Exhibit 10.85

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF INDIANA

INDIANAPOLIS DIVISION

 

In re ITT EDUCATIONAL SERVICES, INC.

SECURITIES LITIGATION (INDIANA)

 

 

   CASE NO. 1:14-cv-01599-TWP-DML

STIPULATION AND AGREEMENT OF SETTLEMENT

This Stipulation and Agreement of Settlement dated as of November 2, 2015 (the
“Stipulation”), is submitted in the above-captioned Action pending in the United
States District Court for the Southern District of Indiana and is made and
entered into by and among: (i) Lead Plaintiff Meitav Dash Mutual Fund Management
Ltd. (“Meitav” or “Lead Plaintiff”), plaintiff Babulal Tarapara (“Tarapara”),
plaintiff Kristopher Hennen (“Hennen”), plaintiff Cynthia Grebely (“Grebely”),
and plaintiff Hoai T. Truong (“Truong”) (collectively, “Plaintiffs”), on behalf
of themselves and all other Members of the Settlement Class (as defined herein),
by and through counsel of record in the Litigation (as defined herein); and
Defendants (ii) ITT Educational Services, Inc. (“ITT” or the “Company”), and
(iii) Kevin M. Modany (“Modany”) and Daniel M. Fitzpatrick (“Fitzpatrick”)
(Modany and Fitzpatrick, collectively, the “Individual Defendants”) ((ii) and
(iii) are collectively the “Defendants”), by and through their counsel of record
in the Litigation. Plaintiffs and Defendants together are the “Settling
Parties.” This Stipulation is intended by the Settling Parties to fully,
finally, and forever resolve, discharge, and settle the Released Claims (as
defined herein), and to dismiss this Action against the Defendants with
prejudice, upon and subject to the approval of the Court and the terms and
conditions set forth in this Stipulation, without any admission or concession as
to the merits of any of the Settling Parties’ claims or defenses. Throughout
this Stipulation, all capitalized terms used, but not immediately defined, have
the meanings given to them in Section IV.1, infra.

 

 

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I. THE LITIGATION

On September 30, 2014, this Action was filed as a putative class action on
behalf of purchasers of ITT securities. (Dkt. No. 1). On November 17, 2014, the
Court consolidated two related actions into this Action. (Dkt. No. 18). On
January 21, 2015, the Court consolidated a third related action into this
Action. (Dkt. No. 73). By Order dated March 16, 2015, Meitav was appointed as
Lead Plaintiff for the putative class, Glancy Binkow & Goldberg LLP1 was
appointed as Lead Counsel, and Katz & Korin was appointed as Liaison Counsel in
the consolidated Action. (Dkt. No. 75).

On May 26, 2015, Plaintiffs filed the Consolidated Amended Class Action
Complaint for Violations of the Federal Securities Laws (the “Complaint”) (Dkt.
No. 87), alleging violations of Sections 10(b) and 20(a) of the Securities
Exchange Act of 1934, and U.S. Securities and Exchange Commission (“SEC”) Rule
10b-5 promulgated thereunder, against Defendants on behalf of themselves and all
other similarly situated purchasers of the securities of ITT from February 26,
2013, through May 12, 2015, both dates inclusive (the “Class Period”).

Subsequently, the parties agreed to conduct settlement negotiations in an
attempt to resolve this Action without further litigation. On July 14, 2015, the
Court granted a stay of all proceedings in this Action to facilitate the
Parties’ efforts to resolve this Action through mediation. (Dkt. No. 89).

In preparation for the mediation and to enable Plaintiffs to assess the
reasonableness of any potential settlement, Defendants provided Plaintiffs with
over 180,000 pages of documents not otherwise available to Plaintiffs by virtue
of the discovery stay imposed by the Private Securities Litigation Reform Act,
15 U.S.C. § 78u-4(b)(3)(8).

On August 11 and 12, 2015, following the submission of detailed mediation
statements, the Parties participated in a mediation session conducted by the
Honorable Daniel Weinstein (Ret.) of JAMS. At the end of the two-day mediation,
the parties agreed in principle to a basic framework for

 

1 

During the course of the Litigation, Glancy Binkow & Goldberg LLP changed its
name to Glancy Prongay & Murray LLP. (See Dkt. No. 85).

 

 

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the resolution of this Litigation through settlement, subject to documentation
and the approval of the Court. Thereafter, following additional communications
and arm’s-length negotiations, the Parties agreed to the remaining terms for the
settlement of this Litigation and proceeded to draft this Stipulation.

On October 9, 2015, the Parties jointly requested that the stay of this Action
be extended until October 27, 2015 to allow for this Stipulation, and the terms
of the Settlement embodied herein, to be finalized. (Dkt. No. 90). On
October 26, 2015, the Parties jointly requested an additional two week extension
of the stay of this Action, which the Court granted on October 27, 2015. (Dkt.
No. 93).

 

II. DEFENDANTS’ DENIALS OF WRONGDOING AND LIABILITY

Each Defendant has expressly denied, and continues to deny, all allegations of
wrongdoing, fault, liability, or damage to Plaintiffs and the Settlement Class,
arising out of any of the conduct, statements, acts, or omissions alleged, or
that could have been alleged, in the Complaint and affirm that they have acted
properly and lawfully at all times. Defendants further deny that they ever
engaged in or committed any fraud, any violation of law, any breach of duty, or
any other wrongdoing or improper conduct whatsoever. Defendants maintain that
they had and have meritorious defenses to all allegations in this Action and
that had the terms of this Stipulation not been reached, Defendants would have
continued to contest vigorously Plaintiffs’ allegations. This Stipulation shall
in no event be construed as, or deemed to be evidence of, an admission or
concession by any Defendant with respect to any claim, or of any fault or
liability or wrongdoing or damage whatsoever. Nor shall this Stipulation be
construed as, or deemed to be evidence of, an admission or concession by any
Defendant of any infirmity in the defenses that Defendants could have asserted
in this Action or otherwise.

Nonetheless, Defendants have concluded that further conduct of the Litigation
would be protracted and expensive and wish to avoid the expense, inconvenience,
and distraction of burdensome and protracted litigation. Defendants also have
taken into account the uncertainty and risks inherent in any litigation,
especially in complex cases like this Litigation. Defendants have, therefore,
determined that it is desirable and beneficial that the Litigation be settled in
the manner and upon the terms and conditions set forth in this Stipulation.

 

 

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III. CLAIMS OF PLAINTIFFS AND BENEFITS OF SETTLEMENT

Plaintiffs believe that the claims asserted in the Litigation have merit and
that the evidence developed to date supports the claims. However, Plaintiffs and
their counsel recognize and acknowledge the expense and length of continued
proceedings necessary to prosecute the Litigation against Defendants through
trial, post-trial motions and appeals. Plaintiffs and their counsel also have
taken into account the uncertain outcome and the risk of any litigation,
especially in complex actions such as this Litigation, as well as the
difficulties and delays inherent in such litigation. Plaintiffs and their
counsel also are mindful of the inherent problems of proof under, and possible
defenses to, the securities law violations asserted in this Litigation.
Plaintiffs and their counsel believe that the Settlement set forth in the
Stipulation confers substantial benefits upon the Settlement Class. Based on
their evaluation, Plaintiffs and their counsel have determined that the
Settlement set forth in the Stipulation is in the best interests of the
Settlement Class.

 

IV. TERMS OF STIPULATION AND AGREEMENT OF SETTLEMENT

NOW, THEREFORE, IT IS HEREBY STIPULATED AND AGREED by and among Plaintiffs (for
themselves and all of the other Settlement Class Members) and Defendants, by and
through their respective counsel or attorneys of record, that, subject to the
approval of the Court, this Litigation and the Released Claims shall be finally
and fully compromised, settled and released, and the Litigation shall be
dismissed with prejudice, upon and subject to the terms and conditions of the
Stipulation, as follows.

 

  1. Definitions

As used in this Stipulation, and the exhibits annexed hereto, the following
terms have the meanings specified below. In the event of any inconsistency
between any definition set forth below and any definition set forth in any
document attached as an exhibit to this Stipulation, the definition set forth
below shall control.

 

 

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1.1. “Authorized Claimant” means any Member of the Settlement Class who, in
accordance with the terms of this Stipulation, is entitled to a distribution
from the Net Settlement Fund (as defined in ¶5.3 hereof) pursuant to any Plan of
Allocation or any order of the Court.

1.2. “Claims Administrator” or “Settlement Administrator” means the firm of
Angeion Group.

1.3. “Complaint” means the Consolidated Amended Class Action Complaint for
Violations of the Federal Securities Laws filed by Plaintiffs on May 26, 2015.

1.4. “Court” means the United States District Court for the Southern District of
Indiana.

1.5. “Defendants” means ITT, Modany, and Fitzpatrick.

1.6. “Defendants’ Counsel” means Gibson, Dunn & Crutcher LLP and Ice Miller LLP.

1.7. “Effective Date” means the first date by which all of the events and
conditions specified in ¶7.1 of this Stipulation have been met and have
occurred. The Effective Date is in no way dependent on, or conditioned on, the
approval of any other settlement and/or the resolution of any other action or
litigation against Defendants.

1.8. “Escrow Account” means an escrow account established, maintained, and
controlled by the Escrow Agent into which Defendants shall deposit, or cause to
be deposited, the $12.5375 million ($12,537,500.00) in cash to establish the
Settlement Fund.

1.9. “Escrow Agent” means Glancy Prongay & Murray LLP.

1.10. “Final” means, with respect to any Court order, including, without
limitation, the Judgment, that such order represents a final and binding
determination of all issues within its scope and is not subject to further
review on appeal or otherwise. Without limitation, an order becomes “Final”
when: (a) no appeal has been filed and the prescribed time for commencing any
appeal has expired; or (b) an appeal has been filed and either (i) the appeal
has been dismissed and the prescribed time, if any, for commencing any further
appeal has expired, or (ii) the order has been affirmed in all material respects
and the prescribed time, if any, for commencing any further appeal

 

 

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has expired. For purposes of this Paragraph, an “appeal” includes appeals as of
right, discretionary appeals, interlocutory appeals, proceedings involving writs
of certiorari or mandamus, and any other proceedings of like kind. Any appeal or
other proceeding pertaining to any order adopting or approving a Plan of
Allocation, or to any order issued in respect to an application for attorneys’
fees and expenses, pursuant to ¶¶6.1 and 6.2, below, shall not in any way delay
or preclude the Judgment from becoming Final.

1.11. “ITT Securities” means ITT common stock and any call options or put
options on the same. With respect to put options, references to “purchases” of
ITT Securities mean the writing of put options.

1.12. “Judgment” means the order of final judgment to be entered by the Court
approving the Settlement which, subject to the approval of the Court, shall be
substantially in the form attached as Exhibit B hereto.

1.13. “Lead Plaintiff” means Meitav.

1.14. “Litigation” or “Action” means the consolidated securities class action
pending in this Court under the caption In re ITT Educational Services, Inc.
Securities Litigation (Indiana), Case No. 1:14-cv-01599-TWP-DML, including,
without limitation, all cases consolidated under that caption.

1.15. “Parties” means the Plaintiffs and the Defendants.

1.16. “Person(s)” means an individual, corporation, limited liability company,
professional corporation, partnership, limited partnership, limited liability
partnership, association, joint stock company, estate, legal representative,
trust, unincorporated association, government or any political subdivision or
agency thereof, and any business or legal entity together with their spouses,
heirs, predecessors, successors, administrators, parents, subsidiaries,
affiliates, representatives, or assignees of any of the foregoing, and any other
representative or person or entity acting on behalf of, or claiming under, any
of these persons and entities.

1.17. “Plaintiffs” means Meitav, Tarapara, Hennen, Grebely and Truong, both in
their individual capacities and as representatives of the Settlement Class.

 

 

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1.18. “Plaintiffs’ Counsel” means Lead Counsel (Glancy Prongay & Murray LLP) and
Katz and Korin, P.C.

1.19. “Plan of Allocation” means a plan or formula of allocation of the
Settlement Fund, to be approved by the Court, whereby the Settlement Fund shall
be distributed to Authorized Claimants after payment of or provision for
expenses of notice and administration of the Settlement, Taxes and Tax Expenses
(as defined in ¶2.15(c) hereof), and such attorneys’ fees, costs, expenses, and
interest and any award to the Plaintiffs as may be awarded by the Court. Any
Plan of Allocation is not part of the Stipulation and the Defendants and any
other Released Persons shall not have any responsibility or liability with
respect thereto.

1.20. “Proof of Claim and Release” means the form to be sent to Settlement Class
Members, in the form attached as Exhibit A-2 hereto, upon further order(s) of
the Court, by which any Settlement Class Member may make claims against the
Settlement Fund for damages allegedly incurred by reason of their investment(s)
in ITT Securities.

1.21. “Released Claims” means any and all claims (including Unknown Claims),
demands, debts, losses, damages, duties, rights, disputes, actions, causes of
action, liabilities, obligations, judgments, suits, matters, controversies,
proceedings, or issues, of any kind, nature, character, or description
whatsoever (and including, but not limited to, any claims for damages, whether
compensatory, consequential, special, punitive, exemplary, or otherwise, and any
and all fees, costs, interest, expenses, or charges), whether known or unknown,
contingent or absolute, suspected or unsuspected, foreseen or unforeseen,
disclosed or undisclosed, concealed or hidden, apparent or not apparent, accrued
or unaccrued, matured or unmatured, liquidated or not liquidated, asserted or
unasserted, at law or in equity, that have been asserted, could have been
asserted, or in the future could be asserted against Defendants or any of the
Released Persons in this Litigation or in any other court, tribunal, forum or
proceeding (including, but not limited to, any claims arising under U.S.
federal, state or local law, foreign law, common law, statutory law,
administrative law, rule, regulation, or at equity, relating to alleged fraud,
breach of any duty, negligence, violations of the federal securities laws, or
otherwise, and including all claims within the exclusive jurisdiction of the

 

 

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federal courts), whether individual, class, direct, derivative, representative,
legal, equitable or any other type, or in any other capacity, (a) by reason of,
arising out of, relating to, involving or in connection with, directly or
indirectly, the allegations, claims, conduct, facts, events, practices,
transactions, acts, occurrences, failures, statements, representations, alleged
misrepresentations, alleged omissions, the documents publicly filed with the
U.S. Securities and Exchange Commission by ITT and all disclosures or alleged
non-disclosures made by Defendants in connection with any of the foregoing, or
any other matter, thing or cause whatsoever, or any series thereof, that were,
could have been or in the future might be alleged, claimed, asserted, embraced,
involved, or set forth, referred to in or otherwise related to, directly or
indirectly, the Litigation or subject matter of the Litigation; (b) would have
been barred by res judicata or collateral estoppel had the Action been fully
litigated to a final judgment; and (c) were, could have been, or in the future
could be, asserted in any forum or proceeding or otherwise by any Settlement
Class Member that relate to the purchase, sale, acquisition or holding of ITT
Securities during the Settlement Class Period. The Released Claims shall not
include claims to enforce the Settlement. For the avoidance of doubt, Released
Claims does not include the claims alleged as of the date of this Settlement in
the actions captioned: Sasha Wilfred, Derivatively on Behalf of Nominal
Defendant ITT Educational Services, Inc. v. Kevin M. Modany, et al.,
1:13-cv-03110-JPO (S.D.N.Y.); Janice Nottenkamper, Derivatively on Behalf of
Nominal Defendant ITT Educational Services, Inc. v. Kevin M. Modany, et al.,
1:15-cv-03390 (S.D.N.Y.); Michelle Lawrence, Derivatively on Behalf of Nominal
Defendant ITT Educational Services, Inc. v. Kevin M. Modany, et al.,
1:14-cv-02106 (S.D. Ind.); William McKee, Derivatively on behalf of ITT
Educational Services, Inc. v. Kevin Modany, et al., 49D07-1507-PL-021891 (Marion
Circuit Court, Indianapolis, Indiana); United States Securities and Exchange
Commission v. ITT Educational Services, Inc., Kevin M. Modany, and Daniel M.
Fitzpatrick, 1:15-cv-00758-JMS-MJD (S.D. Ind.); and In re ITT Educational
Services, Inc. Securities Litigation, 1:13-cv-01620-JPO-JLC (S.D.N.Y.).

1.22. “Released Person(s)” means each and all Defendants, and/or any of their
respective past, present or future, family members, spouses, domestic partners,
parents, associates,

 

 

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affiliates, divisions, subsidiaries, officers, directors, stockholders, owners,
members, representatives, employees, attorneys, financial or investment
advisors, consultants, underwriters, investment banks or bankers, commercial
bankers, insurers, reinsurers, excess insurers, co-insurers, engineers,
advisors, principals, agents, heirs, executors, trustees, estates,
beneficiaries, distributees, foundations, general or limited partners or
partnerships, joint ventures, personal or legal representatives, administrators,
or any other person or entity acting or purporting to act for or on behalf of
any of the Defendants, and each of their respective predecessors, successors,
and assigns, and any trust of which any Defendant is the settlor or which is for
the benefit of any Defendant and/or member(s) of his family. For the avoidance
of doubt, Released Persons does not include PricewaterhouseCoopers, LLP, which
is also known as PwC LLP.

1.23. “Settlement” means the settlement of the Litigation as embodied in this
Stipulation.

1.24. “Settlement Class” means, for purposes of this Settlement, and to be
certified pursuant to Fed. R. Civ. P. 23 for purposes of effectuating this
Settlement only, all persons and/or entities who purchased or otherwise acquired
ITT common stock, purchased or otherwise acquired call options on ITT common
stock, or wrote put options on ITT common stock, between February 26, 2013 and
May 12, 2015, both dates inclusive. Excluded from the Settlement Class are
Defendants, the officers and directors of ITT during the Settlement Class
Period, members of their immediate families, the legal representatives, heirs,
successors or assigns of any of the foregoing and any entity in which a
Defendant has or had a controlling interest during the Settlement Class Period.
Any person or entity that timely and validly requests exclusion from the
Settlement Class pursuant to and in accordance with the terms of the Notice
Order (as defined in ¶3.1 hereof) is also excluded from the Settlement Class.

1.25. “Settlement Class Member” or “Member of the Settlement Class” means a
Person who falls within the definition of the Settlement Class as set forth in
¶1.24 and who does not validly request exclusion from the Settlement Class in
accordance with the procedures to be established by the Court in connection with
the approval of this Stipulation and the Settlement.

 

 

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1.26. “Settlement Class Period” means the period commencing on February 26,
2013, through May 12, 2015, both dates inclusive.

1.27. “Settlement Fund” means $12.5375 million ($12,537,500.00) in cash, plus
any interest earned thereon.

1.28. “Settling Parties” means, collectively, Defendants and Plaintiffs, on
behalf of themselves and the Members of the Settlement Class.

1.29. “Unknown Claims” means any and all Released Claims, of every nature and
description, which Plaintiffs or any Settlement Class Member does not know or
suspect to exist in his, her or its favor at the time of the release of the
Released Persons which, if known by him, her or it, might have affected his, her
or its settlement with and release of the Released Persons, or might have
affected his, her or its decision not to object to this Settlement or not to
exclude himself, herself or itself from the Settlement Class. Unknown Claims
include those claims in which some or all of the facts comprising the claim may
be suspected, or even undisclosed or hidden. With respect to any and all
Released Claims, the Settling Parties stipulate and agree that, upon the
Effective Date, Plaintiffs shall expressly waive, and each of the Settlement
Class Members shall be deemed to have waived, and by operation of the Judgment
shall have expressly waived, the provisions, rights, and benefits of California
Civil 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.

Plaintiffs shall expressly waive, and each of the Settlement Class Members shall
be deemed to have, and by operation of the Judgment shall have, expressly waived
any and all provisions, rights, and benefits conferred by any U.S. federal law
or any law of any state or territory of the United States, or principle of
common law or foreign law, which is similar, comparable or equivalent in effect
to California Civil Code § 1542. Plaintiffs and other Settlement Class Members
may hereafter discover facts in addition to or different from those which he,
she or it now knows or believes to be true with respect to the subject matter of
the Released Claims, but Plaintiffs and each Settlement Class

 

 

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Member, upon the Effective Date, shall be deemed to have, and by operation of
the Judgment shall have expressly, fully, finally, and forever settled and
released any and all Released Claims, known or unknown, suspected or
unsuspected, contingent or non-contingent, whether or not concealed or hidden,
which now exist, or heretofore have existed, upon any theory of law or equity
now existing or coming into existence in the future, including, but not limited
to, conduct which is negligent, reckless, intentional, with or without malice,
or a breach of any duty, law or rule, without regard to the subsequent discovery
or existence of such different or additional facts. Plaintiffs acknowledge, and
the Settlement Class Members shall be deemed by operation of the Judgment to
have acknowledged, that the foregoing waiver was separately bargained for and
was a material element of the Settlement.

 

  2. The Settlement

 

  A. Scope and Effect of the Settlement

2.1. The obligations incurred pursuant to this Stipulation shall be in full and
final disposition of the Action and any and all Released Claims as against all
Released Persons. The Settling Parties agree that the amount paid and the other
terms of the Settlement were negotiated at arm’s-length and in good faith by the
Settling Parties, and reflect a settlement reached voluntarily after
consultation with experienced legal counsel and an experienced mediator.

2.2. Upon the Effective Date, Plaintiffs and each of the Settlement Class
Members shall be deemed to have, and by operation of the Judgment shall have,
fully, finally, and forever released, relinquished, and discharged each and
every Released Claim against each of the Released Persons.

2.3. Upon the Effective Date, Plaintiffs and each of the Settlement Class
Members shall have covenanted not to sue the Released Persons with respect to
any Released Claims and will be forever barred and enjoined from commencing,
instituting, participating in, maintaining, or continuing to prosecute any
action or proceeding in any court of law or equity, arbitration tribunal,
administrative forum, or other forum of any kind, asserting any Released Claim
(including, without limitation, Unknown Claims), as well as any claims arising
out of, relating to, or in connection with, the defense, settlement, or
resolution of this Action against any Released Persons.

 

 

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2.4. All Plaintiffs and Settlement Class Members shall be bound by the releases
set forth in the Judgment whether or not they submit a Proof of Claim and
Release, seek or obtain a distribution from the Settlement Fund, are entitled to
receive a distribution under the Plan of Allocation approved by the Court, or
have objected to the Settlement, the Plan of Allocation, or Lead Counsel’s Fee
and Expense Application (as defined in ¶6.1 hereof).

2.5. Upon the Effective Date, any and all Persons shall be permanently barred
and enjoined, to the fullest extent permitted by law, from commencing,
prosecuting, or asserting any and all claims for contribution or indemnity (or
any other claim when the alleged injury to that Person is their actual or
threatened liability to the Settlement Class or a Settlement Class Member) based
upon, relating to, arising out of, or in connection with the Released Claims
and/or transactions in ITT Securities during the Settlement Class Period.

2.6. Upon the Effective Date, each of Defendants and/or the Released Persons
shall be deemed to have, and by operation of the Judgment shall have, fully,
finally, and forever released, relinquished, and discharged the Settlement Class
Members, Plaintiffs, and Plaintiffs’ Counsel from all claims (including Unknown
Claims) arising out of, relating to, or in connection with, the institution,
prosecution, assertion, settlement, or resolution of the Litigation or the
Released Claims.

2.7. Notwithstanding the above, nothing in this Stipulation shall bar any action
or claims to enforce the terms of this Stipulation.

 

  B. The Settlement Fund

2.8. In consideration of the full and final settlement of the Released Claims,
ITT, on behalf of all Defendants, shall cause the principal amount of the
Settlement Fund, $12.5375 million ($12,537,500.00) to be deposited into the
Escrow Account by wire transfer or delivery of a check by no later than fifteen
(15) business days after the later of: (i) the Court’s entry of the Notice
Order, preliminarily approving the Settlement, referenced in ¶3.1 below, or
(ii) receipt by

 

 

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Defendants’ Counsel from Plaintiffs’ Counsel of all necessary payment details to
accomplish payment of the Settlement Fund by wire transfer or check, including
payee name, payee mailing address, bank account number, name of bank, and bank
address, a Sort Code or ABA Routing Number, the currency of the account
receiving the funds, wire transfer instructions, the Tax Identification Number,
and an executed Form W-9.

