exv10w44



 





EXHIBIT 10.44




SETTLEMENT AGREEMENT




     This Settlement Agreement (together with all appendices, exhibits, schedules and attachments
hereto, the “Agreement” or “Settlement”), dated March 6, 2007, is made by and among Rewards Network
Inc., Rewards Network Establishment Services Inc., Rewards Network Services Inc., and RTR Funding
LLC (collectively, “Rewards Network”), on the one hand, and Bistro Executive, Inc., dba Tournesol;
Patrice Lambert; Westward Beach Restaurant Holdings, LLC, formerly dba The Gray Whale; Thomas
Averna; Minibar, Inc., dba Minibar Lounge; and Rebekah Barrow, all suing individually and as the
“Representative Plaintiffs,” subject to judicial approval, on behalf of the Class as defined in
Part B, Paragraph 5, on the other hand. Rewards Network and the Representative Plaintiffs are the
“Settling Parties” or “Parties.” This Agreement supersedes the Initial Settlement Agreement dated
December 21, 2006, and is intended to fully, finally, and forever compromise, resolve, discharge,
and settle the Released Claims subject to the terms and conditions set forth below.



A. SETTLING PARTIES’ CLAIMS AND RECITALS




     1. On May 25, 2004, a class action was filed in the Los Angeles County Superior Court, No.
BC316029, against Rewards Network. The Complaint alleged that Rewards Network violated California
Usury Laws (Cal. Const. Art. XV §1) and California’s Unfair Business Practices Act (Cal. Bus. &
Prof. Code §17200 et seq.). The Complaint sought equitable relief, restitution, and treble
damages.



     2. On June 25, 2004, Rewards Network removed the case to the United States District Court for
the Central District of California (the “Court”). The caption of the case reads Bistro Executive,
Inc., dba Tournesol, et al. v. Rewards Network Inc., et al., Case No. CV-04-4640-CBM (MCx).



 









 





     3. On October 11, 2005, the Court entered an order certifying two classes: a Restaurant Class
and a Guarantor Class. The “Restaurant Class” included all California merchants which, from May
25, 2000, to the filing of the Complaint on May 25, 2004, participated in Rewards Network’s Cash
Advance Program and which took a cash advance from Rewards Network pursuant to the terms of the
Old Form Cash Advance Contracts. The “Guarantor Class” included all persons who, from May 25,
2000, to the filing of the Complaint on May 25, 2004, guaranteed payment of interest and principal
on cash advances pursuant to the Old Form Cash Advance Contracts.



     4. On July 20, 2006, the Court entered an order granting the Representative Plaintiffs partial
summary judgment (the “Summary Judgment Order”), concluding in part that the business transactions
at issue were “loans” based on an application of the doctrine of judicial estoppel. On August 23,
2006, the Court granted Rewards Network’s motion to certify an interlocutory appeal pursuant to 28
U.S.C. § 1292(b). On October 16, 2006, the United States Court of Appeals for the Ninth Circuit
granted Rewards Network’s petition for interlocutory appeal, and the appeal is currently pending in
the Ninth Circuit.



     5. Over the past two and a half years, Class Counsel have conducted an investigation of the
facts, including reviews of Rewards Network’s relevant documents and depositions of Rewards
Network’s representatives, and analyzed the relevant legal issues. Although the Representative
Plaintiffs and Class Counsel believe that the claims asserted in the Complaint have merit, they
have examined the benefits to be obtained under the Settlement compared to the costs, risks, and
delays associated with the continued litigation of these claims, including the uncertainty of the
outcome of the pending appeal in the United States Court of Appeals for the Ninth Circuit. The
factors considered include the following:



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          (a) In imposing liability in its Summary Judgment Order, the Court relied in part on judicial
estoppel and consequently did not consider Rewards Network’s evidence or argument on the element of
whether the transactions at issue were “loans”;




          (b) The basis of the Court’s Summary Judgment Order is subject to uncertainty upon appeal or
reconsideration;




          (c) There is authority for the proposition that calling a transaction a “loan” does not make
it a loan for usury purposes and that usury depends upon the overall economic substance of the
transaction;




          (d) A New York state court found that certain Rewards Network cash advance agreements, which
Rewards Network contends are substantially similar to those at issue in this Action, are not loans.
Transmedia Restaurant Co. v. 33 E. 61st Street Restaurant Corp., 710 N.Y.S.2d 756, 760 (N.Y. App.
Div. 2000);




          (e) Rewards Network has raised both defenses and setoff claims with respect to the promotional
and marketing services that it alleges to have provided to the Class Members;




          (f) Any award of treble damages is uncertain and would have been subject to the Court’s
discretion after an examination of all of Rewards Network’s defenses and the facts and
circumstances of the transactions;




          (g) In November 2003 and again in October 2004, Rewards Network made changes to its standard
form cash advance agreement that together (i) clarified and expressly recognized that Rewards
Network’s promotional and marketing efforts are part of the consideration received by participating
merchants in the transactions, and (ii) eliminated certain provisions of the prior agreements cited
by the Court in its Summary Judgment Order; and




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          (h) The October 2004 form and all forms of cash advance agreements used by Rewards Network
thereafter contain a choice-of-law provision selecting Illinois law, which does not permit civil
usury claims for commercial transactions.




     6. The Representative Plaintiffs were exposed to the risks and burdens attendant to pursuing
this Action as a class action, as well as exposure to counterclaims asserted by Rewards Network,
which sought collection of amounts alleged to be due and owing, as well as attorneys’ fees.



     7. The Representative Plaintiffs and Class Counsel believe that, in consideration of all the
circumstances and as a consequence of vigorous and extensive arms-length settlement negotiations,
the Settlement embodied in this Agreement is fair, reasonable, adequate, and in the best interests
of the Class.



