UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF...
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UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
Unite Southerntates of
SEP 2 7 2005
Il4ichae! N y, Clerk of Court
IN RE
RELIANT SECURITIES LITIGATION
THIS DOCUMENT RELATES TO: ALL ACTIONS
CIVIL ACTION NO. H-02-1810 (CONSOLIDATED) Judge Ewing Werlein, Jr.
STIPULATION AND AGREEMENT OF SETTLEMENT
This Stipulation and Agreement of Settlement (the "Stipulation"), dated as of September
2005, is made and entered into by and among Class Representative Louisiana Municipal
Police Employees' Retirement System ("MPERS"), by and on behalf of itself and the other
members of the Class (as herein defined), and Reliant Energy, Inc. (nlk/a CenterPoint Energy,
Inc.), Reliant Resources, Inc. (nlk!a Reliant Energy, Inc.), R. Steve Letbetter, Stephen W. Naeve,
and Mary P. Ricciardello (collectively the "Reliant Defendants"), Joe Bob Perkins ("Perkins"),
Deloitte & Touche LLP ("Deloitte"), and Goldman, Sachs & Co., Credit Suisse First Boston
Corp. (nlkla Credit Suisse First Boston LLC), ABN AMRO Rothschild LLC, Banc of America
Securities LLC, Deutsche Banc Alex. Brown, Inc., Merrill Lynch Pierce Fenner & Smith Inc.,
and UBS Warburg LLC (nlkla UBS Securities, L.L.C.) (collectively the "Underwriters" or
"Underwriter Defendants") (together, the "Parties to the Stipulation"), by and through their
undersigned counsel.
WHEREAS:
a. On or about May 15, 2002, a number of putative class actions were filed in the
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United States District Court for the Southern District of Texas alleging violations of Sections
10(b) and 20(a) of the Securities Exchange Act of 1934 (the "Exchange Act"), Rule lOb-5
promulgated thereunder, and Sections 11 and 15 of the Securities Act of 1933 (the "Securities
Act"), in connection with the purchase of common stock of Reliant Energy, Inc. and/or Reliant
Resources, Inc.
b. On August 1, 2002, the Court consolidated all related cases under the caption In
re Reliant Securities Litigation, Civ. Act. No. H-02-1810 (the "Action"). On August 29, 2002,
the Court appointed MPERS, the Boca Raton Police & Firefighters Retirement System, and the
Louisiana School Employees' Retirement System as Lead Plaintiffs in this case. On November
27, 2002, the Court appointed the law firm of Berman DeValerio Pease Tabacco Burt & Pucillo
as Lead Counsel and the law firm of Nickens, Keeton, Lawless, Farrell & Flack LLP as Liaison
Counsel.
c. On January 27, 2003, Lead Plaintiffs filed a Consolidated Class Action Complaint
("Complaint"), alleging claims under Sections 10(b) and 20(a) of the Exchange Act on behalf of
open-market purchasers of Reliant Energy, Inc.; claims under Sections 10(b) and 20(a) of the
Exchange Act on behalf of open-market purchasers of Reliant Resources, Inc.; and claims under
Sections 11, 12(a), and 15 of the Securities Act and Article 581-33 of the Texas Securities Act
on behalf of purchasers of Reliant Resources, Inc. in or traceable to the Reliant Resources, Inc.
initial public offering on April 30, 2001 (the "Reliant IPO")
d. The Complaint alleges that the Registration Statement and Prospectus for the
Reliant IPO, and the documents incorporated by reference therein, contained material
misrepresentations and/or failed to disclose material facts regarding Reliant Resources' business,
financial results, and operations capabilities; that those material misrepresentations and
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omissions artificially inflated the price of Reliant Resources common stock; and that as a result
of those material misrepresentations and omissions, members of the Class suffered damages by
purchasing Reliant Resources' stock at artificially inflated prices.
e. Specifically, the Complaint alleges that the Company falsely reported a total of
$7.9 billion in revenue over a three-year period, which made Reliant Energy, Inc.'s energy
trading unit and Reliant Resources, Inc. post-IPO appear far more successful than it was. This
was allegedly accomplished through its wholesale energy trading division reporting revenues
from "round-trip" or "wash" energy trades, whereby Reliant simultaneously bought and sold
electricity and natural gas from other energy traders in the same amount and for the same price.
The Complaint further alleges that these transactions lacked any economic substance and served
no purpose other than to falsely portray the size of the energy trading business and to boost the
wholesale trading division's standing in the gas and power trading industry.
L The Complaint further alleges that Reliant Resources went public at $30 per
share, rising 10% on its first day of trading. The Complaint alleges that on May 10, 2002,
however, Reliant Resources announced that it had canceled a $500 million bond sale and that in
the wake of revelations about another energy company that had engaged in round-trip trades,
Reliant Resources had undertaken a review of its practices and had determined that it too had
engaged in "similar" trades. The Complaint further alleges that on May 13, 2002, Reliant
Resources issued a press release confirming that it had engaged in round-trip energy trading and
disclosing that it had artificially inflated its revenues and expenses by roughly 10% for a three-
year period, from fiscal year 1999 to 2001, including the 1999 and 2000 results of operations that
were part of Reliant Resources' Prospectus for the Reliant IPO. The Complaint also alleges that
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Reliant Resources (and in the pre-TPO periods Reliant Energy, Inc.) subsequently restated their
financial statements for fiscal years 1999, 2000, and 2001 to reduce their revenues and expenses.
g. The Complaint alleges that statements made by Deloitte in the IPO Prospectus:
that the Company's consolidated financial statements for fiscal years 1999 and 2000 "present
fairly in all material respects" the financial position of Reliant Resources; that Deloitte had
conducted its audits in accordance with Generally Accepted Auditing Standards ("GAAS"); and
that such audits provided "a reasonable basis for our opinion," were false and misleading
because Reliant Resources' revenues were materially overstated in 1999 and 2000 due to trades
that had no economic substance and were done solely to inflate revenues and trading volume
rankings and because Deloitte's audits had failed to uncover these "round-trip" or "wash" trades
and therefore did not provide a reasonable basis for the auditor's opinion.
h. On March 28, 2003, the Reliant Defendants filed a motion to dismiss Plaintiffs'
claims under Sections 10(b) and 20(a) of the Exchange Act, Section 12(a) of the Securities Act
and Article 581-33 of the Texas Securities Act. On April 28, 2003, the Reliant Defendants filed
an answer and affirmative defenses with respect to Lead Plaintiffs' claims under Sections 11 and
15 of the Securities Act. On June 6, 2003, Defendant Joe Bob Perkins also filed a motion to
dismiss Lead Plaintiffs' claims under Sections 10(b) and 20(a) of the Exchange Act, Sections 11,
12, and 15 of the Securities Act, and Article 581-33 of the Texas Securities Act. Also, on June 6,
2003, the Underwriter Defendants filed an answer and affirmative defenses with respect to Lead
Plaintiffs' Section I and 12 claims brought against them.
i. On August 5, 2003, Defendant Deloitte filed an answer to the Complaint, denying
its substantive allegations and claims and asserting various defenses, including without limitation
that (i) at all times, Deloitte acted in good faith and exercised reasonable care and did not know,
ru
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and in the exercise of reasonable care could not have known, of any misstatements alleged in the
Complaint, (ii) Deloitte was entitled to and did justifiably rely on material information provided
to it by others, (iii) no act by Deloitte caused any loss or depreciation of the value of any
security, and (iv) Plaintiffs' claims were barred in whole or in part by the statute of limitations
and/or the doctrine of laches. Deloitte denies making any misrepresentation, engaging in any
wrongdoing whatsoever, violating Generally Accepted Accounting Principles ("GAAP") or
GAAS or otherwise failing to do what it had an obligation to do.
j. On January 16, 2004, the Court entered a Memorandum Opinion and Order
dismissing with prejudice (i) Plaintiffs' claims on behalf of open-market purchasers of Reliant
Energy, Inc. and Reliant Resources, Inc. for violations of Sections 10(b) and 20(a) of the
Exchange Act; (ii) Plaintiffs' claims under Section 12(a)(2) of the Securities Act in connection
with the Reliant IPO; (iii) Plaintiffs' claim against Perkins for violation of Section 11 of the
Securities Act in connection with the Reliant IPO; and (iv) Plaintiffs' claims under the Texas
Securities Act. Still pending after this Order were Plaintiffs' claims against the Reliant
Defendants, Defendant Deloitte and the Underwriter Defendants for violations of Section II of
the Securities Act in connection with the Reliant IPO. Also pending were Plaintiffs' claim under
Section 15 of the Securities Act as to Defendants Reliant Energy, Inc., R. Steve Letbetter,
Stephen W. Naeve, Mary P. Ricciardello, and Joe Bob Perkins. The Section 11 and 15 claims
relate to alleged material misstatements and omissions in the Registration Statement and
Prospectus for the Reliant IPO. The Court's Memorandum Opinion and Order of January 16,
2004 dismissed with prejudice all claims made on behalf of open-market purchasers of Reliant
Energy, Inc.
k. On February 2, 2004, Lead Plaintiffs filed a motion and memorandum of law
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pursuant to Fed. R. Civ. P. 54(b) for reconsideration or, in the alternative, for certification of
partial final judgment with respect to the Court's Memorandum Opinion and Order of January
16, 2004. On April 23, 2004, the Court entered an Order denying this motion.