2.9. The amount as specified in ¶2.8 of this Stipulation shall be the full and
sole monetary contribution made by or on behalf of the Released Persons in
connection with resolution of the Action and the Settlement, including with
respect to the payment of notice and administration expenses, which shall be
paid out of the Settlement Fund. Under no circumstances will Defendants,
collectively or separately, or anyone on their behalves, be required to pay or
cause to be paid any amount in addition to the principal amount of the
Settlement Fund caused to be deposited with the Escrow Agent pursuant to ¶2.8 of
this Stipulation and the Settlement set forth herein. If the Settlement Fund, or
any portion thereof, is not deposited into the Escrow Account by the time
specified in ¶2.8 hereof, the Parties agree that Defendants will not be
obligated to pay the Settlement Fund or any portion thereof and Lead
Plaintiff’s, Plaintiffs’, Plaintiffs’ Counsel’s, and any other parties’ remedy
against Defendants shall be to terminate the Settlement.

 

  C. The Escrow Agent

2.10. The Escrow Agent shall invest the Settlement Fund, transferred pursuant to
¶2.8 herein, in instruments either fully insured or backed by the full faith and
credit of the United States Government or an agency thereof and shall reinvest
the proceeds of these instruments as they mature in similar instruments at their
then-current market rates. Defendants and the other Released Persons shall not
have any responsibility or liability whatsoever for investment decisions. All
risks related to the investment of the Settlement Fund shall be borne by the
Escrow Agent and the Settlement Fund, and not by any of the Defendants or other
Released Persons who shall be held harmless for any losses arising from the
investment or disbursement of the Settlement Fund.

2.11. The Escrow Agent shall permit Plaintiffs’ Lead Counsel or the Claims
Administrator to withdraw up to two hundred fifty thousand dollars ($250,000.00)
from the

 

 

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Settlement Fund, upon funding of the Settlement Fund as set forth in ¶2.8, to be
used to pay the reasonable costs of providing notice of the Settlement to the
Settlement Class, as well as customary administration costs. Prior to the
Effective Date, payment of any notice and administration costs exceeding
$250,000.00 shall require written agreement from Defendants, through Defendants’
Counsel. Subsequent to the Effective Date, without further approval by
Defendants or the Court, the Settlement Fund may be used by Lead Counsel to pay
notice and administration costs reasonably and actually incurred in excess of
$250,000.00. Other than amounts disbursed for providing notice to the Settlement
Class, customary administration costs, and Taxes and Tax Expenses (discussed in
Section IV.2.D, infra), and the Fee and Expense Award (as defined in ¶6.1
hereof) (which shall be paid to Lead Counsel immediately following the Court’s
execution of an order awarding such fees and expenses), the Settlement Fund
shall not be distributed until the Effective Date of the Settlement, as set
forth in ¶7.1.

2.12. Subject to further order(s) and/or direction(s) as may be made by the
Court, or as provided in this Stipulation, the Escrow Agent is authorized to
execute such transactions as are consistent with the terms of this Stipulation.

2.13. All funds held by the Escrow Agent shall be deemed and considered to be in
custodia legis of the Court, and shall remain subject to the jurisdiction of the
Court, until such time as such funds shall be distributed pursuant to this
Stipulation, or are returned to the Persons paying the same pursuant to this
Stipulation in the event that this Settlement is not consummated or is
terminated pursuant to the provisions of Section IV.2.E below, and/or upon
further order(s) of the Court.

2.14. The Escrow Agent shall not be responsible for the payment of any sums due
to Authorized Claimants or other Persons, except to the extent of maintaining
account of and appropriately paying sums as required by this Stipulation, but
only to the limited extent that such sums have been delivered into the Escrow
Account as required by this Stipulation. The Escrow Agent shall be liable to the
extent provided for under the laws of the State of Indiana.

 

 

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  D. Taxes

2.15. (a) The Settling Parties and the Escrow Agent shall treat the Escrow
Account as a “qualified settlement fund” for purposes of Section 468B of the
Internal Revenue Code of 1986, as amended, and the Treasury Regulations
promulgated thereunder. The Escrow Agent shall timely make such elections as are
necessary or advisable to carry out the provision of this ¶2.15, including,
without limitation, the “relation-back election” described in Treas. Reg.
§1.468B-1 back to the earliest permitted date. Such elections shall be made in
compliance with the procedures and requirements contained in such regulations.
It shall be the responsibility of the Escrow Agent to prepare and deliver timely
and properly the necessary documentation for signature by all necessary parties,
and thereafter to cause the appropriate filing to occur.

(b) The Escrow Agent shall be the Escrow Account’s “administrator” as that term
is used in Treas. Reg. §1.468B-2. As administrator, the Escrow Agent shall
satisfy the administrative requirements imposed by Treas. Reg. §1.468B-2 by,
e.g., (i) obtaining a taxpayer identification number, (ii) satisfying any
information reporting or withholding requirements imposed on distributions from
the Settlement Fund, and (iii) timely and properly filing applicable federal,
state or local tax returns necessary or advisable with respect to the Settlement
Fund (including, without limitation, the returns described in Treas. Reg.
§§1.468B-2(k)) and paying any taxes reported thereon. Such returns (as well as
the election described in this ¶2.15) shall be consistent with this ¶2.15 and in
all events shall reflect that all Taxes, as defined in subsection (c) below, on
the income earned by the Settlement Fund shall be paid out of the Settlement
Fund as provided in ¶2.15(c) hereof.

(c) All: (i) taxes (including any estimated taxes, interest, or penalties)
arising with respect to the income earned by the Settlement Fund, including,
without limitation, any taxes or tax detriments that may be imposed upon
Defendants or Defendants’ Counsel with respect to any income earned by the
Settlement Fund for any period during which the Settlement Fund does not qualify
as a “qualified settlement fund” for federal or state income tax purposes
(collectively, “Taxes”); and (ii) expenses and costs incurred in connection with
the operation and implementation

 

 

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of this ¶2.15, including, without limitation, expenses of tax attorneys and/or
accountants and mailing and distribution costs and expenses relating to filing
(or failing to file) the returns described in this ¶2.15 (collectively, “Tax
Expenses”), shall be paid out of the Settlement Fund. Neither Defendants,
Defendants’ Counsel, nor other Released Persons shall have any liability or
responsibility for the Taxes or the Tax Expenses, or the filing of any tax
returns or other documents with the Internal Revenue Service or any other state
or local taxing authority. With funds from the Settlement Fund, the Escrow Agent
shall indemnify and hold harmless Defendants, Defendants’ Counsel, and other
Released Persons for Taxes and Tax Expenses (including, without limitation,
Taxes payable by reason of any such indemnification). Further, Taxes and Tax
Expenses shall be treated as, and considered to be, a cost of administration of
the Settlement Fund and shall timely be paid by the Escrow Agent out of the
Settlement Fund without prior order from the Court and the Escrow Agent shall be
obligated (notwithstanding anything herein to the contrary) to withhold from
distribution to Authorized Claimants any funds necessary to pay such amounts,
including the establishment of adequate reserves for any Taxes and Tax Expenses
(as well as any amounts that may be required to be withheld under Treas. Reg.
§1.468B-2(1)(2)). Neither Defendants, Defendants’ Counsel, Defendants’ director
and officer liability insurance carriers, nor any other Released Persons shall
be responsible in any respect therefore, nor shall they have any liability
therefore. The Settling Parties agree to cooperate with the Escrow Agent, each
other, and their tax attorneys and accountants to the extent reasonably
necessary to carry out the provisions of this ¶2.15.

 

  E. Termination of Settlement

2.16. In the event that the Stipulation is not approved or the Stipulation is
terminated, canceled, or fails to become effective for any reason, the
Settlement Fund (including accrued interest) less expenses paid, incurred or due
and owing consistent with this Stipulation, including those incurred providing
notice to the Settlement Class, locating Settlement Class Members, soliciting
claims, assisting with the filing of claims administering and distributing the
Net Settlement Fund to Authorized Claimants, processing Proof of Claim and
Release forms, escrow fees and costs if any and all Taxes and Tax Expenses,
provided for herein, shall be refunded pursuant to written instructions from
counsel to the Defendants (in accordance with ¶7.4 herein).

 

 

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  3. Notice Order and Settlement Hearing

3.1. As soon as practicable after execution of this Stipulation, Lead Counsel
(with Defendants’ Counsel’s consent) shall submit the Stipulation, together with
its exhibits, to the Court and shall apply for entry of an order (the “Notice
Order”) attached hereto as Exhibit A, requesting, inter alia, the preliminary
approval of the Settlement set forth in this Stipulation, approval of the
contents and method of distribution for the mailing of a settlement notice (the
“Notice”) in the form attached as Exhibit A-1 hereto, approval of the contents
of the Proof of Claim and Release in the form attached as Exhibit A-2 hereto,
and approval of the contents and method of publication of a summary notice (the
“Summary Notice”) in the form attached as Exhibit A-3 hereto. The Notice shall
include the general terms of the Settlement set forth in this Stipulation, the
proposed Plan of Allocation, the general terms of the Fee and Expense
Application, and the date of the Settlement Hearing (as defined below).
Additionally, Defendants shall assist Lead Counsel and/or the Settlement
Administrator in obtaining, from ITT’s transfer agent, records of ownership as
necessary to process and administer the Notice.

3.2. With its application for entry of the Notice Order, requesting preliminary
approval of the Settlement, Lead Counsel shall request that the Court hold a
hearing (the “Settlement Hearing”) after Notice is given, at which time Lead
Counsel shall request that the Court grant final approval of the Settlement of
this Litigation as set forth herein. To permit compliance with the settlement
notice requirements of the Class Action Fairness Act (“CAFA”), 28 U.S.C. § 1715,
the Settlement Hearing shall take place no earlier than 100 days after the
filing of this Stipulation.2

 

 

2  The Settling Parties will request that the Court schedule the Settlement
Hearing no earlier than 100 days after entry of the Notice Order, preliminarily
approving the Settlement, so that, among other things, the Settling Parties may
comply with the provisions of the Class Action Fairness Act.

 

 

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3.3. At the Settlement Hearing, the Settling Parties shall jointly request entry
of a Judgment, in the form attached hereto as Exhibit B:

(a) finally approving the Settlement as fair, reasonable, and adequate, within
the meaning of Rule 23 of the Federal Rules of Civil Procedure, and directing
its consummation pursuant to its terms;

(b) directing that the Litigation be dismissed without costs and with prejudice,
and releasing the Released Claims;

(c) permanently barring and enjoining the institution and prosecution, by
Plaintiffs and the Settlement Class Members, of any other action or proceeding
against the Released Persons in any court or forum, asserting any Released
Claims; provided, however, that the Judgment shall not bar any action or claim
to enforce the terms of the Settlement, as approved by the Court, or the
Judgment;

(d) permanently barring and enjoining, to the fullest extent permitted by 15
U.S.C. § 78u-4(f)(7)(A) and any other applicable law or regulation, any and all
Persons from commencing, prosecuting, or asserting any and all claims for
contribution or indemnity (or any other claim when the alleged injury to that
Person is their actual or threatened liability to the Settlement Class or a
Settlement Class Member) based upon, relating to, arising out of, or in
connection with the Released Claims and/or transactions in ITT Securities during
the Settlement Class Period;

(e) reserving jurisdiction over the Litigation, including all future proceedings
concerning the administration, consummation, and enforcement of this
Stipulation;

(f) finding that the Complaint in the Litigation was filed on a good faith basis
in accordance with the Private Securities Litigation Reform Act of 1995 and Rule
11 of the Federal Rules of Civil Procedure;

(g) finding, pursuant to Rule 54(b) of the Federal Rules of Civil Procedure,
that there is no just reason for delaying and directing entry of a final
judgment; and

(h) containing such other and further provisions consistent with the terms of
this Stipulation and consistent with Exhibit B to which the Settling Parties
expressly consent in writing.

 

 

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3.4. At or after the Settlement Hearing, Lead Counsel also will request that the
Court approve the proposed Plan of Allocation and the Fee and Expense
Application. Defendants do not and shall not take any position as to the
proposed Plan of Allocation.

 

  4. Releases and Bar Order

4.1. (a) Upon the Effective Date, Plaintiffs and each of the Settlement Class
Members (on behalf of themselves and each of their respective present and former
family members, spouses, domestic partners, parents, associates, affiliates,
divisions, subsidiaries, officers, directors, stockholders, owners, members,
fiduciaries, employees, attorneys, accountants, consultants, underwriters, banks
or bankers, insurers, reinsurers, excess insurers, co-insurers, advisors,
principals, agents, heirs, executors, trustees, estates, beneficiaries,
distributees, foundations, general or limited partners or partnerships, joint
ventures, personal or legal representatives, administrators, predecessors,
successors, and assigns, and any other person or entity who has the right,
ability, standing, or capacity to assert, prosecute, or maintain on behalf of
any Settlement Class Member any of the Released Claims (or to obtain the
proceeds of any recovery therefrom)), regardless of whether that Settlement
Class Member actually submits a Proof of Claim and Release, seeks or obtains a
distribution from the Net Settlement Fund, is entitled to receive a distribution
under the Plan of Allocation approved by the Court, or has objected to the
Settlement, the Plan of Allocation, or Lead Counsel’s Fee and Expense
Application, shall be deemed to have, and by operation of the Judgment shall
have, fully, finally, and forever waived, released, relinquished, discharged,
and dismissed all Released Claims against the Defendants and all other Released
Persons.

(b) Upon the Effective Date, Plaintiffs and each of the Settlement Class Members
(on behalf of themselves and each of their respective present and former family
members, spouses, domestic partners, parents, associates, affiliates, divisions,
subsidiaries, officers, directors, stockholders, owners, members, fiduciaries,
employees, attorneys, accountants, consultants, underwriters, banks or bankers,
insurers, reinsurers, excess insurers, co-insurers, advisors, principals,
agents, heirs, executors, trustees, estates, beneficiaries, distributees,
foundations, general or limited partners or partnerships, joint ventures,
personal or legal representatives, administrators,

 

 

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predecessors, successors, and assigns, and any other person or entity who has
the right, ability, standing, or capacity to assert, prosecute, or maintain on
behalf of any Settlement Class Member any of the Released Claims (or to obtain
the proceeds of any recovery therefrom)), regardless of whether that Settlement
Class Member actually submits a Proof of Claim and Release, seeks or obtains a
distribution from the Net Settlement Fund, is entitled to receive a distribution
under the Plan of Allocation approved by the Court, or has objected to the
Settlement, the Plan of Allocation, or Lead Counsel’s Fee and Expense
Application, shall have covenanted not to sue the Released Persons with respect
to any Released Claims and shall be permanently barred and enjoined from
instituting, commencing, participating in, maintaining, or continuing to
prosecute any action or proceeding in any court of law or equity, arbitration
tribunal, administrative forum, or other forum of any kind, asserting any
Released Claim (including, without limitation, Unknown Claims), as well as any
claims arising out of, relating to, or in connection with, the defense,
settlement, or resolution of this Action against any of the Released Persons.

4.2. Upon the Effective Date, each of Defendants and/or the Released Persons
shall be deemed to have, and by operation of the Judgment shall have, fully,
finally, and forever released, relinquished, and discharged the Settlement Class
Members, Plaintiffs, and Plaintiffs’ Counsel from all claims (including Unknown
Claims) arising out of, relating to, or in connection with, the institution,
prosecution, assertion, settlement, or resolution of the Litigation or the
Released Claims.

4.3. The proposed Judgment shall include, and the Settling Parties agree to the
entry by the Court of an order providing for the bar order in ¶4.4 (the “Bar
Order”), subject to the terms in ¶4.6 herein.

4.4. The Bar Order shall provide that, upon the Effective Date, except as
provided in ¶4.6 below, any and all persons and entities are permanently barred
and enjoined, to the fullest extent permitted by 15 U.S.C. § 78u-4(f)(7)(A) and
any other applicable law or regulation, from commencing, prosecuting, or
asserting any and all claims for contribution or indemnity (or any other claim
when the alleged injury to that person or entity is their actual or threatened
liability to the

 

 

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Settlement Class or a Settlement Class Member) based upon, relating to, arising
out of, or in connection with the Released Claims, against each and every one of
the Released Persons, whether arising under state, federal, common, statutory,
administrative or foreign law, regulation, or at equity, as claims,
cross-claims, counterclaims, or third-party claims, in this Action or a separate
action, in this Court or in any other court, arbitration proceeding,
administrative proceeding, or other forum; and, except as provided in ¶4.6
below, the Released Persons are permanently barred and enjoined, to the fullest
extent permitted by 15 U.S.C. § 78u-4(f)(7)(A) and any other applicable law or
regulation, from commencing, prosecuting, or asserting any and all claims for
contribution or indemnity (or any other claim when the alleged injury to the
Released Person is their actual or threatened liability to the Settlement Class
or a Settlement Class Member) based upon, relating to, or arising out of the
Released Claims, against any person or entity, other than a person or entity
whose liability to the Settlement Class has been extinguished pursuant to the
Settlement and the Judgment, whether arising under state, federal, common,
statutory, administrative, or foreign law, regulation, or at equity, as claims,
cross-claims, counterclaims, or third-party claims, in this Action or a separate
action, in this Court or in any other court, arbitration proceeding,
administrative proceeding, or other forum. Nothing herein shall bar, release, or
alter in any way, any obligations, rights or claims among or between Released
Persons.

4.5. The Judgment shall also contain a provision, substantially in the form set
forth in Exhibit B hereto, requiring that any final verdict or judgment that may
be obtained by or on behalf of the Settlement Class or a Settlement Class Member
against any person or entity subject to the Bar Order as defined herein be
reduced by the greater of: (i) an amount that corresponds to the percentage of
responsibility of any of the Defendants for common damages; or
(ii) $12,537,500.00.

4.6. Notwithstanding the foregoing releases and Bar Order, nothing in this
Stipulation shall release any claims, or bar any action by any of the Settling
Parties, to enforce or to effectuate this Stipulation, the releases and other
terms and conditions of the Settlement, the Notice Order, or the Judgment.

 

 

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  5. Administration and Calculation of Claims, Final Awards, and Supervision and
Distribution of the Settlement Fund

5.1. The Claims Administrator, subject to the supervision of Lead Counsel, and
such supervision and direction of the Court as may be necessary or as
circumstances may require, shall administer and calculate the claims submitted
by Settlement Class Members and shall oversee distribution of the Net Settlement
Fund (defined below in ¶5.3 hereof)) to Authorized Claimants pursuant to the
Plan of Allocation.

5.2. Within ten (10) business days after entry of the Notice Order, counsel for
Defendants will use reasonable efforts to cause ITT’s transfer agent to provide
the Claims Administrator with a list of names and addresses of record holders of
ITT Securities during the Class Period. This information shall be provided in an
electronic format acceptable to the Claims Administrator. Defendants shall be
responsible for any costs or expenses related to providing this information.
Defendants and the other Released Persons shall not have any other role in, or
any responsibility or liability to any Person for, the administration of the
Settlement, nor shall any discovery be taken of Defendants in connection with
such matters.

5.3. Upon the Effective Date and thereafter, the Settlement Fund shall be
applied as follows:

(a) to pay Lead Counsel for Plaintiffs’ attorneys’ fees and expenses with
interest thereon (the “Fee and Expense Award”), if and to the extent allowed by
the Court;

(b) to pay any award of reimbursement of expenses to the Plaintiffs, if and to
the extent allowed by the Court;

(c) to pay all the costs and expenses reasonably and actually incurred in
connection with providing notice, locating Settlement Class Members, soliciting
Settlement Class claims, assisting with the filing of claims, administering and
distributing the Net Settlement Fund to Authorized Claimants, processing Proof
of Claim and Release forms, and paying escrow fees and costs, if any;

(d) to pay the Taxes and Tax Expenses described in ¶2.15 hereof; and

 

 

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(e) to distribute the balance of the Settlement Fund (the “Net Settlement Fund”)
to Authorized Claimants as allowed by the Stipulation, the Plan of Allocation,
or order of the Court.

5.4. Upon the Effective Date and thereafter, and in accordance with the terms of
the Stipulation, the Plan of Allocation, or such further approval and further
order(s) of the Court as may be necessary or as circumstances may require, the
Net Settlement Fund shall be distributed to Authorized Claimants, subject to and
in accordance with the following:

(a) Within one hundred-twenty (120) days after the Notice Order or such other
time as may be set by the Court, each Person claiming to be an Authorized
Claimant shall be required to submit to the Claims Administrator a completed
Proof of Claim and Release form (“Proof of Claim”), substantially in the form of
Exhibit A-2 attached hereto, signed under penalty of perjury, and supported by
such documents as are specified in the Proof of Claim and as are reasonably
available to such Person.

(b) Except as otherwise ordered by the Court, any and all Settlement Class
Members who fail to timely submit a properly completed Proof of Claim within
such period, or such other period as may be ordered by the Court, or otherwise
allowed, shall be forever barred from receiving any payments pursuant to this
Stipulation and the Settlement set forth therein, but shall nevertheless be
barred and enjoined from bringing any action, claim or other proceeding of any
kind against the Released Persons concerning the Released Claims and will in all
respects be subject to and bound by the provisions of this Stipulation, the
releases contained herein, the Judgment, and all proceedings, rulings, orders,
and judgments in this Action, including without limitation, the release of the
Released Claims and the dismissal with prejudice of this Action. Notwithstanding
the foregoing, Lead Counsel shall have the discretion to accept late-submitted
claims for processing by the Claims Administrator so long as distribution of the
Net Settlement Fund is not materially delayed thereby.

(c) The Net Settlement Fund shall be distributed to Authorized Claimants
substantially in accordance with the Plan of Allocation set forth in the Notice
and approved by the Court. Any such Plan of Allocation is not a part of this
Stipulation. No funds from the Net

 

 

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Settlement Fund shall be distributed to Authorized Claimants until the Effective
Date. Defendants shall not have a reversionary interest in the Net Settlement
Fund. If there is any balance remaining in the Net Settlement Fund after six
(6) months from the date of distribution of the Net Settlement Fund (whether by
reason of tax refunds, uncashed checks, or otherwise), Lead Counsel shall, if
feasible, reallocate such balance among Authorized Claimants in an equitable and
economic fashion. Thereafter, any balance which still remains in the Net
Settlement Fund shall be donated to one or more secular §501(c)(3)
organization(s) selected by the Lead Counsel.

5.5. The Released Persons, Defendants’ Counsel and Defendants’ directors and
officers liability insurance carriers shall have no responsibility for, interest
in, or liability whatsoever with respect to any act, omission or determination
of the Escrow Agent, Claims Administrator, Plaintiffs’ counsel, including Lead
Counsel, or designees of said persons regarding the investment or distribution
of the Settlement Fund or Net Settlement Fund, the Plan of Allocation, the
determination, administration, or calculation of claims, the payment or
withholding of Taxes or Tax Expenses, or any losses incurred in connection with
any such matters. Plaintiffs and each Settlement Class Member hereby fully,
finally, and forever release, relinquish, and discharge the Released Persons and
their counsel from any and all such liability.

5.6. No Person shall have any claim against Plaintiffs, Lead Counsel, the Claims
Administrator, or their counsel based on the distributions made substantially in
accordance with this Stipulation and the Settlement contained herein, the Plan
of Allocation, or further order(s) of the Court. No Person shall have any claim
against the Released Persons or their counsel arising from or relating to the
management of, distributions from, or the disposition of the Settlement Fund or
the Net Settlement Fund, and Plaintiffs and each Settlement Class Member hereby
fully, finally, and forever release, relinquish, and discharge the Released
Persons and their counsel from any and all such liability.

