UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
IN RE CYLINK SECURITIES LITIGATION, ) Master File No.
) C-98-04292 (VRW)
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) STIPULATION AND AGREEMENT
This Document Relates To: ALL ACTIONS ) OF SETTLEMENT
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This stipulation and agreement of settlement (the "Stipulation") is
submitted pursuant to Rule 23 of the Federal Rules of Civil Procedure. Subject
to the approval of the Court, this Stipulation is entered into among Lead
Plaintiff Jonny Alpern and the Class (as hereinafter defined) and Defendants
Cylink Corporation ("Cylink"), and Fernand B. Sarrat, John H. Daws, and Thomas
L. Butler (the "Individual Defendants") (Cylink and the Individual Defendants
are collectively referred to hereinafter as the "Defendants"), by and through
their respective counsel.
WHEREAS:
A. Beginning on or about November 6, 1998, seven actions - Wenderhold
v. Cylink Corp. et al., Case No. 98-CV-04292 (VRW), Lerner v. Cylink Corp. et
al., Case No. 98-CV-04296 (VRW), Poling v. Cylink Corp. et al., Case No.
98-CV-04360 (VRW), Silberman v. Cylink Corp. et al., Case No. 98-CV-04536 (VRW),
Vassilakos v. Cylink Corp. et al., Case No. 98-CV-04603 (VRW), Von Schweinitz v.
Cylink Corp. et al., Case No. 98-CV-04673 (VRW),
Plisski v. Cylink Corp. et al., Case No. 98-CV-04757 (VRW)- were filed in this
Court and were consolidated under the caption above by order of the Court
entered April 6, 2000, and are collectively hereinafter referred to as the
"Action";
B. The Amended Consolidated Complaint dated December 5, 2000 (the
"Complaint") filed in the Action generally alleges, among other things, that
Defendants issued press releases and filed quarterly reports with the Securities
and Exchange Commission regarding Cylink's financial condition during the Class
Period -- April 23, 1998 through and including November 5, 1998 -- that were
materially false and misleading in a scheme to artificially inflate the value of
Cylink securities in violation of Sections 10(b) and 20(a) of the Securities
Exchange Act of 1934, and Rule 10b-5 promulgated thereunder;
C. The Complaint further alleges that Plaintiff and other Class Members
purchased the common stock of Cylink during the Class Period at prices
artificially inflated as a result of the Defendants' dissemination of these
materially false and misleading statements;
D. By Order dated August 29, 2001, the Court granted in part and denied
in part the motions to dismiss the Complaint filed by Cylink and by the
Individual Defendants;
E. The Defendants deny any wrongdoing or legal liability 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 or of any fault or liability or wrongdoing or damage whatsoever, or any
infirmity in the defenses that the Defendants have asserted. Defendants also
deny that Lead Plaintiff or Class Members have suffered damage or that the price
of Cylink's common stock was artificially inflated by reason of alleged
misrepresentations, non-disclosures or otherwise, or that the Class was harmed
by the conduct alleged in the Complaint. This Stipulation shall not be construed
or deemed to be a concession by any Plaintiff of any infirmity in the claims
asserted in the Action. The parties to this Stipulation recognize, however, that
the litigation has been filed by Plaintiff and defended by Defendants in good
faith and with adequate basis in fact under Federal Rule of Civil Procedure 11,
that the litigation is being voluntarily settled after advice of counsel, and
that the terms of the settlement are fair, adequate and reasonable;
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F. Plaintiff's Counsel have conducted an investigation relating to the
claims and the underlying events and transactions alleged in the Complaint.
Plaintiff's Counsel have analyzed evidence adduced during pretrial discovery and
have researched the applicable law with respect to the claims of Plaintiff and
the Class against the Defendants and the potential defenses thereto;
G. Plaintiff, by his counsel, has conducted discussions and arm's
length negotiations with counsel for Defendants with respect to a compromise and
settlement of the Action with a view to settling the issues in dispute and
achieving the best relief possible consistent with the interests of the Class.