1. On June 2, 2004, Lead Plaintiffs moved for class certification and appointment of
MPERS as class representative.' On July 30, 2004, Defendants filed memoranda in opposition to
class certification; on August 31, 2004, Lead Plaintiffs filed a reply memorandum in support of
class certification; on September 20, 2004, Reliant Defendants filed a surreply to Lead Plaintiffs
reply; and on October 13, 2004, Lead Plaintiffs filed a response to Reliant Defendants' surreply.
The Court held a hearing on the issue of class certification on February 16, 2005. On February
23, 2005, the Court entered a Memorandum Opinion and Order Certifying the following Class:
"[A]II persons or entities who purchased common shares of Reliant Resources in the Initial
Public Offering on April 30, 2001, or traceable thereto, pursuant to the Reliant Resources
Registration Statement and Prospectus dated April 30, 2001, for the period from April 30, 2001,
through May 14, 2002, and who suffered injury in the form of losses from such purchases, with
exclusions from the class as specified by Lead Plaintiffs in their motion."
m. On March 8, 2005, Reliant Defendants petitioned the United States Court of
Appeals for the Fifth Circuit for permission to appeal the District Court's order granting class
certification. Reliant Defendants also moved on March 22, 2005 for reconsideration of the
Court's order granting class certification. Lead Plaintiffs filed memoranda in opposition to both
the petition to the Fifth Circuit and the motion for reconsideration. On April 27, 2005, the Fifth
Circuit entered a per curiam opinion denying Reliant Defendants' petition. On May 27, 2005,
'The other two Lead Plaintiffs appointed by the Court - the Boca Raton Police & Firefighters Retirement System and the Louisiana School Employees' Retirement System - did not purchase common shares of Reliant Resources. Inc. and therefore did not seek appointment as class representatives on the Section 11 and 15 claims.
on
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the District Court denied Reliant Defendants' motion for reconsideration.
n. During discovery, the Underwriters produced the Underwriting Agreement
between the Underwriters and Reliant Resources, Inc. relating to the Reliant TPO which contains
various provisions for indemnification and reimbursement of the Underwriters in connection
with this Action. After substantial discovery, including extensive document production and
depositions of fact witnesses, Lead Plaintiffs determined that, based on discovery conducted it
was appropriate to forgo, without prejudice, proceeding further with litigation of the claims
against the Underwriters. Accordingly, on May 10, 2005, the Underwriters and Lead Plaintiffs
entered into a Tolling Agreement. The Tolling Agreement provides, inter alia, that in the event
Plaintiffs and the Reliant Defendants agree to settle the Action as between them, such settlement
shall include a dismissal with prejudice of Plaintiffs' Claims against the Underwriters and
provide the Underwriters with a release from any liability in the same manner and to the same
extent as provided to the Reliant Defendants.
o. On March 14 and 15, 2005, Class Representative MPERS (as the sole purchaser
of Reliant Resources, Inc. common stock among the Lead Plaintiffs), and the Defendants
participated in a mediation under the supervision of the Honorable Nicholas H. Politan, retired
United States District Judge. Class Representative MPERS, by and through its counsel,
conducted discussions and arms' length negotiations with counsel for and representatives of
Defendants to determine if the Action could be compromised and settled achieving the best
possible relief consistent with the interests of the Class. These settlement negotiations continued
after the March 14, 2005 meeting. On July 14, 2005, the parties met for a second mediation
under the supervision of Judge Politan. The Settlement was achieved as a result of this second
mediation.
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p. On July 29, 2005, Class Representative MPERS and the Reliant Defendants,
Perkins and Deloitte entered into a Memorandum of Understanding (the "MOU"), memorializing
their agreement in principle to settle the Action, subject to Court approval, on the terms set forth
therein. Among other things, the MOU provides that Defendants shall pay or cause to be paid to
the Class (as defined herein), in settlement of the claims against them, the following sums:
$68,000,000 (Sixty-Eight Million Dollars), which shall be paid by or on behalf of the Reliant
Defendants, and Perkins, and $7,000,000 (Seven Million Dollars), which shall be paid by or on
behalf of Deloitte. Those sums shall be deposited into an interest-bearing escrow account
designated by Plaintiffs' Lead Counsel within ten business days after the signing of this
Stipulation, but no earlier than September 1, 2005. In exchange for this consideration, MPERS,
in its capacity as Lead Plaintiff, agrees, upon final approval of the Settlement, to dismiss the
Action with prejudice and to release all claims, known and unknown, arising out of the purchase
of or decision to hold Reliant Resources, Inc., common stock during the Class Period that have
been or could have been asserted by any member of the Class in the Action against the
Defendants. Defendants agree to release Lead Plaintiffs, the members of the Class, and their
counsel from any claims relating to the institution, prosecution or settlement of the Action.
q. Defendants deny all charges of wrongdoing or liability with respect to each and
all of the claims and contentions that were alleged or that could have been alleged by Plaintiffs
and the Class Members, including but not limited to all contentions concerning Defendants'
conduct, as well as contentions that such conduct constitutes wrongdoing or gives rise to legal
liability or has caused damage to Plaintiffs or the Class Members. Defendants deny any
wrongdoing whatsoever and this Stipulation shall in no event be construed or deemed to be
evidence of or an admission or concession on the part of any Defendant with respect to any claim
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of any fault or liability or wrongdoing or damage whatsoever, or any infirmity in the defenses
that Defendants could have asserted. Defendants assert that they complied with all applicable
laws, regulations, and standards including where applicable GAAP and GAAS, and deny that
they have committed any act or omission giving rise to any liability and/or violation of the law
and state that they are entering into this Settlement to eliminate the burden and expense of further
litigation.
r. Plaintiffs' Lead Counsel has conducted a thorough investigation and engaged in
extensive discovery related to the allegations of wrongdoing pertaining to each Defendant in this
Action, the alleged damages suffered by the Class, and the defenses asserted by each Defendant.
In connection therewith, Plaintiffs' Lead Counsel reviewed numerous news reports, press
releases, public records, and Securities & Exchange Commission filings related to the subject
matter of this Action; researched the applicable law with respect to the claims; reviewed
approximately 230,000 pages of documents produced by the Defendants and other non-parties;
propounded and reviewed responses to requests for admissions and interrogatories by
Defendants; conducted fifteen (15) depositions of witnesses with relevant knowledge; and
consulted extensively with experts retained to advise on the issues of both recoverable damages
and liability. At the time this Action was settled, fact discovery was complete and all expert
reports had been exchanged.
s. Based on its investigation and extensive discovery, Plaintiffs' Lead Counsel
believes that the allegations pursued in this Action are meritorious. Defendants believe that all
of their responses to the allegations and their defenses are meritorious. Further, the Class
Representative and its counsel have concluded that the terms and conditions of the Settlement are
fair, reasonable and adequate to members of the Class, and are in the best interests of the Class.
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Accordingly, the Class Representative has agreed to settle the claims pursuant to the terms and
provisions of this Stipulation, after considering (a) the substantial benefits that the Class
Representative and the other members of the Class will receive from the settlement of this
Action, (b) the attendant risks of continued litigation, especially in complex actions such as this
Action, as well as the difficulties and delays inherent in such litigations, and (c) the desirability
of permitting the Settlement to be consummated as provided by the terms of this Stipulation.
