UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) July 20, 1995
PIPER JAFFRAY COMPANIES INC.
(Exact name of registrant as specified in its charter)
Commission File Number 1-7421
Delaware 41-1233380
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
222 South Ninth Street, Minneapolis, Minnesota 55402
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (612)-342-6000
Exhibit Index located at page 4.
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Item 5. Other Events.
On July 20, 1995 the Company entered into a Settlement Agreement for the
previously disclosed IN RE: PIPER FUNDS, INC. INSTITUTIONAL GOVERNMENT
INCOME PORTFOLIO LITIGATION. The Settlement Agreement was filed with the
United States District Court, District of Minnesota.
Item 7. Financial Statements and Exhibits.
(c) Exhibits
10. Settlement Agreement for IN RE: PIPER FUNDS, INC.
INSTITUTIONAL GOVERNMENT INCOME PORTFOLIO
LITIGATION dated July 20, 1995.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
PIPER JAFFRAY COMPANIES INC.
Date: July 20, 1995 By: /s/ Deborah K. Roesler
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Deborah K. Roesler
Chief Financial Officer and
Managing Director
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EXHIBIT INDEX
Exhibit Form of Filing
10. Settlement Agreement for IN RE: PIPER FUNDS, INC. Filed electronically
INSTITUTIONAL GOVERNMENT INCOME PORTFOLIO
LITIGATION dated July 20, 1995.
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EXHIBIT 10
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
THIRD DIVISION
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In Re: Piper Funds Inc. Institutional Master File No.
Government Income Portfolio 3-94-587
Litigation
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This Document Relates to:
Rodney v. Piper Funds, Inc., et al.;
Civ. No. 3-94-587 (D. Ct. Minn.)
Shonka, et al. v. Piper Funds, Inc.,
et al.; Civ. No. 3-94-614 (D. Ct.
Minn.)
Newcome v. Piper Funds, Inc., et al.;
Civ. No. 3-94-615 (D. Ct. Minn.)
Junker v. Piper Funds, Inc., et al.;
Civ. No. 3-94-684 (D. Ct. Minn.)
Printing Mailing Trade District v.
Piper Funds, Inc., et al.; Civ.
No. 3-94-717 (D. Ct. Minn.)
The History Theatre, Inc. v. Piper
Funds, Inc., et al.; Civ. No.
3-94-1099 (D. Ct. Minn.)
Gold v. Piper Funds, Inc., et al.;
Civ. No. 3-94-1030 (D. Ct. Minn.)
Friedman v. Piper Funds, Inc., et al.;
Civ. No. 4-94-748 (D. Ct. Minn.)
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SETTLEMENT AGREEMENT
THIS SETTLEMENT AGREEMENT ("Settlement Agreement") is made as
of July 20, 1995. It is entered into, subject to preliminary and
final approval by the United States District Court for the District
of Minnesota, the Honorable Paul A. Magnuson ("the Court"), by and
among: (i) Named Plaintiffs Richard J. Rodney, Jr., Douglas
Shonka, Carl Patrick Monahan, Jerry Hoehnen, Rosemary Boris, Thomas
W. Newcome, Delvin D. Junker, Printing Mailing Trade District
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(affiliated with the Newspaper Drivers' Division of the
International Brotherhood of Teamsters), The History Theatre, Inc.,
Paul Gold, Bernard Friedman, and the Settlement Class in In re:
Piper Funds Inc. Institutional Government Income Portfolio
Litigation, United States District Court for the District of
Minnesota Master File No. Civ. 3-94-587, by and through their
counsel of record; (ii) Defendants Piper Capital Management
Incorporated, Piper Jaffray Inc., Piper Jaffray Companies Inc.,
William H. Ellis, Edward J. Kohler and (iii) Piper Funds Inc.
(denominated in the Complaint as "Piper Funds Inc. Institutional
Government Income Portfolio" but intended to refer to Piper Funds
Inc.) (collectively, the "Defendants").
Lead counsel for the Named Plaintiffs and the Settlement Class ("Lead
Settlement Class Counsel") are (i) Schatz Paquin Lockridge Grindal & Holstein
P.L.L.P., and Richard A. Lockridge, and (ii) Head, Seifert & Vander Weide, a
professional association and Vernon J. Vander Weide, who represent and warrant
that they are fully authorized to enter into this Settlement Agreement on behalf
of the Named Plaintiffs.
Counsel for Piper Capital Management Incorporated, Piper Jaffray Companies
Inc., Piper Jaffray Inc., William H. Ellis and Edward J. Kohler are Leonard,
Street and Deinard, P.A., and George F. McGunnigle, who represents and warrants
that he is fully authorized to enter into this Settlement Agreement on their
behalf.
Counsel for Piper Funds Inc. are Gordon Altman Butowsky Weitzen Shalov &
Wein, and Theodore Altman, who represents and warrants that he is fully
authorized to enter into this Settlement Agreement on behalf of Piper Funds Inc.
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The Named Plaintiffs, the Settling Class Members, and the
Defendants are collectively referred to as the "Settlement
Parties."
RECITALS
I.
DESCRIPTION OF THE LITIGATION
On May 9, 1994, Named Plaintiff Richard J. Rodney, Jr., on
behalf of himself and all other persons similarly situated,
commenced a putative class action in the United States District
Court for the District of Minnesota, File No. Civ. 3-94-587,
against the Defendants. On May 19, 1994, Named Plaintiffs Douglas
Shonka, Carl Patrick Monahan, Jerry Hoehnen, and Rosemary Boris, on
behalf of themselves and all other persons similarly situated,
commenced a putative class action in the United States District
Court for the District of Minnesota, File No. Civ. 3-94-614,
against the Defendants. On May 19, 1994, Named Plaintiff Thomas W.
Newcome, on behalf of himself and all other persons similarly
situated, commenced a putative class action in the United States
District Court for the District of Minnesota, File No. Civ. 3-94-
615, against the Defendants. On June 9, 1994, Named Plaintiff
Delvin D. Junker, on behalf of himself and all other persons
similarly situated, commenced a putative class action in the United
States District Court for the District of Minnesota, File No. Civ.
3-94-684, against the Defendants.
On June 23, 1994, Named Plaintiff Printing Mailing Trade
District (affiliated with the Newspaper Drivers' Division of the
International Brotherhood of Teamsters), on behalf of itself and
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all other persons similarly situated, commenced a putative class
action in the United States District Court for the District of
Minnesota, File No. Civ. 3-94-717, against the Defendants. On
September 19, 1994, Named Plaintiff The History Theatre, Inc., on
behalf of itself and all other persons similarly situated,
commenced a putative class action in the United States District
Court for the District of Minnesota, File No. Civ. 3-94-1099,
against the Defendants. On August 26, 1994, Named Plaintiff Paul
Gold, on behalf of himself and all other persons similarly
situated, commenced a putative class action in the United States
District Court for the District of Minnesota, File No. Civ.
3-94-1030, against the Defendants. On August 29, 1994, Named
Plaintiff Bernard Friedman, on behalf of himself and all other
persons similarly situated, commenced a putative class action in
the United States District Court for the District of Minnesota,
File No. Civ. 4-94-748, against the Defendants. All of those
actions have been consolidated in the United States District Court
for the District of Minnesota under the caption In Re: Piper Funds
Inc. Institutional Government Income Portfolio Litigation, Master
File No. Civ. 3-94-587 (the "Litigation").
On or about October 5, 1994, the Named Plaintiffs filed an Amended
Consolidated Class Action Complaint (the "Complaint") in the Litigation. In the
Complaint, the Named Plaintiffs alleged that the Defendants breached certain
duties owed to them, and to other putative class members, with respect to
investments in the Piper Funds Inc. mutual fund known as the Institutional
Government Income Portfolio (the "Fund"). The Complaint asserts violations of
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federal and Minnesota state securities statutes and common law claims of
negligent misrepresentation and breach of fiduciary duty.
The Fund is an open-end registered investment company created in 1988,
which is one of twelve separate series of capital stock issued by Piper Funds
Inc., a single open-end management investment company. The dispute described in
the Complaint arises out of the management of the Fund and the sale of shares in
the Fund during the period from July 1, 1991, until May 9, 1994 (the "Settlement
Class Period").
Since the formation of the Fund, and at all times during the Settlement
Class Period, Piper Capital Management Incorporated acted as the Fund's
investment advisor, pursuant to an investment advisor agreement with Piper Funds
Inc., subject to the authority of the Fund's board of directors. Since the
formation of the Fund, and at all times during the Settlement Class Period,
Piper Jaffray Inc. was the principal distributor of the Fund's shares. During
the Settlement Class Period Piper Jaffray Companies Inc. was the parent
corporation of both Piper Capital Management Incorporated and Piper Jaffray Inc.
During some or all of the Settlement Class Period, William H. Ellis was chairman
of the board of directors of the Fund and of Piper Capital Management
Incorporated, and president and chief operating officer of Piper Jaffray
Companies Inc. and Piper Jaffray Inc. During some or all of the Settlement Class
Period, Edward J. Kohler was president of the Fund and president and a director
of Piper Capital Management Incorporated.
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The Complaint alleges that Defendants engaged in wrongful and tortious
conduct with respect to the Named Plaintiffs and others, causing those who had
invested in the Fund during the period from July 1, 1991, until May 9, 1994 to
be damaged. The claimed bases for the alleged wrongful and tortious conduct
include the Complaint's allegations: (i) that during the Settlement Class
Period, Defendants wrongfully and tortiously misrepresented or failed to
disclose in the Fund prospectuses or otherwise matters material to Settlement
Class Members' decisions to invest in the Fund; (ii) that Defendants wrongfully
and tortiously failed to properly direct the Fund's investment strategies
throughout the Settlement Class Period; (iii) that Defendants wrongfully and
tortiously failed to conform the Fund's investment strategies to the Fund's
investment criteria and limitations; and (iv) that Settlement Class Members
sustained damages throughout the Settlement Class Period as a result of
Defendants' alleged wrongful and tortious conduct.
On or about October 21, 1994, the Defendants served and filed a Joint
Answer. All the Defendants denied any breach of any statutory or common law
duty, denied any liability to any Named Plaintiff or other putative class
member, and denied that the class proposed by the Named Plaintiffs should be
certified.
Some of the Named Plaintiffs have filed a second putative
class action lawsuit against KPMG Peat Marwick in connection with
the Fund entitled Rodney, et al. v. KPMG Peat Marwick, Civil No. 3-
94-1073 (the "KPMG Lawsuit"), which has been consolidated with the
Litigation for pretrial proceedings. KPMG Peat Marwick is not a
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party to this Settlement Agreement, and the KPMG Lawsuit is not included as a
part of the Litigation, as defined herein.
Before and since October, 1994, Lead Settlement Class Counsel, who have
been designated by the Court as co-lead counsel for the plaintiffs in the
Litigation, have engaged in extensive discovery, including demanding and
obtaining the production of tens of thousands of pages of documents from the
Defendants. Lead Settlement Class Counsel and Counsel for the Defendants have
also engaged in settlement negotiations, including mediation sessions before
Brian Short, whom the Court appointed as Special Master in the Litigation. Lead
Settlement Class Counsel have also brought motions before the Court, including a
motion seeking an Order under Rule 23 of the Federal Rules of Civil Procedure
certifying the proposed class and designating the Named Plaintiffs as
representatives of the class.
While the Named Plaintiffs' class certification motion was pending, and
before the filing of any formal response to the motion for class certification
by any of the Defendants, but after substantial document discovery, and
intensive negotiations extending over many months, the Settlement Parties'
settlement negotiations led to a preliminary agreement in principle for the
settlement of the Litigation. The terms of that preliminary agreement were first
embodied in that certain Memorandum of Understanding dated February 14, 1995
(the "Memorandum of Understanding"), which was subject to the execution of a
definitive settlement agreement. Pursuant to Stipulated Orders of the Court,
further substantive proceedings in the Litigation, including with respect to the
class certification motion pending before the Court,
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have been stayed pending the Court's consideration of the settlement described
in this Settlement Agreement, and a Settlement Class has been certified with the
understanding that if, for whatever reason, the Settlement Parties do not
achieve a final settlement, then each Settlement Party shall be returned to the
position in the Litigation he, she or it held immediately prior to the date of
the Memorandum of Understanding.
II.
FACT INVESTIGATION AND DISCOVERY
In connection with their pre-filing investigation and the
prosecution of the Litigation, Lead Settlement Class Counsel have undertaken
extensive formal and informal discovery, and have conducted a thorough
examination into the facts and law relating to the matters alleged in the
Litigation. They have attended depositions of the class representatives who have
knowledge of certain relevant facts, and have interviewed other persons having
such knowledge. They have analyzed publicly available documents and information,
documents produced by the Defendants, and documents produced by non-parties.
They have collected and analyzed data regarding the damages they claim have been
sustained by, and potential additional theories of recovery for, Settlement
Class Members. They have had access to financial statements and have questioned
the chief financial officer of Piper Jaffray Companies Inc. concerning the
finances of that defendant, Piper Capital Management Incorporated and Piper
Jaffray Inc. Lead Settlement Class Counsel have also consulted with experts as
to issues of both liability, damages, and Defendants' ability to pay
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any judgment which might, absent this settlement, have been
obtained.
As a result of, inter alia, their fact investigation, discovery and
analysis, the Named Plaintiffs and the Lead Settlement Class Counsel have
concluded that the settlement of the Litigation, as set forth herein, is fair,
reasonable, adequate, and in the best interests of the Settlement Class.
III.
BENEFITS OF SETTLEMENT TO THE SETTLEMENT CLASS Lead Settlement
Class Counsel have carefully weighed the
benefits to the Settlement Class of a settlement of the Litigation for the
Settlement Amount, as defined herein, offered by the Defendants hereunder
against the significant costs, risks and delay that continued prosecution of the
Litigation would involve, and against the judgment that might be obtained at the
conclusion of the Litigation, were the continued prosecution of the Litigation
ultimately successful. Lead Settlement Class Counsel recognize the risks to the
Settlement Class inherent in lengthy complex litigation through trial court and
appellate court proceedings, and are mindful of both problems of proof of
plaintiffs' claims and possible adverse changes in applicable laws or the
interpretation thereof by the courts. Lead Settlement Class Counsel have further
taken into account the potential defenses asserted by the Defendants respecting
class certification, liability and damages, and have taken into account the
financial ability of the Defendants to pay any judgment which the class might
have obtained against said Defendants.
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IV.
