IN THE CIRCUIT COURT OF JEFFERSON COUNTY, ALABAMA HAROLD LOWELL WAINWRIGHT, derivatively on behalf of STERNE AGEE GROUP, INC., Plaintiff, v. JAMES S. HOLBROOK, JR., et al. Defendants.
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CASE NO: CV-2014-902794.00
STIPULATION OF SETTLEMENT AND RELEASE
TABLE OF EXHIBITS
Exhibit A: Class Notice
Exhibit B: Initial Complaint
Exhibit C: Sixth Amended Complaint
Exhibit D: Seventh Amended Complaint
Exhibit E: Eighth Amended Complaint
Exhibit F: [proposed] Preliminary Approval Order
Exhibit G: Proof of Claim and Release
Exhibit H: James S. Holbrook, Jr. Settlement Agreement
Exhibit I: William K. Holbrook Settlement Agreement
Exhibit J: XL Claim Schedule
Exhibit K: Indemnity Earnout Amount Accounting
Exhibit L: Special Litigation Reserve Accounting
Exhibit M: Escrow Agreement
Exhibit N: Exclusion Form
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IT IS HEREBY STIPULATED AND AGREED, by and between Plaintiff Harold
Lowell Wainwright (“Plaintiff”), on behalf of himself and each of the members of the Settlement
Class, on the one hand, and (i) Defendants James S. Holbrook, Jr. and William K. Holbrook
(collectively, the “Holbrook Defendants”), (ii) Defendants Jon S. Sanderson, Eric B. Needleman,
Sal A. Nunziata, Robert G. Nunziata, Walter S. Robertson, III, Walter A. Ruch, III, Henry S. Lynn,
Jr., Linda M. Daniel, Jay W. Carter, and Joe R. Roberts, Jr. (collectively, the “Non-Holbrook
Directors Defendants”), (iii) Nominal Defendant Sterne Agee, LLC (f/k/a Saban Successor
Subsidiary, LLC, f/k/a Sterne Agee Group, Inc. (“SAG”) and, hereinafter, “Sterne Agee”1), and
(iv) Defendant Stifel Financial Corp. (“Stifel,” and collectively with the Holbrook Defendants, the
Non-Holbrook Director Defendants, and Sterne Agee, “Defendants”), on the other hand, each
through their duly authorized counsel, that the above-captioned action, Harold Lowell Wainwright
v. James S. Holbrook, Jr., et al., No. CV-2014-902794.00, pending in the Circuit Court of Jefferson
County, Alabama, is hereby settled on all of the terms and conditions set forth in this Stipulation
of Settlement and Release, and that upon approval by the Court, final judgment shall be entered
on the terms and conditions set forth herein. Throughout this Agreement, all capitalized terms
used, but not immediately defined, have the meanings given to them in Section II.1, infra.
I. INTRODUCTION
1. The Litigation
This Action was initiated on July 2, 2014 in the Circuit Court of Jefferson County,
Alabama. In the Initial Complaint (Doc. 2) in this Action, the plaintiffs asserted claims
derivatively on behalf of then-nominal defendant SAG against the Holbrook Defendants and the
Non-Holbrook Director Defendants for certain actions and inactions in connection with the
1 As a result of SAG’s merger with Stifel Financial Corp., Sterne Agee, LLC is the successor-in-interest to SAG.
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operations and management of SAG. All of the Defendants denied and continue to deny any
allegations of misconduct and the claims asserted in this lawsuit.
Thereafter, the complaint in this Action was amended several times to add claims and
parties. On September 4, 2015, the complaint was amended to add Harold Lowell Wainwright as
Plaintiff and to dismiss the original plaintiffs. (Doc. 325.) On October 2, 2015, Plaintiff filed a
Sixth Amended Complaint (Doc. 341), which, in addition to re-alleging the derivative claims, also
asserted direct claims in connection with SAG’s June 5, 2015 Merger with Stifel. These direct
claims were asserted on behalf of a putative class of former SAG shareholders. On July 6, 2016,
Plaintiff filed a Seventh Amended Complaint (Doc. 399) which asserted additional alleged class
claims in connection with the Merger. The Seventh Amended Complaint also asserted a class
claim for aiding and abetting these alleged breaches of fiduciary duty against Stifel.
On February 13, 2018, Plaintiff filed an Eighth Amended Complaint (Doc. 546), which
asserted alleged class claims against Stifel based on, inter alia, Stifel’s alleged breach of the
Merger Agreement’s provisions governing the Indemnity Earnout Amount.
In addition to this Action, other litigation involving some of the Parties and some of the
alleged conduct at issue in this Action also has been filed. Specifically, on December 4, 2014,
SAG filed an action in the Circuit Court of Jefferson County, Alabama against Defendant James
S. Holbrook, Jr., captioned SAG v. Holbrook (CV-14-90480). In the Holbrook Litigation, SAG
asserted claims against Defendant James S. Holbrook, Jr. regarding the management and operation
of SAG. Defendant James S. Holbrook, Jr. denied and continues to deny the allegations against
him in that lawsuit, including any allegation that he breached any duty in managing or operating
SAG. Defendant James S. Holbrook, Jr. also has indicated his intention to bring claims against
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SAG and its directors alleging breach of contract in connection with two compensation-related
agreements he entered into with SAG and for alleged malfeasance in connection with the Merger.
From the outset of this Action, all Defendants have denied and continue to deny liability
for the claims asserted in the Action and deny that they committed, threatened, attempted, or
intended to commit any wrongful act or violation of law or duty. At various times, Defendants
have filed motions to dismiss or for summary judgment against some or all of Plaintiff’s claims.
On January 6, 2017, the Court granted judgment to Defendants on all of the claims that Plaintiff
had asserted up to that point in time. (Doc. 419.) In its order, the Court reasoned that the
shareholder derivative claims were extinguished upon consummation of the Merger and that
Plaintiff had waived his remaining claims when he signed an Indemnification and Release
Agreement in connection with the Merger on March 31, 2015. Plaintiff moved to reconsider (Doc.
422), and the Court later granted that motion, reversing its grant of judgment to Defendants and
reinstating the dismissed claims (Doc. 452).
Currently, two motions to dismiss are pending. Nominal Defendant Sterne Agee has
moved to dismiss all derivative claims, arguing that those claims were extinguished by the Merger.
(Doc. 570.) Stifel, meanwhile, has moved to dismiss the claims asserted against it in the Eighth
Amended Complaint, arguing that Plaintiff does not have standing to pursue those claims and that,
under the Merger Agreement, those claims had to be brought in the courts of Delaware. (Doc.
573.)
On May 2 and May 3, 2018, the Parties engaged in a two-day, in-person mediation to
attempt to reach an amicable resolution of the claims and defenses at issue in this Action. The
mediation was conducted and overseen by well-respected mediator Ralph B. Levy, Esq., of JAMS,
who has extensive experience mediating complex class action litigations such as this Action. The
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mediation process included exchanges by the Parties of informal discovery and confirmatory due
diligence information, as well as substantial communications with the mediator and with each
other regarding the Parties’ respective views of the merits of the Action. During the mediation,
Sterne Agee and the Holbrook Defendants also engaged in substantial discussions regarding the
claims that had been or would be asserted by each against the other.
Through their arms’-length negotiations and mediation efforts, and based upon their own
respective independent investigations and evaluations of the facts and law relating to all of the
matters alleged in the pleadings, and to avoid further expected long and protracted litigation
(including anticipated appeals) and its attendant cost and expense, the Parties were able to reach
an agreement in principle on the key terms of relief to the Settlement Class. This Settlement is a
compromise, and the Agreement, any related documents, and any negotiations resulting in it shall
not be construed as or deemed to be evidence of or an admission or concession of liability or
wrongdoing on the part of Defendants with respect to any alleged claim of any fault or liability or
wrongdoing or damage whatsoever.
2. Claims of Plaintiff and Benefits of Settlement
Plaintiff and Class Counsel believe that the claims asserted in the Action have merit. But
Plaintiff and Class Counsel also recognize and acknowledge the expense and length of continued
proceedings necessary to prosecute the Action against the Defendants through trial and the costs
of the appellate process. Plaintiff and Class Counsel also have taken into account the uncertain
outcome and risks in connection with the pending motions to dismiss, Plaintiff’s forthcoming
motion for class certification, Defendants’ anticipated summary judgment motions, and a jury trial,
especially in complex matters such as this Action, as well as the risks posed by and the difficulties
and delays relating to post-trial motions, and potential appeals of the Court’s determination of said
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motions, or the verdict of a jury. Plaintiff and Class Counsel also are aware of the risks presented
by the defenses to the claims asserted in the Action. Plaintiff and Class Counsel believe that the
Settlement set forth in this Agreement confers substantial benefits upon the Settlement Class in
light of the circumstances present here. Based on their evaluation, Plaintiff and Class Counsel have
determined that the Settlement set forth in this Agreement is in the best interests of Plaintiff and
the Settlement Class.
3. Defendants’ Denials of Wrongdoing and Liability
Defendants have denied and continue to deny that they have violated any law or duty and
maintain that their conduct was at all times proper and in compliance with all applicable provisions
of law. Defendants have denied and continue to deny specifically each and all of the claims and
contentions alleged in the Action, along with 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 Action. In addition, the Defendants maintain that they have meritorious defenses
to all claims alleged in the Action.
Nonetheless, taking into account the uncertainty, risks, and costs inherent in any litigation,
especially in complex cases such as this Action, and length of the discovery, trial and appellate
processes, Defendants have concluded that further conduct of the Action could be protracted and
distracting. Defendants have, therefore, determined that it is desirable and beneficial to them that
the Action be settled in the manner and upon the terms and conditions set forth in this Agreement.
As set forth in Paragraphs 3.5, 12.1(k), 12.6, and 14.3 below, this Agreement shall in no event be
construed as or deemed to be evidence of an admission or concession by Defendants or any of the
Released Persons with respect to any claim of any fault or liability or wrongdoing or damage
whatsoever.
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II. TERMS OF STIPULATION AND AGREEMENT OF SETTLEMENT
1. Definitions
As used in this Agreement and the attached proposed Class Notice, Proof of Claim and
Release, and Preliminary Approval Order (which are integral parts of this Agreement and are
incorporated in their entirety by reference), the following terms have the following meanings,
unless this Agreement specifically provides otherwise:
1.1 “$6.5 Million Payment” has the meaning given to it in Paragraph 4.1.
1.2 “$6.5 Million Payment Escrow Account” has the meaning given to it in Paragraph
4.6.
1.3 “$6.5 Million Payment Fund” has the meaning given to it in Paragraph 4.6.
1.4 “Action” means the lawsuit captioned Harold Lowell Wainwright v. James S.
Holbrook, Jr., et al., No. CV-2014-902794.00, which is currently pending in the Circuit Court of
Jefferson County, Alabama.
1.5 “Adjusted Parent Deficit” means that the amount described in Section 3.06(b)(ii)(y)
of the Merger Agreement is greater than the sum of (i) the Indemnity Earnout Amount and (ii)
$1,350,000 in interest on the Indemnity Earnout Payment.
1.6 “Adjusted Parent Deficit Amount” means (i) the amount described in Section
3.06(b)(ii)(y) of the Merger Agreement, less (ii) the sum of the Indemnity Earnout Amount and
$1,350,000 in interest on the Indemnity Earnout Payment.
1.7 “Adjusted Parent Surplus” means that the amount described in Section
3.06(b)(ii)(y) of the Merger Agreement is less than the sum of (i) the Indemnity Earnout Amount
and (ii) $1,350,000 in interest on the Indemnity Earnout Payment.
1.8 “Adjusted Parent Surplus Amount” means (i) the sum of the Indemnity Earnout
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Amount and $1,350,000 in interest on the Indemnity Earnout Payment, less (ii) the amount
described in Section 3.06(b)(ii)(y) of the Merger Agreement.
1.9 “Agreement” means this Stipulation of Settlement and Release, together with the
Exhibits attached hereto, which are incorporated herein by reference.
1.10 “Authorized Claimant” means any Claimant who has filed a valid and timely Proof
of Claim and Release and is entitled to a distribution from the Net $6.5 Million Payment Fund
pursuant to the Plan of Allocation approved by the Court.
1.11 “Claimant” means any Person who files a Proof of Claim and Release.
1.12 “Claims Administration Process” means the claims administration process
approved by the Court for the filing and approval of claims and the disbursement of funds from
the Net Settlement Funds.
1.13 “Claims Administrator” means Tilghman & Co., P.C.
1.14 “Class Counsel” means Thomas E. Baddley, Jr., Jeffrey P. Mauro, and John Parker
Yates of the law firm Baddley, Mauro & Yates and Andrew P. Campbell, Stephen Wadsworth,
and Yawanna McDonald of the law firm Campbell Guin, LLC.
1.15 “Class Notice” means the written notice summarizing the terms of this Agreement,
in a form substantially similar to that attached as Exhibit A, to be provided to the Settlement Class
pursuant to the provisions of Section II.5 of this Agreement.
1.16 “Court” means the Circuit Court of Jefferson County, Alabama.
1.17 “Defendants” means Stifel, the Holbrook Defendants, the Non-Holbrook Director
Defendants, and Sterne Agee.
1.18 “Defendants’ Counsel” means (a) Bradley Arant Boult Cummings, LLP, counsel
for Stifel; (b) Balch & Bingham LLP, counsel for the Non-Holbrook Director Defendants; (c)
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Gordon, Dana & Gilmore, LLC and Hawley & Nicholson, P.C., counsel for the Holbrook Director
Defendants; and (d) Bressler, Amery & Ross, P.C., counsel for Sterne Agee.
1.19 “Effective Date” means ten (10) days following the date the Final Judgment and
Order of Dismissal has become final and non-appealable, either because: (a) the prescribed or
presumptively reasonable time for commencing any appeal has expired and no appeal has been
filed; or (b) an appeal has been filed and either (i) the appeal has been dismissed and the prescribed
time, if any, for commencing any further appeals or review, including petitions for rehearing or
reargument, petitions for rehearing en banc, petitions for writs of certiorari or mandamus, or any
other form of appellate review, has expired; or (ii) the Final Judgment and Order of Dismissal has
been affirmed without modification and the prescribed or presumptively reasonable time, if any,
for commencing any further appeals, including petitions for rehearing or reargument, petitions for
rehearing en banc, petitions for writs of certiorari or mandamus, or any other form of appellate
review, has expired. For purposes of this Paragraph, an appeal includes appeals as of right,
discretionary appeals, interlocutory appeals, proceedings involving writs of certiorari or
mandamus, and any other proceeding of like kind whether by affirmance or exhaustion of any
possible appeal or review, writ of certiorari, lapse of time, or otherwise.
