IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE IN RE COMVERGE, INC. SHAREHOLDERS LITIGATION ) CONSOLIDATED ) C.A. No. 7368-VCMR STIPULATION AND AGREEMENT OF COMPROMISE, SETTLEMENT AND RELEASE This Stipulation and Agreement of Compromise, Settlement and Release (together with the exhibits hereto, the Stipulation ) is entered into as of May 26, 2017, between (a) plaintiffs Gary K. Schultz and Saravanan Somlinga (collectively, Plaintiffs ), on behalf of themselves and the Class 1 ; and (b) Alec G. Dreyer, Joseph M. O Donnell, John McCarter, R. Blake Young, Nora Mead Brownell, A. Laurence Jones, John Rego, Rudolf J. Hoefling, and James J. Moore (collectively, the Director Defendants, and together with Plaintiffs, the Parties, and each individually a Party ), by and through their respective undersigned counsel, and embodies the terms and conditions of the Settlement of the abovecaptioned consolidated stockholder class action (the Action ). Subject to the approval of the Court and the terms and conditions expressly provided herein, this Stipulation is intended to fully, finally and forever compromise, settle, release, resolve and dismiss with prejudice: (a) the Action and all claims asserted therein against the Director Defendants; and (b) each and every one of the Released 1 All terms with initial capitalization not otherwise defined herein shall have the meanings ascribed to them in Paragraph 1 below.
Claims against each and every one of the Released Parties, whether asserted in the Action or otherwise. WHEREAS: A. On March 26, 2012, Comverge, Inc. ( Comverge ) announced that it had entered into a definitive agreement (the Merger Agreement ) to be acquired by Peak Merger Corp., an affiliate of H.I.G. Capital, LLC ( HIG ), a private investment firm, for $1.75 per share in cash (the Merger ). B. Following the announcement of the Merger, purported stockholders of Comverge filed five actions in the Court of Chancery of the State of Delaware (the Court ) asserting claims in connection with the Merger, which were captioned: (i) Schultz v. Young, et al., C.A. No. 7368-VCP; (ii) Somlinga v. Dreyer, et al., C.A. No. 7371-VCP; (iii) Cohen v. Young, et al., C.A. No. 7386-VCP; (iv) Walker v. Comverge, Inc., et al., C.A. No. 7398-VCP; and (v) Kanakamedala v. Young, et al., C.A. No. 7399-VCP. C. On April 6, 2012, the Court entered an order: (i) consolidating the above-referenced class actions under the caption In re Comverge, Inc. Shareholders Litigation, Consolidated C.A. No. 7368-VCMR; (ii) designating Gary K. Schultz, Saravanan Somlinga, and Adrienne Cohen as Lead Plaintiffs in the Action; (iii) designating the law firms of Faruqi & Faruqi, LLP, Levi & Korsinsky LLP, and Gardy & Notis, LLP as Co-Lead Counsel in the Action; and 2
(iv) designating the law firms Rigrodsky & Long, P.A. and Rosenthal, Monhait & Goddess, P.A. as Co-Liaison Counsel in the Action. D. On April 12, 2012, Comverge filed with the SEC a Schedule 14D-9 Solicitation/Recommendation Statement (the Solicitation/Recommendation Statement ) in response to the tender offer by Peak Merger Corp. (the Tender Offer ) commenced in connection with the Merger. E. On April 18, 2012, Plaintiffs filed and served their Verified Consolidated Amended Class Action Complaint alleging, among other things, that the Solicitation/Recommendation Statement was deficient and did not provide Comverge stockholders with material information in connection with the Tender Offer, including the projections used by Houlihan Lokey Capital, Inc. ( Houlihan Lokey ), financial advisor to the Strategy Committee of Comverge s Board of Directors, and fees paid to Houlihan Lokey by HIG. F. On April 19, 2012, Plaintiffs filed a motion to expedite proceedings in connection with their intention to seek injunctive relief in connection with the Tender Offer. G. On April 27, 2012, following full briefing and oral argument, the Court granted expedited proceedings. H. On May 2, 2012, Plaintiffs filed a motion for preliminary injunction. 3
I. On May 1, 2012, Comverge filed with the SEC an amendment to the Solicitation/Recommendation Statement disclosing certain information concerning the projections used by Houlihan Lokey and the compensation received by Houlihan Lokey in connection with providing services to HIG. J. In connection with expedited proceedings in the Action, the Parties and HIG and other third parties conducted expedited discovery, including the production of documents and depositions of Laurence Jones (Chairman of the Strategy Committee of Comverge s Board of Directors), Deborah Ifrah (Managing Director of J.P. Morgan Securities LLC, financial advisor to Comverge), Thomas Puricelli (Senior Vice President of Houlihan Lokey Capital, financial advisor to the Strategy Committee), and Joseph Zulli (Principal at HIG). K. On May 6, 2012, Plaintiffs filed a motion to compel with respect to documents and information withheld from production by Comverge based on an assertion of the attorney-client privilege. L. On May 8, 2012, following full briefing and oral argument, the Court denied Plaintiffs motion for a preliminary injunction. M. On May 14, 2012, the Tender Offer was successfully completed and on May 15, 2012, the Merger closed (the Closing Date ). N. On April 10, 2013, following full briefing and oral argument (and Comverge s agreement to provide a privilege log and certain other documents), the 4
Court issued an Order granting in part and denying in part Plaintiffs motion to compel. O. Following further document discovery consistent with the Parties agreement and the Court s April 10, 2013 Order, on June 28, 2013, Plaintiffs filed their Verified Consolidated Second Amended Class Action Complaint (the Operative Complaint ). P. The Operative Complaint named the Director Defendants, as well as HIG, Peak Holdings Corp. and Peak Merger Corp. (collectively, the HIG Defendants, and with the Director Defendants, Defendants ) as defendants. The Operative Complaint alleged that the Director Defendants breached their fiduciary duties by conducting a flawed sales process and agreeing to what Plaintiffs contended were preclusive deal protections in connection with the Merger, and that the HIG Defendants aided and abetted those breaches. It sought certification of a class consisting of all former holders of Comverge stock (other than the Defendants and any person, firm, trust, corporation, or other entity related to or affiliated with any defendants). Q. On July 29, 2013, the Director Defendants and the HIG Defendants filed motions to dismiss the Operative Complaint under Court of Chancery Rule 12(b)(6) (the Motions to Dismiss ). 5