THE DEFENDANTS' REASONS FOR SETTLEMENT The Defendants have
concluded that further conduct of the
Litigation would be protracted and expensive for all parties. Substantial
amounts of time, energy and resources of the Defendants, and of their directors,
officers, and employees have been, and unless a settlement is made would
continue to be, devoted to the defense of the claims asserted. The Defendants
also recognize that there are substantial risks attendant to the Litigation. For
example, although the defendants deny any wrongdoing or liability, there are
substantial risks attendant to the Complaints' allegations: (i) that during the
Settlement Class Period, Defendants wrongfully and tortiously misrepresented or
failed to disclose in the Fund prospectuses or otherwise matters material to
Settlement Class Members' decisions to invest in the Fund; (ii) that Defendants
wrongfully and tortiously failed to properly direct the Fund's investment
strategies throughout the Settlement Class Period; (iii) that Defendants
wrongfully and tortiously failed to conform the Fund's investment strategies to
the Fund's investment criteria and limitations; and (iv) that Settlement Class
Members sustained damages throughout the Settlement Class Period as a result of
Defendants' alleged wrongful and tortious conduct.
Piper Jaffray Companies Inc., Piper Capital Management
Incorporated, Piper Jaffray Inc., William H. Ellis and Edward J.
Kohler ("the Piper Jaffray Defendants"), recognize that resolution
of the Litigation is consistent with their goal of resolving client
disputes and enhancing client satisfaction. The Piper Jaffray
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Defendants have, therefore, determined that it is desirable and beneficial to
them that the Litigation be settled in the manner and upon the terms and
conditions set forth in this Settlement Agreement to eliminate the burden,
expense and risk of protracted litigation, and that such settlement is in the
best interests of the Piper Jaffray Defendants and of the shareholders of
Defendant Piper Jaffray Companies Inc.
Piper Funds Inc. has determined that it is in the best interest of the
Fund and its shareholders to settle the Litigation in the manner and upon the
terms and conditions set forth in the Settlement Agreement to eliminate the
burden, expense and risk of protracted litigation. The decision of Piper Funds
Inc. to enter into this Settlement Agreement is based upon the independent
assessment of the Agreement by the Piper Funds Inc. Board of Directors, and is
not dependent upon the decisions of the Piper Jaffray Defendants.
V.
THE DEFENDANTS' DENIALS
The Defendants have denied, and continue to deny, each and all of the
claims and contentions alleged in the Litigation. The Defendants repeatedly have
asserted, and continue to assert, many defenses to such claims and contentions,
and have expressly denied, and continue to deny, any wrongdoing or legal
liability arising out of any of the conduct alleged in the Litigation. The
Defendants have also denied, and continue to deny, inter alia, the allegations
that any Defendant breached any duty to any Named Plaintiff or any Settlement
Class Member, including any duty respecting disclosure of the nature or expected
or actual conduct of the Fund, or the
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level of any risk attendant thereto, and that any Named Plaintiff or Settlement
Class Member has suffered any injury or wrong, has sustained any damage, or is
entitled to any recovery, as a result of any act or failure to act on the part
of any Defendant.
Neither this Settlement Agreement, nor any Exhibits hereto or documents
referred to herein, including without limitation the Memorandum of
Understanding, or any action taken to carry out the Settlement Agreement, is,
may be construed as, or may be used as an admission by or against said
Defendants of any fault, wrongdoing or liability whatsoever. Pursuant to Rule
408, Federal Rules of Evidence, the fact of entering into and carrying out this
Settlement Agreement, the Exhibits hereto, and any negotiations and proceedings
related thereto, shall in no event be construed as, or be deemed as evidence of,
any admission or concession of liability by or estoppel of claims by any of the
undersigned parties or their respective clients, nor a waiver of any applicable
statute of limitations or repose, and shall not be offered or received into
evidence in any action or proceeding against any undersigned party or his or her
respective client(s) in any judicial, quasi-judicial, administrative agency,
arbitration or other tribunal or proceeding for any purpose whatsoever, other
than (a) to enforce the provisions of this Settlement Agreement, or the
provisions of any related agreement or exhibit hereto, or (b) to establish
entitlement of Piper Jaffray Companies Inc. and/or Piper Capital Management
Incorporated to any claimed tax refund or other tax treatment resulting from
this Settlement.
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VI.
AGREEMENTS
NOW, THEREFORE, IT IS HEREBY STIPULATED AND AGREED, by and among the Named
Plaintiffs, and the Defendants, subject to approval of the Court pursuant to
Rule 23(e), Federal Rules of Civil Procedure, that the Litigation is compromised
and settled upon, and subject to, the following terms and conditions:
VII.
DEFINITIONS
All capitalized terms which appear throughout this Settlement Agreement
and the Exhibits attached hereto are defined herein.
As used herein:
A. "Account Holder of Record" or "AHR" shall mean the Settlement Class
Members whose names are listed as purchasers or record holders of
Class Period Shares in records provided to the Settlement Parties by
the Fund's transfer agent or as to whom the Settlement Parties are
otherwise notified by a duly authorized writing.
B. "Advance Deposit Date" shall mean that date on which the
Cash Advance is deposited in the Settlement Fund.
C. "Aggregate Opt-Out Loss" shall mean the sum of the Losses, as
defined herein, sustained by all Fund Accounts held by Settlement
Class Members who request exclusion from the Settlement Class in
accordance with the Class Notice.
D. "Authorized Claimant" shall mean any Settling Class
Member who has completed and returned a Claim and Release
Form. Provided however, that any Settling Class Member
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who does not opt-out of the Settlement Class, but who disputes the
amount of the Loss as set forth in her, his or its Settlement Loss
Statement, shall not be considered an Authorized Claimant until any
and all such disputes are fully and finally resolved as provided in
paragraph IX herein.
E. "Cash Advance" shall mean that $20 million to be
deposited by Piper Jaffray Companies Inc. as an advance
to the Settlement Fund within ten (10) business days
after the date of this Settlement Agreement, as provided
in paragraph X herein.
F. "Cash Component" shall mean that portion of the
Settlement Amount to be paid in cash as provided pursuant
to Paragraph XI(H)(8) and (H)(9) of this Settlement
Agreement.
G. "Cash Refund" shall mean the difference, if any, between
the Cash Advance and the Cash Component, which Cash
Component shall be reduced for this calculation by the
amounts previously advanced for expenses pursuant to
paragraph XI(H)(2). The cash to be returned to Piper
Jaffray Companies Inc. under this provision shall be
calculated under the following formula: Balance of
Settlement Fund on Effective Date (including interest
earned) minus (Cash Component minus Amounts Previously
Advanced for Expenses). Stated otherwise, the difference
between the Cash Advance and the Cash Component shall be:
BSF - [(CC + Icc) - APAE] or (BSF + APAE) - (CC + Icc)
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Where:
BSF = Balance of Settlement Fund
on the Effective Date (including
interest thereon);
CC = Cash Component;
APAE = Amounts Previously Advanced for
Expenses;
It = Total Interest on Cash Advance;
Icc = It x (CC / 20M)
H. "Claim and Release Form" shall mean that form submitted
by a Settling Class Member or Members for the purpose of,
and as a prerequisite to, receiving a recovery under the
Settlement Agreement, which form shall require each
Account Holder of Record associated with a Fund Account
to represent and warrant that he, she, it or they has or
have the authority to relinquish and release all Settled
Claims related to the account(s) identified on the
Settlement Loss Statement, on behalf of all Persons who
purchased said shares of the Fund during the period from
July 1, 1991, through and including May 9, 1994, and any
other original or subsequent holder(s) of any interest in
any of said shares (including but not limited to donees,
assignees, devisees, beneficiaries or other transferees),
filed substantially in the form attached hereto as
Exhibit A, and filed in such manner and within such time
as directed by the Court.
I. "Class Notice" shall mean that form of mailed notice
entitled "Notice of Class Action Determination and
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Hearing on Settlement of Class Action" which shall be mailed to all
Account Holders of Record, substantially in the form attached hereto
as Exhibit B.
J. "Class Period Shares" shall mean the shares issued by the Fund
during the Class Period and purchased by a Settlement Class Member
during the Class Period, including reinvested dividends and
reinvested capital gains distributions.
K. "Counsel for the Defendants" shall mean (i) Leonard,
Street and Deinard, Professional Association, 150 South
Fifth Street, Suite 2300, Minneapolis, Minnesota, 55402,
and George F. McGunnigle, on behalf of Defendants Piper
Capital Management Incorporated, Piper Jaffray Inc.,
Piper Jaffray Companies Inc., William H. Ellis and Edward
J. Kohler, and (ii) Gordon Altman Butowsky Weitzen Shalov
& Wein, 114 West 47th Street, 20th Floor, New York, New
York, 10036, and Theodore Altman, on behalf of Defendant
Piper Funds Inc.
L. "Defendants" shall mean Piper Funds Inc. Institutional
Government Income Portfolio (denominated in the Complaint
as such but intended to refer to Piper Funds Inc.), Piper
Capital Management Incorporated, Piper Jaffray Inc.,
Piper Jaffray Companies Inc., William H. Ellis and Edward
J. Kohler.
M. "Defendant Releasees" shall mean, collectively, the Piper
Jaffray Releasees and the Piper Jaffray Funds Inc.
Releasees, as defined herein. "Defendant Releasee" shall
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encompass any person included in the definition of Piper
Jaffray Releases or Piper Funds Inc. Releasees.
N. "Effective Date" shall mean the date on which the Court's
Order for Final Judgment approving this Settlement
Agreement, substantially in the form attached hereto as
Exhibit C, becomes final. As used in this Settlement
Agreement, "final" means the date upon which the judgment
in the Litigation becomes not subject to further appeal
or review. Thus, "final" means, without limitation, the
date of expiration of the time for filing or noticing of
any appeal from the final judgment of the Court without
any appeal being filed therein (i.e., 30 days); or, if an
appeal is filed in the Litigation, and the judgment in
the Litigation is finally affirmed on appeal, or the
appeal is finally dismissed, the date of expiration of
the time for filing or noticing any appeal from said
affirmance or dismissal without any request for further
discretionary review of such appellate decision being
sought; or, if a further discretionary review of such
appellate decision is sought, and such discretionary
review is denied, the date of expiration of time for
filing or noticing any appeal from said denial; or, if
further discretionary review is granted, the date upon
which such discretionary review results in final
affirmance of the judgment in the Litigation without any
right for further review or appeal or, if there is some
further right of appeal, the expiration of time for
filing or noticing any appeal from said affirmance; or,
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if upon appeal or discretionary review the matter is remanded for
any purpose, the date upon which the judgment following remand
becomes not subject to further appeal or review as described
hereinabove. The Effective Date shall not be affected by any
Settling Class Member's dispute of his, her or its Loss under the
alternative dispute resolution process set forth at paragraph IX
herein.
O. "Eligible Participant-Directed Retirement Plan" shall
mean a Participant-Directed Retirement Plan which has,
for each individual plan participant or former
participant who is a Settlement Class Member:
1. records of each participant's name and address; and
2. records of each participant's transactions in the
Fund throughout the period from the plan's initial
purchase of shares in the Fund until May 9, 1994,
which records:
a. are sufficient to permit the plan to provide
data reflecting each individual participant's
transaction history for each transaction, including, but
not limited to, (1) transaction date, (2) transaction
description, (3) number of shares, (4) price of shares
as of the transaction date, (5) total amount of
transaction, so as to permit the calculation of such
participant's Loss in the manner set forth in the
Settlement Loss Statement furnished to such
participant's plan; and
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b. reconcile, when aggregated to combine the
transactions of all plan participants, with
the plan's aggregate transaction history as
stated in the Settlement Loss Statement.
P. "Escrow Agent" shall mean Norwest Bank, Minnesota, N.A.,
or any successor thereto hereinafter approved by the
Court to serve as custodian and paying agent for all
funds paid into the Settlement Fund pursuant to the terms
of an Escrow Agreement to be entered into among the
Escrow Agent, Piper Jaffray Companies Inc. and Lead
Settlement Class Counsel, in the form attached hereto as
Exhibit E (the "Escrow Agreement").
Q. "Fee Award and Expense Reimbursement" shall mean that
amount of the Settlement Amount awarded by the Court to
Settlement Class Counsel for attorneys' fees and to
reimburse Settlement Class Counsel for expenses incurred
in connection with the Litigation and the settlement
thereof including, but not limited to, expert fees,
travel costs and expenses, deposition transcripts, long
distance telephone calls, and other costs and expenses
(collectively "Reimbursable Expenses") and, in the event
such application is made and approved by the Court, any
compensation to those named class representatives
represented by Lead Settlement Class Counsel. Any
amount awarded in connection with a Fee Award and Expense
Reimbursement shall be paid out of the Settlement Fund
upon approval by the Court and shall reduce the amount of
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the Settlement Amount available to be paid to Settling
Class Members.
R. "Fee and Expense Petition" shall mean Settlement Class Counsel's
petition(s) to the Court for an award of attorneys' fees and
reimbursement of Reimbursable Expenses and, in the event such
application is made and approved by the Court, any compensation to
those named class representatives represented by Lead Settlement
Class Counsel.
S. "Fund" shall mean the Institutional Government Income
Portfolio, a Piper Fund Inc. mutual fund.
T. "Fund Account" shall mean a separately numbered account which
evidences a purchase of shares in the Fund (including reinvested
dividends and reinvested capital gains distributions) during the
Settlement Class Period.
U. "KPMG Lawsuit" shall mean that certain action captioned
Rodney, et al. v. KPMG Peat Marwick, United States
District Court for the District of Minnesota, File No.
Civ. 3-94-1073, which has been consolidated for pretrial
purposes with In re: Piper Funds Inc. Institutional
Government Income Portfolio Litigation, Master File No.
3-94-587.
V. "Lead Settlement Class Counsel" shall mean the law firm
of Schatz Paquin Lockridge Grindal & Holstein P.L.L.P.
and Richard A. Lockridge, 2200 Washington Square
Building, 100 Washington Avenue South, Minneapolis,
Minnesota, 55401, and the law firm of Head, Seifert &
Vander Weide, a professional association, and Vernon J.
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Vander Weide, One Financial Plaza, Suite 2400, 120 South Sixth
Street, Minneapolis, Minnesota, 55402.
W. "Litigation" shall mean the lawsuits which have been
consolidated for trial in the United States District
Court for the District of Minnesota under the caption In
Re: Piper Funds Inc. Institutional Government Income
Portfolio Litigation, Master File No. 3-94-587, which
definition excludes the KPMG Lawsuit.
