourn the Settlement Hearing from time to time and without furthe r
notice to the Settlement Class . The Court reserves the right to approve the Settlement at or after the
Settlement Hearing with such modifications as may be consented to by the Settling Parties and
without further notice to the Settlement Class . The Court further reserves the right to enter the Order
of Final Judgment and Dismissal, inter alia, dismissing the Actions with prejudice as to the Settling
Defendants and against Representative Plaintiffs and the Settlement Class at or after the Settlement
Hearing and without further notice to the Settlement Class .
19. Upon the Effective Date, the Representative Plaintiffs and each of the Settlement
Class Members, on behalf of themselves, their successors and assigns, and any other Person claiming
(now or in the future) through or on behalf of them, and regardless of whether any such
Representative Plaintiff or Settlement Class Member ever seeks ; or obtains by any means, including,
without limitation, by submitting a Proof of Claim and Release or any similar document, any
distribution from the Gross Settlement Fund, shall be deemed to have, and by operation of th e
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Judgment shall have, fully, finally, and forever released, relinquished, and discharged all Released
Claims against the Outside Directors and Harrison and shall have covenanted not to sue the Outside
Directors or Harrison with respect to all such Released Claims, and shall be permanently barred and
enjoined from instituting, commencing, or prosecuting any such Released Claim against the Outside
Directors or Harrison .
20. Except as otherwise provided in the Stipulation no person who is not a Settlement
Class Member or counsel for one or more of the Representative Plaintiffs shall have any rights to
any portion of the Gross Settlement Fund .
21 . Banks, brokerage firms, institutions, and other Persons who are nominees tha t
purchased Publicly Traded Securities of Enron for the beneficial interest of other Persons during the
Settlement Class Period shall, within ten (10) calendar days of receiving the Mailed Notice (a) send
the Mailed Notice to all such beneficial owners, or (b) if they have not already done so in connection
with the settlement with Andersen Worldwide Societe Cooperative ("AWSC"), send a list of the
names and addresses of such beneficial owners to the Notice and Claims Administrator, in which
event the Notice and Claims Administrator shall promptly mail the Mailed Notice to such beneficial
owners . The Mailed Notice will advise such nominees that their reasonable costs in providing the
Mailed Notice to such beneficial owners, to the extent not already reimbursed in connection with the
prior settlement with AWSC, will be reimbursed by Plaintiffs' Settlement Counsel from the Gross
Settlement Fund .
22. All reasonable costs and expenses incurred in identifying and providing notice to
Settlement Class Members and in administering the Gross Settlement Fund shall be paid as set forth
in the Stipulation .
23. The Court retains jurisdiction over all proceedings arising out of or related to the
Stipulation and/or the Settlement .
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24. If for any reason the Settlement does not become effective in accordance with the
terms of the Stipulation, this Preliminary Approval Order shall be rendered null and void and shal l
be vacated nunc pro tunc, and the provisions of ¶¶6 .2 and 7.5 of the Stipulation shall apply .
25. Without further order of the Court, the Settling Parties may agree to reasonable
extensions of time to carry out any of the provisions of this Preliminary Approval Order or the
Stipulation.
26. Pending final determination as to whether the Settlement as set forth in the Stipulatio n
should be approved, no Settlement Class Member shall commence, prosecute, pursue or litigate an y
Released Claim against the Outside Directors or Harrison, whether directly, representatively or i n
any other capacity, and regardless of whether or not any such Settlement Class Member ha s
appeared in the Actions .
IT IS SO ORDERED .
DATED :THE HONORABLE MELINDA HARMONUNITED STATES DISTRICT JUDGE
S :\Settlement\Enron .Set\Outside Directors Settlement\preliminary app ord-Clean .do c
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EXHIBIT F-1
UNITED STATES DISTRICT COURTSOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
In re ENRON CORPORATION SECURITIESLITIGATION
Civil Action No . H-01-3624(Consolidated)
This Document Relates To :
MARK NEWBY, et al ., Individually and OnBehalf of All Others Similarly Situated,
Plaintiffs ,
vs.
ENRON CORP ., et al .,
Defendants .
THE REGENTS OF THE UNIVERSITY OFCALIFORNIA, et al ., Individually and On Behalfof All Others Similarly Situated,
Plaintiffs ,
vs .
KENNETH L. LAY, et al .,
Defendants .
[Caption continued on following page .]
CLASS ACTION
NOTICE OF PENDENCY AND PARTIAL SETTLEMENT OF CLASS ACTIO N
EXHIBIT F-1
WASHINGTON STATE INVESTMENTBOARD, et al., On Behalf of Themselves andAll Others Similarly Situated,
Plaintiffs,vs .
KENNETH L. LAY, et al .,
Defendants
NATHANIEL PULSIFER, TRUSTEE OFTHE SHOOTERS HILL REVOCABLETRUST, INDIVIDUALLY AND ONBEHALF OF ALL OTHERS SIMILARLYSITUATED,
Plaintiffs ,
vs .
KENNETH L. LAY, et al .,
Civil Action No . H-02-340 1
CLASS ACTION
Civil Action No . 02-3010
CLASS ACTION
Defendants .
TO: (1) ALL PERSONS WHO PURCHASED OR ACQUIRED PUBLICLY TRADED EQUITYOR DEBT SECURITIES OF ENRON CORPORATION (INCLUDING ALL SECURITIESISSUED BY ENRON-RELATED ENTITIES, THE VALUE OR REPAYMENT OFWHICH WAS DEPENDENT ON THE CREDIT, FINANCIAL CONDITION, ORABILITY TO PAY OF ENRON CORPORATION) ("PUBLICLY TRADED SECURITIES"AS FURTHER DEFINED BELOW) DURING THE PERIOD FROM SEPTEMBER 9,1997THROUGH AND INCLUDING NOVEMBER 27, 200 1
This Notice of Pendency and Partial Settlement of Class Action (the "Notice") is given
pursuant to Rule 23 of the Federal Rules of Civil Procedure to inform you of the proposed partial
settlement of these Actions (the "Settlement") and the hearing (the "Settlement Hearing") to be held
by the United States District Court for the Southern District of Texas (the "Court") to consider the
fairness, reasonableness and adequacy of the Settlement as set forth in the Stipulation of Settlement
among the Representative Plaintiffs and the Outside Directors (as further defined below) and Ken
Harrison ("Harrison"), dated as of January 12, 2005 (the "Stipulation"), on file with the Court . All
capitalized terms not defined prior to their use in this Notice have the meanings set forth in Section
VIII, below.