5.7. It is understood and agreed by the Settling Parties that any proposed Plan
of Allocation of the Net Settlement Fund including, but not limited to, any
adjustments to an Authorized Claimant’s claim set forth therein, is not a part
of the Stipulation and is to be considered

 

 

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by the Court separately from the Court’s consideration of the fairness,
reasonableness, and adequacy of the Settlement set forth in the Stipulation, and
any order or proceeding relating to the Plan of Allocation shall not operate to
terminate or cancel the Stipulation or affect the finality of the Court’s
Judgment approving this Stipulation and the Settlement set forth herein, or any
other orders entered pursuant to the Stipulation. The time to appeal from
approval of the Settlement shall commence upon the Court’s entry of the Judgment
regardless of whether a Plan of Allocation has been submitted to the Court or
has been approved.

5.8. All Persons who fall within the definition of Members of the Settlement
Class shall be subject to and bound by the provisions of this Stipulation, the
releases contained herein, and the Judgment with respect to all Released Claims,
regardless of whether such Persons seek or obtain by any means, including,
without limitation, by submitting a Proof of Claim or any similar document, any
distribution from the Settlement Fund or the Net Settlement Fund.

 

  6. Lead Counsel’s Attorneys’ Fees and Expenses

6.1. Lead Counsel may submit an application to the Court (the “Fee and Expense
Application”) for distributions to Plaintiffs’ counsel from the Settlement Fund
for: (a) an award of attorneys’ fees of up to twenty-five percent (25%) of the
Settlement Fund (i.e. up to $3,134,375); plus (b) the payment of reasonable
expenses incurred in connection with prosecuting the Litigation (including, but
not limited to the fees and expenses of experts and consultants), plus any
interest on such attorneys’ fees and expenses at the same rate and for the same
periods as earned by the Settlement Fund (until paid) as may be awarded by the
Court; plus (c) the payment to Plaintiffs for time and expense in litigation of
this action (the “Fee and Expense Award”). Lead Counsel reserves the right to
make additional applications to the Court for fees and expenses incurred based
on unanticipated developments in the Litigation or in the administration of the
Settlement.

6.2. The Fee and Expense Award, including the fees and expenses of experts and
consultants as awarded by the Court shall be payable to Lead Counsel, from the
Settlement Fund, immediately upon the entry of the Court’s order awarding such
fees and expenses, notwithstanding the existence of any timely filed objections
thereto, or potential for appeal therefrom, or collateral

 

 

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attack on the Settlement or any part thereof, subject to Lead Counsel’s
obligation to repay those amounts to the Settlement Fund, if and when, as a
result of any appeal and/or further proceedings on remand, or successful
collateral attack, the Fee and Expense Award is reduced or reversed or return of
the Settlement Fund is required consistent with the provisions of ¶7.3 hereof.
If, and when, as a result of any appeal and/or further proceedings on remand, or
successful collateral attack, the Fee and Expense Award is overturned or
reduced, or if the Settlement is terminated or is not approved by the Court, or
if there is an appeal and any order approving the Settlement does not become
Final and binding upon the Settlement Class, then, within ten (10) business days
from receiving notice from Defendants’ Counsel or from a court of appropriate
jurisdiction, Lead Counsel shall refund to the Settlement Fund such fees and
expenses previously paid to them from the Settlement Fund, plus interest thereon
at the same rate as earned on the Settlement Fund, in an amount consistent with
such reversal or modification. Lead Counsel may allocate awarded attorneys’ fees
among other plaintiffs’ counsel in a manner in which, in Lead Counsel’s
good-faith judgment, reflects the contributions of such counsel to the
initiation, prosecution, and resolution of the Litigation. Each such plaintiff’s
counsel’s law firm receiving fees and expenses, as a condition of receiving such
fees and expenses, on behalf of itself and each partner and/or shareholder of
it, shall agree that the law firm and its partners and/or shareholders are
subject to the jurisdiction of the Court for the purpose of enforcing the
provisions of this Paragraph.

6.3. The procedure for and the allowance or disallowance by the Court of any Fee
and Expense Application by Lead Counsel to be paid out of the Settlement Fund,
are not part of the Settlement set forth in this Stipulation, and are to be
considered by the Court separately from the Court’s consideration of the
fairness, reasonableness, and adequacy of the Settlement set forth in this
Stipulation; and any order or proceeding relating to any Fee and Expense
Application, or any appeal from any order relating thereto or reversal or
modification thereof, shall not operate to terminate or cancel this Stipulation
or the Settlement.

6.4. Defendants and the other Released Persons and their counsel shall have no
responsibility for, and no liability whatsoever with respect to, any payment
from the Settlement Fund of any type or nature whatsoever, including attorneys’
fees and expenses paid to any counsel for Plaintiffs or the Settlement Class.

 

 

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6.5. Defendants and the other Released Persons and their counsel shall have no
responsibility for, and no liability whatsoever with respect to, the allocation
among plaintiffs’ counsel, and/or any other Person who may assert some claim
thereto, of any Fee and Expense Award that the Court may make in the Litigation.

 

  7. Conditions of Settlement, Effect of Disapproval, Cancellation, or
Termination

7.1. The Effective Date of this Stipulation, and the Settlement incorporated
herein, shall be conditioned on the occurrence of all of the following events:

(a) the Court has entered the Notice Order, preliminarily approving the
Settlement, as required by ¶3.1 hereof;

(b) the Court has granted final approval of the Settlement as described herein,
following notice to the Settlement Class and a Settlement Hearing, as prescribed
by Rule 23 of the Federal Rules of Civil Procedure, and has entered the
Judgment, in all material respects in accordance with ¶3.3 and Exhibit B hereof;

(c) Defendants have not exercised their option to terminate the Settlement
pursuant to ¶7.5 hereof; and,

(d) the Judgment has become Final, as defined in ¶1.10 hereof.

7.2. Upon the occurrence of all of the events referenced in ¶7.1 hereof, any and
all remaining interest or right of Defendants in or to the Settlement Fund, if
any, shall be absolutely and forever extinguished. If any of the conditions
specified in ¶7.1 hereof are not met, then this Stipulation shall be canceled
and terminated subject to ¶7.3 hereof, unless Plaintiffs’ Lead Counsel and
Defendants’ Counsel all mutually agree in writing to proceed with the Settlement
in accordance with ¶7.4.

7.3. Unless otherwise ordered by the Court, in the event the Effective Date does
not occur or this Stipulation shall terminate, or be canceled, or otherwise fail
to become effective for any reason, including, without limitation, in the event
that the Settlement as described herein is not

 

 

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approved by the Court or the Judgment is reversed or vacated following any
appeal taken there from, then:

(a) within fifteen (15) business days after written notification of such event
is sent by Defendants’ Counsel or Lead Counsel to the Escrow Agent, the
Settlement Fund (including accrued interest), excluding only reasonable costs
actually incurred in connection with providing notice to the Settlement Class
that have either been properly disbursed or are due and owing pursuant to ¶2.11
(so long as supporting documentation for such costs is provided) and Taxes and
Tax Expenses that have been paid or that have accrued and will be payable at
some later date in accordance with ¶2.15 (so long as supporting documentation
for such taxes is provided), will be refunded, reimbursed, and repaid by the
Escrow Agent to Defendants, as directed in writing by Defendants’ Counsel; if
said amount or any portion thereof is not returned within such fifteen (15) day
period, then interest shall accrue thereon at the same rate as earned by the
Settlement Fund until the date that said amount is returned;

(b) at the request of Defendants’ Counsel, the Escrow Agent or its designee
shall apply for any Tax refund owed on the Settlement Fund and pay the proceeds
to Defendants, as directed in writing by Defendants’ Counsel, after deduction of
any fees or expenses reasonably incurred in connection with such application(s)
for refund pursuant to such written request;

(c) the Settling Parties shall be restored to their respective positions in the
Litigation as of July 14, 2015, the date the Court granted a stay of this Action
pending settlement discussions, with all of their respective claims and defenses
preserved as they existed on that date, and the Settling Parties shall in good
faith propose a new case schedule;

(d) any order certifying a class in this Action for purposes of this Settlement
prior to termination shall be null and void and a class shall not be considered
certified for purposes of further litigation;

(e) the terms and provisions of this Stipulation shall be null and void and
shall have no further force and effect with respect to the Settling Parties
(except for ¶¶1.1-1.29, 2.9, 2.10, 2.12-2.16, 5.5, 6.2, 6.4, 7.3, 7.4, 8.2, 8.5,
8.6, 8.7, 8.11, 8.16, 8.17, and 8.18 which shall survive

 

 

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termination), and neither the existence nor the terms of this Stipulation (nor
any negotiations preceding this Stipulation nor any acts performed pursuant to,
or in furtherance of, this Stipulation) shall be used in this Litigation or in
any other proceeding for any purpose; and

(f) any judgment or order entered by the Court in accordance with the terms of
this Stipulation shall be treated as vacated, nunc pro tunc.

7.4. If the Court does not enter the Judgment in all material respects in the
form attached as Exhibit B hereto, or if the Court enters the Judgment and
appellate review is sought and, on such review, the entry of the Judgment is
finally vacated, modified, or reversed, then this Stipulation and the Settlement
incorporated therein shall be cancelled and terminated, unless all parties who
are adversely affected thereby, in their sole discretion within thirty
(30) business days from the date of the mailing of such ruling to such parties,
provide written notice to all other parties hereto of their intent to proceed
with the Settlement under the terms of the Judgment as modified by the Court or
on appeal. Such notice may be provided on behalf of Plaintiffs and the
Settlement Class Members by Lead Counsel. No Settling Party shall have any
obligation whatsoever to proceed under any terms other than substantially in the
form provided and agreed to herein; provided, however, that no order of the
Court concerning any Fee and Expense Application or Plan of Allocation, or any
modification or reversal on appeal of such order, shall constitute grounds for
cancellation or termination of this Stipulation by any Settling Party. Without
limiting the foregoing, Defendants shall have, in their sole and absolute
discretion, the option to terminate the Settlement in its entirety in the event
that the Judgment, upon becoming Final, does not provide for the dismissal with
prejudice of the Litigation against them or provide the releases or bar orders
contained in Exhibit B.

7.5. If, prior to the Settlement Hearing, any Persons who otherwise would be
Settlement Class Members have validly requested exclusion from the Settlement
Class (“Requests for Exclusion”) in accordance with the provisions of the Notice
or Notice Order, and such Persons, in the aggregate, during the Settlement Class
Period purchased or acquired ITT common stock or options on ITT common stock
(and/or wrote put options on ITT common stock) equal to or more

 

 

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than a certain percentage of ITT Securities specified in a separate Supplemental
Agreement to the Stipulation, then Defendants shall have, in their sole and
absolute discretion, the option to terminate this Stipulation on behalf of all
Settling Parties in accordance with the procedures set forth in the Supplemental
Agreement. Lead Counsel shall, however, have an opportunity to seek retraction
of any Request for Exclusion under the terms of the Supplemental Agreement. The
Supplemental Agreement shall not be filed with the Court. If required by the
Court, Plaintiffs and Defendants shall request that the Supplemental Agreement
be filed under seal and/or any of its terms be disclosed only in camera to the
Court for purposes of approving the Settlement, and that such disclosure shall
be carried out to the fullest extent possible in accordance with the practices
of the Court so as to preserve the confidentiality of the Supplemental
Agreement, particularly the threshold percentage amount of ITT Securities
specified in the Supplemental Agreement. The Claims Administrator shall promptly
(and not more than three (3) business days after the Claims Administrator
receives such a request) electronically provide copies of any or all Requests
for Exclusion to Lead Counsel and to Defendants’ Counsel. A listing of all
persons who have validly requested exclusion from the Settlement Class shall be
provided by Lead Counsel to Defendants’ Counsel within five (5) business days
following the deadline for requesting exclusion from the Settlement Class and to
the Court no later than ten (10) days prior to the Settlement Hearing. The list
of persons who have validly requested exclusion from the Settlement Class
provided to the Court shall also include a certification that all Requests for
Exclusion have been previously provided to Defendants’ Counsel.

 

  8. Miscellaneous Provisions

8.1. All of the exhibits attached hereto are hereby incorporated by reference as
though fully set forth herein.

8.2. The headings herein are used for the purpose of convenience only and are
not meant to have legal effect.

8.3. The Settling Parties: (a) acknowledge that it is their intent to consummate
this Stipulation; and (b) agree, subject to their fiduciary and other legal
obligations, to cooperate to the extent reasonably necessary to effectuate and
implement all terms and conditions of this Stipulation and to exercise their
best efforts to accomplish the foregoing terms and conditions of this
Stipulation.

 

 

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8.4. The Settling Parties intend this Settlement to be a final and complete
resolution of all disputes that have arisen, or could have arisen, between them,
and all claims that have been asserted, or that could have been asserted, by
Plaintiffs and the Settlement Class Members against the Defendants and other
Released Persons with respect to the Released Claims. The Settlement compromises
claims which are contested and shall not be deemed an admission by any Settling
Party as to the merits of any claim or defense.

8.5. While Defendants deny that the claims advanced in the Litigation were
meritorious, they will not assert in any public forum that the Litigation was
not filed by Plaintiffs in good faith and/or is not being settled voluntarily
after consultation with competent legal counsel. Plaintiffs will not assert in
any public forum that Defendants’ defenses were, or would be, made in bad faith
or without reasonable bases, or that the Settlement is not in the best interests
of the Settlement Class Members. The Judgment will contain a finding that,
during the course of the Litigation, the parties and their respective counsel at
all times complied with the requirements of Federal Rule of Civil Procedure 11.
The Settling Parties agree that the amount paid to the Settlement Fund and the
other terms of the Settlement were negotiated at arm’s length and in good faith
by the Settling Parties and reflect a Settlement that was reached voluntarily
after consultation with competent legal counsel. The Settling Parties reserve
their right to rebut, in a manner that such party determines to be appropriate,
any contention made in any public forum that the Litigation was brought or
defended in bad faith or without a reasonable basis.

8.6. While maintaining their positions that the claims and defenses asserted in
the Action are meritorious, Plaintiffs and Plaintiffs’ Counsel, on the one hand,
and Defendants and Defendants’ counsel, on the other, shall not make any public
statements or statements to the media (whether or not for attribution) that
disparage the other’s business, conduct, or reputation or that of their counsel
based on the subject matter of the Action.

 

 

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8.7. Whether or not the Settlement is approved by the Court, and whether or not
the Settlement is consummated, none of this Stipulation, its Exhibits, the fact
and terms of the Settlement contained herein, or any act performed or document
executed pursuant to or in furtherance of this Stipulation or the Settlement:
(a) is or may be deemed to be or may be used as an admission of, concession of,
or evidence of, the truth or validity of any Released Claim, of any allegations
or claims made in the Litigation, of any allegations or claims that could have
been made in the Litigation, or of any allegation of wrongdoing, negligence,
fault, or liability of Defendants or any other Released Persons; or (b) is or
may be deemed to be or may be used as an admission of, concession of, or
evidence of, the deficiency or infirmity of any defense that has been or could
have been asserted in the Action or in any litigation; or (c) is or may be
deemed to be or may be used as an admission of, or evidence of, any liability,
negligence, fault, misrepresentation, omission, or wrongdoing as against any of
Defendants or any Released Persons in any arbitration proceeding or other civil,
criminal, or administrative action or proceeding in any court, administrative
agency, or other tribunal; or (d) is or may be deemed to be or may be used as an
admission of, or evidence that class certification is appropriate in this
Action, except for purposes of this Settlement; or (e) is or may be deemed to be
or may be used as an admission of, or evidence that the consideration to be paid
under the Settlement represents the amount which could be or would have been
recovered after trial in this Action; or (f) is or may be deemed to be or may be
used as an admission of, or evidence that any damages potentially recoverable
under the Complaint would have exceeded or would have been less than the
Settlement Fund. Neither this Stipulation nor the Settlement, nor any act
performed or document executed pursuant to or in furtherance of this Stipulation
or the Settlement shall be admissible in any proceeding for any purpose, except
to enforce the terms of the Settlement; provided, however that if the Settlement
is approved by the Court, the Released Persons may refer to or file the
Stipulation and/or the Judgment in any action that may be brought against them
in order to support a defense or counterclaim based on principles of res
judicata, collateral estoppel, release, good faith settlement, judgment bar or
reduction, or any other theory of claim preclusion or issue preclusion or
similar defense or counterclaim under U.S. federal or state law or foreign law.

 

 

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8.8. The Stipulation may be amended or modified only by a written instrument
signed by or on behalf of all Settling Parties or their respective
successors-in-interest. Without further order of the Court, counsel for the
Settling Parties may agree to reasonable extensions of time to carry out any
provisions of this Stipulation.

8.9. The waiver by one party of any breach of this Stipulation by any other
party shall not be deemed a waiver of any other prior or subsequent breach of
this Stipulation. The provisions of this Stipulation may not be waived except by
writing signed by the affected party, or counsel for that party.

8.10. This Stipulation, including its Exhibits and Supplemental Agreement which
are material parts thereof, constitutes the entire agreement among the parties
hereto and no representations, warranties, or inducements have been made to any
party concerning the Stipulation other than the representations, warranties, and
covenants contained and memorialized in such documents. It is understood by the
Settling Parties that, except for the matters expressly represented herein, the
facts or law with respect to which this Stipulation is entered into may turn out
to be other than, or different from, the facts now known to each party or
believed by such party to be true; each party therefore expressly assumes the
risk of the facts or law turning out to be so different, and agrees that this
Stipulation shall be in all respects effective and not subject to termination by
reason of any such different facts or law. Except as otherwise provided herein,
each party shall bear its own costs.

8.11. This Stipulation shall not be construed more strictly against one Settling
Party than another merely by virtue of the fact that it, or any part of it, may
have been prepared by counsel for one of the Settling Parties, it being
recognized that it is the result of arm’s-length negotiations among the Settling
Parties and all Settling Parties have contributed substantially and materially
to the preparation of this Stipulation.

8.12. Lead Counsel, on behalf of the Settlement Class, is expressly authorized
by Plaintiffs to take all appropriate action required or permitted to be taken
by the Settlement Class pursuant to this Stipulation to effectuate its terms and
also are expressly authorized to enter into any

 

 

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modifications or amendments to this Stipulation on behalf of the Settlement
Class which they deem appropriate. Plaintiffs and Lead Counsel represent and
warrant that none of Plaintiffs’ claims or causes of action referred to herein,
or that could have been alleged in the Litigation, has been assigned,
encumbered, hypothecated, conveyed, transferred, or in any manner granted or
given, in whole or in part, to any other Person.

8.13. Each counsel or other Person executing this Stipulation and any documents
prepared in furtherance of the Stipulation on behalf of any party hereto, hereby
warrants that such Person has the full authority to do so.

8.14. This Stipulation may be executed in one or more counterparts. All executed
counterparts and each of them shall be deemed to be one and the same instrument.
A complete set of executed counterparts shall be filed with the Court.

8.15. This Stipulation shall be binding upon, and inure to the benefit of, the
successors and assigns of the Parties hereto, including any corporation or other
entity into or with which any Party merges, consolidates, or reorganizes.

8.16. The Court shall retain jurisdiction with respect to implementation and
enforcement of the terms of this Stipulation, and all Parties hereto submit to
the jurisdiction of the Court for purposes of implementing and enforcing the
settlement embodied in the Stipulation.

8.17. Nothing in this Stipulation, Settlement, or the negotiations or
proceedings relating to the foregoing is intended to or shall be deemed to
constitute a waiver of any applicable privilege or immunity, including, without
limitation, the accountants’ privilege, the attorney-client privilege, the joint
defense privilege, or work product immunity; further, all communications,
documents, and/or other statements between Plaintiffs’ Counsel and Defendants’
Counsel in connection with the mediation of this Litigation and relating to the
drafting and execution of this Settlement shall be kept confidential and shall
be inadmissible in any proceeding in any U.S. federal or state court or other
tribunal or otherwise, in accordance with Rule 408 of the Federal Rules of
Evidence as if such Rule applied in all respects in any such proceeding or
forum.

 

 

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8.18. This Stipulation and the Settlement contemplated by it, and all disputes
arising out of or relating to the Stipulation and Settlement shall be construed
and enforced in accordance with, and governed by, the substantive laws and
procedural rules of the State of Indiana without giving effect to Indiana’s
choice-of-law principles, except to the extent that federal law requires that
federal law governs. Any dispute relating to this Stipulation shall be brought
exclusively in the United States District Court for the Southern District of
Indiana.

8.19. Any written notice required pursuant to or in connection with this
Stipulation shall be delivered by e-mail to the Parties’ counsel as designated
and identified below and also by overnight mail addressed to a representative of
Lead Counsel and/or Defendants’ Counsel, which shall be Robert V. Prongay and
Jennifer L. Conn at the addresses identified below, respectively, unless and
until notification of a change in said representatives.

8.20. Except where specifically noted, all time periods set forth in this
Settlement will be computed in calendar days and pursuant to the terms of Rule
6(a) of the Federal Rules of Civil Procedure.

IN WITNESS WHEREOF, the parties hereto have caused the Stipulation to be
executed, by their duly authorized attorneys, dated as of November 2, 2015.

 

Dated: November 2, 2015     GLANCY PRONGAY & MURRAY LLP     By:  

/s/ Robert V. Prongay

    Lionel Z. Glancy     Robert V. Prongay     Leanne H. Solish     1925 Century
Park East, Suite 2100     Los Angeles, California 90067     Telephone:     (310)
201-9150     Facsimile:      (310) 201-9160     Lead Counsel for Lead Plaintiff
and the Class

 

 

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    KATZ & KORIN, PC     Offer Korin [Atty. No. 14014-49]     334 North Senate
Avenue     Indianapolis, Indiana 46204-1708     Telephone:     (317) 464-1100  
  Facsimile:      (317) 464-1111     Liaison Counsel for Lead Plaintiff and the
Class Dated: November 2, 2015     GIBSON, DUNN & CRUTCHER LLP     By:  

/s/ Jennifer L. Conn

    Jennifer L. Conn     200 Park Avenue     New York, New York 10166-0193    
Telephone:     (212) 351-4000     Facsimile:      (212) 351-4035     Wayne W.
Smith     3161 Michelson Drive     Irvine, California 92612-4412     Telephone:
    (949) 451-3800     Facsimile:      (949) 451-4220     ICE MILLER LLP    
Philip A. Whistler     Thomas E. Mixdorf     One American Square, Suite 2900    
Indianapolis, Indiana 46282-0200     Telephone:     (317) 236-2100    
Facsimile:      (317) 592-4790     Counsel for Defendants      

 

 

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EXHIBIT A

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF INDIANA

INDIANAPOLIS DIVISION

 

In re ITT EDUCATIONAL SERVICES, INC.

SECURITIES LITIGATION (INDIANA)

  

CASE NO. 1:14-cv-01599-TWP-DML

 

EXHIBIT A

 

ORDER PRELIMINARILY APPROVING SETTLEMENT AND PROVIDING FOR NOTICE OF PROPOSED
SETTLEMENT

 

WHEREAS, a putative class action is pending before the Court entitled In re ITT
EDUCATIONAL SERVICES, INC. SECURITIES LITIGATION (INDIANA), Civil Action
No. 1:14-cv-01599-TWP-DML, United States District Court for the Southern
District of Indiana (the “Litigation”);

WHEREAS, the Court has received the Stipulation of Settlement dated as of
November 2, 2015 (the “Stipulation”)1, which has been entered into by
Plaintiffs, on behalf of themselves and all Members of the Settlement Class, and
Defendants, and the Court has reviewed the Stipulation and the Exhibits annexed
thereto;

WHEREAS, the Settling Parties having made application, pursuant to Federal Rule
of Civil Procedure 23(e), for an order preliminarily approving the Settlement of
this Litigation, in accordance with the Stipulation which sets forth the terms
and conditions for a proposed Settlement of the Litigation and for dismissal of
the Litigation with prejudice upon the terms and conditions set forth therein;
and the Court having read and considered the Stipulation;

 

 

1  For purposes of this Order, the Court adopts all defined terms as set forth
in the Stipulation, and the capitalized terms used herein shall have the same
meaning as in the Stipulation.