1.20 “Eighth Amended Complaint” means the Eighth Amended Complaint filed in this
Action on February 13, 2018 (Doc. 546).
1.21 “Eligible Equityholder” has the meaning given to it in Paragraph 8.7.
1.22 “Equityholders” means all Persons who, as of June 5, 2015, held shares of SAG’s
common stock, shares of SAG’s preferred stock, In-the-Money Company Warrants to purchase
SAG common stock, shares underlying convertible debentures of SAG, and/or vested and eligible
to receive Merger consideration (i) 2015 performance shares under SAG’s Amended and Restated
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Deferred Compensation Plan, (ii) 2019 performance shares under SAG’s Amended and Restated
Compensation Plan, and/or (iii) tracking shares under SAG’s Amended and Restated 2009
Deferred Compensation Plan.
1.23 “Equivalent Regulation” has the meaning given to it in Paragraph 10.1.
1.24 “Escrow Agent” means Computershare Inc. and Computershare Trust Company,
N.A.
1.25 “Escrow Agreement” has the meaning given to it in Paragraph 4.6.
1.26 “Exchange Agent” means Computershare Inc. and Computershare Trust Company,
N.A.
1.27 “Execution Date” means July 19, 2018.
1.28 “Exhibits” means the documents attached hereto.
1.29 “Fairness Hearing” means the evidentiary hearing to be held by the Court after the
circulation of Class Notices to the Settlement Class to determine whether the Settlement set forth
in this Agreement shall receive final approval pursuant to Ala. R. Civ. P. 23 and whether
certification of the Settlement Class should be made final. The Fairness Hearing shall be held no
earlier than sixty (60) days after the date of entry of the Preliminary Approval Order.
1.30 “Fee and Expense Application” has the meaning given to it in Paragraph 11.1.
1.31 “Fee and Expense Award” has the meaning given to it in Paragraph 11.3.
1.32 “Final Judgment and Order of Dismissal” means the order of the Court finally
approving the Settlement set forth in this Agreement and dismissing the Action (and any individual
and derivative claims contained within the Action) with prejudice, and which shall be substantially
in the same form as is agreed to by the Parties and submitted to the Court at or before the Fairness
Hearing.
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1.33 “Final Order Date” means the date the Court enters the Final Judgment and Order
of Dismissal.
1.34 “Holbrook Defendants” means James S. Holbrook, Jr. and William K. Holbrook.
1.35 “Holbrook Litigation” means the lawsuit captioned SAG v. Holbrook (CV-14-
90480), which is currently pending in the Circuit Court of Jefferson County, Alabama.
1.36 “Indemnification and Release Agreement” means the indemnification and release
agreement that certain former SAG shareholders, including Plaintiff, executed in connection with
the signing of the Merger Agreement.
1.37 “Indemnity Earnout Amount” has the same meaning given that term in the Merger
Agreement and means the forty-five million dollar ($45,000,000) reserve that, under the Merger
Agreement, Stifel was entitled to retain to satisfy certain of Equityholders’ contingent,
indemnification obligations.
1.38 “Indemnity Earnout Amount Accounting” has the meaning given to it in Paragraph
3.9.
1.39 “Indemnity Earnout Amount Balance” means the amount described in Section
3.06(b)(ii) of the Merger Agreement.
1.40 “Indemnity Earnout Payment” has the meaning given to it in Paragraph 4.2.
1.41 “Indemnity Earnout Payment Escrow Account” has the meaning given to it in
Paragraph 4.7.
1.42 “Indemnity Earnout Payment Fund” has the meaning given to it in Paragraph 4.7.
1.43 “Initial Complaint” means the first complaint filed in this Action on July 2, 2014
(Doc. 2).
1.44 “Initial XL Claim Amount” has the meaning given to it in Paragraph 4.3.
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1.45 “Initial XL Claim Amount Fund” has the meaning given to it in Paragraph 4.8.
1.46 “In-The-Money Company Warrants” has the same meaning given that term in the
Merger Agreement and means all warrants to purchase SAG stock that, as of June 5, 2015, had an
exercise price that was less than the Merger consideration per fully diluted share of SAG.
1.47 “Merger” means Stifel’s acquisition of SAG via a series of merger transactions on
June 5, 2015, wherein first, Saban Merger Subsidiary, Inc. was merged into and with SAG, and
then, immediately thereafter, the surviving entity was merged into Saban Successor, LLC (n/k/a
Sterne Agee, LLC), a wholly-owned subsidiary of Stifel.
1.48 “Merger Agreement” means the Agreement and Plan of Merger entered into by and
between SAG, Stifel, Saban Merger Subsidiary, Inc., Saban Successor, LLC, and Fortis Advisors
LLC on February 23, 2015 to effectuate the Merger, as amended from time to time by various
letter agreements.
1.49 “Net $6.5 Million Payment Fund” has the meaning given to it in Paragraph 8.3.
1.50 “Net Indemnity Earnout Payment Fund” has the meaning given to it in Paragraph
8.5.
1.51 “Net Initial XL Claim Amount Fund” has the meaning given to it in Paragraph 8.6.
1.52 “Net Settlement Funds” has the meaning given to it in Paragraph 8.11.
1.53 “Net Subsequent XL Claim Amounts” has the meaning given to it in Paragraph 8.8.
1.54 “Non-Holbrook Director Defendants” means Jon S. Sanderson, Eric B.
Needleman, Sal A. Nunziata, Robert G. Nunziata, Walter S. Robertson, III, Walter A. Ruch, III,
Henry S. Lynn, Jr., Linda M. Daniel, Jay W. Carter, and Joe R. Roberts, Jr.
1.55 “Notice and Administration Costs” means all costs and expenses incurred in
connection with the issuance and publication of the Class Notices and the Claims Administration
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Process. For the avoidance of doubt:
(a) Costs and expenses incurred by Class Counsel shall not be Notice and
Administration Costs but rather shall be included in the Fee and Expense
Application and, if approved by the Court, included in the Fee and
Expense Award;
(b) All costs and expenses reasonably and actually incurred by Claims
Administrator in connection with preparing and providing the Class
Notices, administering and distributing the Net $6.5 Million Payment Fund
to the Settlement Class Members, and processing Proofs of Claim and
Release shall be included as Notice and Administration Costs; and
(c) All costs incurred by the Claims Administrator in connection with or as a
result of the submission of objections to, appeals of or collateral challenges
to the proposed Settlement or Final Judgment and Order of Dismissal shall
be included as Notice and Administration Costs.
1.56 “Notice and Administration Fund” has the meaning given to it in Paragraph 9.2.
1.57 “Objection/Exclusion Deadline” means the date by which written objection to this
Agreement must be filed with the Court or a request for exclusion by a Settlement Class Member
must be received by Claims Administrator, which shall be designated as a date fourteen (14) days
before the originally scheduled date of the Fairness Hearing (and if the Fairness Hearing is
continued, the deadline runs from the first scheduled Fairness Hearing), or on such later date as
the Court may order.
1.58 “Party” means Plaintiff and each of the Defendants.
1.59 “Parties” means, collectively, the Plaintiff, on behalf of himself and the members
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of the Settlement Class, and the Defendants.
1.60 “Person” means an individual, corporation, 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 respective spouses, heirs, predecessors, successors, representatives or assignees.
1.61 “Plaintiff” means Harold Lowell Wainwright, the named plaintiff in this Action.
1.62 “Plan of Allocation” means the plans or formulas, submitted by Class Counsel and
approved by the Court, for the (i) allocation of the Net $6.5 Million Payment Fund to Authorized
Claimants after payment of expenses of notice and administration of the Settlement, any expenses,
taxes, penalties, or interest or tax preparation fees owed by that Settlement Fund, and such
attorneys’ fees, costs, expenses, and interest as may be awarded by the Court from that Settlement
Fund; (ii) allocation of the Net Indemnity Earnout Payment Fund to Equityholders after payment
of any expenses, taxes, penalties, or interest or tax preparation fees owed by the that Settlement
Fund; (iii) allocation of the Net Initial XL Claim Amount Fund to Equityholders after payment of
any expenses, taxes, penalties, or interest or tax preparation fees owed by the that Settlement Fund,
and such attorneys’ fees as may be awarded by the Court from that Settlement Fund; and (iv)
allocation of the Net Subsequent XL Claim Amounts to Equityholders after payment of such
attorneys’ fees as may be awarded by the Court from the Subsequent XL Claim Amounts. For the
avoidance of doubt, Defendants and Defendants’ Counsel are not involved in the determination of
the Plan of Allocation, which is to be solely submitted to the Court for its approval by Class
Counsel.
1.63 “Preliminary Approval Order” means the order to be entered by the Court
preliminarily approving the Settlement as set forth in this Agreement, conditionally certifying the
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Settlement Class for settlement purposes only, designating Class Counsel as counsel for the
Settlement Class and Plaintiff as representative of the Settlement Class, appointing Computershare
Inc. and Computershare Trust Company, N.A. as Escrow Agent, and Tilghman & Co., P.C. as
Claims Administrator, and approving the form and content of the Class Notice and Proof of Claim
and Release form to be disseminated to the Settlement Class. A proposed version of the
Preliminary Approval Order is attached hereto as Exhibit F.
1.64 “Proof of Claim and Release” means the proof of claim and release to be completed
and executed by each Settlement Class Member and approved through the Claims Administration
Process before that Settlement Class Member will be entitled as an Authorized Claimant to any
distribution from the Net $6.5 Million Payment Fund. The Proof of Claim and Release shall be
identical in all material respects to the form attached hereto as Exhibit G.
1.65 “Released Claims” means and includes any and all manner of claims, causes of
action, cross-claims, counterclaims, suits, demands, actions, rights, charges, liabilities, losses,
obligations, and controversies of any kind, nature, or description whatsoever, whether known or
unknown, accrued or unaccrued, foreseen or unforeseen, matured or not matured, suspected or
unsuspected, liquidated or not liquidated, fixed or contingent, direct or derivative, including
“Unknown Claims” as defined in this Agreement, whether class, individual, representative, or
otherwise in nature, whether arising in law or equity or under any statute, regulation, ordinance,
contract, or otherwise, for damages, interest, costs, expenses, attorneys’ fees, fines, civil or other
penalties, or other payment of money, whenever incurred, or for declaratory relief, or for injunctive
or other equitable relief, whether federal, state or otherwise, and in whatever forum, that (a) have
been asserted or could have been asserted in the Action by or on behalf of the Releasing Persons,
or any of them, against any of the Released Persons; (b) relate in any way to the facts,
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circumstances, transactions, events, occurrences, disclosures, statements, omissions, acts, failures
to act, or other matters which were or could have been alleged, raised or referred to in the Action;
(c) relate in any way to the litigation or settlement of this Action, including, but not limited to, any
claim that the Settlement herein was fraudulently induced, was the product of suppression, or was
in any other way affected by any misrepresentation or omission whatsoever made (or not made)
or asserted to have been made (or not made) by or on behalf of Defendants; or (d) relate in any
way to the litigation or settlement of the Holbrook Litigation or any other claims between Stifel
and Sterne Agee, on the one hand, and James S. Holbrook, Jr. and William K. Holbrook, on the
other hand.
1.66 “Released Persons” means each of the Defendants, as well as (a) all of their
respective current and former heirs, personal representatives, assigns, predecessors, successors-in-
interest, parents, subsidiaries and affiliates; (b) all current and former shareholders, partners,
members, controlling Persons, directors, managers, representatives, agents, officers, directors, and
employees of any of such persons (or spouses thereof); (c) all entities in which any one or more
Defendants or any member(s) of one or more Defendant’s immediate family has or have a
controlling interest; (d) all assigns or transferees of any of the Persons or entities named or
referenced in clauses (a)–(c); and (e) any Person who is acting or has acted for or on behalf of any
of the Persons named in clauses (a)–(d), including any current or former financial advisors,
consultants, commercial bankers, investment bankers, accountants, insurers, reinsurers, or
attorneys, and any officers, directors, controlling Persons, and employees of any of such Persons,
as well as their respective heirs, representatives, successors and assigns.
1.67 “Releasing Persons” means individually and collectively (a) the Plaintiff and (b)
the Settlement Class and each Settlement Class Member thereof, in each case in clauses (a)–(b),
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on behalf of themselves and any of their respective past, present, or future officers, directors,
stockholders, agents, employees, legal representatives, partners, associates, trustees, parents,
subsidiaries, divisions, affiliates, spouses, heirs, executors, administrators, personal
representatives, counsel (including Class Counsel), and purchasers, and (c) predecessors,
successors, or assigns of any of the Persons identified in clauses (a)–(b), in each case regardless of
whether the Class Member submits any Proof of Claim or receives any payment pursuant to any
claims process that may be established and approved by the Court.
1.68 “Request for Exclusion” means a written request for exclusion from the Settlement
Class that is submitted on or before Objection/Exclusion Deadline in accordance with the
procedures set forth in the Class Notice approved by the Court.
1.69 “SAG” means Sterne Agee Group, Inc.
1.70 “Settlement” means the settlement and related terms between the Parties as set forth
in this Agreement.
1.71 “Settlement Class” means all Equityholders, excluding (i) Defendants, (ii) Persons
who timely and validly exclude themselves therefrom as provided in this Agreement, and (iii)
Persons who do not timely and validly exclude themselves from the Settlement Class as provided
in this Agreement but who nonetheless are excluded by order of the Court.
1.72 “Settlement Class Member” means a Person who falls within the definition of the
Settlement Class.
1.73 “Settlement Funds” has the meaning given to it in Paragraph 4.9.
1.74 “Settlement Website” means the internet website that the Claims Administrator will
establish and host pursuant to the provisions of Section II.5 of this Agreement, following entry of
the Preliminary Approval Order.
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1.75 “Seventh Amended Complaint” means the Seventh Amended Complaint filed in
the Action on June 6, 2016 (Doc. 399).
1.76 “Sixth Amended Complaint” means the Sixth Amended Complaint filed in the
Action on October 2, 2015 (Doc. 341).
1.77 “Special Litigation Reserve” means the approximately thirty-six million, six
hundred eighty-five thousand dollar ($36,685,000) reserve that, under the Merger Agreement, as
amended by the June 5, 2015 letter agreement, Stifel was entitled to retain to satisfy certain of
SAG’s and/or Equityholders’ contingent, indemnification obligations.
1.78 “Special Litigation Reserve Accounting” has the meaning given to it in Paragraph
3.10.
1.79 “Sterne Agee” means Nominal Defendant Sterne Agree, LLC (f/k/a Saban
Successor Subsidiary, LLC, f/k/a SAG).
1.80 “Stifel” means Defendant Stifel Financial Corp.
1.81 “Subsequent XL Claim Amounts” has the meaning given to it in Paragraph 4.3.