R. On November 25, 2014, following full briefing and oral argument, the Court issued a Memorandum Opinion granting the HIG Defendants motion to dismiss and dismissing with prejudice all claims against the HIG Defendants, and granting in part and denying in part the Director Defendants motion to dismiss and dismissing all claims against the Director Defendants other than claims for breach of fiduciary duties based on the termination fees, expense reimbursement, and Convertible Notes agreed to in connection with the Merger. S. Following the Court s decision on the Motions to Dismiss, the Parties conducted merits-based discovery, including the production of documents and depositions of former Comverge directors Nora Mead Brown, Alec Dreyer, Rudolf Hoefling, Laurence Jones (second deposition), John McCarter, James Moore, Joseph O Donnell and John Rego; Comverge President and CEO Blake Young, Comverge CFO David Mathieson; and Michael Macakanja (Managing Director of JP Morgan), Thomas Puricelli (second deposition), and Brian Schwartz (Executive Managing Director of HIG). The Parties also exchanged expert reports and conducted expert-based discovery, including depositions of Plaintiffs experts Guhan Subramanian and J.T. Akins, and Defendants expert Paul Gompers. T. On April 29, 2016, the Director Defendants filed a motion for summary judgment. 6
U. On June 13, 2016, the parties executed a stipulation and proposed order, which was entered by the Court on June 27, 2016, (a) certifying the Action as a class action on behalf of a non-opt out class defined as: all record and beneficial holders of Comverge common stock at the time that the Merger between Comverge and an affiliate of HIG closed on May 15, 2012, and their successors in interest, successors, predecessors in interest, predecessors, representatives, trustees, executors, administrators, estates, heirs, assigns or transferees, immediate and remote, and any person or entity acting for or on behalf of, or claiming under, any of them, and each of them, together with their predecessors in interest, predecessors, successors in interest, successors, and assigns, but excluding Comverge, HIG, and officers or directors of Comverge, HIG and any person, firm, trust, corporation or other entity related to or affiliated with Comverge and/or HIG as of May 15, 2012; and (b) certifying Plaintiffs as class representatives. V. On October 31, 2016, following full briefing and oral argument, the Court issued an Order denying the Director Defendants motion for summary judgment. W. On November 18, 2016, the Parties submitted a Joint Pre-Trial Stipulation in connection with the trial of the Action, which was set to commence on December 13, 2016. 7
X. On November 29, 2016, the Parties separately filed opening Pre-Trial Briefs in connection with the trial of the Action. Y. On December 9, 2016, the Parties reached agreement to pursue mediation to negotiate a settlement of the Action, and they asked the Court to defer trial scheduled to begin on December 13, 2016 until the mediation effort concluded. Z. On April 13, 2017, the Parties, through their representatives, participated in a voluntary mediation session before Robert A. Meyer, Esq. to attempt to negotiate a settlement of the Action. At the mediation, the Parties reached an agreement in principle to settle the action and agreed to cooperate to prepare definitive documentation. AA. This Stipulation is intended fully, finally and forever to resolve, discharge and settle the Released Plaintiffs Claims (as defined herein) and the Released Defendants Claims (as defined herein) with prejudice. It is the intention of the Parties that the Settlement will release all Released Plaintiffs Claims and Released Defendants Claims. BB. The entry by the Parties into this Stipulation is not, and shall not be construed as or deemed to be evidence of, an admission as to the merit or lack of merit of any claims or defenses asserted in the Action. 8
CC. Based upon their investigation and prosecution of the case, Plaintiffs and Class Counsel have concluded that the terms and conditions of the Settlement are fair, reasonable and adequate to Plaintiffs and the other Class Members and in their best interests. Class Counsel has received sufficient information to evaluate the merits of the Settlement. Based on Plaintiffs direct oversight of the prosecution of this Action and with the advice of their counsel, each of the Plaintiffs has agreed to settle and release the claims raised in the Action pursuant to the terms and provisions of this Stipulation, after considering (a) the financial benefit that Plaintiffs and the other Class Members will receive under the Settlement, (b) the significant risks of continued litigation and trial, and (c) the desirability of permitting the Settlement to be consummated as provided by the terms and conditions of this Stipulation. DD. The Director Defendants deny any and all allegations of their respective wrongdoing, fault, liability or damage whatsoever, and each of the Director Defendants denies that he or she engaged in, committed or aided or abetted the commission of any breach of duty, wrongdoing or violation of law. EE. The Director Defendants enter into this Stipulation solely because they consider it desirable that the Action be settled and dismissed with prejudice in order to, among other things, eliminate the uncertainties, burden and expense of further litigation. Nothing in this Stipulation shall be construed as any admission 9