     8. Rewards Network has vigorously denied, and continues to deny, all liability with respect to
any and all of the facts or claims alleged in the Complaint or other actions, denies that it
engaged in any wrongdoing, denies that it acted improperly in any way, and denies any liability to
the Representative Plaintiffs, to the Class, or to any third party. Rewards Network nevertheless
desires to settle the Action on the terms and conditions set forth in this Agreement solely for the
purpose of avoiding the burden, expense, risk, and uncertainty of continuing the proceedings in the
Action, and for the purpose of putting to rest all controversies among the Parties.



     9. In no event is this Agreement to be construed as, or is to be deemed evidence of, an
admission or concession on the part of Rewards Network or Released Parties (as defined herein) with
respect to any claim by the Representative Plaintiffs including, without limitation, whether cash
advanced pursuant to Rewards Network’s Cash Advance Program constituted a



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“loan,” or with respect to any assertion of fault, liability, wrongdoing, damage, or the
propriety of class certification of the Class if the Action were to be litigated rather than
settled.



     10. In no event is this Agreement to be construed as, or is to be deemed evidence of, an
admission or concession on the part of the Representative Plaintiffs or any Class Member as to the
viability, efficacy, or sufficiency of any defense, setoff claim, or counterclaim that Rewards
Network has asserted or could assert if the Action were to be litigated rather than settled.



     11. The Settling Parties intend that the proposed settlement embodied in this Agreement
resolves all claims and disputes between the Representative Plaintiffs, the Class Members, Rewards
Network, and all Released Parties with respect to the Released Claims.



B. DEFINITIONS




     In addition to the terms defined elsewhere in this Agreement, for purposes of this Agreement
and all its Appendices or Exhibits, the following terms shall have the meanings as set forth below.



     1. “Action” means the lawsuit filed by the Representative Plaintiffs in the Los Angeles County
Superior Court, which was removed to the United States District Court for the Central District of
California (the “Court”), and is now captioned Bistro Executive, Inc., dba Tournesol, et al. v.
Rewards Network Inc., et al., Case No. CV-04-4640-CBM (MCx).



     2. “Administration” or “Administration Costs” means the act of, and the costs associated with,
administering the settlement, including, but not limited to, processing claims, processing returned
and/or undeliverable mail, responding to class member inquiries, distributing payments and airline
mileage awards to Class Members, preparing and disseminating reports about administrative issues,
maintaining a web site devoted to the Action, and post-distribution settlement administration and
related activities.



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     3. “Administrator” means Rust Consulting, Inc., the independent third party administrator to
be hired by Rewards Network to handle in good faith all or parts of the Notice and Administration.



     4. “Cash Advance Program” means the program whereby Rewards Network advanced cash to
participating merchants in exchange for credits to be redeemed by Rewards Network members when they
dined at the participating merchants’ restaurants (as such program was operated from May 25, 2000
through December 31, 2004 under the Old Form Cash Advance Contracts).



     5. The “Class” or “Settlement Class” means the following:



          (a) All California merchants which, from May 25, 2000 through December 31, 2004, participated
in Rewards Network’s Cash Advance Program and received a cash advance from Rewards Network pursuant
to the terms of any Old Form Cash Advance Contract.




          (b) All persons who, from May 25, 2000 through December 31, 2004, guaranteed a Merchant Class
Member’s obligations under any Old Form Cash Advance Contract.




     6. “Class Members,” “Members of the Class,” or “Settlement Class Members,” as the context may
require, means all persons or entities that are included in the Class definition in Part B,
Paragraph 5 above, but does not include:



          (a) Persons or entities with claims based exclusively upon cash advances made by Rewards
Network prior to May 25, 2000.




          (b) Any persons or entity that previously opted out of the class in this Action.




          (c) Persons or entities that validly and timely elect exclusion from the Settlement Class
pursuant to Fed. R. Civ. P. 23 and under the conditions and procedures as


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           determined by the Court and described in any Notice of the settlement of the Action as set
forth in Part F, Paragraph 2.




     7. “Class Counsel” means the following:



	 	 	 
	Kenneth R. Chiate, Esq.

Daniel L. Brockett, Esq.

Quinn Emanuel Urquhart

Oliver & Hedges, LLP

865 South Figueora Street, 10th Floor

Los Angeles, CA 90017

Phone: 213-443-3000

Fax: 213-443-3100

	 	Anat Levy, Esq.

Anat Levy & Associates, P.C.

8840 Wilshire Blvd., Third Floor

Beverly Hills, CA 90211

Phone: 310 -358-3138

Fax: 310-358-3104






     8. The “Class Period” means May 25, 2000 through December 31, 2004.



     9. “Class Representatives” means the individually named Plaintiffs in this Action who have
been determined by the Court to adequately represent the interests of the Class Members.



     10. “Complete Settlement Approval” means the date on which all appeals related to the Final
Order of the Settlement are resolved, or 31 days after the Final Order if no appeal is commenced.



     11. “Eligible Base Amount” means the total amount Rewards Network received from or on behalf
of a Class Member through December 31, 2006 in excess of the total amount Rewards Network advanced
to that Class Member under all Old Form Cash Advance Contracts. In calculating the Eligible Base
Amount for any given Class Member, all advances by Rewards Network to or on behalf of the Class
Member and all amounts received by Rewards Network (including from any collection action) under all
applicable Old Form Cash Advance Contracts shall be netted against each other.



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     12. “Final Order” means the Final Order of Judgment and Dismissal to be entered at the Final
Approval Hearing if the Court grants final approval to this Settlement as proposed on behalf of the
Class, substantially in the form of Exhibit B.