Indeed, Plaintiff and Defendants, including representatives of Defendants'
insurance carriers, conducted several mediation sessions with Magistrate Judge
Edward A. Infante;
H. Based upon their investigation and pretrial discovery as set forth
above, Plaintiff's Counsel have concluded that the terms and conditions of this
Stipulation are fair, reasonable and adequate to Plaintiff and the Class, and in
their best interests, and have agreed to settle the claims raised in the Action
pursuant to the terms and provisions of this Stipulation, after considering (a)
the substantial benefits that Plaintiff and the members of the Class will
receive from settlement of the Action, (b) the attendant risks of litigation,
and (c) the desirability of permitting the Settlement to be consummated as
provided by the terms of this Stipulation; and
I. Defendants have concluded that it is desirable that this Action be
fully and finally settled in the manner and upon the terms and conditions set
forth herein in order to avoid the expense, inconvenience and distraction of
further legal proceedings and to fully and finally settle the Settled Claims (as
defined below). In determining to enter the Stipulation, the defendants also
have considered a number of issues, including the uncertain outcome and the risk
inherent in any litigation, especially in complex actions such as this Action,
as well as the difficulties and delays inherent in such litigation.
NOW THEREFORE, without any admission or concession on the part of
Plaintiff 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 the
defenses whatsoever by Defendants, it is hereby STIPULATED AND AGREED, by and
among the parties to this Stipulation, through their
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respective attorneys, subject to approval of the Court pursuant to Rule 23(e) of
the Federal Rules of Civil Procedure, in consideration of the benefits flowing
to the parties hereto from the Settlement, that all Settled Claims (as defined
below) as against the Released Parties (as defined below) shall be compromised,
settled, released and dismissed with prejudice, 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:
(a) "Authorized Claimant" means a Class Member who submits a
timely and valid Proof of Claim form to the Claims Administrator.
(b) "Claims Administrator" means the firm of Mulholland & Company
which shall administer the Settlement.
(c) "Class" and "Class Members" means all persons who purchased
the common stock of Cylink during the period from April 23, 1998 through
November 5, 1998, inclusive. Excluded from the Class are the Defendants, members
of the immediate family (parents, spouses, siblings, and children) of each of
the Individual Defendants, any subsidiary of Cylink, the directors and officers
of Cylink or any subsidiary of Cylink, any entity in which any excluded person
has a controlling interest, and the legal representatives, heirs, successors,
and assigns of any excluded person. Also excluded from the Class are any
putative Class Members who exclude themselves by filing a request for exclusion
in accordance with the requirements set forth in the Notice.
(d) "Class Period" means, for the purposes of this Stipulation
only, the period of time from April 23, 1998 through November 5, 1998,
inclusive.
(e) "Defendants" means Cylink and the Individual Defendants.
(f) "Defendants' Counsel" means the law firms of Wilson Sonsini
Goodrich & Rosati, Bergeson & Eliopolous LLP, and Bryant Clohan & Baruh LLP.
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(g) "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 22 below.
(h) "Notice" means the Notice of Pendency of Class Action, Hearing
On Proposed Settlement and Attorneys' Fee Petition and Right to Share in
Settlement Fund, which will be filed with the Court on or before November 1,
2002, and which, if approved by the Court, will be sent to members of the Class.
(i) "Order and Final Judgment" means the proposed order to be
entered approving the Settlement, which will be filed with the Court on or
before November 1, 2002, and which, if signed by the Court, will dismiss this
Action with prejudice.
(j) "Plaintiff's Counsel" means the law firm of Innelli and
Molder.
(k) "Plaintiff" or "Lead Plaintiff" means Jonny Alpern.
(l) "Preliminary Approval Order" means the proposed order
preliminarily approving the Settlement and directing notice thereof to the
Class, which will be filed with the Court on or before November 1, 2002.
(m) "Publication Notice" means the summary notice of proposed
Settlement and hearing for publication, which will be filed with the Court on or
before November 1, 2002.
(n) "Released Parties" means the Defendants, their past or present
subsidiaries, parents, successors and predecessors, officers, directors,
shareholders, agents, employees, attorneys, advisors, investment advisors,
auditors, accountants, insurers and reinsurers, insurers' and reinsurers'
counsel, and any person, firm, trust, corporation, officer, director or other
individual or entity in which any Defendant has a controlling interest or which
is related to or affiliated with any of the Defendants, and the legal
representatives, heirs, successors in interest or assigns of the Defendants.
(o) "Settled Claims" means any and all claims, rights or causes of
action or liabilities whatsoever, whether based on federal, state, local,
statutory or common law or any other law, rule or regulation, including both
known claims and Unknown Claims, that have been or could have been asserted in
any forum by the Class Members or any of them against any of
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the Released Parties which arise out of or relate in any way to the allegations,
transactions, facts, matters or occurrences, representations or omissions
involved, set forth, referred to or that could have been asserted in the
Complaint relating to the purchase of shares of the common stock of Cylink
during the Class Period.