1.82 “Taxes” has the meaning given to it in Paragraph 10.4.
1.83 “Tax Expenses” has the meaning given to it in Paragraph 10.4.
1.84 “Total Settlement Amount” means the sum of the $6.5 Million Payment, the
Indemnity Earnout Payment, and the XL Claim Amount, which shall be paid severally by or on
behalf of the Defendants in the amounts, time, and manner set forth in Paragraphs 4.1, 4.2, and
4.3.
1.85 “Unknown Claims” means any and all Released Claims against the Released
Persons that a Releasing Person does not know or suspect to exist in his, her, or its favor as of the
Final Order Date, which if known by the Releasing Person might have affected his, her, or its
18
decision(s) with respect to the Settlement.
1.86 “XL” means XL Specialty Insurance Company, the directors’ and officers’ liability
insurer for SAG.
1.87 “XL Claims” means only the claims for indemnification and/or defense costs that
Stifel and/or Sterne Agee have submitted to XL as of July 19, 2018 that are set forth in the schedule
attached as Exhibit J.
1.88 “XL Claim Amount” has the meaning given to it in Paragraph 4.3.
1.89 “XL Claim Amount Escrow Account” has the meaning given to it in Paragraph 4.8.
2. Dismissals, Releases, and Covenants not to Sue
2.1 Subject to Court approval, Plaintiff agrees, on behalf of himself and the Settlement
Class Members, that this Agreement shall be in full and final disposition of: (i) the Action against
the Defendants; and (ii) any and all Released Claims as against all Released Persons.
2.2 Upon final approval of the Settlement reflected in this Agreement, and as part of
the entry of the Final Judgment and Order of Dismissal, Class Counsel shall dismiss the Action
with prejudice as to the Defendants.
2.3 The Plaintiff, on behalf of himself and each other Releasing Person, hereby
releases, and each of the Settlement Class Members and other Releasing Persons shall be deemed
to have released, and by operation of the Final Judgment and Order of Dismissal upon the Effective
Date shall have released, all Released Claims against all of the Released Persons, separately and
severally. In connection therewith, upon the Effective Date, each of the Releasing Persons: (i)
shall be deemed to have, and by operation of the Final Judgment and Order of Dismissal, shall
have, fully, finally, and forever waived, released, relinquished, and discharged to the fullest extent
permitted by law, all Released Claims against each and all of the Released Persons, whether or not
such Releasing Person executes and delivers a Proof of Claim and Release; (ii) shall forever be
19
barred and enjoined from commencing, instituting, or prosecuting a class action or any other action
or proceeding in any court of law or equity, arbitration tribunal, or other forum of any kind,
directly, representatively, derivatively, or in any other capacity and wherever filed, any Released
Claims against any of the Released Persons; and (iii) agrees and covenants not to sue any of the
Released Persons with respect to any Released Claims or to assist any third party in commencing
or maintaining any suit against any Released Person related in any way to any Released Claims.
2.4 The Releasing Persons may hereafter discover facts other than or different from
those which they now know or believe to be true with respect to the subject matter of the Released
Claims. Nevertheless, Plaintiffs and the other Releasing Persons do hereby expressly, fully,
finally, and forever settle and release, and each Releasing Person, upon the Effective Date, shall
be deemed to have, and by operation of the Final Judgment and Order of Dismissal shall have,
fully, finally, and forever settled and released, any and all Released Claims, whether or not
concealed or hidden, without regard to the subsequent discovery or existence of such different or
additional facts.
2.5 With respect to any and all Released Claims against any and all Released Persons,
the Parties stipulate and agree that, by operation of the Final Judgment and Order of Dismissal,
upon the Effective Date, each Releasing Person shall have expressly waived, and shall be deemed
to have waived, and by operation of the Final Judgment and Order of Dismissal shall have
expressly waived, the provisions, rights and benefits of Cal. Civ. Code § 1542 or any federal, state
or foreign law, rule, regulation or common-law doctrine that is similar, comparable, equivalent or
identical to, or that has the effect in whole or part of, Section 1542 of the California Civil Code,
which provides:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER
20
FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.
2.6 Plaintiff and the other Releasing Persons irrevocably waive and expressly release
each of the Released Persons from any claim that the Settlement herein was fraudulently induced,
was the product of suppression, or was in any other way affected by any misrepresentation or
omission whatsoever made or asserted to have been made by or on behalf of any Defendant in this
action.
2.7 Only Authorized Claimants shall be entitled to receive any distributions from the
Net $6.5 Million Payment Fund. The Proof of Claim and Release to be executed by each Claimant
shall contain a release of all Released Claims by the executing Settlement Class Member against
the Released Persons and shall be identical in all material respects to the form attached hereto as
Exhibit G. All Settlement Class Members shall be bound by the releases set forth in Paragraphs
2.3, 2.4, 2.5, and 2.6 whether or not they submit a valid and timely Proof of Claim and Release or
become Authorized Claimants.
2.8 Stifel and Sterne Agee, on the one hand, and the Non-Holbrook Director
Defendants, on the other hand, hereby mutually release, and shall be deemed to have mutually
released, and by operation of the Final Judgment and Order of Dismissal upon the Effective Date
shall have mutually released, each other from any and all manner of claims, causes of action, cross-
claims, counterclaims, suits, demands, actions, rights, charges, liabilities, losses, obligations, and
controversies of any kind, nature, or description whatsoever, whether known or unknown, accrued
or unaccrued, foreseen or unforeseen, matured or not matured, suspected or unsuspected,
liquidated or not liquidated, fixed or contingent, direct or derivative, including any and all claims
that Stifel, Sterne Agee, and the Non-Holbrook Director Defendants do not know or suspect to
exist in their favors as of the Effective Date, and which if known by them, might have affected
21
their decisions with respect to the Settlement, whether class, individual, representative, or
otherwise in nature, whether arising in law or equity or under any statute, regulation, ordinance,
contract, or otherwise, for damages, interest, costs, expenses, attorneys’ fees, fines, civil or other
penalties, or other payment of money, whenever incurred, or for declaratory relief, or for injunctive
or other equitable relief, whether federal, state or otherwise, and in whatever forum, that (a) they
have asserted or could have asserted in the Action against each other; (b) relate in any way to the
facts, circumstances, transactions, events, occurrences, disclosures, statements, omissions, acts,
failures to act, or other matters which were or could have been alleged, raised or referred to in the
Action; or (c) relate in any way to the litigation or settlement of this Action, including any claim
that the Settlement herein was fraudulently induced, was the product of suppression, or was in any
other way affected by any misrepresentation or omission whatsoever made (or not made) or
asserted to have been made (or not made) by or on behalf of, on the one hand, Stifel and/or Sterne
Agee or, on the other hand, the Non-Holbrook Director Defendants.
2.9 The Holbrook Director Defendants, on the one hand, and the Non-Holbrook
Director Defendants, on the other hand, hereby mutually release, and shall be deemed to have
mutually released, and by operation of the Final Judgment and Order of Dismissal upon the
Effective Date shall have mutually released, each other from any and all manner of claims, causes
of action, cross-claims, counterclaims, suits, demands, actions, rights, charges, liabilities, losses,
obligations, and controversies of any kind, nature, or description whatsoever, whether known or
unknown, accrued or unaccrued, foreseen or unforeseen, matured or not matured, suspected or
unsuspected, liquidated or not liquidated, fixed or contingent, direct or derivative, including any
and all claims that the Holbrook Director Defendants and the Non-Holbrook Director Defendants
do not know or suspect to exist in their favors as of the Effective Date, and which if known by
22
them, might have affected their decisions with respect to the Settlement, whether class, individual,
representative, or otherwise in nature, whether arising in law or equity or under any statute,
regulation, ordinance, contract, or otherwise, for damages, interest, costs, expenses, attorneys’
fees, fines, civil or other penalties, or other payment of money, whenever incurred, or for
declaratory relief, or for injunctive or other equitable relief, whether federal, state or otherwise,
and in whatever forum, that (a) they have asserted or could have asserted in the Action against
each other; (b) relate in any way to the facts, circumstances, transactions, events, occurrences,
disclosures, statements, omissions, acts, failures to act, or other matters which were or could have
been alleged, raised or referred to in the Action; or (c) relate in any way to the litigation or
settlement of this Action, including any claim that the Settlement herein was fraudulently induced,
was the product of suppression, or was in any other way affected by any misrepresentation or
omission whatsoever made (or not made) or asserted to have been made (or not made) by or on
behalf of, on the one hand, the Holbrook Director Defendants, on the other hand, the Non-
Holbrook Director Defendants.
2.10 Stifel hereby releases, and shall be deemed to have released, and by operation of
the Final Judgment and Order of Dismissal upon the Effective Date shall have released, any and
all manner of claims, causes of action, cross-claims, counterclaims, suits, demands, actions, rights,
charges, liabilities, losses, obligations, and controversies of any kind, nature, or description
whatsoever, whether known or unknown, accrued or unaccrued, foreseen or unforeseen, matured
or not matured, suspected or unsuspected, liquidated or not liquidated, fixed or contingent, direct
or derivative, that have arisen or could arise from Section 11.06(d) of the Merger Agreement.
3. Representations, Acknowledgements, and Warranties
3.1 Class Counsel have concluded, after due investigation and after carefully
considering the relevant circumstances, that: (1) it is in the best interest of the Plaintiff and the
23
Settlement Class to enter into this Agreement to avoid the uncertainties of litigation and assure
that the benefits reflected herein, including the value of the Total Settlement Amount to be paid
severally by the Defendants under this Agreement, are obtained for the Plaintiff and the Settlement
Class, and (2) the Settlement set forth in this Agreement is fair, reasonable, and adequate within
the meaning of Alabama Rule of Civil Procedure 23 and in the best interests of the Plaintiff and
the Settlement Class.
3.2 Based on, among other things, their extensive investigation in the Action, including
the informal discovery conducted and the information sharing that occurred before, during, and
after the two-day mediation on May 2 and 3, 2018, which included, among other things, disclosure
of the amount of insurance potentially available to cover the claims that have been asserted against
the Defendants, Class Counsel represent and warrant that there is no fact or state of facts that could
have or would have changed the conclusions set forth in Paragraph 3.1 or their decision to
recommend and agree to this Settlement at the Total Settlement Amount set forth herein. Class
Counsel further represent and warrant that no potential discovery of additional information,
whether related to the merits of the claims in the Action, the amounts potentially available to satisfy
a judgment or settlement of the Action, or any other matter material to the Action or this
Settlement, could impact their decision to enter into this Settlement.
3.3 Plaintiff and the other Releasing Persons acknowledge, and shall be deemed to have
acknowledged, that the inclusion of “Unknown Claims” in the definition of Released Claims was
separately bargained for and was a key element of the Agreement and part of the material
consideration for Defendants entering into this Settlement.
3.4 Plaintiff and Class Counsel acknowledge that Defendants have made, and will
make, no representation and will take no position as to the fairness, reasonableness, or adequacy
24
of the Settlement to Plaintiff, Class Counsel, or the Settlement Class. Class Counsel shall be solely
responsible for advocating for and demonstrating to the Court the fairness, reasonableness, and
adequacy of the Settlement to Plaintiff and the Settlement Class. Defendants and Defendants’
Counsel specifically disclaim any duty or obligation to the Plaintiff or the Settlement Class,
including any duty or obligation to act as proponents of the fairness, reasonableness, or adequacy
of the Settlement to Plaintiff and the Settlement Class.
3.5 Plaintiff, for himself individually and on behalf of each Settlement Class Member,
and the Defendants acknowledge and agree that neither this Agreement nor any statement made in
the negotiation thereof or in any proceedings before the Court or any other forum regarding the
Settlement or the negotiation thereof shall be deemed or construed to be an admission or evidence
of any fault, liability, wrongdoing, or any violation of any statute, regulation, law, rule, or principle
of common law or equity, or the truth or merit of any allegations or claims in the Action, or any
infirmity or weakness of any claim or defense, as to any facts or claims that have been or might be
alleged or asserted in the Action.
3.6 Each counsel or other Person executing this Agreement on behalf of any Party
hereto expressly warrants and represents that (a) such Person has the full authority to execute this
Agreement on behalf of the Party for whom such Person is executing the Agreement (including on
behalf of such Person’s client, to the extent the Person signing this Agreement is an attorney); (b) it
is acting upon its respective independent judgments and upon the advice of its respective counsel,
and not in reliance upon any representation, warranty, or covenant, express or implied, of any
nature or kind by any other Person other than the representations, warranties and covenants
contained and memorialized in this Agreement; and (c) any representation, warranty or covenant,
express or implied, of any nature or kind that is not contained in this Agreement is immaterial to
25
the decision to enter into this Agreement. The undersigned Class Counsel represent and warrant
that they are authorized to execute this Agreement on behalf of both the Plaintiff and the Settlement
Class.
3.7 Plaintiff represents and warrants that he has not assigned any right with respect to
any matter encompassed within the Released Claims, will indemnify, defend and hold all other
Parties harmless as a result of any assignment of such right, and enters into this Settlement without
coercion of any kind.
3.8 Plaintiff and Class Counsel acknowledge that Stifel and Sterne Agee have reached
settlement agreements to resolve certain claims between Stifel and Sterne Agee, on the one hand,
and James S. Holbrook, Jr. and William K. Holbrook, on the other hand, including, but not limited
to, the claims asserted in the Holbrook Litigation. The settlement agreements resolving the claims
in the Holbrook Litigation were previously provided to Class Counsel and are attached hereto as
Exhibits H and I. Plaintiff further acknowledges that those settlement agreements require Stifel,
among other things, to make certain payments to or on behalf of James S. Holbrook, Jr. and
William K. Holbrook, and that those payments will be and are properly charged to the Indemnity
Earnout Amount, as set forth in the Indemnity Earnout Amount Accounting.