X. (A) "Loss" shall mean, for each Fund Account (and each
participant in an Eligible Participant-Directed
Retirement Plan which Plan complies with the
procedures set forth in paragraph VIII(G-J) and in
the Class Notice), the costs associated with the
purchase and ownership of Class Period Shares,
consisting of (a) the dollar amount of purchases
(including reinvested dividends and reinvested
capital gains distributions) of Class Period
Shares, and (b) negative charges (e.g. service and
annual maintenance fees) deducted from the Fund
Account, subtracting from said costs the following:
1. if the Fund Account's Class Period Shares
were redeemed during the Class Period,
the amount actually received upon
redemption;
2. if the Fund Account's Class Period Shares
were not redeemed during the Class
Period, the amount which would have been
21
<PAGE>
received if shares held after May 9,
1994, had been redeemed on May 9, 1994;
3. if the Fund Account received dividends
and/or capital gains distributions
attributable to Class Period Shares, the
amount of dividends and/or capital gains
distributions whether received in the
form of cash or in the form of additional
Fund shares as a result of reinvesting
such dividends and/or capital gains
distributions; and
4. if shares of the Fund were purchased in
the Fund Account prior to the beginning
of trading on July 1, 1991, and if all or
some of those shares of the Fund were
held at the beginning of trading on July
1, 1991, the amount of Profits (as
defined below) the account made on such
shares held at the beginning of trading
on July 1, 1991.
If this Loss calculation produces a negative dollar amount,
reflecting a gain for that Fund Account, the Loss for that
Fund Account shall be zero.
(B) In calculating the "Loss" sustained by each
Settlement Class Member, the following principles,
methods and definitions shall be employed:
1. "Class Period Shares" shall have the meaning
set forth in paragraph VII (I) hereof.
22
<PAGE>
2. Interest shall be applied to all transactions,
including without limitation, purchases
(including reinvested dividends and reinvested
capital gains distributions) redemptions and
distributions, before and during the Class
Period in the form of a multiplier, which is
attached hereto as Exhibit K, and is expressly
incorporated as part of this Loss definition.
This multiplier is an approximation of, for a
given transaction date, the May 9, 1994 value
of one dollar invested in the Piper Jaffray
Money Market Fund at the opening of trading on
that transaction date, compounding interest
daily at a rate derived from the Piper Jaffray
Money Market Fund monthly rate of return.
3. In the case of Settlement Class Members with Pre-Class
Period purchases, the method of associating redemptions
with purchases will be the first-in, first-out ("FIFO")
method.
4. When Fund shares have been transferred between
separately numbered Fund Accounts, all
separately numbered accounts directly or
indirectly linked by the transfer of shares
shall be combined into a single combined Fund
Account for purposes of calculating Loss. For
example, if Account A transferred shares to B,
and C transferred shares to B and D, and D
transferred shares to E, then A, B, C, D and E
23
<PAGE>
shall be combined into a single Fund Account
for purposes of calculating Loss.
5. Where a Fund Account reflects purchases of
Fund shares both before and during the
Settlement Class Period, positive
distributions (e.g., dividends and capital
gains distributions) and negative charges
(e.g., service and annual maintenance fees)
received or deducted during the Class Period
shall be allocated on a proportioned basis
between (i) purchases made prior to, and (ii)
purchases made during, the Settlement Class
Period. To determine the amount of a
distribution or charge associated with the
ownership of Class Period Shares, the gross
amount of the distribution or charge is
multiplied by the ratio of the balance of
Class Period Shares, to the total share
balance (including both Class Period Shares
and shares purchased before the Class Period)
on the day prior to the distribution or
charge.
6. Where a Fund Account reflects purchases of shares prior
to the Class Period followed by pre-Class Period
redemption(s) of some, but not all, of said shares,
pre-Class Period distributions and charges shall be
included in the calculation of Profits based upon the
24
<PAGE>
ratio of said shares held during the Class Period to the
total share balance (including shares held during the
Settlement Class Period and shares sold prior to the
Settlement Class Period) on the date prior to the
distribution or charge.
7. "Profits" on shares held as of July 1, 1991,
shall be calculated as:
(a) Proceeds received from the redemption of
shares during the Settlement Class Period which
shares were held at the beginning of trading on
July 1, 1991;
PLUS
(b) The net asset value as of May 9, 1994, $8.48 per
share, of all shares held by a Fund Account at the
beginning of trading on July 1, 1991, which shares
were not redeemed prior to or on May 9, 1994;
PLUS
(c) Any dividends or capital gains distributions
attributable to the shares held at the beginning
of trading on July 1, 1991, which dividends and/or
capital gains distributions were received during
or before the Settlement Class Period;
MINUS
(d) Any charges (e.g. service and annual
maintenance fees) attributable to the
25
<PAGE>
shares held at the beginning of trading on July 1,
1991, which charges were deducted during or before
the Settlement Class Period.
MINUS
(e) The purchase price, as of the date of purchase, of
shares that constituted a Fund Account's balance
at the beginning of trading on July 1, 1991,
(including reinvested dividends and reinvested
capital gains distributions).
If this calculation yields a negative value, reflecting
a loss for that Fund Account, profits are set to zero.
(C) The methodology for applying the above narrative
definition is set forth in two sample Settlement
Loss Statements attached hereto as Exhibits F-1 and
F-2, which Settlement Loss Statements are expressly
incorporated in the definition of Loss. The
quantitative description of the "Loss" calculation
defined above is expressly incorporated into the
above definition of "Loss," and is attached hereto
as Exhibit D. The Piper Jaffray Defendants
represent, in good faith and to the best of their
belief, that such quantitative description of
"Loss" is wholly consistent with this paragraph
VII(X). Said quantitative description is to be
applied in a manner consistent with this paragraph
26
<PAGE>
VII(X). To the extent said quantitative
description is not consistent with this paragraph
VII(X), this paragraph VII(X) shall control.
(D) Settling Class Members may dispute the calculation
of their Loss pursuant to the alternative dispute
resolution process described at paragraph IX
herein. If a Settling Class Member disputes his,
her or its Loss, the final and binding Loss figure
which results from that alternative dispute
resolution process shall be the Loss for the Fund
Account or Accounts at issue.
Y. "Named Plaintiffs" shall mean the Named Plaintiffs in the
Litigation, specifically Richard J. Rodney, Jr., Douglas
Shonka, Carl Patrick Monahan, Jerry Hoehnen, Rosemary
Boris, Thomas W. Newcome, Delvin D. Junker, Printing
Mailing Trade District, affiliated with the Newspaper
Drivers' Division of the International Brotherhood of
Teamsters, The History Theatre, Inc., Paul Gold, and
Bernard Friedman.
Z. "Net Settlement Amount" shall mean the Settlement Amount less (i)
all Fee Award and Expense Reimbursements approved by the Court and
(ii) all other expenses of creating and administering the Settlement
Fund, including the fees and expenses of the Escrow Agent as
provided herein.
AA. "Net Total Loss" shall mean the Total Loss, as defined
herein, less the Aggregate Opt-Out Loss, as defined
herein.
27
<PAGE>
AB. "Note Component" shall mean that portion of the
Settlement Amount to be paid in the form of unsecured
promissory notes as provided pursuant to Paragraph X of
this Settlement Agreement.
AC. "Participant-Directed Retirement Plan" shall mean any
retirement plan (including but not limited to any 401(k)
plan, profit sharing plan, money purchase pension plan,
stock bonus plan, employee stock ownership plan, or
403(b)(7) custodial account plan) wherein the individual
plan participant directs how the participant's accounts
in the plan shall be invested. For purposes of this
definition, the term "participant" includes beneficiaries
and alternate payees. If a plan allows participants to
direct the investment of some but not all of their
accounts in the plan, the portion of the plan as to which
the participants exercise investment direction shall be
considered a Participant-Directed Retirement Plan, and
the remainder shall not be considered such a plan. A
plan is included in this definition of Participant-
Directed Retirement Plan even though the participants
must select among a limited number of investment options
offered under the plan. A plan is not a Participant-
Directed Retirement Plan to the extent that someone other
than the participant (such as the employer, plan
committee, trustee, investment manager, or other named
fiduciary) makes the actual investment decisions for plan
assets.
28
<PAGE>
AD. "Person" shall mean any natural person, corporation, general
partnership, limited partnership, limited liability company, limited
liability partnership, association, joint stock company, trust,
unincorporated organization, government and any political
subdivision thereof, or any other type of entity.
AE. "Piper Capital" or "Piper Capital Management
Incorporated" shall mean Piper Capital Management
Incorporated, a Delaware corporation.
AF. "Piper Funds" or "Piper Funds Inc." shall mean Piper
Funds Inc. (and shall also include the entity identified
in the Litigation as Piper Funds Inc. Institutional
Government Income Portfolio), a Delaware corporation.
AG. "Piper Funds Inc. Releasees" shall mean: Piper Funds Inc.
and all and each of its predecessors, successors,
assigns, direct and indirect subsidiaries, divisions,
parents, affiliates and related corporations and
entities, insurers and mutual funds or series of shares
and all and each of its and their respective
predecessors, successors and assigns, and all and each of
its and their present and former officers, directors,
principals, shareholders, insurers, employees,
independent contractors, agents, attorneys (except Dorsey
& Whitney), auditors and accountants (except KPMG Peat
Marwick) and their respective assigns, successors,
agents, representatives, heirs, executors, administrators
and insurers.
29
<PAGE>
If and to the extent any persons could be construed as
included within the definitions of both "Piper Jaffray Releasees"
and "Piper Funds Inc. Releasees," then persons shall be assigned to
one category or the other as follows: (1) Piper Capital Management
Incorporated, Piper Jaffray Companies Inc., Piper Jaffray Inc.,
William H. Ellis and Edward J. Kohler are within the category of
"Piper Jaffray Releasees;" and (2) all persons other than those
listed in (1) above encompassed within the definitions of "Piper
Funds Inc. Releasees" are within the category of "Piper Funds Inc.
Releasees".
AH. "PJCI" or "Piper Jaffray Companies Inc." shall mean Piper
Jaffray Companies Inc., a Delaware corporation.
AI. "PJI" or "Piper Jaffray Inc." shall mean Piper Jaffray
Inc., a Delaware corporation.
AJ. "Piper Jaffray Defendants" shall mean Piper Jaffray
Companies Inc., Piper Jaffray Inc., Piper Capital
Management Incorporated, William H. Ellis, and Edward J.
Kohler.
AK. "Piper Jaffray Releasees" shall mean Piper Capital
Management Incorporated, Piper Jaffray Companies Inc.,
Piper Jaffray Inc., William H. Ellis and Edward J.
Kohler, and all and each of their respective
predecessors, successors, assigns, direct and indirect
subsidiaries, divisions, parents, affiliates and related
corporations and entities, insurers and mutual funds or
series of shares and all and each of its and their
respective predecessors, successors and assigns, and all
30
<PAGE>
and each of its and their present and former officers, directors,
principals, shareholders, insurers, employees (including brokers),
independent contractors, agents, attorneys (except Dorsey &
Whitney), auditors and accountants (except KPMG Peat Marwick) and
their respective assigns, successors, agents, representatives,
heirs, executors, administrators and insurers.
If and to the extent any persons could be construed as
included within the definitions of both "Piper Jaffray Releasees"
and "Piper Funds Inc. Releasees," then persons shall be assigned to
one category or the other as follows: (1) Piper Capital Management
Incorporated, Piper Jaffray Companies Inc., Piper Jaffray Inc.,
William H. Ellis and Edward J. Kohler are within the category of
"Piper Jaffray Releasees;" and (2) all persons other than those
listed in (1) above encompassed within the definitions of "Piper
Funds Inc. Releasees" are within the category of "Piper Funds Inc.
Releasees".
AL. "Potential Defendants" shall mean all Persons, as defined
herein, against whom the Settlement Class Members have
asserted or shall in the future assert any claim
(including any third-party defendants or other persons
or entities who are sued as a result of such
claim(s)), in any forum (including but not limited to
any court or arbitration proceeding) arising out of,
relating to, in any way connected with a Settled
Claim or which, if the Potential Defendant were a
Defendant Releasee, would constitute, a Settled Claim
as defined herein, provided however that Potential
31
<PAGE>
Defendants shall not include the Piper Funds Inc.
Releasees, the Piper Jaffray Releasees, and KPMG Peat
Marwick.
AM. "Settled Claim" shall mean any claim which falls within
the definition of "Settled Claims."
AN. "Settled Claims" shall mean any and all claims, actions,
causes of action, rights or liabilities, including,
without limitation, Unknown Claims, as defined herein,
which exist against any of the Defendant Releasees by
reason of any matter, event, cause or thing whatsoever
for any period, whether within or outside the Settlement
Class Period, arising out of any fact, event, or
transaction occurring at any time before, through and
including the date of this Settlement Agreement, relating
to, arising out of or in any way connected with:
1. any purchase, made by or on behalf of any
Settlement Class Member, of shares of the Fund;
2. any actions or failures to act by any Defendant
Releasee in any way respecting any investment in the Fund, or
decisions related to the purchase, made by or on behalf of any
Settlement Class Member, of shares of the Fund;
3. any of the facts, circumstances, transactions, events,
occurrences, acts, omissions or failures to act that are or
could have been or were attempted to have been alleged or
referred to in the Litigation, including without limitation
all of the claims which have been or may be asserted in any of
32
<PAGE>
the actions brought by the Named Plaintiffs prior to their
consolidation into the Litigation, including but not limited
to any claim: (i) that during the Settlement Class Period,
Defendants wrongfully and tortiously misrepresented or failed
to disclose in the Fund prospectuses or otherwise matters
material to Settlement Class Members' decisions to invest in
the Fund; (ii) that Defendants wrongfully and tortiously
failed to properly direct the Fund's investment strategies
throughout the Settlement Class Period; (iii) that Defendants
wrongfully and tortiously failed to conform the Fund's
investment strategies to the Fund's investment criteria and
limitations; and (iv) that Settlement Class Members sustained
damages throughout the Settlement Class Period as a result of
Defendants' alleged wrongful and tortious conduct; or
4. the Fund, including but not limited to all claims:
a. which relate to the management of the Fund,
including but not limited to claims based on violations
of any limitation or restriction on the management of
the Fund, including but not limited to restrictions
arising in connection with any prospectus, registration
statement, statement of additional information, contract
(including but not limited to all agreements between the
Fund and Piper Capital Management
33
<PAGE>
Incorporated), statute, regulation or other
source of law;
b. which relate to the offer or sale of shares in
the Fund, including but not limited to claims
based on:
(1) misrepresentation or omission of facts or
opinions relating to the Fund, whether
oral or in writing;
(2) unfair or unlawful sales practices in
connection with the sale of shares in the
Fund;
(3) unsuitability of an investment in the
Fund;
(4) unauthorized purchase of shares in the
Fund; or
(5) failure to execute instructions to sell
shares in the Fund; or
c. for violations of:
(1) federal and state securities statutes and
regulations;
(2) federal and state RICO statutes;
(3) Minnesota Consumer Fraud Act and
counterpart statutes in other states; (4)
Investment Company Act of 1940; (5) Investment Advisers
Act; (6) Employee Retirement Income Security Act; (7)
common law fraud; (8) negligent misrepresentation;
34
<PAGE>
(9) unsuitability; or
(10) breach of fiduciary duty.