(p) "Settled Defendants' Claims" means any and all claims, rights
or causes of action or liabilities whatsoever, whether based on federal, state,
local, statutory or common law or any other law, rule or regulation, including
both known claims and Unknown Claims, that have been or could have been asserted
in the Action or any forum by the Defendants or any of them or the successors
and assigns of any of them against Plaintiff, Class Members or their attorneys,
which arise out of or relate in any way to the institution, prosecution, or
settlement of the Action.
(q) "Settlement" means the settlement contemplated by this
Stipulation.
(r) "Unknown Claims" means any and all Settled Claims which any
Plaintiff or 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 Settled
Defendants' Claims which any Defendant 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
Settled Claims and Settled Defendants' Claims, the parties stipulate and agree
that upon the Effective Date, the Plaintiff and the Defendants shall expressly,
and each Class Member shall be deemed to have, and by operation of the 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 Cal.
Civ. Code ss. 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.
Plaintiff and Defendants acknowledge, and Class Members by operation of law
shall be deemed to have acknowledged, that the inclusion of "Unknown Claims" in
the definition of Settled
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Claims and Settled Defendants' Claims was separately bargained for and 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 Settled Claims as
against all Released Parties and any and all Settled Defendants' Claims.
3. (a) Pursuant to the Order and Final Judgment, upon the
Effective Date of this Settlement, Plaintiff and members of the Class on behalf
of themselves, their heirs, executors, administrators, successors and assigns,
and any persons they represent, shall, with respect to each and every Settled
Claim, release and forever discharge, and shall forever be enjoined from
prosecuting, any Settled Claims against any of the Released Parties.
(b) Pursuant to the Order and Final Judgment, upon the
Effective Date of this Settlement, each of the Defendants, on behalf of
themselves and the Released Parties, shall release and forever discharge each
and every of the Settled Defendants' Claims, and shall forever be enjoined from
prosecuting the Settled Defendants' Claims.
THE SETTLEMENT CONSIDERATION
4. Defendants will pay $6.2 million (the "Cash Settlement Amount")
into an interest-bearing escrow account on behalf of Plaintiff and the Class
within 30 days from the filing of this fully executed stipulation with the
Court. The Cash Settlement Amount and any interest earned thereon shall be the
Gross Settlement Fund. The Plaintiff and Defendants also acknowledge and agree
that, notwithstanding anything else in this paragraph, if Cylink files for
bankruptcy protection (or if an involuntary bankruptcy petition is filed against
Cylink) prior to the occurrence of all events set forth in Paragraph 22,
subsections (a) through (c), then the parties shall seek the bankruptcy court's
approval of the settlement and, if it has not yet occurred, of payment of the
Cash Settlement Amount into the escrow account, which payment will be contingent
on such approval. All parties will cooperate as necessary in obtaining an
appropriate order.
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5. (a) 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 7 hereof, (ii) the attorneys' fee
and expense award referred to in paragraph 8 hereof, and (iii) the remaining
administration expenses referred to in paragraph 9 hereof. The balance of the
Gross Settlement Fund after the above payments shall be the Net Settlement Fund
which shall be distributed to the Authorized Claimants as provided in paragraphs
10-12 hereof. Any sums required to be held in escrow hereunder shall be held by
an independent Escrow Agent for the Settlement Fund. This Escrow Agent shall be
PNC Bank, N.A. 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 the persons
paying the same pursuant to this Stipulation and/or further order of the Court.
Accordingly, the Escrow Agent shall only disburse funds by an order of the
Court, upon signature of Plaintiff's Counsel, after notice to Defendants'
Counsel. The Escrow Agent shall invest any funds in excess of $100,000 in short
term United States Agency 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 bank account insured by the FDIC.
The parties hereto agree that the Settlement Fund is intended to be a Qualified
Settlement Fund within the meaning of Treasury Regulation ss. 1.468B-1 and that
the Escrow Agent, as administrator of the Settlement Fund within the meaning of
Treasury Regulation ss. 1.468B-2(k)(3), shall be responsible for filing tax
returns for the Settlement Fund and paying from the Settlement Fund any Taxes
owed with respect to the Settlement Fund. Counsel for Defendants agree to
provide promptly to the Escrow Agent the statement described in Treasury
Regulation ss. 1.468B-3(e).
(b) 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 settlement and
shall be timely paid by the Escrow Agent without prior Order of the Court.