3.9 The Parties hereby acknowledge and agree that:
(a) Stifel has disclosed to Plaintiff, Class Counsel, the Holbrook Defendants,
and the Non-Holbrook Director Defendants an accounting of the Indemnity
Earnout Amount Balance as of June 30, 2018, attached hereto as Exhibit K
(the “Indemnity Earnout Amount Accounting”);
(b) Plaintiff, Class Counsel, the Holbrook Defendants, and the Non-Holbrook
Director Defendants have reviewed the Indemnity Earnout Amount
26
Accounting, including each of the specific amounts that Stifel has charged
to the Indemnity Earnout Amount as reflected in the Indemnity Earnout
Amount Accounting;
(c) The Indemnity Earnout Amount Accounting is substantially correct and all
amounts that Stifel heretofore has charged to the Indemnity Earnout
Amount have been properly charged to the Indemnity Earnout Amount;
(d) Any claims relating to or arising from Stifel’s administration of the
Indemnity Earnout Amount are included in the definition of Released
Claims set forth in Paragraph 1.65 and shall be released by the Releasing
Persons upon the Effective Date as set forth in Section II.2;
(e) As shown on the Indemnity Earnout Amount Accounting, Stifel has agreed
to pay interest on the Indemnity Earnout Payment in an amount equal to
$1,350,000. The Indemnity Earnout Payment interest shall be credited to
the Indemnity Earnout Amount Balance, as reflected in the Indemnity
Earnout Amount Accounting;
(f) The Indemnity Earnout Amount Accounting shows that, as of June 30,
2018, an Adjusted Parent Deficit existed in the amount of the Adjusted
Parent Deficit Amount; and
(g) If, at any time following the Execution Date, there remains an Adjusted
Parent Deficit, then all payments otherwise contemplated to be paid by
Stifel pursuant to the Merger Agreement, including, without limitation, any
payments related to (i) a tax receivable that is the subject of an ongoing IRS
audit, (ii) any amounts collected by Stifel or Sterne Agee from XL or any
27
other insurance company other than with respect to the XL Claim Amount,
or (iii) the final resolution of any claim for indemnification made by Stifel
which is set forth on the Indemnity Earnout Amount Accounting, shall
instead be retained by Stifel, having the effect of reducing the Adjusted
Parent Deficit by the amount so retained. At any time at which there is then
no Adjusted Parent Deficit, payments contemplated to be paid by Stifel
pursuant to the Merger Agreement, including, without limitation, the
payment of interest on the Indemnity Earnout Payment referenced in
Paragraph 3.09(e) or any payment otherwise contemplated under Section
3.06(b) of the Merger Agreement, shall be distributed in accordance with
the Merger Agreement.
3.10 The Parties hereby acknowledge and agree that:
(a) Stifel has disclosed to Plaintiff, Class Counsel, the Holbrook Defendants,
and the Non-Holbrook Director Defendants an accounting of the Special
Litigation Reserve as of June 30, 2018, attached hereto as Exhibit L (the
“Special Litigation Reserve Accounting”);
(b) Plaintiff, Class Counsel, the Holbrook Defendants, and the Non-Holbrook
Director Defendants have reviewed the Special Litigation Reserve
Accounting, including each of the specific amounts that Stifel has charged
to the Special Litigation Reserve as reflected in the Special Litigation
Reserve Accounting;
(c) The Special Litigation Reserve Accounting is substantially correct and all
amounts that Stifel has charged to the Special Litigation Reserve have been
28
properly charged to the Special Litigation Reserve;
(d) The full balance of the Special Litigation Reserve, after excluding all
amounts that Stifel has charged to the Special Litigation Reserve, has
already been distributed to Equityholders and there will be no additional
distributions from the Special Litigation Reserve to Equityholders in the
future; and
(e) Any claims relating to or arising from Stifel’s administration of the Special
Litigation Reserve are included in the definition of Released Claims set
forth in Paragraph 1.65 and shall be released by the Releasing Persons upon
the Effective Date as set forth in Section II.2.
3.11 Plaintiff and Class Counsel hereby acknowledge and agree that they are aware of
the amount of insurance potentially available to cover the claims that have been asserted against
the Defendants and that the $6.5 Million Payment is less than the available limits on the primary
XL policy under which the claims that have been asserted in the Action are covered and coverage
under potentially applicable excess policies was not triggered since the primary policy limits were
not exhausted.
4. The Settlement Fund
4.1 Within thirty (30) days of the Final Order Date, notwithstanding any remaining
objections or appeals, the Holbrook Defendants, the Non-Holbrook Director Defendants, and
Sterne Agee shall severally cause to be paid six million, five hundred thousand dollars
($6,500,000) (the “$6.5 Million Payment”) by wire transfer to the $6.5 Million Payment Escrow
Account. Prior to the Fairness Hearing, Class Counsel shall provide the Holbrook Defendants, the
Non-Holbrook Director Defendants, and Sterne Agee with information necessary to complete the
wire transfer, including a federal taxpayer identification number for the payee or account holder
29
for the account receiving payment. For the avoidance of doubt, this Agreement does not impose
any obligation, whether joint or several, upon the Holbrook Defendants, the Non-Holbrook
Director Defendants, or Sterne Agee to personally pay the $6.5 Million Payment if their insurance
carrier(s) for any reason fail to make the payment.
4.2 Within thirty (30) days of the Final Order Date, notwithstanding any remaining
objections or appeals, Stifel shall pay or cause to be paid fifteen million dollars ($15,000,000) (the
“Indemnity Earnout Payment”) by wire transfer to the Indemnity Earnout Payment Escrow
Account. Prior to the Fairness Hearing, Class Counsel shall provide Stifel with information
necessary to complete the wire transfer, including a federal taxpayer identification number for the
payee or account holder for the account receiving payment.
4.3 Within thirty (30) days of the Final Order Date, notwithstanding any remaining
objections or appeals, Stifel shall pay or cause to be paid any amounts that Stifel and/or Sterne
Agee have been able to recover from XL as of the Final Order Date on the XL Claims by wire
transfer to the XL Claim Amount Escrow Account. Prior to the Fairness Hearing, Class Counsel
shall provide Stifel with information necessary to complete the wire transfer, including a federal
taxpayer identification number for the payee or account holder for the account receiving payment.
To the extent Stifel recovers any additional amounts from XL on the XL Claims after the Final
Order Date, but before the Effective Date, Stifel also shall pay or cause to be paid those amounts
by wire transfer to the XL Claim Amount Escrow Account. Collectively, the amounts that Stifel
and/or Sterne Agee recover from XL on the XL Claims from the Execution Date to the Effective
Date are the “Initial XL Claim Amount.” To the extent that Stifel and/or Sterne Agee recover
additional amounts from XL on the XL Claims after the Effective Date, those amounts shall be the
“Subsequent XL Claim Amounts.” Collectively, the Initial XL Claim Amount and the Subsequent
30
XL Claim Amounts are the “XL Claim Amount.” The Subsequent XL Claim Amounts shall not
be paid to the XL Claim Amount Escrow Account; instead, those amounts, upon receipt by Stifel
and/or Sterne Agee, shall be distributed as set forth in the Plan of Allocation and Paragraphs 8.9
and 8.10 of this Agreement. This Agreement does not alter in any way or supersede the insurance
policies issued by XL to SAG that may apply to the matters scheduled in Exhibit J, and this
Agreement does not confer or extend any rights under such policies upon Plaintiff, Settlement
Class Members, Class Counsel, or any other Person. The XL Claim Amount shall be determined
by XL in consultation with Stifel and Sterne Agee, and such determination shall be final for
purposes of this Agreement and binding upon all Parties, Class Counsel, and Settlement Class
Members.
4.4 The obligation of the Holbrook Defendants, the Non-Holbrook Director
Defendants, and Sterne Agee to cause to be paid the payment described in Paragraph 4.1, on the
one hand, and Stifel to pay or cause to be paid the payments described in Paragraphs 4.2 and 4.3,
on the other hand, shall be several and not joint or joint and several, provided, however, that it is a
condition precedent to the Settlement that within thirty (30) days of the Final Order Date: (i) that
the $6.5 Million Payment be paid into the $6.5 Million Payment Escrow Account; (ii) that the
Indemnity Earnout Payment be paid into the Indemnity Earnout Payment Escrow Account; and
(iii) that the Initial XL Claim Amount be paid into the XL Claim Amount Escrow Account.
4.5 Other than the payments described in Paragraphs 4.1, 4.2, and 4.3, neither the
Defendants nor any of the Released Persons shall have any liability, responsibility, or obligation
to pay or reimburse any other amounts to any Person, including Plaintiff, Class Counsel, any
Settlement Class Members, or any other Releasing Persons in connection with, relating to, or
arising out of the Action, the Released Claims, or this Settlement. For the avoidance of doubt, but
31
without limiting the prior sentence, none of the Defendants or any Released Person shall have any
liability, responsibility or obligation to pay or reimburse any Person with respect to any Notice
and Administration Costs, any Fee and Expense Award or, other than as set forth in Paragraph 8
of the Escrow Agreement, any expense, costs, loss, or liability suffered or incurred by the Escrow
Agent with respect to the creation, maintenance, and distribution of any Escrow Account or the
Escrow Agreement.
4.6 The wire-transferred fund described in Paragraph 4.1, together with any income
earned thereon in the $6.5 Million Payment Escrow Account from the date of such wire transfer,
shall constitute the “$6.5 Million Payment Fund.” The $6.5 Million Payment Fund shall be
established as an income earning escrow account (the “$6.5 Million Payment Escrow Account”)
maintained and administered by the Escrow Agent, subject to approval by the Court, in accordance
with an escrow agreement therewith to be agreed upon by the Parties and the Escrow Agent (the
“Escrow Agreement”).
4.7 The wire-transferred fund described in Paragraph 4.2, together with any income
earned thereon in the Indemnity Earnout Payment Escrow Account from the date of such wire
transfer, shall constitute the “Indemnity Earnout Payment Fund.” The Indemnity Earnout Payment
Fund shall be established as an income earning escrow account (the “Indemnity Earnout Payment
Escrow Account”) maintained and administered by the Escrow Agent, subject to approval by the
Court, in accordance with the Escrow Agreement.
4.8 The wire-transferred funds described in Paragraph 4.3, together with any income
earned thereon in the XL Claim Amount Escrow Account from the date of such wire transfers,
collectively shall constitute the “Initial XL Claim Amount Fund.” The Initial XL Claim Amount
Fund shall be established as an income earning escrow account (the “XL Claim Amount Escrow
32
Account”) maintained and administered by the Escrow Agent, subject to approval by the Court, in
accordance with the Escrow Agreement.
4.9 The $6.5 Million Payment Fund, the Indemnity Earnout Payment Fund, and the
Initial XL Claim Amount Fund shall be referred to collectively as the “Settlement Funds,” and
each, individually, as a “Settlement Fund,” in this Agreement.
4.10 The Escrow Agreement shall provide, among other things included in Exhibit M,
that: (a) the Escrow Agent shall not disburse any funds from the Settlement Funds except as
expressly directed by the Court and as (i) provided in this Agreement or the Escrow Agreement or
(ii) as directed in a joint written direction to the Escrow Agent by counsel for the Defendants and
Class Counsel; and (b) other than as set forth in Paragraph 8 of the Escrow Agreement, (i) the
Defendants shall have no liability, obligation, or responsibility with respect to any act, omission,
or determination by the Escrow Agent or any other Person, or any of their respective designees or
agents, in connection with the allocation, use, disbursement, administration, or oversight of the
Settlement Fund; and (ii) no Person shall have any claim of any kind against the Defendants or
Defendants’ Counsel with respect to the matters set forth in this Paragraph 4.10 or the Escrow
Agreement.
4.11 With the sole exception of Notice and Administration Costs described in Section
II.9, Taxes as described in Section II.10, and any escrow fees or expenses, no monies shall be
disbursed from the Settlement Funds before the Effective Date and without the specific
authorization of the Court, except in the event of termination of this Agreement and return of the
Settlement Funds to the Defendants pursuant to Paragraph 13.7 below.
4.12 The Settlement Funds shall be held in (i) one or more money market mutual funds
listed in Schedule 3 of the Escrow Agreement comprised of investments secured by the full faith
33
and credit of the United States government (“Approved Funds”) or (ii) one or more interest-
bearing, FDIC-insured accounts to be maintained by Escrow Agent at one or more of the banks
listed in Schedule 4 of the Escrow Agreement (“Approved Banks”). In the absence of further
written instructions from Class Counsel, the Escrow Agent shall invest the Settlement Funds in
one or more of the Approved Funds. All income earned while the Settlement Funds are held in
one or more Approved Funds shall be for the benefit of the Settlement Funds. If any portion of a
Settlement Fund is moved to an Approved Bank, the Escrow Agent shall pay into the Settlement
Fund at a rate equal to one-half of the then current one-month Treasury Bill rate. The Defendants
shall have no responsibility, obligations, or liabilities whatsoever with respect to the investment of
the Settlement Funds or any losses suffered by, or fluctuations in the value of, the Settlement
Funds. No Person shall have any claim of any kind against the Defendants or their respective
counsel with respect to the matters set forth in this Paragraph.
4.13 Following the Effective Date, but not prior thereto, and only with the approval of
the Court, the Escrow Agent is authorized to execute such transactions with or on behalf of the
Settlement Class Members as are consistent with the terms of this Agreement.
4.14 All funds held by the Escrow Agent pursuant to this Agreement shall be deemed
and considered to be in custodia legis of the Court, and shall remain subject to the jurisdiction of
the Court, until such time as such funds are either returned to the Defendant pursuant to Paragraph
13.7 of this Agreement or distributed subsequent to the Effective Date pursuant to the Plan of
Allocation approved by the Court or other order(s) of the Court, provided, however, and for the
avoidance of doubt, that the Court shall not have jurisdiction to issue orders contrary to Paragraphs
4.10 and 4.11 hereof.
5. Preliminary Approval Order and Notice to the Settlement Class
5.1 Promptly after execution of this Agreement, but in no event later than seven (7)
34
court days after this Agreement is signed (unless such time is extended by the written agreement
of Class Counsel and Defendants’ Counsel), Class Counsel shall submit this Agreement together
with its Exhibits to the Court and apply for entry of the Preliminary Approval Order, substantially
in the form of Exhibit F hereto.
5.2 The requested Preliminary Approval Order shall include, among others included in
Exhibit F, provisions for the following:
(a) Preliminary approval of the Settlement set forth in this Agreement as fair,
reasonable, and adequate within the meaning of Ala. R. Civ. P. 23;
(b) Conditional approval of the Settlement Class as for settlement purposes
only;
(c) Appointment of Class Counsel and Plaintiff as the representatives for the
Settlement Class;
(d) Approval of the mailing of the Class Notices, substantially in the form
attached as Exhibit A, which shall include, among other things, the general
terms of the Settlement set forth in this Agreement, the proposed Plan of
Allocation, the appointment of the Claims Administrator by Class Counsel,
the terms of the Claims Administration Process, the Proof of Claim and
Release, the general terms of the Fee and Expense Application, the
Exclusion Form, and the date of the Fairness Hearing and shall inform
Settlement Class Members of their rights to seek exclusion from the
Settlement Class and to object to the Settlement, the Plan of Allocation, the
terms of the Claims Administration Process, and the Fee and Expense
Application, and which also shall inform Settlement Class Members where
35
they may direct written or oral inquiries regarding the Settlement and also
where they may obtain additional information about the Action;
(e) Approval of the procedures set forth in the Class Notices for Persons who
would otherwise be Settlement Class Members to seek exclusion from the
Settlement Class or object to the Settlement, the Plan of Allocation, and/or
the Fee and Expense Application;
(f) Approval of the appointment of Computershare Inc. and Computershare
Trust Company, N.A. as Escrow Agent; and
(g) The scheduling of the Fairness Hearing, which shall be held no earlier than
sixty (60) days after the date of entry of the Preliminary Approval Order, at
which the Court will consider any submissions or presentations by Class
Counsel into the fairness, reasonableness, and adequacy of the Settlement,
address any objections to it, and determine whether the Court should (i)
finally approve the Settlement as fair, reasonable, and adequate and in the
best interests of the Plaintiff and the Settlement Class, pursuant to Rule
23(e) of the Alabama Rules of Civil Procedure; and (ii) enter the Final
Judgment and Order of Dismissal dismissing the Class Action with
prejudice, each Party to bear its own costs (except as provided herein), and
extinguish, release and enjoin prosecution of any and all Released Claims.
