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P •UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF TE :DALLAS DIVISION

TODD HOLLEY, individually and on §Behalf of All Others Similarly Situated, §

PLAINTIFF §

V. ORIGINAL §KITTY HAWK, INC., M. TOM §CHRISTOPHER, RICHARD §WADSWORTH and CONRAD §KALITTA §

DEFENDANTS. §

U .S. DISTRICT COURTNORTHERN DISTRICT OF TEXAS

FILEDA'S

- 3" WE

CLERK, U .S. ICT COURT

CASE NO. 3-00 CV 0828-P

STIPULATION OF SETTLEMENT

This Stipulation of Settlement (the "Stipulation"), dated as of the date of the las t

signature below, is made and entered into by and among the following Settling Parties (as

defined in Section IV, ¶ 1 .22): (i) the Lead Plaintiffs (as defined in Section IV, ¶ 1 .10) (on behalf

of themselves and each of the Settlement Class Members (as defined in Section IV, ¶ 1 .19)), by

and through their counsel of record in the Litigation (as defined in Section I) ; (ii) the Defendants

(as defined in Section IV, ¶ 1 .4), individually or by and through their counsel of record in the

Litigation ; and (iii) Great American Insurance Company, Inc . ("Great American") . The Settling

Parties intend this Stipulation to fully, finally and forever resolve, discharge and settle the

Released Claims (as defined in Section IV, ¶ 1 .14), subject to the terms and conditions state d

herein .


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1 . THE LITIGATION AND RELATED PROCEED INGS

On and after April 19, 2000, the following actions were filed in the United States District

Court for the Northern District of Texas, Dallas Division (the "Court"), as a proposed clas s

action on behalf of persons who purchased the common stock of Kitty Hawk, Inc . ("Kitty Hawk"

or the "Company") between April 29, 1999 and April 11, 2000, inclusive (the "Litigation") :

a. Todd Holley v. Kitty Hawk, Inc., Civil Case No. 3-00CV0828 ;

b . Russell Schwegman v. M Tom Christopher, et al, Civil Case No. 3-000V0867 ;

c. Dale Crandall v. M. Tom Christopher, et al, Civil Case No. 3-00CV 1102; and

d. Charles Landan, et al v. M. Tom Christopher, et al, Civil Case No. 3-000V1623 .

On July 24, 2000, the Court entered an Order consolidating Case No . 3-000V0867 and

Case No. 3-OOCV1102 with Case No. 3-00CV0828. On July 28, 2000, the Court entered an

Order consolidating Case No . 3-000V1623 with Case No . 3-00CV0828 . Thus, the Litigation, in

its entirety, exists as consolidated Case No. 3-000V0828.

On November 19, 2001, the Court confirmed the appointment of Alpine Aviation, Inc . ,

Abraham Mathew, David Anders and David Reedy as Lead Plaintiffs for the Litigation . By the

same Order, the Court approved the selection of Lead Plaintiffs' Counsel : Milberg Weis s

Bershad Hynes & Lerach LLP and Cauley Geller Bowman & Coates, LLP (now Cauley

Bowman Carney & Williams, PLLC) . The Court appointed St an ley , Mandel & Iola, LLP as

Liaison Counsel .

Plaintiffs filed their Amended Class Action Complaint (the "Amended Complaint") o n

February 19, 2002, expanding the class period to include those persons who purchased Kitt y

Hawk common stock between August 1 , 1997 and April 11 , 2000, inclusive (the "Class Pe riod") .

The Amended Complaint included as defendants M . Tom Christopher ("Christopher") (KittySTIPULATION OF SETTLEMENT

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Hawk's former Chairman of the Board and Chief Executive Officer), Richard Wadsworth

("Wadsworth") (Kitty Hawk's former Senior Vice President of Finance and Chief Financial

Officer) and Conrad A. Kalitta ("Kalitta") (Director since 1997, Chairman of the Board, Chief

Executive Officer and President from November 1997-1998) (together the "Individua l

Defendants") . Plaintiffs did not name Kitty Hawk as a Defendant in the Amended Complain t

because the Company was in bankruptcy at the time Plaintiffs filed the Amended Complaint .

In the Amended Complaint, Plaintiffs allege that officers and directors of Kitty Hawk ,

Christopher, Wadsworth and Kalitta violated §10(b) of the Securities Exchange Act of 1934 (the

"1934 Act"), Rule lOb-5 promulgated thereunder, and §20(a) of the 1934 Act, by disseminating

materially false and misleading information to the investing public through the Company's press

releases and financial filings with the Securities and Exchange Commission (the "SEC"), from

August 1, 1997 through April 11, 2000, inclusive . Plaintiffs additionally allege that the

Individual Defendants violated §20(a) of the 1934 Act by and through the conduct alleged above .

Plaintiffs allege that the false and misleading information disseminated to the public artificiall y

inflated the Company's stock price throughout the Class Period .

Plaintiffs further allege that Wadsworth and Christopher (together, the "§ 11 Defendants" )

violated §§11 and 15(a) of the Securities Act of 1933 (the "1933 Act") by issuing a false and

misleading Prospectus on November 17, 1997, in connection with an offering of Kitty Hawk

common stock (the "Offering") made pursuant to a merger between Kitty Hawk and Kalitta's

American International Airlines, Inc. ("AIA"), Kalitta Flying Services, Inc ., Flight One

Logistics, Inc . and O.K. Turbines, Inc . (collectively the "Kalitta Companies") . Plaintiffs assert

that the false and misleading Prospectus artificially inflated the price of the Kitty Hawk stoc k

issued in connection with the Offering .STIPULATION OF SETTLEMENT

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Kalitta filed his separate Motion to Dismiss on June 13, 2002 . Christopher and

Wadsworth filed their Joint Motion to Dismiss on June 14, 2002 . Plaintiffs' filed their Response

to the Motions to Dismiss on August 19, 2002 . Defendant Kalitta filed his Reply in Support of

the Motion to Dismiss on October 1, 2002 .

Separately, on September 30, 2002, Great American filed a rescission action in th e

United States District Court for the Northern District of Texas, Dallas Division styled Great

American Insurance Company, Inc. v. M. Tom Christopher, Conrad A. Kalitta, Richard R.

Wadsworth, Jr., James R. Craig and Kitty Hawk, Inc., Case No. 3-02 CV 2112 P (th e

"Rescission Action"), seeking to rescind a directors' and officers' insurance policy issued to

Kitty Hawk, Inc., based upon alleged material misrepresentations in the policy application.

Great American issued to Kitty Hawk its Directors' and Officers Liability Insuranc e

Policy (the "Policy") . Great American claims to have issued the Policy based upon

representations made in a Proposal Form that stated, among other things, that : (a) Kitty Hawk

was not experiencing financial difficulties ; (b) Kitty Hawk was not contemplating bankruptcy;

and (c) Kitty Hawk's most recent 10-K and 10-Q filings accurately represented Kitty Hawk's

status as a going concern . Great American asserted that when Kitty Hawk's general counse l

executed the Proposal Form, Defendants were aware that Kitty Hawk was experiencing grav e

financial difficulties and considering the possibility of bankruptcy. Great American therefore

sought to rescind the Policy .

Wadsworth, Christopher and Kalitta moved to dismiss the Rescission Action. The

District Court denied that motion to dismiss . Thereafter, Kalitta and Christopher file d

counterclaims against Great American in the Rescission Action asserting, among other things ,

that Great American had brought its Rescission Action in bad faith.STIPULATION OF SETTLEMENT

s 0On October 28, 2003, the parties and Great American submitted to mediation before th e

Honorable Nicholas H . Politan, and reached an agreement to settle the Litigation, memorialize d

by this Stipulation of Settlement ("Stipulation") .

The settlement terms relating to the Rescission Action and the Coverage Counter-Clai m

are set fo rth in a comp anion settlement agreement (attached hereto as Exhibit C and fully

incorporated herein) . To the extent any term in this Stipulation or the Supplemental Agreemen t

varies with the terms of Exhibit C, Exhibit C's terms control .

II. DEFENDANTS' DENIALS OF WRONGDOING AND LIABILITY

Defendants have expressly and emphatically denied and continue to deny each and all o f

the claims and contentions alleged by the Lead Plaintiffs . 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 Litigation .

Defendants also have denied and continue to deny, inter alia, the allegations that the Lead

Plaintiffs or the Settlement Class have suffered damage or that the Lead Plaintiffs or th e

Settlement Class were harmed by the alleged conduct . Neither the Stipulation nor the Settlement

shall be construed, whether in whole or in part, as evidence, or an admission or a concession on

the part of Defendants, of any fault or liability, nor shall the Stipulation, the Settlement or the

Supplemental Agreement be considered an admission by Defendants that Lead Plaintiffs have

satisfied the requirements for class certification under Federal Rule of Civil Procedure 23 . In the

event that the Settlement is terminated for any reason, any and all defenses shall remain available

to Defendants (including any objections to class certification) . Without conceding any infirmity

in any defenses they have asserted or intended to assert in the Litigation, Defendants consider it


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their desire and in their best interest that this Litigation be dismissed on the terms set forth herei n

in order to avoid further expense and protracted litigation .

III. CLAIMS OF THE LEAD PLAINTIFFS AND BENEFITS OF SETTLEMENT

The Lead Plaintiffs believe that the claims asserted in the Litigation have merit .

However, Lead Plaintiffs' Counsel recognize and acknowledge Defendants' denial o f

wrongdoing and liability, as well as the expense and length of continued proceedings necessar y

to prosecute the Litigation through trial and through appeals . Lead Plaintiffs' Counsel also hav e

taken into account the uncertain outcome and risk of any litigation, especially a complex actio n

such as the Litigation, as well as the difficulties and delays inherent in such litigation . Lead

Plaintiffs' Counsel considered the inherent problems of proving, and possible defenses to, the

allegations asserted in the Litigation. Based on their evaluation, Lead Plaintiffs' Counsel believe

that the settlement set forth in this Stipulation confers substantial benefits upon the Settlement

Class and protects the best interests of the Lead Plaintiffs and the Settlement Class .

IV. TERMS OF STIPULATION AND AGREEMENT OF SETTLEMENT

NOW, THEREFORE, IT IS HEREBY STIPULATED AND AGREED by and among the

Lead Plaintiffs (for themselves and the Settlement Class Members) and Defendants and Great

American, individually or by and through their counsel or attorneys of record, that, subject t o

Court approval, the Litigation and the Released Claims shall be finally and fully compromised ,

settled, released and dismissed with prejudice, as to all Settling Parties, upon and subject to th e

terms and conditions of the Stipulation, as follows :

1 . Defmitions

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


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1 .1 "Kitty Hawk" means Kitty Hawk, Inc . and all of its predecessors, successors ,

parents, subsidiaries, divisions, and related or affiliated entities and each of its or their presen t

and former assigns, partners, attorneys, officers, directors, principals, employees, accountants ,

associates, agents, representatives, consultants, advisors, predecessors, successors, heirs ,

executors, administrators, custodians, and beneficiaries .

1 .2 "Authorized Claimant" means any Settlement Class Member who files a Proof o f

Claim in such form and manner, and within the time limitation, as set forth in the Proof of Clai m

form attached to the Settlement Notice .

1 .3 "Claims Administrator" means the firm of A .B. Data, Ltd.

1 .4 "Defendants" mean Kitty Hawk and any individual named as a defendant in an y

complaint in this litigation, including M. Tom. Christopher, Richard Wadsworth and Conrad

Kalitta.

1 .5 "Effective Date" means the first date by which all of the events and condition s

specified in ¶7 .1 of the Stipulation have been met and have occurred . Upon the Effective Date ,

each Settlement Class Member shall be deemed to have, and by operation of the Order and Fina l

Judgment shall have, fully and finally, and forever released, relinquished, and discharged al l

Released Claims and all other claims that were or could have been asserted in the Litigation

against the Released Parties .

1 .6 "Escrow Agent" means the law firm of Cauley Bowman Carney & Williams,

PLLC.

1 .7 "Final" means : (i) the date of final affirmance on an appeal of the Judgment, the

expiration of the time for a petition for or a denial of a writ of certiorari to review the Judgment

and, if certiorari is granted, the date of final affirmance of the Judgment following reviewSTIPULATION OF SETTLEMENT

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pursuant to that grant; or (ii) the date of final dismissal of any appeal from the Judgment or th e

final dismissal of any proceeding on certiorari to review the Judgment ; or (iii) if no appeal i s

filed, the expiration date of the time for the filing or noticing of any appeal from the Court' s

Judgment approving the Stipulation substantially in the form of Exhibit B attached hereto, i.e. ,

thirty (30) days after entry of the Judgment, such that the Judgment represents a final and

binding judgment with respect to the Litigation. Any proceeding or order, or any appeal or

petition for a writ of certiorari pertaining solely to any plan of allocation and/or application fo r

attorneys ' fees , costs or expenses , shall not in any way delay or preclude the Judgment from

becoming Final .

1 .8 "Individual Defendants" mean M. Tom Christopher, Richard Wadsworth an d

Conrad Kalitta.

1 .9 "Judgment" means the judgment to be rendered by the Court, substantially in the

form attached hereto as Exhibit B .

1 .10 "Lead Plaintiffs" mean Alpine Aviation, Inc ., Abraham Mathew, David Anders

and David Reedy .

1 .11 "Lead Plaintiffs' Counsel" means the law firms of Cauley Bowman Carney &

Williams , PLLC, 11001 , P.O. Box 25438 , Little Rock, AR 72211, and Milberg Weiss Bershad

Hynes & Lerach LLP, 5355 Town Center Road , Suite 900 , Boca Raton, FL 33486 .

1 .12 "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

their spouses, heirs, predecessors, successors, representatives, or assignees .


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1 .13 "Plaintiffs' Settlement Counsel" means Cauley Bowman Carney & Williams ,

PLLC .

1 .14 "Plan of Allocation" means a plan or formula of allocating the Settlement Fun d

whereby the Settlement Fund shall be distributed to Authorized Claimants after payment o f

expenses of notice and settlement administration, Taxes and Tax Expenses, and such attorneys '

fees , costs , expenses, and interest as the Court may award . Any Plan of Allocation is not part of

the Stipulation, and neither Defendants nor Great American shall have any responsibility o r

liability with respect thereto .

1 .15 "Released Claims" mean all claims (including, but not limited to, Unknow n

Claims as defined in ¶1 .23), demands, losses, rights, and causes of action of any natur e

whatsoever, whether known or unknown, whether suspected or unsuspected, whether concealed

or hidden, by any Released Persons, whether under state or federal law, based upon or arising ou t

of, or related to either or both of (a) the purchase of Kitty Hawk common stock during th e

Settlement Class Period and/or (b) the acts, facts, transactions, events, occurrences, disclosures ,

statements, omissions, or failures to act that were, could or might have been alleged in th e

Litigation by any Representative Plaintiff, Lead Plaintiff, or Settlement Class Member .

1 .16 "Released Persons" mean the Individual Defendants, Kitty Hawk, Great

American and any and all of its or their present and former affiliates, parents, subsidiaries

(whether or not directly or wholly owned), predecessors and successors, and each of its or their

present and former assigns, partners, attorneys, insurers, officers, directors, principals,

employees, accountants, associates, agents, representatives, consultants, advisors, predecessors ,

successors, heirs, executors, administrators, custodians, and beneficiaries .


• •

1 .17 "Representative Plaintiffs" means the persons or entities appointed as Lead

Plaintiffs and the persons or entities designated as Class Representatives in the Litigation .

1 .18 "Representative Plaintiffs' Counsel" means counsel who have appeared for any of

the Representative Plaintiffs in the Litigation .

1 .19 "Settlement Class" means all Persons who purchased Kitty Hawk common stoc k

between August 1, 1997 and April 11, 2000, inclusive . Excluded from the Settlement Class are

Kitty Hawk, the Individual Defendants and members of their immediate families, any entity i n

which Kitty Hawk has or had a controlling interest , Kitty Hawk directors and officers , and the

legal representatives, heirs, successors, or assigns of any such excluded Person . Those Person s

who timely and validly request exclusion from the Settlement Class pursuant to the "Notice o f

Pendency and Settlement of Class Action" to be sent to potential Settlement Class Members are

also excluded from the Settlement Class .

