settlement agreement...2 1.3 “agreement execution date means the date on which the final signature...

SETTLEMENT AGREEMENT

This SETTLEMENT AGREEMENT (“Settlement Agreement”) is entered into by and among (a) Plaintiffs (as defined in Paragraph 1.24 below) in the litigation titled Johnson, et al., vs. Couturier, et al., No. 2:05-cv-02046 RRB GGH (E.D. Cal.) and Stanton vs. Couturier, No. 2:07-cv-01208 WBS-JFM (E.D. Cal.) (collectively, the “Action”), for themselves and on behalf of the ESOP (as defined in Paragraph 1.12 below), (b) the Defendants (as defined in Paragraph 1.7 below), (c) The Employee Ownership Holding Company, Inc., a Delaware corporation, (d) The Employee Ownership Holding Company Employee Stock Ownership Plan, (e) RSUI Indemnity Company (“RSUI”), and (f) Continental Casualty Company (“CNA”), in consideration of the promises, covenants and agreements herein described and for other good and valuable consideration acknowledged by each of them to be satisfactory and adequate.

WHEREAS, Plaintiffs brought the Action asserting claims of breach of fiduciary duty

under ERISA and under applicable state law against Defendants; and WHEREAS, the Parties (as defined in Paragraph 1.22 below) have voluntarily

participated in mediation with the Honorable Kimberly J. Mueller. As a result of that mediation, the Parties have reached the settlement memorialized in this Settlement Agreement.

NOW, THEREFORE, without any admission or concession on the part of the Plaintiffs

of any lack of merit of the Action, and without any admission or concession on the part of Defendants as to the merit of the Action, it is hereby STIPULATED AND AGREED, by and among the Parties, through their respective attorneys, subject to approval of the Court pursuant to the Federal Rules of Civil Procedure, in consideration of the benefits flowing to the Parties from the Settlement Agreement, that all Released Claims (as defined in Paragraph 1.29 below) shall be compromised, settled, released and dismissed with prejudice, upon and subject to the following terms and conditions: 1. Definitions

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As used in this Settlement Agreement, italicized and capitalized terms and phrases not otherwise defined herein have the meanings provided below:

1.1 “Action” has the meaning set forth in the first paragraph of this Settlement Agreement.

1.2 “Affected Participants” means (a) all Persons (as defined in Paragraph 1.23

below) who are current participants in the ESOP (as defined in Paragraph 1.12 below); (b) all Persons who are beneficiaries of a current participant in the ESOP; (c) all Persons who were participants in the ESOP from and after October 2, 1996 including any such participant who previously claimed or received benefits; and (d) all Persons who are or were beneficiaires of a participant in the ESOP at any time from and after October 2, 1996, including any such beneficiary who previously claimed or received benefits.

Case 2:05-cv-02046-RRB-GGH Document 728-3 Filed 01/05/2010 of 51

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1.3 “Agreement Execution Date” means the date on which the final signature is affixed to this Settlement Agreement.

1.4 “Bar Order” means an order of the Court (as defined in Paragraph 1.6 below), to be contained in the Judgment (as defined in Paragraph 1.18 below), barring the filing or pursuit of certain claims. The terms of the Bar Order are set forth in Exhibit A hereto.

1.5 “Complaints” means each of: the Consolidated Amended Complaint (dkt. 150) filed in Johnson, et al., vs. Couturier, et al., No. 2:05-cv-02046 RRB GGH (E.D. Cal.) and the Complaint (dkt. 1) filed in Stanton vs. Couturier, No. 2:07-cv-01208 WBS-JFM (E.D. Cal.).

1.6 “Court” means the United States District Court for the Eastern District of California.

1.7 “Defendants” means the following Persons (as defined in Paragraph 1.23 below): Clair R. Couturier, Jr. (“CRC”), David R. Johanson (“DRJ”), Robert E. Eddy (“REE”), Johanson Berenson LLP (“JBLLP”), and Pensco, Inc. a New Hampshire chartered trust company (“Pensco”).

1.8 “Defendants’ Released Claims” shall have the meaning set forth in Paragraph 4. 1.9 “Defendant Releasees” means each Defendant other than REE, and their

respective Representatives (as defined in Paragraph 1.31 below), successors, assigns, parents, subsidiaries, directors, officers, attorneys, underwriters, insurers, agents, heirs, spouses and children.

1.10 “DOL Action” means Hilda Solis, Secretary of Labor v. Couturier, et al., Case No. 2:08-cv-02732 RRB-GGH (E.D. Cal.).

1.11 “ERISA” means the Employee Retirement Income Security Act of 1974, as amended, including all regulations promulgated thereunder, and court decisions interpreting such Act or regulations.

1.12 “ESOP” means The Employee Ownership Holding Company Employee Stock Ownership Plan and Trust, and any of its predecessor plans, including the Noll Manufacturing Company Employee Stock Ownership Plan and Trust.

1.13 “ESOP Litigation Counsel” means Bullivant Houser Bailey. 1.14 “Final” means, with respect to any judicial ruling, order or judgment, that the

ruling, order or judgment has been entered on the Court’s docket, provided that if a timely objection to such ruling, order or judgment has been filed by a Party, such ruling, order or judgment shall not be Final until the period for any appeals, petitions, motions for reconsideration, rehearing, or certiorari or any other proceedings for review (“Review Proceeding”) has expired without the initiation of a Review Proceeding, or, if a Review Proceeding has been timely initiated, that there has occurred a full and final disposition of any


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such Review Proceeding without a reversal or any material modification, including the exhaustion of proceedings in any remand and/or subsequent appeal after remand.

1.15 “Financial Institution” shall have the meaning set forth in Paragraph 7.1.

1.16 “Insurers” means CNA and RSUI.

1.17 “Inventory” means an inventory of the contents of the Palm Desert Property provided by CRC to TEOHC as described in Paragraph 5.2 hereof.

1.18 “Judgment” shall mean the Court’s final judgment approving the Settlement, which shall contain the material terms set forth in Exhibit A hereto. A proposed form of the Judgment is attached hereto as Exhibit A.

1.19 “Palm Desert Property” means the real property described on Exhibit B hereto, together with the contents thereof set forth on the Inventory.

1.20 “Palm Desert Property Return Claim” means the claim of CRC for a federal income tax benefit resulting from his return to TEOHC of the Palm Desert Property pursuant to Paragraph 3.4 hereof.

1.21 “Palm Desert Property Return Claim Determination Date” shall have the meaning set forth in Paragraph 3.5 hereof.

1.22 “Parties” means the Plaintiffs, the Defendants, TEOHC (as defined in Paragraph 1.34 below), the ESOP and the Insurers. "Party” means any one of these Parties.

1.23 “Person” means an individual, partnership, corporation, governmental entity or any other form of entity or organization. "Persons" means more than one such Person.

1.24 “Plaintiffs” means the Plaintiffs Gregory Johnson, Darleen Stanton, Kelly Morrell, William Rodwell, and Edward Rangell. "Plaintiff” means any one of these Plaintiffs.

1.25 “Plaintiffs’ Counsel” means (a) Keller Rohrback P.L.C. on behalf of Plaintiffs

Johnson, Rangell, Stanton and Morrell, and (b) Devine, Markovits & Snyder, LLP, Shayne Nichols LLC, and the Righetti Law Firm on behalf of Plaintiff Rodwell.

1.26 “Plan of Allocation” means the plan of allocation to be submitted by Plaintiffs to

the Court for its approval.

1.27 “Settlement Fund” means a qualified settlement fund established by Plaintiffs’ Counsel at the Financial Institution.

1.28 “Real Estate Protocol” means a protocol established by separate agreement between TEOHC Counsel (as defined in Paragraph 1.35 below) and Plaintiffs’ Counsel, with respect to procedures to be followed to effectuate the sale of the Palm Desert Property.


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1.29 “Released Claims” shall have the meaning set forth in Paragraph 4.

1.30 “Releases” means the releases set forth in Paragraph 4.

1.31 “Representatives” means, with respect to any Party: such Party’s current and

past partners, attorneys, trustees, fiduciaries, administrators, directors, officers, affiliates and employees.

1.32 “Settlement” means the settlement to be consummated under this Settlement Agreement.

1.33 “Successor-In-Interest” means a Person’s estate, legal representatives, heirs, successors or assigns, including successors or assigns that result from corporate mergers or other structural changes.

1.34 “TEOHC” means The Employee Ownership Holding Company, Inc., a Delaware

Corporation, and all of its predecessors, subsidiaries and affiliates, including TEOHC California, Inc., formerly known as Noll Manufacturing Company, Inc., and TEOHC Washington, Inc., formerly known as N & NW Manufacturing Holding Company, Inc.

1.35 “TEOHC Counsel” means Orrick, Herrington & Sutcliffe LLP. 2. Court Approval of the Settlement

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2.1 Preliminary Approval

. The Parties shall promptly move the Court for entry of an order preliminary approving the Settlement, which (a) provides for notice of the Settlement to be provided to the Affected Participants, the form of which notice (the “Notice”) is attached hereto as Exhibit C; (b) finds that the Notice fairly and adequately: (i) describes generally the terms and effect of this Settlement Agreement, the effect of the Bar Order and the effect of the injunction barring claims by Affected Participants, TEOHC or the ESOP against each of the Defendants, the ESOP, TEOHC, the Insurers, and the respective Representatives of each of the Defendants, the ESOP, TEOHC, and the Insurers, which Bar Order and injunction are set forth in the form of Judgment attached hereto as Exhibit A; (ii) gives notice of the time and place of the final fairness hearing; and (iii) describes how the recipients of the Notice may object to entry of the Judgment; (c) finds that Plaintiffs’ proposed manner of communicating the Notice to the persons and entities to whom notice will be given, consisting of mailing thereof to the last known address of each such person as reflected in the records of the ESOP, and the publication of such notice on a website identified therein, is the best notice practicable under the circumstances; and (d) formally determining that this global resolution comes within the provisions of the U.S. Department of Labor’s (the “DOL’s”) Prohibited Transaction Exemption (“PTE”) 79-15.