by any of the Director Defendants of any kind, including admissions as to wrongdoing, fault, liability, or damages whatsoever, or as evidence as to any of the foregoing. Nothing in this Stipulation shall be construed as an allocation of fault or liability between or among any of the Director Defendants. NOW, THEREFORE, IT IS HEREBY STIPULATED, CONSENTED TO AND AGREED, by Plaintiffs, for themselves and on behalf of the Class, and by the Director Defendants that, subject to the approval of the Court and pursuant to Court of Chancery Rule 23 and the other conditions set forth herein, for the good and valuable consideration set forth herein and conferred on Plaintiffs and the Class, the Action shall be finally and fully compromised, settled and dismissed with prejudice, and that the Released Claims shall be finally and fully compromised, settled, released and dismissed with prejudice as to the Released Parties, as defined herein, in the manner and upon the terms and conditions hereafter set forth. A. Definitions 1. In addition to the terms defined above, the following capitalized terms, used in this Stipulation, shall have the meanings specified below: a. Account means the bank account referred to below and maintained by the Settlement Administrator into which the Settlement Amount, less the amount of any Fee and Expense Award, shall be deposited. The funds in 10
the Account shall be invested in United States Treasury Bills (or a mutual fund invested solely in such instruments) and all interest accrued thereon shall be collected and reinvested until distributed as provided herein. b. Administrative Costs means all costs and expenses associated with providing notice of the Settlement to the Class or otherwise administering or carrying out the terms of the Settlement, including, without limitation, taxes and tax-related costs relating to the Account, the actual costs of printing and mailing the Notice and Proof of Claim, reimbursements to nominee owners for forwarding the Notice and Proof of Claim to their beneficial owners, the administrative expenses incurred and fees charged by the Settlement Administrator in connection with providing Notice via mail, website, telephone and email as needed, the fees and expenses of Class Counsel in connection with administration of the Settlement, and the fees and expenses, if any, of the Settlement Administrator. c. Class means a class consisting of all record holders and beneficial owners of Comverge common stock at the time that the Merger between Comverge and an affiliate of HIG closed on May 15, 2012, and their successors in interest, successors, predecessors in interest, predecessors, representatives, trustees, executors, administrators, estates, heirs, assigns or transferees, immediate and remote, and any person or entity acting for or on behalf of, or claiming under, any 11
of them, and each of them, together with their predecessors in interest, predecessors, successors in interest, successors, and assigns, but excluding Comverge, officers or directors of Comverge, HIG and any person, firm, trust, corporation or other entity related to or affiliated with Comverge and/or HIG as of May 15, 2012. d. Class Counsel means the law firms of Faruqi & Faruqi, LLP, Levi & Korsinsky LLP, Gardy & Notis, LLP, Monteverde & Associates PC, Rigrodsky & Long, P.A. and Rosenthal, Monhait & Goddess, P.A. e. Class Distribution Order means an order entered by the Court authorizing and directing that the Net Settlement Fund be distributed proportionately, pursuant to the Plan of Allocation in Paragraph [7] of this Stipulation. f. Class Member means a member of the Class. g. Closing means the consummation of the Merger on the Closing Date. h. Effective Date means the first business day following the date the Judgment becomes Final. The finality of the Judgment shall not be affected by any proceeding (including appeals) regarding solely an application for attorneys fees and expenses or any special award to Plaintiffs from the Net Settlement Fund or approval of any Plan of Allocation of the Net Settlement Fund. 12
i. Eligible Shares means shares of Comverge common stock owned by Class Members at the Closing. j. Fee and Expense Award means an award to Plaintiffs Counsel of fees, expenses and incentive awards to Plaintiffs, to be paid from the Settlement Amount, approved by the Court in accordance with this Settlement Agreement and in full satisfaction of any and all claims for attorneys fees, expenses or incentive awards that have been, could be or could have been asserted by Class Counsel or any other counsel for any member of the Class in connection with the Action. k. Final means with respect to any judgment or order that the judgment or order is finally affirmed on appeal or is no longer subject to appeal and the time for any petition for reargument, appeal, or review, by certiorari or otherwise, has expired. l. Immediate Family means an individual s spouse, parents, siblings, children, grandparents, grandchildren; the spouses of his or her parents, siblings and children; and the parents and siblings of his or her spouse, and includes step and adoptive relationships. m. Judgment means the Final Order and Judgment to be entered in the Action substantially in the form attached hereto as Exhibit [D]. 13
n. Legal Claims means any and all manner of claims, demands, rights, liabilities, losses, obligations, duties, damages, diminutions in value, costs, debts, expenses, interest, penalties, fines, sanctions, fees, attorneys fees, expert or consulting fees, actions, potential actions, causes of action, suits, agreements, judgments, decrees, matters, issues and controversies of any kind, nature or description whatsoever, whether disclosed or undisclosed, accrued or unaccrued, apparent or not apparent, foreseen or unforeseen, matured or not matured, suspected or unsuspected, liquidated or not liquidated, fixed or contingent, which now exist, or heretofore or previously existed, or may hereafter exist, including known claims and Unknown Claims, whether direct, derivative, individual, class, representative, legal, equitable or of any other type, or in any other capacity, whether based on state, local, foreign, federal, statutory, regulatory, common or other law or rule, including but not limited to any claims under state securities law, or under state disclosure law or any claims that could be asserted derivatively on behalf of Comverge. o. Net Settlement Fund means the Settlement Fund less any Taxes, Tax Expenses (as defined below), attorneys fees and expenses, awards, notice and Administration Costs and any other expenses approved by the Court. 14