1 .20 "Settlement Class Member" or "Member of the Settlement Class" means a Person

who falls within the definition of "Settlement Class . "

1 .21 "Settlement Class Period" means the period commencing on August 1, 1997 an d

ending on April 11, 2000 , inclusive.

1 .22 "Settlement Fund" means the principal amount of $2 .75 Million Dollars

($2,750,000.00), plus any interest that may accrue thereon as provided herein .

1 .23 "Settling Parties" mean, collectively, Kitty Hawk, the Individual Defendants, the

Representative Plaintiffs and the Lead Plaintiffs, on behalf of themselves and the Members of the

Settlement Class .

1 .24 "Unknown Claims" mean any Released Claims that any Representative Plaintiff,

Lead Plaintiff or Settlement Class Member does not know or suspect to exist in his, her or itsSTIPULATION OF SETTLEMENT

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favor at the time of the release of the Released Persons which, if known by him, her or it, might

have affected his, her or its settlement with and release of the Released Persons, or might have

affected his, her or its decision not to object to this settlement 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 the Effective Date, the Representative Plaintiffs shall

expressly, and each of the Settlement Class Members shall be deemed to have and by operation

of the Judgment shall have expressly, waived the provisions, rights, and benefits conferred by

any law of any United States state or territory, or principle of common law, which is similar,

comparable, or equivalent to California Civil Code § 1452, 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 Representative Plaintiffs, Lead 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 b e

true with respect to the subject matter of the Released Claims, but each Representative Plaintiff

and Lead Plaintiff shall expressly, and each Settlement Class Member, upon the Effective Date,

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, which now exist, or heretofore

have existed upon any theory of law or equity now existing or coming into existence in the

future, including, but not limited to, conduct which is negligent, intentional, with or without

malice, or a breach of any duty, law or rule, without regard to the subsequent discovery or

existence of such different or additional facts. The Representative Plaintiffs and Lead Plaintiffs


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acknowledge, and the Settlement Class Members shall be deemed by operation of the Judgment

to have acknowledged, that the foregoing waiver was separately bargained for and is a key and

fundamental element of the settlement of the Litigation .

2. The Settlement

a. The Settlement Fund

2.1 The p rincipal amount of $2,750,000 shall constitute the Se ttlement Fund that shal l

be paid by Great American on behalf of Defendants into an interest bearing escrow account a t

Bank of America or Centennial Bank or its designee (maintained by the Escrow Agent) no later

than ten (10) business days following receipt of notice by counsel for all of the Defendants of th e

Court's execution of the Order Preliminarily Approving Settlement and Providing For Notice ,

substantially in the form attached hereto as Exhibit A. In the event the Court approves th e

Settlement, all such funds paid into the Settlement Fund and interest earned thereon shall be

distributed in accordance with this Stipulation and Orders of the District Court .

2.2 The Escrow Agent shall invest the Settlement Fund deposited pursuant to ¶2 . 1

above in instruments backed by the full faith and credit of the United States Government or full y

insured by the United States Government or an agency thereof, and shall reinvest the proceeds o f

these instruments as they mature in similar instruments at their current market rates . The Escrow

Agent shall bear all risks related to Settlement Fund investment .

2.3 The Escrow Agent shall not disburse the Settlement Fund except as provided in

the Stipulation, by an order of the Court, or by the prior written agreement of Defendants '

counsel and Lead Plaintiffs' Counsel .


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2 .4 Subject to further order and/or direction as the Court may enter or provide, the

Escrow Agent may execute transactions on behalf of the Settlement Class Members consisten t

with the terms of the Stipulation .

2.5 All funds held by the Escrow Agent shall be deemed and considered to be i n

custodia legis of the Court, and shall remain subject to the Court's jurisdiction, until such time a s

such funds shall be distributed pursuant to the Stipulations and/or further Order(s) of the Court .

2.6 Within ten (10) days after payment of the Settlement Fund to the Escrow Agen t

pursuant to ¶2 .1, the Escrow Agent may establish a "Notice and Administration Fund," and ma y

deposit up to $150,000 from the Settlement Fund into it . Lead Plaintiffs' Counsel may use the

Notice and Administration Fund to pay costs and expenses reasonably and actually incurred in

connection with providing notice to the Settlement Class, locating Settlement Class Members ,

soliciting Settlement Class claims, assisting with claims filing, administering and distributing th e

Settlement Fund to Authorized Claimants , processing Proof of Claim and Release forms and

paying escrow fees and costs , if any. The Notice and Administration Fund may also be invested

and earn interest as provided for in ¶2 .2 of this Stipulation .

b. Taxes

2.7 The Settling Parties and the Escrow Agent agree to treat the Settlement Fund at al l

times as a "qualified settlement fund" within the meaning of United States Treasury Reg . §

1 .468B-1 . In addition, the Escrow Agent shall timely make such elections as necessary or

advisable to carry out the provisions of this ¶2 .7, including the "relation-back election" (as

defined in Treasury Reg. § 1 .468B-1) back to the earliest permitted date . Such elections shall

occur in compliance with the procedures and requirements contained in such regulations . The


•

Escrow Agent shall timely and properly prepare and deliver the necessary documentation for

signature by all necessary parties, and thereafter cause the appropriate filing to occur .

(a) For the purpose of §468B of the Inte rnal Revenue Code of 1986, as

amended, and the regulations promulgated thereunder, the "administrator" shall be the Escrow

Agent. The Escrow Agent shall timely and properly file all informational and other tax returns

necessary or advisable with respect to the Settlement Fund (including, without limitation, the

returns described in Treasury Reg § 1 .468B-2(k)) . Such returns (as well as the election

described in this ¶2.7) shall reflect that all Taxes as defined in subsection (b) below (including

any estimated taxes, interest, or penalties) on the income earned by the Settlement Fund shall be

paid out of the Settlement Fund as provided in ¶2.7(b) hereof.

(b) All (i) taxes (including any estimated taxes , interest or penalties ) ari sing

with respect to the income earned by the Settlement Fund, including any taxes or tax detriments

that may be imposed upon Defendants or their counsel with respect to income earned by the

Settlement Fund for any period during which the Settlement Fund does not qualify as a

"qualified settlement fund" for federal or state income tax purposes ("Taxes") ; and (ii ) expenses

and costs incurred in connection with the operation and implementation of this ¶2.7 (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 ¶2 .7) ("Tax

Expenses"), shall be paid out of the Se ttlement Fund . Defendants shall not have any liability or

responsibility for the Taxes or the Tax Expenses . The Escrow Agent shall indemnify and hold

Defendants and Great American harmless for Taxes and Tax Expenses (including, without

limitation, Taxes payable by reason of any such indemni fication) . Further, Taxes and Tax

Expenses shall be treated as, and considered as, a cost of Settlement Fund administration and


shall be timely paid by the Escrow Agent out of the Settlement Fund without prior order from the

Court . The Escrow Agent shall (notwithstanding anything herein to the contrary) 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 amounts that

may be required to be withheld under Treasury Reg § 1 .468B-2(1)(2)) . Defendants and Great

American are not responsible and shall not have any liability therefore. The Settling Parties

hereto 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 ¶2 .7 .

(c) For the purpose of this ¶2.7, references to the Settlement Fund shall

include both the Settlement Fund and the Notice and Administration Fund, and shall also include

any earnings thereon .

c. Termination of Se ttlement

2 .8 In the event that the Stipulation is not approved, or is terminated, canceled or fails

to become effective for any reason, including, without limitation, in the event the Judgment is

reversed or vacated following any appeal taken therefrom, or is successfully collaterally

attacked, the Settlement Fund (including accrued interest), less reasonable expenses actually

incurred or due and owing from the Notice and Administration Fund, which expenses shall in no

case exceed $150,000, shall be refunded to Great American .

3. Notice Order and Settlement Hearing

3 .1 Promptly after execution of the Stipulation, the Settling Parties shall submit the

Stipulation together with its Exhibits to the Court and shall jointly apply for entry of an order

(the "Notice Order"), substantially in the form and content of Exhibit A attached hereto,

requesting, inter alia, preliminary approval of the settlement set forth in the Stipulation, and


• 0approval for the mailing of a settlement notice (the "Notice") and publication of a summar y

notice, substantially in the forms of Exhibits A-1 and A-3 attached hereto . The Notice shall

include the general terms of the settlement set forth in the Stipulation, the proposed Plan o f

Allocation, the general terms of the Fee and Expense Application as defined in ¶6 .1 below, and

the date of the Settlement Hearing as defined below.

3 .2 The Settling Parties shall request that, after Notice is given, the Court hold a

hearing (the "Settlement Hearing") and approve the settlement of the Litigation as set fort h

herein. At or after the Settlement Hearing, Lead Plaintiffs' Counsel shall request that the Cour t

approve the proposed Plan of Allocation and the Fee and Expense Application .

4. Releases

4.1 Upon the Effective Date, as defined in ¶1 .5, the Representative Plaintiffs, the

Lead Plaintiffs, and each of the Settlement Class Members shall be deemed to have, and by

operation of the Judgment shall have, fully, finally and forever released, relinquished an d

discharged all Released Claims and all other claims that were or could have been asserted in th e

Litigation against the Released Persons, regardless of whether such Settlement Class Membe r

executes and delivers a Proof of Claim and Release.

4.2 The Proof of Claim and Release to be executed by Settlement Class Member s

shall release all Released Claims against the Released Persons and shall appear substantially i n

the form and content contained in Exhibit A-2 attached hereto .

4.3 Upon the Effective Date, as defined in ¶1 .5, each of the Released Persons shall b e

deemed to have, and by operation of the Judgment shall have, fully, finally and forever released ,

relinquished and discharged each and all of the Lead Plaintiffs, Representative Plaintiffs, the

Settlement Class Members, and Lead Plaintiffs' Counsel from all claims (including Unknown


0

Claims), arising out of, in any way relating to, or in connection with the institution, prosecution,

assertion, settlement or resolution of the Litigation or the Released Claims .

5. Administration and Calculation of Claims, Final Awards and Supervisio n

and Distribution of Settlement Fund

5.1 The Claims Administrator, subject to such supervision and direction of the Cour t

and/or Lead Plaintiffs' Counsel as may be necessary or as circumstances may require, shal l

administer and calculate the claims submitted by Settlement Class Members and shall overse e

distribution of the Net Settlement Fund (defined below) to Authorized Claimants . The

Settlement Fund shall be applied as follows :

(a) to pay all the costs and expenses reasonably and actually incurred i n

connection with : providing Notice, locating Settlement Class Members, soliciting Settlement

Class claims, assisting with claims filing, administering and distributing the Settlement Fund t o

Authorized Claimants, processing Proof of Claim and Release forms and paying escrow fees an d

costs, if any;

(b) to pay the Taxes and Tax Expenses described in ¶2 .7 above ;

(c) to pay to Representative Plaintiffs' Counsel attorneys' fees, expenses, and

costs, with interest thereon (the "Fee and Expense Award"), if and to the extent allowed by th e

Court ; and

(d) to distribute the Settlement Fund to Authorized Claimants, as allowed b y

the Stipulation, the Plan of Allocation, and the Court .

5 .2 Upon the Effective Date and thereafter, and in accordance with the terms of th e

Stipulation and Plan of Allocation, or such further approval and further Court Order(s) as may b e


r •

necessary or as circumstances may require, the Settlement Fund shall be distributed t o

Authorized Claimants, subject to and in accordance with the following :

(a) Within ninety (90) days after the mailing of the Notice or such other time

as the Court may set, each Person claiming to be an Authorized Claimant must submit to th e

Claims Administrator a completed Proof of Claim and Release, substantially in the form of

Exhibit A-2 attached hereto, signed under penalty of perjury and supported by such document s

as specified in the Proof of Claim and Release and as are reasonably available to the Authorize d

Claimant.

(b) Except as otherwise ordered by the Court, all Settlement Class Member s

who fail to timely submit a Proof of Claim and Release within such period, or such other period

as may be ordered by the Court, or otherwise allowed, shall be forever barred from receiving any

payments pursuant to the Stipulation and the settlement set forth herein, but will in all other

respects be subject to and bound by the provisions of the Stipulation, the releases containe d

herein, and the Judgment.

(c) The Settlement Fund shall be distributed to the Authorized Claimant s

substantially in accordance with the Plan of Allocation described in the Notice and approved b y

the Court .

5 .3 Neither the Defendants nor Great American shall have any responsibility for ,

interest in, or liability whatsoever with respect to the investment or distribution of the Settlemen t

Fund, the Plan of Allocation, the determination, administration, or calculation of claims, the

payment or withholding of Taxes, or any losses incurred in connection therewith .

5.4 No Person shall have any claim against Lead Plaintiffs' Counsel, Representativ e

Plaintiffs' Counsel, any claims administrator , Defendants or their counsel , or Great American or


its counsel based on distributions made substantially in accordance with the Stipulation and the

settlement contained herein, the Plan of Allocation, or further Court Orders .

5 .5 If any Settlement Fund Balance remains in the Net Settlement Fund twelve (12 )

months after the Effective Date, Lead Plaintiffs' Counsel shall reallocate such balance among

authorized claimants in an equitable and economic fashion . Thereafter, any balance still

remaining in the Net Settlement Fund shall be donated to a charitable or educational entity

designated by Lead Plaintiffs' Counsel .

5 .6 It is understood and agreed by the Settling Parties that any proposed Plan o f

Allocation of the Net Settlement Fund, including, but not limited to, any adjustments to an

Authorized Claimant's claim set forth therein, is not a part of the Stipulation and shall be

considered by the Court separately from the Court's consideration of the fairness, reasonableness

and adequacy of the settlement set forth in the Stipulation. No order or proceeding relating to the

Plan of Allocation shall operate to terminate or cancel 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 the Stipulation .

6. Representative Plaintiffs' Counsel 's Attorneys' Fees and Reimbursement of

Expense s

6.1 Representative Plaintiffs' Counsel may submit an application or applications (the

"Fee and Expense Application") for distributions to them from the Settlement Fund for : (a) an

award of attorneys' fees payable from the Settlement Fund, and (b) reimbursement of expenses

and costs incurred in connection with prosecuting the Litigation, plus any interest on such

attorneys' fees, costs, and expenses at the same rate and for the same periods as earned by th e


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Settlement Fund . Representative Plaintiffs' Counsel reserve the right to make additional

applications for fees and expenses incurred .

6.2 The attorneys' fees, expenses, and costs, including the fees of experts an d

consultants, as the Court awards, shall be paid to Plaintiffs' Settlement Counsel from the

Settlement Fund, as ordered, immediately after the Court executes an order awarding such fees

and expenses. Plaintiffs' Settlement Counsel shall thereafter allocate the attorneys' fees amongst

Representative Plaintiffs' Counsel in a manner in which they in good faith believe reflects the

contributions of such counsel to the Litigation . In the event the Effective Date does not occur, or

the Judgment or the order making the Fee and Expense Award is reversed or modified, or the

Stipulation is cancelled or terminated for any other reason, and in the event that the Fee and

Expense Award has been paid to any extent, then Representative Plaintiffs' Counsel shall, within

ten (10) days from receiving notice from Defendants' counsel, counsel for Great American, or

from a court of appropriate jurisdiction, refund to the Settlement Fund the fees, expenses, and

costs previously paid to them from the Settlement Fund, plus interest thereon at the same rate as

earned on the Settlement Fund in an amount consistent with such reversal or modification . Each

such Representative Plaintiffs' Counsel's law firm, as a condition of receiving such fees and

expenses, on behalf of itself and each partner and/or shareholder of it, agrees that the law firm

and its partners and/or shareholders are subject to the jurisdiction of the Court for the purpose of

enforcing the provisions of this paragraph. Without limitation, each such law firm and its

partners and/or shareholders agree that the Court may, upon application of Defendants and/or

Great American, summarily issue orders, including, without limitation, judgments and

attachment orders and may make appropriate findings of or sanctions for contempt against them

or any of them should such law firm fail timely to repay fees and expenses pursuant to this ¶6 .2 .


6.3 The procedure for and the allowance or disallow ance by the Court of any

applications by any of Representative Plaintiffs' Counsel for attorneys' fees, costs, and expenses

payable from the Settlement Fund, are not part of the settlement set forth in the Stipulation, and

shall be considered by the Court separately from the Court's consideration of the fairness,

reasonableness, and adequacy of the settlement set forth in the Stipulation . Any Order or

proceedings relating to the Fee and Expense Application, or any appeal from any order relating

thereto or reversal or modification thereof, shall not operate to terminate or cancel the

Stipulation, or affect or delay the finality of the Judgment approving the Stipulation and th e

settlement of the Litigation set forth herein.