NOW WHEREFORE, without any admission or concession on the part of MPERS of
any lack of merit of the Action whatsoever, and without any admission or concession of any
liability or wrongdoing or lack of merit in their defenses whatsoever by Defendants, it is hereby
STIPULATED AND AGREED, by and among the Parties to the Stipulation, through
their respective attorneys, subject to the approval of the Court pursuant to Rule 23(e) of the
Federal Rules of Civil Procedure, in consideration of the mutual promises and benefits flowing
to the Parties to the Stipulation from the Settlement, that any and all Released and Settled Claims
(as defined below) as against the Released Parties (as defined below) and all Released and
Settled Defendants' Claims (as defined below) shall be fully, finally, and forever compromised,
settled, released and dismissed with prejudice, and without an assessment of costs against any
party, upon and subject to the following terms and conditions:
CERTAIN DEFINITIONS
1. As used in this Stipulation, the following terms shall have the following
meanings:
(I) "Action" means the consolidated litigation under the caption in re Reliant
Securities Litigation, Civ. Act. No. H-02-18 10 (the "Action")
(2) "Authorized Claimant" means a Class Member who submits a timely and
IEC
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valid Proof of Claim form, which includes proof of the Class Members' loss, to the Claims
Administrator.
(3) "Claims Administrator" means the firm of A.B. Data Ltd., selected by
Plaintiffs' Lead Counsel subject to approval of the Court, which shall administer the Settlement.
(4) "Class" and "Class Members" means all persons or entities who purchased
common shares of Reliant Resources in the Initial Public Offering on April 30, 2001, or
traceable thereto, pursuant to the Reliant Resources Registration Statement and Prospectus dated
April 30, 2001, for the period from April 30, 2001, through and including May 14, 2002, and
who suffered injury in the form of losses from such purchases. Excluded from the Class are
Defendants Reliant Energy, Inc.; Reliant Resources, Inc.; R. Steve Letbetter, Mary P.
Ricciardello, Stephen W. Naeve, and Joe Bob Perkins; Deloitte & Touche LLP; Deloitte U.S.
Entities; Goldman, Sachs & Co., Credit Suisse First Boston Corp., ABN AMRO Rothschild
LLC, Banc of America Securities LLC, Deutsche Bane Alex. Brown, Inc., Merrill Lynch Pierce
Fenner & Smith, Inc., and UBS Warburg LLC, the officers and directors of Reliant Energy, Inc.
or its successor in interest and Reliant Resources, Inc., and members of the individual
Defendants' immediate families, any entity in which any of the Defendants has a majority
interest or is a parent or subsidiary of or is controlled by Reliant Energy, Inc., CenterPoint
Energy, Inc., or Reliant Resources, Inc., and the officers, directors, affiliates, legal
representatives, heirs, predecessors, successors and assigns of any of the excluded persons or
entities. Also excluded from the Class are any Class Members who properly exclude themselves
by timely filing a request for exclusion in accordance with the requirements set forth in the
Notice of Pendency of Class Action, Proposed Settlement of Class Actions, Settlement Fairness
Hearing, and Right to Share in Settlement Fund, which is to be sent to members of the Class
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substantially in the form attached hereto as Exhibit I to Exhibit A. All persons and entities
described above as being excluded from the Class are not "Class Members".
(5) "Class Distribution Order" means the order approving the Claims
Administrator's administrative determinations concerning the acceptance and rejection of the
claims submitted herein and approving any fees and expenses not previously applied for,
including the fees and expenses of the Claims Administrator, deteniiining that the Effective Date
has occurred and directing payment of the Net Settlement Fund to Authorized Claimants.
(6) "Class Period" means the period of April 30, 2001, through May 14, 2002.
(7) "Class Representative" means the Louisiana Municipal Police Employees'
Retirement System.
(8) "Complaint" means the Consolidated Class Action Complaint filed on or
about January 27, 2003.
(9) "Court" means the United States District Court for the Southern District of
Texas.
(10) "Defendants" means Reliant Energy, Inc. (n!kla CenterPoint Energy, Inc.),
Reliant Resources, Inc. (nlk/a Reliant Energy, Inc.), R. Steve Letbetter, Stephen W. Naeve, Mary
P. Ricciardello, Joe Bob Perkins, Deloitte & Touche LLP, and the Underwriters.
(11) "Defendants' Counsel" means Reliant Defendants' Counsel, Deloitte's
Counsel, Perkins' Counsel, and the Underwriters' Counsel.
(12) "Deloitte" means Deloitte & Touche LLP.
(13) "Deloitte's Counsel" means the law firms of Davis Polk & Wardwell and /or
Beck, Redden & Secrest, LLP.
(14) "Deloitte U.S. Entities" means Deloitte & Touche USA LLP, Deloitte Tax
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LLP, Deloitte Financial Advisory Services LLP, Deloitte Consulting LLP (successor to Deloitte
Consulting Holding LLC), Deloitte Consulting (Nevada) LLC, Deloitte Consulting L.P., Deloitte
Consulting (US) LLC and Deloitte Consulting (Holding Sub) LLC, and each of their
predecessors, successors, and assigns, and each of their present and former partners, principals,
officers, directors, members, shareholders, and employees. Deloitte Tax LLP, Deloitte Financial
Advisory Services LLP, Deloitte Consulting LLP (successor to Deloitte Consulting Holding
LLC), Deloitte Consulting (Nevada) LLC, Deloitte Consulting L.P., Deloitte Consulting (US)
LLC and Deloitte Consulting (Holding Sub) LLC, together with Deloitte & Touche LLP, are
affiliates of each other and subsidiaries of Deloitte & Touche USA LLP.
(15) "Effective Date of Settlement" or "Effective Date" means the date upon
which the Settlement contemplated by this Stipulation shall become effective, as set forth in
paragraph 26 below.
(16) "Escrow Account" means the interest bearing bank account established and
maintained by the Escrow Agent to receive the deposit of the monetary payments in the
Settlement Amount and from which distributions described in this Stipulation in paragraphs 4
and 5 and any other paragraphs mentioned therein, will be made.
(17) "Escrow Agent" means the law firm of Berman DeValeno Pease Tabacco
Burt & Pucillo.
(18) "Gross Settlement Fund" means the sum of the Settlement Amount and all
interest earned on the Settlement Amount.
(19) "Individual Defendants" means R. Steve Letbetter, Stephen W. Naeve, Mary
P. Ricciardello, and Joe Bob Perkins.
(20) "Lead Plaintiffs" means the Louisiana Municipal Police Employees'
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Retirement System, the Louisiana School Employees' Retirement Systems, and the Boca Raton
Police & Firefighters Retirement System.
(21) "Memorandum of Understanding" or "MOU" means the memorandum of
understanding to resolve this Action executed on July 29, 2005.
(22) "MPERS" means the Louisiana Municipal Police Employees' Retirement
System.
(23) "Net Settlement Fund" means the balance of the Gross Settlement Fund after
the payments set forth in paragraph 4 below.
(24) "Notice" means the Notice of Pendency of Class Action, Proposed
Settlement of Class Action, Settlement Fairness Hearing, and Right to Share in Settlement Fund,
which is to be sent to members of the Class substantially in the form attached hereto as Exhibit I
to Exhibit A.
(25) "Order of Dismissal and Final Judgment" means the proposed order to be
entered approving the Settlement substantially in the form attached hereto as Exhibit B.
(26) "Order for Preliminary Approval of Settlement" means the proposed
Preliminary Order in Connection with Settlement Proceedings preliminarily approving the
Settlement and directing notice thereof to the Class substantially in the form attached hereto as
Exhibit A.
(27) "Perkins" means Joe Bob Perkins.
(28) "Perkins' Counsel" means the law firms of Fried, Frank, Harris, Shriver &
Jacobson and Fulbright & Jaworski, LLP.
(29) "Plaintiffs" means the Lead Plaintiffs.
(30) "Plaintiffs' Counsel" means any counsel who has appeared on behalf of any
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of the plaintiffs in this Action.
(31) "Plaintiffs' Lead Counsel" means the law firm of Berman DeValerio Pease
Tabacco Burt & Pucillo.
(32) "Plaintiffs' Liaison Counsel" means the law firm of Nickens, Keeton,
Lawless, Farrell & Flack, LLP.