p. Notice means Notice of Proposed Settlement of Class Action, Settlement Hearing and Right to Appear, substantially in the form attached hereto as Exhibit [B]. q. Proof of Claim means the Proof of Claim, substantially in the forms attached hereto as Exhibit [C]. r. Released Defendants Claims means any Legal Claims (including Unknown Claims ) that have been or could have been asserted in the Action or any forum by the Director Defendants or the HIG Defendants or any one of them or their respective successors and assigns against Plaintiffs, the Class Members, or any of their respective counsel, which arise out of or relate in any way to the institution, prosecution, settlement or dismissal of the Action, including but not limited to alleged litigation misconduct, breaches of confidentiality orders, violations of court rules, and defamation; Legal Claims (including Unknown Claims ) against Plaintiffs and their affiliates arising from or relating to the alleged conduct underlying the Director Defendants respective affirmative defenses; and any Legal Claims (including Unknown Claims ) of bad faith or abuse of process against Plaintiffs or Class Counsel relating to their prosecution of the Action; provided, however, that the Released Defendants Claims shall not include any claims relating to the enforcement of the Settlement. 15
s. Released Defendant Parties means (i) the Director Defendants, (ii) the members of each Director Defendant s Immediate Family, (iii) the HIG Defendants and Grace Bay Holdings II, LLC, (iv) Comverge, and (v) any of the foregoing s respective parent entities, controlling persons, associates, predecessors, successors, assigns, affiliates, or subsidiaries, and each and all of their past or present officers, directors, executives, stockholders, principals, representatives, employees, attorneys, financial or investment advisors, consultants, accountants, auditors, investment bankers, commercial bankers, entities providing fairness opinions, underwriters, brokers, dealers, insurers, advisors or agents, heirs, executors, trustees, general or limited partners or partnerships, limited liability companies, members, managers, joint ventures, personal or legal representatives, estates, and administrators. t. Released Plaintiffs Claims means any and all manner of Legal Claims (including Unknown Claims ) that were asserted by Plaintiffs on their own behalf and/or on behalf of all other Class Members in the Action, or could have been or in the future might be asserted by Plaintiffs, or the Class in the Action or in any other court, tribunal, forum or proceeding that are based upon, arise out of, relate in any way to, or involve, directly or indirectly, any of the actions, events, conduct, decisions, negotiations, fairness opinions, transactions, occurrences, statements, representations, misrepresentations, omissions, 16
disclosures, allegations, facts, practices, events, claims or any other matters, things or causes whatsoever, or any series thereof, that relate in any way to the Merger or the Merger Agreement, including, without limitation, those that were alleged, asserted, or claimed in the Action or which are based upon, arise out of, relate in any way to, or involve, directly or indirectly, the events or conduct at issue in the Action, provided, however, that the Released Claims shall not include any claims for the enforcement of the Settlement. As to Plaintiffs, Released Plaintiffs Claims shall also include all Legal Claims related to the prosecution, defense, settlement or dismissal of the Action, including but not limited to alleged litigation misconduct, breaches of confidentiality orders, violations of court rules, and defamation. u. Released Plaintiff Parties means (i) Plaintiffs, (ii) all Class Members, and (iii) any of the foregoing s respective parent entities, controlling persons, associates, predecessors, successors, assigns, affiliates, or subsidiaries, and each and all of their past or present officers, directors, executives, stockholders, principals, representatives, employees, attorneys, financial or investment advisors, consultants, accountants, auditors, investment bankers, commercial bankers, entities providing fairness opinions, underwriters, brokers, dealers, insurers, advisors or agents, heirs, executors, trustees, general or limited 17
partners or partnerships, limited liability companies, members, managers, joint ventures, personal or legal representatives, estates, and administrators. v. Released Claims means the Released Defendants Claims and the Released Plaintiffs Claims. w. Released Parties means the Released Defendant Parties and the Released Plaintiff Parties. x. Scheduling Order means the Scheduling Order, substantially in the form attached hereto as Exhibit [A]. y. Settlement means the settlement contemplated by this Stipulation. z. Settlement Amount means a total amount of five million nine hundred thousand dollars in cash ($5,900,000). aa. bb. Settlement Administrator means Epiq Systems, Inc. Settlement Fund means the fund consisting of the Settlement Amount deposited in the Account. cc. Settlement Hearing means the hearing to be held by the Court to determine whether to confirm its prior certification of the Class pursuant to Court of Chancery Rule 23 subject to the revisions set forth herein, whether Plaintiffs and Class Counsel have adequately represented the Class, whether the proposed Settlement should be approved as fair, reasonable and adequate, whether 18
all Released Claims should be dismissed with prejudice as against the Released Parties, whether an Order and Judgment approving the Settlement should be entered, and whether and in what amount any Fee and Expense Award should be paid to Plaintiffs out of the Settlement Fund. dd. Settlement Payment Recipients means all Class Members who submit a valid Proof of Claim to the Settlement Administrator by the deadline in the Notice. ee. Unknown Claims means any and all claims that otherwise fall within the definition of Released Plaintiffs Claims and that Plaintiffs or any Class Member does not know or suspect exists in his, her or its favor at the time of the release of the Released Claims as against the Released Defendant Parties, including without limitation those which, if known, might have affected the decision to enter into this Settlement, and any and all claims that otherwise fall within the definition of Released Defendants Claims and that any Director Defendant does not know or suspect to exist in his or her favor at the time of the release of the Released Claims as against the Released Plaintiff Parties, including without limitation those which, if known, might have affected the decision to enter into this Settlement. With respect to any of the Released Claims, the Parties stipulate and agree that upon the Effective Date, Plaintiffs and the Director Defendants shall expressly, and each of the Class Members shall be 19