6 .4 Defendants and Great American shall have no responsibility for, and no liabilit y

whatsoever with respect to, any payment to Representative Plaintiffs' Counsel from th e

Settlement Fund .

7. Conditions of Settlement, Effect of Disapproval, Cancellation or Terminatio n

7.1 The Effective Date of the Stipulation is conditioned on the occurrence of all of th e

following events :

(a) Great American has made the Settlement Fund contributions as required

by ¶2.1 above;

(b) the Court has entered the Judgment, or a judgment substantially in th e

form of Exhibit B and B-1 attached hereto ;

(c) the Settlement has not been terminated pursuant to ¶7 .4; and

(d) the Judgment has become Final, as defined in ¶1 .7 above.


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7.2 Upon the occurrence of all of the events referenced in ¶7 .1 above, any and al l

remaining interest or right of Defendants in or to the Settlement Fund, if any, shall be absolutel y

and forever extinguished .

7 .3 If all of the conditions specified in ¶7.1 are not met, then the Stipulation shall b e

cancelled and terminated subject to ¶7 .5, unless Lead Plaintiffs' Counsel, Defendants' counse l

and Great American's counsel mutually agree in writing to proceed with the Stipulation .

7.4 If, prior to the Settlement Hearing, Persons who otherwise would be Members o f

the Settlement Class in accordance with the provisions of the Notice Order and the notice given

pursuant thereto properly submit Requests for Exclusion from the Settlement Class, and if the

aggregate number of shares of Kitty Hawk common stock purchased by such class members

during the Settlement Class Period equals or exceeds the amount specified in a separate

supplemental agreement ("Supplemental Agreement") between the parties, then Defendants shall

have, in their sole and absolute discretion, the option to terminate the Stipulation in accordance

with the procedures set forth in the Supplemental Agreement . The Supplemental Agreement and

all of its terms are hereby incorporated into this Stipulation (and vice versa) ; however, the

Supplemental Agreement will not be filed with the Court unless and until a dispute arises among

the parties concerning its interpretation or application . Copies of all Requests for Exclusion

received and copies of all written revocations of Requests for Exclusion received shall be

delivered to Defendants' counsel and Great American's counsel within two (2) business days o f

receipt by Lead Plaintiffs' Counsel or their agents, but in no event later than seven (7) court days

before the Settlement Hearing.

7.5 Unless otherwise ordered by the Court, in the event the Stipulation shal l

terminate, be cancelled, or shall not become effective for any reason, within five (5) business


•

days after written notification of such event is sent to the Escrow Agent by Defendants' counsel,

Lead Plaintiffs' Counsel or counsel for Great American, the Settlement Fund (including accrued

interest), plus any amount then remaining in the Notice and Administration Fund (including

accrued interest) less expenses and any costs which have either been properly disbursed pursuant

to ¶¶2 .5 or 2.6 herein, or are determined to be chargeable to the Notice and Administration Fund,

shall be refunded by the Escrow Agent to Great American. At the request of Great American's

counsel, the Escrow Agent or their designee shall apply for any tax refund owed to the

Settlement Fund and pay the proceeds, after deduction of any fees or expenses reasonably

incurred in connection with such application(s) for refund to Great American.

7.6 In the event that the Stipulation is not approved by the Court or the settlement set

forth in the Stipulation is terminated or fails to become effective in accordance with its terms, the

Settling Parties shall be restored to their respective positions in the Litigation prior to the parties'

October 28, 2003 mediation . In such event, the terms and provisions of the Stipulation, with the

exception of ¶¶7.3-7 .6 herein, shall have no further force and effect with respect to the Settling

Parties and shall not be used in the Litigation or in any other proceeding for any purpose, and

any judgment or order entered by the Court in accordance with the terms of the Stipulation shall

be treated as vacated , nunc pro tunc . No Court order or modification or reversal on appeal o f

any Court order concerning the Plan of Allocation or the amount of any attorneys' fees, costs,

expenses, and interest awarded by the Court to the Representative Plaintiffs or any of their

counsel shall constitute grounds for cancellation or termination of the Stipulation . If the

Effective Date does not occur, or if the Stipulation is terminated pursuant to its terms, neither the

Representative Plaintiffs nor any of their counsel shall have any obligation to repay any amounts

actually and properly disbursed from the Notice and Administration Fund . In addition, the


0 •

Escrow Agent shall pay all unpaid expenses already incurred and properly chargeable to th e

Notice and Administration Fund pursuant to ¶2 .6 hereof at the time of such termination or

cancellation in accordance with the terms of the Stipulation, prior to refunding the balance i n

accordance with ¶7 .5 above .

7.7 If a trustee, receiver or conservator is appointed under the United States

Bankruptcy Code, and upon entry of a final order of a court of competent jurisdiction

determining the transfer of the Settlement Fund, or any portion thereof, by or on behalf o f

Defendants to be a preference, voidable transfer, fraudulent transfer or similar transaction, the n

the releases given and Judgment entered pursuant to this Stipulation shall be null and void .

8. Miscellaneous Provision s

8 .1 The Settling Parties: (a) acknowledge that it is their intent to consummate thi s

agreement 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 in goo d

faith to accomplish the foregoing terms and conditions of the Stipulation .

8 .2 The Settling Parties intend this settlement to be a final and complete resolution o f

all disputes between them with respect to the Litigation . The settlement compromises claims

that were contested and shall not be deemed as an admission by any Settling Party as to the

merits of any claim or defense . The Judgment will contain a statement that during the course of

the Litigation, the Settling Parties and their respective counsel at all times complied with the

requirements of Federal Rule of Civil Procedure 11 . The Settling Parties agree that the amount

paid to the Settlement Fund and the other terms of the settlement were negotiated in good faith

by the Settling Parties, and reflect a settlement that was reached voluntarily after consultatio n

with competent legal counsel .


0 S

8.3 Neither the Stipulation nor the settlement, nor any act performed or documen t

executed pursuant to or in furtherance of the Stipulation or the settlement is, may be deemed as ,

or may be used as an admission or evidence of: (a) the validity or lack thereof of any Released

Claim or of any wrongdoing or liability of the Defendants and/or Great American ; or (b) any

fault or omission of the Defendants and/or Great American in any civil , criminal, or

administrative proceeding in any court, administrative agency, or other tribunal . The Judgment

shall include the statements set forth above . Defendants and/or Great American may file th e

Stipulation and/or the Judgment in any action brought against any of them in order to support a

defense or counterclaim based on principles of res judicata, collateral estoppel, release, goo d

faith settlement, judgment bar or reduction, or any other theory of claim preclusion or issu e

preclusion or similar defense or counterclaim .

8.4 All agreements made and orders entered during the course of the Litigatio n

relating to the confidentiality of information shall survive this Stipulation . All documents

protected by confidentiality agreements or orders obtained by any of the Settling Parties shoul d

be destroyed or returned at the option of the producing party within sixty (60) days of th e

execution of this Stipulation .

8.5 All of the Exhibits to the Stipulation constitute material and integral parts hereof,

fully incorporated herein by reference .

8.6 The Settling Parties may amend or modify the Stipulation only by a writte n

instrument signed by or on behalf of all of them or their respective successors-in-interest .

8 .7 This Stipulation supersedes and extinguishes any and all other promises ,

representations, or agreements, whether written or oral, made at any time prior to the date of thi s

Stipulation by and between the Settling Parties or any of their current and former officers,STIPULATION OF SETTLEMENT

0 I

directors, stockholders, partners, principals, employees, agents, parent corporations, subsidiaries ,

affiliates, predecessors, estates, successors, assigns , and attorneys, regarding the resolution of th e

Litigation. The Settling Parties agree that this Stipulation and the Supplemental Agreemen t

contain the entire agreement between the Settling Parties with respect to the Litigation and tha t

the terms of this Stipulation are contractual and not mere recitals . The Settling Parties may not

change, modify, amend, or alter this Stipulation and the Supplemental Agreement except by

written agreement signed by all Parties hereto . No representation, promise, or inducement no t

included in this Stipulation or the Supplemental Agreement shall bind any Settling Party heret o

and there shall be no verbal agreements of any kind between the Parties hereto .

8 .8 Lead Plaintiffs' Counsel, on behalf of the Settlement Class, are expressl y

authorized by the Lead Plaintiffs to take all appropriate action required or permitted to be taken

by the Settlement Class pursuant to the Stipulation to effectuate its terms, and to enter into any

modifications or amendments to the Stipulation on behalf of the Settlement Class that they deem

appropriate .

8 .9 Each counsel or other Person executing the Stipulation or any of its Exhibits o n

behalf of any party hereto hereby represents that such Person has the full authority to do so .

8.10 The Stipulation may be executed in one or more counterparts . All executed

counterparts and each of them shall be deemed to be one and the same instrument . A complete

set of executed counterparts shall be filed with the Court .

8.11 The Stipulation is binding upon, and shall inure to the benefit of, the successor s

and assigns of the Settling Parties .


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8.12 The Court shall retain jurisdiction with respect to implementing and enforcing thi s

Stipulation, and the Settling Parties submit to the Court's jurisdiction for purposes of

implementing and enforcing the settlement embodied herein .

8 .13 The Stipulation and the Exhibits attached hereto and the Supplemental Agreemen t

shall be considered to have been negotiated, executed and delivered, and to be wholly performed ,

in the State of Texas, and the rights and obligations of the parties to the Stipulation shall b e

construed and enforced in accordance with, and governed by, the internal, substantive laws of th e

State of Texas without giving effect to that State's choice of law principles .

IN WITNESS WHEREOF , the parties hereto have caused the Stipulation to be executed ,

by their duly authorized attorneys, dated as of January C 1- , 2005.

CAU Y BOWMAN CARNEY& WILLIAMS, PLLC

S. GENE CAULEY AR# 94012CURTIS L. BOWMAN AR# 86022J. ALLEN CARNEY AR#94122TIFFANY WYATT AR#2001287P.O. Box 2543 8Little Rock, AR 72211(501) 312-8500(501) 312 -8505 (fax)

MILBERG WEISS BERSHAD HYNES & LERACH LLPMAYA S. SAXENAR. TIMOTHY VANNATTA5355 Town Center RoadSuite 900Boca Raton, FL 33486

Co-Lead Counsel for Plaintiffs


GLASS, PHILLIPS & MURRAYCHARLES C . FREDERIKSEN TX# 074133002200 One Galleria Tower13355 Noel RoadDallas , Texas 75240-1518(972) 419.7184(972) 419 .8329 (fax)

Counsel for Richard Wadsworth

MILLER, CANFIELD, PADDOCK AND STONEDAVID A. FRENCH MI# P31944SONAL HOPE MITHANI MI# P5198 4101 North Main Street, 7~' FloorAnn Arbor, MI 48104(734) 663-2445(734) 747-7147 (fax)

Counsel for Conrad Kalitt a

MANDELL, MENKES & SURDYK, LLCLEN SURDYK IL#6191685STEPHEN ROSENFELD IL# 6216769Suite 300333 W. Wacker DriveChicago, IL 60606(312) 251-1000(312) 251-1010 (fax)

Counsel for Great American Insurance Company


M. Tom Christopher

t UL-

GLASS, PHILLIPS & MURRAYCHARLES C. FREDERIKSEN TX# 074133002200 One Galleria Tower13355 Noel RoadDallas, Texas 75240-1518(972) 419.7184(972) 419.8329 (fax)


MILLER, CANFIELD, PADDOCK AND STONEDAVID A. FRENCH MI# P31944SONAL HOPE MITHANI MI# P51984101 North Main Street, 7th FloorAnn Arbor, MI 48104(734) 663-2445(734) 747-7147 (fax)

Counsel for Conrad Kalitta

MANDELL, MENKES & SURDYK, LLCLEN SURDYK IL#6191685STEPHEN ROSENFELD IL# 6216769Suite 300333 W. Wacker DriveChicago, IL 60606(312) 251-100 0(312) 251-1010 (fax)


STIPULATION OF SETTLEMENT Page 28

i i

M. Tom Christophe r

GLASS, PHILLIPS & MURRAYCHARLES C. FREDERIKSEN TX# 074133002200 One Galleria Tower13355 Noel RoadDallas, Texas 75240-1518(972) 419 .7184(972) 419.8329 (fax )


I qy~^'j WMILLER, CANFIELD, PADDOCK AND STONEDAVID A. FRENCH MI# P31944SONAL HOPE MITHANI MI# P51984101 North Main Street, 7th FloorAnn Arbor, MI 48104(734) 663-2445(734) 747-7147 (fax)


MANDELL, MENKES & SURDYK, LLCLEN SURDYK IL#6191685STEPHEN ROSENFELD IL# 6216769Suite 300333 W. Wacker DriveChicago, IL 60606(312) 251-1000(312) 251-1010 (fax )



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M. Tom Christopher

GLASS, PHILLIPS & MURRAYCHARLES C. FREDERIKSEN TX# 074133002200 One Galleria Tower13355 Noel RoadDallas , Texas 75240-1518(972) 419.7184(972) 419.8329 (fax)


MILLER, CANFIELD, PADDOCK AND STONEDAVID A. FRENCH MI# P31944SONAL HOPE MITHANI MI# P51984101 North Main Street, 7th FloorAnn Arbor, MI 48104(734) 663-2445(734) 747-7147 (fax)

Conrad Ka ' a

MANDELL, MENKES & SURDYK, LLLEN SURDYK IL#6191685STEPHEN ROSENFELD IL# 6216769Suite 300333 W. Wacker DriveChicago, IL 60606(312) 251-100 0(312) 251-1010 (fax)



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EXHIBIT A

UNITED STATES DISTRICT COURTFOR THE NORTHERN DISTRICT OF TEXA S

DALLAS DIVISION

TODD HOLLEY, individually and on §Behalf of All Others Similarly Situated, §

PLAINTIFF, §

§v. §

KITTY HAWK, INC., M. TOM §

CHRISTOPHER, RICHARD §

WADSWORTH and CONRAD §

KALITTA §

DEFENDANTS. §

CASE NO. 3-00 CV 0828-P

[PROPOSED] ORDER PRELIMINARILY APPROVING SETTLEMENTAND PROVIDING FOR NOTIC E

WHEREAS, a consolidated putative class action is pending in this Court, styled In re

Kitty Hawk, Inc. Securities Litigation , Civil Action No. 3-00 CV 0828-P ;

WHEREAS, the parties , having made application pursuant to Federal Rule of Civil

Procedure 23 for an order approving the settlement of this action, in accordance with a

Stipulation of Settlement dated as of January , 2005 (the "Stipulation"), which, togethe r

with the Exhibits annexed thereto, sets forth the terms and conditions for a proposed settlemen t

and dismissal of the Litigation with prejudice upon the terms and conditions set forth therein ;

and the Court having read and considered the Stipulation and the Exhibits annexed thereto ; and


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WHEREAS , all defined terms contained herein shall have the same me anings as set forth

in the Stipulation ;

NOW THEREFORE, IT IS HEREBY ORDERED :

1 . The Court does hereby preliminarily approve the Stipulation and the settlement

set forth therein as being fair, just, reasonable, and adequate as to the Settlement Class Members ,

subject to further consideration at the Settlement Hearing described below .

2. A hearing (the "Settlement Hearing") shall take place before this Court o n

2005, at : .m., at the United States District Court for the Northern

District Court of Texas (Dallas), 1100 Commerce Street, Room 1654, Dallas, TX 75242-1003,

to determine: (a) whether the proposed settlement of the Litigation on the terms and conditions

provided for in the Stipulation is fair, just, reasonable, and adequate as to the Settlement Class,

and thus appropriate for Court approval ; (b) whether the Court should enter Judgment as

provided in ¶1 .9 of the Stipulation ; (c) whether the Court should approve the proposed Plan of

Allocation; and (d) what amount of fees and expenses the Court should award to Representative

Plaintiffs' Counsel . The Court may adjourn the Settlement Hearing without further notice to

Members of the Settlement Class .

