Case 3:05-cv-00115-RRE-KKK Document 748-1 Filed 10/16/12 Page 2 of 97
UNITED STATES DISTRICT COURT DISTRICT OF NORTH DAKOTA
RAYMOND HANS, GAYLE HERBERT, LARRY RICHMAN, DONNA WALKER MICHAEL WEBSTER, BERNARD MCKAY, and TAMMY BLAKE on behalf of themselves, individually and on behalf of all others similarly situated in the Former Employee Class; and CARLOS GONZALES, DONALD KLAIN, JOLENE MATHESON-GODSCHALK, and SIDNEY LEIN, on behalf of themselves individually and on behalf of all others similarly situated in the Current Employee Class;
Plaintiffs,
v. Civil Action No. 3:05-CV-00115-RRE-KKK GARY D. THARALDSON, CONNIE THARALDSON, ROGER THARALDSON, RAYMOND BRAUN and JAMES LOCHOW as the Trustees of the MICHELLE THARALDSON TRUST and as Trustees of the CLASS ACTION MATTHEW THARALDSON TRUST, SOUTH SETTLEMENT AGREEMENT DAKOTA TRUST COMPANY, LLC as Trustee of the MICHELLE LYN THARALDSON LEMASTER DYNASTY TRUST, as Trustee of the MATTHEW THARALDSON DYNASTY TRUST and as Trustee of the MICHAEL THARALDSON DYNASTY TRUST, and LINDA THARALDSON individually and in her capacity as Trustee for the MICHAEL THARALDSON TRUST,
Defendants, and
THARALDSON MOTELS, INC. EMPLOYEE STOCK OWNERSHIP PLAN,
Nominal Defendant.
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This Class Action Settlement Agreement (“Settlement Agreement”) is made and entered into by, between, and among GARY THARALDSON , his heirs, executors, agents, attorneys, and assigns (collectively “Tharaldson”); CONNIE THARALDSON,
RAYMOND BRAUN and JAMES LOCHOW as Trustees of the Michelle Tharaldson
Trust and as Trustees of the Matthew Tharaldson Trust; SOUTH DAKOTA TRUST
COMPANY, LLC as Trustee of the Michelle Lyn Tharaldson LeMaster Dynasty Trust, as Trustee of the Matthew Tharaldson Dynasty Trust, and as Trustee of the Michael
Tharaldson Dynasty Trust; LINDA THARALDSON individually and in her capacity as
Trustee for the Michael Tharaldson Trust; ROGER THARALDSON (all of the above collectively “Defendants” and when Colleen Haugen, Delphine Nauer, Cleone Nitti,
Rodney Tharaldson, Fargo-Moorhead Area Foundation, and Tharaldson Motels II, Inc.
(“TMI II”) are included with Defendants, “Settling Defendants”); RAYMOND HANS,
GAYLE HERBERT, LARRY RICHMAN, DONNA WALKER, MICHAEL
WEBSTER, BERNARD MCKAY and TAMMY BLAKE (collectively “FEC
Representatives”), on behalf of themselves, individually, and on behalf of all others similarly situated in the Former Employee Class in the matter of Hans v. Tharaldson ,
3:05-CV-00115-RRE-KKK (D.N.D.) (“Action”); CARLOS GONZALES, DONALD
KLAIN, JOLENE MATHESON-GODSCHALK, and SIDNEY LIEN (collectively
“CEC Representatives”), on behalf of themselves, individually, and on behalf of all others similarly situated in the Current Employee Class in the Action; TMI
HOSPITALITY, INC. (“TMI”)(formerly Tharaldson Motels, Inc.); TMI
HOSPITALITY, INC. EMPLOYEE STOCK OWNERSHIP PLAN AND TRUST
(“TMI ESOP”)(formerly the Tharaldson Motels, Inc. Employee Stock Ownership Plan
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and Trust); and TMI II (all of the foregoing collectively “Parties”). All capitalized terms not otherwise defined shall have the meaning ascribed thereto in Section I of this
Settlement Agreement.
RECITALS
WHEREAS, on December 30, 2004, Raymond Hans filed a Class Action
Complaint in the United States District Court for the District of Nevada asserting claims on behalf of himself and a purported class of participants and beneficiaries of the TMI
ESOP and the TMI ESOP for alleged violations of ERISA in connection with the acquisition of sponsor stock by the TMI ESOP;
WHEREAS, on April 14, 2005, Raymond Hans, Chuck LeBlanc, and Larry
Richman filed an Amended Class Action Complaint for alleged violations of ERISA asserting claims on behalf of themselves and a purported class of participants and beneficiaries of the TMI ESOP;
WHEREAS, on May 17, 2005, Raymond Hans, Chuck LeBlanc, and Larry
Richman filed a Second Amended Class Action Complaint for alleged violations of
ERISA asserting claims on behalf of themselves and a purported class of participants and beneficiaries of the TMI ESOP;
WHEREAS, on June 20, 2005, Defendants filed a Motion to Dismiss and to
Transfer Venue;
WHEREAS, on December 20, 2005, the Action was transferred to the United
States District Court for the District of North Dakota, Southeastern Division;
WHEREAS, on May 2, 2006, Raymond Hans, Gayle Herbert, Jeremy Jackey,
Chuck LeBlanc, Larry Richman, Donna Walker and Michael Webster (collectively
“Original Plaintiffs”) filed a Third Amended Class Action Complaint for alleged
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violations of ERISA asserting claims on behalf of themselves and a purported class of participants and beneficiaries of the TMI ESOP;
WHEREAS, on May 23, 2006, Original Plaintiffs filed a Fourth Amended Class
Action Complaint for alleged violations of ERISA asserting claims on behalf of themselves and a purported class of participants and beneficiaries of the TMI ESOP;
WHEREAS, on December 21, 2007, Original Plaintiffs filed a Motion for Class
Certification;
WHEREAS, on November 18, 2008, North Star Trust Company (“North Star”), not in its corporate capacity, but solely in its capacity as a fiduciary and as trustee of the
TMI ESOP, filed a Motion to Intervene as plaintiff in the Action;
WHEREAS, between December 8, 2008 and December 10, 2008, the Court conducted a hearing on Original Plaintiffs’ Motion for Class Certification;
WHEREAS, on June 22, 2009, the Court stayed the Action to allow the parties to engage in mediation;
WHEREAS, on February 19, 2010, a Joint Motion was filed to lift the stay in the
Action;
WHEREAS, on May 7, 2010, the Court (a) granted Original Plaintiffs’ Motion for
Class Certification and created two sub-classes, i.e. , the Former Employee Class and the
Current Employee Class, (b) appointed the Original Plaintiffs as representatives of the
Former Employee Class, (c) appointed North Star as Class Representative for the Current
Employee Class, (d) appointed the law firms of Moore & Van Allen PLLC and Skadden,
Arps, Slate, Meagher & Flom LLP as class counsel for the Current Employee Class, (e) appointed the law firm of Cohen, Milstein, Hausfeld, & Toll as class counsel for the
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Former Employee Class, and (f) appointed the law firm of Solberg, Stewart, Miller &
Tjon as liaison counsel for the Former Employee Class;
WHEREAS, on May 21, 2010, North Star filed a Motion for Clarification and
Modification of the Order on Motion for Class Certification;
WHEREAS, on August 27, 2010, the Court (a) granted North Star’s Motion for
Clarification and Modification of the Order on Motion for Class Certification, (b) directed North Star to identify appropriate class representatives and class counsel for the
Current Employee Class, (c) modified the definitions of the Former Employee Class and the Current Employee Class, and (d) removed Jeremy Jackey and Chuck LeBlanc as FEC
Representatives and replaced them with Bernard McKay and Tammy Blake;
WHEREAS, on October 22, 2010, the Court appointed Charles Berryhill, Carlos
Gonzales, Don Klain, Jolene Matheson-Godschalk, and Sidney Lien as class representatives for the Current Employee Class, and the Court appointed the law firm of
Keller Rohrback L.L.P as class counsel for the Current Employee Class (Former
Employee Class and Current Employee Class being hereafter collectively called
“Participant Classes”);
WHEREAS, on April 7, 2011, Charles Berryhill voluntarily withdrew as a CEC
Representative;
WHEREAS, on April 8, 2011, the Participant Classes, North Star, and Defendants each filed motions for summary judgment as to the claims asserted in the Action;
WHEREAS, on October 29, 2011, the Court (a) granted in part and denied in part the motion for summary judgment filed by Tharaldson, (b) denied the motion for partial summary judgment filed by North Star, (c) granted the motion for summary judgment
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filed by the Non-Fiduciary Selling Shareholders (as defined in the motion for summary judgment), and (d) denied the motions for partial summary judgment filed by the
Participant Classes.