2.2 Final Approval. Attached hereto as Exhibit A is the proposed form of the Judgment which the Parties shall request the Court enter at the conclusion of its final fairness hearing. The Parties shall cooperate in good faith, including taking all steps and efforts contemplated by this Settlement Agreement and any other steps or efforts that may become


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necessary by order of the Court (unless such order materially modifies the terms of this Settlement Agreement), to carry out this Settlement Agreement. Subject to the simultaneous effectiveness of the settlement of the DOL Action, the Settlement shall become effective upon the Court’s entry of the Judgment, and the Judgment becoming Final. 3. Settlement Consideration

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Defendants shall cause to be paid the following settlement consideration: 3.1 On behalf of DRJ and JBLLP, CNA agrees to deposit into the Settlement Fund the

sum of $1,200,000. Such deposit shall be made no later than ten business days after the Court’s entry of the Judgment.

3.2 On behalf of CRC and REE, RSUI agrees to deposit into the Settlement Fund the

sum of $3,850,000. Such deposit shall be made no later than ten business days after the Court’s entry of the Judgment.

3.3 In settlement of the dispute regarding the valuation of certain amounts paid with respect to certain redemption transactions, CRC shall cause his Individual Retirement Account to deposit into the Settlement Fund the sum of $3,750,000 no later than two business days after the entry of the Judgment by the Court.

3.4 The Parties having agreed that, as of the time of this Settlement, CRC does not have an unrestricted right to the Palm Desert Property, CRC shall transfer to TEOHC the Palm Desert Property on or before December 31, 2009 (the "Transfer"). With respect to the real property described on Exhibit B hereto, such Transfer shall be by grant deed, which shall convey good and marketable title, free and clear of all liens, claims, encumbrances, except for taxes accruing from and after the date of the Transfer and except for any liability arising under this Settlement Agreement. Such grant deed shall be accompanied by a bill of sale with respect to the contents of the Palm Desert Property described on the Inventory. Vickie Couturier shall execute such grant deed, bill of sale, and other documents to effectuate the Transfer to the extent necessary under applicable law. TEOHC shall pay any and all real estate transfer taxes, personal property taxes and fees relating to the Transfer and TEOHC shall obtain a policy of title insurance, issued by a nationally-recognized titled insurer reasonably acceptable to TEOHC, which shall insure TEOHC’s title to such real property, free and clear of all liens, claims, encumbrances, except for taxes accruing from and after the date of the Transfer.

3.4.1 From and after the date of the Transfer, all responsibility for protecting and maintaining the Palm Desert Property and the risk of loss to the Palm Desert Property shall be borne by TEOHC, and TEOHC shall insure the Palm Desert Property, at a minimum, against all the risks and at the levels of coverage in the insurance maintained by CRC in effect immediately prior to the Transfer. TEOHC agrees to fully indemnify CRC for all loss or damage to the Palm Desert Property arising from and after the Transfer of the Palm Desert Property and before the Judgment becomes Final, and to fully indemnify, hold harmless and defend CRC from any and all claims relating to the Palm Desert Property, arising from and after the Transfer of the Palm Desert Property and before the Judgment becomes Final. In the


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event of loss or damage to the Palm Desert Property, if insurance has not been obtained by TEOHC or insurance obtained by TEOHC is insufficient to cover the full value of all loss or damage to the Palm Desert Property, then TEOHC shall deposit in the Settlement Fund an amount of money constituting the difference between the full value of all loss or damage to the Palm Desert Property and any insurance proceeds recovered by TEOHC and deposited in the Settlement Fund.

3.4.2 The Palm Desert Property shall be held by TEOHC subject to the terms of

the Real Estate Protocol and this Settlement Agreement. The terms of the Real Estate Protocol shall not be inconsistent with the terms of this Settlement Agreement. Immediately upon the Transfer, TEOHC may contract to list the Palm Desert Property with a licensed real estate broker pursuant to the terms of the Real Estate Protocol and this Settlement Agreement, and TEOHC may immediately begin to market the Palm Desert Property. TEOHC may enter into a contract for sale of the Palm Desert Property at any time after the Transfer and may thereafter transfer title to the Palm Desert Property, consistent with the terms of the Real Estate Protocol and this Settlement Agreement, notwithstanding that Preliminary Approval (pursuant to Paragraph 2.1) or Final Approval (pursuant to Paragraph 2.2) of the Settlement has not taken place, or the Judgment has not been entered by the Court or has not become Final. It is understood and agreed that TEOHC’s right and ability to sell the Palm Desert Property is not contingent on Preliminary Approval or Final Approval of the Settlement, or on entry of the Judgment, or on the Judgment becoming Final, provided that prior to the entry of the Judgment and the Judgment becoming Final, TEOHC shall not sell the Palm Desert Property, or enter into a contract to sell the Palm Desert Property, at a gross sales price less than $5.5 million and TEOHC shall not obligate itself to pay a real estate commission in excess of 5% of the gross sales price of the Palm Desert Property. Proceeds of the sale of the Palm Desert Property (net of commissions and other costs of sale) and, in the event of loss or damage to the Palm Desert Property, proceeds of any insurance recovered by TEOHC (other than amounts expended to repair the Palm Desert Property), shall be deposited by TEOHC into the Settlement Fund. By her execution hereof, Vickie Couturier consents to the provisions of this Paragraph 3.4 and agrees to be bound thereby.

3.5 The Transfer of the Palm Desert Property is intended to constitute a return by CRC of property that was transferred to him as compensation in a fully taxable transaction by TEOHC for all purposes, including Internal Revenue Code § 1341. The amount of any tax benefit actually realized by CRC resulting from the Palm Desert Property Return Claim shall be deposited to the Settlement Fund in accordance with Section 3.7 hereof, but shall not be distributed until the “Palm Desert Property Return Claim Determination Date” has occurred. The Palm Desert Property Return Claim Determination Date shall be the earliest date on which any of the following shall occur:

3.5.1 The statute of limitations provided for in I.R.C. § 6501(a) has expired with respect to CRC’s tax return that includes the Palm Desert Property Return Claim, without the issuance by the Internal Revenue Service (“IRS”) of a statutory notice of deficiency (provided that neither CRC nor any of his agents shall provide the IRS with an extension of such statute of limitations without the prior written consent of Plaintiffs’ Counsel);


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3.5.2 If a statutory notice of deficiency is issued by the IRS, or if the IRS shall

commence an audit of CRC’s return that includes the Palm Desert Property Return Claim, such notice of deficiency or audit has been finally resolved, which shall mean that (a) CRC and the IRS have entered into a final agreement resolving the Palm Desert Property Return Claim (provided that CRC shall not enter into such an agreement without the prior written consent of Plaintiffs’ Counsel); or (b) all administrative and judicial proceedings to resolve such notice of deficiency or audit, including appeals, have been exhausted;

3.5.3 If litigation has been commenced with respect to the Palm Desert

Property Return Claim, a judgment has been entered in such litigation and is final or CRC and the IRS have entered into a final agreement resolving the litigation (provided that CRC shall not enter into such an agreement without the prior written consent of Plaintiffs’ Counsel).

By her execution hereof, Vickie Couturier consents to the provisions of this Paragraph 3.5 and agrees to be bound thereby.

3.6 Upon the occurrence of the Palm Desert Property Return Claim Determination

Date, all amounts deposited into the Settlement Fund by CRC pursuant to Paragraph 3.7 hereof shall be distributed in accordance with the provisions of Section 8 hereof, provided that if it shall be determined pursuant to any statutory notice of deficiency issued by the IRS or any audit commenced by the IRS that CRC is liable to the IRS for any portion of any tax benefit as described in Paragraph 3.7 with respect to the Palm Desert Property Return Claim and deposited into the Settlement Fund, and such determination is embodied in a judgment which has become final or in an agreement between CRC and the IRS and approved in advance in writing by Plaintiffs’ Counsel, then the amount of such tax benefit which CRC is obligated to pay to the IRS, along with interest actually earned on such amount in the Settlement Fund (net of taxes owing or paid with respect to such interest) shall be returned to CRC from the Settlement Fund prior to any other distribution from the Settlement Fund.


3.7 The amount of the tax benefit actually realized by CRC resulting from the return

of the Palm Desert Property shall equal the difference between (a) the amount of federal income tax that would be owed for the taxable year computed without regard to the return of the Palm Desert Property, and (b) the amount of federal income tax owed for the taxable year after giving effect to the return of the Palm Desert Property including the computation provided for in Internal Revenue Code § 1341 with respect to the return of the Palm Desert Property. Provided that the Judgment has been entered, CRC shall deposit the amount of the tax benefit to the Settlement Fund as follows:

3.7.1 To the extent such tax benefit consists of a reduction of tax otherwise required to be paid in connection with CRC’s return for such taxable year, the amount of such reduction shall be deposited by CRC into the Settlement Fund within ten (10) days after the filing of a federal income tax return that includes the Palm Desert Property Return Claim; and


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3.7.2 To the extent that such tax benefit consists of a refund to CRC of tax previously paid or deposited or deemed paid or deposited, or the application of such a refund to unrelated tax liability of CRC, the amount of such refund shall be deposited by CRC into the Settlement Fund within ten (10) days after receipt of said refund by CRC or within 10 days from the time that CRC is notified that said refund has been applied against an unrelated tax liability. By her execution hereof, Vickie Couturier consents to the provisions of this Paragraph 3.7 and agrees to be bound thereby.

4. Releases

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Effective upon the Settlement becoming effective (as described in the last sentence of Paragraph 2.2 above), (a) each Plaintiff, the ESOP and TEOHC absolutely and unconditionally releases and forever discharges each of the Defendant Releasees, the ESOP, TEOHC, and the Insurers, and the respective Representatives of each of the Defendant Releasees, the ESOP, TEOHC, and the Insurers, from all claims of any nature whatsoever (including claims for any and all losses, damages, unjust enrichment, attorneys’ fees, disgorgement of fees, litigation costs, injunction, declaration, contribution, indemnification or any other type or nature of legal or equitable relief), whether accrued or not, whether known, unknown, or unsuspected, in law or equity, other than claims arising under this Settlement Agreement or under the Judgment (“Released Claims”); (b) each Plaintiff and TEOHC absolutely and unconditionally releases and forever discharges REE and his Representatives from all Released Claims; and (c) each of the Defendants absolutely and unconditionally releases and forever discharges each of the Plaintiffs, the ESOP, and TEOHC, and the respective Representatives of each of the Plaintiffs, the ESOP, and TEOHC, from all claims of any nature whatsoever (including claims for any and all losses, damages, unjust enrichment, attorneys’ fees, disgorgement of fees, litigation costs, injunction, declaration, contribution, indemnification or any other type or nature of legal or equitable relief), whether accrued or not, whether known, unknown, or unsuspected, in law or equity, other than claims arising under this Settlement Agreement or under the Judgment (“Defendants’ Released Claims”). To further effectuate the foregoing releases, it is acknowledged that the Judgment shall provide for the dismissal with prejudice of the Actions and shall include the Bar Order. As a condition of the releases of TEOHC by CRC, it is understood and agreed that the TEOHC note in the amount of $1,534,248 that is being held in CRC's Pensco IRA (plus any accrued, unpaid interest on said note), shall be cancelled by TEOHC and will not be paid by TEOHC, and said note shall not be distributed to CRC from the Pensco IRA or any successor IRA and no taxable distribution to CRC shall be reported by Pensco or its successor relating to said note. With respect to the Released Claims and the Defendants’ Released Claims, it is the intention of the Parties to waive to the fullest extent of the law: (a) the provisions, rights and benefits of Section 1542 of the California Civil Code, which provides that “A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor”; and (b) the provisions, rights and benefits of any similar statute or common law of any other jurisdiction that may be, or may be asserted to be, applicable.