At the Fairness Hearing, Class Counsel also will request that the Court
approve the proposed Plan of Allocation and the Fee and Expense
Application.
5.3 Subject to the requirements of the Preliminary Approval Order, Class Counsel shall
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cause Claims Administrator to send, no later than ten (10) days after entry of the Preliminary
Approval Order, the Class Notice by First-Class U.S. Mail, proper postage prepaid, to the
Settlement Class Members, addressed to the mailing address of record for each Settlement Class
Member as reflected in the records of Sterne Agee. As a result, one Class Notice will be sent to
each Settlement Class Member. Prior to mailing, Claims Administrator shall attempt to update the
last known mailing addresses for each Settlement Class Member through the National Change of
Address system or similar databases.
5.4 Class Counsel shall cause Claims Administrator to re-mail any Class Notices
returned by the United States Postal Service with a forwarding address and shall continue to do so
with respect to any such Class Notice that is returned seven (7) days or more prior to the
Objection/Exclusion Deadline. With respect to Class Notices that are returned by the United States
Postal Service without a new or forwarding address, as soon as practicable, Claims Administrator
shall determine whether a valid address can be located through use of the United States Postal
Service’s National Change of Address database and/or other reasonable means and without undue
cost and delay, and then promptly re-mail Class Notices for whom Claims Administrator is
reasonably able to locate a valid address in accordance herewith, so long as the valid address is
obtained by Claims Administrator at least seven (7) days or more prior to the Objection/Exclusion
Deadline.
5.5 Subject to the requirements of the Preliminary Approval Order, and no later than
ten (10) days after entry of the Preliminary Approval Order, Class Counsel shall cause Claims
Administrator to establish the Settlement Website, whose address shall be included and disclosed
in the Class Notice, and which will inform Settlement Class Members of the terms of this
Agreement, their rights, dates, and deadlines, and related information. When established, the
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Settlement Website shall include, in .pdf format, a copy of each operative complaint filed in this
Action, this Agreement and its exhibits, any Preliminary Approval Order entered by the Court, and
a copy of the Class Notice. Class Counsel’s Fee and Expense Application, the Plan of Allocation,
and the motion asking the Court to enter the Final Judgment and Order of Dismissal shall be posted
to the website when they are filed with the Court, along with such other information as the Court
may designate or the Parties may agree to post there. The Settlement Website will be operational
and live by the date of the first mailing of the Class Notice.
5.6 Not later than seven (7) days before the date of the Fairness Hearing, the Claims
Administrator, and, to the extent necessary, the Parties, shall file with the Court a declaration or
declarations, based on the personal knowledge of the declarant(s), verifying compliance with these
class-wide notice procedures.
6. Requests for Exclusion
6.1 Any Settlement Class Member who wishes to be excluded from the Settlement
Class must mail a written “request for exclusion” to Claims Administrator at the address provided
in the Class Notice, mailed sufficiently in advance to be received by Claims Administrator no later
than the Objection/Exclusion Deadline. A written request for exclusion must: (a) contain a caption
or title that identifies it as “Request for Exclusion in Harold Lowell Wainwright v. James S.
Holbrook, Jr., et al., No. CV-2014-902794.00”; (b) include the Settlement Class Member’s name,
mailing and email addresses, and contact telephone number; (c) specify that he or she wants to be
“excluded from the Settlement Class;” and (d) be personally signed by the Settlement Class
Member. A form of the “request for exclusion” is attached hereto as Exhibit N. The requirements
for submitting a timely and valid request for exclusion shall be set forth in the Class Notice.
6.2 Each Settlement Class Member who wishes to be excluded from the Settlement
Class must submit his or her own personally signed written request for exclusion. A single written
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request for exclusion submitted on behalf of more than one Settlement Class Member will be
deemed invalid.
6.3 Unless excluded by separate order entered by the Court for good cause shown
before entry of the Final Judgment and Order of Dismissal, any Settlement Class Member who
fails to strictly comply with the procedures set forth in this Section II.6 for the submission of
written requests for exclusion will be deemed to have consented to the jurisdiction of the Court,
will be deemed to be part of the Settlement Class, and will be bound by all subsequent proceedings,
orders, and judgments in the Action, including, but not limited to, the Release, even if he or she
has litigation pending or subsequently initiates litigation against Defendants relating to the claims
and transactions released in the Action.
6.4 Claims Administrator shall file with the Court, no later than seven (7) days before
the Fairness Hearing, a list reflecting all requests for exclusion it has received. The list shall also
identify which of those requests for exclusion were received late, and which requests for exclusion
failed to comply with the requirements of this Section II.6.
6.5 As set forth in Paragraphs 8.7 and 8.9, any Equityholder who timely and validly
excludes him, her, or itself from the Settlement Class as provided in this Agreement or who
otherwise is excluded from the Settlement Class by the Court shall nevertheless receive a pro rata
share of the Net Indemnity Earnout Payment Fund, the Net Initial XL Claim Amount Fund, and
the Net Subsequent XL Claim Amounts if that Equityholder is entitled to receive distributions of
the Indemnity Earnout Amount Balance under the Section 3.06 of the Merger Agreement.
7. Objections to Settlement
7.1 Any Settlement Class Member who has not filed a timely written request for
exclusion and who wishes to object to the fairness, reasonableness, or adequacy of this Agreement
or the proposed Settlement, or to the Fee and Expense Application, or to any other aspect or effect
39
of the proposed Settlement, must file with the Court a written statement of his or her objection no
later than the Objection/Exclusion Deadline. To file a written statement of objection, a Settlement
Class Member must (a) mail it sufficiently in advance to be received by the Clerk of the Court on
or before the Objection/Exclusion Deadline, or (b) file it in person on or before the
Objection/Exclusion Deadline at the Circuit Court of Jefferson County, Alabama, except that any
objection made by a Settlement Class Member represented by counsel must be filed through the
Court’s electronic case filing system.
7.2 A written statement of objection must: (a) contain a caption or title that identifies it
as “Objection to Class Settlement in Harold Lowell Wainwright v. James S. Holbrook, Jr., et al.,
No. CV-2014-902794.00”; (b) include the Settlement Class Members’ name, mailing and email
addresses, and contact telephone number; (c) set forth the specific reason(s), if any, for each
objection, including all legal support the Settlement Class Member wishes to bring to the Court’s
attention and all factual evidence the Settlement Class Member wishes to introduce in support of
the objection; (d) disclose the name and contact information of any and all attorneys representing,
advising, or in any way assisting the Settlement Class Member in connection with the preparation
or submission of the objection; and (e) be personally signed by the Settlement Class Member.
7.3 A Settlement Class Member may file and serve a written statement of objection
either on his own or through an attorney retained at his own expense; provided, however, that a
written statement of objection must be personally signed by the Settlement Class Member,
regardless of whether he has hired an attorney to represent him.
7.4 Any Settlement Class Member who properly files and serves a timely written
objection, as described in this Section II.7, may appear at the Fairness Hearing, either in person or
through personal counsel hired at the Settlement Class Member’s own expense, to object to the
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fairness, reasonableness, or adequacy of this Agreement or the proposed Settlement, or to the Fee
and Expense Award, or to any other aspect or effect of the proposed Settlement. However, any
Settlement Class Member who intends to make an appearance at the Fairness Hearing must include
a statement to that effect in his or her objection. If a Settlement Class Member hires his or her
own personal attorney to represent him or her in connection with an objection, and if that attorney
wishes to appear at the Fairness Hearing, the attorney must: (a) file a notice of appearance with
the Clerk of Court in the Action no later than the Objection/Exclusion Deadline and (b) serve and
deliver a copy of that notice of appearance to Class Counsel and Defendants’ Counsel no later than
the Objection/Exclusion Deadline.
7.5 Any Settlement Class Member who fails to strictly comply with the provisions and
deadlines of this Section II.7 shall waive any and all objections to the Settlement, its terms, or the
procedures for its approval, shall forfeit any and all rights he or she may have to appear separately
and/or to object, and will be deemed to have consented to the jurisdiction of the Court, to be part
of the Settlement Class, and to be bound by all subsequent proceedings, orders, and judgments in
the Action, including, but not limited to, the Release.
7.6 Any Settlement Class Member who objects to the Settlement but does not file an
exclusion request shall, unless he or she is subsequently excluded by order of the Court, remain a
Settlement Class Member and therefore be entitled to all of the benefits, obligations and terms of
the Settlement if this Agreement and the terms contained therein are approved and the Effective
Date is reached.
8. Administration and Calculation of Claims and Final Awards and Supervision and Distribution of Settlement Fund
8.1 A Claims Administration Process shall be approved by the Court.
8.2 Claims Administrator, acting on behalf of Class Counsel and the Settlement Class,
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and subject to the supervision, direction, and approval of the Court, shall administer and calculate
the claims submitted by Settlement Class Members for the Net $6.5 Million Payment Fund, as set
forth in Paragraph 8.4, and shall oversee the distribution of funds from the Settlement Funds in
accordance with the Claims Administration Process approved by the Court.
8.3 The $6.5 Million Payment Fund shall be applied as follows:
(a) To pay all Notice and Administration Costs;
(b) To pay escrow fees and costs that are attributable to the $6.5 Million
Payment Fund to the Escrow Agent;
(c) To pay Taxes and Tax Expenses that are attributable to the $6.5 Million
Payment Fund;
(d) To pay any attorneys’ fees, expenses, and costs awarded by the Court from
the $6.5 Million Payment Fund as part of the Fee and Expense Award; and
(e) To distribute the balance of the $6.5 Million Payment Fund (the “Net $6.5
Million Payment Fund”) to Authorized Claimants as allowed by the Plan of
Allocation.
8.4 Within thirty (30) days after the Effective Date and subject to such further approval
and further order(s) of the Court as may be required, the Net $6.5 Million Payment Fund shall be
distributed to Authorized Claimants as follows:
(a) At least fourteen (14) days before the Fairness Hearing, or such other time
as may be set by the Court, each Claimant shall be required to submit to
Claims Administrator a separate completed Proof of Claim and Release as
attached to the Class Notices, and substantially in the form of Exhibit G
hereto, signed under penalty of perjury by an authorized Person and
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supported by such documents as specified in the Proof of Claim and Release
and as are reasonably available to the Claimant. The Proof of Claim and
Release shall include, inter alia, an acknowledgement of, and agreement to,
the release of all Released Claims against all Released Persons as set forth
in this Agreement.
(b) Except as otherwise ordered by the Court, all Settlement Class Members
who fail to timely submit a valid Proof of Claim and Release within such
period, or such other period as may be ordered by the Court, as well as all
Settlement Class Members who are excluded by the Court on its own
motion, shall be forever barred from receiving any payments of money from
the $6.5 Million Payment Fund pursuant to this Agreement and the
Settlement set forth herein but in all other respects will be subject to and
bound by the provisions of this Agreement, the Settlement and releases
contained herein, and the Final Judgment and Order of Dismissal, and will
be barred from bringing any claim, suit, or action in any forum against any
of the Released Persons concerning any Released Claim.
(c) All Settlement Class Members whose claims are not approved by the Court
shall be barred from any participation in distributions from the $6.5 Million
Payment Fund, but otherwise shall be bound by the provisions of this
Agreement, the Settlement and releases contained herein, and the Final
Judgment and Order of Dismissal, and will be barred from bringing any
claim, suit, or action in any forum against any of the Released Persons
concerning any Released Claim.
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(d) The Net $6.5 Million Payment Fund shall be distributed to the Authorized
Claimants in accordance with and subject to the Plan of Allocation. The
proposed Plan of Allocation is not and shall not be a part of this Agreement.
8.5 The Indemnity Earnout Payment Fund shall be applied as follows:
(a) To pay all escrow fees and costs that are attributable to the Indemnity
Earnout Payment Fund to the Escrow Agent;
(b) To pay Taxes and Tax Expenses that are attributable to the Indemnity
Earnout Payment Fund; and
(c) To distribute the balance of the Indemnity Earnout Payment Fund (the “Net
Indemnity Earnout Payment Fund”) to Equityholders as set forth in the Plan
of Allocation and Paragraphs 8.7 and 8.10.
8.6 The Initial XL Claim Amount Fund shall be applied as follows:
(a) To pay all escrow fees and costs that are attributable to the Initial XL Claim
Amount Fund to the Escrow Agent;
(b) To pay Taxes and Tax Expenses that are attributable to the Initial XL Claim
Amount Fund;
(c) To pay any attorneys’ fees, expenses, and costs awarded by the Court from
the Initial XL Claim Amount Fund as part of the Fee and Expense Award;
and
(d) To distribute the balance of the Initial XL Claim Amount Fund (the “Net
Initial XL Claim Amount Fund”) to Equityholders as set forth in the Plan
of Allocation and Paragraphs 8.7 and 8.10.