1 . STATEMENT OF PLAINTIFFS' RECOVERY
The Settlement will result in the creation of a cash settlement fund consisting of tw o
components . The first component is the remaining amount of available proceeds from Enron's
directors and officers liability insurance policies which amount is Two Hundred Million Dollars .
Subject to the approval of the Court, this amount will be reduced by $13 million (the "Set Aside
Amount") and the remainder allocated 82 .8% to the Settlement Class and 17 .2% to the Official
Committee of Unsecured Creditors of Enron Corp . The second component consists of the individual
contributions of the Outside Directors and Harrison in the approximate aggregate amount of $13
million . The total amount available to the Settlement Class by reason of this settlement is estimated
to be $168 million and, subject to deduction for costs of notice and administration and certain taxes
and tax related expenses and for attorneys' fees, costs and expenses as approved by the Court, wil l
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be available for distribution to Settlement Class Members (as defined below) . As described more
fully below, the amount of any distribution to Settlement Class Members on a per share basis will
depend on future Court proceedings and it is therefore not possible to estimate the amount of any
such distribution at the present time. See Section XI .
II. STATEMENT OF POTENTIAL OUTCOM E
Representative Plaintiffs, the Outside Directors and Harrison do not agree on the average
amount of damages per share that would have been recoverable from the Outside Directors or
Harrison if Representative Plaintiffs were to have prevailed on each claim asserted . The issues on
which the parties disagree include : (1) whether the Outside Directors or Harrison engaged in conduct
that would give rise to any liability to the Settlement Class under the federal or Texas securities
laws, Texas common law, or any other laws ; (2) whether the Outside Directors or Harrison have
valid defenses to any such claims of liability; (3) the appropriate economic model for determining
the amount by which the Publicly Traded Securities were allegedly artificially inflated (if at all)
during the Settlement Class Period ; (4) the amount by which the Publicly Traded Securities were
allegedly artificially inflated (if at all) during the Settlement Class Period ; (5) the effect of various
market forces influencing the trading price of Publicly Traded Securities at various times during the
Settlement Class Period; (6) the extent to which external factors, such as general market conditions,
influenced the trading price of Publicly Traded Securities at various times during the Settlement
Class Period ; (7) the extent to which the various matters that Representative Plaintiffs alleged wer e
materially false or misleading influenced (if at all) the trading price of Publicly Traded Securities at
various times during the Settlement Class Period ; (8) the extent to which the various allegedly
adverse material facts that Representative Plaintiffs alleged were omitted influenced (if at all) the
trading price of the Publicly Traded Securities at various times during the Settlement Class Period ;
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(9) whether the statements made or facts allegedly omitted were false, material or otherwise
actionable under the federal securities or other laws .
III. STATEMENT OF ATTORNEYS' FEES AND EXPENSES SOUGH T
At a future date, upon further notice to the Settlement Class, counsel for the Representative
Plaintiffs will apply to the Court for an award of attorneys' fees from the Gross Settlement Fund . No
attorneys' fees are being sought at this time. However, the Stipulation provides for the allocation of
Sixteen Million Dollars ($16,000,000) (the "Expense Fund") of the settlement fund for
reimbursement of expenses incurred and expected to be incurred by Plaintiffs' Settlement Counsel in
prosecuting the Actions . The Court will be asked to approve the establishment of the Expense Fund
at the Settlement Hearing .
IV. REASONS FOR SETTLEMENT
The Representative Plaintiffs and their counsel believe that this Settlement is fair, reasonable,
and adequate to the Members of the Settlement Class . The Representative Plaintiffs and thei r
counsel have reached this conclusion after investigating and considering, among other things, the
strengths and weaknesses of the Representative Plaintiffs' claims against the Outside Directors and
Harrison and the Outside Directors' and Harrison's defenses to those claims, the fact that certain of
the claims asserted against the Outside Directors have been dismissed by Court Order dated March
12 and March 25, 2003, the uncertainties of this complex litigation, and the benefit provided by the
Settlement to the Members of the Settlement Class . See Section VII.
V. IDENTIFICATION OF ATTORNEYS' REPRESENTATIVE S
Any questions regarding the Settlement should be directed to Plaintiffs' Settlement Counsel
or their staff:
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RICK NELSO NLERACH COUGHLIN STOIA GELLER RUDMAN & ROBBINS LLP401 B Street, Suite 1600
San Diego, CA 92101-4297Telephone: (800) 449-4900
PLEASE READ THIS NOTICE CAREFULLY. THIS NOTICE RELATES TO A
PROPOSED PARTIAL SETTLEMENT OF THESE ACTIONS AND, IF YOU ARE A
SETTLEMENT CLASS MEMBER, CONTAINS IMPORTANT INFORMATION AS TO YOUR
RIGHTS CONCERNING THE SETTLEMENT AS FURTHER DESCRIBED BELOW .
EXCLUSION DEADLINE : REQUESTS FOR EXCLUSION MUST BE FILED SO AS TO
BE RECEIVED NO LATER THAN , 2005 . SECURITIES BROKERS AND
OTHER NOMINEES : PLEASE SEE THE INSTRUCTIONS ON PAGE BELOW.
VI. BACKGROUND OF THE LITIGATION
The Outside Directors have been named as defendants in the Newby Action . They moved t o
dismiss the Newby Action on the ground that the complaint failed to state a claim upon which relief
could be granted because plaintiffs failed to adequately plead the Outside Directors' scienter . On
March 12 and 25, 2003, the Court granted the Outside Directors' motion to dismiss all claims against
them asserted under the Securities Exchange Act of 1934 (the "1934 Act") and under the Texas
Securities Act . The Outside Directors contend that this ruling necessarily requires dismissal of any
1934 Act or Texas Securities Act claims that might be pursued against the Outside Directors in the
Newby Action. The Outside Directors were also named as defendants in the Washington State
Investment Board case. Their motion to dismiss was under submission when the settlement was
reached. Harrison's motion to dismiss the Newby Action was denied and his motion to dismiss the
Washington State Investment Board case was under submission when the settlement was reached .