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5. Covenants

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The Parties covenant and agree as follows:

5.1 CRC Tax Filing. 5.1.1 Subject to the provisions of Sections , 5.1.2 and 5.1.3, CRC shall take the following actions:

5.1.1 Provided that Plaintiffs’ Counsel provides a written opinion from a

qualified independent tax professional reasonably acceptable to CRC, at no expense to CRC, that the Palm Desert Property Return Claim is supported by either (i) “substantial authority” or (ii) “reasonable basis” and “adequate disclosure” within the meaning of Internal Revenue Code Section 6662(d)(2), CRC will include the Palm Desert Property Return Claim on his federal income tax return for the taxable year pertaining to the transfer to TEOHC of the Palm Desert Property pursuant to Paragraph 3.4 hereof. Such return shall state that there is a reasonable basis for the position taken with respect to the Palm Desert Property Return Claim, and shall include disclosure of the facts and law relevant to such position.

5.1.2 CRC shall cause his federal income tax return for the year in which the

return of the Palm Desert Property under the Settlement occurs to be timely filed (without extension, unless Plaintiffs’ Counsel shall otherwise agree in writing). Such return, and any amendment thereto, will be prepared by a qualified tax professional chosen by CRC and reasonably acceptable to Plaintiffs’ Counsel and will be made available to Plaintiffs’ Counsel (under an appropriate confidentiality agreement) at least twenty (20) days prior to the filing thereof. CRC will make available to such qualified tax professional and to Plaintiffs’ Counsel (under an appropriate confidentiality agreement) his prior years’ tax returns and associated documents that reasonably relate to the Palm Desert Property Return Claim. CRC shall instruct the qualified tax professional who is preparing the return to consider in good faith any suggestions made by Plaintiffs’ Counsel with respect to supporting information to be included in the return with respect to the Palm Desert Property Return Claim, and to incorporate such suggestions unless such qualified tax professional shall in good faith conclude that such suggestions are contrary to applicable law or carry with them a material risk of an adverse tax consequence for CRC. CRC will grant to one or more qualified tax professionals chosen by CRC and reasonably acceptable to Plaintiffs’ Counsel an IRS power of attorney and will agree not to revoke said power(s) of attorney prior to the Palm Desert Property Return Claim Determination Date, and will instruct said qualified tax professional(s) to provide Plaintiffs’ Counsel (under an appropriate confidentiality agreement) with copies of all IRS notices and other communications relating to federal income tax return that includes the Palm Desert Property Return Claim.

5.1.3 CRC will diligently and in good faith pursue the Palm Desert Property

Return Claim, including by timely and diligently responding to all IRS communications, administrative or judicial process with respect to the Palm Desert Property Return Claim. To the extent that any action reasonably necessary to comply with the preceding sentence requires CRC to incur any material expense, he shall notify Plaintiffs’ Counsel in advance of the incurrence thereof, and, if Plaintiffs’ Counsel approve such expense, such expense shall be paid by the Settlement Fund. If Plaintiffs’ Counsel decline to approve such expense, CRC shall not be obligated to take the action. If CRC desires to retain one or more professionals to comply with


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the first sentence of this Paragraph, and requests the Settlement Fund to pay the fees and expenses thereof, such professional(s) shall be chosen by CRC from a list of at least three candidates proposed by Plaintiffs’ Counsel (provided that if none of the persons proposed by Plaintiffs’ Counsel is reasonably acceptable to CRC, Plaintiffs’ Counsel shall propose additional persons until a person reasonably acceptable to CRC is identified). CRC agrees to reasonably coordinate with Plaintiffs’ Counsel in the response to any IRS communication or audit, provided that Plaintiffs’ Counsel’s participation will be limited to the Palm Desert Property Return Claim and will not include any other aspects of CRC’s tax reporting or obligations. If the IRS proposes adjustments to the tax return that includes the Palm Desert Property Return Claim, CRC shall promptly notify Plaintiffs’ Counsel. In such event, or if the IRS fails to timely issue any refund due CRC with respect to the subject tax year, CRC will adopt Plaintiffs’ Counsel’s recommendations regarding how to proceed, including with respect to (1) meeting with the IRS to discuss the proposed adjustments, (2) providing the IRS with an extension of the statute of limitations for the subject tax year, (3) filing a Petition with the United States Tax Court, or an action in the United States District Court or Court of Claims, (4) agreeing to a settlement with the IRS prior to the issuance of a statutory notice of deficiency, (5) filing a refund claim with the IRS, (6) requesting a meeting with the IRS Appeals Office in an attempt to settle the matter without litigation, or (7) any other administrative or judicial action that Plaintiffs’ Counsel deem appropriate to preserve the positions taken on the subject tax return with respect to the Palm Desert Property Return Claim; provided however that CRC will not be obligated to accept any such recommendation if (i) he in good faith concludes, based on advice received from a qualified tax professional, that it is contrary to applicable law or that such recommendation carries with it a material risk of an adverse tax consequence for CRC, or (ii) following such recommendation would require CRC to incur any material expense which Plaintiffs’ Counsel have not authorized be paid from the Settlement Fund.


5.2 Inventory; Condition of Palm Desert Property; CRC Occupancy of Palm Desert Property

. CRC has provided to TEOHC Counsel an inventory of the contents of the Palm Desert Property (the “Inventory”). CRC hereby represents and warrants that (a) the Inventory reflects all material contents of the Palm Desert Property as of the date the Palm Desert Property was purchased by TEOHC for the benefit of CRC, except for contents that have been replaced by property of equal or greater value (which replacement property is reflected on the Inventory), and except for items of inconsequential value disposed of in the ordinary course of CRC’s occupancy of the Palm Desert Property; (b) all material additions to the contents of the Palm Desert Property made during the period from the purchase of the Palm Desert Property by TEOHC for the benefit of CRC through the date of the Inventory which were paid for by TEOHC and for which TEOHC was not reimbursed by CRC; and (c) on or about December 15, 2009, CRC and Vickie Couturier vacated the Palm Desert Property and have left in place in the Palm Desert Property all contents reflected in the Inventory. CRC shall pay all expenses of the Palm Desert Property, including, without limitation, utilities, maintenance, pool service, landscaping, association fees, repairs, and operating expenses, and real estate taxes, accrued or accruing through December 15, 2009, and TEOHC shall be responsible for all such expenses from and after December 15, 2009.


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By her execution hereof, Vickie Couturier consents to the provisions of this Paragraph 5.2 and agrees to be bound thereby. 6. No Admission of Liability

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The Parties understand and agree that this Settlement Agreement embodies a compromise settlement of disputed claims, and that nothing in this Settlement Agreement, including the furnishing of consideration for this Settlement Agreement, shall be deemed to constitute any finding of wrongdoing by any of the Defendants. Further, Plaintiffs, while believing that all Claims brought in the Action have merit, have concluded that the terms of this Settlement Agreement are fair and reasonable given, among other things, the inherent risks, difficulties and delays in complex litigation such as this. 7.

The Settlement Fund

7.1 There shall be establish at a federally-insured financial institution (the “Financial Institution”) designated by Keller Rohrback, P.L.C. a settlement fund account (the “Settlement Fund”) which, along with net earnings thereon, shall be considered a common fund created as a result of the Action. The Financial Institution shall make distributions from the Settlement Fund only in accordance with this Settlement Agreement. For the avoidance of doubt, the Financial Institution shall be instructed that, absent a Court order, no funds are to be paid or withdrawn from the Settlement Fund except pursuant to Paragraphs 7.2 and 8.1 of this Settlement Agreement (and the Paragraphs of this Settlement Agreement explicitly cross-referenced therein) or, upon termination of this Settlement Agreement, pursuant to Paragraph 9 of this Settlement Agreement. Plaintiffs’ Counsel shall promptly notify Defendants’ Counsel of the date of the establishment of the Settlement Fund, shall confirm the identity of the Financial Institution including any information, including but not limited to wiring instructions, needed to make the deposits required by Paragraph 3.

7.2 The funds on deposit in the Settlement Fund shall be invested only in United States Treasury securities and/or securities of United States agencies backed by the full faith and credit of the United States Treasury, and mutual funds or money market accounts that invest exclusively in the foregoing securities. The Settlement Fund shall be structured and managed to qualify as a “qualified settlement fund” described in the Treasury regulations promulgated under Section 468B of the Internal Revenue Code and no Party shall take any position in any filing or before any tax authority that is inconsistent with such treatment. The Financial Institution or another person designated by Keller Rohrback, PLC shall be the Settlement Fund “administrator,” as that term is used in the Section 468B Treasury regulations (the “Administrator”). The Administrator shall (a) prepare and file all income tax and information returns required to be filed, and provide payees with copies of such information returns; (b) pay all taxes owed by the Settlement Fund; (c) pay the fees and expenses incurred by the Financial Institution associated with the administration of the Settlement Fund; and (d) obtain and provide the Company with the Settlement Fund’s federal taxpayer identification number on or before the date that the Company transfers funds to the Settlement Fund. The Administrator shall be authorized to retain a certified public accounting firm for these purposes. All taxes on the income of the Settlement Fund and tax-related expenses, including the expenses, if any, of a


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certified public accounting firm, incurred in connection with the administration of the Settlement Fund shall be paid solely out of the Settlement Fund, shall be considered a cost of administration of the Settlement, and shall be timely paid without further order of the Court. All fees and expenses of the Administrator or the Financial Institution, and of professional advisors engaged by the Administrator or the Financial Institution in connection with the Settlement Fund, shall be funded solely from the Settlement Fund. The Administrator may instruct the Financial Institution to reserve any portion of the Settlement Fund for the purpose of satisfying future or contingent expenses or obligations, including expenses of Settlement Fund administration or any disbursement provided for in Paragraph 8 of this Settlement Agreement. The Parties agree that Defendants have no responsibility, authority, or liability, respecting the operation, expenses, obligations and administration of the Settlement Fund. 8. Payments From The Settlement Fund

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8.1 Disbursements from Settlement Fund

. No funds shall be disbursed from the Settlement Fund except in accordance with the terms of this Settlement Agreement and in any event only after the Judgment is Final. In addition to the disbursements provided for in Paragraph 7.2, funds in the Settlement Fund shall be disbursed as follows:

8.1.1 For Attorneys’ Fees and Expenses and Plaintiff Incentive Awards10.2

. As provided in Paragraph hereof.