8.7 Within thirty (30) days after the Effective Date and subject to such further approval
44
and further order(s) of the Court as may be required, the Net Indemnity Earnout Payment Fund
and the Net Initial XL Claim Amount Fund shall be apportioned and distributed by Exchange
Agent, as set forth in the Plan of Allocation, this Paragraph 8.7, and Paragraph 8.10. Specifically,
the Net Indemnity Earnout Payment Fund and the Net Initial XL Claim Amount Fund shall be
distributed to (i) Settlement Class Members, regardless of whether the Settlement Class Members
have submitted Proofs of Claim and Release forms, and (ii) Equityholders who are not Settlement
Class Members, either because (a) they are Defendants, (b) they have timely and validly excluded
themselves from the Settlement Class or (c) they are excluded from the Settlement Class by the
Court, but who are entitled to receive distributions of the Indemnity Earnout Amount Balance
under Section 3.06 of the Merger Agreement (“Eligible Equityholders”). For the avoidance of all
doubt, any Equityholder (i) who timely and validly excludes him, her, or itself from the Settlement
Class as provided in this Agreement, (ii) who has been excluded from the Settlement Class by the
Court, or (iii) who is a Defendant, shall receive a pro rata share, as described in the Plan of
Allocation and Paragraph 8.10 below, of the Net Indemnity Earnout Payment Fund and the Net
Initial XL Claim Amount Fund, along with the Settlement Class Members, if that Equityholder is
entitled to receive distributions of the Indemnity Earnout Amount Balance under Section 3.06 of
the Merger Agreement. Equityholders who are not members of the Settlement Class and who, as
of the Effective Date, are not entitled to receive distributions of the Indemnity Earnout Amount
Balance under Section 3.06 of the Merger Agreement shall not receive any share of the Net
Indemnity Earnout Payment Fund and the Net Initial XL Claim Amount Fund; but notwithstanding
the foregoing, the Exchange Agent shall retain the unclaimed allocations of the Net Indemnity
Earnout Payment Fund and the Net Initial XL Claim Amount Fund for any such Equityholder
(other than Stifel, Sterne Agee, SAG, or any direct or indirect wholly-owned subsidiary of Sterne
45
Agee or SAG) until (i) such time as that Equityholder, under the terms of the Merger Agreement,
becomes entitled to receive a distribution of his, her, or its pro rata share of the Indemnity Earnout
Amount Balance, at which point in time the Exchange Agent shall distribute that Equityholder’s
allocation of the Net Indemnity Earnout Payment Fund and the Net Initial XL Claim Amount Fund
to the Equityholder or (ii) sufficient time has passed such that, under the terms of the Merger
Agreement, any unclaimed pro rata share of the Indemnity Earnout Amount Balance would
become the property of Stifel free and clear of any claims or interest of any Equityholder
previously entitled thereto, at which point in time the Exchange Agent shall remit the unclaimed
pro rata share(s) of the Net Indemnity Earnout Payment Fund and the Net Initial XL Claim Amount
Fund to Stifel and such unclaimed pro rata share(s) shall be treated as Stifel’s property, free and
clear of any claims or interest of any Equityholder previously entitled thereto. Nothing in this
Paragraph 8.7 shall be construed to entitle any Equityholder who is not a Settlement Class Member
to any share of the Net $6.5 Million Payment Fund.
8.8 The Subsequent XL Claim Amounts shall be applied as follows:
(a) To pay any attorneys’ fees, expenses, and costs awarded by the Court from
the Subsequent XL Claim Amounts as part of the Fee and Expense Award;
and
(b) To distribute the balance of the Subsequent XL Claim Amounts (the “Net
Subsequent XL Claim Amounts”) to Equityholders as set forth in the Plan
of Allocation and Paragraphs 8.9 and 8.10.
8.9 Within thirty (30) days after Stifel and/or Sterne Agee obtain any Subsequent XL
Claim Amounts, and subject to such further approval and further order(s) of the Court as may be
required, Stifel shall cause any attorneys’ fees, expenses, and costs awarded by the Court from the
46
Subsequent XL Claim Amounts to be distributed to Class Counsel, and then the Net Subsequent
XL Claim Amounts shall be apportioned and distributed by Exchange Agent in the same manner
as the Net Indemnity Earnout Payment Fund and the Net Initial XL Claim Amount Fund, as set
forth in the Plan of Allocation, Paragraph 8.7, and Paragraph 8.10. Nothing in this Paragraph 8.9
shall be construed to entitle any Equityholder who is not a Settlement Class Member to any share
of the Net $6.5 Million Payment Fund.
8.10 As shall be set forth in the Plan of Allocation, the Net Indemnity Earnout Payment
Fund, the Net Initial XL Claim Amount Fund, and the Net Subsequent XL Claim Amounts shall
be apportioned to Settlement Class Members and Eligible Equityholders in the same proportions
as the Indemnity Earnout Amount Balance would be apportioned under the terms of Section 3.06
of the Merger Agreement if the Indemnity Earnout Amount Balance were distributed to Settlement
Class Members and Eligible Equityholders.
8.11 The Net $6.5 Million Payment Fund, the Net Indemnity Earnout Payment Fund,
the Net Initial XL Claim Amount Fund, and the Net Subsequent XL Claim Amounts shall be
referred to collectively as the “Net Settlement Funds,” and each, individually, as a “Net Settlement
Fund,” in this Agreement.
8.12 Defendants take no position on the fairness, reasonableness or appropriateness of
the Plan of Allocation, and neither the Defendants nor the Released Persons shall have any
responsibility, obligations, or liabilities whatsoever with respect to the Plan of Allocation or
implementation thereof, or with respect to any other administration or distribution of the
Settlement Funds. No Person shall have any claim of any kind against the Defendants or
Defendants’ Counsel with respect to the matters set forth in this Paragraph.
8.13 No Person shall have any claim against Class Counsel or any Claims Administrator
47
or other agent designated by Class Counsel, Exchange Agent, or the Defendants or Defendants’
Counsel, based on distributions made substantially in accordance with this Agreement, the Plan of
Allocation, or further orders of the Court.
8.14 Class Counsel have indicated that they will submit to the Court a proposed Plan of
Allocation of the Net Settlement Funds, which shall be consistent with the terms of this Section
II.8. The Plan of Allocation, including any adjustments to an Authorized Claimant’s claim for an
allocation of the Net $6.5 Million Payment Fund set forth therein, is not a part of this Agreement,
and it is not a condition of this Agreement that any particular plan of allocation be approved. Any
order or proceedings relating to the Plan of Allocation shall not operate to terminate or cancel this
Agreement or affect the finality of the Court’s Final Judgment and Order of Dismissal approving
the Agreement and the Settlement set forth herein, or any other orders entered pursuant to this
Agreement. Plaintiff shall have no right to renegotiate or seek to renegotiate any other term of this
Settlement that affects the Defendants regardless of whether the Court approves the Plan of
Allocation as proposed.
8.15 All proceedings with respect to the administration, processing, and determination
of claims and proofs of claims by Settlement Class Members and the determination of all
controversies relating thereto, including disputed questions of law and fact with respect to the
validity of claims, shall be subject to the jurisdiction of the Court.
9. Notice and Administration Costs
9.1 All Notice and Administration Costs shall be paid out of the $6.5 Million Payment
Fund.
9.2 Within ten (10) days after the payment of the $6.5 Million Payment Fund or a
portion thereof to the Escrow Agent, the Escrow Agent may establish a “Notice and Administration
Fund.” Initially, up to twenty thousand dollars ($20,000) may be transferred from the $6.5 Million
48
Payment Fund to the Notice and Administration Fund, which represents the Parties’ reasonable
estimate as of Execution Date of the Notice and Administration Costs; thereafter, the Escrow
Agent, with the written consent of Defendants’ Counsel and Class Counsel, may transfer from
time to time such additional funds from the Settlement Fund to the Notice and Administration
Fund as may reasonably be required to pay Notice and Administration Costs. The Notice and
Administration Fund may be used by the Escrow Agent as directed in writing by Class Counsel to
pay Notice and Administration Costs.
9.3 On the Effective Date, any balance (including interest) then remaining in the Notice
and Administration Fund, less expenses incurred but not yet paid, shall be transferred by the
Escrow Agent to, and deposited and credited as part of, the $6.5 Million Payment Fund.
9.4 Funds expended for Notice and Administration Costs are not recoverable if this
Settlement is terminated or does not become final.
10. Taxes
10.1 The Parties and the Escrow Agent agree to treat each Settlement Fund and the
Notice and Administration Fund (collectively, the “Funds”) as being at all times a “qualified
settlement fund” within the meaning of Treas. Reg. § 1.468B-l and any relevant equivalent for
state or other taxes (“Equivalent Regulations”) and agree not to take any position for Tax purposes
inconsistent therewith.
10.2 Upon receipt of and based solely on the written instructions, together with all other
necessary information and documents, of Claims Administrator, acting on behalf of Class Counsel,
Escrow Agent shall timely make the “relation-back election” (as defined in Treas. Reg. § l.468B-
1 and any Equivalent Regulation) back to the earliest permitted date. Such election shall be made
in compliance with the procedures and requirements contained in such regulations. It shall be the
responsibility of Claims Administrator, acting on behalf of Class Counsel, to cause the Escrow
49
Agent to timely and properly prepare and deliver the necessary documentation for signature by all
necessary parties, and thereafter to cause the appropriate filing(s) to occur.
10.3 For the purposes of § 1.468B of the Internal Revenue Code of 1986, the Treasury
regulations thereunder and any Equivalent Regulation the Escrow Agent is hereby designated as
the “administrator” of each of the Funds. Claims Administrator, acting on behalf of Class Counsel,
shall cause the Escrow Agent to timely and properly file all income, informational, and other tax
returns necessary or advisable with respect to each Fund (including the returns described in Treas.
Reg. § l.468B-2(k) or any Equivalent Regulation). Such returns (as well as the election described
in Paragraph 10.2) shall be consistent with this Agreement and in all events shall reflect that all
Taxes on the income earned by the Funds shall be paid out of the Fund in which that income is
earned as provided herein.
10.4 All: (i) taxes (including any estimated taxes, interest, or penalties) arising with
respect to the income earned by any Fund, including any taxes or tax detriments that may be
imposed upon the Defendants or the Released Persons with respect to any income earned by such
Fund for any period during which such Fund does not qualify as a “qualified settlement fund”
within the meaning of Treasury Regulation § 1.468B-1 (or any Equivalent Regulation), and any
other taxes imposed on or in connection with any Fund (collectively, “Taxes”); and (ii) expenses
and costs incurred in connection with the operation and implementation of this Section II.10,
including expenses of tax attorneys and/or accountants and mailing and distribution costs and
expenses relating to filing (or failing to file) the returns described herein (“Tax Expenses”) shall
promptly be paid out of the Fund in which any such Taxes or Tax Expenses have arisen by the
Escrow Agent without prior order from the Court. Taxes shall be treated as, and considered to be,
a cost of administration of the Funds, and the Escrow Agent shall be obligated (notwithstanding
50
anything herein to the contrary) to withhold from distribution to Claims Administrator, Exchange
Agent, or Class Counsel any funds necessary to pay such amounts, including the establishment of
adequate reserves for any Taxes (as well as any amounts that may be required to be withheld under
Treasury Regulation § 1.468B-2(1)(2) or Equivalent Regulation). The Parties agree to cooperate
with the Escrow Agent, each other, and their respective tax attorneys and accountants to the extent
reasonably necessary to carry out the provisions of this Paragraph.
10.5 Neither the Defendants nor the Released Persons shall have any liability or
responsibility whatsoever with respect to any Taxes or Tax Expenses, or reporting requirements
that may relate thereto, or the filing of any tax returns or other documents with the Internal Revenue
Service or any other state or local taxing authority. No Person shall have any claim of any kind
against the Defendants or their respective counsel with respect to the matters set forth in this
Paragraph. For the avoidance of doubt, the provisions of this Paragraph 10.5 are not subject to
variation by Court order, except an order expressly consented to in writing by counsel for each of
the Defendants.
11. Fee and Expense Application
11.1 Class Counsel may file an application or applications (the “Fee and Expense
Application”) to the Court for: (i) an award of attorneys’ fees from the $6.5 Million Payment Fund
in an aggregate amount not to exceed forty percent (40%) of the $6.5 Million Payment Fund; (ii)
the reimbursement of expenses and costs incurred by Class Counsel in pursuing the Action from
the $6.5 Million Payment Fund; and (iii) an award of attorneys’ fees from the Initial XL Claim
Amount Fund and the Subsequent XL Claim Amounts in an aggregate amount not to exceed forty
percent (40%) of the XL Claim Amount, up to a maximum amount of six hundred thousand dollars
($600,000) collectively from the Initial XL Claim Amount Fund and the Subsequent XL Claim
Amounts. The Fee and Expense Application must be filed with the Court no later than fourteen
51
(14) days before the Objection/Exclusion Deadline. As soon as is practicable after filing, Class
Counsel shall cause the Claims Administrator to post on the Settlement Website all papers filed
and served in support of the Fee and Expense Application. Class Counsel shall not seek or accept
an award of attorneys’ fees or reimbursement of expenses and costs from the Indemnity Earnout
Payment Fund. Defendants shall take no position on the fairness, reasonableness, or
appropriateness of any Fee and Expense Application that Class Counsel files, so long as the Fee
and Expense Application complies with this Paragraph 11.1.
11.2 All attorneys’ fees for, and any reimbursement of litigation expenses incurred by,
Class Counsel shall be paid out of the Settlement Funds from which such fees and expenses are
awarded. The Defendants and the Released Persons shall have no responsibility for, and no
liability whatsoever with respect to, any payment of attorneys’ fees or expenses to Class Counsel,
which Class Counsel and Plaintiff shall seek to have paid only from the Settlement Funds from
which such fees and expenses are awarded.
11.3 The attorneys’ fees, expenses and costs as awarded by the Court from the $6.5
Million Payment Fund, the Initial XL Claim Amount Fund, and the Subsequent XL Claim
Amounts, respectively (the “Fee and Expense Award”), shall be transferred to Class Counsel from
those Settlement Funds at the same time that payments of claims to Authorized Claimants and
Eligible Equityholders are authorized to be made pursuant to Paragraphs 8.4, 8.7, and 8.9. Class
Counsel shall thereafter allocate the Fee and Expense Award amongst Class Counsel in a manner
that Class Counsel in good faith believes reflects the contributions of such counsel to the
prosecution and settlement of the Class Action. Any disputes between or amongst Class Counsel
regarding attorneys’ fees, expenses and costs shall be resolved by the Court.
11.4 The Defendants and the Released Persons shall have no responsibility for, and no
52
liability whatsoever with respect to, the allocation among Class Counsel, or any other Person who
may assert some claim thereto, of any Fee and Expense Award that the Court may make in this
Class Action, and the Defendants and the Released Persons take no position with respect to such
matters.
11.5 The procedure for and the allowance or disallowance by the Court of any
applications by Class Counsel for attorneys’ fees, costs, and expenses, including the fees of experts
and consultants, to be paid out of the Settlement Funds, are not part of the Settlement set forth in
this Agreement and are to be considered by the Court separate and apart from the Court’s
consideration of the fairness, reasonableness, and adequacy of the Settlement set forth in this
Agreement, and 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 this Agreement, or affect the finality of the Final Judgment and Dismissal
Order approving this Agreement, the Settlement of the Class Action set forth herein, or the finality
or binding nature of any of the releases granted hereunder. Plaintiff shall have no right to
renegotiate or seek to renegotiate any term of this Settlement that affects the Defendants regardless
of whether the Court approves the Fee and Expense Application as proposed.