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ADMINISTRATION
6. The Claims Administrator shall administer the Settlement under
Plaintiff's Counsel's supervision and subject to the jurisdiction of the Court.
Except as stated in paragraph 14 hereof, the Released Parties shall have no
responsibility for the administration of the Settlement and shall have no
liability to the Class in connection with such administration. Defendants'
Counsel shall cooperate in the administration of the Settlement to the extent
reasonably necessary to effectuate its terms, including providing all
information from Cylink's transfer records concerning the identity of Class
Members and their transactions.
7. Plaintiff's Counsel may expend from the Settlement Amount,
without further approval from the Defendants or the Court, 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,
payment to Cylink's transfer agent for any charges associated with obtaining
Cylink's transfer records, 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.
ATTORNEYS' FEES AND EXPENSES
8. (a) Plaintiff's Counsel will apply to the Court for an award
from the Gross Settlement Fund of attorneys' fees and reimbursement of expenses,
plus interest. Such attorneys' fees, expenses, and interest as are awarded by
the Court shall be payable from the Gross Settlement Fund to Plaintiff's Counsel
within three (3) days from the Court's entry of an Order and Final Judgment and
the Court's award of attorneys fees and expenses, subject to Plaintiff's
Counsel's obligation to make appropriate refunds or repayments to the Settlement
Fund plus accrued interest at the same net rate as is earned by the Gross
Settlement Fund, if and when, as a result of any appeal and/or further
proceedings on remand, or successful collateral attack, the fee or cost award is
reduced or reversed.
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(b) The procedure for, and the allowance or disallowance by the
Court of, any applications by Plaintiff's Counsel for attorneys' fees, costs 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 considered by the Court
separately from the Court's consideration of the fairness, reasonableness and
adequacy of the Settlement set forth in this Stipulation. Any order or
proceeding relating to such fee and expense application, or any appeal from any
order relating thereto or reversal or modification thereof, shall not operate to
terminate or cancel the Stipulation, or affect or delay the finality of the
Judgment approving the Stipulation and the Settlement set forth herein.
Defendants and the Released Parties shall have no responsibility for, and no
liability whatsoever with respect to, the allocation among Plaintiff's Counsel,
and any other person who may assert some claim thereto, of any fee and expense
award that the Court may make in the litigation, and Defendants and the Released
Parties take no position with respect to such matters.
ADMINISTRATION EXPENSES
9. Plaintiff's Counsel will apply to the Court, on notice to
Defendants' Counsel, for an order (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, and, if the Effective Date has occurred, directing payment of the
Net Settlement Fund to Authorized Claimants.
DISTRIBUTION TO AUTHORIZED CLAIMANTS
10. The Claims Administrator shall determine each Authorized
Claimant's pro rata share of the "Net Settlement Fund" based upon each
Authorized Claimant's Recognized Claim (as defined in the Plan of Allocation
described in the Notice, 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 and it is not a condition of this Stipulation
that that Plan of Allocation be approved. It is further understood and agreed by
Plaintiff and Defendants that any proposed Plan of Allocation including, but not
limited to, any adjustments to an Authorized Claimants's claim set
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forth therein, is to be considered by the Court separately from the Court's
consideration of the fairness, reasonableness and adequacy of the Settlement set
forth in this Stipulation, and any order or proceedings relating to the Plan of
Allocation shall not operate to terminate or cancel the Stipulation or affect
the finality of the Court's Judgment approving the Stipulation and the
Settlement set forth herein, or any orders entered pursuant to the Stipulation.
12. Each Authorized Claimant shall be allocated a pro rata share
of the Net Settlement Fund based on his or her Recognized Claim compared to the
total Recognized Claims of all accepted claimants. This is not a claims-made
settlement. The Defendants shall not be entitled to get back any of the
settlement monies once the Settlement becomes final. The Defendants shall have
no involvement in reviewing or challenging claims.
ADMINISTRATION OF THE SETTLEMENT
13. Any member of the Class who does not submit a valid Proof of
Claim will not be entitled to receive any of the proceeds from the Net
Settlement Amount but will otherwise be bound by all of the terms of this
Stipulation and the Settlement, including the terms of the Judgment to be
entered in the Action and the releases provided for herein, and will be barred
from bringing any action against the Released Parties concerning the Settled
Claims.