8.1.2 For ERISA § 502(l) Penalty 8.3. As provided in Paragraph hereof.

8.1.3 For taxes and expenses of the Settlement Fund3.6

. As provided in Paragraphs , 5.1.3 and 7.2 hereof.

8.2 Payment to the ESOP 9. Subject to Paragraph hereof, except as otherwise

provided in Paragraphs 3.5 and 3.6 hereof with respect to the retention in the Settlement Fund of the amounts deposited therein under Paragraph 3.7 until the Palm Desert Property Return Claim Determination Date, and in any event only after the Judgment is Final, amounts in the Settlement Fund from time to time in excess of those amounts necessary to pay the amounts described in Paragraphs 7.2 or 8.1 hereof shall be disbursed to the ESOP to be allocated by the ESOP in accordance with the Plan of Allocation.

8.3 Department of Labor Action. It is acknowledged that Defendants are simultaneously settling the DOL Action as part of a global resolution of claims against Defendants and the Defendant Releasees pertaining to, among other things, the TEOHC ESOP. The DOL Action and the Action have been consolidated for the purpose of reviewing and approving the global resolution reached in the Action and the DOL Action such that this global resolution comes within the provisions of PTE 79-15. The Settlement is conditioned upon the settlement of the DOL Action becoming Final, the DOL Action’s consolidation with the Action and a court determination that this global resolution comes within the provisions of PTE 79-15, and upon the ERISA § 502(l) penalty payable as a result of the settlement of the DOL Action being no greater than (a) $800,000 with respect to the amounts deposited in the Settlement Fund pursuant to Paragraph 3.1 through 3.3, and (b) with respect to the amount deposited in the


13

Settlement Fund pursuant to Paragraph 3.4 above, an amount equal to one-eleventh of such deposited amount. The ERISA § 502(l) penalty shall be payable as follows:

8.3.1 Within ten (10) days following payment of the amounts required by Paragraphs 3.1 through 3.3 above, but in any event only after the Judgment is Final, the Administrator shall cause to be paid eight hundred thousand and no/100 dollars ($800,000) to the United States Department of Labor to partially resolve claims under ERISA § 502(l), 29 U.S.C. § 1132(l) in Solis v. Couturier, 2:08-cv-02732-RRB-GGH (E.D. Cal.).

8.4 Within ten (10) days following receipt of amounts deposited as proceeds of the

sale of the Palm Desert Property into the Settlement Fund as described in Paragraph 3.7 above, but in any event only after the Judgment is Final, the Administrator shall cause to be paid one-eleventh of the amount so deposited to the United States Department of Labor to partially resolve claims under ERISA § 502(l), 29 U.S.C. § 1132(l) in Solis v. Couturier, 2:08-cv-02732-RRB-GGH (E.D. Cal.).

8.4.1 The payments described in Paragraphs 8.3.1 and 8.4 shall be remitted as follows:

If using the regular mail, the payments will be sent to: U.S. Department of Labor ERISA Civil Penalty P.O. Box 70942 Charlotte, NC 28272-0942 If using express mail, the payments will be sent to: U.S. Department of Labor QLP Wholesale Lockbox - NC0810 Lockbox # 70942 1525 West WT Harris Blvd Charlotte, NC 28262

8.5 Within ten (10) days following each payment required by Paragraphs 8.3.1 and

8.4 above, the Administrator will provide written evidence of payment of such amounts to: Regional Director, EBSA San Francisco Regional Office 90 7th Street, Suite 11-300 San Francisco, CA 94103 Phone: (415) 625-2481 Fax: (415) 625-2450 With a duplicate delivered to:


14

Associate Solicitor U.S. Department of Labor Office of the Solicitor Plan Benefits Security Division 200 Constitution Avenue N.W., Room N-4611 Washington, DC 20210 Phone: (202) 693-5600 Fax: (202) 693-5610 and

Regional Solicitor U.S. Department of Labor Office of the Solicitor San Francisco Regional Office 90 7th Street, Suite 3-700 San Francisco, CA 94103 Phone: (415) 625-7740 Fax: (415) 625-7772 9. Termination of the Settlement Agreement

.

9.1 Termination

. This Settlement Agreement may terminate if (a) the Court declines to enter the Judgment, (b) the Judgment entered by the Court is reversed or modified in any material respect on appeal, or (c) prior to the Judgment becoming Final, the settlement of the DOL Action is terminated. This Settlement Agreement shall not terminate if a court of competent jurisdiction modifies, reverses, or refuses to enter any order relating to the award of legal fees and expenses or the Plan of Allocation. If, within thirty (30) days after the date when any reversal or modification which would cause this Settlement Agreement to terminate becomes Final, the Parties have not agreed in writing to proceed with all or part of the Settlement Agreement in light of such ruling, this Settlement Agreement shall automatically terminate and thereupon become null and void.

9.2 Consequences of Termination of the Settlement Agreement

. If the Settlement Agreement terminates, the following shall occur:

9.2.1 Except as otherwise provided in Paragraph 7.2, all settlement consideration paid by or on behalf of any Defendant under Paragraph 3 hereof shall be returned to the respective Persons who deposited funds into the Settlement Fund, and any and all real estate transfer taxes, personal property taxes, and fees relating to the restoration of the Palm Desert Property to CRC shall be borne by TEOHC. In the event the Palm Desert Property has been sold or is under contract for sale, the gross sale price of such sale (which shall be not less than $5.5 million without CRC’s prior written agreement) less commissions not to exceed 5% thereof, but without deduction for carrying costs, staging costs, real estate transfer taxes, personal property taxes, fees, or other costs of sale, shall be remitted to CRC by the Settlement


15

Fund. In the event of loss or damage to the Palm Desert Property from and after the date of the Transfer, the proceeds of any insurance recovered by TEOHC and not expended to repair the loss or damage to the Palm Desert Property shall be remitted to CRC by the Settlement Fund.

9.2.2 The Action shall for all purposes with respect to the Parties revert to its status as of November 2, 2009. Any and all statutes of limitations, statutes of repose and/or other defenses based upon the passage of time applicable to the claims asserted in this Action shall be tolled from November 2, 2009 to the date on which this Settlement Agreement terminates.

9.2.3 All provisions of this Settlement Agreement shall be null and void except for this Paragraph 9.2, and except as otherwise explicitly provided in this Settlement Agreement. 10. Attorneys’ Fees and Expenses and Plaintiff Incentive Awards

.

10.1 Application for Attorneys’ Fees

. Pursuant to the common fund doctrine and/or any applicable statutory fee provision, Plaintiffs’ Counsel may apply to the Court for awards of attorneys’ fees, and for reimbursement of expenses, to be paid solely from the Settlement Fund. In addition, Plaintiffs may apply to the Court for incentive awards in connection with the Action, to be paid solely from the Settlement Fund. Defendants shall take no position with respect to any such applications.

10.2 Disbursement of Attorneys’ Fees and Expenses and Plaintiff Incentive Awards

. If the Court enters one or more orders allowing payment of attorneys’ fees and/or expenses, or Plaintiff incentive payments, upon the order becoming Final the amount awarded shall be disbursed as set forth in such order(s) from the Settlement Fund.

11. Miscellaneous Provisions

.

11.1 Notwithstanding anything else in this Settlement Agreement, this Settlement Agreement does not waive, release, or interfere with the independent right of the Secretary of the United States Department of Labor to bring claims against any person or entity otherwise released by this Settlement Agreement. Nothing in this Settlement Agreement or the Final Judgment shall release, interfere with, qualify, or bar the prosecution of claims by the Secretary for any type of remedy, monetary or non-monetary, without her specific written consent. This paragraph shall supersede and control over any contrary, inconsistent, or ambiguous provisions contained in this Settlement Agreement. This paragraph does not affect any releases contained in any Consent Judgment and Order in the DOL Action.

11.2 TEOHC’s assets and the ESOP’s account shall not be deposited into the Settlement Fund and none of the disbursements from the Settlement Fund described in Paragraph 8 of this Settlement Agreement shall be made from TEOHC’s or the ESOP’s existing assets described in this paragraph. After TEOHC’s satisfaction of its obligations and completion of the final liquidation of TEOHC, the remaining assets of TEOHC and the ESOP will be distributed to ESOP participants in accordance with the provisions of the ESOP.


16

11.3 Governing Law

. This Settlement Agreement shall be governed by the laws of the State of California without giving effect to the conflict of laws or choice of law provisions thereof, except to the extent that the law of the United States governs any matter set forth herein, in which case such federal law shall govern.

11.4 Amendment

. Before entry of the Judgment, the Settlement Agreement may be modified or amended only by written agreement signed by or on behalf of all Parties. Following entry of the Judgment, the Settlement Agreement may be modified or amended only by written agreement signed by or on behalf of all Parties and approved by the Court.

11.5 Waiver

. The provisions of this Settlement Agreement may be waived only by an instrument in writing executed by the waiving party. The waiver by any party of any breach of this Settlement Agreement shall not be deemed to be or construed as a waiver of any other breach, whether prior, subsequent, or contemporaneous, of this Settlement Agreement.

11.6 Construction

. None of the Parties hereto shall be considered to be the drafter of this Settlement Agreement or any provision hereof for the purpose of any statute, case law, or rule of interpretation or construction that would or might cause any provision to be construed against the drafter hereof.

11.7 Principles of Interpretation

. The following principles of interpretation apply to this Settlement Agreement:

11.7.1 Headings

. The headings of this Settlement Agreement are for reference purposes only and do not affect in any way the meaning or interpretation of this Settlement Agreement.