12. Final Judgment and Order of Dismissal
12.1 If the Preliminary Approval Order is entered by the Court, Class Counsel shall then,
at the Fairness Hearing, request entry of the Final Judgment and Order of Dismissal, that among
other things:
(a) Finds that the Court has jurisdiction over the subject matter of the Action
and over all parties to the Action, including all Settlement Class Members;
(b) Finds that Defendants and Defendants’ Counsel had no duty or obligation
to Class Counsel, Plaintiff, the Settlement Class or the Court (i) to act as
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proponents of the fairness, reasonableness, or adequacy of the Settlement to
Plaintiff and the Settlement Class, or (ii) to review, supplement, clarify, or
correct any submissions, presentations or statements to the Court by
Plaintiff or Class Counsel relating to the fairness, reasonableness, or
adequacy of the Settlement to Plaintiff and the Settlement Class;
(c) Approves finally the Settlement set forth in this Agreement and its terms,
which shall be incorporated by reference, as being a fair, reasonable, and
adequate settlement as to Plaintiff and the Settlement Class within the
meaning of Ala. R. Civ. P. 23 and directing its consummation according to
its terms;
(d) Finds that the mailing and distribution of Class Notices to all Settlement
Class Members implemented pursuant to the Agreement (a) constituted the
best practicable notice under the circumstances; (b) constituted notice that
is reasonably calculated, under the circumstances, to apprise the Settlement
Class Members of the pendency of the Action, their right to object or
exclude themselves from the Agreement and proposed Settlement; and to
appear at the Fairness Hearing; (c) was reasonable and constituted due,
adequate, and sufficient notice to all Persons entitled to receive notice; and
(d) met all applicable requirements of the Alabama Rules of Civil
Procedure, the Due Process Clause of the United States Constitution, and
the rules of the Court;
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(e) Finds that Plaintiff and Class Counsel adequately represented the
Settlement Class for purposes of entering into and implementing the
Agreement;
(f) Separately and expressly approves each of the following as fair and
reasonable to the Settlement Class in the context of the overall Settlement:
i. The release of the portion of the Released Claims identified in
Paragraph 1.65(c) hereof;
ii. Paragraph 2.3 hereof;
iii. the release of Unknown Claims and the operation of Paragraph 2.4
hereof;
iv. Paragraph 2.5 hereof.
(g) Orders that the Action and all claims contained therein, as well as all of the
Released Claims, against the Defendants and the Released Persons by the
Plaintiff, the Settlement Class, and all Settlement Class Members shall be
dismissed with prejudice;
(h) Orders that, upon the Effective Date, Plaintiff and all other Releasing
Persons are permanently enjoined and barred from instituting, commencing,
or prosecuting any action or other proceeding asserting any Released
Claims against any Released Person; each of the Releasing Parties: (i) shall
have, fully, finally, and forever waived, released, relinquished, and
discharged to the fullest extent permitted by law, all Released Claims
against each and all of the Released Persons, whether or not such Releasing
Person executes and delivers a Proof of Claim and Release; (ii) shall forever
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be barred and enjoined from commencing, instituting, or prosecuting a class
action or any other action or proceeding in any court of law or equity,
arbitration tribunal, or other forum of any kind, directly, representatively,
derivatively, or in any other capacity, asserting any Released Claims against
any of the Released Persons; and (iii) agrees and covenants not to sue any
of the Released Persons with respect to any Released Claims or to assist any
third party in commencing or maintaining any suit against any Released
Person related in any way to any Released Claims;
(i) Orders that, upon the Effective Date, the releases between and among
Defendants set forth in Paragraphs 2.8, 2.9, and 2.10 of this Agreement shall
be deemed effective;
(j) Orders that the Court retains continuing and exclusive jurisdiction over all
matters relating to the Settlement or the consummation of the Settlement;
the validation of the Settlement; the construction and enforcement of the
Settlement and any orders entered pursuant thereto; and all other matters
pertaining to the Settlement or its implementation and enforcement;
(k) Orders that none of the Agreement nor the Settlement contained therein, any
act performed or document executed pursuant to or in furtherance of the
Agreement or the Settlement, or any statement made in the negotiation
thereof or in any proceedings before the Court or any other forum regarding
the Agreement or the Settlement or the negotiation thereof is or may be
deemed to be or used as a presumption, concession, or admission of, or
evidence of, any fault, liability, wrongdoing, or any violation of any statute,
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regulation, law, rule, or principle of common law or equity, or the truth or
merit of any allegations or claims in the Action, or any infirmity or
weakness of any claim or defense, as to any facts or claims that have been
or might be alleged or asserted in the Action, and shall not be discoverable,
interpreted, construed, deemed, invoked, offered, or received, directly or
indirectly, in evidence or otherwise used by any Person in any action or
proceeding, whether civil, criminal, or administrative, and shall have no
precedential value; provided, however, that the Parties, their respective
counsel or any Settlement Class Member may file the Agreement in an
action to enforce the terms of the Agreement and the Settlement contained
therein. The Released Persons may file the Agreement and/or the Final
Judgment and Order of Dismissal in any action that may be brought against
them in order to support a defense order to support a defense or
counterclaim based on the principles of res judicata, collateral estoppel, full
faith and credit, release, good faith settlement, judgment bar, or reduction
or any other theory of claim preclusion or issue preclusion or similar
defense or counterclaim; and
(l) Directs that the judgment of dismissal with prejudice of the Action shall be
final and entered forthwith.
12.2 At the Fairness Hearing, Class Counsel also will request that the Court approve the
proposed Plan of Allocation, the Claims Administration Process, and the Fee and Expense
Application.
12.3 Class Counsel shall move the Court to enter the Final Judgment and Order of
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Dismissal and to approve the Plan of Allocation and Claims Administration Process after
dissemination of the Class Notice, but not later than seven (7) days before the Fairness Hearing.
The Plan of Allocation must be filed with the Court no later than fourteen (14) days before the
Objection/Exclusion Deadline. As soon as is practicable after filing, Class Counsel shall cause the
Claims Administrator to post on the Settlement Website the motion asking the Court to enter the
Final Judgment and Order of Dismissal and all other papers filed and served in support of final
approval of the Settlement, the proposed Plan of Allocation, and the Claims Administration
Process.
12.4 Defendants agree to cooperate in good faith with Class Counsel to effectuate and
implement the terms and conditions of this Agreement, including the requests for and entry of the
Preliminary Approval Order and the Final Judgment and Dismissal Order, and to exercise their
commercially reasonable efforts to accomplish the terms of this Agreement if it is approved by the
Court, provided, however, that nothing in this Paragraph 12.4 shall be construed in a manner that
is inconsistent with the disclaimer in Paragraph 3.4 hereof.
12.5 In furtherance thereof, Defendants, without admitting that the Action meets the
requisites for certification of a contested litigation class under Alabama Rule of Civil Procedure
23 or for class certification for any purpose other than settlement, hereby agree, on each and all of
the terms and conditions set forth herein, and solely for purposes and in consideration of the
Settlement set forth herein, not to oppose the certification of the Settlement Class for settlement
purposes only, the appointment of Class Counsel as legal counsel for the Settlement Class, or the
approval of Plaintiff as the representative of the Settlement Class.
12.6 For the avoidance of all doubt, the Court’s certification of the Settlement Class for
settlement purposes only shall not be deemed to be an adjudication of any fact or issue for any
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purpose other than the accomplishment of the provisions of this Settlement and this Agreement,
and shall not be considered as law of the case, res judicata, judicial estoppel, promissory estoppel,
or collateral estoppel in the Action or in any other proceeding unless and until the Effective Date
is reached. Whether or not the Settlement reaches the Effective Date, the Parties’ stipulations and
agreements as to class certification for settlement purposes only (and any and all statements or
submission made by the Parties in connection with seeking the Court’s approval of the Settlement
and this Agreement) shall not be deemed to be any stipulation or grounds for estoppel or preclusion
as to the propriety of class certification, nor any admission of fact or law regarding any request for
class certification, in any other action or proceeding, whether or not involving the same or similar
claims. In the event the Settlement and this Agreement are not approved, or the Effective Date is
not reached, or this Agreement is terminated, cancelled, or fails to become effective for any reason
whatsoever, the Parties’ stipulations and agreements as to certification of the Settlement Class
shall be null and void and the Court’s certification order shall be vacated, and thereafter no class
or classes will remain certified, and nothing in this Agreement or other papers or proceedings
related to the Settlement shall be used as evidence or argument by any party concerning whether
the Action may properly be maintained as a class action under applicable law; provided, however,
that Plaintiff and Class Counsel may thereafter seek certification of a litigation class or classes
before the Court without reference to this Settlement or anything filed in support of it, and
Defendants may oppose such certification on any available grounds. In the event the Settlement
and this Agreement are not approved, or the Effective Date is not reached, or this Agreement is
terminated, cancelled, or fails to become effective for any reason whatsoever, nothing in this
Settlement or this Agreement shall be admissible in any effort to certify the proposed Settlement
Class as a litigation class or any other class in this or any other court under any circumstances.
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13. Conditions of Settlement, Effect of Disapproval, Reduction, Modification, or Termination of Settlement
13.1 The Effective Date of this Agreement shall be conditioned on the occurrence of all
of the following events: (a) the Defendants have timely transferred or caused to be timely
transferred (i) the $6.5 Million Payment into the $6.5 Million Payment Escrow Account; (ii) the
Indemnity Earnout Payment into the Indemnity Earnout Payment Escrow Account; and (iii) the
Initial XL Claim Amount into the Initial XL Claim Amount Escrow Account, as required by
Paragraphs 4.1, 4.2, 4.3, and 4.4 above; (b) the Court has entered a Preliminary Approval Order
approving the Class Notices, as required by Paragraph 5.2 above; (c) the Court has approved the
Settlement on the terms and conditions set forth in this Agreement (or on such terms as the Parties
later agree), including Paragraph 12.1, and the approved Settlement contains a release and waiver
consistent with the terms of this Agreement, including: (i) the release of the portion of the Released
Claims identified in Paragraph 1.65(c) hereof; (ii) Paragraph 2.3 hereof; (iii) the release of
Unknown Claims and the operation of Paragraph 2.4 hereof; and (iv) Paragraph 2.5 hereof; (d) the
Court has entered the Final Judgment and Order of Dismissal, which, inter alia, dismisses the
Action with prejudice and expressly refers to and approves the release and waiver set forth in
Paragraphs 1.65(c), 2.3, 2.4, and 2.5 hereto; (e) no Party or their counsel has given notice of intent
to terminate the Settlement pursuant to Paragraphs 13.3, 13.5, or 13.6; and (f) the Final Judgment
and Order of Dismissal has become final and unappealable, as defined in Paragraph 1.19 above.
13.2 Upon the occurrence of all of the events referenced in Paragraph 13.1, any and all
remaining interest or right of the Defendants to the Settlement Funds shall be absolutely and
forever extinguished.
13.3 Class Counsel, acting on behalf of Plaintiff and the Settlement Class, the Holbrook
Defendants, the Non-Holbrook Director Defendants, Sterne Agee, and Stifel each have the right
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to terminate this Settlement in each of their separate discretions by providing written notice to the
other Parties of an election to do so within thirty (30) days following any of the following events:
(a) the Court enters an order declining to enter the Preliminary Approval Order identical in all
material respects with Exhibit F; (b) the Court enters an order declining to approve in all material
respects the Settlement set forth in this Agreement; (c) the Court declines to enter a Final Judgment
and Order of Dismissal that in all material respects satisfies the requirements set forth in Paragraph
12.1; or (d) the Final Judgment and Order of Dismissal is modified in any material respect or
reversed by the Alabama Supreme Court or any intermediate court of appeal. Except as set forth
in Paragraph 13.4 below, each Party shall be the sole judge of materiality as to it with respect to
clauses (a), (b), (c), and (d) of this Paragraph 13.3.
13.4 Neither a modification nor reversal on appeal of the Plan of Allocation or the Fee
and Expense Award shall constitute grounds for cancellation and termination of this Agreement.
13.5 Each Defendant may also, in his, her, or its sole and absolute judgment and
discretion, elect to terminate this Settlement by providing written notice to the other Parties of an
election to do so within thirty (30) days following any of the following events: (a) the Court awards
attorneys’ fees and costs, expert fees, costs, expenses, service awards, or incentive awards other
than from the Settlement Funds as set forth in Paragraphs 11.1, 11.2, and 11.3; or (b) the Court
awards attorneys’ fees and costs, expert fees, costs, expenses, service awards, or incentive awards
to anyone other than Plaintiff and Class Counsel.
13.6 If valid and timely requests for exclusion are submitted by members of the
Settlement Class whose aggregate, fully-diluted holdings of the outstanding shares of SAG
common and preferred stock as of June 5, 2015 (including shares of common stock issuable upon
exercise of In-the-Money Company Warrants and the conversion of SAG convertible debentures,
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as well as vested performance and tracking shares under SAG’s Amended and Restated
Compensation Plan and Amended and Restated 2009 Deferred Compensation Plan) as a
percentage of the total number of fully-diluted outstanding shares of SAG common and preferred
stock as of June 5, 2015 for all members of the Settlement Class exceeds the percentage specified
in a separate Supplemental Agreement Regarding Requests for Exclusion (“Supplemental
Agreement”) executed between Plaintiff and the Non-Holbrook Director Defendants, Sterne Agee,
and Stifel, then each of the Defendants who are parties to the Supplemental Agreement shall have
the option (which option may be exercised unilaterally) to terminate this Settlement in accordance
with the procedures set forth in the Supplemental Agreement. The Supplemental Agreement will
not be filed with the Court unless and until a dispute concerning its interpretation or application
arises between Plaintiff and the Defendants who are parties thereto, or among and between the
Defendants who are parties thereto, but such filing, in the event it occurs, shall be carried out to
the fullest extent possible in accordance with the practices of the Court so as to maintain the
confidentiality of the Supplemental Agreement.
13.7 In the event that any Party terminates the Settlement pursuant to Paragraphs 13.3,
13.5, or 13.6, or, for any other reason, this Agreement fails to become effective in accordance with
its terms, then, within five (5) business days after written notification of such event is sent by
Defendants’ Counsel or Class Counsel to the Escrow Agent, the Escrow Agent shall refund the
Settlement Funds (including accrued income), plus any amount then remaining in the Notice and
Administration Fund (including accrued income), less any Taxes or Notice and Administration
Costs due or are determined to be chargeable to the Notice and Administration Fund, to the
Defendants in the same proportion paid by the Defendants pursuant to written instructions from
the Defendants’ Counsel. In such event, the Defendants shall be entitled to any Tax refunds owing
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to the Settlement Funds. At the request of Defendants’ Counsel, the Escrow Agent or its designee
shall apply for any such refund and pay the proceeds, less the cost of obtaining the Tax refund,
pursuant to written instructions from Defendants’ Counsel.