14. Plaintiff's 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, and to cooperate in the production of information with respect to the
identification of Class Members from Cylink's shareholder transfer records, as
provided herein, the Released Parties shall have no liability, obligation or
responsibility for the administration of the Settlement or disbursement of the
Net Settlement Fund. Plaintiff's Counsel shall have the right, but not the
obligation, to waive what they deem to be formal or technical defects in any
Proofs of Claim submitted in the interests of achieving substantial justice.
15. For purposes of determining the extent, if any, to which a
Class Member shall be entitled to be treated as an "Authorized Claimant", the
following conditions shall apply:
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(a) Each Class Member shall be required to submit a Proof of
Claim, supported by such documents as are designated therein, including proof of
the Claimant's loss, or such other documents or proof as Plaintiff's Counsel, in
their discretion, may deem acceptable;
(b) All Proofs of Claim must be submitted 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 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 Judgment to be entered
in the Action and the releases provided for herein, and will be barred from
bringing any action against the Released Parties concerning the Settled Claims.
Provided that it is received before the motion for the Class Distribution Order
is filed, 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 by
first-class mail 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 Plaintiff's Counsel, who
shall determine in 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) Proofs of Claim that do not meet the submission
requirements may be rejected. Prior to rejection of a Proof of Claim, the Claims
Administrator shall communicate with the Claimant in order to remedy the curable
deficiencies in the Proof of Claims submitted. The Claims Administrator, under
supervision of Plaintiff's 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 therefor, 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;
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(e) If any Claimant whose claim has been rejected in whole or
in part desires to contest such rejection, the Claimant must, within twenty (20)
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, Plaintiff's Counsel shall
thereafter present the request for review to the Court; and
(f) 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.
16. 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 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
Settlement in connection with processing of the Proofs of Claim.
17. Payment pursuant to this Stipulation shall be deemed final and
conclusive against all Class Members. All Class Members whose claims are not
approved by the Court 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 Judgment to be
entered in the Action and the releases provided for herein, and will be barred
from bringing any action against the Released Parties concerning the Settled
Claims.
18. All proceedings with respect to the administration, processing
and determination of claims described by paragraph 15 of 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.
19. 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,
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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 have been resolved by the Court, and all appeals therefrom
have been resolved or the time therefor 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 therefor has
expired; and (iv) all costs of administration have been paid.
PRELIMINARY APPROVAL ORDER AND HEARING
20. On or before November 1, 2002, the parties shall apply to the
Court for entry of a Preliminary Approval Order. The Preliminary Approval
Hearing is scheduled for November 12, 2002 at 10 a.m. before the Honorable
Vaughn R. Walker.
ORDER AND FINAL JUDGMENT
21. If the Settlement contemplated by this Stipulation is approved
by the Court, counsel for the parties shall request that the Court enter an
Order and Final Judgment dismissing this Action with prejudice.
EFFECTIVE DATE OF SETTLEMENT, WAIVER OR TERMINATION
22. The Effective Date of Settlement shall be the date when all
the following events listed in subsections (a) through (c) shall have occurred:
(a) entry of the Preliminary Approval Order in all material
respects consistent with this Stipulation;
(b) approval by the Court of the Settlement, following notice
to the Class and a hearing, as prescribed by Rule 23 of the Federal Rules of
Civil Procedure; and
(c) entry by the Court of an Order and Final Judgment,
consistent with this Stipulation in all material respects, and the expiration of
any time for appeal or review of such Order and Final Judgment, or, if any
appeal is filed and not dismissed, after such Order and Final Judgment 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
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parties hereto elect to terminate this Settlement, the date that such
Alternative Judgment becomes final and no longer subject to appeal or review;
Provided, however, that if a bankruptcy petition is filed by or
against Cylink before occurrence of all events in Paragraph 22 subsections (a)
through (c), then the Effective Date shall not be deemed to have occurred until
the additional occurrence of the Bankruptcy Court's approval of the Settlement
or determination that its approval is not necessary.
23. Defendants' Counsel or Plaintiff's 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
hereto within thirty (30) days of: (a) the Court's declining to enter the
Preliminary Approval Order 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 and Final Judgment in any material respect; (d) in the event
of a bankruptcy petition necessitating an application for approval from the
Bankruptcy Court pursuant to Paragraph 4, the Bankruptcy Court's declining to
approve the Settlement in any material respect, unless the Bankruptcy Court
determines its approval to be unnecessary; (e) the date upon which the Order and
Final Judgment is modified or reversed in any material respect by the Court of
Appeals or the Supreme Court; or (f) the date upon which an Alternative Judgment
is modified or reversed in any material respect by the Court of Appeals or the
Supreme Court.