11.7.2 Singular and Plural

. Definitions apply to the singular and plural forms of each term defined.

11.7.3 Gender

. Definitions apply to the masculine, feminine, and neuter genders of each term defined.

11.7.4 References to a Person

. References to a Person are also to the Person’s permitted heirs, trustees, personal representatives, executors, administrators, directors, officers, employees, agents, partners, members, successors and assigns.

11.7.5 Terms of Inclusion

. Whenever the words “include,” “includes,” or “including” are used in this Settlement Agreement, they shall not be limiting but rather shall be deemed to be followed by the words “without limitation.”

11.7.6 Time

. References to “days” in this Settlement Agreement are to calendar days, unless otherwise stated.

11.8 Further Assurances. All Parties agree, without further consideration, and as part of finalizing the Settlement hereunder, that they will in good faith execute and deliver such other


17

documents and take such other actions as may be necessary to consummate and effectuate the subject matter and purpose of this Settlement Agreement. Such documents shall include the release and dismissal with prejudice of the plaintiffs' claims against RSUI in the lawsuit The Employee Holding Company, Inc. et al. v. RSUI Indemnity Company, No. 28-47012, in the Superior Court for the State of California, County of Napa, upon the Court's entry of the Judgment and the Judgment becoming Final.

11.9 Notices

. Any notice, demand, or other communication under this Settlement Agreement (other than the Notice, or other notice given at the direction of the Court) shall be in writing and shall be deemed duly given upon receipt if it is addressed to each of the intended recipients as set forth below and personally delivered, sent by registered or certified mail (postage prepaid), sent by confirmed facsimile, or delivered by reputable express overnight courier:

IF TO PLAINTIFFS:

Gary Gotto Gary Greenwald Keller Rohrback P.L.C. 3101 N. Central Avenue Suite 1400 Phoenix, AZ 85013 Telephone: (602) 248-0088 Facsimile: (602) 248-2822 Terence J. Devine

Devine, Markovits & Snyder, LLP 52 Corporate Circle Albany, New York 12203 Telephone: (518) 464-0640 Facsimile: (518) 464-0200

Stanley H. Shayne Shayne Nichols LLC Two Miranova Place, Suite 220 Columbus, Ohio 43215 Telephone: (614) 221-2220 Facsimile: (614) 221-9020


18

IF TO DEFENDANTS

Theodore M. Becker Julie A. Govreau

Morgan, Lewis & Bockius, LLP 77 West Wacker Drive Fifth Floor

Chicago, Illinois 60601 Telephone: (312) 324-1000 Facsimile: (312) 324-1001 Attorneys for Defendant Couturier

Christopher J. Rillo

Kathleen A. Stimeling Schiff Hardin LLP One Market Street Spear Street Tower, 32nd Floor San Francisco, California 94105 Telephone: (415) 901-8700 Facsimile: (415) 901-8701 Attorneys for Defendant Johanson Robert Eddy 12168 Stallion Way Truckee, California 96161 Defendant

Mary Jo Shartsis Kajsa M. Minor Shartsis Friese LLP One Maritime Plaza, 18th Floor San Francisco, California 94111 (415) 421-6500 Attorneys for Defendant Pensco, Inc. David A. Tartaglio Musick, Peeler & Garrett LLP One Wilshire Blvd. Suite 200 Los Angeles, CA 90017 Attorneys for RSUI


19

Natalie P. Vance Klinedinst, P.C. 801 K Street Suite 2800 Sacramento, CA 95814

Telephone: 916.444.7573 Attorneys for Johanson Berenson LLP Cynthia J. Larsen Orrick Herrington & Sutcliffe LLP 400 Capitol Mall, Suite 3000 Sacramento, California 95814 Telephone: (916) 447-9200 Facsimile: (916) 329-4900 Attorneys for Defendant TEOHC Robert B. Miller Bullivant Houser Bailey 300 Pioneer Tower 888 SW Fifth Street Portland, Oregon 97204 Telephone: (503) 228-6351 Facsimile: (503) 295-0915 Attorneys for Defendant TEOHC ESOP

Any Party may change the address at which it is to receive notice by written notice

delivered to the other Parties in the manner described above. 11.10 Entire Agreement

. This Settlement Agreement contains the entire agreement among the Parties relating to this Settlement. It specifically supersedes any settlement terms or settlement agreements relating to the Defendants that were previously agreed upon orally or in writing by any of the Parties. In the event of any dispute regarding the interpretation of this Settlement Agreement, no Party may rely upon or cite any previous version of this Settlement Agreement.

11.11 Counterparts

. This Settlement Agreement may be executed by exchange of faxed or scanned executed signature pages, and any signature thereby transmitted for the purpose of executing this Settlement Agreement shall be deemed an original signature for purposes of this Settlement Agreement. This Settlement Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original, but all of which, taken together, shall constitute one and the same instrument.

11.12 Binding Effect

. This Settlement Agreement binds and inures to the benefit of the Parties hereto, their assigns, heirs, administrators, executors, and successors.


24

EXHIBITS TO THE SETTLEMENT AGREEMENT

Exhibits

A Judgment B Legal Description C Notice to ESOP Participants


EXHIBIT A


UNITED STATES DISTRICT COURT EASTERN DISTRICT OF CALIFORNIA

SACRAMENTO DIVISION

GREGORY JOHNSON, et al.,

Plaintiffs,

v.

CLAIR R. COUTURIER, JR., et al.,

Defendants,

No. 2:05-cv-02046 RRB GGH

(Lead Case-Consolidated)

DARLEEN STANTON,

Plaintiff,

v.

CLAIR R. COUTURIER, JR., et al.

Defendants.

No. 2:07-CV-01208 WBS-JFM

(Consolidated under

2:05-CV-02046 RRB GGH)

ORDER AND FINAL JUDGMENT

This Order concerns the settlement (“Settlement”) of this litigation (the “Action”)

involving claims for alleged violations of the Employee Retirement Income Security Act of

1974, as amended, 29 U.S.C. §§ 1001, et seq. (“ERISA”) and state law, with respect to The

Employee Ownership Holding Company, Inc., a Delaware corporation (“TEOHC”), The

Employee Ownership Holding Company Employee Stock Ownership Plan and Trust (the

“ESOP”), and the Noll Manufacturing Company Employee Stock Ownership Plan and Trust (the

“Noll ESOP”) (the ESOP and the Noll ESOP are referred to herein collectively as the “Plans”).


A Settlement Agreement, dated December __, 2009 (“Settlement Agreement”), was filed with

the Court on December __, 2009. 1 Before the Court are: (1) Plaintiffs’ Motion for Final

Approval of Settlement (“Final Approval Motion”); (2) Plaintiffs’ Motion and Memorandum for

Approval of Plan of Allocation (“Plan of Allocation Motion”); and (3) Plaintiffs’ Counsel’s

Motion for Award of Attorneys’ Fees and Expenses and Plaintiff Incentive Awards (collectively,

the “Fees and Expenses Motion”). Also before the Court for approval simultaneously with the

Settlement Agreement are consent judgments made between the United States Department of

Labor (“DOL”) and defendants Couturier, Johanson, Johanson Berenson LLP and Eddy (the

“Consent Judgments”) in the action entitled Solis v. Couturier, 2:08-cv-02732-RRB-GGH (E.D.

Cal.) (the “DOL Action”).

On December __, 2009, the Court entered its Order Preliminarily Approving Settlement

and Setting Fairness Hearing (“Preliminary Approval Order”). The Court has received

declarations attesting to the mailing of the Notice and publication of the Notice in accordance

with the Preliminary Approval Order. A hearing was held on ____________, 20__ (the “Final

Approval Hearing”) to: (i) determine whether to grant the Final Approval Motion; (ii) determine

whether to grant the Plan of Allocation Motion; (iii) determine whether to grant the Fees and

Expenses Motion; and (iv) rule upon such other matters as the Court might deem appropriate.

IT IS THEREFORE ORDERED, ADJUDGED AND DECREED AS FOLLOWS:

1. The Court has jurisdiction over the subject matter of this action and all parties

thereto pursuant to 29 U.S.C. § 1132(e).

2. The Settlement was negotiated at arm’s-length by experienced counsel who were

fully informed of the facts and circumstances of the action and of the strengths and weaknesses

1 All capitalized terms used in this Order and Final Judgment and not defined herein shall have the meanings assigned to them in the Settlement Agreement and Preliminary Approval Order.

2


of their respective positions. The Settlement was reached after the Parties had engaged in

extensive discovery and motion practice. Plaintiffs’ Counsel and Defendants’ Counsel are

therefore well positioned to evaluate the benefits of the Settlement, taking into account the

expense, risk, and uncertainty of protracted litigation over numerous questions of fact and law.

3. The Action has been consolidated with the DOL Action for the specific purpose

of the Court’s consideration of whether to approve the proposed Settlement in the Action and the

proposed Consent Judgments in the DOL Action and to enter the judgments sought in both. The

consolidated actions come within the provisions of the U.S. Department of Labor’s (“DOL’s”)

Prohibited Transaction Exemption (“PTE”) 79-15, which provides, among other things, that

sections 406 and 407(a) of ERISA and section 4975(c)(2) of Title 26 of the United States Code

shall not apply with respect to any transaction or activity which is authorized or required, prior to

the occurrence of such transaction or activity by a settlement of litigation approved by a United

States District Court where the nature of such transaction or activity is specifically described in

the settlement and the DOL is a party to the litigation at the time of settlement.

4. The DOL is authorized to bring all claims under ERISA for prohibited

transactions and breach of ERISA fiduciary duties, concurrently with plan fiduciaries. The DOL

has provided complete releases to defendants Couturier, Johanson, Eddy, and Johanson Berenson

LLP, in the proposed Consent Judgments in the DOL Action.

5. The proposed Settlement and the proposed Consent Judgments warrant final

approval because they are fair, adequate, and reasonable to the Parties, the ESOP, the Affected

Participants, and to others whom they affect based upon (1) the complexity, expense and likely

duration of the litigation; (2) the reaction to the Settlement of the Affected Participants; (3) the

stage of the proceedings and the amount of discovery completed; (4) the risks of establishing

3


liability; (5) the risks of establishing damages; (6) the ability of the Defendants to withstand a

greater judgment; (7) the range of reasonableness of the settlement fund in light of the best

possible recovery; and (8) the range of reasonableness of the settlement fund to a possible

recovery in light of all the attendant risks of litigation.