3 . Pursuant to Federal Rule of Civil Procedure 23, the Court preliminarily certifies ,

solely for purposes of effectuating this settlement, a Settlement Class of all Persons who

purchased Kitty Hawk common stock between August 1, 1997 and April 11, 2000, inclusive .

Excluded from the Settlement Class are Kitty Hawk, the Individual Defendants and members of

their immediate families, any entity in which Kitty Hawk has or had a controlling interest,

directors and officers of Kitty Hawk, and the legal representatives, heirs, successors, or assigns

of any such excluded Person . Those Persons who timely and validly request exclusion from the


0 .

Settlement Class pursuant to the "Notice of Pendency and Settlement of Class Action" to be sent

to potential Settlement Class Members are also excluded from the Settlement Class .

4. With respect to the Settlement Class, this Court preliminarily and solely fo r

purposes of effectuating this Settlement finds that : (a) the Members of the Settlement Class are

so numerous that joinder of all Settlement Class Members in the Litigation is impracticable; (b)

questions of law or fact common to the Settlement Class predominate over any individual

questions; (c) the Representative Plaintiffs' claims are typical of the claims of the Settlement

Class; (d) the Representative Plaintiffs and their counsel have fairly and adequately represented

and protected the interests of all Settlement Class Members ; and (e) a class action is superior to

other available methods for the fair and efficient adjudication of the controversy, considering : (i)

the interests of the Settlement Class Members in individually controlling the prosecution of the

separate actions ; (ii) the extent and nature of any litigation concerning the controversy already

commenced by Settlement Class Members; (iii) the desirability or undesirability of continuing

the litigation of these claims in this particular forum ; and (iv) the difficulties likely to b e

encountered in the management of the class action.

5. The Court approves, as to form and content, the Notice of Pendency an d

Settlement of Class Action (the "Notice"), the Proof of Claim and Release Form (the "Proof o f

Claim"), and Summary Notice annexed as Exhibits A-1, A-2 and A-3 hereto, and finds that th e

mailing and distribution of the Notice and publishing of the Summary Notice substantially in the

manner and form set forth in ¶¶ 6-7 of this Order : meets the requirements of Federal Rule of

Civil Procedure 23 and due process, constitutes the best notice practicable under the

circumstances and constitutes due and sufficient notice to all Persons entitled thereto .


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6. Lead Plaintiffs' Counsel are hereby authorized to retain the firm of A .B. Data,

Ltd. ("Claims Administrator") to supervise and administer the notice procedure as well as th e

processing of claims as more fully set forth below :

(a) Within seven (7) business days of the date of this Order, (the "Notice Date") ,

Lead Plaintiffs' Counsel shall cause a copy of the Notice and the Proof of Claim, substantially in

the forms annexed as Exhibits A-1 and A-2 hereto, to be mailed by first class mail to al l

Settlement Class Members who can be identified with reasonable effort ;

(b) Within fourteen (14) business days of the date of this Order, Lead Plaintiffs '

Counsel shall publish the Summary Notice once in the national edition of Investor's Business

Daily ; and

(c) At least seven (7) calendar days prior to the Settlement Hearing, Lead Plaintiffs '

Counsel shall serve on Defendants' counsel and file with the Court proof (by affidavit o r

declaration) of such mailing and publishing .

7. Nominees who purchased Kitty Hawk common stock for the benefit of another

Person during the period between August 1, 1997 and April 11, 2000, inclusive, shall be

requested to send the Notice and the Proof of Claim to all such beneficial owners within ten (10)

days after receipt thereof, or to send a list of the names and addresses of such beneficial owners

to the Claims Administrator within ten (10) days of receipt thereof, in which event the Claims

Administrator shall promptly mail the Notice and Proof of Claim to such beneficial owners .

8. Any Person falling within the definition of the Settlement Class who desires to

request exclusion from the Settlement Class shall do so within the time set forth and in the

manner described in the Notice . Unless the Court orders otherwise, no request for exclusion


•

shall be valid unless it is made within the time set forth and in the manner described in the

Notice .

9. All Members of the Settlement Class shall be bound by all determinations and

judgments in the Litigation concerning the settlement, including, but not limited to, the releases

provided for therein, whether favorable or unfavorable to the Settlement Class .

10. Settlement Class Members who wish to participate in the settlement shall

complete and submit Proof of Claim forms in accordance with the instructions contained therein .

Unless the Court orders otherwise, all Proof of Claim forms must be submitted no later tha n

ninety (90) days from the Notice Date . Any Settlement Class Member who does not timely

submit a Proof of Claim within the time provided for shall be barred from sharing in the

distribution of the proceeds of the Settlement Fund, unless otherwise ordered by the Court, and

shall be barred and enjoined from asserting any Released Claims against Defendants .

11 . Any Member of the Settlement Class may enter an appearance in the Litigation, at

their own expense, individually or through counsel of their own choice . If they do not enter an

appearance, they will be represented by Lead Plaintiffs' Counsel .

12 . All proceedings in the Litigation are stayed until further order of the Court, excep t

as may be necessary to implement the settlement or comply with the Stipulation . Pending final

determination regarding settlement approval, neither the Representative Plaintiffs, the Lead

Plaintiffs, nor any Settlement Class Member, either directly, representatively, or in any other

capacity, shall commence or prosecute against any of the Released Persons, any action or

proceeding in any court or tribunal asserting any of the Released Claims .

13 . Any Member of the Settlement Class may appear and show cause, if he, she or it

has any reason why : (a) the proposed settlement of the Litigation should or should not beSTIPULATION OF SETTLEMENT Page 33

I

approved as fair, just, reasonable and adequate ; (b) a judgment should or should not be entered

thereon; or (c) the Plan of Allocation should or should not be awarded to Lead Plaintiffs'

Counsel ; provided, however, that no Settlement Class Member or any other Person shall be heard

or entitled to contest the approval of the terms and conditions of the proposed settlement or (if

approved) the judgment to be entered thereon approving the same, or the order approving the

Plan of Allocation, or the attorneys' fees and expenses to be awarded to the Representative

Plaintiffs' Counsel, unless written objections, papers, and briefs are filed with the Clerk of the

United States District Court for the Northern District of Texas (Dallas), no later than ten (10 )

business days prior to the Settlement Hearing, with copies sent to :

CAULEY BOWMAN CARNEY& WILLIAMS, PLLC

S. GENE CAULEY AR# 94012CURTIS L. BOWMAN AR# 86022J. ALLEN CARNEY AR#94122TIFFANY WYATT AR#2001287P.O. Box 2543 8Little Rock, AR 7221 1

-and-

MILBERG WEISS BERSHAD HYNES & LERACH LLPMAYA S . SAXENAR. TIMOTHY VANNATTA5355 Town Center RoadSuite 900Boca Raton , FL 33486

-and-


0

WINSTEAD SECHREST & MINICK P .C .JOHN P . KINCADEROBERT J. WITTE5400 Renaissance Tower1201 Elm StreetDallas, Texas 75270

-and-

GLASS, PHILLIPS & MURRAYCHARLES C . FREDERIKSEN2200 One Galleria Tower13355 Noel RoadDallas , Texas 75240-151 8

-and-

MILLER, CANFIELD, PADDOCK AND STONEDAVID A. FRENCHSONAL HOPE MITHANI101 North Main Street, 7`h FloorAnn Arbor, MI 48104

-and-

MANDELL, MENKES & SURDYK, LLCLEN SURDYKSTEPHEN ROSENFELDSuite 300333 W . Wacker DriveChicago , IL 60606

U

Any Member of the Settlement Class who does not make his, her or its objection in the manner

provided herein shall be deemed to have waived such objection and shall forever be foreclosed

from making any objection to the fairness, justness, reasonableness, or adequacy of the proposed

settlement, the Plan of Allocation, or the award of attorneys' fees and expenses to counsel for th e

Representative Plaintiffs , unless otherwise ordered by the Court .

14. The Court approves passage of title and ownership of the Settlement Fund to the

Escrow Agent in accordance with the Stipulation's terms and obligations . No Person that is not a


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Settlement Class Member or counsel to the Representative Plaintiffs shall have any right to any

portion of, or in the distribution of, the Settlement Fund unless otherwise ordered by the Court o r

otherwise provided in the Stipulation .

15. All funds held by the Escrow Agent shall be deemed and considered to be in the

Court 's custodia legis, and shall remain subject to the Court's jurisdiction, until the time such

funds are distributed pursuant to the Stipulation and/or further Order(s) of the Court .

16. All motions and papers in support of the settlement , the Plan of Allocation, and

any application by Representative Plaintiffs' Counsel for attorneys' fees or reimbursement o f

expenses shall be filed and served seven (7) calendar days prior to the Settlement Hearing .

17. The Defendants and Great American Insurance Company, Inc. shall not have any

responsibility for the Plan of Allocation or any application for attorneys' fees or reimbursemen t

of expenses submitted by Lead Plaintiffs' Counsel, and the Court will consider such matter s

separately from the fairness, justness, reasonableness, and adequacy of the settlement .

18 . At or after the Settlement Hearing, the Court shall determine whether to approve

the Plan of Allocation proposed by Lead Plaintiffs' Counsel and any application for attorneys '

fees or reimbursement of expenses .

19. All reasonable costs incurred in identifying and notifying class members, as wel l

as in administering the Settlement Fund, shall be paid as set forth in the Stipulation . In the event

the Court does not approve settlement or the settlement otherwise fails to become effective,

neither the Representative Plaintiffs nor any of their counsel shall have any obligation to repay to

Defendants or their insurers the reasonable and actual costs of class notice and of administration.

20. The Court reserves the right to adjourn the date of the Settlement Hearing without

further notice to the Members of the Settlement Class, and retains jurisdiction to consider all


• 0

further applications arising out of or connected with the proposed se tt lement . The Court may

approve the settlement, with such modifications to which the Settling Parties may agree, i f

appropriate, without further notice to the Settlement Class .

21 . In the event that this Settlement is terminated for any reason, the terms of thi s

Order are vacated and shall have no effect in this case .

IT IS SO ORDERED.

THE HONORABLE JORGE A . SOLISUNITED STATES DISTRICT JUDG E

DATE

Submitted by :


S. GENE CAULEY, # 94012CURTIS L . BOWMAN, #86022J. ALLEN CARNEY, #94122TIFFANY WYATT, #2001287P .O. Box 2543 8Li tt le Rock , AR 72211(501) 312-850 0(501) 312-8505 (fax)

MILBERG WEISS BERSHAD HYNES & LERACH LLPMAYA S . SAXENAR. TIMOTHY VANNATTA5355 Town Center RoadSuite 900Boca Raton , FL 33486


S


WINSTEAD SECHREST & MINICK P .C.JOHN P. KINCADE, TX#11429600ROBERT J. WITTE, TX#007887001201 Elm Street5400 Renaissance TowerDallas , TX 75270(214) 745-5400(214) 745-5390 (fax)

Counsel for M. Tom Christopher

GLASS, PHILLIPS & MURRAYCHARLES C. FREDERIKSEN TX# 074133002200 One Galleria Tower13355 Noel RoadDallas, Texas 75240-1518(972) 419 .7184(972) 419 .8329 (fax )


MILLER, CANFIELD, PADDOCK AND STONEDAVID A. FRENCH MI# P3194 4SONAL HOPE MITHANI MI# 51984101 North Main Street, 7th FloorAnn Arbor, MI 48104(734) 663-2445(734) 747-7147 (fax)


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MANDELL, MENKES & SURDYK, LLCLEN SURDYK IL#6191685STEPHEN ROSENFELD IL# 6216769Suite 300333 W . Wacker DriveChicago , IL 60606(312) 251-1000(312) 251-1010 (fax )



EXHIBIT A- 1

UNITED STATES DISTRICT COURTFOR THE NORTHERN DISTRICT OF TEXAS

DALLAS DIVISION

TODD HOLLEY, individually and onBehalf of All Others Similarly Situated,

PLAINTIFF,

V. CASE NO. 3-00 CV 0828-P

KITTY HAWK, INC., M. TOMCHRISTOPHER, RICHARDWADSWORTH and CONRADKALITTA

DEFENDANTS.

NOTICE OF PENDENCY AND SETTLEMENT OF CLASS ACTIO N

TO: ALL PERSONS WHO PURCHASED THE COMMON STOCK OF KITTY HAWK,INC. ("KITTY HAWK") DURING THE PERIOD AUGUST 1, 1997 AND APRIL 11,2000, INCLUSIVE.

PLEASE READ THIS NOTICE CAREFULLY. THIS NOTICE RELATES TO A

PROPOSED SETTLEMENT OF THIS CLASS ACTION LAWSUIT . IF YOU ARE A CLAS S

MEMBER, THIS NOTICE CONTAINS IMPORTANT INFORMATION AS TO YOUR

RIGHTS CONCERNING THE SETTLEMENT . IF YOU ARE A MEMBER OF THE CLAS S

AND DO NOT SUBMIT A TIMELY REQUEST FOR EXCLUSION, YOU WILL BE BOUN D

BY THE RELEASE REGARDLESS OF WHETHER YOU SUBMIT A CLAIM .


• 9

YOU ARE HEREBY NOTIFIED, pursuant to an Order of the United States District

Court for the Northern District of Texas (Dallas) (the "Court"), and Federal Rule of Civi l

Procedure 23, that the parties have reached a cash settlement in the amount of two million seve n

hundred fifty thousand dollars ($2,750,000) in the above-captioned action (the "Litigation")

subject to Court approval .

The proposed settlement creates a Settlement Fund in the amount of $2,750,000. Your

recovery from this fund will depend on a number of variables, including the number of shares o f

Kitty Hawk common stock you purchased during the period between August 1, 1997 and April

11, 2000, and the timing of your purchases and any sales . Depending on the number of eligible

securities purchased by Settlement Class Members who elect to participate in the settlement an d

when those securities were purchased and sold, the estimated average recovery per damage d

share will be approximately $ .3823 before deduction of Court-approved fees and expenses .

Defendants emphatically deny any and all claims of wrongdoing, and any and all liability

alleged in connection with such claims . Further , Representative Plaintiffs and the Defendants d o

not agree on the average amount of damages per share that would be recoverable if th e

Representative Plaintiffs prevailed on each claim alleged. The issues on which the partie s

disagree include, among others : (1) the appropriate economic model for determining the amoun t

by which Kitty Hawk common stock was allegedly artificially inflated (if at all) during the

Settlement Class Period; (2) the amount by which Kitty Hawk common stock was allegedl y

artificially inflated (if at all) during the Settlement Class Period ; (3) the effect of various market

forces influencing the trading prices of Kitty Hawk common stock at various times during th e

Settlement Class Period; (4) the extent to which external factors, such as general market an d

industry conditions, influenced the trading prices of Kitty Hawk common stock at various timesSTIPULATION OF SETTLEMENT Page 41

• 0

during the Settlement Class Period; (5) the extent to which the various matters that

Representative Plaintiffs allege were materially false or misleading influenced (if at all) th e

trading prices of Kitty Hawk common stock at various times during the Settlement Class Period;

(6) the extent to which the various allegedly adverse material facts that Representative Plaintiff s

alleged were omitted influenced (if at all) the trading prices of Kitty Hawk common stock a t

various times during the Settlement Class Period ; and (7) whether the statements allegedly made

or facts allegedly omitted were material, false, misleading, or otherwise actionable under th e

securities laws.

Representative Plaintiffs believe that the proposed settlement is the best that could b e

obtained and is in the best interests of the Settlement Class . There are significant risks

associated with continuing to litigate and proceeding to trial . In addition, there is a danger that

the Settlement Class would not prevail on their claims against the Defendants even if those

claims went to trial, in which case the Class would receive nothing . Further, had the cas e

proceeded to trial and assuming the Representative Plaintiffs established liability of the

Defendants, the amount of damages recoverable by Settlement Class Members would have been

subject to rigorous attack by the Defendants . Recoverable damages are limited to losses actuall y

caused by conduct found actionable under applicable securities laws . Had the Litigation gone to

trial, Defendants would have tried to prove that all or most of the losses of Settlement Clas s

Members were caused by non-actionable market, industry, or other general economic factors .

The proposed settlement eliminates these risks and provides an immediate recovery for

Settlement Class Members .