     13. “Merchant Account” means that Rewards Network account with a unique identifying account
number used in the ordinary course of business by Rewards Network to identify the restaurant or
merchant that received cash advances under Old Form Cash Advance Contracts.



     14. “Merchant Class Member” means any merchant described in Paragraph 5(a) above.



     15. “Notice” means the notice to the members of the Class as approved by the Court in the
Preliminary Approval Order.



     16. “Notice Costs” means the entire cost of providing the notice of the settlement to all
Class Members ordered by the Court.



     17. “Old Form Cash Advance Contract” means the pre-October 2004 form of contract used by
Rewards Network in its Cash Advance Program in California and executed by or on behalf of Class
Members during the period May 25, 2000 through December 31, 2004.



     18. “Preliminary Approval Order” means the order to be entered if the Court grants preliminary
approval of this Agreement and certifies the Class for settlement purposes only, substantially in
the form attached as Exhibit A.



     19. (a) Subject to Paragraph 19(b) of this Part B, “Released Claims” means any claims, Unknown
Claims, demands, obligations, actions, causes of action, suits, cross-claims, matters, issues,
liens, liabilities, costs, and expenses of any nature by the Settlement Class Members against the
Released Parties arising out of, or in connection with, or in any way related



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to any Rewards Network cash advance program. This includes any claim related to activity
engaged in or any services performed directly or indirectly in connection with any cash advance
transaction, whether for damages, punitive damages, exemplary damages, treble damages, penalties,
restitution, disgorgement, or any declaratory, injunctive or any other equitable relief of any
kind, whether based on any federal or state statute, regulation or common law theory (specifically
including, but not limited to, any claim asserting that any cash advance transaction violated usury
laws or constituted any unfair or deceptive trade or business practice or violation of the
California Business & Professions Code).



          (b) “Released Claims” do not include (i) any claim to enforce this Agreement; or (ii) any
claim by a Class Member against Rewards Network based on any contract entered after December 31,
2006. In the event Rewards Network brings any claim against a Class Member for amounts Rewards
Network advanced under any Old Form Cash Advance Contract, or for any amounts under any cash
advance contract entered into from October 1, 2004, through December 31, 2006, that is not an Old
Form Cash Advance Contract, then the Class Member may raise any claim, defense, counterclaim, or
cross-claim, except for a claim or claims asserting that the transaction violated usury laws or
constituted any unfair or deceptive trade or business practice or violation of the California
Business & Professions Code.




     20. “Released Parties” means, collectively, Rewards Network Inc., Rewards Network
Establishment Services Inc., Rewards Network Services Inc. and RTR Funding LLC, and (a) any and all
of their respective past, present and future parent companies, subsidiaries, divisions, affiliates,
predecessors, successors, and assigns; (b) the respective present and former general partners,
limited partners, principals, members, directors, and their attorneys, officers, employees,
stockholders, owners, agents, subrogees, heirs, executors, representatives,



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administrators, trustees, transferees, and assigns of any of them; and (c) all persons or
entities acting on behalf or at the direction of any of the foregoing.



     21. “Unknown Claims” means all claims arising out of facts relating to any matter covered by
the Released Claims, which in the future are or may be found to be other than or different from the
facts now believed to be true, so that each person or entity so affected shall be deemed to have
expressly waived all of the rights and benefits of any provision of the law, either state or
federal, providing that a general release does not extend to claims which the creditor does not
know or suspect to exist in his or her favor at the time of executing the release, which if known
by him or her must have materially affected his or her settlement with the debtor, including
without limitation Section 1542 of the California Civil Code, which reads as follows:




Section 1542. General Release: extent. 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.


All persons or entities providing releases under this Agreement, including all Class Members, upon
Complete Settlement Approval shall be deemed to have, and by operation of the Final Order shall
have, waived any and all provisions, rights or benefits conferred by Section 1542 of the California
Civil Code or any comparable law of any state or territory of the United States, or principle of
common law, which is similar, comparable or equivalent to Section 1542 of the California Civil Code
with respect to the Released Claims. All persons or entities providing releases under this
Agreement may hereafter discover facts other than 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 such
person or entity, upon Complete Settlement Approval, shall be deemed to have, and by operation of
the Final Order in the Action shall have, fully, finally, and forever settled and released any and
all such claims, known or unknown, suspected or


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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 conduct which is negligent, 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.




C. CERTIFICATION OF CLASS FOR SETTLEMENT PURPOSES ONLY




     1. For settlement purposes only, the Parties agree that, as part of the Preliminary Approval
Order (as defined herein), the Court should make preliminary findings and enter an order granting
provisional certification of the Settlement Class subject to final findings and certification in
the Final Order, and appointing Class Counsel and Class Representatives of the Settlement Class.
For settlement purposes only, the Settlement Class is certified pursuant to Rules 23(b)(2) and
23(b)(3) of the Federal Rules of Civil Procedure. Rewards Network does not consent to
certification of the Settlement Class for any purpose other than to effectuate the settlement of
the Action. If this Agreement is not approved by the Court or is terminated pursuant to its terms
for any other reason, or is disapproved in a final order by a court of competent jurisdiction, the
Parties shall be restored to the status quo ante as more specifically set forth in Part K.



D. SETTLEMENT CONSIDERATION AND ECONOMIC RELIEF




     1. For all Class Members that as of the date of this Agreement no longer participate in any
Rewards Network cash advance program, and without requiring them to submit a Claim Form, Rewards
Network will forego and will not enforce any rights to receive sums over and above the cash
advanced by Rewards Network pursuant to the Class Members’ Old Form Cash Advance Contracts. In
making this calculation, all advances by Rewards Network to or on behalf of the Class Member and
all amounts received by Rewards Network (including from any



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collection action) under all applicable Old Form Cash Advance Contracts shall be netted
against each other. The Settling Parties estimate that there are approximately $32 million in such
uncollected amounts.