(33) "Plan of Allocation" means the Plan of Allocation of Net Settlement Fund
Among Class Members as set forth in Section IV of the Notice.
(34) "Proof of Claim" means the proposed Proof of Claim and Release form
substantially in the form attached hereto as Exhibit 2 to Exhibit A.
(35) "Publication Notice" means the Summary Notice of Proposed Settlement and
Settlement Hearing for publication substantially in the form attached hereto as Exhibit 3 to
Exhibit A.
(36) "Recognized Claim" means the amount of an Authorized Claimant's loss that
is determined by the Claims Administrator to be compensable under the Plan of Allocation.
(37) "Released Parties" means the Defendants and each of their past or present
subsidiaries, parents, divisions, related or affiliated entities, successors and predecessors, their
respective present and former partners, principals, officers, directors, members, shareholders,
receivers, associates, agents, owners, employees, servants, attorneys, advisors, insurers,
subrogees, coinsurers, reinsurers and investment advisors, auditors, accountants and any person,
firm, company, partnership, trust, corporation, officer, director or other individual or entity in
which any Defendant has a majority interest or which is related to or affiliated with any of the
Defendants and the legal representatives, heirs, executors, administrators, successors in interest,
transferees or assigns of the Defendants. "Released Parties" includes the Deloitte U.S. Entities.
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(38) "Released and Settled Claims" means and includes any and all claims or
causes of action, including Unknown Claims (as defined below), debts, suits, rights of action,
dues, sums of money, accounts, bonds, bills, covenants, contracts, controversies, agreements,
promises, judgments, variances, executions, obligations, demands, rights, liabilities, damages,
losses, fees, and costs of any kind, nature and/or description whatsoever, matured or unmatured,
liquidated or unliquidated, accrued or unaccrued, known or unknown, suspected or unsuspected,
contingent or non-contingent, whether or not asserted, threatened, alleged or litigated, at law,
equity or otherwise, including, without limitation, claims for contribution or indemnification, or
for costs, expenses (including, without limitation, amounts paid in settlement) and attorneys'
fees, claims for negligence, fraud, breach of fiduciary duty, or violations of any federal, state or
local statutes, common law, rules or regulations, that now exist or heretofore existed, that have
been or could have been asserted in the Action by the Class Representative or any Class Member
against the Released Parties, whether directly, indirectly, representatively, derivatively or in any
other capacity, arising out of the purchase of or decision to hold Reliant Resources common
stock during the Class Period. Provided, however, the term Released and Settled Claims does
not mean and does not include a claim that has been or could have been asserted by a Class
Member that is both (i) against a registered broker and/or dealer, acting solely in that capacity
and not in respect of its role as an underwriter of Reliant's IPO, and (ii) not based on or related
to, in whole or in part, the broker/dealer's conduct as an underwriter of the Reliant IPO or on the
Registration Statement or Prospectus for the Reliant IPO.
(39) "Released and Settled Defendants' Claims" means and includes any and all
claims or causes of action, including Unknown Claims (as defined below), debts, suits, rights of
action, dues, sums of money, accounts, bonds, bills, covenants, contracts, controversies,
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agreements, promises, judgments, variances, executions, obligations, demands, rights, liabilities,
damages, losses, fees, and costs of any kind, nature and/or description whatsoever, matured or
unmatured, liquidated or unliquidated, accrued or unaccrued, known or unknown, suspected or
unsuspected, contingent or non-contingent, whether or not asserted, threatened, alleged or
litigated, at law, equity or otherwise, including, without limitation, claims for contribution or
indemnification, or for costs, expenses (including, without limitation, amounts paid in
settlement) and attorneys' fees, claims for negligence, fraud, breach of fiduciary duty, or
violations of any federal, state or local statues, common law, rules or regulations, that now exist
or heretofore existed, that have been or could have been asserted in the Action by the
Defendants, the Released Parties, or any of them or the successors or assigns of any of them
against any of the Lead Plaintiffs, other Class Members or their counsel, which relate to the
institution, prosecution or settlement of the Action.
(40) "Reliant" or "Reliant Resources" means Reliant Resources, Inc. (nlkla
Reliant Energy, Inc.), and its subsidiaries and affiliates.
(41) "Reliant Defendants" means Reliant Energy, Inc. (n!k/a CenterPoint Energy,
Inc.), Reliant Resources, Inc. (nlkla Reliant Energy, Inc.), R. Steve Letbetter, Stephen W. Naeve,
and Mary P. Ricciardello.
(42) "Reliant Defendants' Counsel" means the law firm of Baker Botts L.L.P.
(43) "Reliant IPO" means the Reliant Resources, Inc. initial public offering on
April 30, 2001.
(44) "Settlement" means the settlement contemplated by this Stipulation.
(45) "Settlement Amount" means the settlement payments and deliveries
described in paragraph 4 below.
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(46) "Stipend" means a compensatory payment requested by a Lead Plaintiff and
approved by the Court for that Lead Plaintiffs reasonable time, effort and expense incurred
relating to the prosecution of this Action.
(47) "Underwriter Defendants" or "Underwriters" means Goldman, Sachs & Co.,
Credit Suisse First Boston Corp. (nlkla Credit Suisse First Boston LLC), ABN AMRO
Rothschild LLC, Banc of America Securities LLC, Deutsche Banc Alex. Brown, Inc., Merrill
Lynch Pierce Fenner & Smith Inc., and UBS Warburg LLC (nfk!a UBS Securities, L.L.C.).
(48) "Underwriter Defendants' Counsel" or "Underwriters' Counsel" means
Wachtel], Lipton, Rosen & Katz and King & Pennington, LLP.
(49) "Unknown Claims" means any and all Released and Settled Claims which
the Class Representative or other Class Member does not know or suspect to exist in his, her or
its favor at the time of the release of the Released Parties, and any Released and Settled
Defendants' Claims which any of the Released Parties does not know or suspect to exist in his,
her or its favor, which if known by him, her or it might have affected his, her or its decision(s)
with respect to the Settlement. With respect to any and all Released and Settled Claims and
Released and Settled Defendants' Claims, the Parties to the Stipulation stipulate and agree that,
upon the Effective Date, the Class Representative and the Released Parties shall expressly, and
each Class Member shall be deemed to have, and by operation of the Order of Dismissal and
Final Judgment shall have, expressly waived any and all provisions, rights and benefits conferred
by any law of any state or territory of the United States, or principle of common law, which is
similar, comparable, or equivalent to California Civil Code § 1542, which provides:
A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor.
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Class Representative and the Released Parties acknowledge, and the other Class Members by
operation of law shall be deemed to have acknowledged, that the inclusion of "Unknown
Claims" in the definition of Released and Settled Claims and Released and Settled Defendants'
Claims was separately bargained for and each was a key element of the Settlement.
Scope and Effect of Settlement
2. The obligations incurred pursuant to this Stipulation shall be in full and final
disposition of the Action and any and all Released and Settled Claims as against all Released
Parties and any and all Released and Settled Defendants' Claims.
3. (1) Upon the Effective Date of the Settlement, and without any further action,
the Class Representative shall dismiss the Action with prejudice, and without an assessment of
costs against any party, and the Class Representative and Class Members on behalf of
themselves, their heirs, executors, administrators, successors and assigns, and any persons they
represent, for good and valuable consideration the receipt and adequacy of which is hereby
acknowledged shall, with respect to any and all Released and Settled Claims, fully, finally and
forever release, relinquish and discharge, and shall forever be enjoined from prosecuting, any
and all Released and Settled Claims against any and all of the Released Parties, whether or not
such Class Members have executed and delivered a Proof of Claim, participated in the
Settlement, filed an objection to the Settlement, the Proposed Plan of Allocation, or any
application by Plaintiffs' Counsel for an award of Attorneys' Fees and Expenses, and whether or
not the claims of such Class Members have been approved or allowed. Nothing contained herein
shall, however, bar any action or claim to enforce the terms of this Stipulation or the Order of
Dismissal and Final Judgment.