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VII. BACKGROUND OF THE SETTLEMEN T
Counsel for the Representative Plaintiffs have conducted an investigation relating to the
claims and underlying events alleged in the complaints . Counsel for the Representative Plaintiffs
also have conducted considerable formal and informal discovery in the Actions and in related
litigation and have analyzed the evidence obtained therein, and have researched the applicable law
with respect to the claims alleged in the complaints and the potential defenses thereto .
The Representative Plaintiffs, by their counsel, have conducted arm's-length negotiations
with counsel for the Outside Directors and Harrison with a view toward settling the issues in dispute
and achieving the best result possible consistent with the interests of the Settlement Class .
Based upon their investigation, counsel for the Representative Plaintiffs have concluded that
the terms of the Settlement as set forth in the Stipulation are fair, reasonable, and adequate to the
Representative Plaintiffs and the Settlement Class, and in the best interest of the Representative
Plaintiffs and the Settlement Class, and have agreed to settle the Actions as to the Outside Director s
and Harrison pursuant to the terms and provisions of the Stipulation, after considering (i) the benefits
that the Representative Plaintiffs and the Settlement Class will receive from the Settlement ; (ii) the
attendant risks of litigation ; and (iii) the desirability of permitting the Settlement to be consummated
as provided by the terms of the Stipulation .
The Outside Directors and Harrison have denied and continue to deny each and all of the
claims and allegations of wrongdoing made by the Representative Plaintiffs in the Actions and
maintain furthermore that they have meritorious defenses . The Outside Directors and Harrison have
expressly denied and continue to deny all charges of wrongdoing or liability against them arising out
of any of the conduct, statements, acts or omissions alleged, or that could have been alleged, in the
Actions . The Outside Directors and Harrison also have denied and continue to deny, inter alia, the
allegations that the Representative Plaintiffs or the Settlement Class Members were harmed by th e
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Outside Directors' and Harrison's conduct alleged in the Actions . Pursuant to the terms of th e
Stipulation, the Stipulation shall in no event be construed or deemed to be evidence of or a n
admission or concession by the Outside Directors and Harrison with respect to any claim of any fault
or liability or wrongdoing or damage whatsoever.
Nonetheless, the Outside Directors and Harrison have concluded that further conduct of the
Actions would be protracted and expensive, and that it is desirable that the Actions be fully and
finally settled in the manner and upon the terms and conditions set forth in the Stipulation. The
Outside Directors and Harrison also have taken into account the uncertainty and risks inherent in any
litigation, especially in complex cases like the Actions . The Outside Directors and Harrison have,
therefore, determined that it is desirable and beneficial to them that the Actions be settled in th e
manner and upon the terms and conditions set forth in the Stipulation .
THIS NOTICE IS NOT INTENDED TO BE, AND SHOULD NOT BE CONSTRUED AS ,
AN EXPRESSION OF ANY OPINION BY THE COURT WITH RESPECT TO THE TRUTH O F
THE ALLEGATIONS IN THE ACTIONS OR THE MERITS OF THE CLAIMS OR DEFENSES
ASSERTED. THIS NOTICE IS SOLELY TO ADVISE YOU OF THE PENDENCY OF THE
ACTION AND THE PROPOSED PARTIAL SETTLEMENT THEREOF AND OF YOUR
RIGHTS IN CONNECTION THEREWITH .
VIII. DEFINITIONS
As used in this Notice , the following terms have the meanings specified below. Any
capitalized terms not specifically defined in this Notice shall have the meanings set forth for suc h
terms in the Stipulation .
I . "Actions" means, for purposes of this notice, the Newby Action, Washington State
Investment Board, et al . v. Kenneth L. Lay, et al., Civil Action No . H-02-3401 (S .D. Tex.) (the
"WSIB Action") ; Nathaniel Pulsifer, Trustee of The Shooters HillRevocable Trust, Individually and
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On BehalfofAll Others Similarly Situated v. Kenneth L. Lay, et al., Civil Action No . 02-3010 (S .D.
Tex.) .
2 . "Authorized Claimant" means any Settlement Class Member who is entitled to a
distribution from the Gross Settlement Fund pursuant to the terms of the Stipulation, any Plan of
Allocation, or any order of the Court .
3 . `Bankruptcy Court" means the United States District Court for the Southern District
of New York, presiding over In re Enron Corp ., et. al., Case No. 01-16034 (AJG) .
4. "Court" means the United States District Court for the Southern District of Texas,
Houston Division .
5 . "Defendants" means each and all of the defendants that have been or may be named
in any of the complaints in the Actions .
6. "Committee Action" means Official Committee of Unsecured Creditors of Enron
Corp. v. Andrew S. Fastow, et al., Civil Action No . H-04-0091 (S .D. Tex.).
7 . "Derivative Actions" means Pirelli Armstrong Tire Corporation Retiree Medica l
Benefits Trust, Derivatively on Behalf of Enron Corporation, et at . v. Kenneth Lay, et al., Civil
Action No. H-01-3645, in the United States District Court for the Southern District of Texas ;
Detectives Endowment Association Annuity Fund, derivatively on behalf of Enron Corporation v .
Kenneth L . Lay et al., C .A. No. H-01-3892; Joseph E. Kassoway and Robert T. Kassoway Trust v.
Andrew S. Fastow et at., C.A. No. H-01-3690 ; Fred Greenberg, derivatively on behalf of Enron
Corp. v. Robert A . Belfer et al., C.A. No. H-01-3998; Lynn Goffman et al. v. Robert A . Belfer et al.,
C.A. No. H-02-1838; David Trzebucki et al, v. Andrew S. Fastow et al., C.A. No. H-02-1832; Rick
Barksy v. Arthur Andersen LLP et al., C.A. No. H-02-1922; Richard P. Bergsieker v. Kenneth L . Lay
et at., C.A. No . H-02-3427 and any other case asserting derivative claims or claims that are the
property of Enron .
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8 . "Effective Date" means the first date by which all of the events and conditions
specified in paragraph 7 .1 of the Stipulation have occurred and have been met, respectively .
9. "Enron" means Enron Corp ., a reorganized debtor.