WHEREAS, on April 4, 2012, the Court granted the CEC Representatives’
Motion for Leave to File a Fifth Amended Complaint;
WHEREAS, on May 8, 2012, the CEC Representatives filed a Fifth Amended
Complaint for alleged violations of ERISA;
WHEREAS, Former Employee Class Counsel and Current Employee Class
Counsel (collectively “Class Counsel”) conducted significant discovery regarding the facts and claims asserted in the Complaint, served document requests on Defendants and subpoenas on third parties, and reviewed thousands of pages of documents produced in this Action;
WHEREAS, the Class Representatives, North Star, TMI, TMI II, and Tharaldson, each through their respective counsel, conducted arm’s-length negotiations over a period of months before Robert Meyer, an experienced attorney and mediator, which culminated in the execution of a Settlement Agreement Memorandum of Understanding;
WHEREAS, the Class Representatives have agreed to fully, finally, and forever release, resolve, discharge and settle all Settled ESOP Claims on behalf of themselves and the Participant Classes against Settling Defendants;
WHEREAS, Tharaldson, Linda Tharaldson, TMI, the TMI ESOP, and TMI II have agreed to fully, finally, and forever release, resolve, discharge and settle various claims between and among them;
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WHEREAS, as a result of factual investigation and legal research conducted by
Class Counsel concerning the claims asserted in the Complaint, Class Counsel have concluded that the terms of this Settlement are fair, reasonable, adequate and in the best interests of the Participant Classes and the TMI ESOP, and have agreed to settle the
Action on the terms set forth herein after considering: (i) the benefits that the Participant
Classes will receive from the Settlement; (ii) the risks, difficulties, and delays involved with complex litigation such as this, including prosecution through trials and appeals; (iii) the specific risks inherent in complex actions under ERISA, including problems of proof and the variety of defenses potentially available to Defendants; and (iv) the desirability of permitting the Settlement to be consummated as provided herein;
WHEREAS, the Settling Defendants deny the material allegations of the
Complaint; deny any wrongdoing or liability whatsoever; believe that all Defendants acted at all times reasonably and prudently with respect to the TMI ESOP and the
Participant Classes; would assert certain other defenses if this Settlement were not consummated; and are entering into the Settlement solely to avoid the cost, disruption, and uncertainty of litigation;
WHEREAS, the Parties desire to promptly and fully resolve and settle with finality all of the claims on the terms set forth herein and subject to the approval of the
Court;
NOW, THEREFORE, the Parties, in consideration of the promises, covenants and agreements herein described, and for other good and valuable consideration, acknowledged by each of them to be satisfactory and adequate, and without any
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admission or concession as to any matter of fact or law, and intending to be legally bound, do hereby agree as follows.
I. DEFINITIONS
As used in this Settlement Agreement, the following terms have the following meanings, unless a section or subsection of this Settlement Agreement specifically provides otherwise. Capitalized terms used in this Settlement Agreement, but not defined in this Section I, shall have the meaning ascribed to them elsewhere in this Settlement
Agreement.
1. “Action” means the class action pending in this Court styled RAYMOND
HANS, GAYLE HERBERT, LARRY RICHMAN, DONNA WALKER, MICHAEL
WEBSTER, BERNARD MCKAY and TAMMY BLAKE on behalf of themselves, individually and on behalf of all others similarly situated in the Former Employee Class; and CARLOS GONZALES, DONALD KLAIN, JOLENE MATHESON-GODSCHALK, and SIDNEY LEIN, on behalf of themselves individually and on behalf of all others similarly situated in the Current Employee Class v. GARY D. THARALDSON, CONNIE
THARALDSON, ROGER THARALDSON, RAYMOND BRAUN and JAMES LOCHOW as the Trustees of the MICHELLE THARALDSON TRUST and as Trustees of the
MATTHEW THARALDSON TRUST, SOUTH DAKOTA TRUST COMPANY, LLC as
Trustee of the MICHELLE LYN THARALDSON LEMASTER DYNASTY TRUST, as
Trustee of the MATTHEW THARALDSON DYNASTY TRUST and as Trustee of the
MICHAEL THARALDSON DYNASTY TRUST, and LINDA THARALDSON individually and in her capacity as Trustee for the MICHAEL THARALDSON TRUST and
THARALDSON MOTELS, INC. EMPLOYEE STOCK OWNERSHIP PLAN, (Nominal
Defendant), Civil Action No. 3:05-cv-00115-RRE-KKK.
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2. “CEC Representatives” means Carlos Gonzales, Donald Klain, Jolene
Matheson-Godschalk, and Sidney Lien.
3. “Claim” or “Claims” means any and all actions, causes of action, proceedings, adjustments, executions, offsets, contracts, judgments, obligations, errors of
commission or omission, suits, debts, dues, sums of money, accounts, reckonings, bonds, bills, specialties, variances, covenants, trespasses, damages, demands (whether written or
oral), agreements, promises, liabilities, controversies, costs, expenses, attorney’s fees and
losses whatsoever, whether in law or in equity, and whether based on any federal law,
state law, foreign law, common law doctrine, rule, regulation or otherwise, whether
accrued or not, whether already acquired or acquired in the future, brought by way of
demand, complaint, cross-claim, counterclaim, third-party claim or otherwise.
4. “Class Counsel” means Former Employee Class Counsel and Current
Employee Class Counsel, collectively.
5. “Class Representatives” means FEC Representatives and CEC
Representatives collectively.
6. “Complaint” means all of the complaints filed in this action.
7. “Court” means the United States District Court for the District of North
Dakota, Southeastern Division.
8. “Current Employee Class” is as defined by the Court in its August 27,
2010 Order: all persons, other than Defendants in this Action, members of Defendants’
immediate families, and Defendants’ legal representatives, heirs, successors, or assigns of
any excluded party, who were participants in the TMI ESOP at any time from December
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30, 1998 to the present and who is a present employee of TMI and the TMI ESOP beneficiaries of such persons.
9. “Current Employee Class Counsel” means Keller Rohrback L.L.P.