(2) Upon the Effective Date of the Settlement, and without any further action,
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the Defendants and the Released Parties, on behalf of themselves, their heirs, executors,
administrators, successors and assigns, and any persons they represent, for good and valuable
consideration the receipt and adequacy of which is hereby acknowledged shall, with respect to
any and all Released and Settled Defendants' Claims, fully, finally and forever release,
relinquish and discharge any and all Released and Settled Defendants' Claims, and shall forever
be enjoined from prosecuting any and all Released and Settled Defendants' Claims against any
and all of the Lead Plaintiffs, Class Members, or their counsel. Nothing contained herein shall,
however, bar any action or claim to enforce the terms of this Stipulation or the Order of
Dismissal and Final Judgment.
(3) Upon the Effective Date of the Settlement, and without any further action,
each of the Reliant Defendants, Deloitte and Joe Bob Perkins, on behalf of themselves, their
heirs, executors, administrators, successors and assigns, and any persons they represent, for good
and valuable consideration the receipt and adequacy of which is hereby acknowledged shall,
fully, finally and forever release, relinquish and discharge any and all Released and Settled
Claims, and shall forever be enjoined from prosecuting any and all Released and Settled Claims
and/or any other claims relating in any way or arising out of this Action against any of the other
Reliant Defendants, Deloitte and/or Joe Bob Perkins. Nothing contained herein shall, however,
bar any action or claim to enforce the terms of this Stipulation or the Order of Dismissal and
Final Judgment.
The Settlement Consideration
4. (1) Defendants shall pay or cause to be paid to the Class (as defined in the
Court's certification order of February 18, 2005), in settlement of the claims against them, the
following sums: $68,000,000 (Sixty-Eight Million Dollars), which shall be paid by or on behalf
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of the Reliant Defendants and Perkins, and $7,000,000 (Seven Million Dollars), which shall be
paid by or on behalf of Deloitte. The respective payments by or on behalf of the Reliant
Defendants and Deloitte shall be wire-transferred into the Escrow Account within ten (10)
business days after the signing of the Stipulation, and no earlier than September 1, 2005,
provided that the Reliant Defendants and Deloitte have received appropriate wire instructions
from Plaintiffs' Lead Counsel at least four (4) business days in advance. In no event shall
Defendants be required to pay any amounts, other than as specified in this paragraph, into the
Escrow Account or otherwise in payment of any aspect of this Settlement, including without
limitation, payment to the Class Members of their attorney's fees or reimbursement of any other
expenses.
(2) The Gross Settlement Fund, net of any Taxes (as defined below) on the
income thereof, shall be used to pay (i) the notice and administration costs referred to in
paragraph 6 hereof, (ii) the attorneys' fee and expense award referred to in paragraph 13 hereof,
(iii) the remaining administration expenses referred to in paragraph 7 hereof, (iv) Stipends, if
any, awarded to Lead Plaintiffs referred to in paragraph 8 hereof. The balance of the Gross
Settlement Fund after the above payments shall be the "Net Settlement Fund" that shall be
distributed to the Authorized Claimants as provided in paragraphs 10-12 hereof.
(3) Any sums required to be held in escrow prior to the Effective Date shall be
held by Plaintiffs' Lead Counsel as Escrow Agent for the Gross Settlement Fund. All funds held
by the Escrow Agent shall be deemed to be in the custody of the Court and shall remain subject
to the jurisdiction of the Court until such time as the funds shall be distributed or returned to
persons paying the same pursuant to this Stipulation and/or further order of the Court. The
Escrow Agent shall invest any funds in excess of $100,000 in short term United States Agency
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or Treasury Securities, and shall collect and reinvest all interest accrued thereon. Any funds held
in escrow in an amount of less than $100,000 may be held in an interest-bearing account insured
by the FDIC. The Escrow Agent shall bear all risks related to the investment of the Gross
Settlement Fund. The Escrow Agent shall not disburse the contents of the Escrow Account
except as provided in this Stipulation in paragraphs 4 and 5 and any other paragraphs mentioned
therein or an Order of the Court. Subject to such further order and/or direction as may be made
by the Court, the Escrow Agent is authorized to execute such transactions on behalf of the
members of the Class as are provided for in this Stipulation in paragraphs 4 and 5 and any other
paragraphs mentioned therein. The Escrow Agent shall not be responsible for the payment of
any sums due except to the extent of maintaining account of and appropriately paying sums as
required by this Stipulation, but only to the limited extent such sums are delivered into the
Escrow Account. The Escrow Agent shall not be responsible for the performance of any
obligations made herein by any party to this Stipulation. The Escrow Agent may rely upon
representations of Plaintiffs' Counsel or Defendants' Counsel in carrying out their duties
hereunder. The Escrow Agent shall be liable only for acts of gross negligence or willful
misconduct. The assumption of duties as Escrow Agent shall not preclude the Escrow Agent
from continuing to represent, as the case may be, the Lead Plaintiffs or Class Members. The
Escrow Agent may relieve themselves of the duties provided herein absent agreement of the
parties to this Stipulation by interpleading the sums then held by them.
(4) The Parties to the Stipulation agree that the Gross Settlement Fund is intended
to be a Qualified Settlement Fund within the meaning of Treasury Regulation § 1.46813-1.
Defendants, Defendants' Counsel, and the Released Parties shall have no liability or
responsibility for the payment of any Taxes or Tax Expense. Plaintiffs' Lead Counsel shall be
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responsible for filing tax returns for the Gross Settlement Fund and paying from the Gross
Settlement Fund any Taxes owed with respect to the Gross Settlement Fund. Plaintiffs' Lead
Counsel shall indemnify and hold harmless Defendants, Defendants' Counsel, and the Released
Parties for any liability for Taxes or Tax Expense. It shall be the responsibility of Defendants'
Counsel to provide timely to the Escrow Agent the statement described in Treasury Regulations
§ 1.468B-3(e).
5. All (i) taxes on the income of the Gross Settlement Fund, and (ii) expenses and
costs incurred in connection with the taxation of the Gross Settlement Fund (including, without
limitation, expenses of tax attorneys and accountants) (collectively, "Taxes") shall be paid out of
the Gross Settlement Fund, shall be considered to be a cost of administration of the Gross
Settlement Fund and shall be timely paid by the Escrow Agent without prior Order of the Court.
The Escrow Agent shall inform Defendants' Counsel of such tax payments.
Administration Expenses
6. Prior to the Effective Date, Plaintiffs' Lead Counsel may expend from the Gross
Settlement Fund, without further approval from Defendants or the Court, up to $250,000 to pay
the reasonable costs and expenses associated with the administration of the Settlement, including
without limitation, the costs of identifying members of the Class and effecting mail Notice and
Publication Notice. Such amounts shall include, without limitation, the actual costs of
publication, printing and mailing the Notice, reimbursements to nominee owners for forwarding
Notice to their beneficial owners, and the administrative expenses incurred and fees charged by
the Claims Administrator in connection with providing Notice and processing the submitted
claims.
7. Plaintiffs' Lead Counsel will apply to the Court, on notice to Defendants'
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Counsel, for the Class Distribution Order approving the Claims Administrator's administrative
determinations concerning the acceptance and rejection of the claims submitted herein and
approving any fees and expenses not previously applied for, including the fees and expenses of
the Claims Administrator, determining that the Effective Date has occurred and directing
payment of the Net Settlement Fund to Authorized Claimants.
Payments to Lead Plaintiffs
8. Pursuant to Section 2113(a)(4) of the Exchange Act, Lead Plaintiffs may seek
Court approval for a payment of up to $15,000 for reasonable time, effort and expense incurred
by each Lead Plaintiff relating to the prosecution of this Action and the representation of the
Class as Lead Plaintiffs to be paid from the Gross Settlement Fund.
9. Defendants, Defendants' Counsel, and the Released Parties shall have no
responsibility for, and no liability whatsoever with respect to any payment to Lead Plaintiffs
pursuant to Section 21 D(a)(4), and will take no position with respect to such application by Lead
Plaintiffs. The award of a payment to Lead Plaintiffs pursuant to Section 211)(a)(4) is not a
necessary term of this Stipulation or the Settlement and it is not a condition of this Stipulation or
the Settlement that such an award be approved by the Court.
Allocation of Settlement Amounts To Authorized Claimants
10. The Claims Administrator shall determine each Authorized Claimant's pro rata
share of the cash in the Net Settlement Fund based upon each Authorized Claimant's Recognized
Claim (as defined in the Plan of Allocation described in Section IV of the Notice attached hereto
as Exhibit I to Exhibit A, or in such other Plan of Allocation as the Court approves).