6. The Final Approval Motion is GRANTED, and the Settlement and the Consent

Judgments are hereby APPROVED as fair, adequate and reasonable to the Parties, the ESOP,

and the Affected Participants and others whom they affect, and in the public interest. The

settling parties are directed to consummate the Settlement and the Consent Judgments in

accordance with the respective terms of the Settlement Agreement and the Consent Judgments.

7. The Plan of Allocation is hereby APPROVED as fair, adequate, and reasonable to

the Parties, the ESOP, and the Affected Participants. The Administrator shall, in accordance

with the respective provisions of the Settlement Agreement and the Consent Judgments, disburse

the Settlement Funds to the ESOP for distribution by the ESOP’s trustee(s) in accordance with

the Plan of Allocation, subject to any amounts withheld by the Administrator for the payment of

taxes, statutory penalties, expenses and other sums as authorized in the Settlement Agreement,

and attorneys fees and expenses and incentive awards to Plaintiffs as authorized by this Order.

The Court finds payments and distributions made in accordance with such Plan of Allocation to

be “restorative payments” as defined in IRS Revenue Ruling 2002-45. Any modification or

change in the Plan of Allocation that may hereafter be approved shall in no way disturb or affect

this Judgment and shall be considered separate from this Judgment.

8. Incentive awards payable from the Settlement Fund in accordance with the

Settlement Agreement are awarded as follows: ________________________.

4


9. Plaintiffs’ Counsel are hereby awarded attorneys’ fees of 33.33% of all amounts

deposited in the QSF in accordance with the terms of the Settlement Agreement, plus $450,000

payable with respect to Plaintiffs’ Counsel’s successful efforts to secure an injunction with

respect to indemnification sought by the Defendants from TEOHC, and expenses of

$____________________. Such award shall be payable from the Settlement Fund in accordance

with the terms of the Settlement Agreement.

10. The Court retains jurisdiction over the Action, the Parties, the ESOP and the

Affected Participants for all matters relating to the Action, including (without limitation) the

administration, interpretation, effectuation or enforcement of the Settlement Agreement, this

Order and Final Judgment, and any application for fees and expenses incurred in connection with

future actions necessary to fully consummate the Settlement and distribute the proceeds thereof.

11. Without further order of the Court, the Parties may agree in writing to reasonable

extensions of time to carry out any of the provisions of the Settlement Agreement.

12. Plaintiffs, the Affected Participants and their personal representatives, heirs,

executors, administrators, trustees, successors, and assigns, are forever barred and enjoined from

prosecuting any claims of any nature whatsoever relating to the ESOP, the Noll ESOP, or

TEOHC and its predecessors, affiliates and subsidiaries (including but not limited to TEOHC

California, Inc. (formerly known as the Noll Manufacturing Company, Inc.) and TEOHC

Washington, Inc., (formerly known as N&NW Manufacturing Holding Company, Inc.)), arising

out of or related to the facts on which the claims asserted in the Action or the DOL Action are

based (including in any pleading, motion or other paper filed in either action or on appeal),

including, without limitation, claims for any and all losses, damages, unjust enrichment,

attorneys’ fees, disgorgement of fees, litigation costs, injunction, declaration, contribution,

5


indemnification or any other type or nature of legal or equitable relief and any similar claims

regarding the administration of TEOHC and its predecessors, affiliates and subsidiaries

(including but not limited to TEOHC California, Inc. (formerly known as the Noll

Manufacturing Company, Inc.) and TEOHC Washington, Inc., (formerly known as N&NW

Manufacturing Holding Company, Inc.)), the ESOP, and the Noll ESOP, whether accrued or not,

whether known, unknown, or unsuspected, in law or equity, against any of the Defendants, the

Defendant Releasees, TEOHC and its predecessors, affiliates and subsidiaries (including but not

limited to TEOHC California, Inc. (formerly known as the Noll Manufacturing Company, Inc.)

and TEOHC Washington, Inc., (formerly known as N&NW Manufacturing Holding Company,

Inc.)), the ESOP, the Noll ESOP, the Insurers, or any of their respective predecessors,

successors, assigns, subsidiaries, affiliates, trustees, administrators, fiduciaries, officers,

directors, agents, employees or counsel.

13. TEOHC and its predecessors, affiliates and subsidiaries (including but not limited

to the TEOHC California, Inc. (formerly known as the Noll Manufacturing Company, Inc.) and

TEOHC Washington, Inc., (formerly known as N&NW Manufacturing Holding Company,

Inc.)), the ESOP, the Noll ESOP, and all of their respective predecessors, successors, assigns,

subsidiaries, affiliates, trustees, administrators, fiduciaries, officers, directors, agents, employees

and counsel, are forever barred and enjoined from prosecuting any claims of any nature

whatsoever relating to the ESOP, the Noll ESOP, or TEOHC and its predecessors, affiliates and

subsidiaries (including but not limited to TEOHC California, Inc. (formerly known as the Noll

Manufacturing Company, Inc.) and TEOHC Washington, Inc., (formerly known as N&NW

Manufacturing Holding Company, Inc.)) arising out of or related to the facts on which the

claims asserted in the Action or the DOL Action are based (including in any pleading, motion or

6


other paper filed in either action or on appeal), including, without limitation, claims for any and

all losses, damages, unjust enrichment, attorneys’ fees, disgorgement of fees, litigation costs,

injunction, declaration, contribution, indemnification or any other type or nature of legal or

equitable relief), and any similar claims regarding the administration of TEOHC and its

predecessors, affiliates and subsidiaries (including but not limited to TEOHC California, Inc.

(formerly known as the Noll Manufacturing Company, Inc.) and TEOHC Washington, Inc.,

(formerly known as N&NW Manufacturing Holding Company, Inc.)), the ESOP, or the Noll

ESOP, whether accrued or not, whether known, unknown, or unsuspected, in law or equity,

against any of the Defendants, the Defendant Releasees, the Insurers, or any of their respective

predecessors, successors, assigns, subsidiaries, affiliates, trustees, administrators, fiduciaries,

officers, directors, agents, employees or counsel.

14. The Defendants, the Defendant Releasees, the ESOP, the Noll ESOP, and

TEOHC and its predecessors, affiliates and subsidiaries (including but not limited to TEOHC

California, Inc. (formerly known as the Noll Manufacturing Company, Inc.) and TEOHC

Washington, Inc., (formerly known as N&NW Manufacturing Holding Company, Inc.)) are

forever barred and enjoined from prosecuting against Plaintiffs or any of them any claim seeking

damages or other relief arising out of the institution or prosecution of the Action.

15. All counts asserted in the Action are DISMISSED WITH PREJUDICE, without

further order of the Court, pursuant to the terms of the Settlement Agreement.

16. In the event that the Settlement is terminated in accordance with the terms of the

Settlement Agreement, this Judgment shall be null and void and shall be vacated nunc pro tunc,

and Paragraph 9 of the Settlement Agreement shall govern the rights of the Parties thereto.

7


8

SO ORDERED this ___ day of ___________, 20__.

__________________________________ HONORABLE RALPH R. BEISTLINE

UNITED STATES DISTRICT JUDGE


EXHIBIT B


EXHIBIT C


UNITED STATES DISTRICT COURT EASTERN DISTRICT OF CALIFORNIA

Johnson, et al., vs. Couturier, et al.

No. 2:05-cv-02046 RRB GGH

Stanton vs. Couturier, et al.

No. 2:07-cv-01208 WBS-JFM

NOTICE OF PROPOSED SETTLEMENT OF LITIGATION, SETTLEMENT FAIRNESS HEARING, AND PROPOSED BAR ORDER

Your legal rights might be affected if you are: a current or former participant in The Employee Ownership Holding Company Employee Stock Ownership Plan and Trust (the “ESOP”) or The Noll Manufacturing Company Employee Stock Ownership Plan and Trust (the “Noll ESOP”) (the ESOP and the Noll ESOP are referred to herein collectively as the “Plans”).

PLEASE READ THIS NOTICE CAREFULLY. A FEDERAL COURT AUTHORIZED THIS NOTICE. THIS IS NOT A SOLICITATION. YOU HAVE NOT BEEN SUED.

This notice (“Notice”) advises you of a proposed settlement (the “Settlement”) of litigation (referred to herein as the “Action”) brought by Gregory Johnson, Darleen Stanton, Kelly Morrell, William Rodwell, and Edward Rangell (collectively, the “Plaintiffs”) against Clair R. Couturier, Jr. (“CRC”), David R. Johanson (“DRJ”), Robert E. Eddy (“REE”), Johanson Berenson LLP (“JBLLP”), and Pensco, Inc. a New Hampshire chartered trust company (“Pensco”) (collectively, “Defendants”). Plaintiffs and Defendants are referred to herein collectively as the (“Parties”). In the Action, Plaintiffs seek to recover losses which they allege were suffered by the Plans as the result of breaches of fiduciary duty by CRC, DRJ and REE. The United States District Court for the Eastern District of California (the “Court”) has preliminarily approved the Settlement, and has scheduled a hearing (the "Fairness Hearing") to evaluate the fairness and adequacy of the Settlement at which the Court will consider (i) whether to approve the Settlement as fair and adequate; (ii) whether to enter the Bar Order (see Question 4 below); (iii) whether to approve the Plan of Allocation (see Question 5 below); and (iv) whether to award attorneys’ fees and expenses to Plaintiffs' Counsel and incentive awards to Plaintiffs (see Question 8 below). The Fairness Hearing, before the Hon. Ralph R. Beistline, has been scheduled for _________ __, 20__, at __:00 __.m. in Courtroom ___, of the United States District Court for the Eastern District of California, Robert T. Matsui United States Courthouse, 501 I Street, Sacramento, California. The terms of the Settlement are contained in a Settlement Agreement (the “Settlement Agreement”), a copy of which is available at www.Kellersettlements.com or by contacting Plaintiffs’ Counsel identified below. Capitalized and italicized terms used in this Notice and not defined herein have the meanings assigned to them in the Settlement Agreement.