10. "Enron D&O Policies" means Associated Electric & Gas Insurance Services Limited
Insurance Policy No. D0079A1 A98 ; Energy Insurance Mutual Limited Excess Policy No . 900630-
OODO; Federal Insurance Company Excess Policy No . 8142-05-47; Hartford/Twin City Fire
Insurance Company Excess Policy No . NDA 0131301-9814 ; Greenwich Insurance Company Excess
Policy No. ELU 82248-01 ; Lloyd's of London Insurance Certificate No . 901/LK9802531 ; St . Paul
Mercury Insurance Company Excess Policy No . 568CM0934 ; Federal Insurance Company Excess
Policy No. 8181-43-14; Royal Insurance Company of America Policy No . P SF000633; ACE
Bermuda Insurance Ltd . Excess Policy No . EC-AD01-001 ; and Kemper Insurance Indemnity Co . as
participating in Federal Quota Share Policy No . 8179-41-03 .
11 . "Expense Fund" means a principal amount not to exceed Sixteen Million Dollars
($16,000,000), plus any interest that may accrue thereon . The Expense Fund shall be paid from, and
not in addition to, the Gross Settlement Fund .
12. The term "Harrison" means Ken L. Harrison and his attorneys, insurers, and each and
all of the heirs, executors, administrators, spouses, assigns and/or bankruptcy estates of such persons,
in each instance only in their capacity as such, but excluding the Non-Settling Defendants in the
Actions .
13. "Judgment" means, for purposes of this notice, a judgment to be rendered by the
Court, substantially in the form attached to the Stipulation as Exhibit D .
14. "Lead Plaintiff' means The Regents of the University of California .
15 . "Newby Action" means the actions brought on behalf of all purchasers (and their
beneficiaries) of any publicly traded equity and debt securities of Enron Corporation, as defined i n
-8-
that action , from October 19, 1998 through November 27, 2001, inclusive (excluding Defendants,
the officers and directors of Enron , and members of their immediate families or their successors,
heirs, and legal representatives), proceeding as a consolidated action captioned Newby, et al. v.
Enron Corp ., et al., No. H-01 -3624 (S.D. Tex .) .
16. "Insurance Proceeds" means the sum of $200 million dollars which represents the
remaining limits of coverage under the Enron D&O Policies w ritten by those insurance carriers
above the layer of insur ance provided by Hartford/Twin Cities Insurance Company (the "Insurance
Carriers") .
17. "Interpleader Action" means the First Amended Third Party Counterclaim for
Interpleader filed by the Insurance Carriers in the Newby Action on October 22, 2004 , related to
disposition of the Insurance Proceeds, pending in the Court .
18. "Non-Outside Director Defendants" means the defendants other th an the Outside
Directors that have been named in the complaints in the Actions .
19. "Non-Settling Defendants" means each and all of the current Defendants except the
Outside Directors and Harrison .
20 . "Notice and Claims Administrator" means Gilardi & Co. LLC or its successors .
21 . "Outside Directors" means Robert Belfer, Norman Blake , Ronnie Chan, Joh n
Duncan, Paulo Ferraz Pereira, Joe Foy, Wendy Gramm, Robert Jaedicke, Charles LeMaistre,
Rebecca Mark-Jusbasche, John Mendelsohn, Jerome Meyer, Frank Savage, John Urquhart, John
Wakeham, Charls Walker, Bruce Willison and Herbert Winokur and their attorneys, insurers, and
each and all of the heirs, executors, administrators, spouses, assigns and/or bankruptcy estates of
such persons, in each instance only in their capacity as such, and any person or entity in which any
of the above has or had a controlling interest or which is or was related to or affiliated with any of
the above, but excluding the Non-Settling Defendants in the Actions .
-9-
22. "Person" means an individual, corporation, limited liability corporation, professional
corporation, limited liability partnership, partnership, limited partnership, association, joint stock
company, estate, legal representative, trust, unincorporated association, government or any political
subdivision or agency thereof, and any business or legal entity and any spouses, heirs, predecessors,
successors, representatives, or assignees of any of the foregoing .
23. "Plaintiffs' Settlement Counsel" means Lerach Coughlin Stoia Geller Rudman &
Robbins LLP (and any successors thereof), William S . Lerach, Keith F . Park, Helen J . Hodges, 401
B Street, Suite 1600, San Diego, California 92101 .
24. "Plan of Allocation" means any plan or formula of allocation of the Gross Settlement
Fund, to be approved by the Court upon further notice to the Settlement Class, whereby the Net
Settlement Fund shall in the future be distributed to Authorized Claimants . Any Plan of Allocation
is not part of the Stipulation and the Outside Directors and Harrison shall have no responsibility or
liability with respect thereto .
25. "Proof of Claim and Release" means the form to be sent to Settlement Class
Members, upon further order(s) of the Court, by which Settlement Class Members may make claims
against the Settlement Fund for damages allegedly incurred by reason of their investment(s) in the
Publicly Traded Securities .
26. "Released Claims" means: any and all claims, demands, rights, liabilities and cause s
of action (including "Unknown Claims" as defined in 133, below) of any nature whatsoever
(excluding claims under ERISA), asserted under the Securities Act of 1933, that Representative
Plaintiffs and/or any Settlement Class Member have, had, or may have against the Outside Directors
or Harrison based on, arising out of, or related to, directly or indirectly, both purchases or other
acquisitions of any Publicly Traded Securities, including stock, notes and foreign debt securities ,
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during the Settlement Class Period and all acts, facts, statements , or omissions that were or could
have been alleged in the Actions .
27 . "Representative Plaintiffs" means the Lead Plaintiff in the Newby Action and the
named plaintiffs in the Actions .
28. "Settlement Amount" means: (1) the Insurance Proceeds and (2) the Stock Sales Gai n
Amount .
29. "Settlement Class" means all Persons (and their beneficiaries) who purchased o r
acquired any publicly traded equity or debt secu rities of Enron between September 9, 1997 and
November 27, 2001, inclusive, and including purchasers of all securities issued by Enron-related
entities during the Settlement Class Period, the value or repayment of which was dependent on the
credit, financial condition, or ability to pay of Enron Corporation (collectively, the "Publicly Traded
Securities").' Excluded from the Settlement Class are Defendants, the officers and directors of
Enron, and members of their immediate families or their successors, heirs, and legal representatives .