11. The Plan of Allocation proposed in the Notice is not a necessary term of this
Stipulation or this Settlement and it is not a condition of this Stipulation or this Settlement that
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the Plan of Allocation be approved. Defendants, Defendants' Counsel, and the Released Parties
will not have any responsibility for nor any involvement with the Plan of Allocation and will
take no position with respect to such proposed Plan of Allocation or such plan as may be
approved by the Court.
12. Each Authorized Claimant shall be allocated a pro rata share of the cash in the
Net Settlement Fund based on his, her or its Recognized Claim compared to the total Recognized
Claims of all Authorized Claimants. This is not a claims made settlement. Defendants will have
no ability to get back any portion of the Settlement Amount once the Effective Date occurs.
Defendants will have no involvement in reviewing or challenging claims.
Attorneys' Fees and Expenses
13. Plaintiffs' Lead Counsel, on behalf of all Plaintiffs' Counsel, will apply to the
Court for an award from the Gross Settlement Fund of attorneys' fees and reimbursement of
expenses. Such attorneys' fees, expenses and costs, including the fees of experts and
consultants, as awarded by the Court ("Fee and Expense Award"), shall be paid from the Gross
Settlement Fund to Plaintiffs' Lead Counsel, as ordered, within five business days of the District
Court's entry of the Order of Dismissal and Final Judgment substantially in the form attached
hereto as Exhibit B and approval of an award of fees and expenses. Plaintiffs' Lead Counsel
shall thereafter be responsible for allocating the attorneys' fees amongst all Plaintiffs' Counsel.
In the event that the Effective Date does not occur, or the Order of Dismissal and Final Judgment
or the Fee and Expense Award is reversed or modified in a material respect, or the Stipulation is
cancelled or terminated for any other reason, and in the event that the Fee and Expense Award
has been paid to any extent, then each Plaintiffs' Counsel shall be obligated, jointly and
severally, within five business days from receiving notice from Defendants' Counsel, or from a
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court of appropriate jurisdiction, to refund to the Gross Settlement Fund, the fees, expenses and
costs previously paid from the Gross Settlement Fund plus interest thereon at the same rate as
earned on the Gross Settlement Fund in an amount consistent with such reversal or modification.
The award of attorneys' fees, expenses, and costs is not a necessary term of this Stipulation and
it is not a condition of this Stipulation that Plaintiffs' Lead Counsel's petition for fees and
expenses be approved by the Court.
14. The procedure for and the allowance or disallowance by the Court of any
application by Plaintiffs' Lead Counsel for attorneys' fees and expenses to be paid out of the
Gross Settlement Fund, are not part of the Settlement set forth in this Stipulation, and are to be
submitted to the Court separately from the Court's consideration of the fairness, reasonableness
and adequacy of the Settlement set forth in this Stipulation, 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 Stipulation, or affect or delay
the finality of the Order of Dismissal and Final Judgment approving this Stipulation, the
Effective Date, or the Settlement of the Action set forth herein.
15. Defendants, Defendants' Counsel, and the Released Parties shall have no
responsibility for and no liability whatsoever with respect to the allocation amongst Plaintiffs'
Counsel, or other counsel who may purport to represent the Plaintiffs and or the Class Members
in connection with the Action, and/or any other person who may assert some claim thereto, of
any Fee and Expense Award that the Court may make in the Action. Defendants, Defendants'
Counsel and the Released Parties will take no position with respect to Plaintiffs' Lead Counsel's
application for attorneys' fees and reimbursement of expenses.
Administration of the Settlement
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16. The Claims Administrator shall administer the Settlement under Plaintiffs' Lead
Counsel's supervision and subject to the jurisdiction of the Court. Defendants, Defendants'
Counsel, and the Released Parties shall have no role in or responsibility for administering the
Settlement, reviewing or challenging claims submitted, and shall have no liability whatsoever to
any person or entity including, but not limited to, the Class Members, any other Plaintiffs, or
Plaintiffs' Counsel in connection with such administration. The administration of the Settlement
is defined as, the investment, allocation, and distribution of the Gross Settlement Fund, the
determination, calculation, processing, or payment of claims, the review and approval or
rejection of Proofs of Claim, the Plan of Allocation, and the determination, payment, or
withholding of taxes or any loss incurred in connection therewith, and no person or entity,
including but not limited to, the Class Members, Plaintiffs and Plaintiffs' Counsel, shall have any
claims against Defendants, Defendants' Counsel, and the Released Parties in connection
therewith. Defendants and Defendants' Counsel shall cooperate in the administration of the
Settlement to the extent reasonably necessary to effectuate its terms. Reliant Defendants shall
promptly provide or cause to be provided to the claims administrator any information in their
possession or control needed to assist the claims administrator in providing Notice to the Class.
17. Plaintiffs' Lead Counsel shall be responsible for supervising the administration of
the Settlement and disbursement of the Net Settlement Fund by the Claims Administrator.
Except for their obligation to pay the Settlement Amount, Defendants shall have no liability,
obligation or responsibility for the disbursement of the Net Settlement Fund. Plaintiffs' Lead
Counsel shall have the right, but not the obligation, to waive what they deem to be technical
defects in any Proof of Claim submitted in the interest of achieving substantial justice.
18. For purposes of determining the extent, if any, to which a Class Member shall be
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entitled to be treated as an Authorized Claimant, the following conditions shall apply:
(a) Each Class Member shall be required to submit a Proof of Claim
(substantially in the form attached hereto as Exhibit 2 to Exhibit A), supported by such
documents as are designated therein, including proof of the claimant's loss, or such other
documents or proof as Plaintiffs' Lead Counsel, in their discretion, may deem acceptable;
(b) All Proofs of Claim must be submitted to the Claims Administrator by the
date specified in the Notice unless such period is extended by Order of the Court. Any Class
Member who fails to submit a Proof of Claim to the Claims Administrator by such date shall be
forever barred from receiving any payment pursuant to this Stipulation (unless, by Order of the
Court, a later submitted Proof of Claim by such Class Member is approved), but shall in all other
respects be bound by all of the terms of this Stipulation and the Settlement including the terms of
the Order of Dismissal and Final Judgment entered in the Action and the releases provided for
herein, and will be barred from bringing any action against any of the Released Parties
concerning the Released and Settled Claims, whether or not such Class Member has filed an
objection to the Settlement, the proposed Plan of Allocation, or any application by any of the
Lead Plaintiffs' counsel for an award of Attorney's Fees and Expenses and Costs. Provided that
it is actually received no later than thirty days after the final date for submission of Proofs of
Claim, a Proof of Claim shall be deemed to have been submitted when posted, if received with a
postmark indicated on the envelope and if mailed first-class postage prepaid and addressed in
accordance with the instructions thereon. In all other cases, the Proof of Claim shall be deemed
to have been submitted when actually received by the Claims Administrator;
(c) Each Proof of Claim shall be submitted to and reviewed by the Claims
Administrator, under the supervision of Plaintiffs' Lead Counsel, who shall determine in
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accordance with this Stipulation the extent, if any, to which each claim shall be allowed, subject
to review by the Court pursuant to subparagraph (e) below;
(d) Each Proof of Claim that does not meet the filing requirements may be
rejected. Prior to rejection of a Proof of Claim, the Claims Administrator shall communicate
with the claimant in order to afford such claimant the opportunity to remedy any curable
deficiencies in the Proof of Claim submitted. The Claims Administrator, under supervision of
Plaintiffs' Lead Counsel, shall notify, in a timely fashion and in writing, all claimants whose
Proofs of Claim they propose to reject in whole or in part, setting forth the reasons thereof, and
shall indicate in such notice that the claimant whose claim is to be rejected has the right to a
review by the Court if the claimant so desires and complies with the requirements of
subparagraph (e) below;
(e) If any claimant whose claim has been rejected in whole or in part desires
to contest such rejection, the claimant must, within twenty days after the date of mailing of the
notice required in subparagraph (d) above, serve upon the Claims Administrator a notice and
statement of reasons indicating the claimant's grounds for contesting the rejection along with any
supporting documentation, and requesting a review thereof by the Court. If a dispute concerning
a claim cannot be otherwise resolved, Plaintiffs' Lead Counsel shall thereafter present the
request for review to the Court for a final determination; and
(0 The administrative determinations of the Claims Administrator accepting
and rejecting claims shall be presented to the Court, on notice to Defendants' Counsel, for
approval by the Court in the Class Distribution Order.