deemed to have, and by operation of the Judgment shall have, expressly waived, relinquished and released any and all provisions, rights and benefits conferred by or under Cal. Civ. Code 1542 or any law of the United States or any state of the United States or territory of the United States or other jurisdiction, or principle of common law, which is similar, comparable or equivalent to Cal. Civ. Code 1542, which provides: 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. The Parties acknowledge, and the other Class Members by operation of law shall be deemed to have acknowledged, that they may discover facts in addition to or different from those now known or believed to be true with respect to the Released Claims, but that it is the intention of Parties, and by operation of law the other Class Members, to completely, fully, finally and forever extinguish any and all Released Claims, known or unknown, suspected or unsuspected, which now exist, or heretofore existed, or may hereafter exist, and without regard to the subsequent discovery of additional or different facts. The Parties acknowledge, and the other Class Members and other Released Parties by operation of law shall be deemed to have acknowledged, that the inclusion of Unknown Claims in the definition of 20
Released Claims was separately bargained for and was a key element of the Settlement and was relied upon by the Parties in entering into this Stipulation. B. Settlement Consideration and Administration 2. In consideration for the full and final settlement and dismissal with prejudice of, and the release of, any and all Released Claims, the Director Defendants and/or Comverge s insurers shall cause to be paid a total of $5,900,000 for the benefit of the Class. $250,000 of the Settlement Amount shall be deposited into the Account, within ten (10) business days of the later of: (i) the Court granting the Scheduling Order; or (ii) Class Counsel and/or the Settlement Administrator providing a W-9 for the Settlement Fund and complete information and instructions for payment by both check and wire, and shall be used in the first instance to administer the Settlement. The remainder of the Settlement Amount (i.e., $5,650,000) shall, subject to Class Counsel and/or the Settlement Administrator providing the information set out in (ii) of the preceeding sentence, be deposited into the Account within ten (10) business days after the Effective Date (such date the Settlement Funding Date ). No Director Defendant, nor Comverge, nor any other person or entity who or which paid any portion of the Settlement Fund, nor any Released Defendant Party shall have any obligation to pay or bear any additional amounts, expenses, costs, damages, or fees to or for the benefit of Plaintiffs or any Class Members in connection with this Settlement, 21
including but not limited to attorneys fees and expenses for any counsel to any Class Member, or any costs of notice or settlement administration or otherwise. 3. The Settlement Administrator shall, subject to the jurisdiction, direction and approval of the Court, oversee administration and distribution of the Settlement Fund. The Settlement Administrator shall discharge its duties under Class Counsel s supervision. No Released Defendant Party shall have any responsibility whatsoever for the administration of the Settlement, and no Released Defendant Party shall have any liability whatsoever to any person, including, but not limited to, Plaintiffs and the Class Members, for fees or expenses charged by the Settlement Administrator or otherwise in connection with any such administration. 4. Under the supervision of Class Counsel, the Settlement Administrator shall provide Notice of the proposed Settlement and distribute the Settlement Fund on a pro rata basis as set forth herein, as approved by the Court. Within five (5) business days of execution of this Stipulation, Comverge shall provide or cause to be provided to Class Counsel and/or the Settlement Administrator stockholder information from its transfer agent as appropriate for providing Notice to the Class. The Settlement Administrator shall mail the Notice to each such person as set forth in such records, or who otherwise may be identified through further reasonable effort. The Notice shall request that 22
brokerage firms, banks and other persons or entities who are members of the Class in their capacities as record holders, but not as beneficial owners, send the Notice promptly to beneficial owners. 5. Class Counsel may pay from the Settlement Fund, without further approval from the Director Defendants, Comverge, or further order of the Court, up to $250,000 for Administrative Costs actually and reasonably incurred. In the event that the Settlement is terminated pursuant to the terms of this Stipulation, any amounts reasonably paid or reasonably incurred pursuant to this Paragraph (except for fees paid to Class Counsel, if any) shall not be returned or repaid to the Director Defendants, or any other person who paid any portion of the Settlement Amount into the Account. 6. Subject to Paragraph [9] below, the Settlement Fund shall be applied as follows: a. To pay all Administrative Costs reasonably incurred; b. Subject to the approval and further order(s) of the Court, to pay to Plaintiffs any Fee and Expense Award; c. To pay any Taxes and/or Tax Expenses (as defined below) owed by the Settlement Fund; and d. Subject to the approval and further order(s) of the Court, to distribute the balance of the Net Settlement Fund to the Class Members as 23