Representative Plaintiffs' Counsel have not received any payment for their services i n

prosecuting this Litigation on behalf of the Representative Plaintiffs and the Members of the


• S

Settlement Class . If the Court approves the settlement, counsel for the Representative Plaintiffs

will apply to the Court for attorneys' fees constituting 40% of the Settlement Fund . Counsel also

plans to seek reimbursement of out-of-pocket expenses from the settlement proceeds, for a total

of fees and expenses which shall not exceed 45% of the Settlement Fund .

This Notice is not intended to be, and should not be construed as, an expression of an y

opinion by the Court with respect to the truth of the allegations in the Litigation or the merits o f

the claims or defenses asserted. Defendants have expressly denied any and all wrongdoing

and/or liability. This Notice is to advise you of the proposed settlement and of your rights i n

connection therewith .

If you have any questions about the sett lement , you may contact the following Lea d

Plaintiffs' Counsel :

CAULEY BOWMAN CARNEY& WILLIAMS, PLLCS. GENE CAULEYCURTIS L. BOWMANJ. ALLEN CARNEYTIFFANY WYATTP.O. Box 2543 8Little Rock , AR 7221 1

-and-

MILBERG WEISS BERSHAD HYNES & LERACH LLPMAYA S. SAXENAR. TIMOTHY VANNATTA5355 Town Center RoadSuite 900Boca Raton , FL 33486


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1 . DEFINITIONS

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

1 . "Kitty Hawk" means Kitty Hawk, Inc . and all of its predecessors, successors ,

parents, subsidiaries, divisions, and related or affiliated entities and each of its or their present



executors, administrators, custodians and beneficiaries .

2. "Defendants" mean Kitty Hawk and any individual named as a defendant in any

complaint in this litigation, including M . Tom Christopher, Richard Wadsworth and Conra d

Kalitta.

3 . "Individual Defendants" mean M . Tom Christopher, Richard Wadsworth and

Conrad Kalitta .

4. "Lead Plaintiffs" mean Alpine Aviation, Inc., Abraham Mathew, David Anders

and David Reedy.

5 . "Lead Plaintiffs' Counsel" means the law firms of Cauley Bowman Carney &

Williams , PLLC, P.O. Box 25438 , Little Rock , AR 72211 , and Milberg Weiss Bershad Hynes &

Lerach LLP, 5355 Town Center Road , Suite 900 , Boca Raton , FL 33486 .

6. "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 an d

their spouses, heirs, predecessors, successors, representatives or assignees .


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7. "Representative Plaintiffs" means the persons or entities appointed as Lea d

Plaintiffs and the persons or entities designated as Class Representatives in this Litigation .

8. "Representative Plaintiffs' Counsel" means counsel who have appeared for any of

the Representative Plaintiffs in the Litigation .

9. "Settlement Class" means all Persons who purchased Kitty Hawk common stock

between August 1, 1997 and April 11, 2000, inclusive . Excluded from the Settlement Class are

Kitty Hawk, the Individual Defendants and members of their immediate families, any entity in

which Kitty Hawk has or had a controlling interest, Kitty Hawk directors and officers, and the

legal representatives, heirs, successors, or assigns of any such excluded Person . Those Persons

who timely and validly request exclusion from the Settlement Class pursuant to the "Notice of

Pendency and Settlement of Class Action" to be sent to potential Settlement Class Members are

also excluded from the Settlement Class .

10. "Settlement Class Member" or "Member of the Settlement Class" means a Perso n

who falls within the definition of the Settlement Class .

11 . "Settlement Class Period" means the period commencing on August 1, 1997 and

ending on April 11, 2000, inclusive.

II. THE LITIGATION AND RELATED PROCEEDING S

1 . On and after April 19, 2000, the following actions were filed in the United State s

District Court for the Northern District of Texas, Dallas Division (the "Court") as a propose d

class action on behalf of persons who purchased the common stock of Kitty Hawk, Inc. ("Kitty

Hawk" or the "Company") between April 29, 1999 and April 11, 2000, inclusive (th e

"Litigation") :

a. Todd Holley v. Kitty Hawk, Inc., Civil Case No . 3-000V0828 ;


I

b. Russell Schwegman v. M. Tom Christopher, et al, Civil Case No . 3-000V0867;

c. Dale Crandall v. M. Tom Christopher, et al, Civil Case No. 3-00CV1102 ; and

d. Charles Landan, et al v. M. Tom Christopher, et al, Civil Case No. 3-00CV1623 .

2 . On July 24, 2000, the Court entered an Order consolidating Case No. 3-

000V0867 and Case No . 3-00CV1102 with Case No . 3-00CV0828 . On July 28, 2000, the Cour t

entered an Order consolidating Case No . 3-00CV1623 with Case No. 3-00CV0828. Thus, the

Litigation, in its entirety , exists as consolidated Case No. 3-00CV0828 .

3 . On November 19, 2001, the Court confirmed the appointment of Alpine Aviation ,

Inc., Abraham Mathew, David Anders and David Reedy as Lead Plaintiffs for the Litigation . By

the same Order, the Court approved the selection of Lead Plaintiffs' Counsel : Milberg Weiss

Bershad Hynes & Lerach LLP and Cauley Geller Bowman & Coates, LLP (now Cauley

Bowman Carney & Williams , PLLC) .

4. Plaintiffs filed their Amended Class Action Complaint (the "Amended

Complaint") on February 19, 2002, expanding the class period to include those persons wh o

purchased Kitty Hawk common stock between August 1, 1997 and April 11, 2000, inclusive (the

"Class Period"). The Amended Complaint included as defendants M . Tom Christopher

("Christopher") (Kitty Hawk's former Chairman of the Board and Chief Executive Officer) ,

Richard Wadsworth ("Wadsworth") (Kitty Hawk's former Senior Vice President of Finance an d

Chief Financial Officer) and Conrad A . Kalitta ("Kalitta") (Director since 1997, Chairman of th e

Board, Chief Executive Officer and President from November 1997-1998) (together th e

"Individual Defendants") . Plaintiffs did not name Kitty Hawk as a Defendant in the Amende d

Complaint because the Company was in bankruptcy at the time Plaintiffs filed the Amende d

Complaint .


5 . In the Amended Complaint, Plaintiffs allege that officers and directors of Kitty

Hawk, Christopher, Wadsworth and Kalitta violated § 10(b) of the Securities Exchange Act o f

1934 (the "1934 Act"), Rule lOb-5 promulgated thereunder, and §20(a) of the 1934 Act, b y

disseminating materially false and misleading information to the investing public through th e

Company's press releases and financial filings with the Securities and Exchange Commissio n

(the "SEC"), from August 1, 1997 through April 11, 2000, inclusive . Plaintiffs additionall y

allege that the Individual Defendants violated §20(a) of the 1934 Act by and through the conduc t

alleged above. Plaintiffs allege that the false and misleading information disseminated to th e

public artificially inflated the Company's stock price throughout the Class Period .

6. Plaintiffs further allege that Wadsworth and Christopher (together, the "§1 1

Defendants") violated § §11 and 15(a) of the Securities Act of 1933 (the "1933 Act") by issuing a

false misleading Prospectus on November 17, 1997 in connection with an offering of Kitty Hawk

common stock (the "Offering"), made pursuant to a merger between Kitty Hawk and Kalitta' s

American International Airlines , Inc. ("AIA"), Kalitta Flying Services, Inc ., Flight One

Logistics, Inc . and O.K. Turbines, Inc . (collectively the "Kalitta Companies") . Plaintiffs assert

that the false and misleading Prospectus artificially inflated the price of all Kitty Hawk stock

issued in connection with the Offering.

7. Kalitta filed his separate Motion to Dismiss on June 13, 2002, and Christopher

and Wadsworth filed their Joint Motion to Dismiss on June 14, 2002 . Plaintiffs' filed their

Response to the Motions to Dismiss on August 19, 2002 . Kalitta filed his Reply in Support of

the Motion to Dismiss on October 1, 2002 .

8 . On October 28, 2003, the parties submitted to mediation before the Honorabl e

Nicholas H. Politan, and reached an agreement to settle the Litigation .


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III. DEFENDANTS' DENIALS OF WRONGDOING AND LIABILITY

Defendants have expressly and emphatically denied and continue to deny each and all o f

the claims and contentions alleged by the Lead Plaintiffs . Defendants expressly have denied an d

continue to deny all charges of wrongdoing or liability against them arising out of any of th e

conduct, statements, acts or omissions alleged, or that could have been alleged, in the Litigation .

Defendants also have denied and continue to deny, inter alia, the allegations that the Lead

Plaintiffs or the Settlement Class (as defined above) have suffered damage or that the Lead

Plaintiffs or the Settlement Class were harmed by the alleged conduct . Neither the Stipulation

nor the Settlement shall be construed, whether in whole or in part, as evidence, or an admissio n

or concession on the part of Defendants, of any fault or liability, nor shall the Stipulation, the

Settlement or the Supplemental Agreement be considered an admission by Defendants that Lea d

Plaintiffs have satisfied the requirements for class certification under Federal Rule of Civi l

Procedure 23 . In the event that the Settlement is terminated for any reason, any and all defense s

shall remain available to Defendants (including any objections to class certification) . Without

conceding any infirmity in any defenses they have asserted or intend to assert in the Litigation ,

Defendants consider it desirable and in their best interest that this Litigation be dismissed on th e

terms set forth herein in order to avoid further expense and protracted litigation .


IV. CLAIMS OF THE LEAD PLAINTIFFS AND BENEFITS OF SETTLEMENT

The Lead Plaintiffs believe that the claims asserted in the litigation have merit. However,

Lead Plaintiffs' Counsel recognize and acknowledge Defendants' denial of wrongdoing an d

liability, as well as the expense and length of continued proceedings necessary to prosecute th e

Litigation through trial and through appeals. Lead Plaintiffs' Counsel also have taken into

account the uncertain outcome and risk of any litigation, especially in complex actions such a s

the Litigation, as well as the difficulties and delays inherent in such litigation. Lead Plaintiffs '

Counsel considered the inherent problems of proving, and possible defenses to, the allegation s

asserted in the Litigation. Based on their evaluation, Lead Plaintiffs' Counsel believe that the

settlement set forth in the Stipulation confers substantial benefits upon the Settlement Class an d

protects the best interests of the Lead Plaintiffs and the Settlement Class .

V. THE RIGHTS OF THE SETTLEMENT CLASS MEMBER S

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 V of this Notice, upon the

Court's approval of such terms .

If you are a Settlement Class Member, you have the following options :

1 . You may file a Proof of Claim as described below. If you choose this option, you

will remain a Settlement Class Member, you will share in the proceeds of the propose d

settlement if your claim is timely and valid and if the proposed settlement is finally approved b y

the Court, and you will be bound by the Judgment and Release described below.

2. If you do not wish to be included in the Settlement Class and you do not wish to

participate in the proposed settlement described in this Notice, you may request to be excluded .

To do so, you must so state in writing no later than , 2005 . You must set forth :


•

(a) the name of this Litigation (In re Kitty Hawk, Inc. Securities Litigation, Civil

Action No. 3-00 CV 0828) ;

(b) your name, address, and telephone number, and the name and address of th e

record owner of Kitty Hawk common stock if different from your own ;

(c) the number of shares of Kitty Hawk common stock you purchased and the

number of shares of common stock you sold during the Settlement Class Period, and the date s

and prices of any purchase( s) and/or sale(s) ; and

(d) that you wish to be excluded from the Settlement Class .

You must address the exclusion request as follows :


S. GENE CAULEYCURTIS L. BOWMANJ. ALLEN CARNEYTIFFANY WYAT TP. O. Box 25438Little Rock, AR 7221 1

-and-

MILBERG WEISS BERSHAD HYNES & LERACH LLPMAYA S . SAXENAR. TIMOTHY VANNATTA5355 Town Center RoadSuite 900Boca Raton, FL 3348 6

NO REQUEST FOR EXCLUSION WILL BE CONSIDERED VALID UNLESS ALL OF THE

INFORMATION DESCRIBED ABOVE IS INCLUDED IN ANY SUCH REQUEST .

3 . 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 Litigation; and (d)STIPULATION OF SETTLEMENT Page 50

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you will not be precluded, by reason of your decision to request exclusion from the Settlemen t

Class, from otherwise prosecuting an individual claim, if timely, against Defendants based on th e

matters complained of in the Litigation .

4. If you do not request in writing exclusion from the Settlement Class as set forth in

Paragraph 2 above, you will be bound by any and all determinations or judgments in the

Litigation in connection with the settlement entered into or approved by the Court, whethe r

favorable or unfavorable to the Settlement Class, including, without limitation, the Judgmen t

described in Section VIII, Paragraph 1, below, and you shall be deemed to have, and b y

operation of the Judgment shall have, fully released all of the Released Claims (defined below )

against the Released Persons , regardless of whether you submit a valid Proof of Claim .

5 . If you do not request in writing exclusion from the Settlement Class, you may still

object to the settlement and/or the application of Representative Plaintiffs' Counsel for an awar d

of attorneys' fees and reimbursement of expenses in the manner set forth below . Filing a Proof

of Claim does not preclude a Settlement Class Member from objecting to the settlement .

However, if your objection is rejected, you will be bound by the settlement and the Judgmen t

(described in Section VIII, Paragraph 1, below ) just as if you had not objected .

6. You may do nothing at all . If you choose this option, you will not share in the

proceeds of the settlement, but you will be bound by any judgment entered by the Court, and yo u

shall be deemed to have, and by operation of the Judgment shall have, fully released all of th e

Released Claims (defined below) against the Released Persons .

7. If you are a Settlement Class Member, you may, but are not required to, enter a n

appearance through counsel of your own choosing at your own expense . If you do not do so, yo u

will be represented by Lead Plaintiffs' Counsel :STIPULATION OF SETTLEMENT Page 51

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S. GENE CAULEYCURTIS L. BOWMANJ. ALLEN CARNEYTIFFANY WYATTP.O. Box 2543 8Little Rock, AR 7221 1

-and-


VI. THE PROPOSED SETTLEMENT

The Settling Parties have reached a settlement in the Litigation, embodied in a Stipulation

of Settlement dated as of January , 2005 (the "Stipulation"), on file with the Court . Lead

Plaintiffs' Counsel, on the basis of, among other things, a thorough investigation of the facts and

the law relating to the acts, events, and conduct complained of and the subject matter of the

Litigation, have concluded that the proposed settlement is fair to and in the best interests of th e

Settlement Class .

The following description of the proposed settlement of the Litigation is only a summary ,

and reference is made to the text of the Stipulation, on file with the Court, for a full statement o f

its provisions:

1 . The settlement fund consists of $2,750 ,000 in cash, plus any interest that may

accrue thereon ("Settlement Fund") .


2. Upon Court approval of the Stipulation and entry of a Judgment that becomes a

Final Judgment, and upon satisfaction of the other conditions to the settlement, described below ,

the Settlement Fund will be distributed as follows :

(a) to pay costs and expenses in connection with providing notice to the members o f

the class and administering the settlement on behalf of the Settlement Class ;

(b) to pay Representative Plaintiffs' Counsel attorneys' fees, expenses, and costs ,

with interest thereon (the "Fee and Expense Award"), if and to the extent allowed by the Court ;

and

(c) to pay the reasonable costs incurred in the preparation of any tax returns required

to be filed on behalf of the Settlement Fund, as well as the taxes (and any interest and penaltie s

determined to be due thereon) owed by reason of the earnings of the Settlement Fund, includin g

all Taxes and Tax Expenses as defined in the Stipulation .

3 . Subject to Court approval of the Plan of Allocation described below, the balance

of the Settlement Fund (the "Net Settlement Fund") shall be distributed to Settlement Clas s

Members who submit valid, timely, Proof of Claim forms ("Authorized Claimants"), as follows :

(a) Each Person claiming to be an Authorized Claimant shall submit a separate Proo f

of Claim and Release signed under penalty of perjury and supported by such documents a s

specified in the Proof of Claim as are reasonably available to the Authorized Claimant .