 

ORDER PRELIMINARILY APPROVING SETTLEMENT AND PROVIDING

FOR NOTICE OF PROPOSED SETTLEMENT

1

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NOW, THEREFORE, IT IS HEREBY ORDERED:

1. The Court does hereby preliminarily approve the Stipulation and the
Settlement set forth therein, including all provisions therein and exhibits
attached thereto, subject to further consideration at the Settlement Hearing
described below.

2. The Court finds that: (a) the Stipulation resulted from arm’s-length
negotiations; and (b) the Stipulation is sufficiently fair, reasonable and
adequate as to the Settlement Class to warrant providing notice of the
Settlement to Settlement Class Members and to warrant holding a Settlement
Hearing under Rule 23(e) of the Federal Rules of Civil Procedure.

3. The Settlement Hearing shall be held before this Court on             
        , 2016,2 at     :       .m., in the Birch Bayh Federal Building & U.S.
Courthouse, 46 East Ohio Street, Courtroom 344, Indianapolis, Indiana 46204, for
the purpose of determining, among other things: (i) whether the proposed
Settlement of the Litigation, on the terms and conditions provided for in the
Stipulation is fair, reasonable and adequate and in the best interests of the
Settlement Class and should be finally approved by the Court; (ii) whether, for
purposes of settlement only, the Settlement Class should be finally certified;
whether Lead Plaintiff should be finally appointed as a representative for the
Settlement Class; and whether Lead Counsel should be finally appointed as
counsel for the Settlement Class; (iii) whether a Judgment, in the form attached
as Exhibit B to the Stipulation should be entered herein, dismissing and
releasing the Released Claims (as that term is defined in the Stipulation) with
prejudice; (iv) whether the proposed Plan of Allocation should be approved;
(v) whether to grant Lead Counsel’s request of fees and expenses; (vi) whether
the Court

 

2 

The Settling Parties have respectfully requested that the Court schedule the
Settlement Hearing no earlier than 100 days after entry of this Order,
preliminarily approving the Settlement, so that, among other things, they may
comply with the notice provisions set forth in the Class Action Fairness Act, 28
U.S.C. § 1715(b).

 

ORDER PRELIMINARILY APPROVING SETTLEMENT AND PROVIDING

FOR NOTICE OF PROPOSED SETTLEMENT

2

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should grant Plaintiffs’ reimbursement of their reasonable costs and expenses
(including lost wages) directly related to their representation of the
Settlement Class; and (vii) to consider any other matters that may properly be
brought before the Court in connection with the Settlement.

4. Pursuant to Rule 23 of the Federal Rules of Civil Procedure, the Court
preliminarily certifies, solely for the purposes of effectuating this
Settlement, a Settlement Class consisting of all persons and/or entities who
purchased or otherwise acquired the common stock of ITT Educational Services,
Inc. (“ITT” or the “Company”) (ticker symbol: ESI), purchased or otherwise
acquired call options on ITT common stock, or wrote put options on ITT common
stock, between February 26, 2013 and May 12, 2015, both dates inclusive (the
“Settlement Class”). Excluded from the Settlement Class are Defendants, the
officers and directors of ITT during the Settlement Class, members of their
immediate families, and the legal representatives, heirs, successors or assigns
of any of the foregoing and any entity in which a Defendant has or had a
controlling interest during the Settlement Class Period. Also excluded from the
Settlement Class is any person or entity that timely and validly requests
exclusion from the Settlement Class, pursuant to and in accordance with the
terms of this Order. There has been no prior notice to the Settlement Class of
the certification of the Settlement Class in this Litigation or prior
opportunity for any individual or entity to request to be excluded from being a
Member of the Settlement Class.

5. With respect to the Settlement Class, the Court preliminarily finds, for
purposes of effectuating this Settlement only, that the prerequisites for a
class action under Rules 23(a) and (b)(3) of the Federal Rules of Civil
Procedure have been satisfied in that: (a) the number of Settlement Class
Members is so numerous that joinder of all members thereof is impracticable;
(b) there are questions of law and fact common to the Settlement Class; (c) the
claims of the Lead Plaintiff are typical of the claims of the Settlement Class
it represents; (d) Lead Plaintiff and Lead

 

ORDER PRELIMINARILY APPROVING SETTLEMENT AND PROVIDING

FOR NOTICE OF PROPOSED SETTLEMENT

3

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Counsel have and will continue to fairly and adequately represent the interests
of the Settlement Class; (e) the questions of law and fact common to the
Settlement Class predominate over any questions affecting only individual
Members of the Settlement Class; and (f) a class action is superior to other
available methods for the fair and efficient adjudication of the controversy.

6. Pursuant to Rule 23 of the Federal Rules of Civil Procedure, and for the
purposes of this Settlement only, Lead Plaintiff, is preliminarily appointed as
a class representative for the Settlement Class and Glancy Prongay & Murray LLP,
previously appointed Lead Counsel, is preliminarily appointed as counsel for the
Settlement Class.

7. The Court approves, as to form and content, the Notice of Proposed Settlement
of Class Action, Motion for Attorneys’ Fees and Settlement Hearing (the
“Notice”), the Proof of Claim and Release form (the “Proof of Claim”), and the
Summary Notice (“Summary Notice”) annexed respectively as Exhibits A-1, A-2 and
A-3 to the Stipulation, and finds that the mailing and distribution of the
Notice and publishing of the Summary Notice substantially in the manner and form
set forth in this Order meet the requirements of Federal Rule of Civil Procedure
23 and the due process requirements of Section 21D(a)(7) of the Securities
Exchange Act of 1934, the Due Process clause of the U.S. Constitution, and any
other applicable law, and is the best notice practicable under the circumstances
and shall constitute due and sufficient notice to all Persons entitled thereto.

8. Upon the entry of this Order, pending final determination by the Court as to
whether the Settlement, as set forth in the Stipulation, is fair, reasonable,
and adequate, and should be finally approved, and whether the Judgment
dismissing the Litigation with prejudice, as set forth in Exhibit B to the
Stipulation, should be approved, the Court orders a continuation of the stay of
litigation in this Action first entered on July 14, 2015, and neither Plaintiffs
nor any Settlement Class Member, either directly, representatively, or in any
other capacity, shall assert, commence, or prosecute

 

ORDER PRELIMINARILY APPROVING SETTLEMENT AND PROVIDING

FOR NOTICE OF PROPOSED SETTLEMENT

4

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against any of the Released Persons, any of the Released Claims in this
Litigation, or in any other action or litigation in any court, arbitration or
other tribunal, or in any other proceeding or forum. This injunction is
necessary to protect and effectuate the Settlement, this Order, and the Court’s
flexibility and authority to effectuate the Settlement and to enter judgment
when appropriate, and is ordered in aid of the Court’s jurisdiction and to
protect its judgments.

9. The Court appoints the firm Angeion Group (the “Claims Administrator”) to
supervise and administer the notice procedure, as well as the processing of
claims as more fully set forth below:

a. Not later than twenty (20) business days after the date of this Order (the
“Notice Date”), the Claims Administrator shall cause a copy of the Notice and
the Proof of Claim, substantially in the forms annexed as Exhibits A-1 and A-2
to the Stipulation, respectively, to be mailed by first class mail to all of the
potential Settlement Class Members who can be identified with reasonable effort;

b. Not later than ten (10) business days after the Notice Date, the Claims
Administrator shall cause the Summary Notice, substantially in the form annexed
as Exhibits A-3 to the Stipulation, to be published once in Investor’s Business
Daily, and on a different day shall cause the Summary Notice to be published
once on Business Wire;

c. Not later than the Notice Date, the Claims Administrator shall cause copies
of the Stipulation and its Exhibits, the Notice, the Summary Notice, and the
Proof of Claim to be posted on the following website:
www.ITTEducationSecuritiesLitigation-Indiana.com; and

 

ORDER PRELIMINARILY APPROVING SETTLEMENT AND PROVIDING

FOR NOTICE OF PROPOSED SETTLEMENT

5

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d. Not later than seventy (70) days after the date of this Order, Plaintiffs’
Lead Counsel shall cause to be served on Defendants’ Counsel and filed with the
Court proof, by affidavit or declaration, of such mailing, publishing and
posting.

10. Nominees who purchased or otherwise acquired ITT Securities between
February 26, 2013 and May 12, 2015, both dates inclusive, shall send the Notice
and the Proof of Claim to all beneficial owners of such ITT Securities within
fourteen (14) days after receipt thereof, or send a list of the names and
addresses of such beneficial owners to the Claims Administrator within fourteen
(14) days of receipt thereof, in which event the Claims Administrator shall
promptly mail the Notice and the Proof of Claim to such beneficial owners. Lead
Counsel shall, if requested, reimburse banks, brokerage houses, or other
nominees solely for their reasonable out-of-pocket expenses incurred in
providing the Notice to beneficial owners who are potential Members of the
Settlement Class out of the Settlement Fund, which expenses would not have been
incurred except for the sending of such Notice, subject to further order of this
Court with respect to any dispute concerning such compensation.

11. Any Person falling within the definition of the Settlement Class may, upon
request, be excluded from the Settlement Class. Any such Person must submit to
the Claims Administrator a request for exclusion (“Request for Exclusion”), to
be received no later than twenty-eight (28) days prior to the Settlement
Hearing. A Request for Exclusion must state: (a) the name, address, and
telephone number of the Person requesting exclusion; (b) each of the Person’s
purchases and sales of ITT Securities made during the Settlement Class Period,
including the dates of purchase or sale, the number of shares/options purchased
and/or sold, and the price paid or received per share for each such purchase or
sale; and (c) a statement that the Person wishes to be excluded from the
Settlement Class. All Requests for Exclusion must also be signed by the Person
requesting exclusion. All

 

ORDER PRELIMINARILY APPROVING SETTLEMENT AND PROVIDING

FOR NOTICE OF PROPOSED SETTLEMENT

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Persons who submit valid and timely Requests for Exclusion in the manner set
forth in this Paragraph shall have no rights under the Settlement, shall not
share in the distribution of the Net Settlement Fund, and shall not be bound by
the Settlement or the Judgment entered in this Litigation.

12. Any Person within the definition of the Settlement Class who does not timely
and validly request exclusion from the Settlement Class shall be deemed to have
waived his, her, or its right to be excluded from the Settlement Class and shall
be bound by all determinations and judgments in the Litigation concerning the
Settlement, whether favorable or unfavorable to the Settlement Class. All
Members of the Settlement Class (all Persons who fall within the definition of
the Settlement Class but do not submit a timely and valid Request for Exclusion
in the manner stated in this Order) shall be bound by the Settlement and the
Judgment, including, but not limited to, the release of the Released Claims
provided for in the Settlement and the Judgment, if the Court approves the
Settlement.

13. Settlement Class Members who wish to collect in the Settlement shall
complete and submit Proof of Claim forms in accordance with the instructions
contained therein. Unless the Court orders otherwise, all Proof of Claim forms
must be postmarked no later than one hundred twenty (120) days from the date of
this Order. Any Settlement Class Member who does not timely submit a Proof of
Claim form within the time provided for shall be barred from sharing in the
distribution of the proceeds of the Net Settlement Fund, unless otherwise
ordered by the Court, but nonetheless will be bound by all of the terms of the
Settlement, including the releases provided for therein, and shall be barred and
enjoined from bringing any action, claim or other proceeding of any kind against
any Released Person concerning any Released Claim, and shall be bound by any
judgment or determination of the Court affecting the Settlement Class Members.

 

ORDER PRELIMINARILY APPROVING SETTLEMENT AND PROVIDING

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14. The Claims Administrator, subject to the supervision of Lead Counsel and the
Court, will make administrative determinations concerning the acceptance and
rejection of the Proof of Claim forms submitted. By submitting a Proof of Claim
Form, a Member of the Settlement Class shall be deemed to have submitted to the
jurisdiction of the Court with respect to the claim submitted, and the claim
will be subject to investigation and discovery under the Federal Rules of Civil
Procedure.

15. Any Member of the Settlement Class may enter an appearance in the
Litigation, at his, her or its own expense, individually or through counsel of
his, her or its own choice. If they do not enter an appearance, Lead Counsel
will represent them. If any Settlement Class Member chooses to hire an attorney
at their own expense, that attorney must file a notice of appearance with the
Court and serve it on Lead Counsel and Defendants’ Counsel so that notice is
received at least fourteen (14) days prior to the Settlement Hearing.

16. Any Member of the Settlement Class may appear at the Settlement Hearing and
show cause, if he, she or it has any reason, why the proposed Settlement of the
Litigation should or should not be approved as fair, reasonable and adequate,
why a Judgment should or should not be entered thereon, why the Plan of
Allocation should or should not be approved, why attorneys’ fees and
reimbursement of expenses should or should not be awarded to Lead Counsel, or
why Plaintiffs should not be reimbursed their reasonable costs and expenses
(including lost wages) directly related to their representation of the
Settlement Class; provided, however, that no Settlement Class Member or any
other Person shall be heard or entitled to contest the approval of the terms and
conditions of the proposed Settlement, or, if approved, the Judgment to be
entered thereon approving the same, or the order approving the Plan of
Allocation, or the attorneys’ fees and expenses to be awarded to Lead Counsel,
or Plaintiffs’ reimbursement of costs and expenses (including lost wages)
directly

 

ORDER PRELIMINARILY APPROVING SETTLEMENT AND PROVIDING

FOR NOTICE OF PROPOSED SETTLEMENT

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related to their representation of the Settlement Class, unless that Settlement
Class Member has filed said objections, papers and briefs with the Clerk of the
United States District Court for the Southern District of Indiana, no later than
twenty-one (21) days prior to the Settlement Hearing and delivered copies of any
such papers to counsel for the Settling Parties identified in the Notice, such
that they are received on or before such date. Any objection must include: (a)
the full name, address, and phone number of the objecting Settlement Class
Member; (b) a list and documentation of all of the Settlement Class Member’s
transactions involving the ITT Securities included in the Settlement Class
definition, including brokerage confirmation receipts or other competent
documentary evidence of such transactions, including the amount and date of each
purchase or sale and the price paid and/or received (including all income
received thereon); (c) a written statement of all grounds for the objection
accompanied by any legal support for the objection; (d) copies of any papers,
briefs or other documents upon which the objection is based; (e) a list of all
persons who will be called to testify in support of the objection; (f) a
statement of whether the objector intends to appear at the Settlement Hearing;
(g) a list of other cases in which the objector or the objector’s counsel have
appeared either as settlement objectors or as counsel for objectors in the
preceding five years; and (h) the objector’s signature, even if represented by
counsel. Any Member of the Settlement Class who does not make his, her or its
objection in the manner provided shall be deemed to have waived such objection
and shall forever be foreclosed from making any such objection, unless otherwise
ordered by the Court. By objecting to the Settlement, the Judgment, the Plan of
Allocation, Lead Counsel’s Fee and Expense Application, or otherwise requesting
to be heard at the Settlement Hearing, an objector shall be deemed to have
submitted to the jurisdiction of the Court with respect to that Person’s
objection or request to be heard and the subject matter of the Settlement,
including, but not limited to, enforcement of the terms of the Settlement
(including, but not limited to, the release of the Released Claims provided for
in the Settlement and the Judgment).

 

ORDER PRELIMINARILY APPROVING SETTLEMENT AND PROVIDING

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17. All funds held by the Escrow Agent shall be deemed and considered to be in
custodia legis of the Court, and shall remain subject to the jurisdiction of the
Court, until such time as such funds shall be distributed pursuant to the
Stipulation or further order(s) of the Court.

18. All papers in support of the Settlement, the Plan of Allocation, and the Fee
and Expense Application, shall be filed and served not later than thirty-five
(35) days prior to the Settlement Hearing. Any papers in further support of the
Settlement, the Plan of Allocation, and the Fee and Expense Application, shall
be filed and served no later than ten (10) days prior to the Settlement Hearing.
If an objection is filed pursuant to Paragraph 16 above, any reply papers shall
be filed no later than seven (7) days before the Settlement Hearing.

19. Neither Defendants nor any of the Released Persons shall have any
responsibility for or liability with respect to the Plan of Allocation, any
application for attorneys’ fees or expenses submitted by Lead Counsel, or any
application for Plaintiffs’ reimbursement of costs and expenses (including lost
wages) directly related to their representation of the Settlement Class, and
such matters will be considered separately from the fairness, reasonableness and
adequacy of the Settlement.

20. At or after the Settlement Hearing, the Court shall determine whether the
Plan of Allocation proposed by Lead Counsel and any application for attorneys’
fees or expenses by Lead Counsel or Plaintiffs shall be approved. Any further
orders or proceedings solely regarding the Plan of Allocation or any application
for attorneys’ fees or expenses by Lead Counsel or Plaintiffs, or any appeal
from any order relating thereto or reversal or modification thereof, shall not
operate to terminate the Settlement or in any way disturb or affect or delay the
Settlement or the Judgment and the release of the Released Claims.

 

ORDER PRELIMINARILY APPROVING SETTLEMENT AND PROVIDING

FOR NOTICE OF PROPOSED SETTLEMENT

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21. All reasonable expenses incurred in identifying and notifying Settlement
Class Members, as well as administering the Settlement Fund, and paying Taxes
and Tax expenses, shall be paid as set forth in the Stipulation. Unless
otherwise provided in the Stipulation, there shall be no distribution of any
portion of the Settlement Fund to any Settlement Class Member until a Plan of
Allocation is finally approved and is affirmed on appeal or certiorari or is no
longer subject to review by appeal of certiorari and the time for any petition
for rehearing, appeal of review, whether by certiorari or otherwise, has
expired. In the event the Settlement is not approved by the Court, or otherwise
fails to become effective, neither the Plaintiffs nor Lead Counsel shall have
any obligation to repay any amounts actually and properly disbursed from the
Settlement Fund pursuant to this Paragraph. If the Settlement does not become
Final or is terminated for any reason, within fifteen (15) business days of
termination, the Settlement Fund shall be returned to Defendants pursuant to
written instructions from Defendants’ Counsel, together with any interest earned
on the Settlement Fund, less any notice and administration costs actually
incurred.

22. Defendants have denied, and continue to deny, any and all allegations of
wrongdoing, fraud, fault, liability, or damage related to the claims asserted in
the Action; affirm that they have acted properly and lawfully at all times;
maintain that they had and have meritorious defenses to all claims alleged in
the Action; and have represented that they entered into the Settlement solely in
order to eliminate the burden, expense, and uncertainties of further litigation.
Whether or not the Settlement is approved by the Court, none of this Order, the
Stipulation, including its Exhibits, the fact and terms of the Settlement
contained therein, or any act performed or document executed pursuant to or in
furtherance thereof: (a) is or may be deemed to be or may be used as an
admission

 

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FOR NOTICE OF PROPOSED SETTLEMENT

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of, concession of, or evidence of, the truth or validity of any Released Claim,
of any allegations or claims made in the Litigation, of any allegations or
claims that could have been made in the Litigation, or of any allegation of
wrongdoing, negligence, fault, or liability of Defendants or any other Released
Persons; or (b) is or may be deemed to be or may be used as an admission of,
concession of, or evidence of, the deficiency or infirmity of any defense that
has been or could have been asserted in the Action or in any litigation; or
(c) is or may be deemed to be or may be used as an admission of, concession of,
or evidence of, any liability, negligence, fault, misrepresentation, omission,
or wrongdoing as against any of Defendants or any Released Persons in any
arbitration proceeding or other civil, criminal, or administrative action or
proceeding in any court, administrative agency, or other tribunal; or (d) is or
may be deemed to be or may be used as an admission of, or evidence that class
certification is appropriate in this Action, except for purposes of this
Settlement; or (e) is or may be deemed to be or may be used as an admission of,
or evidence that the consideration to be paid under the Settlement represents
the amount which could be or would have been recovered after trial in this
Action; or (f) is or may be deemed to be or may be used as an admission of, or
evidence that any damages potentially recoverable under the Complaint would have
exceeded or would have been less than the Settlement Fund. Neither the
Stipulation nor the Settlement, nor any act performed or document executed
pursuant to or in furtherance of the Stipulation or the Settlement shall be
admissible in any proceeding for any purpose, except to enforce the terms of the
Settlement; provided, however that if the Settlement is approved by the Court,
the Released Persons may refer to or file the Stipulation and/or the Judgment in
any action that may be brought against them in order to support a defense or
counterclaim based on principles of res judicata, collateral estoppel, release,
good faith settlement, judgment bar or reduction, or any other theory of claim
preclusion or issue preclusion or similar defense or counterclaim under U.S.
federal or state law or foreign law.

 

ORDER PRELIMINARILY APPROVING SETTLEMENT AND PROVIDING

FOR NOTICE OF PROPOSED SETTLEMENT

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23. In the event that the Settlement does not become effective in accordance
with the terms of the Stipulation or the Effective Date does not occur, or in
the event that the Settlement Fund, or any portion thereof, is returned to the
Defendants, then this Order shall be rendered null and void to the extent
provided by and in accordance with the Stipulation and shall be vacated and, in
such event, all orders entered and releases delivered in connection herewith
shall be null and void to the extent provided by and in accordance with the
Stipulation. In such an event, the Settling Parties shall return to their
positions as of July 14, 2015, the date this Action was stayed pending
settlement discussions, without prejudice in any way.

24. Pending the Settlement Hearing, the Court stays all proceedings in the
Litigation, other than proceedings necessary to carry out or enforce the terms
and conditions of the Stipulation.

25. The Court reserves the right to adjourn the date of the Settlement Hearing
without further notice to the Members of the Settlement Class, and retains
jurisdiction to consider all further applications arising out of or connected
with the Settlement. The Court may approve the Settlement, with such
modifications as may be agreed to by the Settling Parties, if appropriate,
without further notice to the Settlement Class.

 

DATED:                           

 

     

THE HONORABLE TANYA WALTON PRATT

UNITED STATES DISTRICT JUDGE

 

ORDER PRELIMINARILY APPROVING SETTLEMENT AND PROVIDING

FOR NOTICE OF PROPOSED SETTLEMENT

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EXHIBIT A-1

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF INDIANA

INDIANAPOLIS DIVISION

 

In re ITT EDUCATIONAL SERVICES, INC.

SECURITIES LITIGATION (INDIANA)

  

CASE NO. 1:14-cv-01599-TWP-DML

 

EXHIBIT A-1

 

NOTICE OF PROPOSED SETTLEMENT OF CLASS ACTION, MOTION FOR ATTORNEYS’ FEES AND
SETTLEMENT HEARING

 

IF YOU PURCHASED OR OTHERWISE ACQUIRED THE COMMON STOCK OF ITT EDUCATIONAL
SERVICES, INC. (“ITT” OR THE “COMPANY”) (TICKER SYMBOL: ESI; CUSIP: 45068B109),
PURCHASED OR OTHERWISE ACQUIRED CALL OPTIONS ON ITT COMMON STOCK, OR WROTE PUT
OPTIONS ON ITT COMMON STOCK, BETWEEN FEBRUARY 26, 2013 AND MAY 12, 2015, BOTH
DATES INCLUSIVE, YOU COULD RECEIVE A PAYMENT FROM A CLASS ACTION SETTLEMENT.

A federal court authorized this Notice. This is not a solicitation from a
lawyer.

Your legal rights are affected whether you act, or don’t act.

Read this Notice carefully.1

Securities and Time Period: ITT Educational Services, Inc. (“ITT”) common stock
(ticker symbol: ESI; CUSIP: 45068B109) purchased or acquired, call options on
ITT common stock purchased or acquired, and put options on ITT common stock
written, between February 26, 2013 and May 12, 2015, both dates inclusive (the
“Settlement Class Period”).