provided in the Plan of Allocation (as defined below), or as otherwise ordered by the Court. 7. The Net Settlement Fund shall be allocated among all Class Members pursuant to the terms of this Paragraph (the Plan of Allocation ). Under the supervision of Class Counsel, the Settlement Administrator shall make distributions from the Account to the Settlement Payment Recipients in the following manner and subject to the following conditions as soon as reasonably practicable after the Effective Date. a. The Net Settlement Fund shall be allocated on a pro-rata per-share basis amongst the Settlement Payment Recipients who have submitted a valid Proof of Claim (except that distributions that would result in payment less than five dollars ($5) will not be paid) by the deadline provided in the Notice, based on the number of Comverge common stock held by the applicable Settlement Payment Recipient upon the date of Closing (the Initial Distribution ). The Director Defendants shall have no input, responsibility or liability for any claims, payments or determinations by the Settlement Administrator with respect to Class Member claims for payment under this Settlement. b. Any Class Member who does not submit a valid Proof of Claim by the deadline provided in the Notice will not be entitled to receive any distribution from the Settlement Fund, but will otherwise be bound by all of the 24
terms of this Stipulation and the Settlement, and the releases provided for herein, and will be permanently barred and enjoined from bringing any action, claim or other proceeding of any kind against the Released Parties with respect to the Released Claims. c. If Class Counsel and/or the Settlement Administrator have made reasonable efforts to provide for Settlement Payment Recipients to claim their payments, any amount of the Net Settlement Fund that remains unclaimed by the Settlement Payment Recipients after a period of six (6) months after the Initial Distribution, if economically feasible, will be re-disbursed by the Settlement Administrator for payment to all Settlement Payment Recipients who claimed their payments in the Initial Distribution, on a pro rata per share basis (except that supplemental distributions that would result in payment less than five dollars ($5) will not be paid). If a re-disbursement is not economically feasible or if funds still remain after a supplemental distribution, then any such unclaimed amount of the Net Settlement Fund shall be transferred to the Delaware Department of Finance, Office of Unclaimed Property for handling in accordance with the State s laws of interstate escheat. d. The Account shall be deemed to be in the custody of the Court, and it will remain subject to the jurisdiction of the Court until such time as it is distributed or returned pursuant to the terms of this Stipulation and/or further 25
order of the Court. The Settlement Administrator shall, subject to the jurisdiction, direction and approval of the Court, oversee administration and distribution of the Account. e. Class Counsel will apply to the Court, on notice to the Director Defendants counsel, for a Class Distribution Order approving the Settlement Administrator s administrative determinations concerning the acceptance and rejection of the claims submitted herein, approving any Administration Costs not previously paid, and directing payment of the Net Settlement Fund to Settlement Payment Recipients. f. The Settlement Administrator shall process each Proof of Claim received and, after entry of the Class Distribution Order, distribute the Net Settlement Fund to the Settlement Payment Recipients. g. For purposes of determining the extent, if any, to which a Class Member shall be entitled to be treated as a Settlement Payment Recipient the following conditions shall apply: i. Each Class Member shall be required to submit a Proof of Claim. If the Class Member s stock ownership differs from the stockholder list provided by Comverge, the Proof of Claim must be supported by such documents as are designated therein including proof of the stock ownership claimed or such 26
other documents or proof as the Settlement Administrator, in its discretion, may deem acceptable. Class Counsel shall have the right, but not the obligation, to advise the Settlement Administrator to waive what Class Counsel deem to be formal or technical defects in any Proof of Claim submitted in the interests of achieving substantial justice; ii. Each Proof of Claim must be submitted by the date specified in the Notice, unless such period is extended by Class Counsel or Order of the Court. Any Class Member who fails to submit a Proof of Claim by such date shall be forever barred from receiving any payment pursuant to this Stipulation (unless, by Order of the Court, a later submitted Proof of Claim by such Class Member is approved), but shall in all other respects be bound by all of the terms of this Stipulation and the Settlement, including the terms of the Judgment. Provided that it is received before the motion for the Class Distribution Order is filed, a Proof of Claim shall be deemed to have been submitted when posted, if received with a postmark indicated on the envelope and if mailed by first-class mail and addressed in accordance with the instructions thereon. In all other cases, the 27
Proof of Claim shall be deemed to have been submitted when actually received by the Settlement Administrator; iii. Each Proof of Claim shall be submitted to and reviewed by the Settlement Administrator, who shall determine in accordance with this Stipulation and the approved Plan of Allocation the extent, if any, to which each claim shall be allowed, subject to review by the Court; iv. Any Proof of Claim that does not meet the submission requirements may be rejected. Prior to rejection of a Proof of Claim, the Settlement Administrator shall communicate with the claimant in order to attempt to remedy any curable deficiencies in the Proof of Claim submitted. The Settlement Administrator shall notify, in a timely fashion and in writing, each claimant whose Proof of Claim it proposes to reject in whole or in part, setting forth the reasons therefor, and shall indicate in such notice that the claimant whose claim is to be rejected has the right to a review by the Court if the claimant so desires and complies with the requirements of subparagraph (v) below; 28