10. “Defendants” means Gary D. Tharaldson; Connie Tharaldson; Roger
Tharaldson; Raymond Braun and James Lochow solely as the Trustees of the Michelle
Tharaldson Trust and as Trustees of the Matthew Tharaldson Trust; South Dakota Trust
Company, LLC solely as Trustee of the Michelle Lyn Tharaldson Lemaster Dynasty
Trust, as Trustee of the Matthew Tharaldson Dynasty Trust and as Trustee of the Michael
Tharaldson Dynasty Trust; and Linda Tharaldson individually and in her capacity as
Trustee for the Michael Tharaldson Trust.
11. “Designated ESOP Notes” means the following promissory notes issued by the TMI ESOP:
Original Payee Original Loan Payment Due Outstanding Amount Principal Michael Tharaldson Trust $6,622,188.00 12/31/30 $5,849,624.00 Matthew Tharaldson Dynasty $8,347,560.00 12/31/30 $7,373,709.01 Trust
12. “ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, 29 U.S.C. § 1001, et seq..
13. “Expense Award” shall have the meaning set forth in Section V.1 of this
Settlement Agreement
14. “FEC Representatives” means Raymond Hans, Gayle Herbert, Larry
Richman, Donna Walker, Michael Webster, Bernard McKay, and Tammy Blake.
15. “Fee Award” shall have the meaning set forth in Section V.1 of this
Settlement Agreement.
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16. “Final Order” means the Order and Final Judgment, substantially in the form of Exhibit C hereto.
17. “Former Employee Class” is as defined by the Court in its August 27,
2010 Order: all persons, other than Defendants in this Action, members of Defendants’ immediate families, and Defendants’ legal representatives, heirs, successors, or assigns of any excluded party, who were participants in the TMI ESOP at any time from December
30, 1998 to the present and who received an allocation of TMI ESOP assets to their accounts which they did not subsequently forfeit under the terms of the TMI ESOP and who are no longer employees of TMI, and the beneficiaries of such persons.
18. “Former Employee Class Counsel” means Cohen, Milstein, Sellers & Toll,
P.L.L.C.
19. “Incentive Awards” shall have the meaning set forth in Section V.1 of this
Settlement Agreement
20. “McKay Litigation” means the class action pending in the Court styled
BERNARD MCKAY, on behalf of himself, individually, and on behalf of all others similarly situated, Plaintiff, v. GARY D. THARALDSON, Defendant, and THARALDSON
MOTELS, INC. EMPLOYEE STOCK OWNERSHIP PLAN, Nominal Defendant, Civil
Action No. 3:08-CV-113-RRE-KKK.
21. “Non-Appealable” means an order entered by the Court is no longer subject to appeal, which shall occur when:
a. if no appeal is taken therefrom, on the date on which the time to
appeal therefrom (including any extension of time) has expired; or
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b. if any appeal is taken therefrom, on the date on which all appeals
therefrom, including any petitions for rehearing or re-argument,
petitions for rehearing en banc, and petitions for writ of certiorari
or any other writ, or any other form or review, have been finally
disposed of, such that the time to appeal therefrom (including any
extension of time) has expired, in a manner resulting in an
affirmance of the Final Order.
22. “Notice” means the form of notice appended hereto as Exhibit A.
23. “Participant Classes” means the Former Employee Class and the Current
Employee Class.
24. “Preliminary Approval Order” means the “Order Preliminarily Approving
Settlement, Approving Form of Notice, and Setting Fairness Hearing” in this Action, substantially in the form of Exhibit B hereto.
25. “Settled Claims” means Settled ESOP Claims, Settled Tharaldson
Indemnification Claims, Settled Tharaldson Contract Claims, and Settled TMI
Indemnification Claims, collectively.
26. “Settled ESOP Claims” means each and every Claim or Unknown Claim relating to or arising out of the acquisition of TMI stock by the TMI ESOP as alleged in the Complaint that: (i) has been asserted or could have been asserted in this Action, including any claims for attorney’s fees, costs or expenses; or (ii) arises under ERISA or any federal law, state law, foreign law, common law doctrine, rule, regulation or otherwise and could have been asserted in any forum by the Participant Classes or the
TMI ESOP against any of the Settling Defendants or TMI Affiliates insofar as the Claim
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or Unknown Claim arises out of or is based upon the allegations, transactions, facts, matters or occurrences, representation or omissions involved, set forth or referred to in the Complaint, and relates to the TMI ESOP, and/or any applicable instruments under which the TMI ESOP operated at the time of the acquisition of TMI stock by the TMI
ESOP as alleged in the Complaint; or (iii) relates to the decision to enter into this
Settlement Agreement, except for Claims to enforce the Settlement Agreement,.
27. “Settled Tharaldson Indemnification Claims” means each and every Claim or Unknown Claim relating to or arising out of all past, present, and future rights of indemnification (whether existing pursuant to contract, statute, by-law, article of incorporation, ERISA plan, resolution, oral agreement, common law, or any other source or form) from any TMI Affiliates or the TMI ESOP in favor of Tharaldson, including, without limitation, indemnification for various legal fees and expenses associated with
Tharaldson’s defense of this Action.
28. “Settled Tharaldson Contract Claims” means each and every Claim or
Unknown Claim relating to or arising out of all past and future payments, contractual or otherwise, purportedly due to Linda Tharaldson from any TMI Affiliates or the TMI
ESOP, including, without limitation, claims to payments purportedly due to Linda
Tharaldson pursuant to that certain agreement titled “Settlement Agreement” and dated
March 28, 1998, settling claims between Tharaldson and Linda Tharaldson and any amendments or modifications thereto.
29. “Settled TMI Indemnification Claims” means each and every Claim or
Unknown Claim relating to or arising out of the conduct of Tharaldson or Linda
Tharaldson that occurred before the execution of the Settlement Agreement
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Memorandum of Understanding, but only to the extent such conduct of Tharaldson or
Linda Tharaldson would have been covered by their respective right to indemnification from a TMI Affiliate, if any.
30. “Settlement” means the settlement and compromise of this Action as provided for in this Settlement Agreement.
31. “Settlement Agreement” means this Class Action Settlement Agreement and any accompanying Exhibits, including any subsequent amendments thereto and any
Exhibits to such amendments.
32. “Settlement Agreement Memorandum of Understanding” means the agreement dated April 20, 2012 and filed with the Court under seal, signed by
Tharaldson, Linda Tharaldson, Kyle Newman, in his capacity as President of TMI II,
Lauris Molbert, in his capacity as CEO of TMI, Paul D. Trost, Vice-President of North
Star in its capacity as Trustee and on behalf of the TMI ESOP, Bruce F. Rinaldi as
Former Employee Class Counsel, and Gary D. Greenwald as Current Employee Class
Counsel.
33. “Settlement Fund” means the Settlement Fund Cash Component and the
Settlement Fund Principal Reduction.
34. “Settlement Fund Cash Component” means Four Million dollars
($4,000,000) paid in the manner described in Section II.A below and any interest or income earned thereon.
35. “Settlement Fund Principal Reduction” means the Eleven Million dollars
($11,000,000) of principal owing on the Designated ESOP Notes that will be deemed paid in the manner described in Section II.B below.