 

 

1  This Notice summarizes and is qualified in its entirety by, and incorporates
by reference, the Stipulation of Settlement dated November 2, 2015 (the
“Stipulation”), which sets forth the terms of the Settlement. Please refer to
the Stipulation for a complete description of the terms and provisions thereof.
A copy of the Stipulation is available at
www.ITTEducationSecuritiesLitigation-Indiana.com. All capitalized terms used,
but not defined herein, shall have the same meanings as in the Stipulation.

 

NOTICE OF PROPOSED SETTLEMENT

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Settlement Fund: $12,537,500.00 in cash. Your recovery will depend on the number
of ITT Securities you, and other Settlement Class Members who file claims,
purchased, acquired and sold, options written, and the prices at which you, and
the other Settlement Class Members who file claims, purchased and sold those ITT
Securities. The estimated average recovery per share of common stock will be
approximately $0.38 per share before deduction of Court-approved fees and
expenses and costs of notice and claims administration. Historically, actual
claims rates are less than 100%, which will result in a higher distribution per
share.

Reasons for Settlement: The case has been litigated since September 2014.
Plaintiffs and Plaintiffs’ Lead Counsel believe that the Settlement provides the
Settlement Class with a benefit now, instead of years of further uncertain
litigation, including disposition of summary judgment motions, a contested trial
and likely appeals, with the possibility of no recovery at all.

Plaintiffs allege that Defendants engaged in securities fraud by misrepresenting
the liabilities relating to two risk-sharing agreements for private student loan
programs for ITT students and the effect of these programs on ITT’s liquidity
and financial condition. Plaintiffs also allege misrepresentations and
omissions, in documents filed with the U.S. Securities and Exchange Commission
(the “SEC”) and in public statements to investors, regarding ITT’s accounting
for its obligations under these risk-sharing agreements for private student loan
programs.

The Defendants deny all claims of wrongdoing and affirm that they have acted
properly and lawfully at all times. Defendants have expressly denied, and
continue to deny, each and all of the allegations made and claims brought by
Plaintiffs in this Action and deny that that they are liable to Plaintiffs or
the Settlement Class. Defendants maintain that they have meritorious defenses to
all of Plaintiffs’ allegations and contend that many of the factual allegations
made in this Action are materially inaccurate. Defendants also have denied, and
continue to deny, among other things, the allegations that Plaintiffs or the
Settlement Class have suffered any injury or damages or that the Settlement
Class was harmed by the conduct alleged in the Complaint or otherwise.

 

NOTICE OF PROPOSED SETTLEMENT

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Nonetheless, Defendants have concluded that further conduct of the Litigation
would be protracted and expensive and wish to avoid the expense, inconvenience,
and distraction of burdensome and protracted litigation. Defendants also have
taken into account the uncertainty and risks inherent in any litigation,
especially in complex cases like this Litigation. Defendants have, therefore,
determined that it is desirable and beneficial that the Litigation be settled in
the manner and upon the terms and conditions set forth in the Stipulation. The
Settlement shall in no event be construed as, or deemed to be evidence of, an
admission or concession by any of the Defendants with respect to any claim of
any fault or liability or wrongdoing or damage to the Settlement Class Members
in this Litigation. Nor shall the Settlement in any event be construed as, or
deemed to be evidence of, an admission or concession by any Defendant of any
infirmity in the defenses that Defendants could have asserted in this Action or
otherwise. Had the terms of the Settlement not been reached, Defendants would
have continued to contest vigorously Plaintiffs’ allegations.

If the Case Had Not Settled: The Settlement must be compared to the risk of no
recovery after contested dispositive motions, trial, and likely appeals. A trial
is a risky proposition. The claims in this Litigation involve numerous complex
legal and factual issues, many of which would require expert testimony. If there
were no Settlement and Plaintiffs failed to establish any essential legal or
factual element of their claims against the Defendants, neither Plaintiffs nor
the Settlement Class would recover anything from the Defendants. Also, if the
Defendants were successful in proving any of their defenses, the Settlement
Class likely would recover substantially less than the amount provided in the
Settlement, or nothing at all.

 

NOTICE OF PROPOSED SETTLEMENT

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The Settling Parties disagree on both liability and damages and do not agree on
the average amount of damages per share, if any, that would be recoverable if
Plaintiffs were to have prevailed on any or all of the claims alleged. Among the
many key issues about which Plaintiffs and Defendants do not agree, include,
without limitation: (1) whether Defendants violated the securities laws or
otherwise engaged in any wrongdoing; (2) whether the misrepresentations and
omissions alleged by Plaintiffs were material, false, misleading or otherwise
actionable under the securities laws; and (3) the method for determining
whether, and the extent to which, purchasers of ITT Securities suffered injury
and damages that could be recovered at trial.

Attorneys’ Fees and Expenses: Plaintiffs’ Lead Counsel has not received any
payment for its work or expenses incurred in investigating the facts, conducting
this Litigation, and negotiating the Settlement on behalf of the Plaintiffs and
the Settlement Class. Plaintiffs’ Lead Counsel will ask the Court for attorneys’
fees not to exceed $3,134,375 (or 25%) of the Settlement Fund and expenses not
to exceed $175,000 to be paid from the Settlement Fund, plus interest on both
amounts. The Lead Plaintiff and other named Plaintiffs will also request payment
for their actual costs and expenses (including lost wages) directly related to
their representation of the Settlement Class, not to exceed $27,500.

If the above amounts are requested and approved by the Court, the average cost
per share of common stock will be approximately $0.10 per share, making the
estimated recovery per share after attorneys’ fees and expenses approximately
$0.28.

Dismissal and Releases: If the proposed Settlement is approved, the Court will
enter a Final Judgment and Order of Dismissal with Prejudice (the “Judgment”).
The Judgment will dismiss the Released Claims with prejudice as to the
Defendants and all other Released Persons. The Judgment will provide that all
Settlement Class Members shall be deemed to have forever released,

 

NOTICE OF PROPOSED SETTLEMENT

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relinquished, dismissed and discharged all Released Claims against all Released
Persons. Settlement Class Members will be permanently barred and enjoined from
pursuing any or all Released Claims (including Unknown Claims) against any
Released Person in this Action or in any other action or proceeding, in any
forum. The definitions of Released Claims and Released Persons, and the terms of
the releases which are part of the Settlement (the “Releases”), are set forth in
the Stipulation as well as in the Proof of Claim form that is enclosed.

More Information: www.ITTEducationSecuritiesLitigation-Indiana.com

Claims Administrator:

ITT Educational Services, Inc. Securities Litigation

Claims Administrator

1801 Market Street, Suite 660

Philadelphia, PA 19103

1-877-235-9544

ITTEducationSecuritiesLitigation-Indiana@AngeionGroup.com

Lead Counsel:

Lionel Z. Glancy, Esq.

Glancy Prongay & Murray LLP

1925 Century Park East, Suite 2100

Los Angeles, California 90067

1-888-773-9224

settlements@glancylaw.com

 

•   Your legal rights are affected whether you act, or don’t act. Read this
Notice carefully.

YOUR LEGAL RIGHTS AND OPTIONS IN THIS SETTLEMENT:

 

SUBMIT A CLAIM    This is the only way to receive a payment. If you wish to
obtain a payment as a Member of the Settlement Class, you will need to file a
Proof of Claim and Release form (“Proof of Claim”). OBJECT    You may write to
the Court if you do not like this Settlement, the proposed Plan of Allocation,
or Lead Counsel’s Fee and Expense Application. EXCLUDE YOURSELF    Receive no
payment. This is the only option that allows you to participate in another
lawsuit, or to otherwise seek recovery, against the Defendants relating to the
claims being released in this Action.

 

NOTICE OF PROPOSED SETTLEMENT

5

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GO TO A HEARING    You may ask to speak in Court about the fairness of the
Settlement. DO NOTHING    Receive no payment. You will remain a Settlement Class
Member, and if you take no action, you will give up your right to seek recovery
against Defendants and all other Released Persons in connection with the claims
being released by Plaintiffs and the Settlement Class in this Action.

 

•   Unless you validly and timely request exclusion from the Settlement Class,
or unless the Court rejects the proposed Settlement, you are bound by the
Stipulation and its Releases of the Defendants and Released Persons, whether or
not you submit a Proof of Claim.

 

•   These rights and options — and the deadlines to exercise them — are
explained in this Notice.

Deadlines:

 

Submit Claim:

                 , 2016   

File Objection:

                 , 2016   

Request Exclusion

                 , 2016    Court Hearing on Fairness of Settlement:     
            , 2016   

 

•   This Notice does not express any opinion by the Court concerning the merits
of any claim in the Action.

 

•   The Court presiding over this case must decide whether to approve the
Settlement. Payments will be made only if the Court approves the Settlement and,
if there are any appeals, after appeals are resolved. Please be patient.

WHAT THIS NOTICE CONTAINS

BASIC INFORMATION

 

  1. Why did I receive this notice package?

 

  2. What is this lawsuit about?

 

  3. Why is this a class action?

 

  4. Why is there a Settlement?

 

NOTICE OF PROPOSED SETTLEMENT

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WHO IS IN THE SETTLEMENT

 

  5. How do I know if I am part of the Settlement?

 

  6. Where are the exceptions to being included?

 

  7. I’m still not sure if I’m included.

THE SETTLEMENT BENEFITS – WHAT YOU GET

 

  8. What does the Settlement provide?

 

  9. How much will my payment be?

HOW YOU GET A PAYMENT – SUBMITTING A CLAIM FORM

 

  10. How can I obtain a payment?

 

  11. When will I receive my payment?

 

  12. What am I giving up to receive a payment?

EXCLUDING YOURSELF FROM THE CLASS ACTION SETTLEMENT

 

  13. How do I get out of the Class?

 

  14. If I do not exclude myself, can I sue the Defendants for the same thing
later?

 

  15. If I exclude myself, can I receive money from the class action Settlement?

THE LAWYERS REPRESENTING YOU

 

  16. Do I have a lawyer in the case?

 

  17. How will the lawyers be paid?

OBJECTING TO THE SETTLEMENT

 

  18. How do I tell the Court that I do not like the Settlement?

THE COURT’S SETTLEMENT HEARING

 

  19. When and where will the Court decide whether to approve the Settlement?

 

  20. Do I have to come to the hearing?

 

  21. May I speak at the hearing?

IF YOU DO NOTHING

 

  22. What happens if I do nothing at all?

GETTING MORE INFORMATION

 

  23. Are there more details about the Settlement?

UNDERSTANDING YOUR PAYMENT

BASIC INFORMATION

 

  1. Why Did I Receive This Notice Package?

You or someone related to you may have purchased or acquired ITT Educational
Services, Inc. (“ITT”) common stock (ticker symbol: ESI) or call options on ITT
common stock, or may have written put options on ITT common stock (stock and
options collectively, “ITT Securities”), between February 26, 2013 and May 12,
2015, both dates inclusive.

 

NOTICE OF PROPOSED SETTLEMENT

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This Notice was sent because you have a right to know about a proposed
Settlement of a class action lawsuit, and about all of your options, before the
Court decides whether to approve the Settlement. If the Court approves the
Settlement, and after any objections or appeals are resolved, the Claims
Administrator appointed by the Court will make the payments to those persons or
entities who timely submit claims in the manner described below.

This package explains the lawsuit, the Settlement, your legal rights, what
benefits are available, who is eligible for them, and how to get them.

The Court in charge of this case is the United States District Court for the
Southern District of Indiana, and the case is known as In re ITT Educational
Services, Inc. Securities Litigation (Indiana), Civil Action
No. 1:14-cv-01599-TWP-DML (the “Action”). The Judge presiding over this Action
is the Honorable Tonya Walton Pratt. Lead Plaintiff Meitav Dash Mutual Fund
Management Ltd. (“Lead Plaintiff”) and Lead Counsel (Glancy Prongay & Murray
LLP) have been preliminarily appointed by the Court to represent the interests
of the Settlement Class in this Action. Lead Plaintiff and other named
Plaintiffs who have been involved in the Litigation (Plaintiff Babulal Tarapara,
Plaintiff Kristopher Hennen, Plaintiff Cynthia Grebely, and Plaintiff Hoai T.
Truong) are collectively called the “Plaintiffs,” and the Company and persons
that Plaintiffs have sued are collectively called the “Defendants.” Here, the
Defendants are ITT; Kevin M. Modany, the Company’s CEO during the Settlement
Class Period; and Daniel M. Fitzpatrick, the Company’s CFO during the Settlement
Class Period. The Settling Parties include the Plaintiffs, on behalf of
themselves and the Settlement Class, and all of the Defendants.

 

  2. What Is This Lawsuit About?

This Litigation alleges violations of the federal securities laws (specifically,
Sections 10(b) and 20(a) of the Securities Exchange Act of 1934) against
Defendants.

 

NOTICE OF PROPOSED SETTLEMENT

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ITT is a Delaware corporation that trades on the New York Stock Exchange (the
“NYSE”) under the ticker symbol “ESI”, with its principal executive offices
located at 13000 North Meridian Street, Carmel, Indiana, 46032. The Company is a
for-profit education company which provides educational services to students
with a focus on providing technology-oriented undergraduate and graduate degree
programs through its ITT Technical Institutes and Daniel Webster College.

Plaintiffs allege that, during the Settlement Class Period, ITT’s stock price
was artificially inflated as a result of a series of untrue or materially
misleading misrepresentations and omissions concerning risk-sharing agreements
relating to certain third-party, private student loan programs which provided
loans to ITT’s students. Defendants deny that they made any such misleading
statements or omissions, deny that ITT’s stock price was artificially inflated
as a result of any statements or omissions, and further deny any and all
allegations of wrongdoing.

 

  3. Why Is This A Class Action?

Class actions are generally used in lawsuits that affect a large number of
individuals; in effect, the class action operates to consolidate into a single
action all of the claims of individuals allegedly harmed by the same conduct or
course of conduct, thus alleviating the need for members of the class to file
their own individual lawsuits to recover for the harm alleged. Once a class is
certified, the Court is empowered to resolve all issues on behalf of members of
the class, except for those members of the class, if any, who specifically
choose to exclude themselves from the Class.

As part of the Settlement approval process, Plaintiffs will ask the Court to
certify a Settlement Class for settlement purposes only. The proposed Settlement
Class will consist of all persons and entities who purchased or otherwise
acquired ITT common stock or call options on ITT common stock, or who wrote put
options on ITT common stock, between February 26, 2013 and May 12, 2015, both
dates inclusive. Excluded from the Settlement Class are Defendants, the

 

NOTICE OF PROPOSED SETTLEMENT

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officers and directors of ITT during the Settlement Class Period, members of
their immediate families, the legal representatives, heirs, successors or
assigns of any of the foregoing and any entity in which a Defendant has or had a
controlling interest during the Settlement Class Period.

All who fit within the definition of the Settlement Class are Members of the
Settlement Class, except those Persons who timely file a Request for Exclusion
that is received by the firm Angeion Group by             , 2016, twenty-eight
(28) days prior to the Settlement Hearing. All Persons who do not timely exclude
themselves from the Settlement Class will be bound by the proposed Settlement
and its accompanying Releases.

 

  4. Why Is There a Settlement?

The Court did not decide in favor of Plaintiffs or Defendants. Instead, both
sides agreed to a Settlement. This permits them to avoid the cost and
uncertainty of a trial, and permits eligible Settlement Class Members, who
submit valid Proof of Claim forms, to receive compensation. While Lead Plaintiff
and Lead Counsel believe that the claims asserted against the Defendants have
merit, they recognize the expense and length of continued proceedings necessary
to pursue their claims against Defendants through trial and appeals, as well as
the difficulties in establishing liability and the uncertain outcome of trial
and appellate risk in complex lawsuits like this one. Accordingly, Lead
Plaintiff and Lead Counsel believe the Settlement is best for all Settlement
Class Members.

Defendants have expressly denied, and continue to deny, each and all of the
claims alleged by Plaintiffs in this Action and affirm that they have acted
properly and lawfully at all times. Nonetheless, Defendants have concluded that
further defense of the Litigation would be protracted and expensive and wish to
avoid the expense, inconvenience, and distraction of burdensome and protracted
litigation. Defendants also have taken into account the uncertainty and risks
inherent in

 

NOTICE OF PROPOSED SETTLEMENT

10

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any litigation, especially in complex cases such as this Litigation. Defendants
have, therefore, determined that it is desirable and beneficial that the
Litigation be settled in the manner and upon the terms and conditions set forth
in the Stipulation.

WHO IS IN THE SETTLEMENT

To see if you will receive money from this Settlement, you first have to
determine if you are a Settlement Class Member.

 

  5. How Do I Know if I Am Part of the Settlement?

The Settlement Class includes all persons and entities who purchased or
otherwise acquired ITT common stock, who purchased or otherwise acquired call
options on ITT common stock, or who wrote put options on ITT common stock,
between February 26, 2013 and May 12, 2015, both dates inclusive.

 

  6. What Are the Exceptions to Being Included?

You are not a Settlement Class Member if you are a Defendant, were an officer or
director of ITT during the Settlement Class Period, are a member of the
immediate families of or are the legal representative, heir, successor, or
assign of any of the foregoing. You also are not a Settlement Class Member if
you are an entity in which a Defendant has or had a controlling interest during
the Settlement Class Period.

 

  7. I’m Still Not Sure if I Am Included.

If you are still not sure whether you are included, you can ask for free help.
You can call Lionel Z. Glancy of Glancy Prongay & Murray LLP at 1-888-773-9224
for more information. Or you can fill out and return the claim form described in
Question 10 to see if you qualify.

 

NOTICE OF PROPOSED SETTLEMENT

11

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THE SETTLEMENT BENEFITS — WHAT YOU GET

 

  8. What Does the Settlement Provide?

The Settlement will result in a Settlement Fund of $12.5375 million
($12,537,500.00) in cash. The balance of this Settlement Fund, after payment of
Court-approved attorneys’ fees and litigation expenses, Taxes and Tax Expenses,
and the costs of claims administration, including the cost of printing and
mailing this Notice and the cost of publishing the Summary Notice (the “Net
Settlement Fund”), will be divided among all eligible Settlement Class Members
who send in valid Proof of Claim forms.

 

  9. How Much Will My Payment Be?

Your share of the Net Settlement Fund will depend on the number of valid claim
forms that Settlement Class Members send in, the number of ITT Securities that
you purchased, acquired, or sold during the relevant period, and the timing of
your purchases, acquisitions, and sales. You will not receive a payment,
however, if your proportionate share of the Net Settlement Fund is less than
$20.00.

You can calculate your claim (“Recognized Claim”) in accordance with the formula
shown below in the Plan of Allocation. After all Settlement Class Members have
sent in their Proof of Claim forms, the payment you receive will reflect your
Recognized Claim in relation to the Recognized Claims of all persons submitting
Proof of Claim forms. The Recognized Claim is not the amount of the payment that
you can expect, but is used to determine how the Net Settlement Fund is
allocated among all persons submitting claims.

 

NOTICE OF PROPOSED SETTLEMENT

12

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HOW YOU OBTAIN A PAYMENT — SUBMITTING A PROOF OF CLAIM FORM

 

  10. How Will I Obtain a Payment?

To qualify for payment, you must be an eligible Settlement Class Member, send in
a valid Proof of Claim form, and properly document your claim as requested in
the Proof of Claim form. A Proof of Claim form is enclosed with this Notice. You
may also get a Proof of Claim form on the internet at
www.ITTEducationSecuritiesLitigation-Indiana.com. Read the instructions
carefully, fill out the Proof of Claim form, include the documents the form asks
for, sign it, and mail it in the enclosed envelope postmarked no later than
            , 2016.

 

  11. When Will I Receive My Payment?

The Court will hold a Settlement Hearing on             , 2016, to decide
whether to approve the Settlement. If the Court approves the Settlement, there
may be appeals. It is always uncertain whether these appeals can be resolved,
and resolving them can take time, perhaps more than a year. Even if no appeals
are filed, it will take several months for the Claims Administrator to process
all of the Proof of Claim forms and to determine the ultimate distribution
amounts.

 

  12. What Am I Giving Up to Receive a Payment?

Unless your Request for Exclusion from the Settlement Class is received by the
deadline of [28 days prior to the Settlement Hearing]             , 2016, you
are a Member of the Settlement Class and will be bound by the Releases of claims
against the Defendants and other Released Persons. That means that you cannot
sue, continue to sue, or be part of any other lawsuit or other proceeding
against the Defendants or any other Released Persons about the Released Claims
in this case. It also means that all of the Court’s Orders, including the
proposed Judgment which will dismiss with prejudice the claims in this Action,
will apply to you and legally bind you, and you will release your claims in this
case against the Defendants and the other Released Persons. The

 

NOTICE OF PROPOSED SETTLEMENT

13

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terms of the Releases, which specifically include the release of Unknown Claims
against the Defendants and all other Released Persons, are set forth in the
Stipulation and are summarized in the Proof of Claim form that is enclosed.

EXCLUDING YOURSELF FROM THE CLASS ACTION SETTLEMENT

If you do not want a payment from the class action Settlement, but you want to
keep the right to sue or to continue to sue the Defendants on your own for the
Released Claims in the class action, then you must take steps to get out of the
Settlement Class. This is called excluding yourself or is sometimes referred to
as opting out of the Settlement Class.

 

  13. How Do I Get Out of the Settlement Class?

To exclude yourself from the Settlement Class, you must send a letter by first
class mail (or its equivalent outside the U.S.) stating that you want to be
excluded from Settlement Class in In re ITT Educational Services, Inc.
Securities Litigation (Indiana), Civil Action No. 1:14-cv-01599-TWP-DML. You
must include your name, address, telephone number, your signature, and the
number of shares of ITT common stock and/or options that you purchased or
acquired between February 26, 2013 and May 12, 2015, both dates inclusive, the
number of shares of ITT common stock and/or options that you sold during this
time period, if any, and the dates of such purchases, acquisitions, and/or
sales, and a statement that you wish to be excluded from the Settlement Class.
You must mail your exclusion request, such that it is received by no later than
            , 2016, to:

ITT Educational Services, Inc. Securities Litigation

Claims Administrator

1801 Market Street, Suite 660

Philadelphia, PA 19103

Please keep a copy of everything you send by mail, in case it is lost during
shipping.

 

NOTICE OF PROPOSED SETTLEMENT

14

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You cannot exclude yourself on the phone or by e-mail. If you ask to be
excluded, you are not eligible to receive any Settlement payment, and you cannot
object to the class action Settlement. If you exclude yourself, you may have the
right to pursue litigation on your own.

 

  14. If I Do Not Exclude Myself, Can I Sue the Defendants for the Same Thing
Later?

No. Unless you timely and validly exclude yourself from the Settlement Class,
you give up any right to sue the Defendants and the Released Persons for the
Released Claims in the Settlement. If you have a pending lawsuit against any of
the Defendants, speak to your lawyer in that case immediately. Remember, the
deadline by which your Request for Exclusion must be received is [28 days prior
to the Settlement Hearing]            , 201  .

 

  15. If I Exclude Myself, Can I Receive Money from the Class Action Settlement?

No. If you exclude yourself, do not send in a Proof of Claim form. You will not
receive any benefit provided for in the Settlement.

THE LAWYERS REPRESENTING YOU

 

  16. Do I Have a Lawyer in This Case?

The Court appointed the law firm of Glancy Prongay & Murray LLP to represent you
and other Settlement Class Members. These lawyers are called Plaintiffs’ Lead
Counsel. You will not be personally liable for the fees and expenses incurred by
these lawyers. If you want to be represented by your own lawyer, you may hire
one at your own expense. If you choose to retain your own counsel, at your own
expense, such counsel must file a notice of appearance on your behalf and must
serve copies of his or her notice of appearance on Lead Counsel and Defendants’
Counsel, at the addresses listed in this Notice, so that notice is received at
least fourteen (14) days prior to the Settlement Hearing.