Also excluded from the Settlement Class are those Persons who timely and validly request exclusio n
The Publicly Traded Securities include without limitation Enron's publicly traded debt and
equity securities (including without limitation Enron's common stock, 6 .40% Notes, 6 .95% Notes,
7.875% Notes, 6.95% Notes, 7% Exchangeable Notes, 6.625% Notes, 7.375% Notes, 8.375%
Medium Term Notes, Floating Rate Notes due March 30, 2000, and Zero Coupon Convertible SeniorNotes) as well as preferred securities issued by Enron, Enron Capital LLC 8% CumulativeGuaranteed Monthly Income Preferred Shares, Enron Capital Trust I Trust Originated Preferred
Securities, Enron Capital Trust II Trust Originated Preferred Securities and Enron Capital Resources,
L.P. 9% Cumulative Preferred Securities (collectively, the "Preferred Securities"), and Osprey
$1,400,000,000 8 .31 % Senior Secured Notes due 03, Yosemite $750,000,000 8 .25% Series 1999-ALinked Enron Obligations due 11/15/04, Yosemite £200,000,000 8 .75% Series 2000-A Linked
Enron Obligations due 07, Enron Credit Linked Notes $500,000,000 8% due 05, Osprey$750,000,000 7 .797% Senior Secured Notes due 03 and €315,000,000 6 .375% Senior Secured Notes
due 03, Enron Credit Linked Notes II $500,000,000 7.375% due 06, Enron Euro Credit Linked
Notes Trust €200,000,000 6 .5% due 06, Enron Sterling Credit Linked Notes Trust £125,000,000
7.25% due 06, and Marlin Water Trust II and Marlin Water Capital Corp . II $475,000,000 6 .31 %
Senior Secured Notes and £515,000,000 6 .19% Senior Secured Notes (collectively, the "Foreign
Debt Securities") .
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from the Settlement Class, to the extent that they are permitted to do so under Rule 23 of the Federal
Rules of Civil Procedure, pursuant to this notice .
30. "Settlement Class Member" or "Member ofthe Settlement Class" mean a Person who
falls within the definition of the Settlement Class .
31 . "Settlement Class Period" means the period commencing on September 9, 1997
through November 27, 2001, inclusive .
32. "Settling Parties" means, collectively, the Representative Plaintiffs (on behalf of
themselves and the Settlement Class Members) and each of the Outside Directors and Harrison .
33. "Stock Sales Gain Amount" means ten percent (10%) of each of the Outsid e
Director's and Harrison's net gain on sales of Enron stock as recited in the Newby Action ("Sales o f
Enron Stock") . The Stock Sales Gain Amount is limited to stock or stock options granted to the
Outside Directors and Harrison during the Class Period as compensation for their services as
directors or officers of Enron . For purposes of the calculation and payment of the Stock Sales Gain
Amount, "Sales of Enron Stock" shall include sales of stock, exchange fund transactions and
cashless exercises of stock options, but shall not include collar transactions from which the Outside
Directors or Harrison received no proceeds during the Class Period . Until deposited in the Stock
Sales Escrow Account pursuant to the terms of the Stipulation, the Stock Sales Gain Amount shall
bear interest at the rate of 5% per annum (i) from November 8, 2004, in the case of each of the
Outside Directors, and (ii) from December 15, 2004, in the case of Harrison . All provisions in the
Stipulation relating to the Stock Sales Gain Amount are several, and not joint, as to each of the
Outside Directors and Harrison .
34. "Unknown Claims" means any Released Claim that any Plaintiff or Settlement Class
Member does not know or suspect to exist in his, her or its favor at the time of the release of the
Released Defendants that if known by him, her or it, might have affected his, her or its settlemen t
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with and release of the Released Defendants , or might have affected his, her or its decision not to
object to this settlement or not to exclude himself, herself or itself from the Settlement Class. With
respect to any and all Rele ased Claims, the Settling Parties stipulate and agree that, upon the
Effective Date, the Plaintiffs shall expressly waive, and each of the Settlement Class Members shall
be deemed to have waived and by operation of the Judgment shall have 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 FAVOR AT
THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM
MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE
DEBTOR.
The Plaintiffs shall expressly waive, and each of the Settlement Class Members shall be deemed to
have waived and by operation of the Judgment shall have waived, any and all provisions, rights and
benefits conferred by any law of any state or territory of the United States, or principle of common
law, that is similar, comparable or equivalent to California Civil Code § 1542 . The Plaintiffs and
Settlement Class Members may hereafter discover facts in addition to or different from those that
any of them now knows or believes to be true with respect to the subject matter of the Released
Claims, but each Plaintiff shall expressly have, and each Settlement Class Member shall be deemed
to have and by operation of the Judgment shall have, fully, finally, and forever settled and released
any and all Released Claims, known or unknown, suspected or unsuspected, contingent or non-
contingent, whether or not concealed or hidden, that 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 that is negligent, reckless, 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
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facts . The Plaintiffs acknowledge, and the Settlement Class Members shall be deemed to hav e
acknowledged, and by operation of the Judgment shall have acknowledged, that the foregoin g
waiver was separately bargained for and a key element of the settlement of which this release is a
part.
35 . "WSIB Action" means the action brought on behalf of all purchasers of the Publicly
Traded Securities from September 9, 1997 through October 18, 1998, inclusive (excluding
Defendants, the officers and directors of Enron, and members of their immediate families or thei r
successors, heirs, and legal representatives), captioned Washington State Investment Board, et al. v.
Kenneth L. Lay, et al., Civil Action No. H-02-3401 (S .D. Tex.) .
IX. THE SETTLEMENT CLAS S
By Order dated , 2005, the Court certified the Settlement Class
pursuant to Rule 23(b)(3) of the Federal Rules of Civil Procedure, for the purpose of the Settlemen t
only, and directed that this Notice be given to Members of the Se tt lement Class . If you fall withi n
the definition of the Settlement Class set forth above at Section VIII then you are a Settlement Clas s
Member.
X. THE RIGHTS OF SETTLEMENT CLASS MEMBERS
If you are a Settlement Class Member, you may receive the benefit of, and you will be boun d
by, the terms of the proposed Settlement described in Section XI of this Notice, upon approval of th e
proposed Settlement by the Court .
If you are a Member of the Settlement Class and if you do not wish to be included in th e
Settlement Class and do not wish to participate in the proposed Settlement described in this Notice ,
you may request to be excluded with respect to all Released Claims .