(b) All Proof of Claim forms must be postmarked or received by

2005 . Unless otherwise ordered by the Court, any Settlement Class Member who fails to submi t

a Proof of Claim within such period, or such other period the Court may order, shall be foreve r

barred from receiving any payments pursuant to the Stipulation, but will in all other respects b e

subject to the provisions of the Stipulation and the final judgment entered by the Court .STIPULATION OF SETTLEMENT Page 53

C_J .J

4. To the extent sufficient funds exist in the Net Settlement Fund, each Authorize d

Claimant will receive an amount equal to the Authorized Claimant 's claim , as defined below. If,

however, the amount in the Net Settlement Fund is not sufficient to permit payment of the tota l

claim of each Authorized Claimant, then each Authorized Claimant shall be paid that percentag e

of the Net Settlement Fund that each Authorized Claimant's claim is of the total of the claims o f

all Authorized Claimants . A "claim" will be computed pursuant to the Plan of Allocation ("Plan

of Allocation") as follows :

Section 11 Claims

Persons that purchased shares in the secondary public offering, dated November14, 1997, shall have a recognized claim equal to the lesser of their out-of-pocketlosses (the purchase price less the amount received on sale) or, if the shares werestill owned on April 20, 2000, the date this Litigation was commenced, thedifference between the purchase price and (i) the price on the date the suit wascommenced or, if greater (ii) the price for which said shares were sold after thesuit was commenced .

Rule IOb-5 Claims

1 . For shares purchased prior to March 19, 1998, the following claims fordamages will be allowed :

a. For shares sold prior to March 19, 1998, no damages will be allowed ;b . For shares sold on or between March 19, 1998, and October 27, 1998,

allowed damages shall be $1 .79 per share ;c. For shares sold on or between October 28, 1998, and March 7, 1999,

allowed damages shall be $3.75 per share ;d. For shares sold on or between March 8, 2000, and April 11, 2000, allowed

damages shall be $5 .08 per share ;e. For shares sold on or between April 12, 2000, and May 1, 2000, allowed

damages shall be $8 .62 per share ;f. For shares sold on or after May 2, 2000, allowed damages shall be $9 .02

per share .

2. For shares purchased on or between March 20, 1998, and October 27,1998, the following claims for damages will be allowed :

a. For shares sold prior to March 20, 1998, no damages will be allowed ;


b. For shares sold on or between October 28, 1998, and March 7, 1999,allowed damages shall be $1 .96 per share ;

c. For shares sold on or between March 8, 2000, and April 11, 2000, alloweddamages shall be $3 .28 per share ;

d. For shares sold on or between April 12, 2000, and May 1, 2000, alloweddamages shall be $6 .82 per share ;

e. For shares sold on or after May 2, 2000, allowed damages shall be $7 .23per share .

3. For shares purchased on or between October 28, 1998, and March 7, 2000,the following claims for damages will be allowed :

a. For shares sold prior to March 8, 2000, no damages will be allowed ;b. For shares sold on or between March 8, 2000, and April 11, 2000, allowed

damages shall be $1 .32 per share;c. For shares sold on or between April 12, 2000, and May 1, 2000, allowed

damages shall be $4 .86 per share ;d. For shares sold on or after May 2, 2000, allowed damages shall be $5 .27

per share .

4. For shares purchased on or between March 8, 2000, and April 11, 2000,the following claims for damages will be allowed:

a. For shares sold prior to April 12, 2000 , no damages will be allowed ;b. For shares sold on or between April 12, 2000, and May 1 , 2000, allowed

damages shall be $3 . 54 per share ;c. For shares sold on or after May 2, 2000 , allowed damages shall be $3 .94

per share .

5. For shares purchased on or between April 12, 2000, and May 1, 2000, thefollowing claims for damages will be allowed :

a. For shares sold prior to May 1, 2000, no damages will be allowed ;b. For shares sold on or after May 2, 2000, allowed damages

shall be $0 .40 per share.

In addition to the above schedule, all claims for damages for shares purchasedduring the class period shall be further limited (as provided for under the PrivateSecurities Litigation Reform Act of 1995) by : (i) The difference between the pricepaid and the price received if sold on or before May 1, 2000 ; (ii) The differencebetween the price paid and the average closing price from May 2, 2000, and thedate of sale if sold between May 1, 2000, and July 30, 2000, as provided for inTable 1 ; (iii) The difference between the price paid and $0 .41 if the shares weresold after July 30, 2000, or were held until the current date .


• 1

End Date

5/10/2000

511112000

5/12/2000

5/15/2000

5/16/2000

5/17/2000

5/18/2000

5/19/2000

5/22/2000

5/23/2000

5/24/2000

5/25/2000

5/26/2000

5/30/2000

5/31/2000

6/ 1 /2000

6/2/2000

6/5/2000

6/6/2000

6/7/2000

6/8/2000

6/9/2000

6/12/2000

6/13/2000

6/14/2000

Average Price

$ 0 .1 2

$ 0.25

$ 0.40

$ 0 .39

$ 0 .40

$ 0.41

$ 0.40

$ 0.43

$ 0.43

$ 0.44

$ 0.44

$ 0 .44

$ 0.45

$ 0.45

$ 0 .45

$ 0.44

$ 0.44

$ 0.44

$ 0.45

$ 0.44

$ 0.44

$ 0.44

$ 0.44

$ 0.44

$ 0.44


0 0

6/15/2000 $ 0.43

6/16/2000 $ 0 .43

6/19/2000 $ 0.43

6/20/2000 $ 0.43

6/21/2000 $ 0.43

6/22/2000 $ 0.43

6/23/2000 $ 0.43

6/26/2000 $ 0.43

6/27/2000 $ 0.43

6/28/2000 $ 0.42

6/29/2000 $ 0.42

6/30/2000 $ 0.42

7/3/2000 $ 0.42

7/5/2000 $ 0 .42

7/6/2000 $ 0.42

7/7/2000 $ 0.4 1

7/10/2000 $ 0.41

7/11/2000 $ 0.4 1

7/12/2000 $ 0.41

7/13/2000 $ 0.41

7/14/2000 $ 0.4 1

7/17/2000 $ 0.41

7/18/2000 $ 0.4 1

7/19/2000 $ 0.4 1

7/20/2000 $ 0.4 1

7/21/2000 $ 0.4 1

7/24/2000 $ 0.4 1


a •7/25/2000 $ 0.4 1

7/26/2000 $ 0.4 1

7/27/2000 $ 0.4 1

7/28/2000 $ 0 .4 1

The date of purchase or sale is the "contract" or "trade" date as distinguished fromthe "settlement" date .

Multiple dates of purchase and/or sale of shares shall be accounting for on thefirst in-first out method (FIFO Method), treating the first share purchased as thefirst share sold . For Settlement Class Members who made multiple purchases ormultiple sales during the Settlement Class Period, the earliest subsequent saleshall be matched with the earliest purchase and chronologically thereafter forpurposes of the claim calculations .

The Court has reserved jurisdiction to allow, disallow or adjust the claim of anySettlement Class Member on equitable grounds .

5. Payment pursuant to the Plan of Allocation set forth above shall be conclusiv e

against all Authorized Claimants . No Person shall have any claim against Representativ e

Plaintiffs' Counsel, any claims administrator, Defendants, or other agent designated by Lea d

Plaintiffs' Counsel or Defendants or Defendants' counsel or Defendants' insurers, based o n

distributions made substantially in accordance with the Stipulation and the settlement contained

therein, the Plan of Allocation, or further Court orders . All Settlement Class Members who fai l

to complete and file a valid and timely Proof of Claim and Release shall be barred fro m

participating in distributions from the Net Settlement Fund (unless otherwise ordered by the

Court), but otherwise shall be bound by all of the terms of the Stipulation, including the terms o f

any Judgment entered and the releases given .


0 •

6. To share in the Settlement Fund, you must submit a valid Proof of Claim and

Release on the form enclosed with this Notice no later than , 2005, to the addres s

set forth on the attached Proof of Claim form .

7. The Settlement Fund, less any deductions for fees and costs allowed by the Cour t

and taxes due, shall be maintained by the Escrow Agent for the benefit of the Settlement Class ,

as provided in the Stipulation .

VII. CONDITIONS FOR SETTLEMENT

The settlement is conditioned upon the occurrence of certain events described in the

Stipulation. Those events include , among other things : (a) entry of the Judgment by the Court ,

as provided for in the Stipulation ; and (b) expiration of the time to appeal from or alter or amen d

the Judgment . If, for any reason, any one of the conditions described in the Stipulation is no t

met, the Stipulation might be terminated and, if terminated, will become null and void, and th e

parties to the Stipulation will be restored to their respective positions in the litigation .

VIII. DISMISSAL AND RELEASE S

1 . If the Court approves the proposed settlement, the Court will enter a Judgment

that will dismiss the Litigation against Defendants with prejudice, and bar and permanently

enjoin the Representative Plaintiffs, the Lead Plaintiffs, and each Settlement Class Member ,

regardless of whether such Settlement Class Member has submitted a Proof of Claim, fro m

prosecuting the Released Claims (defined below) against the Released Persons. At such time ,

any such Settlement Class Member shall be conclusively deemed to have released any and al l

such Released Claims against the Released Persons . The Court shall retain jurisdiction over

implementation of the settlement, disposition of the Settlement Fund, hearing and determinin g

Representative Plaintiffs' Counsel's application for attorneys' fees, costs, interest, and expenses


r 0

(including fees and costs of experts), and enforcing and administering the Stipulation, includin g

any releases executed in connection therewith .

2. As used above, "Released Claims" mean all claims (including, but not limited to ,

Unknown Claims as defined below), demands, losses, rights, and causes of action of any nature

whatsoever, whether known or unknown, whether suspected or unsuspected, whether conceale d

or hidden, by any Released Persons, whether under state or federal law, based upon or arising out

of, or related to both the purchase of Kitty Hawk common stock during the Settlement Clas s

Period and the acts, facts, transactions, events, occurrences, disclosures, statements, omissions ,

or failures to act which were, could or might have been alleged in the Litigation by an y

Representative Plaintiff, Lead Plaintiff or Settlement Class Member.

3 . "Unknown Claims" mean any Released Claims that any Representative Plaintiff,

Lead Plaintiff or Settlement Class Member does not know or suspect to exist in his, her or it s

favor at the time of the release of the Released Persons which, if known by him, her or it, migh t

have affected his, her or its settlement with and release of the Released Persons , or might have

affected his, her or its decision not to object to this settlement or not to exclude himself, hersel f

or itself from the Settlement Class . With respect to any and all Released Claims, the Settling

Parties stipulate and agree that, upon the Effective Date, the Representative Plaintiffs and Lea d

Plaintiffs shall expressly, and each of the Settlement Class Members shall be deemed to have,

and by operation of the Judgment shall have expressly, waived the provisions, rights, an d

benefits conferred by any law of any state or territory of the United States, or principle of

common law , which is similar, comparable, or equivalent to California Civil Code § 1452, which

provides :


~ rA general release does not extend to claims which the creditor does not know orsuspect to exist in his favor at the time of executing the release, which if knownby him must have materially affected his settlement with the debtor .

The Representative Plaintiffs, Lead Plaintiffs and Settlement Class Members may hereafte r

discover facts in addition to or different from those that any of them now knows or believes to b e

true with respect to the subject matter of the Released Claims, but each Representative Plaintiff

and Lead Plaintiff shall expressly and each Settlement Class Member, upon the Effective Date ,

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 ,



future, including, but not limited to, conduct which is negligent, intentional, with or withou t

malice, or a breach of any duty, law or rule, without regard to the subsequent discovery o r

existence of such different or additional facts . The Representative Plaintiffs and Lead Plaintiffs


to have acknowledged, that the foregoing waiver was separately bargained for and is a key an d

fundamental element of the settlement of which this release is a part.

IX. NOTICE TO BANKS, BROKERS, AND OTHER NOMINEES

Banks, brokerage firms, institutions, and other Persons who are nominees and whopurchased Kitty Hawk common stock for the beneficial interest of other Persons as of any dayfrom August 1, 1997 through and including April 11, 2000, are requested within ten (10) days ofreceipt of this Notice to : (1) provide Lead Plaintiffs' Counsel with the names and addresses ofsuch beneficial purchasers, or (2) forward a copy of this Notice to each such beneficial purchaserand provide Lead Plaintiffs' Counsel with written confirmation of doing so. Lead Plaintiffs'Counsel offer to prepay your reasonable costs and expenses of complying with this provisionupon submission of appropriate documentation . Additional postage-prepaid copies of the Noticemay be obtained from Lead Plaintiffs' Counsel for forwarding to such beneficial owners . Allsuch correspondence to Lead Plaintiffs' Counsel should be addressed as follows :



S . GENE CAULEYCURTIS L. BOWMANJ. ALLEN CARNEYTIFFANY WYATTP.O. Box 2543 8Li ttle Rock, AR 7221 1

-and-

MILBERG WEISS BERSHAD HYNES & LERACH LLPMAYA S . SAXENAR. TIMOTHY VANNATTA5355 Town Center RoadSuite 900Boca Raton, FL 33486

X. ATTORNEYS' FEES, COSTS, AND EXPENSES OF PLAINTIFFS' ATTORNEY S

To date, Representative Plaintiffs' Counsel have not received any payment for thei r

services in conducting this Litigation on behalf of the Representative Plaintiffs and the Members

of the Settlement Class, nor have counsel been reimbursed for their out-of-pocket expenses .

Representative Plaintiffs' Counsel in the Litigation will apply to the Court at the conclusion o f

the hearing described below, for an award of attorneys' fees of 40% of the Settlement Fund, plu s

reimbursement of expenses, the aggregate of which shall not exceed 45% of the Settlement Fund .

Such sums as the Court may grant will be paid from the Settlement Fund . Settlement Clas s

Members are not personally liable for any fees or expenses awarded by the Court.

The fee requested by Representative Plaintiffs' Counsel will compensate them for thei r

efforts in achieving the Settlement Fund for the benefit of the Settlement Class, and for their ris k

in undertaking this case on a contingent basis . If approved by the Court, the fee requested woul d

fall within the range of fees awarded to plaintiffs' counsel under similar circumstances i n

litigation of this type.STIPULATION OF SETTLEMENT Page 62

• 0

XI. THE HEARING ON PROPOSED SETTLEMENT

A hearing (the "Hearing") will take place before the Honorable Jorge A . Solis, at the

United States District Court for the Northern District of Texas (Dallas), 1100 Commerce Street ,

Room 1654, Dallas , TX 75242-1003, at _.m., on , 2005, for the purpose of

determining whether: (a) the proposed settlement is fair, reasonable and adequate and

appropriate of Court approval ; (b) the proposed Plan of Allocation is fair, just, reasonable and

adequate; (3) the Court should approve applications of Representative Plaintiffs' Counsel for an

award of attorneys' fees, costs and expenses ; and (d) the Court should enter Judgment dismissing

the Litigation with prejudice as against Defendants . The Hearing may be adjourned from time to

time by the Court at the Hearing or any adjourned session thereof without further notice.

Any Member of the Settlement Class who has not requested exclusion may appear at th e

Hearing to show cause why the proposed Settlement should not be approved, or the Litigation

should not be dismissed with prejudice as against the Defendants, and to present any opposition

to the Plan of Allocation or the application of Representative Plaintiffs' Counsel for attorneys'

fees, costs and expenses ; provided, however, that no such Person shall be heard, unless his or her

objection or opposition is made in writing and is filed, together with copies of all other papers

and briefs by him, her or it with the Court no later than , 2005 at the followin g

address :

CLERK OF THE COURTUNITED STATES DISTRICT COURTNORTHERN DISTRICT OF TEXAS (DALLAS)1100 Commerce StreetRoom 1654Dallas , Texas 75242-1003


0

with copies to :CAULEY BOWMAN CARNEY& WILLIAMS, PLLC

S. GENE CAULEYCURTIS L. BOWMANJ. ALLEN CARNEYTIFFANY WYATTP .O. Box 2543 8Little Rock , AR 7221 1

-and-

MILBERG WEISS BERSHAD HYNES & LERACH LLPMAYA S . SAXENAR. TIMOTHY VANNATTA5355 Town Center RoadSuite 900Boca Raton, FL 33486


-and-

WINSTEAD SECHREST & MINICK P .C .JOHN P. KINCADEROBERT J. WITTE5400 Renaissance Tower1201 Elm StreetDal las, Texas 7527 0

Counsel for M. Tom Christophe r

-and-

GLASS, PHILLIPS & MURRAYCHARLES C . FREDERIKSEN2200 One Galleria Tower13355 Noel RoadDallas, Texas 75240-151 8


-and-


• 0

MILLER, CANFIELD, PADDOCK AND STONEDAVID A. FRENCHSONAL HOPE MITHANI101 North Main Street, 7th FloorAnn Arbor, MI 48104


-and-

MANDELL, MENKES & SURDYK, LLCLEN SURDYKSTEPHEN ROSENFELDSuite 300333 W. Wacker DriveChicago, IL 60606


Unless otherwise ordered by the Court, any Member of the Settlement Class who does not mak e

his, her or its objection or opposition in the manner provided shall be deemed to have waived al l

objections and opposition to the fairness, reasonableness and adequacy of the propose d

settlement, the Plan of Allocation, or to the request of Representative Plaintiffs' Counsel fo r

attorneys' fees, costs and expenses .