v. If any claimant whose claim has been rejected in whole or in part desires to contest such rejection, the claimant must, within twenty (20) calendar days after the date of mailing of the notice required in subparagraph (iv) above, serve upon the Settlement Administrator a notice and statement of reasons indicating the claimant s grounds for contesting the rejection along with any supporting documentation, and requesting a review thereof by Class Counsel. If a dispute concerning a claim cannot be otherwise resolved, Class Counsel shall thereafter present the request for review and decision to the Court on notice to the claimant; and h. This is not a claims-made settlement. Upon the Effective Date, neither the Defendants, nor any other person or entity who or which paid any portion of the Settlement Fund, shall have any right to the return of the Settlement Fund or any portion thereof irrespective of the number of Claims filed, the collective damages of Settlement Payment Recipients, the percentage of recovery of damages, or the amounts paid to Settlement Payment Recipients from the Net Settlement Fund. 8. Neither the Director Defendants nor any other Released Defendant Party shall take any position on or have any involvement with the 29
proposed Plan of Allocation so long as the proposed Plan of Allocation remains as reflected herein. Any modification of the proposed Plan of Allocation by the Court shall not affect the enforceability of the Stipulation, provide any of the Parties with the right to terminate the Settlement, impose an obligation on any of the Director Defendants or the other Released Defendant Parties to increase the consideration paid in connection with the Settlement or affect or delay the binding effect, effectiveness, or finality of the Judgment and the release of the Released Claims. Finality of the Settlement shall not be conditioned on any ruling by the Court or any appellate court solely concerning any plan of allocation. 9. Payment from the Settlement Fund made pursuant to and in the manner set forth herein shall be deemed conclusive compliance with this Stipulation. No Class Member shall have any claim against Plaintiffs, Class Counsel, the Director Defendants, Comverge, the Released Parties, the Settlement Administrator, or any of their counsel, based on the distributions made substantially in accordance with this Stipulation and/or orders of the Court. The Released Parties shall have no liability whatsoever for the investment of the Settlement Fund, notice to the Class, the administration of the Settlement Fund, the calculation of any distribution from the Settlement Fund, or the nonperformance of the Settlement Administrator, nor shall they have any liability whatsoever for the 30
payment or withholding of Taxes (including interest and penalties) owed by the Class Members or any losses incurred in connection therewith. C. Scope of the Settlement 10. Upon the Effective Date and the occurrence of all of the other events referenced in Paragraph [14] below, the Action shall be dismissed with prejudice, with each Party to bear its own costs and expenses, except as otherwise expressly provided in this Stipulation. Notwithstanding the preceding sentence, nothing in this Stipulation shall modify, amend, change or otherwise reduce the scope, nature, right or entitlement to reimbursement or advancement of fees and expenses to any Defendant provided as a result of Comverge s Bylaws or other governing documents, the Merger Agreement, applicable law, any policy of insurance, or any other contract providing for similar reimbursement or advancement. 11. Upon the Effective Date and the occurrence of all of the other events referenced in Paragraph [14] below, Plaintiffs and all Class Members and their respective successors-in-interest, successors, predecessors-in-interest, predecessors, representatives, trustees, executors, administrators, estates, heirs, assigns or transferees, in their capacities as such, and any person or entity acting for or on behalf of, or claiming under, any of them, and each of them, shall be deemed by operation of law to have fully, finally and forever released, settled and 31
discharged the Released Defendant Parties and all of their respective counsel from and with respect to the Released Plaintiffs Claims, and shall forever be barred and enjoined from commencing, instigating, instituting, maintaining, prosecuting, asserting, or participating in any action or other proceeding in any court of law or equity, arbitration tribunal, or administrative forum, or other forum of any kind, whether individual, class, derivative, representative, legal, equitable, or in any other capacity, asserting any of the Released Plaintiffs Claims against any of the Released Defendant Parties. 12. Upon the Effective Date and the occurrence of all of the other events referenced in Paragraph [14] below, the Director Defendants and their respective successors-in-interest, successors, predecessors-in-interest, predecessors, representatives, trustees, executors, administrators, estates, heirs, assigns or transferees, in their capacities as such, and any person or entity acting for or on behalf of, or claiming under, any of them, and each of them, and any and all of the other Released Defendant Parties, shall be deemed by operation of law to have fully, finally and forever released, settled and discharged each and every one of the Released Defendants Claims, and shall forever be barred and enjoined from commencing, instituting or prosecuting any of the Released Defendants Claims, against any of the Released Plaintiff Parties. 32
D. Submission of the Settlement to the Court for Approval 13. As soon as practicable after this Stipulation has been executed, Plaintiffs and the Director Defendants shall jointly apply to the Court for entry of the Scheduling Order in the form attached hereto as Exhibit [A], among other things: (i) approving and providing for the mailing of the Notice and Proof of Claim substantially in the form attached hereto as Exhibits [B] and [C] and scheduling the Settlement Hearing to consider: (a) the proposed Settlement, (b) the joint request of the Parties that the Judgment be entered substantially in the form attached hereto as Exhibit [D], (c) Plaintiffs application for a Fee and Expense Award, and (d) any objections to the foregoing; and (ii) staying the prosecution of the Action pending further order of the Court. The Parties agree to take all reasonable and appropriate steps to seek and obtain entry of the Scheduling Order. At the Settlement Hearing, the Parties shall jointly request that the Judgment be entered substantially in the form attached hereto as Exhibit [D]. E. Conditions of Settlement 14. This Stipulation shall be subject to the following conditions and, except as provided in Paragraphs [19] and [20], shall be canceled and terminated unless: a. the Court enters the Scheduling Order substantially attached hereto as Exhibit [A]; 33