However, Settled Claims shall not include any non- class claim
of embezzlement or other physical theft of money of a
Settlement Class Member or clerical error in the crediting or
debiting of a Settlement Class Member's Fund Account, where
such claim (in any of the above categories) is unrelated to
any decline in the net asset value of the Fund.
AO. "Settlement Amount" shall be an amount not to exceed
seventy million dollars ($70,000,000.00), calculated as
of the Effective Date, and determined as follows:
Abbreviations: M = Million
AOOL = Aggregate Opt-Out Loss
TL = Total Loss
NTL = Net Total Loss
1. If 70.4M - [(AOOL - 2% of TL) x (70M / TL)]
NTL
is greater than or equal to one-half (.5), then the
Settlement Amount shall be determined as follows:
A. If the Aggregate Opt-Out Loss is less than or equal
to two percent (2%) of the Total Loss, then Piper
Capital Management Incorporated and Piper Jaffray
Companies Inc. shall be jointly obligated to pay
$70 million in full and complete settlement of all
Settled Claims as provided for herein.
B. If the Aggregate Opt-Out Loss exceeds two percent
(2%) of Total Loss, then the amount to be paid
jointly by Piper Capital Management Incorporated
35
<PAGE>
and Piper Jaffray Companies Inc. hereunder will be,
for every dollar of Aggregate Opt-Out Loss in
excess of two percent (2%) of Total Loss, reduced
from $70 million by the fraction of a dollar
represented by the fraction:
$70 million
TL
Thus, the amount to be paid jointly by Piper
Capital Management Incorporated and Piper Jaffray
Companies Inc. will be calculated as follows:
$70 M - [ (AOOL - 2% of TL) x (70M / TL)]
2. If 70.4M - [(AOOL - 2% of TL) x (70M / TL)]
NTL
is less than one-half (.5), then the Settlement Amount
shall be determined as follows:
A. If Total Loss is less than or equal to $144
million, then the Settlement Amount shall equal the
lesser of
(a) (.5 x NTL) - $400,000, or
(b) $70 million.
B. If Total Loss is greater than $144 million, then
the Settlement Amount shall equal the lesser of:
(a) 71.6M - (.5 x AOOL), or
(b) $70 million.
Attached hereto as Exhibit L for illustration purposes only is a
chart of hypothetical Settlement Amounts to be paid by Piper Capital
Management and Piper Jaffray Companies Inc. based upon assumed Total
Loss and
Aggregate Opt-Out Loss figures.
36
<PAGE>
AP. "Settlement Class" shall mean a class of all Persons who
purchased shares of the Fund (including purchase by
reinvesting dividends or reinvesting capital gains
distributions) during the Settlement Class Period, and
all other original or subsequent holder(s) of any
interest in any of said shares (including but not limited
to donees, assignees, devisees, beneficiaries, and other
transferees).
AQ. "Settlement Class Counsel" shall mean Lead Settlement
Class Counsel and any other counsel of record for any
Named Plaintiff.
AR. "Settlement Class Member" shall mean a member of the
Settlement Class, including persons who elect to opt-out
of the class.
AS. "Settlement Class Period" shall mean the period from
July 1, 1991, through May 9, 1994, inclusive.
AT. "Settlement Counsel" shall mean Lead Settlement Class
Counsel and Counsel for the Defendants.
AU. "Settlement Fund" shall mean an interest-bearing escrow
account, for the benefit of Settling Class Members, to be
maintained with the Escrow Agent into which the
Settlement Amount shall be deposited by Piper Capital
Management Incorporated and Piper Jaffray Companies Inc.
when the payment thereof becomes due and payable as
provided herein. The expenses of administration of the
Settlement Fund, including the expenses of creating and
maintaining the Settlement Fund and the fees and expenses
of the Escrow Agent, shall be paid out of the Settlement
37
<PAGE>
Fund and shall reduce the Settlement Amount available for
distribution to the Settling Class Members. The Escrow Agent shall
have such duties and responsibilities as are identified in the
Escrow Agreement. In the event that this Settlement Agreement is
terminated as provided herein prior to the Effective Date, all
payments theretofore made to the Settlement Fund, plus interest
thereon (less the expenses of creating and maintaining the
Settlement Fund and the fees and expenses of the Escrow Agent),
shall be paid by the Escrow Agent to Piper Jaffray Companies Inc.
within ten (10) days of such termination. Interest which accrues on
the Cash Advance after the Advance Deposit Date but prior to the
Effective Date shall accrue to the benefit of the Settling Class
Members except as provided for herein. Interest which accrues after
the Effective Date on the Cash Advance accrues to the benefit of the
Settling Class Members. No distribution shall be made from the
Settlement Fund to any Settling Class Member or otherwise prior to
the Effective Date of the Settlement. The Settlement Fund shall meet
the criteria of a "designated settlement fund" as defined in Section
468B of the Internal Revenue Code of 1986 upon the Effective Date as
(i) approved by United States District Court and subject to its
continuing jurisdiction, (ii) established to resolve claims arising
out of a tort or violation of law, and (iii) having assets
segregated from other assets of Piper Capital
38
<PAGE>
Management Incorporated and Piper Jaffray Companies Inc.
and administered independently by the Escrow Agent.
AV. "Settlement Loss Statement" shall mean that form which
states the Loss for each Fund Account and which includes:
a. a Settlement Loss Summary;
b. a Loss analysis based upon the transaction
history of all Class Period Shares; and
c. if applicable, an analysis of pre-Class Period
profits.
AW. "Settlement Parties" shall mean the Named Plaintiffs, the
Settling Class Members and the Defendants.
AX. "Settling Class Member" shall mean a Settlement Class
Member not excluded from the Settlement by Order of the
Court.
AY. "Total Loss" shall mean the sum of the Losses sustained by all Fund
Accounts (and all participants in Eligible Participant-Directed
Retirement Plans which Plans comply with the procedures set forth at
paragraph VII(G-J) and the Class Notice), whether or not a
Settlement Class Member associated with a Fund Account requests
exclusion from the Settlement or the Settlement Class.
AZ. "Unknown Claims" as used in the definition of "Settled Claims" in
Paragraph VII(AM) hereof, shall mean claims arising during the
Settlement Class Period related to the matters identified in
paragraph VII (AM), which any of the Settling Class Members do not
know of or suspect to exist in their favor at the time of their
release of the
39
<PAGE>
Defendant Releasees, which if known by them might have affected
their settlement with the Defendant Releasees.
VIII.
CALCULATION OF LOSS
A. As soon as practicable, and pursuant to the Court's Order
dated February 16, 1995, the Defendants will provide
information to Lead Settlement Class Counsel to assist
them in their calculation of a "Loss" amount for each
Fund Account (as well as a "Total Loss" amount). The
Defendants will provide data to Lead Settlement Class
Counsel, which reflects Defendants' good faith belief as
to the transaction history of each Fund Account.
B. The transaction history of each Fund Account will be
provided to the Account Holder of Record for review in
the form of the Settlement Loss Statement. The
responsibility for verifying the accuracy of the
transaction history shall rest with each Account Holder
of Record. Any Settling Class Member may invoke the
alternative dispute resolution procedure set forth in
paragraph IX, herein, to correct any alleged errors which
could impact the Loss calculation. If a Settling Class
Member fails to invoke the alternative dispute resolution
within the time permitted under this agreement, such
Settling Class Member waives the right to dispute his,
her or its Loss figure under the Settlement Agreement.
Defendants may, at their discretion, undertake to correct
mistakes or errors in the data whether or not an Account
40
<PAGE>
Holder of Record brings such errors to the attention of Lead
Settlement Class Counsel.
C. Lead Settlement Class Counsel will take all measures necessary to
assure that the confidentiality of all customer account information
provided by the Defendants will be preserved, and that all such
customer account information will not be made public or shared with
other customers.
D. Defendants have calculated a Loss figure for each Fund
Account maintained in the records of the Fund's transfer
agent. Defendants have provided such calculations to
Lead Settlement Class Counsel. Lead Settlement Class
Counsel may calculate a preliminary Loss figure for each
Fund Account of Record (as well as a Total Loss amount).
Alternatively, Lead Settlement Class Counsel may conduct,
or cause to be conducted, a review or audit of the
calculations provided by Defendants.
E. Lead Settlement Class Counsel shall advise Defendants in
writing at least thirty (30) days prior to making their
calculations available to Account Holders of Record of
any differences or discrepancies noted in their review,
if any, of the calculations, so that Defendants may
review said calculations or audited calculations and
raise objections concerning any potential or alleged
errors. If the Defendants have given written notice of
such objections to Lead Settlement Class Counsel within
twenty (20) days of receiving such amounts and
calculations, the Settlement Parties shall use their best
41
<PAGE>
efforts to resolve any disagreements over said calculations between
themselves, but if they are unable to resolve such disagreements
within ten (10) business days after delivery of such notice by the
Defendants, they shall jointly seek a ruling of the Court as to all
matters in dispute, which decision shall be final and nonappealable.
F. Defendants will prepare a Settlement Loss Statement for
each Fund Account (or for a combined group of Fund
Accounts as explained more fully in the definition of
Loss at paragraph VII(X)), substantially in the form
attached hereto as Exhibit F, and provide such form to
Lead Settlement Class Counsel. Lead Settlement Class
Counsel may thereafter prepare a final Settlement Loss
Statement reflecting the final Loss figure for each Fund
Account (or combined Fund Accounts), and shall distribute
such Settlement Loss Statement to each Account Holder of
Record along with the Class Notice. Provided, however,
that in lieu of preparing such final Settlement Loss
Statement, Lead Settlement Class Counsel may at their own
discretion, copy the Settlement Loss Statements provided
as a courtesy by the Defendants.
G. Certain Participant-Directed Retirement Plans ("Plan" or "Plans")
have purchased or sold shares in the Fund on behalf of individual
participants, without providing the Fund with any information as to
the purchases and sales of these individual participants. Such plans
have made purchases and sales in the aggregate in a single Fund
42
<PAGE>
Account which reflects only these aggregate transactions. Pursuant
to the methodology generally employed under this Agreement, under
which Loss is calculated for each Fund Account, the Loss for each of
such plans would not reflect each individual participant's Loss, as
distinguished from the aggregate Loss of the plan as a whole.
Nonetheless, the Settling Parties agree that if, and only if, a
Participant-Directed Retirement Plan meets the criteria of an
Eligible Participant-Directed Retirement Plan as defined herein, and
elects to be treated on an individual participant basis rather than
an aggregate basis, such Eligible Plan will be treated on an
individual participant basis for the purposes of calculating a Loss
amount. Under such circumstances each such individual participant
account within the Plan account shall be treated for all purposes as
if it were a separate Fund Account. Any transfer of shares between
two or more participant accounts within the same Plan shall result
in combining such accounts for purposes of calculating Loss, based
on the principles set forth in paragraph VII(X).
H. Each Eligible Participant-Directed Retirement Plan which elects to
have Loss calculated on an individual participant basis rather than
an aggregate basis, shall comply with the procedures set forth in
the Class Notice, and shall provide Lead Settlement Class Counsel
with data reflecting the transaction history for each individual
participant in such Plan who purchased Class Period
43
<PAGE>
Shares. Such data shall include, for each participant, the name and
address of that participant along with a transaction history
beginning with the participant's first purchase of a share or shares
of the Fund through and including May 9, 1994, including, for each
transaction: (a) transaction date, (b) transaction description, (c)
number of shares, (d) price of shares as of the transaction date,
(e) total amount of transaction. The data shall be provided in
printed "hard copy" form, and on computer diskette stored in ASCII
format and/or a format readable by Microsoft Access or Excel.
Otherwise eligible plans which fail to comply with the procedures
set forth in the Class Notice will not be eligible to have Loss
calculated on an individual participant basis, but will instead have
Loss calculated on a Fund Account basis.
I. Upon receipt of such data, the Defendants shall reconcile
the aggregate purchase and sale transaction history as
reflected in the Fund's records, with the aggregate
purchase and sale transaction history as reflected in the
records provided by the Plan fiduciary or administrator.
Any dispute between the Defendants and such fiduciary or
administrator over the aggregate purchase and sale
transaction histories shall be subject to the alternative
dispute resolution process set forth in paragraph IX
herein.
J. Upon receipt of such data, the Defendants shall also
reconcile the individual participant purchase and sale
44
<PAGE>
transaction histories with the aggregate purchase and sale
transaction history for each Eligible Participant- Directed
Retirement Plan. The purpose of the reconciliation is to confirm
that the sum of individual transactions of a particular type on a
particular date corresponds to the aggregate data for that
particular date. The Settling Parties shall make all reasonable
efforts to resolve any dispute arising from the reconciliation of
the data. In the event that the Settling Parties cannot reconcile
the Plan's aggregate transaction history with the cumulative
individual transactions histories, the aggregate transaction history
shall be controlling, and the plan fiduciary or administrator shall
be solely responsible for adjusting the individual participant
transaction histories until they reconcile with the aggregate
transaction history. Any disputes with respect to reconciliation of
the individual and aggregate transaction histories shall not be
subject to the alternative dispute resolution process set forth in
paragraph IX herein, or any other appeal or review.
K. Once reconciliation of the data is complete, Defendants shall
prepare a Settlement Loss Statement for each individual participant
reflecting the Loss of that participant according to the same
methodology used for Account Holders of Record, which Statement
shall be forwarded to Lead Settlement Class Counsel for their
review. Lead Settlement Class Counsel may, but shall not
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be required to, conduct or cause to be conducted an audit of such
Settlement Loss Statements. Lead Settlement Class Counsel shall
return such Settlement Loss Statements to the Plan administrator or
fiduciary, who shall in turn forward such statement directly to each
participant. The Loss figure set forth in that Settlement Loss
Statement shall be final and binding upon the individual
participant, and shall not be subject to the alternative dispute
resolution process set forth in paragraph IX herein, or any other
appeal or review.