Any questions regarding the Settlement should be directed to Plaintiffs’ Counsel: Gary Gotto or Gary Greenwald, Keller Rohrback P.L.C., 3101 N. Central Avenue, Suite 1400, Phoenix, Arizona 85012, tel: 602-248-0088 (counsel for Plaintiffs Johnson, Stanton, Morrell and Rangell), Terence Devine, Devine, Markovits & Snyder, LLP, 52 Corporate Circle, Albany, New York 12203, tel: 518-464-0640 or Stanley H. Shayne, Shayne Nichols LLC, Two Miranova Place, Suite 220, Columbus, Ohio 43215 tel: 614-221-2220 (counsel for Plaintiff Rodwell). Plaintiffs’ Counsel have established a toll-free phone number, (800) 236-8134, if you have questions or comments. Plaintiffs’ Counsel may also be contacted via email ([email protected]). Please do not contact the Court, as Court personnel will not be able to answer your questions.

PLEASE READ THIS NOTICE CAREFULLY AND COMPLETELY. IF YOU ARE A CURRENT OR FORMER PARTICIPANT IN THE PLANS , THE SETTLEMENT MAY AFFECT YOUR RIGHTS. YOU ARE NOT BEING SUED IN THIS MATTER. YOU DO NOT HAVE TO APPEAR IN COURT, AND YOU DO NOT HAVE TO HIRE AN ATTORNEY IN THIS CASE. IF YOU ARE IN FAVOR OF THE SETTLEMENT, YOU NEED NOT DO ANYTHING. IF YOU DISAPPROVE, YOU MAY OBJECT TO THE SETTLEMENT PURSUANT TO THE PROCEDURES DESCRIBED BELOW.


ACTIONS YOU MAY TAKE IN THE SETTLEMENT

NO ACTION IS NECESSARY TO RECEIVE PAYMENT.

If the Settlement is approved by the Court and you are a current or former participant who qualifies for an allocation of a portion of the Settlement Fund (see "The Plan of Allocation" below), you do not need to do anything in order to receive an allocation. The portion, if any, of the Settlement Fund to be allocated to your ESOP account or otherwise for your benefit will be calculated as part of the implementation of the Settlement. If you are a current participant in the ESOP, any share of the Settlement Fund to which you are entitled will be credited to your ESOP account. If you are no longer a participant and are entitled to share in the Settlement Fund, you will be notified of the procedures for remitting your allocation to you or for your benefit.

YOU CAN OBJECT (NO LATER THAN December __, 2009).

If you wish to object to any part of the Settlement, you can write to the Court and counsel and explain why you do not like the Settlement.

YOU CAN GO TO THE HEARING ON ______________

Whether you support or object to the Settlement, you may attend the fairness hearing. If you have submitted a written objection to the Court and counsel, as explained below, you can ask to speak in Court with respect to the aspect of the Settlement to which you object.

WHAT THIS NOTICE CONTAINS SUMMARY OF SETTLEMENT ...............................................................................................................................3 BASIC INFORMATION.............................................................................................................................................4

1. Why did I get this Notice package?................................................................................................................... 4 2. What is the lawsuit about? What has happened so far?....................................................................................4 3. Why is there a Settlement? ................................................................................................................................4 4. What does the Settlement provide? ..................................................................................................................5 5. What will be my share of the Settlement Fund? ...............................................................................................5 6. How can I get my portion of the recovery?.......................................................................................................5 7. When would I receive my payment? ................................................................................................................. 5 8. How will the lawyers be paid? .......................................................................................................................... 5

OBJECTIONS ……………………………………………………………………………………………………….. 6 9. How do I tell the Court if I don’t like the Settlement? ...................................................................................... 6

THE COURT’S FAIRNESS HEARING………………………………………………………………………… 7 10. When and where will the Court decide whether to approve the Settlement? ………………………………. 7 11. Do I have to come to the hearing?................................................................................................................... 7 12. May I speak at the hearing? …………………………………………………………………………………. 7

IF YOU DO NOTHING …………………………………………………………………………………………... 7 13. What happens if I do nothing at all? …………… ……………………………………….. 7

GETTING MORE INFORMATION …………………………………………………..………………………….. 7 14. How do I get more information? ………………………………………………………………………… 7 As described in more detail below, the Action concerns allegations that Defendants CRC, DRJ and REE breached fiduciary duties they owed to the Plans and to TEOHC. The allegations are set forth in the operative complaints and are described in certain rulings of the Court and of the Ninth Circuit Court of Appeals, which are available at www.Kellersettlements.com.

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SUMMARY OF SETTLEMENT Under the Settlement, the following deposits are to be made into a qualified settlement fund (the "Settlement Fund"): (i) $8.8 million in cash, of which $7.6 million will be deposited by or on behalf of Defendants CRC and REE, and $1.2 million will be deposited by or on behalf of Defendants DRJ and JBLLP by their insurance carrier. (ii) the net proceeds (after costs of sale) realized by TEOHC upon the sale of the Palm Desert Property. The Palm Desert Property is a home in the Big Horn golf community of Palm Desert, California, which was purchased by TEOHC and transferred to CRC in 2007. Under the Settlement, CRC will return the Palm Desert Property and the bulk of its contents to TEOHC. TEOHC will immediately begin to market the Palm Desert Property. Based on consultations with brokers active in the local market, it is anticipated that TEOHC will list the Palm Desert Property at a price in excess of $5,000,000, and it is hoped that the full list pricing can be realized after a reasonable marketing period. However, due to current unfavorable conditions in the national economy and in the local real estate market, it is impossible to predict what price can actually be achieved or how long a marketing period will be necessary. (iii) the dollar value of the federal income tax benefits that may be realized by CRC as the result of his return of the Palm Desert Property under the Settlement. This component of the Settlement is also highly uncertain as to amount and timing of receipt. While it is believed that CRC's return of the Palm Desert Property under the Settlement should give rise to material federal income tax benefits (which could approach or exceed $2 million), numerous potential legal and factual issues exist that could reduce or even eliminate the amount of those federal income tax benefits. In addition, it is impossible predict the extent, if any, to which the Internal Revenue Service will challenge CRC's entitlement to any such benefits, how long it would take to resolve any such challenge, the expenses to be incurred in the resolution thereof (which will generally be borne by the Settlement Fund) or what the terms of any such resolution would be. The amounts in the Settlement Fund shall be disbursed as follows:

(a) Pursuant to § 502(l) of ERISA, a penalty equal to one-eleventh of the amounts deposited in the Settlement Fund described in the immediately preceding paragraphs (i) and (ii) (i.e., all deposits other than those arising from federal income tax benefits as described in paragraph (iii)) will be paid to the United States Treasury as the result of the concurrent settlement of an action brought by the Secretary of Labor against CRC, DRJ, REE and others (Solis v. Couturier, 2:08-cv-02732-RRB-GGH (E.D. Cal.) (the “DOL Action”)), alleging breaches of fiduciary duty by CRC, DRJ and REE. The DOL Action will be settled concurrently with the Action as part of a global resolution of ERISA and other claims related to Defendants, and the Court has consolidated the Action and the DOL Action for the purpose of reviewing and approving the global resolution reached in the Action and the DOL Action such that this global resolution comes within the provisions of the U.S. Department of Labor’s (“DOL’s”) Prohibited Transaction Exemption (“PTE”) 79-15, which provides, essentially, that the global resolution of the Action and the DOL Action is not prohibited under ERISA.

(b) Court awarded Plaintiffs' Counsel attorneys’ fees and expenses, Plaintiff incentive awards, and reasonable costs of the Settlement approved by the Court, shall be paid from the Settlement Fund. (c) The balance in the Settlement Fund shall be disbursed to the ESOP, subject to the Plan of Allocation. Disbursements will be made as promptly as practicable after the Court's approval of the Settlement has become Final. It is anticipated that an interim disbursement with respect to the $8.8 million in cash to be deposited into the Settlement Fund will be made promptly upon the Court’s approval of the Settlement becoming Final, and that the remaining amounts to be deposited into the Settlement Fund will be distributed as promptly thereafter as practicable after the deposits have been made in accordance with the terms of the Settlement Agreement.

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BASIC INFORMATION

1. Why did I get this Notice package? Either you or someone in your family may have been a participant in one of the Plans at some time on or after October 2, 1996 (all such participants are referred to herein as “Affected Participants”). The Court has directed that this Notice be sent to you because as such a participant, you may be entitled to share in the proceeds of the Settlement and you will be subject to the Bar Order, if the Settlement is finally approved by the Court. This Notice explains the Action, the Settlement, your legal rights, what benefits are available, who is eligible for them, and how you will receive your portion of the benefits. This Notice also informs you with respect to the Fairness Hearing set by the Court. The issuance of this Notice is not an expression of the Court’s opinion on the merits of any claim in the Action, and the Court still has to decide whether to approve the Settlement. If the Court approves the Settlement, payment to the ESOP will be made after all related appeals, if any, are favorably resolved, and after the Palm Desert Property is sold and the deposits to be made by CRC with respect to federal income tax benefits have been completed. It is uncertain when these various events will occur, and it is likely that they may take a year or more to be finally resolved. It is anticipated, however, that upon the Court’s approval of the Settlement becoming Final, the ESOP will make one or more interim distributions with respect to the cash proceeds of the Settlement.

2. What is the lawsuit about? What has happened so far?

In the Action, Plaintiffs allege, among other things, that the Defendants CRC, DRJ and REE were fiduciaries of the Plans and directors of TEOHC and violated fiduciary duties under the Employee Retirement Income Security Act of 1974 (“ERISA”) and under applicable state law by permitting certain payments to CRC. Plaintiffs sought to recover from the losses to the Plans allegedly caused by the fiduciary breaches.

Defendants deny that they have any liability whatsoever or that they breached any fiduciary duties. If the litigation were to continue, Defendants would raise numerous defenses to liability, including the following:

• They were not fiduciaries as alleged by Plaintiffs, or, if they were fiduciaries, their fiduciary duties did not extend to the matters at issue in the Action;

• To the extent they were fiduciaries as to the matters at issue in the Action, they fully discharged all fiduciary duties in a manner wholly consistent with applicable law;

• The relief sought by the Plaintiffs in the Action is not permitted under applicable law; and

• Plaintiffs were not damaged.

The Parties have engaged in extensive discovery and motion practice, including multiple motions by Defendants to dismiss the Action. Plaintiffs successfully sought and obtained injunctions with respect to the payment of substantial amounts sought by Defendants from TEOHC pursuant to alleged indemnity rights, and the expenditure or transfer by CRC of certain assets; the injunction was appealed to the Ninth Circuit Court of Appeals and was affirmed on appeal.