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36. “Settling Defendants” means the Defendants and Colleen Haugen,
Delphine Nauer, Cleone Nitti, Rodney Tharaldson, Fargo-Moorhead Area Foundation, and TMI II and with respect to natural persons who are Settling Defendants, their present or past heirs, executors, administrators, and assigns, and with respect to legal entities other than natural persons, who are Settling Defendants, their predecessors, successors and assigns.
37. “Settling Parties” means the Class Representatives, on behalf of themselves and the Participant Classes, TMI, the TMI ESOP, TMI II, and the Settling
Defendants.
38. “Tax” or “Taxes” means any and all taxes, fees, levies, duties, tariffs, imposts, and other charges of any kind (together with any and all interest, penalties, additions to tax and additional amounts imposed with respect thereto) imposed by any governmental authority, including income tax and other taxes and charges on or regarding franchises, windfall or other profits, gross receipts, property, sales, use, capital stock, payroll, employment, social security, workers’ compensation, unemployment compensation, or net worth; taxes or other charges in the nature of excise, withholding, ad valorem, stamp, transfer, value added, or gains taxes; license, registration and documentation fees; and customs’ duties, tariffs, and similar charges.
39. “Termination Notice” shall have the meaning set forth in Section XIV.1 of this Settlement Agreement.
40. “Tharaldson” means Gary D. Tharaldson, his heirs, executors, agents, attorneys, and assigns.
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41. “TMI” means TMI Hospitality, Inc., formerly known as Tharaldson
Motels, Inc.
42. “TMI Affiliates” means collectively TMI and its officers, directors, former directors except for Tharaldson, employees, and all subsidiaries and affiliates, including, but not limited to, TMI Development Company, Inc., TMI Property Management, Inc.,
TMI Communications, Inc., and TMI Employee Management, Inc., as well as all officers, directors, and employees of such subsidiaries and affiliates.
43. “TMI ESOP” means the TMI Hospitality, Inc. Employee Stock Ownership
Plan and Trust, formerly known as the Tharaldson Motels, Inc. Employee Stock
Ownership Plan and Trust.
44. “TMI ESOP Counsel” means the law firm of Moore & Van Allen PLLC.
45. “TMI II” means Tharaldson Motels II, Inc.
46. “Unknown Claim” means any Claim that any Settling Party does not know or suspect to exist in his, her or its favor but that accrued at any time on or before the
Final Order becomes Non-Appealable, including, without limitation, Claims that if known might have affected the decision to enter into this Settlement Agreement or not to object to the Settlement. With respect to all Settled Claims, the Settling Parties stipulate and agree that upon the Final Order becoming Non-Appealable, each Settling Party shall expressly waive, and shall be deemed to, and by operation of the Final Order shall, waive and relinquish, to the fullest extent permitted by law, the provisions, rights and benefits of Chapter 9-13-02 of the North Dakota Century Code and all similar, comparable, and/or equivalent provisions of the statutory or common laws of any other State, Territory, or other jurisdiction. Chapter 9-13-02 reads:
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A general release does not extend to claims which the creditor does not know or suspect to exist in the creditor’s favor at the time of executing the release, which if known by creditor, must have materially affected the creditor’s settlement with the debtor.
The Settling Parties may hereafter discover facts in addition to or different from those which they now know or believe to be true with respect to the subject matter of the
Settled Claims but hereby stipulate and agree that they do, upon the Final Order becoming Non-Appealable, fully, finally and forever settle and release any and all Settled
Claims, known or unknown, suspected or unsuspected, contingent or non-contingent, which now exist, or heretofore have existed upon any theory of law or equity, including, but not limited to, conduct which is negligent, intentional, with or without malice, or a breach of any duty, law or rule, without regard to the subsequent discovery or existence
of such different or additional facts. The Settling Parties acknowledge and by operation
of law the heirs, executors, administrators, successors, assigns, predecessors, successors
and assigns of the Settling Parties shall be deemed to have acknowledged, that the
inclusion of Unknown Claims in the definition of each of the claims comprising the
Settled Claims was separately bargained for and was a key element of the Settlement
Agreement of which the releases are a part. The Settling Parties (including the Settling
Defendants and Class Representatives, for themselves and on behalf of the Participant
Classes) assume the risk of subsequent discovery or understanding of any matter, fact, or
law that if now known or understood, would in any respect have affected his, her, or its
entering into this Settlement Agreement.
II. SETTLEMENT FUND
A. SETTLEMENT FUND CASH COMPONENT
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1. TMI shall create the Settlement Fund Cash Component in two payments of Two Million Dollars ($2,000,000) each. The first payment shall be made thirty (30) days after the entry of the Final Order by the Court (the “Initial Funding Date”) and shall be paid into an interest bearing account established by Class Counsel in the name of the
TMI Hospitality Inc. ESOP Litigation Settlement Fund. (“Bank Account”). The second payment shall be made into the Bank Account no later than the date (“Final Funding
Date”) which is one (1) year after the Initial Funding Date. The payment made on the
Final Funding Date shall be subject to offset for TMI’s unreimbursed administrative expenses as described in paragraph II.A.5 below.
2. Under no circumstances shall TMI have any obligations to fund any amounts incurred in connection with the Settlement, whether administrative costs or otherwise, in excess of the $4,000,000 set forth in Section II.A.1 above except for administrative costs of the settlement incurred by TMI or the TMI ESOP in excess of
$150,000. Under no circumstances shall Settling Defendants have any obligations to fund any amounts incurred in connection with the Settlement, whether administrative costs or otherwise, unless expressly stated herein.
3. The Settlement Fund Cash Component held in the Bank Account described in Section II.A.1 above shall be deemed to be in the custody of the Court and shall remain subject to the jurisdiction of the Court and shall be administered by Class
Counsel in accordance with the terms of this Settlement Agreement and the Orders of the
Court. The Settlement Fund Cash Component shall not be released from the Bank
Account until the Final Order becomes Non-Appealable or the Settlement is terminated in accordance with Section XIV below.
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4. Upon the Final Order becoming Non-Appealable, the Settlement Fund
Cash Component shall be used to pay (i) any Taxes on the income thereof or any distribution of the proceeds thereof in accordance with this Settlement Agreement, (ii)
Notice and class administration expenses; and (iii) the Expense Award, the Incentive
Awards and the Fee Award. The remainder, if any, of the Settlement Fund Cash
Component after the payment of the above amounts shall be sent to the TMI ESOP to be
allocated in accordance with the Plan of Allocation as described in Section III below.
5. TMI shall be entitled to reimbursement up to $150,000 for approved
expenses related to the administration of this Settlement Agreement to be paid (i) first
from settlement proceeds in the McKay Litigation available after the payment of any
court-approved expense or fee awards to class counsel in the McKay Litigation and (ii) as
an offset to the $2,000,000 payment due on the Final Funding Date. TMI agrees that it
will not seek reimbursement for expenses exceeding $150,000 that it, or any person or
entity hired by it or by the TMI ESOP, incurs for the administration of the Settlement
Agreement. On the Final Funding date, TMI will be allowed to offset from the
$2,000,000 payment any previously unreimbursed expenses that TMI has actually
incurred or expenses that TMI reasonably anticipates it will incur in the administration of
the Settlement Agreement. On the final Principal Reduction date described in paragraph
II.B.1 below, any amounts offset by TMI in anticipation of administrative expenses that
are not actually incurred will be sent to the TMI ESOP to be allocated in accordance with
the Plan of Allocation described in Section III below.