IX.
ALTERNATIVE DISPUTE RESOLUTION
OF LOSS CALCULATIONS
A. In the event that, to the extent permitted herein, a
Settling Class Member disputes the amount of her, his or
its Loss as set forth on the Settlement Loss Statement,
the Settling Class Member shall notify Lead Settlement
Class Counsel by indicating the existence of such a
dispute on the Claim and Release Form. If a Settling
Class Member fails to invoke this alternative dispute
process within thirty days of the mailing of the Claim
and Release Form, such Settling Class Member waives the
right to dispute their Loss calculation as reflected in
their Settlement Loss Statement. Lead Settlement Class
Counsel and such Member shall attempt to resolve such
dispute. Settling Class Members may not dispute the
methodology used to calculate Loss under this Agreement,
which methodology shall apply to all Settling Class
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Members. In the event that the Member and Lead Settlement Class
Counsel are unable to resolve any such dispute, the dispute shall be
submitted to the Court or to a Special Master appointed by the Court
for such purpose, and the decision by the Court or such Special
Master shall be final and binding upon such Settling Class Member,
and shall not be appealable.
B. Each Settling Class Member who does not elect to be
excluded from the Settlement Class but who disputes her,
his or its Loss as set forth on the Settlement Loss
Statement shall be subject to the dispute resolution
process described above at paragraph IX(A). The fact
that a Settling Class Member's Loss is subject to such
dispute resolution process shall not affect that Settling
Class Member's obligations under this Agreement, and this
Agreement shall be binding upon that Member as if that
Member were considered an Authorized Claimant. Thus, by
failing to request exclusion from the Settlement Class,
a Settling Class Member who disputes his, her, or its
Loss, agrees to release all claims (without regard to the
ultimate resolution of the dispute over Loss), to the
same extent as all other Settling Class Members who do
not dispute the amount reflected on the Settlement Loss
Statement.
C. To the extent that each Settling Class Member disputes
the calculation of her, his or its Loss, such Class
Members will not receive any distribution until such
dispute is resolved, and the entire amount of the Loss
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claimed by such Settling Class Member shall be held in the
Settlement Fund and shall not be distributed to any Settling Class
Member or Authorized Claimant until such dispute is finally and
fully resolved by the Court or Special Master as provided in
paragraph IX(A).
D. Lead Settlement Class Counsel shall assume that Settling Class
Members who dispute their Loss will receive the highest amount
claimed for the purpose of calculating the proportionate share of
the remaining Authorized Claimants.
E. The Defendants may participate in the dispute resolution process at
their election, and shall cooperate in providing such records,
account statements or other information which may be, in the view of
Lead Settlement Class Counsel, relevant to the resolution of such
disputes.
F. All Loss disputes shall be resolved not later than thirty (30) days
prior to the first installment payment due date on the Installment
Note.
X.
COMPONENTS OF THE SETTLEMENT AMOUNT
A. The Settlement Amount shall consist of the following two
components:
1. Cash Component. The Cash Component shall be an
amount equal to two-sevenths of the Settlement
Amount. The Cash Component shall be payable to the
Settlement Fund in cash, as provided herein.
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2. Note Component. The Note Component shall be an
Amount equal to the Settlement Amount less the Cash
Component. The Note Component shall be payable to
the Settlement Fund as provided herein, pursuant to
the terms of the two unsecured promissory notes
described below to be jointly and severally issued
by Defendants Piper Capital Management Incorporated
and Piper Jaffray Companies Inc. as follows:
a. Forty-six percent (46%) of the Note Component
will consist of a three-year unsecured note, in the form
attached hereto as Exhibit G, due and payable to the
Settlement Fund for the benefit of all Settling Class
Members in three equal installments of principal on the
first, second and third anniversaries of the Advance
Deposit Date of this Settlement Agreement (the
"Installment Note"). The Installment Note shall bear
interest from and after the Effective Date at the rate
of eight percent (8%) per annum on the unpaid principal
balance thereof (computed on the basis of the actual
number of days elapsed in a year of 365 days), due and
payable in three installments together with principal
payments on the Installment Note. The Installment Note
shall be a joint and several obligation of Piper Capital
Management Incorporated and Piper Jaffray Companies Inc.
Each installment of principal
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and interest shall be deposited in the Settlement Fund
on the due date thereof. The Installment Note may be
prepaid in whole or in part at the option of Piper
Capital Management Incorporated and Piper Jaffray
Companies Inc. without penalty, upon payment of an
amount equal to the principal amount to be prepaid plus
interest accrued thereon to the date of such prepayment.
b. Fifty-four percent (54%) of the Note Component
will consist of an unsecured note, in the form
attached hereto as Exhibit H, which shall be
due and payable to the Settlement Fund for the
benefit of all Settling Class Members upon the
receipt by the Defendants of tax refunds or
tax benefits to be received as a result of the
payment of a sum or sums due under this
Settlement Agreement (the "Tax Note" and,
together with the Installment Note, the
"Notes"). The Defendants will undertake to
act promptly to make all filings necessary to
obtain the above-referenced tax refund(s) or
tax benefit(s). The Tax Note shall bear
interest from and after the Effective Date at
the rate of eight percent (8%) per annum on
the unpaid principal balance thereof (computed
on the basis of the actual number of days
elapsed in a year of 365 days), payable in a
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lump sum together with each payment of principal of the
Tax Note. Principal and accrued interest on the Tax Note
shall be due and payable not later than two (2) business
days after receipt by the Defendant Releasees of the tax
refunds or tax benefits. No payment of principal or
interest shall be due before the receipt of said tax
refunds or tax benefits, except as provided hereinafter
and in paragraph X(B) below. Notwithstanding the
foregoing, and without regard to whether such tax
refunds are received, the principal balance of the Tax
Note and all accrued interest thereon shall be paid on
the last day of the fifteenth (15th) month following the
Advance Deposit Date to the extent not previously paid.
The Tax Note shall be a joint and several unsecured
obligation of Piper Capital Management Incorporated and
Piper Jaffray Companies Inc. The Tax Note may be prepaid
in whole or in part at any time at the option of Piper
Capital Management Incorporated and Piper Jaffray
Companies Inc. without penalty upon payment of an amount
equal to the principal amount to be prepaid and interest
accrued thereon to the date of such prepayment.
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B. Lead Settlement Class Counsel have the right, upon
delivery of written notice to Piper Jaffray Companies
Inc., to declare the Notes to be immediately due and
payable upon the occurrence of either of the following
events (each an "Event"):
1. The acquisition by any individual, entity or group
(within the meaning of ss. 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934 (the "Exchange Act")) of
beneficial ownership (within the meaning of Exchange Act Rule
13d-3) of 50% or more of either (i) the then outstanding
shares of common stock of Piper Jaffray Companies Inc., Piper
Jaffray Inc. or Piper Capital Management Incorporated (the
"Outstanding Company Common Stock") or (ii) the combined
voting power of the then outstanding voting securities of
Piper Jaffray Companies Inc., Piper Jaffray Inc. or Piper
Capital Management Incorporated entitled to vote generally in
the election of directors (the "Outstanding Company Voting
Securities"); provided, however, that the following
acquisitions shall not cause the promissory notes to become
due and payable: (a) any acquisition of voting securities of
Piper
Jaffray Companies Inc. by Piper Jaffray
Companies Inc. or any of its wholly-owned
subsidiaries, provided (i) that such
acquisition of voting securities does not
constitute a liquidation of PJCI, and (ii) not
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less than 51 percent of the outstanding shares
of voting securities of such subsidiaries
continues to be held by PJCI,
(b) any acquisition of voting securities of Piper
Jaffray Companies Inc. by any employee benefit
plan (or related trust) sponsored or
maintained by Piper Jaffray Companies Inc. or
any of its subsidiaries, including without
limitation Piper Jaffray Companies ESOP,
provided that such acquisition is for
investment and not for resale and that any
voting securities so acquired are held not
less than three (3) years from the Advance
Deposit Date, or
(c) any acquisition by any corporation with
respect to which, immediately following such
acquisition, more than 60% of respectively,
the then-outstanding shares of common stock of
such corporation and the combined voting power
of the then- outstanding voting securities of
such corporation entitled to vote generally in
the election of directors is then beneficially
owned (within the meaning of Exchange Act Rule
13d-3), directly or indirectly, by all or
substantially all of the individuals and
entities who were the beneficial owners,
respectively, of the Outstanding Company
Common Stock and Outstanding Company Voting
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Securities immediately prior to such acquisition in
substantially the same proportions as was their
ownership, immediately prior to such acquisition, of the
Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be;
2. Default in the payment of an amount in excess of
five hundred thousand dollars ($500,000) of the
principal of or interest on any indebtedness of
Piper Jaffray Companies Inc. or Piper Capital
Management Incorporated for borrowed money, as and
when the same shall become due, or under any
mortgage, agreement or other instrument under or
pursuant to which such indebtedness is issued, if
such default shall continue beyond the period of
grace, if any, allowed with respect thereto, and if
the holders thereof cause such indebtedness to
become due prior to its stated maturity, without an
assertion by Piper Jaffray Companies Inc. or Piper
Capital Management Incorporated that the existence
or amount of indebtedness is contested, or that
Piper Jaffray Companies Inc. or Piper Capital
Management Incorporated are otherwise legally
entitled to withhold payment of the indebtedness,
provided that if, notwithstanding such assertion,
the amount or existence of indebtedness is
contested, the lender requires the payment of such
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indebtedness, all amounts due hereunder shall
become immediately due and payable.
Within ten (10) business days after the occurrence of an Event,
Piper Jaffray Companies Inc. shall provide written notice to Lead
Settlement Class Counsel of the occurrence of any such Event. Lead
Settlement Class Counsel shall have the right, in their sole
discretion, to waive any rights conferred by this Settlement
Agreement to declare the Notes to be immediately due and payable.
XI.
ACTIONS, UNDERSTANDINGS AND ACKNOWLEDGEMENTS
Based upon the recitals, the definitions, the mutual exchange
of promises, and the valuable consideration set forth in this Settlement
Agreement, the Settlement Parties agree as follows:
A. The Litigation is being settled to avoid the risk,
uncertainty, expense, and inconvenience of further litigation.
B. The Defendants do not admit, either expressly or implicitly, that they
are subject to any liability whatsoever by reason of any of the matters alleged
in the Litigation. The Defendants deny all such liability and deny that they
have committed any violation of law. They have agreed to settle the Litigation
on the terms set forth herein to eliminate the risk, uncertainty, burden,
expense, harassment, inconvenience, and distraction of protracted litigation, to
amicably resolve disputes with clients, and to prevent the splitting of the
claims of clients into multiple lawsuits and/or arbitrations.
C. This Settlement Agreement and all documents,
negotiations, and proceedings related to it are not, and shall not
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be construed to be, an admission by the Defendants respecting the validity of
the Defendants' liability with respect to any claims or any alleged wrongdoing
by any of them whatsoever, and shall not be used or offered by any party or
non-party for any purpose, including, without limitation, as evidence in any
proceeding in any forum, or as an admission of any of the claims of the
Litigation, except to the extent permitted in paragraph XI(E)(1) and (2) and
that this Settlement Agreement or its exhibits may be used to enforce the terms
and conditions hereof against the parties to this Settlement Agreement, and may
be disclosed by the Defendant Releasees for tax purposes, insurance purposes,
accounting purposes and other purposes not inconsistent with this Settlement
Agreement.
D. By Order issued on February 15, 1995, the Court entered an amended
pretrial schedule, which provided for, inter alia, an indefinite stay of all
deadlines to which the Defendants may be subject in the Litigation pending
further order of the Court. The Settlement Parties agree that such stay shall
remain in place until the Effective Date or until preliminary or final approval
is denied, whichever comes first.
E. Use of Discoverable Information in the KPMG Lawsuit
1. Named Plaintiffs are continuing to prosecute the KPMG
Lawsuit. The Defendants agree that the Named Plaintiffs will be permitted
to retain custody of documents produced by the Defendants pursuant to
discovery requests served on the Defendants during the Litigation and to
use such documents in the KPMG Lawsuit in the manner in which documents
are customarily used in litigation, provided that all such documents shall
continue to be governed by the protective
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orders entered in the Litigation and shall be destroyed or returned to the
Defendants upon the final resolution of the Litigation and of the KPMG
Lawsuit, as set forth in P. 25 of Pretrial Order No. 6 (November 12,
1994), and further provided that the Named Plaintiffs and Lead Settlement
Class Counsel will preserve the strict confidentiality of all settlement
communications, including confidential information exchanged in the course
of settlement negotiations, with the Defendants and/or their counsel,
except that Lead Settlement Class Counsel may disclose information
substantiating the calculation of each Settlement Class Member's Loss
under this Agreement. Provided, however, that Defendants may, at their
discretion, authorize Lead Settlement Class Counsel to disclose
confidential information. The Defendants further agree that they, and
their employees, officers and directors, will remain subject to document
requests, depositions, and to appearance as witnesses at trial in the KPMG
Lawsuit without subpoena, to the same extent as if Defendants were named
parties in the KPMG Lawsuit, but subject to all other requirements under
the Federal Rules of Civil Procedure.
2. The Named Plaintiffs and lead Settlement Class Counsel will be
permitted to use the Fund Account Loss data contained in the Settlement
Loss Statements in the KMPG lawsuit furnished to the Class pursuant
hereto, provided that (i) such data shall be subject to the
confidentiality limitations imposed pursuant to the protective order
entered in this Litigation and Judge Magnuson's February 17, 1995 order
(ii) such data may be used in the KPMG lawsuit only if
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there is an Effective Date under this agreement, and (iii)
such data shall be deemed to satisfy any duplicative discovery
request for the transaction data contained in the Settlement
Loss Statements.
F. If the Aggregate Opt-Out Loss exceeds ten percent (10%)
of the Total Loss, as provided in paragraph XI(H)(6) and (7) herein, Piper
Jaffray Companies Inc. may terminate this Settlement Agreement, at its sole and
exclusive option, after which this Settlement Agreement shall be of no force and
effect.