19. Each claimant shall be deemed to have submitted to the jurisdiction of the Court
with respect to the claimant's claim, and the claim will be subject to investigation and discovery
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under the Federal Rules of Civil Procedure, provided that such investigation and discovery shall
be limited to that claimant's status as a Class Member and the validity and amount of the
claimant's claim. No discovery shall be allowed on the merits of the Action or the Settlement in
connection with processing of the Proofs of Claim.
20. Payment pursuant to this Stipulation shall be deemed final and conclusive against
all Authorized Claimants. All Class Members whose claims are not approved by the Court or
who fail to submit a claim shall be barred from participating in distributions from the Net
Settlement Fund, but otherwise shall be bound by all of the terms of this Stipulation and the
Settlement, including the terms of the Order of Dismissal and Final Judgment to be entered in the
Action and the releases provided for herein, and will be barred from bringing any action against
any of the Released Parties concerning the Released and Settled Claims whether or not such
Class Member has filed an objection to the Settlement, the proposed Plan of Allocation, or any
application by any of the Lead Plaintiffs' counsel for an award of Attorney's Fees and Expenses.
21. Any and all Class Members shall be bound by all the terms of this Stipulation and
the Settlement including the terms of the Order of Dismissal and Final Judgment entered in the
Action and the releases provided for herein, and will be barred from bringing any action against
any of the Released Parties concerning the Released and Settled claims whether or not such
Class Members participated in the Net Settlement Fund, and whether or not the claims of such
Class Members have been approved or allowed.
22. All proceedings with respect to the administration, processing and determination
of claims described in this Stipulation 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.
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23. The Net Settlement Fund shall be distributed to Authorized Claimants by the
Claims Administrator only after the Effective Date and after: (i) all claims have been processed,
and all claimants whose claims have been rejected or disallowed, in whole or in part, have been
notified and provided the opportunity to be heard concerning such rejection or disallowance; (ii)
all objections with respect to all rejected or disallowed claims not otherwise resolved, have been
resolved and all appeals therefrom have been resolved or the time therefore has expired; (iii) all
matters with respect to attorneys' fees, costs, and disbursements have been resolved by the
Court, all appeals therefrom have been resolved or the time therefore has expired, and (iv) all
costs of administration and Taxes on the Settlement Fund have been paid.
Order for Preliminary Approval of Settlement
24. Promptly after this Stipulation has been fully executed, Plaintiffs' Lead Counsel
and the Defendants' Counsel jointly shall apply to the Court for entry of an Order for
Preliminary Approval of Settlement, substantially in the form attached hereto as Exhibit A.
Order of Dismissal and Final Judgment
25. If the Settlement contemplated by this Stipulation is approved by the Court,
Plaintiffs' Lead Counsel and the Defendants' Counsel shall request that the Court enter the Order
of Dismissal and Final Judgment substantially in the form attached hereto as Exhibit B.
Effective Date of Settlement, Waiver or Termination
26. The Effective Date of Settlement shall be the date when all the following shall
have occurred:
(1) Entry of the Order for Preliminary Approval of Settlement in all material
respects in the form attached hereto as Exhibit A;
(2) Payment of the entire Settlement Amount into the Escrow Account
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described herein;
(3) Approval by the Court of the Settlement;
(4) Entry by the Court of the Order of Dismissal and Final Judgment, in all
material respects in the form attached hereto as Exhibit B, and the expiration of any time for
appeal or review of so much of the Order of Dismissal and Final Judgment as approves the
fairness, reasonableness and adequacy of the Settlement or, if any such appeal is filed and not
dismissed, after the approval of the fairness, reasonableness and adequacy of the Settlement is
upheld on appeal in all material respects and is no longer subject to review upon appeal or
review by writ of certiorari or, in the event that the Court enters an order and final judgment in
form other than that provided above ("Alternative Judgment") and none of the Parties to the
Stipulation elects to terminate this Settlement pursuant to paragraph 27, the date that such
Alternative Judgment becomes final and no longer subject to appeal or review. The Effective
Date shall not be delayed by any modification of or appeal from those parts of the Order of
Dismissal and Final Judgment that pertain to the Plan of Allocation (as set forth in the Notice),
the award of attorneys' fees and expenses, or the compensatory award to Lead Plaintiffs.
27. Defendants' Counsel, or any of them, or Plaintiffs' Lead Counsel shall have the
right to terminate the Settlement and this Stipulation by providing written notice of their election
to do so ("Termination Notice") to all other Parties to the Stipulation within thirty days of (a) the
Court's declining to enter the Order for Preliminary Approval of Settlement in any material
respect; (b) the Court's refusal to approve this Stipulation or any material part of it; (c) the
Court's declining to enter the Order of Dismissal and Final Judgment in any material respect; (d)
the date upon which the Order of Dismissal and Final Judgment is modified or reversed in any
material respect by the United States Court of Appeals or the United States Supreme Court; or
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(e) the date upon which an Alternative Judgment is modified or reversed in any material respect
by the United States Court of Appeals or the United States Supreme Court.
28. Simultaneously herewith, Plaintiffs' Lead Counsel and the Defendants' Counsel
are executing a "Supplemental Agreement" setting forth certain conditions under which this
Stipulation may be withdrawn or terminated by the Defendants in the event that Class Members
holding in excess of a certain percentage of shares, timely and validly request exclusion from the
Class. In the event of a withdrawal from this Stipulation pursuant to the Supplemental
Agreement, this Stipulation shall become null and void and of no further force and effect and the
provisions of paragraph 29 shall apply. Notwithstanding the foregoing, this Stipulation shall not
become null and void as a result of the election by the Defendants to withdraw from the
Stipulation pursuant to the Supplemental Agreement unless all conditions set forth in the
Supplemental Agreement have been satisfied.
29. Except as otherwise provided herein, in the event the Settlement is terminated or
modified in any material respect or fails to become effective for any reason, then the parties to
this Stipulation shall be deemed to have reverted to their respective status in the Action as of the
date and time immediately prior to the execution of the MOU and, except as otherwise expressly
provided, the parties shall proceed in all respects as if the MOU and this Stipulation and any
related orders had not been entered, and any portion of the Settlement Amount previously paid
by or on behalf of Defendants, together with any interest earned thereon, less any Taxes due with
respect to such income, and less costs of administration and notice actually incurred and paid or
payable from the Settlement Amount (not to exceed $250,000 without the prior approval of
Defendants and the Court) pro rated based on the amount of the contribution, shall be returned to
Defendants or their insurers making the payments within ten business days of the termination,
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modification in any material respect, or failure to become effective for any reason of the
Settlement.
No Admission of Wrongdoing
30. This Stipulation, whether or not consummated, and any proceedings taken
pursuant to it:
(I) Shall not be offered or received against Defendants as evidence of or
construed as or deemed to be evidence of any presumption, concession or admission by any
Defendant of the truth of any fact alleged by Plaintiffs or the validity of any claim that had been
or could have been asserted in the Action or in any litigation, or the deficiency of any defense
that has been or could have been asserted in the Action or in any litigation, or of any liability,
negligence, fault, or wrongdoing of any Defendant;
(2) Shall not be offered or received against any Defendant as evidence of a
presumption, concession or admission of any fault, misrepresentation or omission with respect to
any statement or written document approved or made by any Defendant;
(3) Shall not be offered or received against Defendants as evidence of a
presumption, concession or admission of any liability, negligence, fault or wrongdoing, or in any
way referred to for any other reason as against any of the Parties to the Stipulation, in any other
civil, criminal or administrative action or proceeding, other than such proceedings as may be
necessary to effectuate the provisions of this Stipulation, provided however, that the Released
Parties may refer to this Stipulation to effectuate the liability protection granted the Released
Parties hereunder, including, without limitation, to support a defense or counterclaim, in any
action brought against any of the Released Parties, based on principles of res judicata, collateral
estoppel, release, judgment, bar or reduction, or any other theory of claim preclusion or issue
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preclusion or similar defense or counterclaim.