6. All parties understand that it is extremely likely that the Settlement Fund
Cash Component will be exhausted after payment of the amounts in subsections (i) – (iv)
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of Section II.A.4 above and that there will likely be no allocation of any of the
Settlement Fund Cash Component to the Participant Classes in accordance with the Plan of Allocation.
7. In the event that the Settlement is terminated in accordance with Section
XIV below, Class Counsel shall return to TMI the entire balance of the Settlement Fund
Cash Component (including all interest or income accrued or earned thereon), net of any
Taxes due on such interest income, within ten (10) business days of receiving a
Termination Notice and without the necessity of any Court order.
8. The Settling Parties shall not have any liability or responsibility for the payment of any Taxes incurred by or with respect to the Settlement Fund Cash
Component, and any such Taxes shall be paid out of the Settlement Fund Cash
Component.
B. SETTLEMENT FUND PRINCIPAL REDUCTION
1. Contemporaneous with the Final Order becoming Non-Appealable and contemporaneous with the TMI ESOP’s payments of interest due on the Designated
ESOP Notes on each subsequent December 31 for 3 years (“Principal Reduction
Period”), a total of Eleven Million dollars ($11,000,000) of principal on the Designated
ESOP Notes will be deemed paid by TMI II or its successor(s) in the following amounts
(each a “Principal Reduction”):
Principal Reduction on Final Order Becoming Non-Appealable: $3 Million Principal Reduction Subsequent December 31: $3 Million Principal Reduction Subsequent December 31: $4 Million Principal Reduction Subsequent December 31: $1 Million
The Principal Reduction shall be first applied to the principal owed on the
Designated ESOP Note that was issued to the Matthew Tharaldson Dynasty Trust, and
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only when there is no further principal owed on the Designated ESOP Note that was issued to the Matthew Tharaldson Dynasty Trust shall the Principal Reduction be applied to the Designated ESOP Note that was issued to the Michael Tharaldson Trust. Cleone
Nitti and Delphine Nauer, who have a security interest in the Designated ESOP Note that was issued to the Michael Tharaldson Trust, have consented to the application of the
Principal Reduction to the promissory note issued by the TMI ESOP to the Michael
Tharaldson Trust as described above, and contemporaneous with the Final Order becoming Non-Appealable will execute the document attached as Exhibit F to this
Settlement Agreement, entitled Consent To Section II.B.1 of the Class Action Settlement
Agreement in Hans v. Tharaldson , CV-00115-RRE-KKK (D.N.D.)
2. Each Principal Reduction will be treated as principal actually paid by the
TMI ESOP for purposes of determining the amount of TMI stock to be released from the
TMI ESOP’s suspense account for each Designated ESOP Note and for adjusting the future interest payments on such note accordingly.
3. In the event of a sale of TMI (or any other transaction pursuant to which the Designated ESOP Notes will be repaid or the shares pledged as collateral for the
Designated ESOP Notes will be exchanged for cash or other property) during the
Principal Reduction Period, any remaining Principal Reduction not deemed paid prior to the date of the sale closing, will be deemed paid immediately prior to closing. Subject to the provisions of Section V, the TMI stock released from the TMI ESOP’s suspense accounts for the Designated ESOP Notes as a result of each Principal Reduction will be allocated to the Participant Classes in accordance with the Plan of Allocation.
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4. TMI II agrees that it will not sell, transfer, assign, pledge, or in any manner encumber (collectively a “Transfer”) the Designated ESOP Notes or any portion thereof during the Principal Reduction Period without providing at least 7 days prior written notice of such Transfer to TMI and the TMI ESOP, which notice shall include, without limitation, a description of the Designated ESOP Note to be Transferred and the name and address of the person or entity to whom such Transfer shall be made. TMI II understands and agrees that TMI and the TMI ESOP may provide notice of the Principal
Reductions to any Transferee of the Designated ESOP Notes during the Principal
Reduction Period.
5. TMI II agrees that it will return the Designated ESOP Notes to the TMI
ESOP within 30 days of the Final Order becoming Non-Appealable so that each of the
Designated ESOP Notes may be endorsed as follows: “The Outstanding Principal
Amount of This Note Is Subject To Reduction Pursuant to a Court Approved Settlement
Agreement.” The TMI ESOP will return the endorsed Designated ESOP Notes to TMI II within 7 days of receipt from TMI II.
III. PLAN OF ALLOCATION
1. The Plan of Allocation is attached hereto as Exhibit D. After proceeds of the Settlement Agreement are allocated in accordance with the Plan of Allocation as approved by the Court, the proceeds will become subject to the terms of the TMI ESOP, as amended from time to time by TMI. TMI retains all rights as sponsor of the TMI
ESOP to make necessary amendments to the TMI ESOP Plan to effectuate the Plan of
Allocation or for any other purpose, except TMI will not amend the TMI ESOP, without the written consent of Class Counsel, in any way that has the effect of reducing, modifying, or altering: ( i) any benefit to which a Settlement Participant (as defined in the
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Plan of Allocation) may become entitled under the Plan of Allocation; ( ii ) the Valuation
Date (as defined in the Plan of Allocation) as of which the TMI stock released from the
TMI ESOP’s suspense accounts for the Designated ESOP Notes as a result of each
Principal Reduction will be allocated; or ( iii ) the manner or method of allocation of shares to Settlement Participant Accounts under the Plan of Allocation.
2. The Settling Defendants shall have no responsibility for preparing or providing input into the Plan of Allocation or the distribution of the Settlement Fund
pursuant to the Plan of Allocation.
3. The Participant Classes shall not have any claim against Class
Representatives, North Star, TMI Affiliates, TMI ESOP, or the Settling Defendants, or
counsel to any of the foregoing, including any of the individuals involved in the
distribution under the Plan of Allocation, based on any distributions of the Settlement
Fund made substantially in accordance with this Settlement Agreement or as authorized by the Court.
IV. SETTLEMENT ADMINISTRATION
Class Counsel shall be responsible for publication and mailing of the required
Notice to the Participant Classes. Fees and expenses for the Notice will be paid by Class
Counsel and will be reimbursable as a cost from the Settlement Fund Cash Component.
The Notice to the Participant Classes in this Action will be coordinated with the approval
and notice required in the McKay Litigation so as to minimize the costs incurred in the
McKay Litigation.
V. PAYMENT OF FEES ,INCENTIVE AWARDS , AND REIMBURSEMENT OF COSTS AND EXPENSES
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1. Class Counsel will apply to the Court for an award from the Settlement
Fund of (i) attorney’s fees (the “Fee Award”), (ii) incentive awards for Class
Representatives (“Incentive Awards”) and (iii) reimbursement of litigation costs and expenses (the “Expense Award”).
2. The Settling Defendants and their counsel will take no position regarding the application for or award of the Fee Award, the Incentive Awards, or the Expense
Award, provided that the application for the Fee Award does not exceed one-third of the
Settlement value. The Settling Defendants, TMI, and the TMI ESOP agree to take no position regarding the Class Counsel’s application for a Fee Award, Incentive Awards, or
Expense Award provided that the application for Fee Award, Incentive Awards, and
Expense Awards, combined, does not exceed $4,675,000. This Settlement Agreement is not contingent on and will not be affected in any way by the Court’s or any appellate court’s ruling with respect to any application for Fee Award, Incentive Awards, or
Expense Award by Class Counsel.