     2. In addition, each Merchant Class Member that submits (or is deemed to have submitted) a
Valid Claim Form (as defined in Part J, Paragraph 2) will be entitled to a payment in an amount
equal to 35% of the Eligible Base Amount subject to the conditions set forth below. The Settling
Parties estimate that the value to the Class from such payments is between $26.6 million and $28
million. Eligible Merchant Class Members that submit Valid Claim Forms (subject to the provisions
for handling challenged or Denied Claims as described in Part J below), will receive compensation
as follows:



          (a) Three equal installments, with the first installment to be made no later than 45 days
after the approval of valid claims under Part J below, and no later than 45 days after the
resolution of disputed claims under Part J below; the second installment to be made in July 2008;
and the third installment to be made in January 2009.




          (b) For each installment described in Part D, Paragraph 2(a) above, amounts up to $8,000 will
be paid 50% in cash and 50% in airline miles, based on a retail value of $0.04 per mile. For
example, the first $8,000 will be paid with $4,000 in cash and with $4,000 worth of airline miles
(100,000 miles). If any installment exceeds $8,000, the compensation will be $4,000 worth of
airline miles with the balance paid entirely in cash. For instance, if Rewards Network advanced
cash to a Merchant Class Member during the Class Period and subsequently received back the full
amount advanced, plus $102,858, the Merchant Class Member that files a Valid Claim Form would
receive 35% of that amount ($36,000) payable in three installments of $12,000 as follows: year one
- $8,000 in cash plus $4,000 worth of airline miles; year two -


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$8,000 in cash plus $4,000 worth of airline miles; year three — $8,000 in cash plus $4,000
worth of airline miles. As another example, if Rewards Network received back $205,715 in excess of
the amount it advanced to a Merchant Class Member during the Class Period, the Merchant Class
Member would receive $72,000 (35% of $205,715) in three installments consisting of $20,000 in cash
and $4,000 worth of airline miles.




          (c) Any Merchant Class Member that is entitled to receive an award of airline miles under this
Settlement may designate any person to receive the mileage award by providing the name, address,
social security number, phone number, and any email address of the designee, and by providing a
copy of the designee’s airline frequent flyer account card or account statement that shows the
designee’s valid frequent flyer account number. Any Merchant Class Member that is entitled to
receive 50,000 or more miles in each installment may designate its mileage award to be divided
equally among two or more different frequent flyer accounts held by the Merchant Class Member or
its designee, including with different airlines, by providing the frequent flyer account
information requested on the Claim Form.




          (d) In the event the award of airline miles for any installment payment made under this
Settlement would be less then 500 miles, then Rewards Network agrees to award the recipient 500
miles for each installment.




          (e) The miles awarded under this Settlement will be subject to the standard terms and
conditions that the participating airline applies to its program membership at any given time,
including terms and conditions for crediting and using the miles awarded. The participating
airlines are solely responsible for and may change the terms and conditions; provided, however,
that the miles awarded under this Agreement will not be subject to terms and


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conditions that are materially different from those imposed by the participating airline to
its program membership in the ordinary course of its business.




          (f) Rewards Network will make commercially reasonable efforts to ensure that awarded miles are
actually credited to the Merchant Class Member/designee’s frequent flyer account after information
about the award is transmitted by Rewards Network or the Administrator to the airline.




          (g) If the miles awarded under this Settlement are not honored by any designated airline
because the frequent flyer account is invalid or inactive, the Merchant Class Member or designee
will forfeit its rights to such miles, unless within 30 days after receiving written notice that
the award will not be honored, the Merchant Class Member or designee provides written notice to the
Settlement Administrator either designating another frequent flyer account to receive the awarded
miles or otherwise advising the Administrator that the account provided on the Claim Form has been
reactivated. Rewards Network has no liability or obligation if the miles awarded under any
installment are not subsequently honored by any designated airline because the airline ceases doing
business, files for bankruptcy, or terminates the program to which the awarded miles were credited.




     3. The Settlement will not affect Rewards Network’s right, if any, to collect any outstanding
cash advances still owed by any Class Member, except as provided in Paragraph B.19(b) above.



     4. Rewards Network will not be obligated to establish a settlement fund, but will pay claims
under this Agreement as they come due. No interest shall accrue or be paid on Class benefits.



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     5. Subject to Court approval, Rewards Network will make a separate $50,000 payment to each
Class Representative to reflect the additional effort, expense, and risk the Class Representatives
incurred in bringing this action and their exposure to counterclaims and attorneys’ fees. Payment
to Class Representatives will be made no later than 28 days following Complete Settlement Approval.



     6. Within 90 days after Complete Settlement Approval, Rewards Network will release any and all
UCC or property liens filed with the California Secretary of State or any other governmental entity
with regard to Class Members that have either directly or indirectly remitted to Rewards Network
the full amount of any advances they received under Old Form Cash Advance Contracts. Any liens
unrelated to Old Form Cash Advance Contracts will not be released.



     7. Any Class Member or designee that receives benefits under the Settlement is solely
responsible for any tax consequences resulting therefrom.



E. RELEASE BY CLASS MEMBERS




     1. In accordance with the provisions of the Final Order, for good and sufficient
consideration, the receipt of which is hereby acknowledged, upon Complete Settlement Approval,
Representative Plaintiffs and each Settlement Class Member shall be deemed to have, and by
operation of the Final Order shall have, fully, finally and forever released, relinquished, and
discharged all Released Claims against the Released Parties.