G. The Named Plaintiffs and Lead Settlement Class Counsel, having
determined that the terms of this Settlement Agreement are fair and reasonable,
are prepared to cooperate with the Defendant Releasees in connection with any
government investigations or regulatory inquiries concerning the events
described in the Litigation. Lead Settlement Class Counsel have concluded, and
are prepared to argue to regulatory and enforcement agencies, that this
Settlement Agreement should be regarded as the final resolution of all issues
which have been raised with respect to the Defendants in connection with the
sale and management of the Fund during the Settlement Class Period. Lead
Settlement Class Counsel will make themselves reasonably available to
participate in such investigations as may be requested by the Defendant
Releasees.
H. Creation, Payment, Administration and Distribution of the
Settlement Fund
1. Within five (5) business days after the date of this
Settlement Agreement, Lead Settlement Class Counsel, Piper
Jaffray Companies Inc. and the Escrow Agent shall enter into
the Escrow Agreement.
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2. Within ten (10) business days after the date of this Settlement
Agreement, Piper Jaffray Companies Inc. shall deposit the Cash Advance in
the Settlement Fund. Prior to the Effective Date of this Settlement
Agreement, the Cash Advance shall be used solely for the payment of the
fees and expenses owed to the Escrow Agent and incurred in creating and
maintaining the Settlement Fund.
3. In the event of termination of this Settlement Agreement as
provided herein, all funds held in the Settlement Fund, comprised of the
Cash Advance and interest earned thereon, less expenses paid prior to such
date pursuant to paragraph XI (H)(2) above, shall be returned by the
Escrow Agent to Piper Jaffray Companies Inc. within ten (10) days of such
termination.
4. Subject to the approval of the Court, the Settlement Parties
stipulate and agree that notice by mail will be provided according to the
following procedures to the Settlement Class Members whose names and
addresses are able with reasonable effort to be determined by reference to
the computer records of the Defendants. Notice shall be given to all
Account Holders of Record by United States mail, postage prepaid, provided
that the notice shall be forwarded to any forwarding addresses, and that
any undeliverable notices shall be returned to Lead Settlement Class
Counsel, or their designees. Mailed notice shall be in the form attached
hereto as Exhibit B. Notice to remaining Settlement Class Members shall be
made by publication one time in (i) The Minneapolis Star Tribune, (ii) The
St. Paul Pioneer Press, and (iii) the
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national edition of The Wall Street Journal. Published notice shall be in
substantially the form attached hereto as Exhibit I and shall be at least
45 and one-half square inches. Proof of publication shall be submitted to
the Court as part of the application for final approval of the Settlement
Agreement. Lead Settlement Class Counsel shall provide, or arrange to
provide, the form of notice, provided that the form and manner of notice
shall be acceptable to the Defendants.
5. Within approximately sixty (60) days of the mailing of the Class
Notice and Settlement Loss Statement to each Account Holder of Record,
Lead Settlement Class Counsel shall mail a Claim and Release Form to each
Settling Class Member and such Claim and Release Form shall be returned to
Lead Settlement Class Counsel not later than 30 days from the mailing
thereof. No Claim and Release Form which disputes the Loss shall be deemed
to invoke the ADR process unless such Claim and Release Form is received
by the deadline provided.
6. Within five (5) business days following the deadline for the
return of Settling Class Members' Claim and Release Forms, Lead Settlement Class
Counsel shall prepare a Class Response Report to the Defendants to include:
(1) Name, Fund Account number(s), and Loss calculation for
each Settlement Class Member who elects to be excluded from the
Settlement Class along with a calculation of the Aggregate Opt-Out
Loss;
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(2) The Loss calculation for each Settling Class Member by
name and Fund Account number(s) who does not dispute his, her or its
Loss, and a calculation of the total undisputed Loss;
(3) The high and low amount of the Loss calculation for each
Settling Class Member by name and Fund Account number(s) who
disputes his, her or its Loss, and a calculation of the highest
possible total disputed Loss and lowest possible total disputed
Loss;
(4) The Loss calculation for each participant in an Eligible
Participant-Directed Retirement Plan by name, and a total Loss
number for such Eligible plans;
(5) Calculation of the Lowest Possible Total
Loss ("LPTL") and Highest Possible Total Loss
("HPTL"); and
(6) Calculation of the Defendants' ten (10)
percent AOOL termination provision based upon the
HPTL and LPTL, as provided in paragraph XI(F).
7. Within five (5) business days of the receipt of the
Class Response Report, the Defendants shall confirm or reject the
conclusions presented in such Report. If the Defendants reject the
conclusions reached by Lead Settlement Class Counsel, the Settling Parties
shall use their best efforts to resolve any disputes over said
conclusions. If the Settling Parties are unable to resolve such disputes
within five (5) business days after Defendants confirm or reject the
Report,
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they shall jointly seek a ruling of the Court as to all matters in
dispute, which decision shall be final and nonappealable. If after the
resolution of any disputes over the Class Response Report, the AOOL
exceeds ten (10) percent of the HPTL, Piper Jaffray Companies Inc. may
terminate this Settlement Agreement, at its sole and exclusive option,
after which this Settlement Agreement shall be of no force and effect. If
the AOOL exceeds ten (10) percent of the LPTL but does not exceed ten (10)
percent of the HPTL, the Settling Parties shall permit the alternative
dispute resolution process to proceed until the termination provision is
triggered under both HPTL and LPTL, or is triggered under neither HPTL nor
LPTL.
8. If the Loss disputes submitted by Settling Class Members are
fully and finally resolved within ten (10) business days of the Effective
Date, the Escrow Agent shall pay the Cash Refund to Piper Jaffray
Companies Inc. based on the final Settlement Amount.
9. If the Loss disputes submitted by Settling Class Members are not
fully and finally resolved within ten (10) business days of the Effective
Date, Lead Settlement Class Counsel shall, at that time, calculate a
preliminary Settlement Amount for the purpose of determining a preliminary
Cash Component and preliminary Note Component. Lead Settlement Class
Counsel shall calculate a highest possible Settlement Amount, based upon
the assumption that all outstanding Loss disputes will be resolved in
favor of the highest amount claimed, and a lowest possible Settlement
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Amount, based upon the assumption that all outstanding Loss disputes will
be resolved at the lowest amount. The calculation of the Cash Refund shall
be made based upon the highest possible Settlement Amount. The Preliminary
Note Component shall be calculated based upon the lowest possible
Settlement Amount. Within five (5) business days of the resolution of all
Loss disputes, Lead Settlement Class Counsel shall calculate a final
Settlement Amount, and a final Cash Component and final Note Component.
Thereafter, the Escrow Agent shall pay to Piper Jaffray Companies Inc. the
Cash Refund, if any (less any portion thereof previously returned). Piper
Jaffray Companies Inc. and Piper Capital Management Incorporated, at their
discretion, shall either re-issue the original notes based upon the final
Note Component amount upon cancellation of the previously defined notes,
or shall issue additional notes to cover the difference between the
preliminary and final Note Component amounts, which notes shall include
interest from and after the Effective Date on the final Note Component
Amount.
10. Following the full or partial payment of the Cash Refund within
ten (10) days of the Effective Date, any expenses paid out of the
Settlement Fund and approved by the Court in response to the Fee Award and
Expense Reimbursement petition shall be drawn from the Settlement Fund and
shall thereby reduce the amount of cash available for distribution to
Settling Class Members.
11. Piper Jaffray Companies Inc. and Piper Capital
Management Inc. shall deposit into the Settlement Fund,
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payments of principal and interest on the Notes as they become due and
payable, as provided in paragraph X of this Settlement Agreement.
12. Except for the obligation of Piper Capital Management
Incorporated and Piper Jaffray Companies Inc. to timely deliver the
Settlement Amount to the Settlement Fund as it becomes due and payable
pursuant to the terms hereof, no Defendant, Piper Jaffray Releasee, Piper
Funds Inc. Releasee, or other Person shall have any obligation to
contribute any amount to the Settlement Amount or the Settlement Fund, or
shall otherwise be liable to pay to any person any amount pursuant to this
Settlement Agreement.
13. Lead Settlement Class Counsel, acting on behalf of the Settling
Class Members, and subject to the supervision, direction and approval of
the Court, shall process and be responsible for each Claim and Release
Form submitted by a Settling Class Member. The cost of processing the
Claim and Release Forms and any expenses incurred in resolving any such
disputes shall be paid from the Settlement Fund and shall thereby reduce
the amount of cash available for distribution to Settling Class Members.
The Escrow Agent shall be responsible for (i) all distributions of funds
contained in the Settlement Fund in accordance with the terms of the
Escrow Agreement, and the terms hereof, and (ii) any tax reporting
requirements and tax returns to be filed by or on behalf of the Settlement
Fund. The Defendant Releasees shall have no responsibility, financial
obligation or liability whatsoever with respect to (a) the administration
of the Settlement Fund,
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(b) the processing of Claim and Release Forms or disputes relating thereto
(except as explicitly provided herein), or (c) payments or distributions
from the Settlement Amount once the Settlement Amount is deposited in the
Settlement Fund. Notwithstanding the foregoing, any of the Defendants may,
at their option, take any action they deem necessary to ensure that the
criteria established for processing and validating the Claim and Release
Forms are properly and fully enforced, and that Persons who fail to meet
those criteria do not receive a distribution of funds from the Settlement
Fund. Lead Settlement Class Counsel shall provide Defendants with a
reasonable opportunity to review the Claim and Release Forms of Settling
Class Members before any distributions are made. Neither the Settlement
Amount nor the Settlement Fund shall be reduced as a result of the failure
of a Settling Class Member to meet such criteria.
14. As further provided in the Escrow Agreement, distributions to
the Settling Class Members who are Authorized Claimants and payments to
others shall be made by the Escrow Agent out of the Settlement Fund, at
the direction of Lead Settlement Class Counsel and subject on each
occasion to the approval of the Court. At the time of each distribution to
Settling Class Members as provided herein, any amounts in the Settlement
Fund shall first be paid (i) to pay any fee then due and payable to the
Escrow Agent, (ii) to reimburse expenses incurred by the Escrow Agent and
Lead Settlement Class Counsel on behalf of or in connection with the
administration of the Settlement Fund, and (iii) to pay that
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portion of the Fee Award and Expense Reimbursement then due
and payable.
15. In the case of each distribution to Settling Class Members, each
Settling Class Member shall receive the same proportionate percentage of
his, her or its Loss, as every other Settling Class Member, provided
however, that distributions shall be made only to Authorized Claimants.
16. To the extent that each Settling Class Member disputes the
calculation of her, his or its Loss, such Member shall not receive any
distribution until the dispute is resolved by the Court or Special Master
as provided in paragraph IX(A), and the entire amount of the Loss claimed
by such Settling Class Member shall be held in the Settlement Fund and
shall not be distributed to any other Settling Class Member or Authorized
Claimant until such dispute is finally and fully resolved by the Court or
Special Master as provided in paragraph IX(A). If the aggregate amount of
such disputes, as calculated based upon the higher amount claimed, is
equal to or less than ten (10) million dollars, distributions may be made
to Settling Class Members who do not dispute their Loss prior to the
resolution of such disputes. Settling Class Members who do not dispute
their Loss shall receive a proportionate share based on the assumption
that any disputing Settling Class Member will be entitled to the higher
amount claimed. In the event that the aggregate disputed amount of such
disputes exceeds ten (10) million dollars, then no distributions shall be
made to any Settling Class Member until all such disputes are finally and
fully resolved.
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17. Lead Settlement Class Counsel shall make all reasonable efforts
to locate each Account Holder of Record. Defendants shall cooperate in
such efforts by providing reasonable assistance in locating such persons.
Until such reasonable efforts have been made, the Distribution to which
any Account Holder of Record is entitled (as a percentage of the Loss
reflected on each Member's Settlement Loss Statement) shall be withheld
from distribution to other Settling Class Members and shall remain in the
Settlement Fund. In the event that such Account Holders of Record cannot
be located on or before the date three years after the Advance Deposit
Date, the amounts held on behalf of such AHRs shall be distributed
proportionately to Settling Class Members who are Authorized Claimants. In
the event that a Settling Class Member has received the Class Notice, but
has failed to submit a Claim and Release Form on or before the date three
years after the Advance Deposit Date, such Settling Class Members shall be
forever barred from receiving any distributions from the Settlement Fund
and such amounts shall be distributed proportionately to all other
Authorized claimants.
18. It is the Defendants' position that no "incentive payment,"
"reimbursement" or other enhanced payment or compensation should be made
to any Named Plaintiff. Lead Settlement Class Counsel may, at their
option, make a motion before the Court seeking such payments.
19. Lead Settlement Class Counsel and Counsel for the
Piper Jaffray Defendants have retained the law firm of
Bredhoff & Kaiser of Washington, D.C. to obtain advice from
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the Department of Labor as to whether the Department would consider
participation in the proposed settlement by Settlement Class Members which
are employee benefit plans subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), to be a "prohibited
transaction" within the meaning of Section 406(a) of ERISA or Section
4975(c)(1) of the Internal Revenue Code and, if so, whether any statutory
exemption under Section 408(b) of ERISA or Section 4975(d) of the Internal
Revenue Code would be applicable. Once the Department has rendered its
advice, Lead Settlement Class Counsel will make copies available to all
such employee benefit plans which are members of the Settlement Class. I.
Release Provisions Relating to Piper Jaffray Releasees
1. In consideration of the payment of the Settlement
Amount to be made pursuant to this Settlement
Agreement, the Settling Class Members hereby
release, and hereby consent to an Order of the
Court effectuating their release, of any and all
claims which the Settling Class Members, or any of
them, had or have against the Piper Jaffray
Releasees, or any of them, arising out of, based
upon, or otherwise related to, the Settled Claims,
whether in litigation, arbitration, or any other
forum.
2. In consideration of the payment of the Settlement
Amount to be made pursuant to this Settlement
Agreement, each Settling Class Member will,
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immediately after the Effective Date, dismiss with prejudice
any Settled Claim against any of the Piper Jaffray Releasees.