3. Any Fee Award, Incentive Awards, Expense Award, and the expenses for the Notice and administration expenses associated with the implementation of the
Settlement Agreement, shall be paid solely from the Settlement Fund, subject to the
Court’s approval at the Final Approval Hearing. Under no circumstances shall TMI have any obligations to fund any amounts incurred in connection with the Settlement, whether administrative costs or otherwise, in excess of the $4,000,000 set forth in Section II.A.1 above except for administrative costs of the settlement incurred by TMI or the TMI
ESOP in excess of $150,000, as discussed in Section II.A.4 below. Under no circumstances shall Settling Defendants have any obligations to fund any amounts
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incurred in connection with the Settlement, whether administrative costs or otherwise, unless expressly stated herein.
4. The Incentive Awards, Expense Award, and Fee Award shall be paid first out of the Settlement Fund Cash Component. Within 5 business days of the Final Order becoming Non-Appealable, Court-approved Incentive Awards shall be paid from the
Bank Account. After payment of approved Incentive Awards, if any, any balance
remaining in the Bank Account shall next be used to pay for any Court-approved Expense
Award. After payment of approved Incentive Awards and Expense Award, any balance
remaining in the Bank Account shall next be used to pay Class Counsel for any Court-
approved Fee Award. After payment of all of the above, the balance remaining in the
Bank Account, if any, shall be paid to the TMI ESOP for allocation in accordance with
the Plan of Allocation.
5. If the Final Order becomes Non-Appealable before the Final Funding
Date, Class Counsel will defer payment of the unpaid portion of an approved Fee Award
until after the Final Funding Date.
6. In the event that the approved amount of the Fee Award, the Expense
Award, and Incentive Awards, collectively, exceeds the remaining amount in the
Settlement Fund Cash Component, Class Counsel will defer that portion of the court-
approved Fee Award that cannot be satisfied out of the Settlement Fund Cash Component
and those deferred fees (the “Deferred Fee Award”) will be satisfied from the benefits
conferred upon the TMI ESOP by the Settlement Fund Principal Reduction in Section
II.B above and otherwise in accordance with Section V.7 below.
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7. To effectuate the payment of the Deferred Fee Award, a portion of the unallocated shares in the TMI ESOP loan suspense account no longer encumbered by an acquisition loan as a result of the Settlement Fund Principal Reduction will be converted to cash. At the discretion of TMI, the conversion to cash will be effected through redemption of shares by TMI or by an exchange of shares for allocated or unallocated cash held by the TMI ESOP. The shares will be converted to cash based on the shares’ fair market value as determined by the TMI ESOP’s trustee in accordance with Section
4.11 of the ESOP. The number of shares converted to cash each year will be sufficient to pay the Deferred Fee Award owing for that year, which will be equal to the product obtained by multiplying the total Deferred Fee Award by a fraction, the numerator of which is the annual Principal Reduction for that year and the denominator of which is
$11,000,000. The TMI ESOP Trustee will pay the Deferred Fee Award on or before
October 15 following the date of each Principal Reduction. Proceeds from the conversion to cash that exceed the Deferred Fee Award owing for that year will be allocated in accordance with the Plan of Allocation.
VI. NO ADMISSION OF WRONGDOING
The Parties acknowledge that this Settlement Agreement embodies a compromise of disputed claims and that nothing in the Settlement Agreement shall be interpreted or deemed to constitute any finding of wrongdoing by the Settling Defendants, TMI
Affiliates or the TMI ESOP or give rise to any inference of liability in this or any other proceeding. This Settlement Agreement shall not be offered or received against the
Settling Defendants, TMI Affiliates or the TMI ESOP as any admission by any such party with respect to the truth of any fact alleged by Class Representatives or the validity
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of any claim that had been or could have been asserted in the Action or in any litigation or of any liability, negligence, fault, or wrongdoing of any such party.
VII. PRELIMINARY APPROVAL ORDER
Within 5 days after execution of this Settlement Agreement, on behalf of the
Participant Classes, Class Counsel shall move the Court to enter the Preliminary
Approval Order (“Preliminary Approval Motion”). The Preliminary Approval Order will be substantially in the form of Exhibit B hereto, providing for, among other things:
1. Preliminary approval of the Settlement Agreement;
2. A hearing date for the Court to consider final approval of the Settlement
(which may be continued with court approval upon motion of any party)(“Final Approval
Hearing”);
3. A deadline by which all objections to the Settlement must be made;
4. A deadline for the filing of briefs in support of the Settlement and for
Class Counsel’s application for Fee Award, Incentive Awards, and Expense Award; and
5. Approval of the Notice to Participant Classes.
VIII. ORDER AND FINAL JUDGMENT OF DISMISSAL TO BE ENTERED BY THE COURT FOLLOWING APPROVAL OF THE SETTLEMENT
Following the Final Approval Hearing, upon approval by the Court of the
Settlement contemplated by this Settlement Agreement, the Final Order, substantially in the form of Exhibit C attached hereto, shall be entered by the Court.
IX. CONDITIONS OF SETTLEMENT –COURT APPROVAL
1. Each of the following is an express condition of Settlement:
a. The Court maintains this Action as a mandatory, non-opt out class
pursuant to Fed. R. Civ. P . 23(b)(1) or (b)(2);
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b. The Court enters a Preliminary Approval Order substantially in the
form annexed hereto as Exhibit B;
c. The Court enters the Final Order, substantially in the form annexed
hereto as Exhibit C;
d. The Court approves the settlement of the McKay Litigation as
stated in Section XI below.
2. The Court approval of the Fee Award, Incentive Awards, and/or Expense
Award, the Plan of Allocation, or reimbursement of administrative costs of the Settlement to TMI are not conditions of Settlement. No action by the Court or any courts of appeal related to the Fee Award, the Incentive Awards, the Expense Award, the Plan of
Allocation, or reimbursement of administrative costs of the Settlement to TMI shall prevent the Final Order allowing the approval of the Settlement from becoming Non-
Appealable.
X. ADDITIONAL CONDITIONS OF SETTLEMENT –REISSUANCE OF PROMISSORY NOTES
1. TMI II and Tharaldson currently owe TMI $7,154,222.01 plus accrued interest based on two promissory notes that become due and owing on December 31,
2012 (“TMI II Notes”). As partial consideration for the payment by TMI of the
Settlement Fund Cash Component, the amount due and owing under the TMI II Notes will be increased by $1,000,000 automatically upon the Final Order Becoming Non-
Appealable. To secure its obligations to pay TMI the amounts due under the TMI II
Notes, TMI II has heretofore pledged to TMI three promissory notes (collectively, the
“Currently Pledged Notes”) made by the TMI ESOP and assigned to TMI II by the promissory notes’ original holders, as further described as follows:
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Original Payee Original Loan Payment Due Outstanding Amount Principal Linda Tharaldson $6,825,000 12/31/30 $6,028,775.36 Michelle Tharaldson Trust $8,500,000 6/30/20 $5,432,334.28 Matthew Tharaldson Trust $8,500,000 6/30/20 $5,432,334.28
2. The TMI ESOP agrees to reissue two (2) promissory notes to TMI II, in substantially the form as in Exhibit E (collectively, the “Reissued Notes”) in exchange for the Michelle Tharaldson Trust Note above. The Reissued Notes will be in the principal amounts of (a) $2,125,446.65; and (b) $3,306,887.63.