     2. In accordance with the provisions of the Final Order, for good and sufficient
consideration, the receipt of which is hereby acknowledged, upon Complete Settlement Approval, each
of the Settling Parties, all Class Members, and all signatories to this Agreement shall be deemed
to have, and by operation of the Final Order shall have, fully, finally and forever released,
relinquished and discharged Representative Plaintiffs, Class Counsel, and Rewards



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Network and its counsel in this Action from any claims (including unknown claims) for abuse of
process, defamation, negligence, or malicious prosecution, or any other claim arising out of,
relating to, or in connection with the institution, prosecution, defense, assertion, or resolution
of the Action, including any right under any statute or federal law to seek counsel fees and costs,
except as set forth herein.



F. EXCLUSIONS FROM AND OBJECTIONS TO SETTLEMENT




     1. The “Opt-Out Date” will be a date set by the Court and identified in the Notice. The
Opt-Out Date shall be approximately 45 days after the mailing of the Notice and no later than 28
days before the Final Approval Hearing.



     2. Each Class Member that wishes to be excluded from the Settlement must mail or otherwise
deliver to the Administrator on or before the Opt-Out Date an appropriate written request for
exclusion — including his, her, or its name, address, telephone number, and Social Security or tax
identification number — that is personally signed by the Class Member or on behalf of the Class
Member. No Class Member, or any person acting on behalf of or in concert or in participation with
that Class Member, may request exclusion of any other Class Member from the Class. Any original
requests for exclusion shall be filed with the Court by the Administrator not later than 14 days
after the Opt-Out Date. The filing shall redact the address, telephone number, and social security
or tax identification number (except for the last three digits), of the person or entity requesting
exclusion. Copies of requests for exclusion will be provided by the Administrator to Class Counsel
and counsel for Rewards Network not later than five days after the Opt-Out Date. If this
Settlement Agreement is granted final approval by the Court, then any and all persons within the
Class that have not submitted a timely, valid, and proper written request for exclusion from the
Settlement will be bound by the releases and other terms and conditions set forth herein and all
proceedings, orders, and judgments in the Action,



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even if those persons have previously initiated or subsequently initiate individual litigation
or other proceedings, including cross-complaints, against Rewards Network relating to the claims
released pursuant to this Settlement. In the event a Merchant Class Member or its guarantor asks
to be excluded from the Settlement, then both the Merchant Class Member and its guarantor shall be
excluded from the Settlement and the Settlement Class.



     3. Any Class Member that has not filed a timely, valid, and proper written request for
exclusion and that wishes to object to the fairness, reasonableness or adequacy of this Agreement,
or any of its terms, must serve upon Class Counsel and counsel for Rewards Network (by mail, hand
or by facsimile transmission) and file with the Court no later than 28 days before the Final
Approval Hearing or as the Court may otherwise direct, a written statement, signed by the objector
or the objector’s duly authorized agent, including the objector’s name, address and social
security or tax identification number, setting forth any objections, as well as the specific
reason(s), if any, for each objection, including any legal support the Class Member wishes to bring
to the Court’s attention and a description of any evidence the Class Member wishes to introduce in
support of the objection. Class Members may so object either on their own or through an attorney
hired at their own expense who files an appearance on their behalf. Class Counsel and counsel for
Rewards Network, if they choose, shall file with the Court and serve on opposing counsel any papers
in response to any objections received, no later than 14 days before the Final Approval Hearing.



     4. Rewards Network has the right to terminate this Agreement if the total Eligible Base Amount
attributable to and paid by or on behalf of Class Members that opt out of the Class exceeds $2.5
million. If Rewards Network exercises its right to terminate this Agreement



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pursuant to this provision, the Parties will be returned to their respective positions status
quo ante, as provided in Part K.



G. THE FINAL JUDGMENT AND ORDERS OF DISMISSAL




     1. The Final Approval Hearing will be held at a date and time to be set by the Court after
mailing of the Notice and the passing of the Opt-Out Date. The Final Approval Hearing shall be
approximately 70 days after the mailing of Notice. At the Final Approval Hearing, the Court will
consider and determine whether the Settlement should be finally approved as fair, reasonable, and
adequate; whether any objections to the Settlement should be overruled; and whether a Final Order
approving the Settlement and dismissing the Action should be entered.



     2. If, after the Final Approval Hearing, the proposed Settlement is approved by the Court,
Class Counsel shall promptly file and request the Court to enter a Final Order, substantially in
the form of Exhibit B:



          (a) Approving the Agreement and judging its terms to be fair, reasonable, adequate and in the
best interests of the Class; directing consummation of its terms; and reserving continuing
jurisdiction to implement, enforce, administer, effectuate, interpret and monitor compliance with
the provisions of the Agreement and the Final Order;




          (b) Dismissing the Action (including Rewards Network’s counterclaims against the
Representative Plaintiffs) with prejudice and without costs (except as otherwise provided herein),
and releasing all Released Claims against the Released Parties;




          (c) Permanently barring and enjoining Representative Plaintiffs and Class Members from
asserting, commencing, prosecuting or continuing any Released Claims against the Released Parties;




          (d) Permanently barring and enjoining Rewards Network from asserting, commencing, prosecuting
or continuing any action against any Class Member based on Old


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Form Cash Advance Contracts to recover sums over and above the cash advanced by Rewards
Network pursuant to the Class Member’s Old Form Cash Advance Contracts. In making this
calculation, all advances by Rewards Network to or on behalf of the Class Member and all amounts
received by Rewards Network (including from any collection action) under all applicable Old Form
Cash Advance Contracts shall be netted against each other. Nothing contained herein shall limit
Rewards Network’s rights with respect to claims relating to contracts that are not Old Form Cash
Advance Contracts; and




          (e) Vacating the Court’s Summary Judgment Order.