b. the Court enters the Judgment substantially in the form attached hereto as Exhibit [D] and dismisses the Action with prejudice; c. the Effective Date occurs; and d. the full Settlement Amount is deposited in the Account by the Settlement Funding Date. F. Attorneys Fees and Expenses 15. Plaintiffs intend to petition the Court for a Fee and Expense Award (the Fee and Expense Application ). The Fee and Expense Application will seek (a) reimbursement of Class Counsel s expenses; (b) an award of attorneys fees not to exceed 25% of the Settlement Fund based on the financial recovery to the Class; (c) an award of attorney s fees not to exceed $300,000 based on the disclosures filed by Comverge with the SEC on May 1, 2012 to address Plaintiffs disclosure claims in connection with the Tender Offer; and (d) an award payable to Plaintiffs in the aggregate amount of $10,000. Any Fee and Expense Award shall be paid solely from the Settlement Fund and reduce the settlement consideration paid to the Class Members accordingly. The Director Defendants agree to not oppose the Fee and Expense Application. The Parties acknowledge and agree that any Fee and Expense Award shall be paid solely from the Account to Plaintiffs within the later of five (5) calendar days (i) of the Court s order on the Fee and Expenses Award becoming Final or (ii) the Settlement Funding Date, 34
provided, however, that in the event that the Fee and Expense Award is disapproved, reduced, reversed or otherwise modified, whether on appeal, further proceedings on remand, successful collateral attack or otherwise, the Plaintiffs shall, within five (5) business days after Plaintiffs receive notice of any such disapproval, reduction, reversal or other modification, return to the Settlement Fund the difference between the amount of the Fee and Expense Award awarded by the Court and any attorneys fees, litigation expenses and/or special award ultimately and finally awarded on appeal, further proceedings on remand or otherwise. The Parties acknowledge that the costs of administering the Settlement may include attorneys fees and expenses and that such costs may be paid from the Settlement Fund. Any such attorneys fees and expenses will be presented to the Court in connection with Court approval of the accounting and Class Distribution Order referred to in Paragraph [7]. With the exception of the attorneys fees and expenses referenced in the preceding two sentences, the Fee and Expense Application shall be the only petition for attorneys fees and expenses filed by or on behalf of Plaintiffs or Class Counsel in connection with the Action. In no event shall any of the Released Defendant Parties be obligated to pay any of such attorneys fees and expenses to Plaintiffs or Class Counsel as it is expressly understood that all such payments will be made out of the Settlement Fund. It is not a condition of this Stipulation that the Fee and Expense Application be granted. 35
The Fee and Expense Application may be considered separately from the proposed Settlement. Any disapproval or modification of the Fee and Expense Application by the Court or on appeal shall not affect or delay the enforceability of this Stipulation, provide any of the Parties with the right to terminate the Settlement, or affect or delay the binding effect or finality of the Judgment and the release of the Released Claims. Class Counsel warrants that no portion of any award of attorneys fees or expenses shall be paid to Plaintiffs or any Class Member, except as may be approved by the Court. G. Stay Pending Court Approval 16. Pending Court approval of the Settlement, the Parties agree to stay any and all proceedings in the Action other than those incident to the Settlement. The Parties also agree to use their reasonable best efforts to prevent, stay or seek dismissal of or oppose entry of any interim or final relief in favor of any Class Member in any other litigation against any of the Released Parties which challenges the Settlement or otherwise involves, directly or indirectly, a Released Claim. 17. Except as necessary to pursue the Settlement, pending final determination of whether the Settlement should be approved, all Parties agree not to institute, commence, prosecute, continue, or in any way participate in, whether 36
directly or indirectly, representatively, individually, or in any other capacity, any action or other proceeding asserting any Released Claims. 18. Notwithstanding Paragraphs [16] and [17], nothing herein shall in any way impair or restrict the rights of any Party to defend this Settlement or to otherwise respond in the event any Person objects to the Settlement, the proposed Judgment to be entered, or, in the case of the Plaintiffs solely, the Fee and Expense Application. H. Effect of Disapproval, Cancellation or Termination 19. If either (a) the Court does not enter the Judgment in substantially the form of Exhibit [D], (b) the Court enters the Judgment but on or following appellate review the Judgment is modified or reversed in any material respect, or (c) any of the other conditions of Paragraph [14] is not satisfied, this Stipulation shall be cancelled and terminated unless counsel for each of the Parties to this Stipulation, within ten (10) business days from receipt of such ruling or event, agrees in writing with counsel for the other Parties to proceed with this Stipulation and Settlement, including only with such modifications, if any, as to which all other Parties in their sole judgment and discretion may agree. For purposes of this Paragraph, an intent to proceed shall not be valid unless it is expressed in a signed writing. For purposes of this Paragraph, neither a modification nor a reversal on appeal of the amount awarded pursuant to the Fee 37