XII. EXAMINATION OF PAPERS AND INQUIRIE S

This Notice contains only a summary of the terms of the proposed settlement . For a more

detailed statement of the matters involved in the Litigation, reference is made to the pleadings, t o

the Stipulation, and to other papers filed in this action, which may be inspected at the office o f

the Clerk of the Court, United States District Court for the Northern District of Texa s

(Dallas ), 1100 Commerce Street , Room 1654 , Dallas, TX 75242-1003, during business hours of

each business day.

DO NOT CONTACT THE COURT REGARDING THIS NOTICE


•

If you have any questions about the settlement, you may contact the following Lea d

Plaintiffs' Counsel :


S. GENE CAULEYCURTIS L. BOWMANJ. ALLEN CARNEYTIFFANY WYATTP.O. Box 2543 8Little Rock, AR 7221 1

-and-

MILBERG WEISS BERSHAD HYNES & LERACH LLPMAYA S. SAXENAR. TIMOTHY VANNATTA5355 Town Center RoadSuite 900Boca Raton, FL 33486

DATED: , 2005

BY ORDER OF THE COURTUNITED STATES DISTRICT COURTNORTHERN DISTRICT OF TEXAS (DALLAS )


• •

EXHIBIT A- 2


DALLAS DIVISION

TODD HOLLEY, individua lly and on §Behalf of All Others Similarly Situated, §

PLAINTIFF, §

§V. §

KITTY HAWK, INC., M. TOM §CHRISTOPHER, RICHARD §WADSWORTH and CONRAD §KALITTA §

DEFENDANTS. §

CASE NO. 3-00 CV 0828-P

PROOF OF CLAIM AND RELEASE

1 . GENERAL INSTRUCTION S

1 . To recover as a Member of the Settlement Class based upon your claims in the

consolidated action entitled In re Kitty Hawk, Inc. Securities Litigation , Civil Action No . 3-00

CV 0828-P, pending in the United States District Court for the Northern District of Texa s

(Dallas), you must complete and, on page hereof, sign this Proof of Claim and Release. If

you fail to file a properly addressed (as set forth in paragraph 3 below) Proof of Claim and

Release, your claim may be rejected and you may be precluded from any recovery from the

Settlement Fund created in connection with the proposed settlement of the Litigation .

2. Submission of this Proof of Claim and Release , however, does not assure that you

will share in the proceeds of settlement in the Litigation .


E

3 . YOU MUST MAIL YOUR COMPLETED AND SIGNED PROOF OF CLAI M

AND RELEASE POSTMARKED ON OR BEFORE , 2005,

ADDRESSED AS FOLLOWS:

Claims AdministrationKitty Hawk, Inc. Securities Litigationc/o A.B. Data, Ltd.P.O. Box 170200Milwaukee, WI 53217-801 6

4. If you are NOT a Member of the Settlement Class (as defined in the "Notice o f

Pendency and Settlement of Class Action"), DO NOT submit a Proof of Claim and Release

Form.

5. If you are a Member of the Settlement Class and you did not timely request

exclusion in connection with the proposed settlement, you are bound by the terms of any

judgment entered in the Litigation , including the releases provided therein , REGARDLESS OF

WHETHER YOU SUBMIT A PROOF OF CLAIM AND RELEASE .

II. DEFINITIONS

1 . "Kitty Hawk" means Kitty Hawk, Inc. and all of its predecessors, successors ,

parents, subsidiaries, divisions, and related or affiliated entities and each of its or their presen t



executors, administrators, custodians and beneficiaries .

2. "Individual Defendants" mean M . Tom Christopher, Richard Wadsworth and

Conrad Kalitta .


i 0

3 . "Defendants" mean Kitty Hawk and any individual named as a defendant in any

complaint in this litigation, including M. Tom Christopher, Richard Wadsworth and Conra d

Kalitta .

4. "Great American" means Great American Insurance Company, Inc . and all of its

predecessors, successors, parents, subsidiaries, divisions, and related or affiliated entities an d

each of its or their present and former assigns, partners, attorneys, officers, directors, principals ,

employees, accountants, associates , agents , representatives, consultants, advisors, predecessors ,

successors, heirs, executors, administrators, custodians and beneficiaries .

III. CLAIMANT IDENTIFICATION

1 . If you purchased Kitty Hawk common stock and held the certificate(s) in you r

name, you are the beneficial purchaser as well as the record purchaser . If, however, you

purchased Kitty Hawk common stock and the certificate(s) were registered in the name of a thir d

party, such as a nominee or brokerage firm, you are the beneficial purchaser and the third party i s

the record purchaser.

2. Use Part I of this form entitled "Claimant Identification" to identify each

purchaser of record ("nominee"), if different from the beneficial purchaser of Kitty Hawk

common stock which form the basis of this claim . THIS CLAIM MUST BE FILED BY THE

ACTUAL BENEFICIAL PURCHASER OR PURCHASERS, OR THE LEGAL

REPRESENTATIVE OF SUCH PURCHASER OR PURCHASERS, OF THE KITTY HAW K

COMMON STOCK UPON WHICH THIS CLAIM IS BASED .

3 . All joint purchasers must sign this claim . Executors, administrators, guardians ,

conservators, and trustees must complete and sign this claim on behalf of persons represented b y

them and their authority must accompany this claim, and their titles or capacities must be stated .STIPULATION OF SETTLEMENT Page 69

• E

The Social Security (or taxpayer identification) number and telephone number of the beneficia l

owner may be used in verifying the claim . Failure to provide the foregoing information coul d

delay verification of your claim and/or result in claim rejection .

IV. CLAIM FORM

1 . Use Part II of this form entitled "Schedule of Transactions in Kitty Hawk

Common Stock" to supply all required details of your transaction(s) in Kitty Hawk commo n

stock. If you need more space or additional schedules, attach separate sheets giving all of the

required information in substantially the same form . Sign and print or type your name on eac h

additional sheet .

2. On the schedules, provide all requested information with respect to all of your

purchases and all of your sales of Kitty Hawk common stock that took place at any time

beginning August 1, 1997 through April 11, 2000, inclusive (the "Settlement Class Period") ,

whether such transactions resulted in a profit or a loss . Failure to report all such transactions

may result in claim rejection .

3 . List each transaction in the Settlement Class Period separately and i n

chronological order, by trade date, beginning with the earliest . You must accurately provide th e

month, day and year of each transaction you list .

4. The date of covering a "short sale" is deemed to be the date of purchase of Kitty

Hawk common stock . The date of a "short sale" is deemed to be the date of sale of Kitty Hawk

common stock .

5 . You should attach copies of broker confirmations or other documentation of you r

transactions in Kitty Hawk common stock to your claim . Failure to provide this documentation

could delay verification of your claim and/or result in claim rejection.


1 )

UNITED STATES DISTRICT COURTNORTHERN DISTRICT OF TEXAS (DALLAS )

In re Kitty Hawk, Inc. Securities LitigationCivil Action No . 3-00 CV 0828-P

PROOF OF CLAIM AND RELEAS E

Must be Postmarked No Later Than :, 2005

ntPlease Type or Pri

PART I: CLAIMANT IDENTIFICATION

Beneficial Owner's Name (First, Middle, Last)

Street Address

City

Foreign Province

Social Security Number orTaxpayer Identification

State Zip Code

Foreign Country

Area Code Telephone Number (work)

Individual

Corporation/Other

Area Code Telephone Number (home )


0 0

V. SUBMISSION TO JURISDICTION OF COURT AND ACKNOWLEDGMENT S

I (We) submit this Proof of Claim and Release under the terms of the Stipulation o f

Settlement described in the Notice . I (We) also submit to the jurisdiction of the United State s

District Court for the Northern District of Texas ( Dallas) with respect to my (our) claim as a

Settlement Class Member and for purposes of enforcing the release set forth herein. I (We)

further acknowledge that I am (we are) bound by and subject to the terms of any judgment tha t

may be entered in the Litigation. I (We) agree to furnish additional information to Lea d

Plaintiffs' Counsel or the Claims Administrator to support this claim, including details o f

transactions in other Kitty Hawk securities, such as options, if requested to do so . I (We) have

not submitted any other claim covering the same purchases or sales of Kitty Hawk commo n

stock during the Settlement Class Period and know of no other person having done so on my

behalf.

VI. RELEASE

1 . I (We) hereby acknowledge full and complete satisfaction of, and do hereby fully ,

finally, and forever settle, release , and discharge from the Released Claims each and all of th e

Released Persons .

2. "Released Claims" mean all claims (including, but not limited to, Unknown

Claims as defined below), demands, losses, rights, and causes of action of any natur e

whatsoever, whether known or unknown, whether suspected or unsuspected, whether conceale d

or hidden, by any Released Persons , whether under state or federal law, based upon or a rising out

of, or related to both the purchase of Kitty Hawk common stock during the Settlement Clas s

Period and the acts, facts, transactions, events, occurrences, disclosures, statements, omissions ,


9 0

or failures to act which were, could or might have been alleged in the Litigation by any

Representative Plaintiff, Lead Plaintiff or Settlement Class Member .

3 . "Released Persons" mean Kitty Hawk, the Defendants, Great American and any

and all of their present and former affiliates, parents, subsidiaries (whether or not directly o r

wholly owned), predecessors and successors, and each of its or their present and former assigns ,

partners, attorneys, officers, directors, principals, employees, accountants, associates, agents ,

representatives, consultants, advisors, predecessors, successors, heirs, executors, administrators ,

custodians and beneficiaries .

4. "Unknown Claims" mean any Released Claims that any Representative Plaintiff,

Lead 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 Persons which, if known by him, her or it, might

have affected his, her or its settlement with and release of the Released Persons , or might have

affected his, her or its decision not to object to this settlement or not to exclude himself, hersel f

or itself from the Settlement Class. With respect to any and all Released Claims, the Settling

Parties stipulate and agree that, upon the Effective Date, the Representative Plaintiffs and Lea d

Plaintiffs shall expressly, and each of the Settlement Class Members shall be deemed to have an d

by operation of the Judgment shall have expressly, waived the provisions, rights, and benefit s

conferred by any law of any state or territory of the United States, or principle of common law,

which is similar, comparable, or equivalent to California Civil Code § 1452, which provides :

A general release does not extend to claims which the creditor does not know orsuspect to exist in his favor at the time of executing the release, which if knownby him must have materially affected his settlement with the debtor.

The Representative Plaintiffs, Lead Plaintiffs, and Settlement Class Members may hereafte r

discover facts in addition to or different from those that any of them now knows or believes to be


• i

true with respect to the subject matter of the Released Claims, but each Representative Plaintif f

and Lead Plaintiff shall expressly, and each Settlement Class Member, upon the Effective Date,

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 ,



future, including, but not limited to, conduct which is negligent, intentional, with or withou t

malice, or a breach of any duty, law or rule, without regard to the subsequent discovery o r

existence of such different or additional facts . The Representative Plaintiffs and Lead Plaintiffs


to have acknowledged, that the foregoing waiver was separately bargained for and is a key and

fundamental element of the settlement of which this release is a part .

5. This release shall have no force or effect unless and until the Court approves th e

Stipulation of Settlement and the Stipulation becomes effective on the Effective Date (as define d

in the Stipulation) .

6. I (We) hereby warrant and represent that I (we) have not assigned or transferred

or purported to assign or transfer, voluntarily or involuntarily, any matter released pursuant t o

this release or any other part or portion thereof.

7. I (We) hereby warrant and represent that I (we) have included information abou t

all of my (our) transactions in Kitty Hawk common stock that occurred during the Settlement

Class Period as well as the amount of Kitty Hawk common stock held by me (us) at the openin g

of trading on August 1, 1997, and at the close of trading on April 11, 2000 .


•

SUBSTITUTE FORM W-9

Request for Taxpayer Identi fication Number ("TIN") and Certification

PART I

NAME :

Check Appropriate Box :

❑ Individual/Sole Proprietor

❑ Corporation ❑

❑ IRA ❑ Other

❑ Pension Plan

Partnership ❑ Trust

Enter TIN on appropriate line .

For individuals, this is your social security number (SSN") .

For sole proprietors, you must show your individual name, but you may also enteryour business or "doing business as" name. You may enter either your SSN oryour Employer Identification Number (EIN") .

For other entities, it is your EIN .

- - or ---- -- ---- -------Social Security Number Employer Identification

Number

PART II

For Payees Exempt From Backup Withholdin g

If you are exempt from backup withholding, enter your correct TIN in Part I and write "exempt"on the following line :


i

PART III

Certification

•

UNDER THE PENALTY OF PERJURY, I(WE) CERTIFY THAT :

The number shown on this form is my correct TIN; and

2. I (We) certify that I am (we are) NOT subject to backup withholding under theprovisions of Section 3406(a)(1)(C) of the Internal Revenue Code because : (a) Iam (we are) exempt from backup withholding ; or (b) I (we) have not been notifiedby the Internal Revenue Service that I am (we are) subject to backup withholdingas a result of a failure to report all interest or dividends ; or (c) the InternalRevenue Service has notified me (us) that I am (we are) no longer subject tobackup withholding .

NOTE: If you have been notified by the Internal Revenue Service that you are subject to backupwithholding, you must cross out item 2 above .

SEE ENCLOSED FORM W-9 INSTRUCTION S

The Internal Revenue Service does not require your consent to any provision of this document

other than the certification required to avoid backup withholding .

I declare under penalty of perjury under the laws of the United States of America that th e

foregoing information supplied by the undersigned is true and correct and that this Proof of

Claim and Release form was executed

this day of ( )( ) in( ) .month year City State County

(Sign your name here)

(Type or print your name here)

(Capacity of person(s) signing, e .g., BeneficialPurchase , Executor or Administrator )


0

ACCURATE CLAIMS PROCESSING TAKES ASIGNIFICANT AMOUNT OF TIME.THANK YOU FOR YOUR PATIENCE .

Reminder Checklist :

•

1 . Please sign the above release and declaration.2. Remember to attach supporting documentation, if available .3 . Do not send original or copies of stock certificates .4. Keep a copy of your claim form for your records .5 . If you desire an acknowledgment of receipt of your claim form, please send it

Certified Mail, Return Receipt Requested .6. If you move, please send us your new address .


0 9

EXHIBIT A- 3


DALLAS DIVISION

TODD HOLLEY, individua lly and on §Behalf of All Others Similarly Situated, §

PLAINTIFF, §

§v. §

KITTY HAWK, INC ., M. TOM §

CHRISTOPHER, RICHARD §WADSWORTH and CONRAD §

KALITTA §

DEFENDANTS. §

CASE NO. 3-00 CV 0828-P

SUMMARY NOTICE FOR THE PUBLICATIO N

TO: ALL PERSONS WHO PURCHASED THE COMMON STOCK OF KITTY HAWK ,

INC. ("KITTY HAWK") DURING THE PERIOD BETWEEN AUGUST 1, 1997 AND

APRIL 11, 2000 , INCLUSIVE .

YOU ARE HEREBY NOTIFIED that pursuant to an Order of the United States District

Court for the Northern District of Texas (Dallas), a hearing will take place on ,

2005, at _•_ _.m., before the Honorable Jorge A . Solis, United States District Court for the

Northern District of Texas (Dallas), 1100 Commerce Street, Room 1654, Dallas, Texas 75242-

1003, for the purpose of determining whether : (1) the Court should approve the proposed

settlement of the above-captioned Litigation for the cash sum of $2,750,000 plus any interest that

may accrue thereon as fair, just, reasonable , and adequate; (2) this Court should dismiss the


I

Litigation with prejudice, as set forth in the Stipulation of Settlement dated as of January ,

2005; (3) the Plan of Allocation is fair, just, reasonable, and adequate and therefore appropriate

for approval ; and (4) to approve as reasonable the application of Representative Plaintiffs '

Counsel for payment of attorneys' fees and reimbursement of expenses incurred in connectio n

with this Litigation.