3. In consideration of the payment of the Settlement
Amount to be made pursuant to this Settlement
Agreement, the Settling Class Members hereby
release claims against KPMG Peat Marwick and
Potential Defendants, and credit any judgment
against KPMG Peat Marwick and Potential Defendants,
to the extent of the greater of:
a. the proportion or percentage of liability or
damages to the Settling Class Members equal to the
proportion or percentage of causal fault or causal
responsibility, if any, for which the Piper Jaffray
Releasees are hereafter at trial or otherwise determined
to be responsible; or
b. the proportion or percentage of damages, if
any, which shall hereafter by trial or
otherwise be determined to be damages which
KPMG Peat Marwick or Potential Defendants
would have been entitled to recover from the
Piper Jaffray Releasees as a result of claims,
if any, for contribution, indemnification or
reimbursement, however denominated, arising
under federal or state law, including those
based in tort, contract or statute, or any
other legal theory, which claims:
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(1) arise from or relate to the Settling
Class Members' investment in the Fund; or
(2) arise from or relate to any claim by the Settling
Class Members arising out of, relating to, or in
any way connected with any Settled Claim, or
which, if KPMG Peat Marwick or the Potential
Defendant were a Defendant Releasee, would
constitute a Settled Claim, as defined herein.
c. Except as provided herein, the Settling Class
Members preserve all claims against KPMG Peat
Marwick and all Potential Defendants. It is
specifically understood and agreed that the
releases described herein shall not be
construed as an agreement to dismiss the KPMG
Lawsuit, nor be construed as a release of any
claim or cause of action by the Settling Class
Members against KPMG Peat Marwick or Potential
Defendants, nor be construed as a covenant not
to sue or to forebear from bringing any
lawsuit against KPMG Peat Marwick or any
Potential Defendant, except as otherwise
provided herein.
4. Solely with respect to any and all Settled Claims, it is the
intention of the parties hereto that, upon the Effective Date,
as defined herein, each of the Settling Class Members does
hereby expressly waive and relinquish, to the fullest extent
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permitted by law, the provisions, rights and benefits of any
statute or law which might otherwise render a general release
unenforceable with respect to Unknown Claims against the Piper
Jaffray Releasees. All of the Settling Class Members
acknowledge that they are aware that they 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 this Settlement Agreement, but that it is
their intention to, and each Settling Class Member does
hereby, upon the Effective Date, fully, finally and forever
settle and release any and all Settled Claims against the
Piper Jaffray Releasees, known or unknown, suspected or
unsuspected, contingent or non-contingent, whether or not
concealed or hidden, which now exist, may hereafter exist, or
may heretofore have existed, without regard to the subsequent
discovery or existence of such different or additional facts.
5. The Settling Class Members expressly intend that the releases
described herein shall release all Piper Jaffray Releasees
without regard to the identity of those particular Defendants
responsible for payment of the Settlement Amount.
6. In consideration of the payment of the Settlement
Amount to be made pursuant to this Settlement
Agreement, the Settling Class Members hereby
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covenant and agree not to sue Dorsey & Whitney with respect to
any claim arising out of, relating to, or in any way connected
with any Settled Claim, or which, if Dorsey and Whitney were a
Defendant Releasee, would constitute a Settled Claim, as
defined herein.
7. All releases and covenants not to sue described
herein shall become effective on the Effective
Date.
J. Release Provisions Relating to Piper Funds Inc. Releasees
1. In consideration of the payment of the Settlement
Amount to be made pursuant to this Settlement Agreement, the
Settling Class Members hereby release, and hereby consent to
an Order of the Court effectuating their release, of any and
all claims which the Settling Class Members, or any of them,
had or have against the Piper Funds Inc. Releasees, or any of
them, arising out of, based upon, or otherwise related to, the
Settled Claims, whether in litigation, arbitration, or any
other forum.
2. In consideration of the payment of the Settlement Amount to be
made pursuant to this Settlement Agreement, each Settling
Class Member will, immediately after the Effective Date,
dismiss with prejudice, any Settled Claim against any of the
Piper Funds Inc. Releasees.
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3. In consideration of the payment of the Settlement
Amount to be made pursuant to this Settlement
Agreement, the Settling Class Members hereby
release claims against KPMG Peat Marwick and
Potential Defendants, and credit any judgment
against KPMG Peat Marwick and Potential Defendants,
to the extent of the greater of:
a. the proportion or percentage of liability or
damages to the Settling Class Members equal to the
proportion or percentage of causal fault or causal
responsibility, if any, for which the Piper Funds Inc.
Releasees are hereafter at trial or otherwise determined
to be responsible; or
b. the proportion or percentage of damages, if
any, which shall hereafter by trial or
otherwise be determined to be damages which
KPMG Peat Marwick or Potential Defendants
would have been entitled to recover from the
Piper Funds Inc. Releasees as a result of
claims, if any, for contribution,
indemnification or reimbursement, however
denominated, arising under federal or state
law, including those based in tort, contract
or statute, or any other legal theory, which
claims:
(1) arise from or relate to the Settling
Class Members' investment in the Fund; or
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(2) arise from or relate to any claim by the Settling
Class Members arising out of, relating to, or in
any way connected with any Settled Claim, or
which, if KPMG Peat Marwick or the Potential
Defendant were a Defendant Releasee, would
constitute a Settled Claim, as defined herein.
c. Except as provided herein, the Settling Class
Members preserve all claims against KPMG Peat
Marwick and all Potential Defendants. It is
specifically understood and agreed that the
releases described herein shall not be
construed as an agreement to dismiss the KPMG
Lawsuit, nor be construed as a release of any
claim or cause of action by the Settling Class
Members against KPMG Peat Marwick or Potential
Defendants, nor be construed as a covenant not
to sue or to forebear from bringing any
lawsuit against KPMG Peat Marwick or any
Potential Defendant, except as provided
herein.
4. Solely with respect to any and all Settled Claims, it is the
intention of the parties hereto that, upon the Effective Date,
as defined herein, each of the Settling Class Members does
hereby expressly waive and relinquish, to the fullest extent
permitted by law, the provisions, rights and benefits of any
statute or law which might
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otherwise render a general release unenforceable with respect
to Unknown Claims against the Piper Funds Inc. Releasees. All
of the Settling Class Members acknowledge that they are aware
that they 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 this Settlement
Agreement, but that it is their intention to, and each
Settling Class Member does hereby, upon the Effective Date,
fully, finally and forever settle and release any and all
Settled Claims against the Piper Funds Inc. Releasees, known
or unknown, suspected or unsuspected, contingent or
non-contingent, whether or not concealed or hidden, which now
exist, may hereafter exist, or may heretofore have existed,
without regard to the subsequent discovery or existence of
such different or additional facts.
5. The Settling Class Members expressly intend that the releases
described herein shall release the Piper Funds Inc. Releasees
without regard to the identity of those particular Defendants
responsible for payment of the Settlement Amount.
6. In consideration of the payment of the Settlement Amount to be
made pursuant to this Settlement Agreement, the Settling Class
Members hereby covenant and agree not to sue Dorsey & Whitney
with respect to any claim arising out of, relating to,
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or in any way connected with any Settled Claim, or which if
Dorsey and Whitney were a Defendant Releasee, would constitute
a Settled Claim, as defined herein.
7. All releases described herein shall become
effective on the Effective Date.
K. The Court's Order Preliminarily Approving Settlement
As soon as practicable after execution of this Settlement
Agreement, Settlement Counsel shall apply jointly to the Court for an Order in
form and substance substantially identical to the proposed Order Preliminarily
Approving Settlement, substantially in the form attached hereto as Exhibit J
("Order of Preliminary Approval"), which shall specifically include provisions
which:
1. Preliminarily approve the settlement as embodied in
this Settlement Agreement;
2. Preliminarily approve the creation of the
Settlement Fund and the appointment of the Escrow
Agent;
3. Stay any obligation of the Defendants to answer
interrogatories, and to appear at any depositions in the
Litigation or the KPMG Lawsuit pending the Effective Date of
this Settlement Agreement. Following the Effective Date, said
persons may be deposed in the KPMG Lawsuit, but will not be
subject to interrogatories;
4. Approve the form of Notice of Class Action
Determination and Hearing On Proposed Settlement of
Class Action ("Class Notice") substantially in the
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form attached hereto as Exhibit B, for mailing to Account
Holders of Record in order to provide notice of the hearing
for final approval of the Settlement, and direct that Lead
Settlement Class Counsel mail or cause to be mailed such
Notice of Settlement Hearing to those Account Holders of
Record who can be identified through reasonable effort, such
mailing to be accomplished at least forty-five (45) days prior
to the date of hearing on approval of the Settlement;
5. Approve the form of Summary Notice of Class Action
Determination and Hearing on Proposed Settlement of
Class Action ("Summary Notice"), substantially in
the form attached hereto as Exhibit I, to be
published in order to provide notice of the hearing
for approval of the Settlement, and direct that
Lead Settlement Class Counsel cause such summary
notice to be published once in (i) the Minneapolis
Star Tribune, (ii) the St. Paul Pioneer Press, and
(iii) the national edition of the Wall Street
Journal no earlier than the date of the mailing
proscribed in paragraph XI(K)(4) above and at least
thirty (30) days prior to the date of hearing on
approval of the settlement;
6. Find that mailing and publication pursuant to
paragraphs XI(K)(4) and XI(K)(5) above constitute
the best notice practicable under the
circumstances, constitute due and sufficient notice
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of the matters set forth in said notices to all Persons
entitled to receive notice, and fully satisfy the requirements
of due process and of Rule 23, Federal Rules of Civil
Procedure;
7. Require any Settlement Class Member who desires to request
exclusion from the Settlement Class to so notify the Clerk of
the Court, Lead Settlement Class Counsel and Defendants'
Counsel in the manner set forth in the Class Notice, and to
provide the information required therein;
8. Schedule a hearing to be held by the Court (the
"Settlement Hearing") in order to determine: (i)
whether the settlement should be approved as fair,
reasonable, adequate and in the best interests of
the Settlement Class; (ii) whether a final judgment
should be entered as required by the Settlement
Agreement; and (iii) Fee and Expense Petitions,
including Lead Settlement Class Counsel's Fee and
Expense Petition;
9. Provide that any objections to the settlement or
any Fee and Expense Petition shall be heard, and
any papers submitted in support of said objection
shall be received and considered by the Court at
the Settlement Hearing (unless, in its discretion,
the Court shall direct otherwise), only if, on or
before a date to be specified in the Class Notice,
persons making objections file notice of their
intention to appear, and file copies of such papers
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they propose to submit, with the Clerk of the Court, and, on
or before such date, serve such papers upon Settlement
Counsel;
10. Approve the form of Settlement Loss Statement,
substantially in the form attached hereto as
Exhibit F, and direct that Lead Settlement Class
Counsel mail or cause to be mailed such Settlement
Loss Statement at the same time, in the same
manner, and to the same persons as provided in
paragraph XI(K)(4) above with respect to the Class
Notice;
11. Approve the Claim and Release Form, substantially in the form
attached hereto as Exhibit A, and provide that to claim their
share of the Proceeds of the Settlement Fund, Settling Class
Members shall file a Claim and Release Form in the manner
provided therein within such time as is allowed by the Court;
12. Provide that, if the Agreement is granted final
approval, all Settling Class Members, whether or
not they file a Claim and Release Form within the
time provided therefor, shall be barred from
asserting Settled Claims against any of the
Defendant Releasees, that all Settling Class
Members conclusively shall be deemed to have
released any and all such claims, and that all
Settling Class Members shall immediately dismiss
with prejudice any Settled Claim previously
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asserted in any proceeding other than the
Litigation, whether the form of the proceeding be
arbitration, litigation or any other form of
proceeding;
13. Provide that a Claim and Release Form filed by mail
shall be deemed to have been filed when postmarked
if mailed by first class mail, registered mail or
certified mail, postage prepaid, and addressed in
accordance with the instructions given in the Claim
and Release Forms and that all other Claim and
Release Forms shall be deemed to have been filed at
the time they are actually received by Settlement
Counsel or their designated agents;
14. Provide that the Settlement Hearing may, from time
to time and without further notice to Settling
Class Members, be continued or adjourned by Order
of the Court;
15. Provide that pending final determination of whether the
settlement contained in the Settlement Agreement shall be
approved, neither the Named Plaintiffs nor any other Settling
Class Member, either directly, representatively or in any
other capacity, shall continue, commence or prosecute the
Litigation; and
16. Provide that neither the Named Plaintiffs nor any
other Settlement Class Member, either directly,
representatively or in any other capacity, shall
continue, commence or prosecute to hearing or
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decision any litigation, or other proceeding against any
Defendant Releasee for recovery on any Settled Claim, until
(a) the Named Plaintiffs and/or any other Settlement Class
Member receives the notice described in Paragraph XI(K)(4),
(b) the Named Plaintiffs and/or any other Settlement Class
Member files a request for exclusion, and (c) the Court issues
an order granting the exclusion.
17. Provide that this Settlement Agreement and all
exhibits, documents, negotiations, and proceedings
relating to it shall not be used or offered by any
party or non-party for any purpose including,
without limitation, as evidence in any proceeding
in any forum, or as an admission of any of the
claims of the Litigation, except that the
Settlement Agreement or its exhibits may be used to
enforce the terms and conditions thereof against
the parties to the Settlement Agreement, and may be
disclosed by the Defendant Releasees for tax
purposes, insurance purposes, accounting purposes
and other purposes not inconsistent with the
purposes of this Settlement Agreement.
L. Judgment To Be Entered By the Court Approving the
Settlement
Upon approval by the Court of the settlement set forth in this Settlement
Agreement, final judgment shall be entered by the Court, pursuant to an Order
for Final Judgment, substantially in the form
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attached hereto as Exhibit C (and such companion order in the KPMG Lawsuit as
will give express effect to those provisions of the Settlement Agreement which
relate to the KPMG Lawsuit), which shall specifically include provisions which:
1. Approve the settlement set forth in this Settlement Agreement
as fair, reasonable, adequate and in the best interests of the
Settlement Class, and direct consummation of the settlement in
accordance with the terms and provisions of this Settlement
Agreement;
2. Approve the creation of the Settlement Fund and the
appointment of the Escrow Agent;
3. Fully and finally dismiss the Litigation with prejudice and on
the merits in favor of the Defendants and against all Settling
Class Members without costs (except as may be provided herein)
to any undersigned party as against any other;
4. Adjudge that all Settling Class Members, whether or not they
have submitted a Claim and Release Form, shall conclusively be
deemed to have released all claims, actions, causes of action,
rights or liabilities against the Defendant Releasees arising
out of, based upon or otherwise related to the Settled Claims;
5. Direct all Settling Class Members to immediately
dismiss with prejudice any and all claims which the
Settling Class Members, or any of them, had or have
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against the Defendant Releasees, or any of them, arising out
of, based upon, or otherwise related to, the Settled Claims.