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To request to be excluded in accordance with the preceding paragraph, you must send a
signed, written request to be excluded, postmarked no later than , 2005, and addressed
as follows :
In re Enron Corporation Securities Litigationc/o Gilardi & Co. LLCP.O. Box 5100Larkspur, CA 94977-510 0
You must set forth the name of this Action (In re Enron Corporation Securities Litigation,
Civil Action No . H-01-3624 (Consolidated)), your name, address and telephone number, and state
that you "request exclusion from the Settlement Class in In re Enron Corporation Securities
Litigation, Civil Action No . H-01-3624 (Consolidated) ." You must also set forth the number and
type of Publicly Traded Enron securities that you purchased and sold during the Settlement Class
Period and the prices at which the shares were purchased and sold, along with the name and address
of the record owner of such shares if different from your own. NO PERSON OR ENTITY MAY
EXCLUDE HIMSELF, HERSELF, OR ITSELF FROM THE SETTLEMENT CLASS AFTE R
, 2005 .
If you validly request exclusion from the Settlement Class (a) you will be excluded from the
Settlement Class, (b) you will not share in the proceeds of the Settlement described herein, (c) you
will not be bound by any judgment entered in the Actions insofar as such judgment relates to the
Actions, and (d) you will not be precluded, by reason of your decision to request exclusion from the
Settlement Class, from otherwise prosecuting an individual claim, if timely and otherwise valid,
against the Outside Directors based on the matters complained of in the Actions . If you are a
Settlement Class Member, you may, but are not required to, enter an appearance through counsel of
your own choosing at your own expense, provided that such counsel must file an appearance on your
behalf on or before , 2005, and must serve copies of such appearance on th e
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attorneys listed in Section XlV below . If you do not enter an appearance through counsel of your
own choosing, you will be represented by Plaintiffs' Settlement Counsel .
XI. TERMS OF THE PROPOSED SETTLEMENT
A settlement has been reached in the Actions between the Representative Plaintiffs and the
Outside Directors, the terms and conditions of which are set forth in the Stipulation and the Exhibits
thereto . The following description of the proposed Settlement is only a summary, and reference is
made to the text of the Stipulation, on file with the Court, for a full statement of its provisions .
A. The Settlement Fun d
The entire settlement fund (the "Gross Settlement Fund") consists of the aggregate principa l
amount of Two Hundred Thirteen Million Dollars ($213,000,000) in cash, plus interest thereon, that
has been placed into an interest-bearing account pursuant to the terms of the Stipulation. The
Stipulation provides for the establishment of an Expense Fund in the amount of Sixteen Million
Dollars ($16,000,000), which shall be paid from, and not in addition to, the Gross Settlement Fund .
At the Settlement Hearing, the Court will be asked to approve the establishment of the Expense
Fund. The Expense Fund will be used, subject to the Court's approval(s), to reimburse Plaintiffs'
Settlement Counsel for the expenses that they have incurred and expect to incur in the prosecution of
the Actions . A portion of the Gross Settlement Fund will also be used to pay for this Notice as well
as taxes and tax return preparation expenses regarding the interest earned on the Gross Settlement
Fund .
The Court will be asked to allocate the Insurance Proceeds (after deduction of the Set Aside
Amount) 82 .5% to the Settlement Class and 17 .5% to the settlement of the Committee Action and
the Derivative Actions.
After further notice to the Settlement Class and an opportunity to be heard, Plaintiffs'
Settlement Counsel will seek approval by the Court of a Plan of Allocation that will govern th e
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calculation of Settlement Class Members' claims. In the future, Settlement Class Members will be
sent a Proof of Claim and Release form to establish their claims against the Gross Settlement Fund.
Plaintiffs' Settlement Counsel anticipate that distributions to the Settlement Class will occur
in connection with additional recoveries against the remaining Defendants in the Actions .
B. Releases
If the proposed Settlement is approved by the Court, the Court will enter an order (the "Order
of Final Judgment and Dismissal") that will dismiss the Actions with prejudice as to the Outside
Directors and Harrison . In addition, upon the Effective Date, the Representative Plaintiffs and eac h
of the Settlement Class Members, on behalf of themselves, their successors and assigns, and any
other Person claiming (now or in the future) through or on behalf of them, and regardless ofwhether
any such Representative Plaintiff or Settlement Class Member ever seeks or obtains by any means,
including, without limitation, by submitting a Proof of Claim and Release, any distribution from that
portion of the Gross Settlement Fund allocated to the Settlement Class, shall be deemed to have, an d
by operation of the Judgment shall have, fully, finally, and forever released, relinquished, and
discharged all Released Claims against the Outside Directors and Harrison and shall have covenanted
not to sue the Outside Directors or Harrison with respect to all such Released Claims, and shall be
permanently barred and enjoined from instituting, commencing, or prosecuting any such Released
Claim against the Outside Directors or Harrison. In addition, subject to certain limitations set forth
in the Stipulation, the Outside Directors and Harrison will release the Representative Plaintiffs, the
Settlement Class Members and Plaintiffs' Settlement Counsel from any claims relating to the
prosecution of the Actions . The Court shall retain jurisdiction over these Actions, including, without
limitation, all matters with respect to implementation and enforcement of the terms of the
Stipulation .