     3. The Settlement Agreement shall not be deemed approved unless the Court enters a Final Order
that includes those provisions set forth in Part G, Paragraphs 2(a)-(e) above.



H. NOTICE AND PRELIMINARY APPROVAL OF SETTLEMENT




     1. Within 7 days of the execution of this Agreement, the Parties will jointly submit
preliminary approval papers for the settlement, including a Motion and Supporting Memorandum for
Preliminary Approval and the proposed Preliminary Approval Order, together with a proposed form of
Notice, the proposed Claim Form, the proposed form of the Final Order, and the executed Agreement.



     2. The proposed Preliminary Approval Order will, among other things, set a date for a Final
Approval Hearing, approve the form of the Notice and Claim Form, find that the method of notice
selected constitutes the best notice to all persons within the definition of the Class that is
practicable under the circumstances, and find that the form and method of notice comply fully with
applicable law and the United States Constitution.



     3. No later than 28 days after Preliminary Approval, the Administrator will mail Notice,
substantially in the form attached as Exhibit C, along with a Claim Form (Exhibit D), to the
last-known address of all Class Members, and any mail returned with a forwarding address



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will be promptly re-mailed to such address. In addition, approximately 28 days after the
mailing of the Notice and Claim Form, a Summary Notice substantially in the form attached as
Exhibit E will be published in the California edition of “Nation’s Restaurant News.”



     4. Rewards Network shall bear the expense of all Notice Costs and Administration Costs whether
or not the Settlement is approved.



     5. The Settling Parties agree to designate Rust Consulting, Inc. to serve as Administrator.
The Administrator will use its reasonable efforts to transfer the information available at
www.rnclassaction.com to a website administered by the Administrator.



     6. The Administrator will file with the Court and serve upon Class Counsel and Rewards
Network’s counsel no later than 21 days prior to the Final Approval Hearing an affidavit or
declaration stating that notice has been completed in accordance with the terms of the Preliminary
Approval Order.



I. PAYMENT OF ATTORNEYS’ FEES AND REIMBURSEMENT OF EXPENSES TO CLASS COUNSEL




     1. Class Counsel will submit a fee petition for attorneys’ fees, costs and expenses in an
amount not to exceed $11 million, based on a reasonable and customary percentage of the total value
of the Settlement to the Class, which is estimated at approximately $60 million, and the work and
expenses involved in litigating this Action and in bringing the Action to resolution. Rewards
Network will pay the awarded fees and costs as provided under this Agreement. Class Counsel’s fees
and costs shall not be taken from any recovery that is otherwise due to Class Members hereunder.
Rewards Network agrees that it will not oppose a petition for attorneys’ fees and expenses up to
$11 million, and agrees that this amount is within a reasonable and customary range given the total
value of the Settlement and the work and expenses involved.



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The $11 million limitation is inclusive of all services and expenses incurred by Class Counsel
in this Action, whether incurred before or after Final Approval of the Settlement.



     2. The payment of attorneys’ fees will not be contingent on the value of the claims actually
processed and paid by Rewards Network.



     3. Entry of a Final Order is not conditioned upon an award of the attorneys’ fees and costs
sought by Class Counsel.



     4. All attorneys’ fees, costs and expenses approved by the Court subject to Part I, Paragraph
1, shall be paid to Class Counsel by Rewards Network in three installments, as follows:



          (a) 68.18% of the amount awarded shall be paid no later than 28 days after Complete Settlement
Approval;




          (b) 13.64% shall be paid no later than July, 31 2008; and





          (c) 18.18% shall be paid no later than January 31, 2009.




     5. Rewards Network shall not be liable for any additional attorneys’ fees or expenses of
Representative Plaintiffs or any persons within the Class, or other plaintiffs’ counsel in
connection with this Action. Rewards Network will be entitled to oppose any such fee application.
In no event shall Rewards Network pay more than $11 million in fees, costs, and expenses.



     6. Class Counsel shall not seek any additional fees or costs other than as provided in this
Agreement from Rewards Network in connection with the Settlement of the Action.



J. CLAIMS PROCESS




     1. No later than 28 days after Preliminary Approval, the Administrator will mail the Notice
and Claim Form, substantially in the form attached as Exhibits C and D, to the last-known



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address of all Class Members, and any mail returned with a forwarding address will be promptly
re-mailed to such address.



     2. Pursuant to this Agreement, benefits are available to certain Merchant Class Members only
upon the Administrator’s timely receipt of a Valid Claim Form. A “Valid Claim Form” is a Claim
Form that: (a) is submitted based on advances made and amounts received by Rewards Network under
Old Form Cash Advance Contracts pertaining to a Merchant Class Member’s Merchant Account; (b) is
signed by a Merchant Class Member or by a person who submits written proof that he or she is
authorized to sign on behalf of the Merchant Class Member; (c) provides all information required by
the Claim Form, including copies of contracts or other documents sufficient to show by reasonable
proof (i) the identity and current address of the Merchant Class Member, if any, (ii) the total
amount the Merchant Class Member received from Rewards Network under any Old Form Cash Advance
Contracts, and (iii) the total amount Rewards Network received in return; (d) is received by the
Administrator no later than 45 days after the Court enters a Final Order; (e) is affirmed as true;
and (f) is determined by the Administrator in good faith to be complete and in accordance with the
requirements of this Agreement. If a Merchant Class Member provides sufficient documentation to
support the amounts identified on a Valid Claim Form, those supported amounts will be used to
calculate the compensation due under this Settlement.