This Settlement is the product of intense, arm’s-length negotiations between Plaintiffs’ Counsel, the DOL, and Defendants and their counsel, including a two-day mediation facilitated by the Hon. Kimberly Mueller, United States Magistrate Judge, pursuant to which the terms of the Settlement were established.

3. Why is there a Settlement? At the time of Settlement trial of the Action was approximately 90 days away. While Plaintiffs’ Counsel believed that at trial it was likely that they would be able to establish liability and obtain a substantial judgment, they concluded that it was unlikely that Defendants would have the financial resources to pay materially more than will be paid under the Settlement. Therefore, they concluded that the Settlement was the prudent and advisable course, because it avoided the risks inherent in any litigation, as well as the potential delays associated with trial and potential appeals.

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4. What does the Settlement provide?

The material economic terms of the Settlement are set forth on Page 3 above. The Settlement also provides for general releases of Defendants by Plaintiffs and TEOHC and general releases of CRC and DRJ by the ESOP, and for general releases by Defendants of Plaintiffs, TEOHC, the ESOP and the current and former participants in the Plans. In addition, the Settlement provides for the entry by the Court of a Bar Order that will permanently enjoin the Affected Participants from bringing an action in the future against the Defendants, the ESOP, TEOHC, the Insurers, and certain other persons described in the Settlement Agreement. The Bar Order will also permanently enjoin Plaintiffs, Affected Participants, TEOHC, the ESOP and the Noll ESOP from asserting claims against Defendants that arise out of or are related to the facts on which any of the claims asserted in the Action or in the DOL Action (including in any pleading, motion or other paper filed in either action or on appeal) arise. This means that Affected Participants or the ESOP will not be able to sue Defendants in the future. The Settlement is conditioned upon the concurrent settlement of the DOL Action.

5. What will be my share of the Settlement Fund?

Plaintiffs' Counsel have submitted to the Court a detailed Plan of Allocation for approval at or after the Fairness Hearing. The Plan of Allocation, which may be obtained at www.Kellersettlements.com, or by contacting Plaintiffs’ Counsel, will describe the manner by which the Settlement proceeds paid into the ESOP will be allocated. In general terms, the Plan of Allocation will provide that persons other than CRC who were participants in the Plans on or after July 1, 2001, and who received full or partial distributions of their Capital Accumulations (as defined in the Plans) prior to June 30, 2004, will receive payment from the Settlement Fund for each share allocated to their Stock Account (as defined in the Plans) as follows: (a) promptly after the deposits into the Settlement Fund provided for in Paragraphs 3.1 – 3.3 of the Settlement Agreement, there shall be allocated to each such participant $1.76 per share; (b) promptly after the deposit into the Settlement Fund by TEOHC of the proceeds of the sale of the Palm Desert Property as provided for in Paragraph 3.4 of the Settlement Agreement, there shall be allocated to each such participant an amount equal to $0.80 per share multiplied by a fraction, the denominator of which is $4,000,000, and the numerator of which is the amount so deposited by TEOHC into the Settlement Fund; and (c) at the time of distribution of the amount deposited into the Settlement Fund by CRC pursuant to Paragraph 3.5 of the Settlement Agreement, there shall be allocated to each such participant an amount equal to $0.46 per share multiplied by a fraction, the denominator of which is $2,100,000, and the numerator of which is the amount so deposited by CRC into the Settlement Fund pursuant to Paragraph 3.5 of the Settlement Agreement (net of any amount returned to CRC pursuant to Paragraph 3.6 of the Settlement Agreement). The Plan of Allocation shall further provide the remainder of the net Settlement proceeds will be allocated among all other persons who for whom a Stock Account was maintained by the ESOP as of June 30, 2004 pro rata in accordance with their ESOP Capital Accumulation amounts as of June 30, 2004.

6. How can I get my portion of the recovery? You do not need to file a claim for recovery. If you are entitled to share in the net Settlement proceeds, your share will be deposited in your ESOP account. If you are a former participant you will be notified with respect to the procedure for receiving your share, if any, of the net Settlement proceeds.

7. When would I receive my portion of the recovery?

As discussed above under Question 1, payment is conditioned on several matters, including the Court’s approval of the Settlement and that approval becoming Final and no longer subject to any appeals, the sale of the Palm Desert Property and the deposits by CRC with respect to certain federal income tax benefits he may receive described above under “Summary of the Settlement.” These matters may take one or more years to be finally resolved. As discussed in Questions 1 and 5 above, it is anticipated that certain interim distributions will be made by the ESOP after the Court’s approval of the Settlement has become Final.

8. How will Plaintiffs' Counsel be paid?

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Plaintiffs’ Counsel will apply for an award of attorneys’ fees and expenses on behalf of all Plaintiffs’ counsel. The application for attorneys’ fees will not exceed 33.33% of the cash deposited in the Settlement Fund from time to time (net of amounts payable to the United States Treasury as an ERISA § 502(l) penalty as described above under "Summary of the Settlement,"


and excluding expenses approved by the Court to be reimbursed to Plaintiffs’ Counsel), plus $450,000 payable with respect to Plaintiffs’ Counsel’s successful efforts to secure and uphold on appeal an injunction with respect to indemnification sought by the Defendants from TEOHC. The application for expense reimbursement will not exceed $440,000. Any award of fees and additional expenses will be paid from the Settlement Fund as and when cash is deposited therein in accordance with the terms of the Settlement Agreement, concurrent with disbursements to the ESOP. The written application for fees and expenses, together with the application for incentive awards to the Plaintiffs (which shall not exceed $40,000 in the aggregate) will be filed by January ___, 2010, and the Court will consider this application at the Fairness Hearing. A copy of the application will be available at www.Kellersettlements.com or by a requesting a copy from Plaintiffs’ Counsel. To date, Plaintiffs’ Counsel have received no payment for their services in prosecuting the Action, nor have counsel been reimbursed for their out-of-pocket expenses.

OBJECTIONS

9. How do I tell the Court if I don’t like the Settlement? Any Affected Participant may object to any aspect of the Settlement by filing a written objection with the Court. To object, you must send a letter or other written statement saying that you object to the Settlement, Bar Order, the attorneys’ fee award, and/or the Plaintiff incentive awards in Johnson et al. v. Couturier et al., No. 2:05-cv-02046 RRB GGH. Be sure to include your name, address, telephone number, signature, and a full explanation of all reasons you object to the Settlement. Your written objection must be filed with the Court, and served upon the counsel listed below by no later than January __, 2010:

File with the Clerk of the Court: Clerk of the Court United States District Court for the Eastern District of California Robert T. Matsui United States Courthouse 501 I Street, Sacramento, California 95814 - 7300 Re: Case No. No. 2:05-cv-02046 RRB GGH

And, by the same date, serve copies of all such papers by mail and fax to each of the following:

PLAINTIFFS’ COUNSEL: Gary A. Gotto Gary D. Greenwald KELLER ROHRBACK P.L.C. 3101 N. Central Avenue Suite 1400 Phoenix, AZ 85012 Fax: (602) 248-2822

COUNSEL FOR TEOHC AND THE ESOP

Cynthia J. Larsen Orrick Herrington & Sutcliffe LLP 400 Capitol Mall, Suite 3000 Sacramento, California 95814 Telephone: (916) 447-9200 Fax: (916) 329-4900

COUNSEL FOR DEFENDANTS:

Theodore M. Becker Julie A. Govreau Morgan, Lewis & Bockius, LLP 77 West Wacker Drive Chicago, Illinois 60601 Fax: (312) 324-1001

Christopher J. Rillo Kathleen A. Stimeling Schiff Hardin LLP One Market Street Spear Street Tower, 32nd Floor San Francisco, California 94105 Fax: (415) 901-8701

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The objection must state all supporting bases and reasons for the objection, set forth proof of your participation in the Plans, clearly identify any and all witnesses, documents and other evidence of any kind that are to be presented at the Fairness Hearing in connection with such objections, and further describe the substance of any testimony to be given by you as well as by any supporting witnesses.

UNLESS OTHERWISE ORDERED BY THE COURT, ANYONE WHO DOES NOT OBJECT IN THE MANNER DESCRIBED HEREIN WILL BE DEEMED TO HAVE WAIVED ANY OBJECTION, WILL NOT BE PERMITTED TO SPEAK AT THE FAIRNESS HEARING AND SHALL BE FOREVER FORECLOSED FROM MAKING ANY OBJECTION TO THE PROPOSED SETTLEMENT, THE BAR ORDER AND THE APPLICATION FOR ATTORNEYS’ FEES AND EXPENSES AND PLAINTIFF INCENTIVE AWARDS.

THE COURT’S FAIRNESS HEARING

10. Do I have to come to the hearing? Plaintiffs’ Counsel will answer questions Judge Beistline may have at the Fairness Hearing. You are welcome to come at your own expense. If you send an objection, you do not have to come to Court to talk about it. As long as you mailed your written objection on time, it will be before the Court when the Court considers whether to approve the Settlement as fair, reasonable and adequate. You may also have your own lawyer attend the Fairness Hearing at your expense, but such attendance is not mandatory.

11. May I speak at the hearing? If you have filed a timely objection and are a current ESOP participant or a former participant in the Plans who would be subject to the Bar Order, if you wish to speak, present evidence or present testimony at the Fairness Hearing, you must state in your objection your intention to do so, and must identify any witnesses you intend to call or evidence you intend to present. The Fairness Hearing may be rescheduled by the Court without further notice to Affected Participants. If you wish to attend the Fairness Hearing, you should confirm the date and time with Plaintiffs’ Counsel.

IF YOU DO NOTHING

12. What happens if I do nothing at all?

If you do nothing and you are entitled to participate in the Settlement proceeds, you will participate in those proceeds as described above in this Notice if the Settlement is approved, and you will be subject to the Bar Order.

GETTING MORE INFORMATION 13. How do I get more information?

This Notice summarizes the proposed Settlement. Full details of the Settlement are set forth in the Settlement Agreement. You may obtain a copy of the Settlement Agreement by making a written request to a member of Plaintiffs' Counsel listed on Page 6. Copies of the Settlement Agreement may also be viewed at www. Kellersettlements.com. Plaintiffs’ Counsel have established a toll-free phone number to receive your comments and questions, (800) 236-8134, and may also be contacted via email at [email protected].

DATED: __________, 2___.

BY ORDER OF THE COURT


settlement agreement...2 1.3 “agreement execution date means the date on which the final signature...

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