-17-
XII. NOTICE TO BANKS, BROKERS AND OTHER NOMINEES
Banks, brokerage firms, institutions , and other persons who are nominees that purchased
Enron Publicly Traded Secu rities for the beneficial interest of other persons as of any date from
September 9, 1997 through and including November 27, 2001 are requested to, within ten (10)
calendar days of receipt of this Notice , ( 1) provide the No tice and Claims Administrator with the
names and addresses of such beneficial purchasers (IF YOU HAVE NOT ALREADY DONE SO IN
CONNECTION WITH THE NOTICE TO SETTLEMENT CLASS MEMBERS SENT IN THE
FALL OF 2003 REGARDING THE PARTIAL SETTLEMENT WITH ANDERSEN
WORLDWIDE SOCIETE COOPERATIVE ("AWSC")), or (2) forward a copy of this Notice to
each such beneficial purchaser and provide Plaintiffs ' Sett lement Counsel with wri tten confirmation
that the Notice has been so forwarded . Upon submission of appropriate documentation , Plaintiffs'
Settlement Counsel will reimburse your reasonable costs and expenses of complying with this
provision (to the extent you have not already been reimbursed for providing a list of beneficial
purchasers in connection with the previous partial se ttlement with AWSC) . Additional copies ofthis
Notice may be obtained from the Notice and Claims Administrator by writing to :
In re Enron Corporation Securities Litigationc/o Gilardi & Co. LLCP.O. Box 5100Larkspur, CA 94977-5100
Correspondence to Plaintiffs ' Settlement Counsel should be addressed as follows :
WILLIAM S. LERACHKEITH F. PARKHELEN J . HODGES
LERACH COUGHLIN STOIA GELLERRUDMAN & ROBBINS LLP
401 B Street , Suite 1600San Diego, CA 92101-4297
-18-
XIII. APPLICATION FOR ATTORNEYS' FEES AND EXPENSES
Plaintiffs' Settlement Counsel do not intend to apply for an award of attorneys' fees at thi s
time. As noted above, however, Plaintiffs' Settlement Counsel will ask the Court at the Settlement
Hearing to approve the establishment of the Expense Fund in the amount of $16,000,000 .
Reimbursement of expenses from the Expense Fund will only occur upon further Court order . Any
application for attorneys' fees and reimbursement of expenses not otherwise recovered from the
Expense Fund will only occur after notice of that application has been given to the Settlement Clas s
and an opportunity to be heard. Any such sums as awarded by the Court will be paid from the Gros s
Settlement Fund .
XIV. THE SETTLEMENT HEARING
A hearing (the "Settlement Hearing") will be held on , 2005 at
__.m., before the Honorable Melinda Harmon, United States District Judge, at the Unite d
States District Court for the Southern District of Texas, Bob Casey United States Courthouse, 51 5
Rusk Avenue, Houston, Texas 77002, for the purpose of determining (a) whether the proposed
Settlement as set forth in the Stipulation is fair, reasonable and adequate and should be approved by
the Court ; (b) whether an Order of Final Judgment and Dismissal, substantially in the form of
Exhibit B to the Stipulation, should be entered herein ; and (c) whether the establishment of th e
Expense Fund should be approved . The Court may adjourn the Settlement Hearing from time t o
time and without further notice to the Settlement Class .
Any Settlement Class Member who has not requested exclusion may appear at the Settlement
Hearing and be heard on any of the foregoing matters ; provided, however, that no such person shal l
be heard unless his, her or its objection is made in writing and is filed, together with proof of
membership in the Settlement Class and copies of all other papers and briefs to be submitted by him,
-19-
her or it to the Court at the Settlement Hearing, with the Court no later than
2005, and showing due proof of service on Plaintiffs' Settlement Counsel :
WILLIAM S . LERACHKEITH F . PARKHELEN J. HODGESLERACH COUGHLIN STOIA GELLERRUDMAN & ROBBINS LLP
401 B Street, Suite 1600San Diego , CA 92101-429 7
and upon the following counsel for the Outside Directors :
GIBBS & BRUNS , L .L.P .ROBIN C. GIBBSKATHY D. PATRICKJEAN C. FRIZZELLMICHAEL K. OLDHAMAUNDREA K. FRIEDENBRIAN T. ROSS1100 Louisiana, Suite 5300Houston, TX 77002
Attorneys for certain Outside Directors Defendants Robert A . Belfer, Norman P .Blake, Jr., Ronnie C . Chan, John H . Duncan, Joe H. Foy, Wendy L. Gramm,Robert K. Jaedicke, Charles A . LeMaistre, John Mendelsohn, Jerome Meyer,Frank Savage, John Urquhart, Charls E . Walker, John Wakeham, and HerbertWinokur, Jr.
GRAVES DOUGHERTY HEARON & MOODY PCJOHN J. MCKETTA IIIHELEN CURRIE FOSTER401 Congress Ave., Suite 2200Austin, TX 78701
Attorneys for Rebecca Mark-Jusbasch e
TONKON TORP LLPWILLIAM F . MARTSON, JR.1600 Pioneer Tower888 SW Fifth AvenuePortland OR 9720 4
Attorney-in-charge for Defendant Ken L. Harrison
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MILLER & CHEVALIER, CHARTEREDMARK J . ROCHON655 Fifteenth Street, N.W., Suite 900Washington , D.C. 20005-570 1
Counsel for Paulo V . Ferraz Pereira
Unless otherwise ordered by the Court, any Settlement Class Member who does not make his, her o r
its objection in the manner provided shall be deemed to have waived all objections to the foregoing
matters .
XV. EXAMINATION OF PAPERS AND INQUIRIES
This Notice contains only a summary of the terms of the proposed Settlement . For a more
detailed statement of the matters involved in the Actions, reference is made to the pleadings, to the
Stipulation and to other papers filed in this action, which may be inspected at the Office of the Clerk
of the United States District Court, Bob Casey United States Courthouse, 515 Rusk Avenue,
Houston, Texas 77002, during business hours of any business day.
Inquiries regarding the Actions should be addressed to Plaintiffs' Settlement Counsel at th e
address set forth above .
DO NOT CONTACT THE COURT REGARDING THIS NOTICE.
DATED: , 2005 BY ORDER OF THE COURTUNITED STATES DISTRICT COURTSOUTHERN DISTRICT OF TEXAS
S :\Settlement\Enron .Set\Outside Directors Se ttlement\FI-00017104 .doc
-21-
EXHIBIT F-2
UNITED STATES DISTRICT COURTSOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
In re ENRON CORPORATION SECURITIESLITIGATION
This Document Relates To :
MARK NEWBY, et al ., Individually and OnBehalf of All Others Similarly Situated ,
Plaintiffs ,
vs .
ENRON CORP ., et al .,
Defendants .
THE REGENTS OF THE UNIVERSITY OFCALIFORNIA, et al ., Individually and On Behalfof All Others Similarly Situated,
Plaintiffs ,
vs.
KENNETH L. LAY, et al .,
Defendants .
[Caption continued on following page .]
Civil Action No. H-O1-3624(Consolidated)
CLASS ACTION
SUMMARY NOTICE FOR PUBLICATION
EXHIBIT F-2
WASHINGTON STATE INVESTMENTBOARD, et al ., On Behalf of Themselves andAll Others Similarly Situated,
Plaintiffs ,vs .