6. Bar and permanently enjoin all Settling Class
Members from instituting, asserting or prosecuting,
either directly, representatively, derivatively, or
in any other capacity, any and all claims which the
Settling Class Members, or any of them, had or have
against the Defendant Releasees, or any of them,
arising out of, based upon, or otherwise related
to, the Settled Claims, whether in litigation,
arbitration or any other forum;
7. Bar and permanently enjoin all persons or entities
(including but not limited to, any corporation,
partnership, trustee, conservator, fiduciary, city,
municipality, county, state or other governmental
entity, or self-regulatory agency or organization)
from instituting, asserting or prosecuting any
action or proceeding of any kind against any of the
Defendant Releasees arising from or relating to the
Settled Claims on behalf of or derivative of the
rights of any Settling Class Members; provided,
however, that such bar shall not extend to the
enforcement of any criminal law against the
Defendant Releasees, nor will it extend to a
request by any government entity or self-regulatory
agency for prospective injunctive relief as to any
business practice on the part of any defendant.
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8. Protect the Defendant Releasees against further
litigation and potential liability arising out of
the Settling Class Members' prosecution of claims
against KPMG Peat Marwick and Potential Defendants,
and protect KPMG Peat Marwick and Potential
Defendants from any prejudice arising out of the
Settlement between the Settling Class Members and
the Defendant Releasees by providing that:
a. KPMG Peat Marwick and Potential Defendants are
barred from asserting in any forum (including but not
limited to any court or arbitration proceeding) any
claims against the Defendant Releasees for contribution,
indemnification or reimbursement, however denominated,
arising under federal or state law, including those
based in tort, contract or statute, or any other legal
theory, which claims: (1) arise from or relate to the
Settling
Class Members' investment in the Fund; or
(2) would constitute a Settled Claim, as
defined herein, if KPMG Peat Marwick or
such Potential Defendant were a Defendant
Releasee.
b. The Settling Class Members are barred from recovering
from KPMG Peat Marwick and Potential Defendants to the
extent of the greater of:
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(1) that proportion or percentage of liability to the
Settling Class Members equal to the proportion or
percentage of causal fault or casual
responsibility, if any, for which the Defendant
Releasees are hereafter at trial or otherwise
determined to be responsible; or
(2) the proportion or percentage of damages, if any,
which shall hereafter by trial or otherwise be
determined to be damages which KPMG Peat Marwick
or Potential Defendants would have been entitled
to recover from the Defendant Releasees as a
result of claims, if any, for contribution,
indemnification or reimbursement, however
denominated, arising under federal or state law,
including those based in tort, contract or
statute, or any other legal theory, which claims:
(a) arise from or relate to the Settling
Class Members' investment in the
Fund; or
(b) arise from or relate to any claim by the
Settling Class Members arising out of,
relating to, or in any way connected with
any Settled Claim, or which, if KPMG Peat
Marwick or the
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Potential Defendant were a Defendant
Releasee, would constitute a Settled Claim,
as defined herein.
c. Any judgment in favor of Settling Class Members against
KPMG Peat Marwick or Potential Defendants will be
reduced by a credit reflecting the limitations on
recovery set forth in paragraphs XI(I)(3) and XI(J)(3)
and
XI(L)(8)(b).
d. Except as provided herein, the Settling Class Members
preserve all claims against KPMG Peat Marwick and all
Persons other than the Defendant Releasees.
9. Approve Fee Awards and Expense Reimbursements, all
such Fee Awards and Expense Reimbursements to be
paid out of the Settlement Amount;
10. Order that no person or entity shall use or offer
the Settlement Agreement, its exhibits, documents
or the negotiations or proceedings relating
thereto, for any purpose including, without
limitation, as evidence in any proceeding in any
forum, or as an admission of the claims in the
Litigation, except to the extent permitted in
paragraphs XI(E)(1) and (2) and that the Settlement
Agreement may be used to enforce the terms and
conditions thereof against the parties to the
Settlement Agreement, and may be disclosed by Piper
Jaffray Companies Inc. and/or Piper Capital
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Management Incorporated to the Internal Revenue Service for
tax purposes.
11. Reserve jurisdiction over, without limitation: (i)
implementation of this settlement and any
distribution to Authorized Claimants, pursuant to
further orders of the Court; (ii) the Settlement
Fund and the Escrow Agent; (iii) the Litigation,
until the Effective Date and until each and every
act agreed to be performed by the undersigned
parties shall have been performed pursuant to this
Settlement Agreement, the Escrow Agreement, and the
Exhibits incorporated in this Settlement Agreement;
and (iv) all undersigned parties, and the members
of the Settlement Class, for the purpose of
enforcing and administering the Settlement
Agreement.
M. Indemnification Provisions
1. The Parties to this Settlement Agreement
contemplate that the Court's Order barring claims by KPMG Peat
Marwick and Potential Defendants against the Defendant
Releasees, as set forth more fully at paragraph XI(L)(8),
shall fully protect the Defendant Releasees against further
litigation and potential liability arising out of the Settling
Class Members' prosecution of claims against KPMG Peat Marwick
and/or Potential Defendants. However, in the event that the
Order barring claims by KPMG Peat Marwick and Potential
Defendants, set forth
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more fully at paragraph XI(L)(8), shall later become
ineffective or inapplicable, in whole or in part, as to any
claim or person encompassed therein, each Named Plaintiff and
each Settling Class Member agrees to, and shall defend and
indemnify each and every Defendant Releasee, in connection
with each such claim. Each Named Plaintiff and each Settling
Class Member agrees that no Defendant Releasee shall have any
obligation to appear or otherwise participate in the defense
of any such claim.
2. Each Settling Class Member's indemnity obligation,
described in Paragraph XI(M)(1) above, shall be
satisfied solely by the crediting against or
reducing of any judgment the Settlement Class, or
any member thereof, might obtain against KPMG Peat
Marwick and/or any Potential Defendant in such
amount as is determined, by trial or otherwise, to
be the amount due to KPMG and/or any Potential
Defendant from the Defendant Releasees for any of
the reasons set forth at Paragraphs XI(I)(3)(a) and
(b) and XI(J)(3)(a) and (b). This Indemnification
Agreement is intended to follow, and be in accord
with, the principles set forth in McDermott, Inc.
v. AmClyde --- U.S.---, 114 S.Ct. 1461 (1994);
Pierringer v. Hoger, 21 Wis.2d 182, 124 N.W.2d 106
(1963); and Frey v. Snelgrove, 269 N.W.2d 918
(Minn. 1978). Each Settling Class Member's
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indemnity obligation does not extend to any claim by KPMG Peat
Marwick against the Defendant Releasees for indemnity based
upon a written agreement or contract allegedly giving rise to
such indemnity obligation, unless KPMG Peat Marwick
contractual indemnity claim is based on any of the following
documents previously provided to Lead Settlement Class
Counsel: KPMG 06861 - KPMG 06863. Nothing herein shall be
construed to suggest that any documents, including those
identified above, create a right to indemnity. Except as set
forth above, this Indemnification Provision is further
specifically intended to not in any way release or impair any
Settling Class Members' claim against KPMG or any Potential
Defendant.
N. It is understood and agreed that any and all releases
described herein shall not become effective until the
Effective Date. If there is no Effective Date, or if the
Settlement Agreement is voided, canceled or terminated,
or does not become effective for any reason whatsoever,
then the releases, and all copies thereof, whether
executed or unexecuted, shall be null, void and of no
effect, and shall be destroyed by lead Settlement Class
Counsel.
O. This Settlement Agreement shall be deemed terminated and
canceled, and shall have no further force and effect
whatsoever, if:
1. There is no Effective Date;
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2. The Court's February 15, 1995, Order is revised or
materially modified, whether on appeal or
otherwise;
3. The Court denies the motion to enter an Order preliminarily
approving the settlement and directing that notice of the
settlement be given, substantially in the form provided in
Paragraph XI(K) and Exhibit J hereto, or if such an order is
entered, it is later reversed or materially modified, whether
on appeal or otherwise; or
4. The Court denies the motion for a final judgment as provided
in Paragraph XI(L) and Exhibit C hereto, or if such a final
judgment is entered, it is later reversed or materially
modified, whether on appeal or otherwise.
P. Notwithstanding the foregoing provisions concerning
termination, cancellation or other ineffectiveness of
this Settlement Agreement, the procedure for and the
allowance, disallowance or modification by the Court, or
on appeal, of (i) any applications by Settlement Class
Counsel, including Lead Settlement Class Counsel, for
attorneys' fees, costs and expenses, including the fees
of experts and consultants, or (ii) the distribution of
the Net Settlement Amount to Authorized Claimants, shall
not affect the effectiveness of the Settlement Agreement
or the finality of the Court's Order For Final Judgment
and Settlement set forth herein, or any other orders
entered pursuant to the Settlement Agreement, and any
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such allowance, disallowance or modification shall not constitute
grounds for the termination, cancellation, voiding or
ineffectiveness of this Settlement Agreement. In the event this
Settlement Agreement is voided, terminated or canceled, or fails to
become effective for any reason whatsoever, then each Settlement
Party shall be returned to the position in the Litigation which that
Settlement Party held immediately prior to the date of execution of
the February 14, 1995, Memorandum of Understanding, and the entry of
the February 15, 1995, and March 3, 1995, Stipulated Orders, shall
cooperate to procure all orders needed to effectuate that return,
and shall proceed in all respects as if this Settlement Agreement,
its exhibits and any related agreements or orders had never been
executed.
Q. All of the exhibits attached hereto are incorporated by
this reference as if fully set forth herein.
R. This Settlement Agreement may be amended or modified only by a
written instrument signed by or on behalf of all undersigned
Settlement Parties or their successors in interest and approved by
the Court.
S. The waiver by one Settlement Party of any breach of the Settlement
Agreement by any other Settlement Party shall not be deemed a waiver
by that Settlement Party of any other prior or subsequent breach of
the Settlement Agreement or by any other undersigned Settlement
Party of that or any other prior or subsequent breach of the
Settlement Agreement.
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T. This Settlement Agreement and its exhibits constitute the
entire agreement of the undersigned Settlement Parties.
All prior settlement discussions and negotiations are
merged into and reflected in this Settlement Agreement.
Without limitation, the Memorandum of Understanding,
dated February 14, 1995, is extinguished. No
representations, warranties or inducements, written or
oral, have been made to any Settlement Party concerning
this Settlement Agreement or its exhibits other than the
representations, warranties and covenants contained and
memorialized in such documents.
U. Lead Settlement Class Counsel, on behalf of the
Settlement Class Members, hereby represent and warrant
that they are expressly authorized by the Named
Plaintiffs to take all appropriate action required or
permitted to be taken by the Settlement Class Members
pursuant to the Settlement Agreement to effectuate its
terms and also are expressly authorized to enter into, on
behalf of the Settlement Class Members, any modifications
or amendments to this Settlement Agreement which they
deem appropriate.
V. This Settlement Agreement will be executed on behalf of the
Settlement Class Members by Lead Settlement Class Counsel, and on
behalf of Defendants by Counsel for the Defendants. All counsel
executing this Settlement Agreement hereby represent and warrant
that they are authorized and empowered to execute this Settlement
Agreement on behalf of their stated client(s) and that
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the signature of such counsel is intended to and does legally bind
the stated client(s) of such counsel.
W. Piper Jaffray Companies Inc., Piper Funds Inc., Piper
Jaffray Inc., and Piper Capital Management Incorporated
each covenant, warrant and represent that:
1. each of them is a corporation duly organized,
validly existing and in good standing under the
laws of their respective states of incorporation;
2. each of them has full corporate power and authority
to enter into this Settlement Agreement and all
necessary corporate approval and authority has been
obtained; and
3. neither this Agreement, nor any obligation, duty or
requirement hereunder, if performed by said parties
as provided herein, violate, or would cause a
default of, any agreement, contract, or indenture
which any of said Piper Jaffray Companies, Inc.,
Piper Jaffray Inc., Piper Capital Management and
Piper Funds, Inc. is a party or by which any of
said Piper Jaffray Companies, Inc. Piper Jaffray
Inc., Piper Capital Management and Piper Funds,
Inc. is bound.
X. Piper Funds Inc. covenants, warrants and represents that
it has filed the complaints consolidated in the
Litigation and the Answer to the Amended Consolidated
Complaint with the Securities and Exchange Commission and
will file this Settlement Agreement on or before the
hearing for preliminary approval.
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Y. This Settlement Agreement, and its exhibits, shall be
governed by the laws of the State of Minnesota. The
Settlement Parties submit themselves to the jurisdiction
of the United States District Court for the District of
Minnesota for the enforcement, interpretation or
construction of the Settlement Agreement and its
exhibits, and all other matters regarding or relating to
them.
Z. The Named Plaintiffs warrant that no portion of the
Settled Claims, or any of them, have been assigned to
another.
AA. This Settlement Agreement may be signed in counterparts without each
Settlement Party signing the same, and each such counterpart shall
constitute one and the same agreement, provided, however, that the
Settlement Agreement shall not be binding until it has been signed
by everyone for whom a signature line has been provided.
AB. This Settlement Agreement shall be binding upon and inure
to the benefit of the successors and assigns of the
undersigned Settlement Parties.
AC. All Settlement Parties shall use their best efforts to
perform all terms of this Settlement Agreement.
IN WITNESS WHEREOF, the Settlement Parties hereto have caused this
Settlement Agreement to be executed by their duly authorized attorneys as of the
date set forth above.
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------------------------------
Richard A. Lockridge (#64117)
Gregg M. Fishbein (#202009)
SCHATZ PAQUIN LOCKRIDGE
GRINDAL & HOLSTEIN P.L.L.P.
2200 Washington Square Building
100 Washington Avenue South
Minneapolis, MN 55401
Telephone: 612-339-6900
Co-Lead Counsel for Plaintiffs
------------------------------
Vernon J. Vander Weide (#112173)
Marianne E. Durkin (#25008)
HEAD, SEIFERT & VANDER WEIDE, P.A.
One Financial Plaza, Suite 2400
120 South Sixth Street
Minneapolis, MN 55402
Telephone: 612-339-1601
Co-Lead Counsel for Plaintiffs
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------------------------------
George F. McGunnigle (#70701)
William L. Greene (#198730)
LEONARD, STREET AND DEINARD
Suite 2300
150 South Fifth Street
Minneapolis, MN 55402
Telephone: 612-335-1500
Counsel for Defendants Piper
Capital Management Incorporated,
Piper Jaffray Inc., Piper
Jaffray Companies Inc., William
H. Ellis and Edward J. Kohler
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------------------------------
Theodore Altman
Michael Reuben
GORDON ALTMAN BUTOWSKY WEITZEN
SHALOV & WEIN
114 West 47 Street, 20th Floor
New York, NY 10036
Telephone: 212-626-0800
Counsel for Defendant Piper
Funds, Inc.
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