(4) Shall not be offered or received against Lead Plaintiffs, or the Class
Members as evidence of any infirmity in the claims of Lead Plaintiffs, and the Class Members;
(5) Shall not be construed against Defendants or Lead Plaintiffs and the Class
Members as an admission or concession that the consideration to be given hereunder represents
the amount which could be or would have been recovered after trial; and
(6) Shall not be construed as or received in evidence as an admission,
concession or presumption against Lead Plaintiffs or the Class Members or any of them that any
of their claims are without merit or that damages recoverable under the Complaint would not
have exceeded the Settlement Amount.
Miscellaneous Provisions
31. All of the exhibits attached hereto are hereby incorporated by reference as though
fully set forth herein.
32. The Parties to the Stipulation intend the Settlement to be a final and complete
resolution of all disputes asserted or which could be asserted by the Class Representative and
Class Members against the Released Parties with respect to the Released and Settled Claims.
Accordingly, Lead Plaintiffs and Defendants agree not to assert in this Action that the litigation
was brought or defended in bad faith or without a reasonable basis. The Parties to the Stipulation
stipulate that the complaints, amended complaints, dispositive motions and responsive pleadings
were all filed with evidentiary support and consistent with existing law. Accordingly, the Parties
to the Stipulation shall assert no claims of any violation of Rule 11 of the Federal Rules of Civil
Procedure relating to the prosecution or defense of the Action. The Parties to the Stipulation
agree that the amount paid and the other terms of the Settlement were negotiated at arms' length
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in good faith by the parties with the assistance of an experienced and independent mediator, and
reflect a settlement that was reached voluntarily after consultation with experienced legal
counsel.
33. Upon the Effective Date of the Settlement, Plaintiffs' Lead Counsel, at their
option, shall either destroy, or return to counsel for Defendants (at Defendants' expense), all
documents or other materials produced by Defendants and any third party in discovery from this
litigation in the possession of Plaintiffs' Lead Counsel, except for those documents which are
exhibits to any depositions or pleadings or other matters of public record. Notwithstanding the
foregoing, the Protective Order entered into by the parties and approved by the court on
November 23, 2004, shall remain in effect.
34. This Stipulation may not be modified or amended, nor may any of its provisions
be waived except by a writing signed by all Parties to the Stipulation or their successors-in-
interest.
35. The headings herein are used for the purpose of convenience only and are not
meant to have legal effect.
36. The administration and consummation of the Settlement as embodied in this
Stipulation shall be under the authority of the Court and the Court shall retain continuing and
exclusive jurisdiction for the purpose of entering orders providing for awards of attorneys' fees
and expenses to Lead Plaintiffs' Lead Counsel and enforcing the terms of this Stipulation.
37. The Parties to the Stipulation hereby irrevocably submit to the continuing and
exclusive jurisdiction of the Court for any suit, action, proceeding or dispute arising out of or
relating to this Settlement as embodied in this Stipulation or its applicability and agree that they
will not oppose the designation of such suit, action, proceeding or dispute as a related case to this
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Action.
38. The waiver by one party of any term or condition of this Stipulation by any other
party shall not be deemed a waiver of any other prior or subsequent term or condition of this
Stipulation.
39. This Stipulation and its exhibits constitute the entire agreement among the Parties
to the Stipulation concerning the Settlement of the Action, and no representations, warranties,
payments or inducements have been made by any party hereto concerning this Stipulation and its
exhibits other than those contained and memorialized in such documents.
40. This Stipulation may be executed in one or more counterparts. All executed
counterparts and each of them shall be deemed to be one and the same instrument provided that
counsel for the Parties to the Stipulation shall exchange among themselves original signed
counterparts.
41. This Stipulation shall be binding upon, and inure to the benefit of, the successors
and assigns of the Parties to the Stipulation.
42. The construction, interpretation, operation, effect and validity of this Stipulation,
and all documents necessary to effectuate it, shall be governed by the internal laws of the State of
Texas without regard to conflicts of laws, except to the extent that federal law requires that
federal law govern.
43. This Stipulation shall not be construed more strictly against one party than
another merely by virtue of the fact that it, or any part of it, may have been prepared by counsel
for one of the parties, it being recognized that it is the result of arms' length negotiations between
the parties and all parties have contributed substantially and materially to the preparation of this
Stipulation.
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exhibits hereto, or any related settlement documents, warrant and represent that they have-the full
authority to do so and that they have the authority to take appropriate action required or
permitted to be taken pursuant to the Stipulation to effectuate its terms.
45. Plaintiffs' Lead Counsel and Defendants' Counsel agree to cooperate fully with
one another in seeking Court approval of the Order for Preliminary Approval of Settlement, the
Stipulation and the Settlement, and to promptly agree upon and execute all such other
documentation as may be reasonably required to obtain final approval by the District Court of
the Settlement.
DATED: September f'005
OF COUNSEL:
Peter A. Pease (Admitted Pro Hac Vice) Joseph C. Merschman Berman DeValerio Pease Tabacco Burt & Pucillo
One Liberty Square Boston, MA 02109 Tel: 617/542-8300 Fax: 617/542-1194
BERMAN DeVALERLO PEASE TABAO BUR CILLO
B y.n_Vj I ~ ~L~
.
Mchae J. cillo (Admitted Pro Hac Vice) Esperanté Bldg., Suite 900 222 Lakeview Avenue West Palm Beach, FL 33401 Telephone: 561/835-9400 Facsimile: 561/835-0322 E-Mail: [email protected]
AS ESCROW AGENT and AS ATTORNEYS FOR LOUISIANA MUNICIPAL POLICE EMPLOYEES' RETIREMENT SYSTEM, THE LOUISIANA SCHOOL EMPLOYEES' RETIREMENT SYSTEMS, AND THE BOCA RATON POLICE & FIREFIGHTERS RETIREMENT SYSTEM
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Wendy H. Zoberman (Admitted Pro Hac Vice) Jay W. Eng (Admitted Pro Hac Vice) Berman DeValerio Pease
Tabacco Burt & Pucillo Esperanté Building, Suite 900 222 Lakeview Avenue West Palm Beach, FL 33401 Tel: 561/835-9400 Fax: 561/835-0322
Jacks C. Nickens Richard Keeton Nickens, Keeton, Lawless
& Flack, LLP 600 Travis, Suite 8500 Houston, TX 77002 Tel: 713/571-9191 Fax: 713/571-9652
BAKER BOTTS L
James 1'Ma1ofley 910 Lofsiana Street Houston, Texas 77002-4995 Telephone: 713/229-1234 Facsimile: 713/229-1522
OF COUNSEL:
ATTORNEY-IN-CHARGE FOR DEFENDANTS RELIANT RESOURCES, INC., RELIANT ENERGY, INC., R. STEVE LETBETTER, STEPHEN W. NAEVE, AND MARY P. RICCIARDELLO
Maria Wyckoff Boyce Cristina Espinosa Rodriguez David K. Isaak Baker & Botts L.L.P. 910 Louisiana Street Houston, Texas 77002-4995 Telephone: 713/229-1234 Facsimile: 713/229-1522
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OF COUNSEL:
Howard W. Goldstein Kevin J. Harnisch Fried, Frank, Harris, Shriver & Jacobson LLP 1001 Pennsylvania Ave., N.W. Ste, 800 Washington, D.C. 20004 Telephone: 202/639-7269 Facsimile: 202/639-7003
FULBRIG}IT & JAWORS L.P.
By: Tom Godbold 1301 McKinncy S te 5100 Houston, Texas 77010-3095 Telephone: 713/651-7703 Facsimile: 713/651-5246
ATTORNEY-IN-CHARGE FOR DEFENDANT JOE BOB PERKINS
DECK, REDDEN & SECREST, L.L.F.
OF COUNSEL:
Michael P. Carroll Amelia T.R. Starr Neal A. Potischman Davis Polk & Wardwell 450 Lexington Avenue New York, New York 10017 Telephone: 2121450-4000 Facsimile: 212/450-3800
Jeanne Sommerfeld Beck, Redden & Secrest, L.L,P, 1221 McKinney Street, Suite 4500 Houston, Texas 77010-2010 Telephone: 713/951-3700 Facsimile: 713/951-3720
M. EricJ,R. Nichols 1221 McKinney Street, Suite 4500 Houston, Texas 77010-2010 Telephone: 713/951-3700 Facsimile: 713/951-3720
ATTORNEY-IN-CHARGE FOR DEFENDANT DELOITTE & TOUCHE LLP
40