KENNETH L. LAY, et al .,
Defendants .
NATHANIEL PULSIFER, TRUSTEE OFTHE SHOOTERS HILL REVOCABLETRUST, INDIVIDUALLY AND ONBEHALF OF ALL OTHERS SIMILARLYSITUATED,
Plaintiffs,
vs .
KENNETH L. LAY, et at .,
Civil Action No . H-02-340 1
CLASS ACTION
Civil Action No . 02-3010
CLASS ACTION
Defendants .
TO : (1) ALL PERSONS WHO PURCHASED OR ACQUIRED PUBLICLY TRADED EQUITYOR DEBT SECURITIES OF ENRON CORPORATION (INCLUDING ALL SECURITIESISSUED BY ENRON-RELATED ENTITIES, THE VALUE OR REPAYMENT OFWHICH WAS DEPENDENT ON THE CREDIT, FINANCIAL CONDITION, ORABILITY TO PAY OF ENRON CORPORATION) ("PUBLICLY TRADED SECURITIES"AS FURTHER DEFINED IN THE NOTICE OF PENDENCY AND PARTIALSETTLEMENT OF CLASS ACTION DESCRIBED BELOW) DURING THE PERIODFROM SEPTEMBER 9, 1997 THROUGH AND INCLUDING NOVEMBER 27, 200 1
YOU ARE HEREBY NOTIFIED that the Representative Plaintiffs in the above litigatio n
(the "Actions") have entered into a Stipulation of Settlement (the "Stipulation") with the Outside
Directors of Enron Corp . (the "Outside Directors"), Ken Harrison ("Harrison") and certain other
related entities or persons as further defined in the Stipulation to resolve the issues raised in the
Actions as to the Outside Directors and Harrison.
PLEASE BE FURTHER ADVISED that pursuant to an Order of the United States Distric t
Court, dated , 2005, a hearing will be held on , 2005 at _ .m.,
before the Honorable Melinda Harmon, United States District Judge, at the United States District
Court for the Southern District of Texas, Bob Casey United States Courthouse, 515 Rusk Avenue,
Houston, Texas 77002, for the purpose of determining whether, among other things : (1) the proposed
settlement of the Actions as to the Outside Directors and Harrison, allocation of $187 million : 82.5%
to the Settlement Class and 17 .5% to the Official Unsecured Creditors Committee of Enron and the
payment individually by the Outside Directors and Harrison of $13 million and certain other
consideration should be approved by the Court as fair, reasonable and adequate; (2) the Actions should
be dismissed with prejudice as to the Outside Directors and Harrison pursuant to the terms of the
Stipulation; and (3) a portion of the Gross Settlement Fund should be allocated for the payment of
expenses, excluding attorneys' fees, associated with the prosecution of the Actions . If you meet the
definition of the Settlement Class as set forth above and are not a defendant, an officer or director of
Enron, or a member of their immediate families or their successors, heirs, and legal representatives ;
your rights may be affected by the settlement of the Actions . If you have not received a Notice of
-1-
Pendency and Partial Settlement of Class Action (the "Mailed Notice") you may obtain a copy by
contacting : In re Enron Corporation Securities Litigation , c/o Gilardi & Co . LLC , P.O . Box 5100 ,
Larkspur , CA 94977-5100 .
You will be bound by any judgment rendered in the Actions with respect to the Outside
Directors and Harrison with respect to claims asserted in the actions identified above, and with
respect to other claims that you had, have, or may have against the Outside Directors and Harriso n
(and certain persons and entities related to them) based on matters related to Enron Corporation ,
unless you request to be excluded from the Settlement Class, in writing, in accordance with th e
instructions set forth in the Mailed Notice, postmarkedby , 2005. Any objection to
the Settlement must be filed with the Court by , 2005 , and must show due proof of
service on each of the counsel listed below :
LERACH COUGHLIN STOIA GELLERRUDMAN & ROBBINS LLP
KEITH F. PARKHELEN J . HODGES401 B Street, Suite 1600San Diego , CA 92101-4297
GIBBS & BRUNS , L .L.P .ROBIN C . GIBBSKATHY D. PATRICKJEAN C. FRIZZELLMICHAEL K. OLDHAMAUNDREA K. FRIEDENBRIAN T. ROSS1100 Louisiana, Suite 5300Houston , TX 77002
Attorneys for certain Outside Directors Defendants Robert A . Belfer, Norman P .Blake, Jr ., Ronnie C. Chan, John H. Duncan, Joe H . Foy, Wendy L . Gramm,Robert K. Jaedicke, Charles A . LeMaistre, John Mendelsohn, Jerome Meyer,Frank Savage, John Urquhart, Charts E . Walker, John Wakeham, and HerbertWinokur, Jr.
-2-
GRAVES DOUGHERTY HEARON & MOODY PCJOHN J. MCKETTA IIIHELEN CURRIE FOSTER401 Congress Ave., Suite 2200Austin, TX 7870 1
Attorneys for Rebecca Mark-Jusbasch e
TONKON TORP LLPWILLIAM F . MARTSON, JR .1600 Pioneer Towe r888 SW Fifth AvenuePort land OR 97204
Attorney-in-charge for Defendant Ken L . Harrison
MILLER & CHEVALIER, CHARTEREDMARK J. ROCHON655 Fifteenth Street, N .W., Suite 900Washington, D .C. 20005-570 1
Counsel for Paulo V. Ferraz Pereira
PLEASE DO NOT CONTACT THE COURT REGARDING THIS NOTICE .
DATED: , 2005 BY ORDER OF THE COURTUNITED STATES DISTRICT COURTSOUTHERN DISTRICT OF TEXA S
S :\Settlement\Enron .Set\Outside Directors Settlement\F2-00017106 .doc
-3-
CERTIFICATE OF SERVICE
I hereby certify that a copy of the foregoing STIPULATION OF SETTLEMENT documenthas been served by sending a copy via electronic mail to serve@ESL3624 .com on this 12th day ofJanuary, 2005 .
I further certify that a copy of the foregoing document has been served via overnight mail onthe following parties, who do not accept service by electronic mail on this 12th day of January, 2005 .
Carolyn S . SchwartzUnited States Trustee, Region 233 Whitehall Street, 21st FloorNew York, NY 10004
im"I'L J. ),A vDEBORAH S. GRANGER
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