3. Effective at 12:01 AM in the Central Time Zone on the day after the Final
Order becomes Non-Appealable, the following deliveries shall take place simultaneously through an escrow arrangement reasonably satisfactory to TMI, TMI II, and the TMI
ESOP: (a) the TMI ESOP shall deliver the Reissued Notes to TMI II; (b) TMI shall return the Currently Pledged Notes to TMI II, and TMI II shall then return the Michelle
Tharaldson Trust Note to the TMI ESOP for cancellation; (c) TMI II will assign
(absolutely and not as collateral) and deliver the Linda Tharaldson Note and the Reissued
Note for $2,125,446.65 (outstanding principal on the 2 notes totaling $8,154,222.01) to
TMI in satisfaction of the TMI II Notes (such assignment to be free and clear of all liens,
claims, and encumbrances); and (d) the accompanying loan documents will be modified,
as necessary, to reflect the exchange of notes described herein (the events set forth in paragraph 3 being collectively referred to herein as the “Closing”).
4. The obligations of TMI II and Tharaldson under the terms of the TMI II
Notes will continue, and TMI will retain all rights, until the TMI II Notes are satisfied as provided above. Provided that the TMI II Notes are not then in default and upon payment of all accrued and unpaid interest, TMI will accept the absolute assignment, free
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and clear of all liens, claims and encumbrances, of the Linda Tharaldson Note and the
Reissued Note with a principal amount of $2,125,446.65 referenced above in full satisfaction of the TMI II Notes. Should the TMI II Notes be in default prior to the Final
Order becoming Non-Appealable, the TMI II Notes will become immediately dues and payable and TMI will retain all rights and remedies available to it. A default of the TMI
II Notes shall not prevent the execution or otherwise excuse performance of the other provisions of this Settlement.
5. If the Court has not conducted the hearing for final approval of the
Settlement and entered the Final Order by December 31, 2012 or, even if the Final Order has been entered, should the Final Order remain appealable on December 31, 2012, TMI agrees to extend the maturity date of the TMI II Notes to the earliest of the following dates: (a) seven days after the Final Order becomes Non-Appealable, or (b) thirty days after the receipt of a Termination Notice (the period between December 31, 2012 and the extended maturity date being hereinafter referred to as the “Forbearance Period”).
During the Forbearance Period, TMI II and Tharaldson shall continue to pay interest under the TMI II Notes monthly at the applicable rate, and all other terms of the TMI II
Notes will remain unchanged.
6. If the Forbearance Period ends pursuant to paragraph 5(a) above, then
TMI II, TMI, and Tharaldson will effect the Closing as contemplated in paragraph 3 above. If the Forbearance Period ends pursuant to paragraph 5(b) above, then the TMI II
Notes will become immediately due and payable, and TMI will retain all rights and remedies available to it.
XI. ADDITIONAL CONDITIONS OF SETTLEMENT –APPROVAL OF SETTLEMENT OF MCKAY LITIGATION
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Any Party may withdraw from the Settlement if the proposed settlement of the
McKay Litigation is not approved by an order and judgment of the Court within twenty days of the entry of the Final Order. In the event that any Party timely exercises their respective right to withdraw acceptance, then this Settlement shall be terminated and the provisions of Section XIV.2 shall apply.
XII. ISSUANCE OF NOTICE UNDER THE CLASS ACTION FAIRNESS ACT
1. Subject to the requirements of the Preliminary Approval Order, Class
Counsel shall cause the Notice to be disseminated to Participant Classes. The Parties will seek to set the Final Approval Hearing at least sixty (60) days from the date the Notice is mailed to the Participant Classes, and the order giving final approval may not be issued earlier than ninety (90) days after the officials required to receive notice under the Class
Action Fairness Act of 2005, PL 109-2 (2005) and 28 U.S.C. § 1715(b), (d) (“CAFA”), have been served. To the extent available, TMI (with the assistance of the record keeper for the TMI ESOP) shall provide names and last known addresses of the Participant
Classes in electronic format at least twenty-one (21) days prior to the deadline for providing Notice to the Participant Classes.
2. Pursuant to CAFA, Tharaldson, at his own expense, shall prepare and provide the notices required by CAFA, including the notices to the United States
Department of Justice, the United States Department of Labor, and to the Attorneys
General of all states in which the members of the Participant Classes reside, as specified by 28 U.S.C. § 1715, within ten (10) days of the filing of the Preliminary Approval
Motion. Tharaldson shall give Class Counsel and TMI ESOP Counsel the opportunity to
review the notices at least seven (7) days before service.
XIII. RELEASES
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Upon the Final Order becoming Non-Appealable, and provided that each Party has performed all of the respective obligations under this Settlement Agreement to be performed on or prior to such date by such Party:
1. The TMI ESOP and the Participant Classes, and with respect to natural persons therein, their present or past heirs, executors, administrators, successors, and assigns, and with respect to legal entities other than natural persons therein, their predecessors, successors and assigns (i) shall be conclusively deemed to have fully, finally and forever released, relinquished, and discharged all Settled ESOP Claims against the Settling Defendants and TMI Affiliates; (ii) shall be conclusively deemed to have and by operation of the Final Order shall have fully, finally, and forever released, relinquished, and discharged the Settling Defendants and TMI Affiliates from all Settled
ESOP Claims; (iii) shall be conclusively deemed to have covenanted not to sue any of the
Settling Defendants or TMI Affiliates in any action alleging any claim that is a Settled
ESOP Claim; and (iv) shall forever be enjoined and barred from asserting any Settled
ESOP Claims against any of the Settling Defendants or TMI Affiliates in any action or proceeding of any nature.
2. The Participant Classes, and with respect to natural persons therein, their present or past heirs, executors, administrators, successors, and assigns, and with respect to legal entities other than natural persons therein, their predecessors, successors and assigns (i) shall be conclusively deemed to have fully, finally and forever released, relinquished, and discharged all Settled Tharaldson Contract Claims, whether direct or derivative, against TMI Affiliates; (ii) shall be conclusively deemed to have and by operation of the Final Order shall have fully, finally, and forever released, relinquished,
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and discharged TMI Affiliates from all Settled Tharaldson Contract Claims; (iii) shall be conclusively deemed to have covenanted not to sue TMI Affiliates in any action alleging any claims that are a Settled Tharaldson Contract Claim; and (iv) shall forever be enjoined and barred from asserting any Settled Tharaldson Contract Claims against TMI
Affiliates in any action or proceeding of any nature.
3. Tharaldson, on behalf of himself and all affiliated entities, (i) shall be conclusively deemed to have fully, finally, and forever released, relinquished, and discharged all Settled Tharaldson Indemnification Claims; (ii) shall be conclusively deemed to have and by operation of the Final Order shall have fully, finally, and forever released, relinquished, and discharged the Settled Tharaldson Indemnification Claims;
(iii) shall be conclusively deemed to have covenanted not to sue in any action alleging any claim that is a Settled Tharaldson Indemnification Claim; and (iv) shall forever be enjoined and barred from asserting any Settled Tharaldson Indemnification Claims in any action or proceeding of any nature. TMI represents and warrants that other than the
Settled ESOP Claims and claims that have been previously disclosed neither TMI nor its agents have any current knowledge of any Claims or facts that may give rise to any Claim against Tharaldson that could trigger a claim by Tharaldson for indemnification from
TMI. TMI will indemnify Tharaldson against any Claim that arises in contravention of the representations and warranties contained in the preceding sentence, but only to the extent that absent the release set forth in the first sentence of this Section XIII.2,
Tharaldson would otherwise have been entitled to indemnification with respect to such
Claim and a final determination has been made that TMI breached such representation and warranty.