 

NOTICE OF PROPOSED SETTLEMENT

15

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  17. How Will the Lawyers Be Paid?

Plaintiffs’ Counsel will ask the Court for attorneys’ fees of up to twenty-five
percent (25%) of the Settlement Fund and for expenses up to $175,000 in
connection with the Litigation. The Plaintiffs will also request payment of
their actual costs and expenses (including lost wages) directly related to their
representation of the Settlement Class, not to exceed $27,500. Such sums as may
be approved by the Court will be paid from the Settlement Fund. Settlement Class
Members are not personally liable for any such fees or expenses.

The attorneys’ fees and expenses requested will be the only payment to
Plaintiffs’ Lead Counsel for their efforts in achieving this Settlement and for
their risk in undertaking this representation on a wholly contingent basis.
Since the case began in September 2014, Plaintiffs’ Lead Counsel has conducted
all of the investigation and other efforts necessary to prepare the case for
motion practice, for discovery, and for trial, and has consulted experts
regarding damages and accounting issues. To date, Plaintiffs’ Lead Counsel has
not been paid for its services in conducting this litigation on behalf of the
Plaintiffs and the Settlement Class, nor for their expenses. Plaintiffs’ Lead
Counsel has expended to date more than 4400 hours of attorney and paralegal time
in prosecuting the Settlement Class’s claims. The fee requested will compensate
Plaintiffs’ Lead Counsel for their work in achieving the Settlement Fund.

Plaintiffs’ Lead Counsel shall file a formal motion with the District Court for
final approval of the Settlement, the Plan of Allocation, and any requests for
attorneys’ fees and reimbursement of expenses not later than thirty-five
(35) days prior to the Settlement Hearing. That motion will argue that the
requested fees are well within the range of fees awarded to class counsel under
similar circumstances in other cases of this type. The Court determines what
counsel should receive from the Settlement Fund for fees and expenses, and may
award less than this amount.

 

NOTICE OF PROPOSED SETTLEMENT

16

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OBJECTING TO THE SETTLEMENT

You can tell the Court that you do not agree with the Settlement or some part of
it.

 

  18. How Do I Tell the Court that I Do Not Like the Settlement?

If you are a Settlement Class Member, you can object to the Settlement if you do
not like any part of it, including the Plan of Allocation and any requests for
attorneys’ fees and reimbursement of expenses. You can state the reasons why you
think the Court should not approve the Settlement or any part of it, and the
Court will consider your views. To object, you must send a letter or other
written statement saying that you object to the Settlement in In re ITT
Educational Services, Inc. Securities Litigation (Indiana), Civil Action
No. 1:14-cv-01599-TWP-DML, and explaining in detail the basis for your objection
and any legal support. Be sure to include your (i) full name, (ii) address,
(iii) telephone number, (iv) your signature,(v) the number of shares of ITT
common stock and/or options you purchased, acquired, and/or sold between
February 26, 2013 and May 12, 2015, both dates inclusive; (vi) the number of
shares of ITT common stock and/or options that you sold during this time period,
if any; (vii) the dates of such purchases, acquisitions, and/or sales;
(viii) the prices paid and/or received in those transactions (including all
income received thereon); and (ix) copies of documents (such as brokerage
statements) sufficient to show that you are a Member of the Settlement Class.
You also need to include with your objection any documents on which the
objection is based; a list of all persons, if any, who will be called to testify
in support of the objection; a statement as to whether you intend to appear at
the Settlement Hearing; and a list of other cases in which you or your counsel
have appeared either as settlement objectors or as counsel for objectors in the
preceding five years.

You may not object to the Settlement, or any aspect of it, if you do not qualify
as a Member of the Settlement Class or if you excluded yourself from the
Settlement Class. If you object to the

 

NOTICE OF PROPOSED SETTLEMENT

17

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Settlement, or any aspect of it, or otherwise request to be heard at the
Settlement Hearing, you are submitting to the jurisdiction of the Court with
respect to the subject matter of the Settlement, including, but not limited to,
the release of the Released Claims contained in the Judgment, if approved by the
Court.

The motions in support of the Settlement, the Plan of Allocation, and the
requests for attorneys’ fees and reimbursement of litigation expenses, will be
filed no later than [35 days prior to the Settlement Hearing]             ,
2016, and they will be available from Plaintiffs’ Lead Counsel, the Claims
Administrator, or the Court: their contact information is listed in Section 23,
below. Any objection must be mailed or delivered such that it is received by
each of the following no later than [21 days prior to the Settlement Hearing],
            , 2016:

Court:

Clerk of the Court

U.S. District Court

Clerk’s Office, Room 105

46 East Ohio Street

Indianapolis, IN 46204

Lead Counsel Designee:

Lionel Z. Glancy, Esq.

Glancy Prongay & Murray LLP

1925 Century Park East, Suite 2100

Los Angeles, California 90067

settlements@glancylaw.com

Defendants’ Counsel Designee:

Jennifer L. Conn, Esq.

Gibson, Dunn & Crutcher LLP

200 Park Avenue

New York, NY 10166-0193

THE COURT’S SETTLEMENT HEARING

The Court will hold a hearing to decide whether to grant final approval of the
Settlement. You may attend and you may ask to speak, but neither is required.

 

NOTICE OF PROPOSED SETTLEMENT

18

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  19. When and Where Will the Court Decide Whether to Approve the Settlement?

The Court will hold a Settlement Hearing at     :       .m., on             ,
2016, before the Honorable Tonya Walton Pratt, at the Birch Bayh Federal
Building & U.S. Courthouse, 46 East Ohio Street, Courtroom 344, Indianapolis,
Indiana 46204. At this hearing, the Court will consider whether the Settlement
is fair, reasonable, and adequate and in the best interests of the Settlement
Class, and whether the Settlement should be finally approved by the Court. If
there are objections, the Court will consider them.

Other matters that the Court will determine at the Settlement Hearing include:
(i) whether, for purposes of settlement only, the Settlement Class should be
finally certified; whether Lead Plaintiff should be finally appointed as a
representative for the Settlement Class; and whether Lead Counsel should be
finally appointed as counsel for the Settlement Class; (ii) whether a Judgment,
in the form attached as Exhibit B to the Stipulation, should be entered,
dismissing and releasing the Released Claims with prejudice; (iv) whether the
proposed Plan of Allocation is fair, reasonable, and adequate and should be
approved; (v) whether to grant Lead Counsel’s request of fees and expenses;
(vi) whether the Court should grant Plaintiffs’ reimbursement of their
reasonable costs and expenses (including lost wages) directly related to their
representation of the Settlement Class.

The Court may decide these issues at the Settlement Hearing or take them under
consideration for a later decision. Additionally, the Settlement Hearing may be
adjourned by the Court without further written notice to the Settlement Class.
Any new date for the Settlement Hearing will be posted on the settlement website
at www.ITTEducationSecuritiesLitigation-Indiana.com. If you intend to attend the
Settlement Hearing, you should confirm the date and time with Lead Counsel.

 

NOTICE OF PROPOSED SETTLEMENT

19

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  20. Do I Have to Come to the Hearing?

No. Plaintiffs’ Lead Counsel will answer questions the Court may have. But, 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, the Court will consider it. You may also pay your own lawyer
to attend, but it is not necessary.

 

  21. May I Speak at the Hearing?

You may ask the Court for permission to speak at the Settlement Hearing. To do
so, you must send a letter or other written statement saying that it is your
intention to appear in In re ITT Educational Services, Inc. Securities
Litigation (Indiana), Civil Action No. 1:14-cv-01599-TWP-DML, and explaining in
detail the basis for your desire to speak at the Settlement Hearing. Be sure to
include your full name, address, telephone number, your signature, the number of
shares of ITT common stock and/or options you purchased, acquired, and/or sold
between February 26, 2013 and May 12, 2015, both dates inclusive, the dates of
those transactions and the prices paid and/or received, and copies of documents
(such as brokerage statements) sufficient to show that you are a Member of the
Settlement Class. Your notice of intention to appear must be received no later
than [21 days prior to the Settlement Hearing],             , 2016, by the Clerk
of the Court, Lead Counsel Designee, and Defendants’ Counsel Designee, at the
three addresses listed in Question 18.

IF YOU DO NOTHING

 

  22. What Happens if I Do Nothing at All?

If you do nothing, all of your claims against the Defendants and Released
Persons will be released, but you will not receive any money from this
Settlement and will in all other respects remain a Settlement Class Member and
be subject to the provisions of the Settlement. It is necessary to submit a
Proof of Claim and Release form to receive money from the Settlement.

 

NOTICE OF PROPOSED SETTLEMENT

20

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GETTING MORE INFORMATION

 

  23. Are There More Details About the Settlement?

This Notice summarizes the proposed Settlement. More details are in the
Stipulation and Agreement of Settlement dated as of November 2, 2015 (the
“Stipulation”). You can obtain a copy of the Stipulation or more information
about the Settlement by contacting Plaintiffs’ Lead Counsel:

Lionel Z. Glancy, Esq.

Glancy Prongay & Murray LLP

1925 Century Park East, Suite 2100

Los Angeles, California 90067

settlements@glancylaw.com

1-888-773-9224

or the Claims Administrator:

ITT Educational Services, Inc. Securities Litigation

Claims Administrator

1801 Market Street, Suite 660

Philadelphia, PA 19103

ITTEducationSecuritiesLitigation-Indiana@AngeionGroup.com

1-877-235-9544

or by visiting www.ITTEducationSecuritiesLitigation-Indiana.com

You can also obtain a copy from the Clerk’s office during regular business
hours:

Clerk of the Court

U.S. District Court

Clerk’s Office, Room 105

46 East Ohio Street

Indianapolis, IN 46204

UNDERSTANDING YOUR PAYMENT

The Net Settlement Fund shall be distributed to Settlement Class Members who
submit acceptable Proof of Claim forms (“Authorized Claimants”) in the following
manner:

a. The Claims Administrator shall determine each Authorized Claimant’s share of
the Net Settlement Fund based upon the recognized loss formula (the “Recognized
Loss”) described below. The Recognized Loss formula is intended to equitably
apportion the Net Settlement Fund

 

NOTICE OF PROPOSED SETTLEMENT

21

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among Settlement Class Members. The Recognized Loss formula is not an estimate
of what a Settlement Class Member would have recovered after trial; nor is it
the amount that the Authorized Claimant will be paid pursuant to the Settlement.

b. A Settlement Class Member’s actual share of the Net Settlement Fund will be
determined by the ratio of the Settlement Class Member’s Recognized Loss divided
by the aggregate of the Recognized Loss of all Settlement Class Members.

c. The Proposed Plan of Allocation or Recognized Loss formula is as follows:

For shares of common stock purchased or otherwise acquired between February 26,
2013 and May 11, 2015:

 

  A. For shares held at the end of trading on August 7, 2015, the Recognized
Loss shall be that number of shares multiplied by the lesser of:

 

  (1) the applicable purchase date artificial inflation per share figure, as
found in Table A; or

 

  (2) the difference between the purchase price per share and $3.91.2

 

  B. For shares sold between February 26, 2013 and May 11, 2015, the Recognized
Loss shall be that number of shares multiplied by the lesser of:

 

  (1) the applicable purchase date artificial inflation per share figure less
the applicable sales date artificial inflation per share figure, as found in
Table A; or

 

  (2) the difference between the purchase price per share and the sales price
per share.

 

  C. For shares sold between May 12, 2015 and August 7, 2015, the Recognized
Loss shall be the lesser of:

 

  (1) the applicable purchase date artificial inflation per share figure, as
found in Table A; or

 

 

2  Pursuant to Section 21(D)(e)(1) of the Private Securities Litigation Reform
Act of 1995, “in any private action arising under this title in which the
plaintiff seeks to establish damages by reference to the market price of a
security, the award of damages to the plaintiff shall not exceed the difference
between the purchase or sale price paid or received, as appropriate, by the
plaintiff for the subject security and the mean trading price of that security
during the 90-day period beginning on the date on which the information
correcting the misstatement or omission that is the basis for the action is
disseminated.” The mean (average) closing price of ITT common stock during the
90-day period beginning on May 12, 2015 and ending on August 7, 2015 was $3.91
per share.

 

NOTICE OF PROPOSED SETTLEMENT

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  (2) the difference between the purchase price per share and the sales price
per share; or

 

  (3) the difference between the purchase price per share and the average
closing price between May 12, 2015 and the date of sale, as found in Table B.3

For shares of common stock purchased or otherwise acquired on May 12, 2015:

 

  A. For shares held at the end of trading on August 7, 2015, the Recognized
Loss shall be that number of shares multiplied by the lesser of:

 

  (1) $1.70 per share; or

 

  (2) the difference between the purchase price per share and $3.91.4

 

  B. For shares sold between May 12, 2015 and August 7, 2015, the Recognized
Loss shall be the lesser of:

 

  (1) $1.70 per share; or

 

  (2) the difference between the purchase price per share and the sales price
per share; or

 

  (3) the difference between the purchase price per share and the average
closing price between May 12, 2015 and the date of sale, as found in Table B.5

 

 

3  Pursuant to Section 21(D)(e)(2) of the Private Securities Litigation Reform
Act of 1995, “in any private action arising under this title in which the
plaintiff seeks to establish damages by reference to the market price of a
security, if the plaintiff sells or repurchases the subject security prior to
the expiration of the 90-day period described in paragraph (1), the plaintiff’s
damages shall not exceed the difference between the purchase or sale price paid
or received, as appropriate, by the plaintiff for the security and the mean
trading price of the security during the period beginning immediately after
dissemination of information correcting the misstatement or omission and ending
on the date on which the plaintiff sells or repurchases the security.”

4  Pursuant to Section 21(D)(e)(1) of the Private Securities Litigation Reform
Act of 1995, “in any private action arising under this title in which the
plaintiff seeks to establish damages by reference to the market price of a
security, the award of damages to the plaintiff shall not exceed the difference
between the purchase or sale price paid or received, as appropriate, by the
plaintiff for the subject security and the mean trading price of that security
during the 90-day period beginning on the date on which the information
correcting the misstatement or omission that is the basis for the action is
disseminated.” The mean (average) closing price of ITT common stock during the
90-day period beginning on May 12, 2015 and ending on August 7, 2015 was $3.91
per share.

5  Pursuant to Section 21(D)(e)(2) of the Private Securities Litigation Reform
Act of 1995, “in any private action arising under this title in which the
plaintiff seeks to establish damages by reference to the market price of a
security, if the plaintiff sells or repurchases the subject security prior to
the expiration of the 90-day period described in paragraph (1), the plaintiff’s
damages shall not exceed the difference between the purchase or sale price paid
or received, as appropriate, by the plaintiff for the security and the mean
trading price of the security during the period beginning immediately after
dissemination of information correcting the misstatement or omission and ending
on the date on which the plaintiff sells or repurchases the security.”

 

NOTICE OF PROPOSED SETTLEMENT

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For ITT Call and Put Options that expired after January 30, 2014:

ITT Call Options

 

  (i) The Recognized Claim for each call option on ITT common stock purchased or
otherwise acquired during the Class Period shall be the difference between:
(a) the amount paid per call option and: (b) the sale price received per option
contract received if the call option was subsequently sold (if the option
expired worthless while still owned by the Authorized Claimant, the sales price
shall be deemed to be Zero ($0.00));

 

  (ii) Shares of ITT common stock acquired during the Class Period through the
exercise of a call option shall be treated as a purchase on the date of exercise
for the exercise price plus the cost of the call option, and any Recognized
Claim arising from such transaction shall be computed as provided for other
purchases of ITT common stock as set forth herein;

 

  (iii) No Recognized Claim shall be calculated based upon the sale or writing
of any call option that was subsequently repurchased.

ITT Put Options

 

  (i) The Recognized Claim for each put option on ITT common stock sold or
written during the Class Period, shall be the difference between: (a) the amount
received per put option and (b) the purchase price paid per put option if the
put option was subsequently repurchased at any time (including after the Class
Period). For put options sold or written during the Class Period that expired
worthless and unexercised, the Authorized Claimant’s Recognized Claim shall be
Zero ($0.00);

 

  (ii) For ITT put options that were sold or written during the Class Period,
that were “put” to the Authorized Claimant (i.e. exercised) at any time, the
Authorized Claimant’s Recognized Claim shall be calculated as a purchase of ITT
common stock, and as if the sale of the put option were instead a purchase of
ITT common stock on the date of the sale or writing of the put option, and the
“purchase price paid” shall be the strike price of the put option less the
proceeds received from the sale of the put option;

 

  (iii) No Recognized Claim shall be calculated based upon the sale of any put
option that was previously purchased.

Table A

 

Purchase or Sale Date Range

   Artificial Inflation
Per Share  

02/26/2013 - 01/29/2014

   $ 16.09   

01/30/2014 - 05/21/2014

   $ 8.70   

05/22/2014 – 09/18/2014

   $ 5.50   

09/19/2014 – 04/29/2015

   $ 2.93   

04/30/2015

   $ 2.23   

05/01/2015 – 05/11/2015

   $ 1.70   

05/12/2015

   $ 0.00   

 

NOTICE OF PROPOSED SETTLEMENT

24

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Table B

 

Date of Sale

   Average Closing
Price Between
05/12/2015 and
Date of Sale      Date of Sale    Average Closing
Price Between
05/12/2015 and
Date of Sale  

5/12/2015

   $ 2.27       6/25/2015    $ 3.71   

5/13/2015

   $ 2.24       6/26/2015    $ 3.73   

5/14/2015

   $ 2.28       6/29/2015    $ 3.74   

5/15/2015

   $ 2.41       6/30/2015    $ 3.75   

5/18/2015

   $ 2.43       7/1/2015    $ 3.76   

5/19/2015

   $ 2.44       7/2/2015    $ 3.77   

5/20/2015

   $ 2.42       7/6/2015    $ 3.78   

5/21/2015

   $ 2.42       7/7/2015    $ 3.78   

5/22/2015

   $ 2.43       7/8/2015    $ 3.78   

5/26/2015

   $ 2.43       7/9/2015    $ 3.78   

5/27/2015

   $ 2.45       7/10/2015    $ 3.78   

5/28/2015

   $ 2.45       7/13/2015    $ 3.78   

5/29/2015

   $ 2.59       7/14/2015    $ 3.78   

6/1/2015

   $ 2.80       7/15/2015    $ 3.79   

6/2/2015

   $ 2.93       7/16/2015    $ 3.81   

6/3/2015

   $ 3.00       7/17/2015    $ 3.82   

6/4/2015

   $ 3.06       7/20/2015    $ 3.84   

6/5/2015

   $ 3.11       7/21/2015    $ 3.85   

6/8/2015

   $ 3.12       7/22/2015    $ 3.88   

6/9/2015

   $ 3.15       7/23/2015    $ 3.90   

6/10/2015

   $ 3.17       7/24/2015    $ 3.92   

6/11/2015

   $ 3.22       7/27/2015    $ 3.94   

6/12/2015

   $ 3.28       7/28/2015    $ 3.96   

6/15/2015

   $ 3.34       7/29/2015    $ 3.99   

6/16/2015

   $ 3.40       7/30/2015    $ 3.99   

6/17/2015

   $ 3.46       7/31/2015    $ 3.98   

6/18/2015

   $ 3.52       8/3/2015    $ 3.97   

6/19/2015

   $ 3.57       8/4/2015    $ 3.95   

6/22/2015

   $ 3.60       8/5/2015    $ 3.94   

6/23/2015

   $ 3.64       8/6/2015    $ 3.92   

6/24/2015

   $ 3.68       8/7/2015    $ 3.91   

d. A purchase or sale of ITT common stock shall be deemed to have occurred on
the “contract” or “trade” date as opposed to the “settlement” or “payment” date.

e. The receipt or grant by gift, devise or operation of law of shares of ITT
common stock during the Settlement Class Period shall not be deemed a purchase
or sale of ITT common

 

NOTICE OF PROPOSED SETTLEMENT

25

--------------------------------------------------------------------------------

stock shares for the calculation of an Authorized Claimant’s Recognized Loss,
nor shall it be deemed an assignment of any claim relating to the purchase of
such securities. The grantor of the gift or devise, who purchased ITT common
stock during the Settlement Class Period, shall retain the right to file a claim
in this Litigation unless that right to file a claim was specifically
transferred in the instrument of gift or assignment.

f. The receipt of ITT common stock during the Settlement Class Period in
exchange for securities of any other corporation or entity shall not be deemed a
purchase or sale of ITT common stock.

g. Any gains on sales of ITT common stock shall be offset against losses in
calculating the Recognized Loss. To the extent a Claimant had an overall gain
from transactions in ITT common stock during the Settlement Class Period, the
value of the Recognized Loss will be zero.

h. The total recovery payable to Authorized Claimants from transactions in call
or put options shall not exceed five percent (5%) of the Net Settlement Fund.

i. For Settlement Class Members who made multiple purchases or sales during the
Settlement Class Period, the first-in, first-out (“FIFO”) method will be applied
to such holdings, purchases, and sales for purposes of calculating a claim.
Under the FIFO method, sales of ITT Securities during the Settlement Class
Period will be matched, in chronological order, against ITT Securities purchased
during the Settlement Class Period.

j. No Authorized Claimant whose proportionate share of the Net Settlement Fund
is less than $20.00 shall receive a distribution from the Net Settlement Fund.
Rather, that Claimant’s proportionate share of the Net Settlement Fund shall be
redistributed among all remaining Authorized Claimants.

 

NOTICE OF PROPOSED SETTLEMENT

26

--------------------------------------------------------------------------------

k. Settlement Class Members whose Request for Exclusion is not received by the
deadline and do not submit an acceptable Proof of Claim by the deadline for
submitting claims will not share in the recovery, but nevertheless will be bound
by the Settlement and the Order and Final Judgment of the Court releasing claims
against Defendants and other Released Persons and dismissing this Litigation.

l. Distributions will be made to Authorized Claimants after all claims have been
processed and after the Court has finally approved the Settlement.

DO NOT TELEPHONE THE COURT REGARDING THIS NOTICE

SPECIAL NOTICE TO NOMINEES

The Court has ordered that if you held any ITT Securities purchased or acquired
between February 28, 2013 and May 12, 2015, both dates inclusive, as nominee for
a beneficial owner, then, within fourteen (14) days after you receive this
Notice, you must either: (1) send a copy of this Notice and the Proof of Claim
form by first class mail to all such beneficial owners; or (2) provide a list of
the names and addresses of all such beneficial owners (preferably in the format
of an electronic spreadsheet) to the Claims Administrator:

ITT Educational Services, Inc. Securities Litigation

Claims Administrator

1801 Market Street, Suite 660

Philadelphia, PA 19103

ITTEducationSecuritiesLitigation-Indiana@AngeionGroup.com

If you choose to mail the Notice and Proof of Claim form yourself, you may
obtain from the Claims Administrator (without cost to you) as many additional
copies of these documents as you will need to complete the mailing.

Regardless of whether you choose to complete the Notice mailing yourself or
elect to have the Notice mailing performed for you, you may obtain reimbursement
for administrative costs

 

NOTICE OF PROPOSED SETTLEMENT

27

--------------------------------------------------------------------------------

reasonably and actually incurred in connection with forwarding the Notice and
which would not have been incurred but for the obligation to forward the Notice,
upon submission of appropriate documentation to the Claims Administrator.

 

NOTICE OF PROPOSED SETTLEMENT

28

--------------------------------------------------------------------------------

EXHIBIT A-2

--------------------------------------------------------------------------------

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF INDIANA

INDIANAPOLIS DIVISION

 

In re ITT EDUCATIONAL SERVICES, INC.