13.8 In the event that any Party terminates this Agreement pursuant to Paragraphs 13.3,
13.5, or 13.6, or, for any other reason, this Agreement fails to become effective in accordance with
its terms, then, Defendants shall have no obligation under this Agreement or otherwise related to
the Settlement, and the Parties shall be deemed to have reverted to their respective status and
positions in the Action as of the Execution Date and shall proceed in all respects as if this
Agreement and any related orders had not been entered. In such event, the terms and provisions
of this Agreement, with the exception of Paragraphs 3.5, 9.4, 13.7, 13.8, 13.9, and 14.3 herein,
shall have no further force and effect with respect to the Parties and shall not be used in this Action
or in any other proceeding for any purpose, and any judgment or order entered by the Court
pursuant to the terms of this Agreement shall be treated as vacated, pro tunc.
13.9 If the Effective Date does not occur, or if this Agreement is terminated pursuant to
its terms, neither the Plaintiff nor Class Counsel shall have any obligation to repay any amounts
actually and properly disbursed from the Notice and Administration Fund. In addition, any
expenses already incurred and properly chargeable to the Notice and Administration Fund hereof
at the time of such termination or cancellation but which have not been paid, shall be paid by the
Escrow Agent in accordance with the terms of this Agreement prior to the balance being refunded
in accordance with Paragraph 13.7 above.
14. Miscellaneous Provisions
14.1 The Parties (a) acknowledge that it is their intent to consummate this Agreement
and to fully and completely resolve all claims that have been or could have been asserted in the
Action and (b) agree to cooperate to the extent necessary to effectuate and implement all terms
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and conditions of this Agreement and to exercise their good faith efforts to accomplish the
foregoing terms and conditions of this Agreement, each according to the obligations imposed upon
him or it by the Agreement, including approval of the Settlement and the ultimate occurrence of
the Effective Date, provided, however, that nothing in this Paragraph 14.1 shall be construed in a
manner that is inconsistent with the disclaimer in Paragraph 3.4 hereof.
14.2 The Parties agree that the Total Settlement Amount, as well as the other terms of
the Settlement, were negotiated at arm’s-length and reflect a good-faith settlement of the claims
of the Plaintiff, the Settlement Class, and the Settlement Class Members, reached voluntarily after
consultation with experienced legal counsel.
14.3 This Agreement, and all negotiations, documents, and discussions associated with
it and any act performed or document executed pursuant to or in furtherance of this Agreement or
the Settlement, shall be, except as set forth in this Agreement, without prejudice to the rights,
positions, or privileges of the Parties and are not and shall not be deemed to be or used as a
presumption, concession, or admission of, or evidence of, any fault, liability, wrongdoing, or any
violation of any statute, regulation, law, rule, or principle of common law or equity, or the truth or
merit of any allegations or claims in the Action, or any infirmity or weakness of any claim or
defense, as to any facts or claims that have been or might be alleged or asserted in the Action, and
shall not be discoverable, interpreted, construed, deemed, invoked, offered, or received, directly
or indirectly, in evidence or otherwise used by any Person in the Action, or in any other action or
proceeding, whether civil, criminal, or administrative, and shall have no precedential value;
provided, however, that nothing contained herein shall preclude use of the Agreement in any
proceeding to enforce this Agreement or the Final Judgment and Order of Dismissal.
14.4 The Parties agree that pursuant to certain settlement agreements entered into
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between, on the one hand, Stifel and Sterne Agee, and, on the other hand, James S. Holbrook, Jr.
and William K. Holbrook, Stifel shall make or cause to be made certain payments to or on behalf
of James S. Holbrook, Jr. and William K. Holbrook. The Parties further agree that those payments
will be charged to the Indemnity Earnout Amount, as set forth in the Indemnity Earnout Amount
Accounting.
14.5 The Parties agree that:
(a) Stifel has disclosed to Plaintiff, Class Counsel, the Holbrook Defendants,
and the Non-Holbrook Director Defendants an accounting of the Indemnity
Earnout Amount Balance as of June 30, 2018 in the Indemnity Earnout
Amount Accounting;
(b) Plaintiff, Class Counsel, the Holbrook Defendants, and the Non-Holbrook
Director Defendants have reviewed the Indemnity Earnout Amount
Accounting, including each of the specific amounts that Stifel has charged
to the Indemnity Earnout Amount as reflected in the Indemnity Earnout
Amount Accounting;
(c) The Indemnity Earnout Amount Accounting is substantially correct and all
amounts that Stifel heretofore has charged to the Indemnity Earnout
Amount have been properly charged to the Indemnity Earnout Amount;
(d) Any claims relating to or arising from Stifel’s administration of the
Indemnity Earnout Amount are included in the definition of Released
Claims set forth in Paragraph 1.65 and shall be released by the Releasing
Persons upon the Effective Date as set forth in Section II.2;
(e) As shown on the Indemnity Earnout Amount Accounting, Stifel has agreed
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to pay interest on the Indemnity Earnout Payment in an amount equal to
$1,350,000. The Indemnity Earnout Payment interest shall be credited to
the Indemnity Earnout Amount Balance, as reflected in the Indemnity
Earnout Amount Accounting;
(f) The Indemnity Earnout Amount Accounting shows that, as of June 30,
2018, an Adjusted Parent Deficit existed in the amount of the Adjusted
Parent Deficit Amount; and
(g) If, at any time following the Execution Date, there remains an Adjusted
Parent Deficient, then all payments otherwise contemplated to be paid by
Stifel pursuant to the Merger Agreement, including, without limitation, any
payments related to (i) a tax receivable that is the subject of an ongoing IRS
audit, (ii) any amounts collected by Stifel or Sterne Agee from XL or any
other insurance company other than with respect to the XL Claim Amount,
or (iii) the final resolution of any claim for indemnification made by Stifel
which is set forth on the Indemnity Earnout Amount Accounting, shall
instead be retained by Stifel, having the effect of reducing the Adjusted
Parent Deficit by the amount so retained. At any time at which there is then
no Adjusted Parent Deficit, payments contemplated to be paid by Stifel
pursuant to the Merger Agreement, including, without limitation, the
payment of interest on the Indemnity Earnout Payment referenced in
Paragraph 14.5(e) or any payment otherwise contemplated under Section
3.06(b) of the Merger Agreement, shall be distributed in accordance with
the Merger Agreement.
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14.6 The Parties agree that:
(f) Stifel has disclosed to Plaintiff, Class Counsel, the Holbrook Defendants,
and the Non-Holbrook Director Defendants an accounting of the Special
Litigation Reserve as of June 30, 2018, attached hereto as Exhibit L (the
“Special Litigation Reserve Accounting”);
(g) Plaintiff, Class Counsel, the Holbrook Defendants, and the Non-Holbrook
Director Defendants have reviewed the Special Litigation Reserve
Accounting, including each of the specific amounts that Stifel has charged
to the Special Litigation Reserve as reflected in the Special Litigation
Reserve Accounting;
(h) The Special Litigation Reserve Accounting is substantially correct and all
amounts that Stifel has charged to the Special Litigation Reserve have been
properly charged to the Special Litigation Reserve;
(i) The full balance of the Special Litigation Reserve, after excluding all
amounts that Stifel has charged to the Special Litigation Reserve, has
already been distributed to Equityholders and there will be no additional
distributions from the Special Litigation Reserve to Equityholders in the
future; and
(j) Any claims relating to or arising from Stifel’s administration of the Special
Litigation Reserve are included in the definition of Released Claims set
forth in Paragraph 1.65 and shall be released by the Releasing Persons upon
the Effective Date as set forth in Section II.2.
14.7 The waiver by any Party of any breach of this Agreement shall not be deemed or
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construed as a waiver of any other breach of this Agreement, whether prior, subsequent, or
contemporaneous. If one Party to this Agreement considers another Party to be in breach of its
obligations under this Agreement, that Party must provide the breaching Party with written notice
of the alleged breach and provide a reasonable opportunity to cure the breach before taking any
action to enforce any rights under this Agreement.
14.8 Released Persons may file this Agreement and/or the Final Judgment and Order of
Dismissal in any other action that may be brought against them in order to support a defense or
counterclaim based on principles of res judicata, collateral estoppel, full faith and credit, release,
good faith settlement, judgment bar or reduction or any theory of claim preclusion or issue
preclusion or similar defense or counterclaim.
14.9 Each of the Released Persons is intended to be and is a third-party beneficiary of
this Agreement and is authorized to enforce the provisions of this Agreement, including the release
of the Released Claims against the Released Persons and covenant not to sue the Released Persons,
and such other provisions of this Agreement as are applicable to each Released Person.
14.10 The Parties and their counsel, and each of them, agree, to the extent permitted by
law, that all agreements made and orders entered during the course of the Action relating to the
confidentiality of information shall survive this Agreement.
14.11 Neither the Defendants nor Defendants’ Counsel shall object to either the fairness,
adequacy and reasonableness of the Settlement or the certification of the Settlement Class,
provided, however, that nothing in this Paragraph 14.11 shall be construed in a manner that is
inconsistent with Paragraph 3.4 hereof.
14.12 All of the Exhibits to this Agreement are material and integral parts hereof and are
fully incorporated herein by this reference as though fully set forth herein.
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14.13 This Agreement may be amended or modified, or any breach thereof waived, only
by a written instrument signed by or on behalf of all Parties or their successors-in-interest.
14.14 This Agreement and the Exhibits attached hereto constitute the entire, complete,
and integrated agreement among the Parties and supersedes any and all prior negotiations and
agreements. The Parties acknowledge that they enter into this Agreement on the basis of the
covenants, conditions, representations, and agreements set forth herein, only, and neither Party has
relied on any covenant, condition, representation, or agreement not expressly set forth in this
Agreement.
14.15 Except as otherwise provided herein, each Party shall bear its own costs.
14.16 This Agreement 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 facsimile or
PDF signature shall be deemed an original signature for purposes of executing this Agreement. A
complete set of original executed counterparts shall be filed with the Court.
14.17 This Agreement shall be binding upon, and inure to the benefit of, the successors
and permitted assigns of the Parties hereto and upon all other Persons claiming any interest in the
subject matter hereto through any of the Parties hereto, including any Settlement Class Members.
No assignment of this Agreement or the obligations, rights or benefits hereof may be made except
with the prior written consent of the other Party, and any purported assignment not consistent with
this Paragraph shall be null and void.
14.18 The Court shall retain jurisdiction with respect to the implementation and
administration of the Settlement set forth in this Agreement, and all Parties hereto submit to the
jurisdiction of the Court for purposes of implementing and administering the Settlement.
14.19 For the purposes of construing or interpreting this Agreement, the Parties agree that
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it is to be deemed to have drafted equally by all Parties hereto and shall not be construed strictly
for or against any Party.
14.20 The headings herein are used for the purpose of convenience only and are not meant
to have legal effect.
14.21 This Agreement and the Exhibits hereto shall be construed and enforced in
accordance with the laws of the State of Alabama applicable to contracts made within such state
without regard to any otherwise applicable choice of law principles.
14.22 The terms of this Agreement are not severable, but are interdependent and have
been agreed to only as a whole by the Parties.
14.23 Plaintiff and Defendants acknowledge that they have been represented by counsel
and have made their own investigations of the matters covered by this Agreement to the extent
they have deemed it necessary to do so. Therefore, Plaintiff and Defendants and their respective
counsel agree that they will not seek to set aside any part of this Agreement on the grounds of
mistake or fraud. Moreover, Plaintiff and Defendants and their respective counsel understand,
agree, and expressly assume the risk that any fact may turn out hereinafter to be other than,
different from or contrary to the facts now known to them or believed by them to be true, and
further agree that this Agreement shall be effective in all respects notwithstanding and shall not be
subject to termination, modification, or rescission by reason of any such difference in facts.
14.24 All notices shall be delivered by personal delivery, nationally-recognized courier
service, or prepaid registered mail, return receipt requested. Notices shall be deemed delivered
upon actual receipt or tender to and rejection by the intended recipient. Any Party may change the
address information provided in this Paragraph 14.24 by written notice delivered in accordance
with this Paragraph. Any notice or materials to be provided to the Plaintiffs, the Settlement Class,
70
or Class Counsel pursuant to or relating to this Agreement shall be sent to Thomas E. Baddley, Jr.
and Andrew P. Campbell, at the addresses listed below. Any notice or materials to be provided to
the Holbrook Defendants pursuant to or relating to this Agreement shall be sent to Bruce L. Gordon
and John Dana at the address listed below. Any notice or materials to be provided to the Non-
Holbrook Director Defendants pursuant to or relating to this Agreement shall be provided to Will
Hill Tankersley at the address listed below. Any notice or materials to be provided to Sterne Agee
pursuant to or relating to this Agreement shall be provided to Matthew I. Penfield at the address
listed below. Any notice or materials to be provided to Stifel pursuant to or relating to this
Agreement shall be provided to David G. Hymer at the address listed below. All notices shall be
delivered by personal delivery, nationally-recognized courier service, or prepaid registered mail,
return receipt requested. Notices shall be deemed delivered upon actual receipt or tender to and
rejection by the intended recipient. Any Party may change the address information provided in
this Paragraph 14.24 by written notice delivered in accordance with this Paragraph. For the
avoidance of doubt, this Paragraph 14.24 shall not apply to any Class Notice.
14.25 Unless the context of this Agreement clearly requires otherwise: (a) references to
the plural include the singular, the singular the plural, and the part the whole, (b) references to one
gender include all genders, (c) “or” has the inclusive meaning frequently identified with the phrase
“and/or,” (d) “including” has the inclusive meaning frequently identified with the phrase
“including but not limited to” or “including without limitation,” (e) references to “hereunder,”
“herein” or “hereof” relate to this Agreement as a whole, and (f) the terms “dollars” and “$” refer
to U.S. dollars. Any accounting term used herein without specific definition shall have the
meaning ascribed thereto by U.S. generally accepted accounting practices. Section, subsection,
exhibit and schedule references are to this Agreement as originally executed unless otherwise
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specified. Any reference herein to any statute, rule, regulation or agreement, including this
Agreement, shall be deemed to include such statute, rule, regulation or agreement as it may be
modified, varied, amended or supplemented from time to time. Any reference herein to any Person
shall be deemed to include the heirs, personal representatives, successors and permitted assigns of
such Person.
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David G. Hymer One of the Attorneys for Stifel Financial Corp.
OF COUNSEL:
David G. Hymer Tiffany J. DeGruy Zachary A. Madonia Bradley Arant Boult Cummings LLP 1819 Fifth Avenue North Birmingham, Alabama 35203 Telephone: (205) 521-8000 Facsimile: (@05) 521-8800 Email: [email protected]
Attorneys for Defendant Stifel Financial Corp.