24. Except as otherwise provided herein, in the event the
Settlement is terminated 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 October 15, 2002 and, except as otherwise expressly
provided, the parties shall proceed in all respects as if this Stipulation and
any related orders had not been entered, and any portion of the Settlement
Amount previously paid by 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,
shall be returned to the persons paying the same.
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NO ADMISSION OF WRONGDOING
25. This Stipulation, whether or not consummated, and any
proceedings taken pursuant to it:
(a) shall not be offered or received against the Defendants
as evidence of or construed as or deemed to be evidence of any presumption,
concession, or admission by any of the Defendants with respect to the truth of
any fact alleged by Plaintiff 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 the
Defendants;
(b) shall not be offered or received against the Defendants
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, or against the Plaintiff and the Class as
evidence of any infirmity in the claims of Plaintiff and the Class;
(c) shall not be offered or received against the Defendants
or against the Plaintiff or the Class as evidence of a presumption, concession
or admission with respect to any liability, negligence, fault or wrongdoing, or
in any way referred to for any other reason as against any of the parties to
this 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 if this Stipulation is
approved by the Court, Defendants may refer to it to effectuate the liability
protection granted them hereunder;
(d) shall not be construed against the Defendants or the
Plaintiff and the Class 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
(e) shall not be construed as or received in evidence as an
admission, concession or presumption against Plaintiff or the Class 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 Fund.
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MISCELLANEOUS PROVISIONS
26. The parties to this Stipulation intend the Settlement to be a
final and complete resolution of all disputes asserted or which could be
asserted by the Class Members against the Released Parties with respect to the
Settled Claims. Accordingly, Plaintiff and Defendants agree not to assert in any
forum that the litigation was brought by Plaintiff or defended by Defendants in
bad faith or without a reasonable basis. The parties hereto shall assert no
claims of any violation of Rule 11 of the Federal Rules of Civil Procedure
relating to the prosecution, defense, or settlement of the Action. The parties
agree that the amount paid and the other terms of the Settlement were negotiated
at arm's length in good faith by the parties, and reflect a settlement that was
reached voluntarily after consultation with experienced legal counsel.
27. This Stipulation may not be modified or amended, nor may any
of its provisions be waived except by a writing signed by all parties hereto or
their successors-in-interest.
28. The headings herein are used for the purpose of convenience
only and are not meant to have legal effect.
29. 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 jurisdiction for the purpose of entering orders providing for
awards of attorneys' fees and expenses to Plaintiff's Counsel and enforcing the
terms of this Stipulation.
30. The waiver by one party of any breach of this Stipulation by
any other party shall not be deemed a waiver of any other prior or subsequent
breach of this Stipulation.
31. This Stipulation constitutes the entire agreement among the
parties hereto concerning the Settlement of the Action, and no representations,
warranties, or inducements have been made by any party hereto concerning this
Stipulation other than those contained herein.
32. 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 this Stipulation shall
exchange among themselves original signed counterparts.
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33. This Stipulation shall be binding upon, and inure to the
benefit of, the successors and assigns of the parties hereto.
34. All parties acknowledge that this Stipulation constitutes a
substantially contemporaneous exchange of consideration for new (and essentially
equivalent) value given.
35. 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 California without regard
to conflicts of laws, except to the extent that federal law requires that
federal law governs.
36. 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 arm's-length negotiations between the parties and all
parties have contributed substantially and materially to the preparation of this
Stipulation.
37. All counsel and any other person executing this Stipulation,
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.
38. Plaintiff's Counsel and Defendants' Counsel agree to cooperate
fully with one another in seeking Court approval of the Preliminary Approval
Order, 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 Court of the Settlement.
Dated: October ___, 2002 WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
By:
---------------------------------
Leo P. Cunningham
Attorneys for Defendants
CYLINK CORPORATION AND FERNAND SARRAT
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Dated: October ___, 2002 INNELLI AND MOLDER
Attorneys at Law
By:
---------------------------------
John F. Innelli
Attorneys for Plaintiff
Dated: October ___, 2002 BERGESON & ELIOPOLOUS LLP
By:
---------------------------------
Daniel J. Bergeson
Attorneys for Defendant
THOMAS L. BUTLER
Dated: October ___, 2002 BRYANT CLOHAN & BARUH LLP
By:
---------------------------------
Robert Maines
Attorneys for Defendant
JOHN H. DAWS
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