SECURITIES LITIGATION (INDIANA)

  

CASE NO. 1:14-cv-01599-TWP-DML

 

EXHIBIT A-2

 

PROOF OF CLAIM AND RELEASE

 

 

PROOF OF CLAIM AND RELEASE

--------------------------------------------------------------------------------

GENERAL INSTRUCTIONS

1. To be eligible to recover as a member of the Settlement Class1 based on your
claims in the action entitled In re ITT Educational Services, Inc. Securities
Litigation (Indiana), Case No. 1:14-cv-01599-TWP-DML, you must complete and, on
page      hereof, sign this Proof of Claim and Release. Even if you do not fill
out this Proof of Claim and Release, if you do not timely exclude yourself from
the Settlement Class, any and all claims you may have against the Defendants and
other Released Persons in this Action are released to the full extent defined
below. If you fail to file a properly addressed (as set forth in paragraph 3
below) Proof of Claim and Release, your claim may be rejected and you may be
precluded from any recovery from the Net Settlement Fund created in connection
with the proposed Settlement of the Action.

2. Submission of this Proof of Claim and Release, however, does not assure that
you will share in the proceeds of the Settlement in this Action.

3. YOU MUST MAIL YOUR COMPLETED AND SIGNED PROOF OF CLAIM AND RELEASE POSTMARKED
ON OR BEFORE             , 2016, ADDRESSED AS FOLLOWS:

ITT Educational Services, Inc. Securities Litigation

Claims Administrator

1801 Market Street, Suite 660

Philadelphia, PA 19103

4. If you are NOT a member of the Settlement Class, as defined in the Notice of
Proposed Settlement of Class Action, Motion for Attorneys’ Fees and Expenses and
Settlement Fairness Hearing (the “Notice”), DO NOT submit a Proof of Claim and
Release form.

 

 

1  All capitalized terms used, but not defined herein, shall have the same
meanings as in the Stipulation of Settlement dated November 2, 2015 (the
“Stipulation”). A copy of the Stipulation is available at
www.ITTEducationSecuritiesLitigation-Indiana.com.

 

PROOF OF CLAIM AND RELEASE

1

--------------------------------------------------------------------------------

5. If you are a member of the Settlement Class, you are bound by the terms of
any judgment entered in the Action, including the releases included in the
Stipulation of Settlement, WHETHER OR NOT YOU SUBMIT A PROOF OF CLAIM AND
RELEASE FORM.

 

PROOF OF CLAIM AND RELEASE

2

--------------------------------------------------------------------------------

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF INDIANA

INDIANAPOLIS DISTRICT

In re ITT Educational Service, Inc. Securities Litigation (Indiana)

1:14-cv-01599-TWP-DML

PROOF OF CLAIM AND RELEASE

Must Be Postmarked No Later Than:

            , 2016

Please Type or Print in Blue or Black Ink

 

PART I: CLAIMANT IDENTIFICATION

 

 

Last Name    M.I.    First Name

 

Last Name (Co-Beneficial Owner)    M.I.    First Name (Co-Beneficial Owner)

 

[    ] IRA

  [    ] Joint Tenancy      [    ] Employee          [    ] Individual     
[    ] Other:                                        
                        (specify)

 

 

Company Name (Beneficial Owner – If Claimant is not an Individual) or Custodian
Name if an IRA

 

Trustee/Asset Manager/Nominee/Record Owner’s Name (If Different from Beneficial
Owner Above)

 

Account #/Fund# (Not Necessary for Individual Filers)     

 

       

 

    

Social Security Number

   or      Tax Payer Identification Number     

 

         

 

Telephone Number (Primary Daytime)           Telephone Number (Alternate)

 

Email Address             

 

Street Address             

 

       

 

City         State   Zip Code   

 

       

 

Foreign Province         Foreign Country     

 

PROOF OF CLAIM AND RELEASE

3

--------------------------------------------------------------------------------

PART II: SCHEDULE OF TRANSACTIONS IN ITT EDUCATIONAL SERVICES INC. (“ITT) COMMON
STOCK (TICKER SYMBOL: ESI; CUSIP: 45068B109)

 

  A. Number of shares of ITT common stock held at the close of trading on
February 25, 2013                     ,                     . Proof
Enclosed?     ¨  Y    ¨  N

 

  B. Purchases or acquisitions of ITT common stock between February 26, 2013 and
August 7, 2015, both dates inclusive:

 

Trade Date(s) of

Shares

(List

Chronologically)

MM/DD/YYYY

   Number of
Shares of
Stock
Purchased
or Acquired    Purchase
Price Per
Share of
Common
Stock    Total Purchase Price
(Excluding
Commissions, Taxes,
and Fees)
Please round off to the
nearest whole dollar      Is
Purchase
the Result
of a Call
Option?    Proof
Enclosed?

1.

         $             .00       ¨  Y    ¨  N
   ¨  Y    ¨  N

2.

         $             .00       ¨  Y    ¨  N    ¨  Y    ¨  N

3.

         $             .00       ¨  Y    ¨  N    ¨  Y    ¨  N

4.

         $             .00       ¨  Y    ¨  N    ¨  Y    ¨  N

IMPORTANT: (i) If any purchase listed covered a “short sale”, please mark
Yes:    ¨  Y

 

  C. Sales of ITT common stock between February 26, 2013 and August 7, 2015,
both dates inclusive:

 

Trade Date(s) of

Shares

(List

Chronologically)

MM/DD/YYYY

   Number of
Shares of
Stock Sold    Sale Price
Per Share
of
Common
Stock    Total Sales Price
(Excluding
Commissions, Taxes,
and Fees)
Please round off to the
nearest whole dollar      Is Sale the
Result of
a Put
Option?    Proof
Enclosed?

1.

         $             .00       ¨  Y    ¨  N
   ¨  Y    ¨  N

2.

         $             .00       ¨  Y    ¨  N    ¨  Y    ¨  N

3.

         $             .00       ¨  Y    ¨  N    ¨  Y    ¨  N

4.

         $             .00       ¨  Y    ¨  N    ¨  Y    ¨  N

 

  D. Number of shares of ITT common stock held at the close of trading on
August 7, 2015:                     ,                     . Proof
Enclosed?    ¨  Y    ¨  N

 

  E. Number of shares of ITT common stock held at the close of trading on
May 12, 2015:                     ,                     . Proof
Enclosed?    ¨  Y    ¨  N

If you require additional space, attach extra schedules in the same format as
above. Sign and

print your name on each additional page.

YOU MUST READ AND SIGN THE RELEASE ON PAGE    . FAILURE TO SIGN THE RELEASE MAY
RESULT IN A DELAY IN PROCESSING OR THE REJECTION OF YOUR CLAIM.
                    

 

PROOF OF CLAIM AND RELEASE

4

--------------------------------------------------------------------------------

PART III: SCHEDULE OF TRANSACTIONS IN CALL OPTIONS ON ITT EDUCATIONAL SERVICES
INC. (“ITT”) COMMON STOCK (TICKER SYMBOL: ESI; CUSIP: 45068B109)

 

  A. Beginning Position: At the close of trading on February 25, 2013, I owned
the following call options on ITT common stock (must be documented):

 

Date(s) of

Purchase or

Acquisition

(List

Chronologically)

MM/DD/YYYY

   Number
of
Contracts    Expiration
Month
and Year
& Strike
Price of
Options
(i.e.
March
2013/$20)    Purchase
Price
Per
Contract    Amount Paid
(Including
Commissions,
Taxes, and
Fees)      Insert an
“E” if
Exercised,
an “S” if
sold, or
an “X” if
Expired.    Exercise
or Sale
Date
(MM/DD/YYYY)    Sale
Price
Per
Contract,
if
Sold    Amount
Received
(Net of
Commissions,
Taxes,
and Fees),
If Sold      Proof
Enclosed?

1.

            $                             $                    ¨  Y
¨  N

2.

            $
            
  
            $
            
  
   ¨  Y
¨  N

3.

            $
            
  
            $
            
  
   ¨  Y
¨  N

4.

            $                             $                    ¨  Y
¨  N

 

  B. Purchases: Purchases or acquisitions of call options on ITT common stock
between February 26, 2013 and August 7, 2015, both dates inclusive:

 

Date(s) of

Purchase or

Acquisition

(List

Chronologically)

MM/DD/YYYY

   Number
of
Contracts    Expiration
Month and
Year &
Strike Price
of Options
(i.e. May
2014/$20)    Purchase
Price
Per
Contract    Amount Paid
(Including
Commissions,
Taxes, and
Fees)      Insert an
“E” if
Exercised,
an “S” if
sold, or
an “X” if
Expired.    Exercise
or Sale
Date
(MM/DD/YYYY)    Sale
Price
Per
Contract,
if
Sold    Amount
Received
(Net of
Commissions,
Taxes,
and Fees),
If Sold      Proof
Enclosed?

1.

            $                             $                    ¨  Y
¨  N

2.

            $
            
  
            $
            
  
   ¨  Y
¨  N

3.

            $
            
  
            $
            
  
   ¨  Y
¨  N

4.

            $                             $                    ¨  Y
¨  N

 

  C. If you require additional space, attach extra schedules in the same format
as above. Sign and print your name on each additional page.

YOU MUST READ AND SIGN THE RELEASE ON PAGE    . FAILURE TO SIGN THE RELEASE MAY
RESULT IN A DELAY IN PROCESSING OR THE REJECTION OF YOUR CLAIM

 

PROOF OF CLAIM AND RELEASE

5

--------------------------------------------------------------------------------

PART IV: SCHEDULE OF TRANSACTIONS IN PUT OPTIONS ON ITT EDUCATIONAL SERVICES
INC. (“ITT”) COMMON STOCK (TICKER SYMBOL: ESI; CUSIP: 45068B109)

 

  A. Beginning Position: At the close of trading on February 25, 2013, I was
obligated on the following put options on ITT common stock (must be documented):

 

Date(s) of

Writing (Sale)

(List

Chronologically)

MM/DD/YYYY

   Number
of
Contracts    Expiration
Month and
Year &
Strike Price
of Options
(i.e. March
2013/$20)    Sale
Price
Per
Contract    Amount
Received
(Net of
Commissions,
Taxes,
and Fees)      Insert an
“A” if
Assigned,
and “R” if
repurchased,
or an “X” if
Expired    Assign
or
Repurchase
Date
(MM/DD/YYYY)    Price
Paid
Per
Contract    Aggregate
Cost
(Including
Commissions,
Taxes, and
Fees)      Proof
Enclosed?

1.

            $                             $                    ¨  Y
¨  N

2.

            $                             $                    ¨  Y
¨  N

3.

            $                             $                    ¨  Y
¨  N

4.

            $                             $                    ¨  Y
¨  N

 

  B. Sales (Writing) of Put Options and Covering Transactions (Repurchases):
Sales (writing) of put options on ITT common stock and subsequent repurchases of
ITT common stock on those put options between February 26, 2013 and August 7,
2015, both dates inclusive:

 

Date(s) of

Writing (Sale)

(List

Chronologically)

MM/DD/YYYY

   Number
of
Contracts    Expiration
Month and
Year &
Strike Price
of Options
(i.e. May
2014/$20)    Sale
Price
Per
Contract    Amount
Received
(Net of
Commissions,
Taxes,
and Fees)      Insert an
“A” if
Assigned,
and “R” if
repurchased,
or an “X” if
Expired    Assign
or
Repurchase
Date
(MM/DD/YYYY)    Price
Paid Per
Contract    Aggregate
Cost
(Including
Commissions,
Taxes, and
Fees)      Proof
Enclosed?

1.

            $                             $                    ¨  Y
¨  N

2.

            $                             $                    ¨  Y
¨  N

3.

            $                           $                    ¨  Y
¨  N

4.

            $                             $                    ¨  Y
¨  N

If you require additional space, attach extra schedules in the same format as
above. Sign and

print your name on each additional page.

YOU MUST READ AND SIGN THE RELEASE ON PAGE    . FAILURE TO SIGN THE RELEASE MAY
RESULT IN A DELAY IN PROCESSING OR THE REJECTION OF YOUR CLAIM

 

PROOF OF CLAIM AND RELEASE

6

--------------------------------------------------------------------------------

PART V: SUBMISSION TO JURISDICTION OF COURT AND ACKNOWLEDGMENTS

I (We) submit this Proof of Claim and Release form under the terms of the
Stipulation of Settlement described in the Notice. I (We) also submit to the
jurisdiction of the United States District Court for the Southern District of
Indiana with respect to my (our) claim as a Settlement Class Member and for
purposes of enforcing the release set forth herein. I (We) further acknowledge
that I am (we are) bound by and subject to the terms of any judgment that may be
entered in the Action. I (We) agree to furnish additional information to the
Claims Administrator to support this claim if requested to do so. I (We) have
not submitted any other claim covering the same purchases, acquisitions, or
sales of ITT common stock and any call options or put options on ITT common
stock during the Settlement Class Period and know of no other person having done
so on my (our) behalf.

 

PART VI: RELEASE

I (WE) HEREBY ACKNOWLEDGE FULL AND COMPLETE SATISFACTION OF, AND DO HEREBY
FULLY, FINALLY, AND FOREVER WAIVE, RELEASE, RELINQUISH, DISCHARGE AND DISMISS
FROM THE “RELEASED CLAIMS” EACH AND ALL OF THE “RELEASED PERSONS.”

“Released Person(s)” means each and all Defendants, and/or any of their
respective past, present or future, family members, spouses, domestic partners,
parents, associates, affiliates, divisions, subsidiaries, officers, directors,
stockholders, owners, members, representatives, employees, attorneys, financial
or investment advisors, consultants, underwriters, investment banks or bankers,
commercial bankers, insurers, reinsurers, excess insurers, co-insurers,
engineers, advisors, principals, agents, heirs, executors, trustees, estates,
beneficiaries, distributees, foundations, general or limited partners or
partnerships, joint ventures, personal or legal representatives,

 

PROOF OF CLAIM AND RELEASE

7

--------------------------------------------------------------------------------

administrators, or any other person or entity acting or purporting to act for or
on behalf of any of the Defendants, and each of their respective predecessors,
successors, and assigns, and any trust of which any Defendant is the settlor or
which is for the benefit of any Defendant and/or member(s) of his family. For
the avoidance of doubt, Released Persons does not include
PricewaterhouseCoopers, LLP, which is also known as PwC LLP.

“Released Claims” means any and all claims (including Unknown Claims), demands,
debts, losses, damages, duties, rights, disputes, actions, causes of action,
liabilities, obligations, judgments, suits, matters, controversies, proceedings,
or issues, of any kind, nature, character, or description whatsoever (and
including, but not limited to, any claims for damages, whether compensatory,
consequential, special, punitive, exemplary, or otherwise, and any and all fees,
costs, interest, expenses, or charges), whether known or unknown, contingent or
absolute, suspected or unsuspected, foreseen or unforeseen, disclosed or
undisclosed, concealed or hidden, apparent or not apparent, accrued or
unaccrued, matured or unmatured, liquidated or not liquidated, asserted or
unasserted, at law or in equity, that have been asserted, could have been
asserted, or in the future could be asserted against Defendants or any of the
Released Persons in this Litigation or in any other court, tribunal, forum or
proceeding (including, but not limited to, any claims arising under U.S.
federal, state or local law, foreign law, common law, statutory law,
administrative law, rule, regulation, or at equity, relating to alleged fraud,
breach of any duty, negligence, violations of the federal securities laws, or
otherwise, and including all claims within the exclusive jurisdiction of the
federal courts), whether individual, class, direct, derivative, representative,
legal, equitable or any other type, or in any other capacity, (a) by reason of,
arising out of, relating to, involving or in connection with, directly or
indirectly, the allegations, claims, conduct, facts, events, practices,
transactions, acts, occurrences, failures, statements, representations, alleged
misrepresentations,

 

PROOF OF CLAIM AND RELEASE

8

--------------------------------------------------------------------------------

alleged omissions, the documents publicly filed with the U.S. Securities and
Exchange Commission by ITT and all disclosures or alleged non-disclosures made
by Defendants in connection with any of the foregoing, or any other matter,
thing or cause whatsoever, or any series thereof, that were, could have been or
in the future might be alleged, claimed, asserted, embraced, involved, or set
forth, referred to in or otherwise related to, directly or indirectly, the
Litigation or subject matter of the Litigation; (b) would have been barred by
res judicata or collateral estoppel had the Action been fully litigated to a
final judgment; and (c) were, could have been, or in the future could be,
asserted in any forum or proceeding or otherwise by any Settlement Class Member
that relate to the purchase, sale, acquisition or holding of ITT Securities
during the Settlement Class Period. The Released Claims shall not include claims
to enforce the Settlement. For the avoidance of doubt, Released Claims does not
include the claims alleged as of the date of this Settlement in the actions
captioned: Sasha Wilfred, Derivatively on Behalf of Nominal Defendant ITT
Educational Services, Inc. v. Kevin M. Modany, et al., 1:13-cv-03110-JPO
(S.D.N.Y.); Janice Nottenkamper, Derivatively on Behalf of Nominal Defendant ITT
Educational Services, Inc. v. Kevin M. Modany, et al., 1:15-cv-03390 (S.D.N.Y.);
Michelle Lawrence, Derivatively on Behalf of Nominal Defendant ITT Educational
Services, Inc. v. Kevin M. Modany, et al., 1:14-cv-02106 (S.D. Ind.); William
McKee, Derivatively on behalf of ITT Educational Services, Inc. v. Kevin Modany,
et al., 49D07-1507-PL-021891 (Marion Circuit Court, Indianapolis, Indiana);
United States Securities and Exchange Commission v. ITT Educational Services,
Inc., Kevin M. Modany, and Daniel M. Fitzpatrick, 1:15-cv-00758-JMS-MJD (S.D.
Ind.); and In re ITT Educational Services, Inc. Securities Litigation,
1:13-cv-01620-JPO-JLC (S.D.N.Y.).

“Unknown Claims” means any and all Released Claims, of every nature and
description, which Plaintiffs or any Settlement Class Member does not know or
suspect to exist in his, her or its

 

PROOF OF CLAIM AND RELEASE

9

--------------------------------------------------------------------------------

favor at the time of the release of the Released Persons which, if known by him,
her or it, might have affected his, her or its settlement with and release of
the Released Persons, or might have affected his, her or its decision not to
object to this Settlement or not to exclude himself, herself or itself from the
Settlement Class. Unknown Claims include those claims in which some or all of
the facts comprising the claim may be suspected, or even undisclosed or hidden.
With respect to any and all Released Claims, the Settling Parties stipulate and
agree that, upon the Effective Date, Plaintiffs shall expressly waive, and each
of the Settlement Class Members shall be deemed to have waived, and by operation
of the Judgment shall have expressly waived, the provisions, rights, and
benefits of California Civil 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.

Plaintiffs shall expressly waive, and each of the Settlement Class Members shall
be deemed to have, and by operation of the Judgment shall have, expressly waived
any and all provisions, rights, and benefits conferred by any U.S. federal law
or any law of any state or territory of the United States, or principle of
common law or foreign law, which is similar, comparable or equivalent in effect
to California Civil Code § 1542. Plaintiffs and other Settlement Class Members
may hereafter discover facts in addition to or different from those which he,
she or it now knows or believes to be true with respect to the subject matter of
the Released Claims, but Plaintiffs and each Settlement Class Member, upon the
Effective Date, shall be deemed to have, and by operation of the Judgment shall
have expressly, fully, finally, and forever settled and released any and all
Released Claims, known or unknown, suspected or unsuspected, contingent or
non-contingent, whether or not concealed or hidden, which now exist, or
heretofore have existed, upon any theory of law or equity now existing or coming
into existence in the future, including, but not limited to, conduct which is
negligent, reckless, intentional, with or without malice, or a breach of any
duty, law or rule, without regard to

 

PROOF OF CLAIM AND RELEASE

10

--------------------------------------------------------------------------------

the subsequent discovery or existence of such different or additional facts.
Plaintiffs acknowledge, and the Settlement Class Members shall be deemed by
operation of the Judgment to have acknowledged, that the foregoing waiver was
separately bargained for and was a material element of the Settlement.

 

PART VII: CERTIFICATION

I (WE) DECLARE UNDER PENALTY OF PERJURY UNDER THE LAWS OF THE UNITED STATES OF
AMERICA THAT ALL OF THE FOREGOING INFORMATION SUPPLIED ON THIS PROOF OF CLAIM
AND RELEASE FORM BY THE UNDERSIGNED IS TRUE AND CORRECT.

 

Executed this      day of                                                      
in                                                                          
                                      
              (Month/Year)                         
               (City/State/Country)    

 

(Sign your name here)

   

 

(Sign your name here)

 

(Type or print your name here)

   

 

(Type or print your name here)

 

(Capacity of person(s) signing, e.g., Beneficial Purchaser, Executor, or
Administrator)

   

 

(Capacity of person(s) signing, e.g., Beneficial Purchaser, Executor, or
Administrator)

 

PROOF OF CLAIM AND RELEASE

11

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ACCURATE CLAIMS PROCESSING TAKES A

SIGNIFICANT AMOUNT OF TIME.

THANK YOU FOR YOUR PATIENCE.

Reminder Checklist:

 

  1. Please sign the claim form at Paragraph VII above.

 

  2. Remember to attach supporting documentation, if available.

 

  3. Do not send original stock certificates.

 

  4. Keep a copy of your claim form for your records.

 

  5. The Claims Administrator will acknowledge receipt of your Proof of Claim
Form and Release within 60 days. Your claim is not deemed filed until you
receive an acknowledgment postcard or e-mail. If you do not receive a written
acknowledgment within 60 days, please email the Claims Administrator at
ITTEducationSecuritiesLitigation-Indiana@AngeionGroup.com.

 

  6. If you move, please send us your new address.

ITT Educational Services, Inc. Securities Litigation

Claims Administrator

1801 Market Street, Suite 660

Philadelphia, PA 19103

ITTEducationSecuritiesLitigation-Indiana@AngeionGroup.com

 

  7. Please write legibly in blue or black ink. Do not use highlighter on the
Proof of Claim Form and Release or supporting documentation.

THIS PROOF OF CLAIM MUST BE POSTMARKED NO LATER THAN             , 2016 AND MUST
BE MAILED TO:

ITT Educational Services, Inc. Securities Litigation

Claims Administrator

1801 Market Street, Suite 660

Philadelphia, PA 19103

 

PROOF OF CLAIM AND RELEASE

12

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EXHIBIT A-3

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF INDIANA

INDIANAPOLIS DIVISION

 

In re ITT EDUCATIONAL SERVICES, INC.

SECURITIES LITIGATION (INDIANA)

  

CASE NO. 1:14-cv-01599-TWP-DML

 

EXHIBIT A-3

 

SUMMARY NOTICE

 

 

TO: ALL PERSONS OR ENTITIES WHO PURCHASED OR ACQUIRED THE COMMON STOCK OF ITT
EDUCATIONAL SERVICES, INC. (“ITT”) (TICKER SYMBOL: ESI), WHO PURCHASED OR
ACQUIRED CALL OPTIONS ON ITT COMMON STOCK, OR WHO WROTE PUT OPTIONS ON ITT
COMMON STOCK, BETWEEN FEBRUARY 26, 2013 AND MAY 12, 2015, BOTH DATES INCLUSIVE.

PLEASE READ THIS NOTICE CAREFULLY. YOUR RIGHTS MAY BE AFFECTED BY A CLASS ACTION
LAWSUIT PENDING IN THIS COURT.

YOU ARE HEREBY NOTIFIED that a proposed Settlement has been reached in this
Action, which has been preliminarily certified as a class action for the
purposes of settlement only.1 Pursuant to Rule 23 of the Federal Rules of Civil
Procedure and an Order of the United States District Court for the Southern
District of Indiana, a hearing will be held on             , 2016, at     :    
    .m., before The Honorable Tanya Walton Pratt, at the Birch Bayh Federal
Building & U.S. Courthouse, 46 East Ohio Street, Courtroom 344, Indianapolis,
Indiana 46204, for the purpose of determining, among other things: (1) whether
the proposed Settlement of the securities class action claims asserted in this
Litigation, pursuant to which ITT, on behalf of all Defendants, will cause to be
deposited into a Settlement Fund the sum of $12.5375 million in cash, should be
approved by the Court as fair, reasonable, and adequate and in the best
interests of the Settlement Class; (2) whether to certify the Settlement Class
for purposes of settlement; (3) whether this Litigation should be

 

1 

This Summary Notice incorporates by reference the definitions in the Stipulation
and Agreement of Settlement, dated November 2, 2015 (the “Stipulation”), and all
capitalized terms used, but not defined herein, shall have the same meanings as
in the Stipulation.