     3. There shall be only a single recovery and a single Valid Claim Form for each Merchant
Account, with the compensation for any approved claims to be provided in three separate
installments as described in Part D to the Merchant Class Member or to anyone authorized in writing
by the Merchant Class Member to receive the cash payments or miles awarded under this Settlement.



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     4. Promptly after receiving a Claim Form, the Administrator will evaluate the claim in good
faith and, for any deficient claim, will mail to the Class Member, with copies to Class Counsel and
counsel for Rewards Network, a notice informing the Class Member of the deficiency and giving the
Class Member 20 days following the notice to cure any deficiency. If any such claims are not
timely cured, they will become Denied Claims.



     5. Within 7 days after the claim submission deadline, the Administrator will provide Class
Counsel and counsel for Rewards Network with a list identifying: (a) the claimants; (b) the number
of Claim Forms submitted; (c) the number of Claim Forms that were approved (“Approved Claims”); (d)
the total net dollar amount of all submitted Claim Forms (total claimed amount advanced less total
claimed amount Rewards Network received); (e) the total dollar amount approved to pay the Approved
Claims, including the dollar value of any airline mileage awards; (f) the number of Denied Claims;
and (g) the total dollar amount associated with the Denied Claims.



     6. Within 14 days after receiving the list from the Administrator described in Part J,
Paragraph 5 above, Rewards Network, Class Counsel, or separate counsel chosen by any Class Member,
may serve on the other party any objection to the proposed treatment of any claim. Class Counsel
(or separate counsel chosen by the Class Member) and counsel for Rewards Network will meet and
confer regarding any Denied Claims or any other claim for which an objection to the claim has been
served by one of the parties. Class Counsel shall have full settlement authority on behalf of
Class Members other than those who retain separate counsel or otherwise object to Class Counsel’s
representation to resolve Denied Claims and claims to which Rewards Network objects. If counsel
for the Parties cannot agree as to the treatment of a claim to which an objection has been asserted
by either party or of a Denied Claim, the matter will be



23









 






submitted to non-binding mediation, with costs of any such mediation to be shared equally by
Class Counsel and Rewards Network. Claims that are to be submitted to mediation will be submitted
together in bulk no later than 28 days after attempts at informal resolution of all disputed Claims
have been completed. In the event the dispute over any claim is not resolved in mediation, the
Parties will promptly submit the disputed claim to the Administrator to decide in good faith the
treatment of the disputed claim. Any communications with the Administrator concerning such
disputed claims will be shared with counsel for the Class Member and Rewards Network.



     7. If the Settlement is not approved and no Final Order is entered, Rewards Network shall bear
the cost of notifying the members of the Settlement Class.



     8. This Part J sets forth the exclusive procedure for determining the validity of claims, and
no Party may challenge the Administrator’s treatment of a claim except through this procedure.



K. TERMINATION OF THE AGREEMENT




     1. If the Settlement, as a whole, is not approved by the Court or does not receive final
approval after review by any court of competent jurisdiction for any reason, or is terminated in
accordance with its terms for any other reason, this Agreement will be null and void and the
Parties will be returned to their status immediately prior to execution of the Initial Settlement
Agreement on December 21, 2006, as if the Initial Settlement Agreement and this Agreement had never
been made, and (a) the Parties will be relieved from any orders or stipulations made in connection
with this Agreement; (b) neither the Initial Settlement Agreement, this Agreement, nor any
documents filed, submitted, or published pursuant to this Agreement may be used in any litigation,
and nothing contained in any such documents shall impact any legal proceeding (including, inter
alia, the Court’s October 11, 2005 class certification order and its Summary



24









 






Judgment Order and the subsequent interlocutory appeal pending in the Ninth Circuit); and (c)
the Action will proceed with the interlocutory appeal and any other appropriate proceedings.



     2. Accordingly, upon any such termination for any reason: (a) the Parties will be deemed to
have preserved all their substantive or procedural rights or defenses with respect to the Action as
of the date of execution of the Initial Settlement Agreement; (b) the Class shall not include as
members those who were not included in the class certified by the Court as of October 11, 2005; and
(c) the releases and covenants not to enforce provided herein shall be deemed null and void; and
(d) the terms of this Part K shall survive any termination of the Settlement and shall remain
binding on the Parties and effective in all respects regardless of the reasons for such
termination.



     3. The Parties will have the right to withdraw from this Settlement upon written notice to the
other Parties if the Court determines not to approve this Agreement (including the form or terms of
any document or proposed Order referenced or described herein or attached as an Appendix or Exhibit
hereto) in any material respect. Any such withdrawal shall cause this Settlement to terminate, and
the Parties will be returned to their respective status immediately prior to execution of the
Initial Settlement Agreement, as set forth in the preceding paragraph.



L. NO ADMISSION OF LIABILITY




     1. Neither this Agreement nor any drafts hereof nor any documents relating to the settlement
set forth herein constitutes an admission of liability or of any fact by the Representative
Plaintiffs, Class Members, or Rewards Network. The Settling Parties agree that the foregoing
documents:



          (a) Will not be offered or received against any of the Settling Parties or Class Members as
evidence of, or be construed as or deemed to be evidence of, any admission or concession by any of
the Settling Parties or Class Members of (i) the truth or relevance of any


25









 






fact alleged by Representative Plaintiffs or Rewards Network, (ii) the existence of or proper
scope and definition of any class alleged by Representative Plaintiffs, (iii) the propriety of
class certification on the merits if the Action were to be litigated rather than settled, or (iv)
the validity of any claim or the deficiency of any defense that has been or could have been
asserted in the Action or in any other litigation;




          (b) Will not be offered as or received against any of the Settling Parties or Class Members as
evidence of, or construed as or deemed to be evidence of, any admission or concession of any
liability, negligence, fault or wrongdoing, or in any way referred to for any other reason as
against any of the Settling Parties or Class Members, in any other civil, criminal or
administrative action or proceeding, other than such proceedings as may be necessary to effectuate
the provisions of this Agreement; provided, however, that if this Agreement is approved by the
Court, the Settling Parties and Class Members may refer to it to effectuate the liability
protection granted them hereunder, and the Settling Parties and Class Members may refer to it to
enforce the terms of the Settlement; and




          (c) Will not be offered or received as an admission or concession that the consideration to be
given to Class Members hereunder represents the amount which could be or would have been recovered
by any such persons after trial.