If you purchased Kitty Hawk common stock during the period beginning August 1, 1997

through April 11, 2000, inclusive, your rights may be affected by this Litigation and th e

settlement thereof. If you have not received a detailed Notice of Pendency and Settlement o f

Class Action and a copy of the Proof of Claim and Release, you may obtain copies by writing to :

Claims AdministrationKitty Hawk, Inc . Securities Litigationc/o A.B. Data, Ltd .

P .O . Box 170200Milwaukee, WI 53217-801 6

If you are a Settlement Class Member, in order to share in the distribution of the Settlemen t

Fund, you must submit a Proof of Claim and Release no later than , 2005 ,

establishing that you are entitled to a recovery . You will be bound by any judgment rendered i n

the Litigation unless you request to be excluded, in writing, to the above address, postmarked by

2005.

Any objection to the settlement, the Plan of Allocation, or the application for attorneys '

fees and expenses must be filed with the Court no later than , 2005, at the

following address :


i •

CLERK OF THE COURTUNITED STATES DISTRICT COURTNORTHERN DISTRICT OF TEXAS (DALLAS)1100 Commerce StreetRoom 1654Dallas TX 75242-1003

with copies to :


S . GENE CAULEYCURTIS L. BOWMANJ. ALLEN CARNEYTIFFANY WYATTP.O. Box 2543 8Li tt le Rock , AR 7221 1

-and-



-and-

WINSTEAD SECHREST & MINICK P .C.JOHN P. KINCADEROBERT J. WITTE5400 Renaissance Tower1201 Elm StreetDallas , Texas 7527 0


-and-


0 0

GLASS, PHILLIPS & MURRAYCHARLES C . FREDERIKSEN2200 One Galleria Tower13355 Noel RoadDallas , Texas 75240-151 8


-and-

MILLER, CANFIELD, PADDOCK AND STONEDAVID A. FRENCHSONAL HOPE MITHANI101 North Main Street, 7th FloorAnn Arbor, MI 48104


-and-

MANDELL, MENKES & SURDYK, LLCLEN SURDYKSTEPHEN ROSENFELDSuite 300333 W . Wacker DriveChicago , IL 60606


PLEASE DO NOT CONTACT THE COURT OR THE CLERK'S OFFICE REGARDIN G

THIS NOTICE .

DATED: 52005 BY ORDER OF THE COURTUNITED STATES DISTRICT COURTNORTHERN DISTRICT OFTEXAS (DALLAS )


nEXHIBIT B

0


DALLAS DIVISION

TODD HOLLEY, individually and onBehalf of All Others Similarly Situated,

PLAINTIFF,

V. CASE NO. 3-00 CV 0828-P

KITTY HAWK, INC., M. TOMCHRISTOPHER, RICHARDWADSWORTH and CONRADKALITTA

DEFENDANTS.

[PROPOSED] FINAL JUDGMENT AND ORDER OF DISMISSAL WITH PREJUDIC E

This matter came before the Court for hearing pursuant to the Order of this Court, date d

, 2005, on the application of the parties for approval of the settlement

set forth in the Stipulation of Settlement dated as of January , 2005 (the "Stipulation") .

Due and adequate notice having been given to the Settlement Class as required in said Order, and

the Court having considered all papers filed and proceedings had herein, and otherwise bein g

fully informed in the premises and good cause appearing therefore, IT IS HEREBY ORDERED ,

ADJUDGED, AND DECREED that :

1 . This Judgment incorporates by reference the definitions in the Stipulation, and al l

terms used herein shall have the same meaning as set forth in the Stipulation.

2 . This Court has jurisdiction over the subject matter of the Litigation and over al l

parties to the Litigation, including all Settlement Class Members .


0 •

3 . Pursuant to Federal Rule of Civil Procedure 23, this Court hereby approves th e

settlement set forth in the Stipulation and finds that the contributions to the Settlement Fund are

fair and that said settlement is, in all respects, fair, just, reasonable, and adequate to the

Settlement Class .

4. Except as to any individual claim of those Persons (identified in Exhibit 1

attached hereto) who have validly and timely requested exclusion from the Settlement Class, thi s

Court hereby dismisses with prejudice and without costs (except as otherwise provided in the

Stipulation) the Litigation against the Defendants .

5 . The Court finds that the Stipulation and the settlement are fair, just, reasonabl e

and adequate as to each of the Settling Parties, and that the Stipulation and the settlement ar e

hereby finally approved in all respects, and the Settling Parties are hereby directed to perform the

terms of the Stipulation .

6. Upon the Effective Date hereof, the Lead Plaintiffs, Representative Plaintiffs, and

each of the Settlement Class Members shall be deemed to have, and by operation of thi s

Judgment shall have, fully, finally, and forever released, relinquished, and discharged al l

Released Claims against the Released Persons, regardless of whether such Settlement Clas s

Member executes and delivers a Proof of Claim and Release .

7 . Upon the Effective Date hereof, each of the Released Persons shall be deemed t o

have, and by operation of this Judgment shall have , fully, finally, and forever released ,

relinquished and discharged each and all of the Settlement Class Members and Representativ e

Plaintiffs' Counsel from all claims (including Unknown Claims), arising out of, in any way

relating to, or in connection with the institution, prosecution, assertion, settlement, or resolution

of the Litigation or the Released Claims .


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8 . "Settlement Class" means all Persons who purchased Kitty Hawk common stock

between August 1, 1997 and April 11, 2000, inclusive . Excluded from the Settlement Class ar e

Kitty Hawk, the Individual Defendants and members of their immediate families, any entity i n

which Kitty Hawk has or had a controlling interest , Kitty Hawk directors and officers and the

legal representatives , heirs , successors, or assigns of any such excluded Person. Those Persons

who timely and validly requested exclusion from the Settlement Class pursuant to the "Notice of

Pendency and Settlement of Class Action" sent to potential Settlement Class Members are als o

excluded from the Settlement Class .

9. With respect to the Settlement Class, this Court finds and concludes that : (a) the

Members of the Settlement Class are so numerous that joinder of all Settlement Class Member s

in the Litigation is impracticable; (b) questions of law and fact common to the Settlement Class

predominate over any individual questions ; (c) Representative Plaintiffs' claims are typical of the

claims of the Settlement Class ; (d) the Representative Plaintiffs and their counsel have fairly an d

adequately represented and protected the interests of all Settlement Class Members ; and (e) a

class action is superior to other available methods for the fair and efficient adjudication of th e

controversy, considering : (i) the interests of the Members of the Settlement Class in individuall y

controlling the prosecution of the separate actions ; (ii) the extent and nature of any litigation

concerning the controversy already commenced by Members of the Settlement Class ; (iii) the

desirability or undesirability of continuing the litigation of these claims in this particular forum ;

and (iv) the difficulties likely to be encountered in the management of the class action.

10. The Notice of Pendency and Settlement of Class Action provided to th e

Settlement Class constitutes the best notice practicable under the circumstances, including th e

individual notice to all Members of the Settlement Class who could be identified throug h

reasonable effort . Said Notice provided the best notice practicable under the circumstances o f


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those proceedings and of the matters set forth therein, including the proposed settlement set forth

in the Stipulation, to all Persons entitled to such notice, and said Notice fully satisfied the

requirements of Federal Rule of Civil Procedure 23 and the requirements of due process .

11 . No court order regarding the Plan of Allocation or the attorneys' fee and expens e

application shall disturb or affect this Judgment . Any such order shall be considered separate

from this Judgment.

12. Neither the Stipulation nor the settlement contained therein, nor any ac t

performed or document executed pursuant to or in furtherance of the Stipulation or the settlemen t

is or may be deemed to be or may be used as an admission of, or evidence of (a) the validity or

lack thereof of any Released Claim, or of any wrongdoing or liability of the Defendants ; or (b)

any fault or omission of the Defendants in any civil, criminal, or administrative proceeding in

any court, administrative agency, or other tribunal . Defendants may file the Stipulation and/or

this Judgment in any other action that may be brought against it or them in order to support a

defense or counterclaim based on principles of res judicata, collateral estoppel, release, good

faith settlement, judgment bar or reduction, or any other theory of claim preclusion or similar

defense or counterclaim.

13. The Court finds that during the course of the Litigation, the Settling Parties an d

their respective counsel at all times complied with the requirements of Federal Rule of Civi l

Procedure 11 .

14. Without affecting the finality of this Judgment in any way, this Court hereb y

retains continuing jurisdiction over: (a) implementation of this settlement and any award or

distribution of the Settlement Fund, including interest earned thereon ; (b) disposition of the

Settlement Fund ; (c) hearing and determining applications for attorneys' fees, costs, interest, an d


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expenses (including fees and costs of experts and/or consultants) in the Litigation ; and (d) al l

parties hereto for the purposes of construing, enforcing, and administering the Stipulation .

15. In the event that the settlement does not become effective in accordance with the

terms of the Stipulation, then this Judgment shall be rendered null and void to the exten t

provided by and in accordance with the Stipulation and shall be vacated and, in such event, al l

orders entered and releases delivered in connection herewith shall be null and void to the extent

provided by and in accordance with the Stipulation .

IT IS SO ORDERED .

DATED :THE HONORABLE JORGE A. SOLISUNITED STATES DISTRICT JUDGE


Submitted by:


S. GENE CAULEY, #94012CURTIS L. BOWMAN, #86022J. ALLEN CARNEY, #94122TIFFANY WYATT, #2001287P.O. Box 2543 8Little Rock, AR 72211(501) 312-8500(501) 312-8505 (fax)



WINSTEAD SECHREST & MINICK P .C.JOHN P. KINCADE, TX#1 1429600ROBERT J. WITTE, TX#007887001201 Elm Street5400 Renaissance TowerDallas, TX 75270(214) 745-5400(214) 745-5390 (fax)


GLASS, PHILLIPS & MURRAYCHARLES C . FREDERIKSEN TX# 074133002200 One Galleria Tower13355 Noel RoadDallas, Texas 75240-1518(972) 419 .7184(972) 419.8329 (fax)


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MILLER, CANFIELD, PADDOCK AND STONEDAVID A. FRENCH MI# P3194 4SONAL HOPE MITHANI MI# 51984101 North Main Street, 7th FloorAnn Arbor, MI 48104(734) 663-244 5(734) 747-7147 (fax)


MANDELL, MENKES & SURDYK, LLCLEN SURDYK IL#619168 5STEPHEN ROSENFELD IL# 6216769Suite 300333 W. Wacker DriveChicago, IL 60606


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EXHIBIT B-1

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DALLAS DIVISIO N

GREAT AMERICAN INSURANCECOMPANY, INC . ,

Plaintiff,

V. Civil Action No. 3-02CV2112-P

M. TOM CHRISTOPHER, CONRADA. KALITTA, RICHARD R.WADSWORTH, JR., JAMES R. CRAIGand KITTY HAWK, INC .,

Defendants .

FINAL JUDGMENT AND DISMISSAL WITH PREJUDICE

This mater being called and heard and all parties having been given due notice, it i s

hereby ordered, adjudged and decreed that :

1 . This Judgment incorporates by reference the Stipulation of Settlement executed in

the matter ofHolly v. Kitty Hawk, Inc . Case No. 3-00 CU 0828-P .

2. Pursuant to FRCP 41(a)(1)(ii), this action is dismissed with prejudice, with eac h

party bearing its own costs .

3 . Pursuant to FRCP 41(c), all counter-claims filed in this action are hereb y

dismissed with prejudice, with each party bearing its own costs .

IT IS SO ORDERED .

DATED :THE HONORABLE JORGE A. SOLISUNITED STATES DISTRICT JUDGE


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Submitted by :

WINSTEAD SECHREST & MINICK P .C .JOHN P. KINCADE, TX#1 1429600ROBERT J. WITTE, TX#0078870 01201 Elm Street5400 Renaissance TowerDallas , TX 75270(214) 745-5400(214) 745-5390 (fax)


GLASS, PHILLIPS & MURRAYCHARLES C. FREDERIKSEN TX# 074133002200 One Galleria Tower13355 Noel RoadDallas , Texas 75240-1518(972) 419 .7184(972) 419 .8329 (fax )

Counsel for Richard Wadswort h

KELSEY LAW GROU PGEORGE W. KELSEY, ESQ. MI#P 158552395 South Huron Parkway , Suite 200Ann Arbor, MI 48104(734) 973-1222(734). 973.1223 (fax )


MANDELL, MENKES & SURDYK, LLCLEN SURDYK IL#6191685STEPHEN ROSENFELD IL# 6216769Suite 300333 W. Wacker DriveChicago, IL 60606(312) 251-1000(312) 251-1010 (fax)


STIPULATION OF SETTLEMENT Page 9 1

Dallas 1\4069576\323324-1 12/27/2004

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EXHIBIT C

Mutual Release between Great American Insurance Company ("GreatAmerican"), M. Tom Christopher ("Christopher"), Richard Wadsworth("Wadsworth") and Conrad Kalitta ("Kalitta") .

The parties incorporate herein Sections I . through IV of the Stipulation ofSettlement (the "Stipulation") to which this Exhibit C is attached. All defined termsin the Stipulation shall have the same meaning herein.

In consideration of Great American making the settlement payment of$2,750,000 as set forth in Section IV.2.1 of the Stipulation and the mutual covenantsand promises herein, the parties to this Exhibit C agree as follows :

1. Upon the Effective Date, as defined in Stipulation ¶1 .5, GreatAmerican and the Individual Defendants, together with their respective parentcompanies, subsidiaries, affiliates, directors, officers, employees, agents, attorneys,predecessors, successors, assigns, reinsurers, heirs, estates, executors,administrators, trustees, spouses and representatives hereby release, hold harmlessand forever discharge each other and each of their respective past, present andfuture parent companies, subsidiaries, divisions, related or affiliated entities,predecessors and successors, their respective present and former directors, officers,partners, principals, members, stockholders, owners, employees, agents, servants,subrogees, insurers, reinsurers and attorneys, and their respective representatives,heirs, executors, spouses, personal representatives, administrators, successors,transferees and assigns, and any and all persons natural or corporate in privity withthem or acting in concert with them or any of them, from any and all claims,demands, damages actions, causes of action, and claims for relief, whether known orunknown, by statute or in contract, tort, or any other theory of law, that arise out ofor relate in any way to : (a) the Litigation; (b) the Rescission Action and/or thecoverage Counter-Claim (collectively the "Released Coverage Claims") ; (c) claimsthat were or could have been made in connection with the Released CoverageClaims; (d) the Policy ; or (e) conduct of any and all Parties hereto in connectionwith the Released Coverage Claims or the Policy . Each of the parties heretounderstands and agrees that the release contained in subsection (d) of thisparagraph does not apply to Kalitta . Each of the parties hereto further understandsand agrees that, insofar as the release contained in subsection (e) of this paragraphis given by Kalitta, such release shall be deemed to exclude the words "or thePolicy." Notwithstanding the foregoing, the Individual Defendants do not releaseGreat American 1) from any securities claims or coverage under the Policy forclaims of wrongful acts made against the Individual Defendants by any SettlementClass Member who opts out of the Settlement Class, and 2) from unpaid reasonableand necessary defense expenses incurred in connection with the Litigation or anyopt out litigation; and

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2. Upon the Effective Date, as defined in Stipulation ¶1 .5, GreatAmerican and the Individual Defendants will each dismiss with prejudice theirrespective claims in the Rescission Action and the Coverage Counterclaim and anyrelated claims with each side to bear their own attorney fees and costs .

This document may be executed in one or more counterparts . All executedcounterparts and each of them shall be deemed to be one and the same instrument .A complete set of executed counterparts shall be filed with the Court .

M. Tom Christopher

GLASS, PHILLIPS & MURRAYCHARLES C . FREDERIKSEN TX#07413310

2200 One Galleria TowerDallas , Texas 75240-1518

Ph: (972) 419 .7184Fax: (972) 419 .8329 (fax)

Counsel for Richard Wadswort h

Conrad Kalitta

Authorized Representative forGreat American Insurance Company

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Dallas 1\4070818\323324-9 1/12/2005

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