 

SUMMARY NOTICE

1

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dismissed with prejudice pursuant to the terms and conditions set forth in the
Stipulation, including, but not limited to, the release of claims against the
Defendants and other Released Persons; (4) whether the proposed plan to
distribute the settlement proceeds (the “Plan of Allocation”) is fair,
reasonable, and adequate and therefore should be approved; (5) whether the
application of Lead Counsel for the payment of attorneys’ fees and expenses
incurred in connection with this Litigation should be approved; and (6) whether
the Court should grant the application of Plaintiffs for reimbursement of their
reasonable costs and expenses (including lost wages) directly related to their
representation of the Settlement Class.

If you purchased or otherwise acquired ITT common stock, purchased or otherwise
acquired call options on ITT common stock, or wrote put options on ITT common
stock, between February 26, 2013 and May 12, 2015, both dates inclusive, your
rights may be affected by this Settlement. This Summary Notice provides only a
summary of matters, and a detailed Notice of Proposed Settlement of Class
Action, Motion for Attorneys’ Fees and Settlement Hearing (the “Notice”)
describing the Action, the proposed Settlement, and the rights of Settlement
Class Members has been mailed to persons or entities known to be potential
Settlement Class Members. If you have not received the Notice or a copy of the
Proof of Claim and Release form, you may obtain copies by writing to ITT
Educational Services, Inc. Securities Litigation, Claims Administrator, 1801
Market Street, Suite 660, Philadelphia, PA 19103, or you can download a copy at
www.ITTEducationSecuritiesLitigation-Indiana.com.

If you are a Settlement Class Member, you have the right to appear in Court at
the Settlement Hearing to object to the Settlement, the Plan of Allocation, Lead
Counsel’s application for an award of attorneys’ fees and expenses, and/or the
application by Plaintiffs for any costs or expenses. You must submit a written
objection in accordance with the procedures described in the Notice, which must
be filed and served so that it is received no later than             , 2016. You
also have the right to exclude yourself from the Settlement Class by submitting
a written request for exclusion from the Settlement Class in accordance with the
procedures described in the Notice. The request for exclusion must be received
no later than             , 2016. If the Settlement is approved by the

 

SUMMARY NOTICE

2

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Court, you will be bound by the Settlement and the Court’s Judgment, including
the releases provided for in the Settlement and the Judgment, unless you submit
a request to be excluded. To object, to otherwise request to be heard, or to
exclude yourself from the Settlement Class, submit a written objection to be
received by no later than             , 2016, or a request for exclusion to be
received by no later than             , 2016, in accordance with the procedures
described in the Notice.

If you are a Settlement Class Member, in order to share in the distribution of
the Net Settlement Fund, you must submit a Proof of Claim and Release form
postmarked no later than             , 2016, establishing that you are entitled
to recovery.

PLEASE DO NOT CONTACT THE COURT OR THE CLERK’S OFFICE REGARDING THIS NOTICE. If
you have any questions about the Settlement, you may contact Lead Counsel at the
address listed below:

Lionel Z. Glancy, Esq.

Glancy Prongay & Murray LLP

1925 Century Park East, Suite 2100

Los Angeles, California 90067

settlements@glancylaw.com

1-888-773-9224

or go to the following website: www.ITTEducationSecuritiesLitigation-Indiana.com

DATED:                     

 

SUMMARY NOTICE

3

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EXHIBIT B

--------------------------------------------------------------------------------

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF INDIANA

INDIANAPOLIS DIVISION

 

In re ITT EDUCATIONAL SERVICES, INC.

SECURITIES LITIGATION (INDIANA)

  

CASE NO. 1:14-cv-01599-TWP-DML

 

EXHIBIT B

 

FINAL JUDGMENT AND ORDER OF

DISMISSAL WITH PREJUDICE

 

WHEREAS, a class action is pending before the Court entitled In re ITT
EDUCATIONAL SERVICES, INC. SECURITIES LITIGATION (INDIANA), Civil Action
No. 1:14-cv-01599-TWP-DML, United States District Court for the Southern
District of Indiana (the “Litigation”);

WHEREAS, the Court has received the Stipulation and Agreement of Settlement
dated as of November 2, 2015 (the “Stipulation”), which has been entered into by
Plaintiffs (on behalf of themselves and the Settlement Class) and Defendants,
and the Court has reviewed the Stipulation and the Exhibits annexed thereto;

WHEREAS, pursuant to Federal Rule of Civil Procedure 23(e), this Court
preliminarily approved the Settlement of this Litigation, as set forth in the
Stipulation, in an Order dated              , 201  , (the “Notice Order”);

WHEREAS, on application of the Settling Parties, this matter came before the
Court for hearing on                      (the “Settlement Hearing”), to
determine whether the terms and conditions of the Settlement are fair,
reasonable, adequate and in the best interests of the Settlement Class, and
should be finally approved; and whether Judgment should be entered pursuant to
the terms of the Settlement, among other things, releasing all Released Claims
against all Released Persons and dismissing the Litigation with prejudice; and

 

FINAL JUDGMENT AND ORDER OF DISMISSAL WITH PREJUDICE

1

--------------------------------------------------------------------------------

WHEREAS, due and adequate notice having been given of the Settlement as required
in the Notice Order, and the Court having considered all papers filed and
proceedings held herein, including all matters submitted to it at the Settlement
Hearing, and otherwise being fully informed in the premises and good cause
appearing therefore,

IT IS HEREBY ORDERED, ADJUDGED AND DECREED that:

1. This Judgment incorporates by reference the definitions in the Stipulation,
and all capitalized terms used herein shall have the same meanings set forth in
the Stipulation.

2. This Court has jurisdiction over the subject matter of the Litigation and
over all Parties to the Litigation, including all Members of the Settlement
Class who did not timely file a Request for Exclusion from the Settlement Class
by the             , 201  , deadline pursuant to the Notice Order.

3. Pursuant to Rule 23 of the Federal Rules of Civil Procedure, for purposes of
this Settlement only, the Court finally certifies this Action as a class action,
with a Settlement Class defined as all persons and/or entities who purchased or
otherwise acquired the common stock of ITT Educational Services, Inc. (“ITT” or
the “Company”) (ticker symbol: ESI), purchased or otherwise acquired call
options on ITT common stock, or wrote put options on ITT common stock, between
February 26, 2013 and May 12, 2015, both dates inclusive. Excluded from the
Settlement Class are Defendants, the officers and directors of ITT during the
Settlement Class Period, members of their immediate families, the legal
representatives, heirs, successors or assigns of any of the foregoing and any
entity in which a Defendant has or had a controlling interest during the
Settlement Class Period. Also excluded from the Settlement Class is any person
or entity that timely and validly requested exclusion from the Settlement Class,
pursuant to and in accordance with the terms of the Notice Order, and as listed
on Schedule 1 hereto.

 

FINAL JUDGMENT AND ORDER OF DISMISSAL WITH PREJUDICE

2

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4. With respect to the Settlement Class, for purposes of this Settlement only,
the Court finds and concludes that the prerequisites for a class action under
Rules 23(a) and (b)(3) of the Federal Rules of Civil Procedure have been
satisfied in that: (a) the number of Settlement Class Members is so numerous
that joinder of all members thereof is impracticable; (b) there are questions of
law and fact common to the Settlement Class; (c) the claims of the Lead
Plaintiff and Court- appointed class representative, Meitav Dash Mutual Fund
Management Ltd., are typical of the claims of the Settlement Class it
represents; (d) Lead Plaintiff, as the class representative, has and will
continue to fairly and adequately represent the interests of the Settlement
Class; (e) the questions of law and fact common to the Members of the Settlement
Class predominate over any questions affecting only individual Members of the
Settlement Class; and (f) a class action is superior to other available methods
for the fair and efficient adjudication of the controversy.

5. Pursuant to Rule 23 of the Federal Rules of Civil Procedure, and for the
purposes of this Settlement only, the Court hereby affirms its determinations in
the Notice Order and finally appoints Lead Plaintiff as a class representative
for the Settlement Class, and finally appoints Lead Counsel, Glancy Prongay &
Murray LLP, as class counsel for the Settlement Class.

6. Notice of the pendency of the Action as a class action and of the proposed
Settlement was given to Settlement Class Members in accordance with the terms of
the Settlement and the Court’s Notice Order. The distribution of the Notice and
the publication of the Summary Notice, as provided for in the Notice Order,
constituted the best notice practicable under the circumstances, including
individual notice to all Members of the Settlement Class who could be identified
through reasonable effort. In addition to providing the best notice practicable
under the circumstances to all

 

FINAL JUDGMENT AND ORDER OF DISMISSAL WITH PREJUDICE

3

--------------------------------------------------------------------------------

Persons entitled to such notice, the form and method of notifying the Settlement
Class of the pendency of the Action as a class action and of the terms and
conditions of the proposed Settlement met the requirements of due process and
fully satisfied the requirements of Federal Rule of Civil Procedure 23,
Section 21D(a)(7) of the Securities Exchange Act of 1934, the requirements of
Due Process under the U.S. Constitution, and any other applicable law.

7. Pursuant to and in compliance with Rule 23 of the Federal Rules of Civil
Procedure, the Court hereby finds that due and adequate notice of these
proceedings, including the Settlement Hearing, was directed to all persons and
entities who are Settlement Class Members, advising them of the Settlement, and
of their right to object thereto, and a full and fair opportunity was accorded
to all Settlement Class Members to be heard with respect to the Settlement.
Thus, it is hereby determined that all Settlement Class Members, other than
those persons and entities that are listed on Schedule 1 hereto, who have timely
excluded themselves from the Settlement Class, are bound by this Judgment.

8. Pursuant to Rule 23 of the Federal Rules of Civil Procedure, this Court
hereby approves the Settlement set forth in the Stipulation and finds that said
Settlement is, in all respects, fair, reasonable and adequate to, and is in the
best interests of the Plaintiffs, the Settlement Class, and each of the
Settlement Class Members. This Court further finds the Settlement set forth in
the Stipulation is the result of arm’s-length negotiations, undertaken with the
assistance of an experienced mediator, between experienced counsel representing
the interests of the Plaintiffs, the Settlement Class Members, and the
Defendants. Accordingly, the Settlement embodied in the Stipulation is hereby
approved in all respects and shall be consummated in accordance with its terms
and provisions. The Settling Parties are hereby directed to perform the terms of
the Stipulation.

 

FINAL JUDGMENT AND ORDER OF DISMISSAL WITH PREJUDICE

4

--------------------------------------------------------------------------------

9. Except as to any individual claim of those persons or entities (identified in
Schedule 1 attached hereto), whose timely request for exclusion from the
Settlement Class was received before the             , 201   deadline, the
Litigation and all claims contained therein, including all of the Released
Claims, are dismissed with prejudice as against each and all of the Released
Persons. The Settling Parties are to bear their own costs, except as otherwise
provided in the Stipulation.

10. Upon the Effective Date, the Plaintiffs and each of the Settlement Class
Members (on behalf of themselves and each of their respective present and former
family members, spouses, domestic partners, parents, associates, affiliates,
divisions, subsidiaries, officers, directors, stockholders, owners, members,
fiduciaries, employees, attorneys, accountants, consultants, underwriters, banks
or bankers, insurers, reinsurers, excess insurers, co-insurers, advisors,
principals, agents, heirs, executors, trustees, estates, beneficiaries,
distributees, foundations, general or limited partners or partnerships, joint
ventures, personal or legal representatives, administrators, predecessors,
successors, and assigns, and any other person or entity who has the right,
ability, standing, or capacity to assert, prosecute, or maintain on behalf of
any Settlement Class Member any of the Released Claims (or to obtain the
proceeds of any recovery therefrom)), regardless of whether that Settlement
Class Member actually submits a Proof of Claim and Release, seeks or obtains a
distribution from the Net Settlement Fund, is entitled to receive a distribution
under the Plan of Allocation approved by the Court, or has objected to the
Settlement, the Plan of Allocation, or Lead Counsel’s Fee and Expense
Application, shall be deemed to have, and by operation of the Judgment shall
have, fully, finally, and forever waived, released, relinquished, discharged,
and dismissed all Released Claims against the Defendants and all other Released
Persons.

11. Upon the Effective Date, Plaintiffs and each of the Settlement Class Members
(on behalf of themselves and each of their respective present and former family
members, spouses,

 

FINAL JUDGMENT AND ORDER OF DISMISSAL WITH PREJUDICE

5

--------------------------------------------------------------------------------

domestic partners, parents, associates, affiliates, divisions, subsidiaries,
officers, directors, stockholders, owners, members, fiduciaries, employees,
attorneys, accountants, consultants, underwriters, banks or bankers, insurers,
reinsurers, excess insurers, co-insurers, advisors, principals, agents, heirs,
executors, trustees, estates, beneficiaries, distributees, foundations, general
or limited partners or partnerships, joint ventures, personal or legal
representatives, administrators, predecessors, successors, and assigns, and any
other person or entity who has the right, ability, standing, or capacity to
assert, prosecute, or maintain on behalf of any Settlement Class Member any of
the Released Claims (or to obtain the proceeds of any recovery therefrom)),
regardless of whether that Settlement Class Member actually submits a Proof of
Claim and Release, seeks or obtains a distribution from the Net Settlement Fund,
is entitled to receive a distribution under the Plan of Allocation approved by
the Court, or has objected to the Settlement, the Plan of Allocation, or Lead
Counsel’s Fee and Expense Application, shall have covenanted not to sue the
Released Persons with respect to any Released Claims and shall be permanently
barred and enjoined from instituting, commencing, participating in, maintaining,
or continuing to prosecute any action or proceeding in any court of law or
equity, arbitration tribunal, administrative forum, or other forum of any kind,
asserting any Released Claim (including, without limitation, Unknown Claims), as
well as any claims arising out of, relating to, or in connection with, the
defense, settlement, or resolution of this Action against any of the Released
Persons.

12. Upon the Effective Date hereof, each of the Released Persons shall be deemed
to have, and by operation of this Judgment shall have, fully, finally, and
forever released, relinquished, and discharged Plaintiffs, each and all of the
Settlement Class Members, and Lead Counsel from all claims (including Unknown
Claims), arising out of, relating to, or in connection with the institution,
prosecution, assertion, settlement, or resolution of the Litigation or the
Released Claims.

 

FINAL JUDGMENT AND ORDER OF DISMISSAL WITH PREJUDICE

6

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13. Upon the Effective Date, except as provided in ¶15 below, any and all
persons and entities are permanently barred and enjoined, to the fullest extent
permitted by 15 U.S.C. § 78u-4(f)(7)(A) and any other applicable law or
regulation, from commencing, prosecuting, or asserting any and all claims for
contribution or indemnity (or any other claim when the alleged injury to that
person or entity is their actual or threatened liability to the Settlement Class
or a Settlement Class Member) based upon, relating to, arising out of, or in
connection with the Released Claims, against each and every one of the Released
Persons, whether arising under state, federal, common, statutory, administrative
or foreign law, regulation, or at equity, as claims, cross-claims,
counterclaims, or third-party claims, in this Action or a separate action, in
this Court or in any other court, arbitration proceeding, administrative
proceeding, or other forum; and, except as provided in ¶15 below, the Released
Persons are permanently barred and enjoined, to the fullest extent permitted by
15 U.S.C. § 78u-4(f)(7)(A) and any other applicable law or regulation, from
commencing, prosecuting, or asserting any and all claims for contribution or
indemnity (or any other claim when the alleged injury to the Released Person is
their actual or threatened liability to the Settlement Class or a Settlement
Class Member) based upon, relating to, or arising out of the Released Claims,
against any person or entity, other than a person or entity whose liability to
the Settlement Class has been extinguished pursuant to the Settlement and the
Judgment, whether arising under state, federal, common, statutory,
administrative, or foreign law, regulation, or at equity, as claims,
cross-claims, counterclaims, or third-party claims, in this Action or a separate
action, in this Court or in any other court, arbitration proceeding,
administrative proceeding, or other forum. Nothing herein shall bar, release, or
alter in any way, any obligations, rights or claims among or between Released
Persons.

14. Upon the Effective Date, any final verdict or judgment that may be obtained
by or on behalf of the Settlement Class or a Settlement Class Member against any
person or entity subject to the Bar Order described in ¶13 above shall be
reduced by the greater of: (i) an amount that corresponds to the percentage of
responsibility of any of the Defendants for common damages; or
(ii) $12,537,500.00.

 

FINAL JUDGMENT AND ORDER OF DISMISSAL WITH PREJUDICE

7

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15. Notwithstanding any of the releases or the Bar Order above, nothing in this
Judgment shall release any claims, or bar any action by any of the Settling
Parties, to enforce or to effectuate the Stipulation, the releases and other
terms and conditions of the Settlement, the Notice Order, or this Judgment.

16. The Plan of Allocation submitted by Lead Counsel, as described in the Notice
and in accordance with ¶1.19 of the Stipulation, is hereby approved as fair,
reasonable and adequate. Any further orders or proceedings solely regarding the
Plan of Allocation, or any appeal from any order relating thereto or reversal or
modification thereof, shall be considered separate and apart from this Judgment
and shall not operate to terminate the Settlement or in any way disturb or
affect this Judgment and the release of the Released Claims.

17. None of the Stipulation, its Exhibits, the fact and terms of the Settlement
contained therein, or any act performed or document executed pursuant to or in
furtherance of the Stipulation or the Settlement: (a) is or may be deemed to be
or may be used as an admission of, concession of, or evidence of, the truth or
validity of any Released Claim, of any allegations or claims made in the
Litigation, of any allegations or claims that could have been made in the
Litigation, or of any of any allegation of wrongdoing, negligence, fault, or
liability of the Defendants or any other Released Persons; or (b) is or may be
deemed to be or may be used as an admission of, concession of, or evidence of,
the deficiency or infirmity of any defense that has been or could have been
asserted in the Action or in any litigation; or (c) is or may be deemed to be or
may be used as an admission of, or evidence of, any liability, negligence,
fault, misrepresentation, omission, or wrongdoing as against

 

FINAL JUDGMENT AND ORDER OF DISMISSAL WITH PREJUDICE

8

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any of the Defendants or any Released Persons in any arbitration proceeding or
other civil, criminal, or administrative action or proceeding in any court,
administrative agency, or other tribunal; (d) is or may be deemed to be or may
be used as an admission of, or evidence that class certification is appropriate
in this Action, except for purposes of the Settlement; or (e) is or may be
deemed to be or may be used as an admission of, or evidence that the
consideration to be paid under the Settlement represents the amount which could
be or would have been recovered after trial in this Action; or (f) is or may be
deemed to be or may be used as an admission of, or evidence that any damages
potentially recoverable under the Complaint would have exceeded or would have
been less than the Settlement Fund. Neither the Stipulation nor the fact or
terms of the Settlement, nor any act performed or document executed pursuant to
or in furtherance of the Settlement, shall be admissible in any proceeding for
any purpose, except to enforce the terms of the Settlement. The Released Persons
nevertheless may refer to or file the Stipulation and/or this Judgment in any
other action that may be brought against them in order to support a defense or
counterclaim based on principles of res judicata, collateral estoppel, release,
good faith settlement, judgment bar, or reduction or any other theory of claim
preclusion or issue preclusion or similar defense or counterclaim under U.S.
federal or state law or foreign law.

18. Without affecting the finality of this Judgment in any way, this Court
hereby retains continuing jurisdiction over: (a) implementation of this
Settlement and any award or distribution of the Settlement Fund, including
interest earned thereon; (b) disposition of the Settlement Fund; (c) hearing and
determining applications for attorneys’ fees and expenses in the Litigation; and
(d) all Settling Parties hereto for the purpose of construing, enforcing and
administering the Stipulation of Settlement.

 

FINAL JUDGMENT AND ORDER OF DISMISSAL WITH PREJUDICE

9

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19. The Court finds that during the course of the Litigation, the Settling
Parties and their respective counsel at all times complied with the requirements
of Federal Rule of Civil Procedure 11.

20. In the event that the Settlement does not become effective in accordance
with the terms of the Stipulation or the Effective Date does not occur, or in
the event that the Settlement Fund, or any portion thereof, is returned to the
Defendants, then this Judgment shall be rendered null and void to the extent
provided by and in accordance with the Stipulation and shall be vacated to the
extent provided by the Stipulation and, in such event, (a) all orders entered
and releases delivered in connection herewith shall be null and void to the
extent provided by and in accordance with the Stipulation; and (b) the fact of
the Settlement shall not be admissible in any trial of the Action and Lead
Plaintiff and Defendants reserve their rights to proceed in all respects as if
the Settlement had not been entered into and without any prejudice in any way
from the negotiation, fact or terms of the Settlement.

21. The Court hereby GRANTS Lead Counsel attorneys’ fees of     % of the
Settlement Fund and expenses in an amount of $        , together with the
interest earned thereon for the same time period and at the same rate as that
earned on the Settlement Fund until paid. The Court finds that the amount of
fees awarded is fair and reasonable in light of the time and labor required, the
novelty and difficulty of the case, the skill required to prosecute the case,
the experience and ability of the attorneys, awards in similar cases, the
contingent nature of the representation and the result obtained for the
Settlement Class. Said fees shall be allocated among any other plaintiffs’
counsel in a manner which, in Lead Counsel’s good-faith judgment, reflects each
counsel’s contribution to the institution, prosecution, and resolution of the
Litigation. The Court hereby GRANTS Lead Plaintiff Meitav Dash Mutual Fund
Management Ltd. its reasonable

 

FINAL JUDGMENT AND ORDER OF DISMISSAL WITH PREJUDICE

10

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costs and expenses (including lost wages) directly related to its representation
of the Settlement Class in the amount of $        . The Court hereby GRANTS
Plaintiff Babulal Tarapara his reasonable costs and expenses (including lost
wages) directly related to his representation of the Settlement Class in the
amount of $        . The Court hereby GRANTS Plaintiff Kristopher Hennen his
reasonable costs and expenses (including lost wages) directly related to his
representation of the Settlement Class in the amount of $        . The Court
hereby GRANTS Plaintiff Cynthia Grebely her reasonable costs and expenses
(including lost wages) directly related to her representation of the Settlement
Class in the amount of $        . The Court hereby GRANTS Plaintiff Hoai T.
Truong her reasonable costs and expenses (including lost wages) directly related
to her representation of the Settlement Class in the amount of $        .

22. The awarded attorneys’ fees and expenses, and interest earned thereon, shall
be paid to Plaintiffs’ Lead Counsel from the Settlement Fund immediately after
the date this Order is executed subject to the terms, conditions, and
obligations of the Stipulation and in particular ¶6.2 thereof, which terms,
conditions, and obligations are incorporated herein.

 

DATED:                        

 

   

THE HONORABLE TANYA WALTON PRATT

UNITED STATES DISTRICT JUDGE

 

FINAL JUDGMENT AND ORDER OF DISMISSAL WITH PREJUDICE

11

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SCHEDULE 1

List of Persons Excluded from the Class in

In re ITT EDUCATIONAL SERVICES, INC. SECURITIES LITIGATION (INDIANA),

Civil Action No. 1:14-cv-01599-TWP-DML

The following Persons, and only the following Persons, properly excluded
themselves from the Settlement Class by the             , 201  , deadline
pursuant to the Court’s Order dated             , 201  :

 

IN RESPONSE TO THE NOTICE OF

 

PROPOSED SETTLEMENT OF CLASS ACTION

                 

 

FINAL JUDGMENT AND ORDER OF DISMISSAL WITH PREJUDICE

12