M. CONTINUING JURISDICTION




     1. The United States District Court for the Central District of California, Western Division,
will have continuing jurisdiction over the Action for the purpose of implementing the Settlement
until the Action and all related matters are fully resolved, and for enforcement of the Final
Order. The Court will resolve any dispute regarding the Parties’ obligations under the Final
Order. Notwithstanding the foregoing, the procedure set forth in Paragraph J above shall



26









 






be the exclusive procedure for determining the validity of claims, and no Class Member may
challenge any claim denial except through the procedure set forth in Part J.



N. STATEMENTS TO THE PRESS




     1. The Settling Parties will agree upon the form of any public statement to the press or
governmental agencies concerning the Settlement and the proceedings leading to its ultimate
approval or disapproval by the Court (whether issued by mail, website posting or other means of
communication). Other than securities filings and related releases, the Settling Parties shall not
without first obtaining the consent of the other side (a) initiate any public announcement,
including a press release, or other communications with the press regarding the Settlement; (b)
make any public comments that would undermine the joint press release or the Settlement; or (c)
make any disparaging public statements about any other Party or counsel for a Party. The consent
required under this Paragraph shall not be unreasonably withheld. Nothing in this Paragraph shall
prohibit Class Counsel from providing legal advice to individual Class Members.



     2. Representative Plaintiffs agree not to make any public statement to the press or
governmental agencies concerning the Settlement and the proceedings leading to its ultimate
approval or disapproval by the Court (whether issued by mail, website posting or other means of
communication) unless required by law or court order.



O. MISCELLANEOUS PROVISIONS




     1. Entire Agreement. This Agreement and its exhibits constitute the entire agreement and
understanding between and among the Parties with respect to settlement, and supersedes any and all
prior negotiations and agreements or understandings (oral or written) with respect to the subject
matter hereof, including the Initial Settlement Agreement dated December 21, 2006.



27









 





     2. Neutral Interpretation. This Agreement shall not be construed more strictly against one
Party than another merely because it may have been prepared by counsel for one of the Parties, it
being recognized that, because of the arms-length negotiations resulting in the Agreement, all
parties have contributed substantially and materially to the preparation of the Agreement.



     3. Choice of Law. This Agreement will be governed by federal law and the internal laws of
California, without regard to its choice of law principles.



     4. Choice of Forum. The forum selected by the Parties for implementation and enforcement of
the Settlement shall be California, in the United States District Court for the Central District of
California, Western Division.



     5. Modifications or Amendments. This Agreement may not be modified or amended except by a
writing signed by all Settling Parties and their respective counsel and the subsequent approval of
the Court.



     6. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed
to be an original, but all of which together shall constitute one and the same instrument.



     7. Additional Acts to Effectuate the Agreement. The Settling Parties shall execute all
documents and perform all acts necessary and proper to effectuate the terms of this Agreement and
to obtain the benefits of the Agreement.



     8. Authority. Class Counsel represent that the Representative Plaintiffs have approved this
Settlement and that Class Counsel is authorized to sign this Agreement on behalf of the
Representative Plaintiffs and the class certified by the Court on October 11, 2005.



28









 





     9. Confidentiality. The Parties acknowledge that they have received confidential information
in connection with this litigation and settlement process. The Parties agree to honor this Court’s
Protective Order and agree that they will not use such confidential information for any purpose
other than in any action to enforce the terms of this Settlement.



     10. Nonbinding Mediation. In the event that the Settling Parties are unable to resolve any of
their differences concerning the terms of the Settlement Agreement, the Settling Parties agree to
participate in nonbinding mediation concerning such differences.



     11. Recitals. The Parties agree that the Recitals are hereby incorporated into and are an
integral part of the Agreement.



     IN WITNESS WHEREOF, the undersigned Parties hereto have caused this Agreement to be duly
executed on the date first written above:





	 	 	 	 	 
	 	 	QUINN EMANUEL URQUHART OLIVER & HEDGES, LLP
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Daniel L. Brockett
	 

	 	 	 	 
	 

	 	 	 	Daniel L. Brockett, Esq.
	 

	 	 	 	Class Co-Counsel









	 	 	 	 	 
	 	 	JENNER & BLOCK LLP
	 
	 	 	 	 
	 

	 	By:
	 	/s/ David J. Bradford
	 

	 	 	 	 
	 

	 	 	 	David J. Bradford
	 

	 	 	 	One of the Attorneys for





REWARDS NETWORK INC., REWARDS NETWORK ESTABLISHMENT SERVICES INC., REWARDS
NETWORK SERVICES INC., AND RTR FUNDING LLC









	 	 	 	 	 
	ANAT LEVY & ASSOCIATES, P.C.	 	 
	 

	 	 	 	 
	By:

	 	/s/ Anat Levy	 	 
	 

	 	 	 	 
	 

	 	Anat Levy, Esq.	 	 
	 

	 	Class Co-Counsel	 	 







29