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4. Linda Tharaldson, on behalf of herself, her heirs, executors, agents, attorneys, and assigns, (i) shall be conclusively deemed to have fully, finally and forever released, relinquished, and discharged all Settled Tharaldson Contract Claims; (ii) shall be conclusively deemed to have and by operation of the Final Order shall have fully,
finally, and forever released, relinquished, and discharged the Settled Tharaldson
Contract Claims; (iii) shall be conclusively deemed to have covenanted not to sue in any
action alleging any claim that is a Settled Tharaldson Contract Claim; and (iv) shall
forever be enjoined and barred from asserting any Settled Tharaldson Contract Claims in
any action or proceeding of any nature
5. TMI shall be conclusively deemed to have fully, finally and forever
released, relinquished, and discharged (i) all Settled TMI Indemnification Claims, and (ii)
the Participant Classes and Class Counsel for any Claim or Unknown Claim relating to or
arising out of the initiation, prosecution, and settlement of the Settled ESOP Claims and
Settled Tharaldson Contract Claims.
6. The Settling Defendants shall be deemed to have fully, finally, and forever
released, relinquished and discharged any and all Claims and Unknown Claims against
the Participant Classes and Class Counsel.
XIV. EFFECT OF DISAPPROVAL ,CANCELLATION OR TERMINATION
1. If at any time prior to the Final Order becoming Non-Appealable (i) the
Court refuses or declines to allow any of the conditions specified in Section IX.1 (a)-(d) or (ii) if the Final Order is reversed or materially altered, then any one of the Settling
Parties, through their respective counsel, shall have the right to terminate the Settlement by providing written notice (“Termination Notice”) to the remaining Settling Parties within ten (10) days after receiving notice of the event prompting the right to terminate.
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2. Except as may otherwise be provided herein, in the event the Settlement is terminated, then the Settling Parties shall be deemed to have reverted to their respective status in this Action as of April 19, 2012, and, except as may otherwise be expressly provided herein, the Settling Parties shall proceed in all respects as if this Settlement
Agreement and any related orders had not been entered, and any portion of the Settlement
Fund Cash Component previously paid by or on behalf of TMI, or the Settling
Defendants, together with any interest earned thereon, less any Taxes due with respect to such income shall be returned within ten (10) days to TMI.
XV. MISCELLANEOUS PROVISIONS
1. Within 30 days of the Final Order becoming Non-Appealable any Party or counsel who has received any confidential materials (excluding attorney work product and any materials filed with the Court but not excluding materials filed under seal with the Court), shall either return such materials to counsel for the party who produced the confidential materials or destroy them as provided in the Protective Order entered in this
Action on October 21, 2005.
2. No opinion or advice concerning the Tax consequences of the Settlement
Agreement has been given or will be given by counsel involved in the Action to
Participant Classes, nor is any representation or warranty in this regard made by virtue of this Settlement Agreement. The Tax obligations of the Participant Classes and the determination thereof are the sole responsibility of each member of the Participant
Classes, and it is understood that the Tax consequences may vary depending on the particular circumstances of each member of the Participant Classes.
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3. Class Representatives intend that all rights and obligations that are binding on them under this Settlement Agreement, including each and every covenant, agreement and warranty, also shall bind the Participant Classes.
4. The Settling Parties: (a) acknowledge that it is their intent to consummate this Settlement; and (b) agree to exercise their best efforts and to act in good faith to cooperate to the extent necessary to effectuate and implement all terms and conditions of this Settlement Agreement. Class Representatives, TMI, North Star, Tharaldson, TMI II, and counsel for the forgoing agree to cooperate fully with one another in seeking entry of the Preliminary Approval Order and final approval of this Settlement. The Settling
Parties also agree to promptly execute and/or provide such documentation as may be reasonably required to obtain preliminary and final approval of this Settlement.
5. All of the exhibits attached hereto and identified herein are hereby incorporated by reference as though fully set forth herein.
6. This Settlement Agreement may be amended or modified only by written instrument signed by, or on behalf of, all Settling Parties or their successors in interest.
7. This Settlement Agreement constitutes the entire agreement among the
Settling Parties, and no representations, warranties or inducements have been made to any party concerning this Settlement Agreement or the Settlement Agreement
Memorandum of Understanding, other than the representations, warranties, and covenants contained and memorialized in such documents. In the event of any conflicts between this Settlement Agreement, the Settlement Agreement Memorandum of
Understanding, or any other document, the Settling Parties agree that this Settlement
Agreement shall control.
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8. Except as otherwise provided herein, each party shall bear its own costs.
The Fee Award, Incentive Awards, and Expense Award, subject to Court approval, shall be paid solely out of the Settlement Fund.
9. Each signatory to this Settlement Agreement represents that he or she is authorized to enter into this Settlement Agreement on behalf of the respective parties he or she represents.
10. This Settlement Agreement may be executed in one or more original, photocopied, or facsimile counterparts. All executed counterparts and each of them shall be deemed to be one and the same instrument.
11. This Settlement Agreement shall be binding upon, and inure to the benefit of, the successors, assigns, executors, administrators, heirs and legal representatives of the Settling Parties, provided, however, that no assignment by any Settling Party shall operate to relieve such party of its obligations hereunder.
12. All terms of this Settlement Agreement shall be governed by and interpreted according to the laws of the State of North Dakota without regard to its rules of conflicts of law and in accordance with the laws of the United States.
13. The headings in this Settlement Agreement are used for purposes of convenience and ease of reference only and are not meant to have any legal effect, nor are they intended to influence the construction of this Settlement Agreement in any way.
14. The waiver by one party of any breach of this Settlement Agreement by any other party shall not be deemed a waiver of any other breach of this Settlement
Agreement. The provisions of this Settlement Agreement may not be waived except by a
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writing signed by the affected party, or counsel for that party, or orally on the record in court proceedings.
15. The Settling Parties agree to submit to the jurisdiction of the Court and shall be bound by the terms of this Settlement Agreement, including, without limitation, disputes related to implementing and enforcing the Settlement embodied in this
Settlement Agreement. Any and all disputes related to claims that are not satisfactorily resolved by the Settling Parties shall be submitted to the Court for final resolution.
16. This Settlement Agreement is deemed to have been drafted by all Settling
Parties hereto, as a result of arm’s-length negotiations among the Settling Parties.
Whereas all Settling Parties have contributed substantially and materially to this
Settlement Agreement, it shall not be construed more strictly against one party than another.
17. The Settling Parties reserve the right, subject to the Court’s approval, to request any reasonable extensions of time that might be necessary to carry out any of the provisions of this Settlement Agreement.
18. Neither this Settlement Agreement nor the Settlement, nor any negotiation, nor act performed, nor document executed, nor proceedings held pursuant to or in forbearance of this Settlement Agreement or the Settlement, even if this Settlement
Agreement is canceled or terminated: (i) is, or may be deemed to be, or may be used as an admission of, or evidence of the validity of any Settled Claims, or of any wrongdoing, negligence, misrepresentation, violation or liability of any Settling Party; (ii) is, or may be deemed to be, or may be used as an admission of, or evidence of any infirmity in the
Complaints or Claims asserted by the Participant Classes or the TMI ESOP; or (iii) is,
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