Stipulation and Settlement Agreement



 Exhibit 10.1 
 Alfred J. Landegger, Esq. – State Bar No. 84419 
 alfred@landeggeresq.com 
 Michael S. Lavenant, Esq. – State Bar No. 198765 
 michael@landeggeresq.com 
 Oscar E. Rivas, Esq. – State Bar No. 211510 
 oscar@landeggeresq.com

 LANDEGGER, BARON, LAVENANT & INGBER, ALC 
 15760
Ventura Boulevard, Suite 1200 
 Encino, California 91436 
 Tel:
818.986.7561 - Fax: 818.986.5147 
 Attorneys for Defendants 
 U.S. Remodelers, Inc. & U.S. Home Systems, Inc. 
 Gregory D. Helmer, Esq. – State Bar No. 150184 
 ghelmer@helmerfriedman.com 
 Andrew H. Friedman, Esq. – State Bar
No. 153166 
 afriedman@helmerfriedman.com 
 HELMER — FRIEDMAN, LLP 
 723 Ocean Front Walk 
 Venice, California 90291 
 Tel: 310.396.7714 - Fax: 310.396.9215 
 Attorneys for Plaintiffs 
 UNITED STATES DISTRICT COURT 
 FOR THE CENTRAL DISTRICT OF CALIFORNIA 
  

					
	KENNETH JOHN LODGE, JUDSON	 	)	  	CASE NO.: CV07-05409 CAS
	LERTZMAN, BARBARA GALARO	 	)	  	(AJWx)
	AND MICHAEL HOPKINS,	 	)	  	
	individually and on behalf of all others	 	)	  	[Honorable Judge Christina A.
	similarly situated,	 	)	  	Snyder]
		 	)	  	
		 	)	  	
	 Plaintiffs,
	 	)	  	
		 	)	  	
	  vs.	 	)	  	STIPULATION AND
		 	)	  	SETTLEMENT AGREEMENT
	U.S. REMODELERS, INC., a	 	)	  	
	corporation, U.S. HOME SYSTEMS,	 	)	  	
	INC., a corporation, and DOES 1	 	)	  	
	through 75, inclusive,	 	)	  	
		 	)	  	
		 	)	  	
	 Defendants.
	 	)	  	

  

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 TABLE OF CONTENTS 
  

									
	I.	  	SUMMARY OF SETTLEMENT TERMS	  	1
			
	II.	  	DEFINITIONS	  	2
			
	III.	  	BACKGROUND	  	11
			
	IV.	  	SETTLEMENT APPROVAL & IMPLEMENTATION PROCEDURE	  	15
				
		  	A.	  	Preliminary Approval Of Settlement	  	15
				
		  	B.	  	Conditional Certification of Class	  	16
				
		  	C.	  	Cooperation	  	17
				
		  	D.	  	Notice of Settlement By Mail	  	18
					
		  		  	1.	  	Notice by Mail	  	18
					
		  		  	2.	  	Notice by Internet	  	19
				
		  	E.	  	Claim Form	  	19
				
		  	F.	  	Exclusion (“Opt-Outs”)	  	21
				
		  	G.	  	Declaration of Compliance	  	23
				
		  	H.	  	Sufficient Notice	  	24
				
		  	I.	  	Objection To Settlement	  	24
				
		  	J.	  	Final Fairness And Approval Hearing	  	25
				
		  	K.	  	Class Composition, Payment and Distribution of Funds, Subclassses and Formulas for Payment	  	26
					
		  		  	1.	  	General Provisions for Distribution of Settlement Funds to the Class	  	26
					
		  		  	2.	  	Payment of Class Counsel Fees, Enhancements and Settlement Administration Costs	  	26
					
		  		  	3.	  	Distribution of Funds to the Commission Subclass	  	28
					
		  		  	4.	  	Distribution of Funds to the Expenses Claims Subclass	  	29
					
		  		  	5.	  	Payment of Class Counsel Fees and Class Representative Enhancements	  	30

  

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		  		  	6.	  	Payment of Settlement Administration Costs	  	31
				
		  	L.	  	The Settlement Administrator	  	31
				
		  	M.	  	Time For Distribution	  	33
				
		  	N.	  	Taxes	  	33
					
		  		  	1.	  	Withholding and Reporting Requirements	  	33
					
		  		  	2.	  	Determination and Payment of Taxes	  	34
				
		  	O.	  	Circular 230 Disclaimer	  	34
			
	V.	  	LIMITATIONS ON USE OF THIS SETTLEMENT	  	35
				
		  	A.	  	No Admission	  	35
				
		  	B.	  	Non-Evidentiary Use	  	36
				
		  	C.	  	Nullification	  	36
			
	VI.	  	RELEASE	  	36
			
	VII.	  	MISCELLANEOUS PROVISIONS	  	38
				
		  	A.	  	Amendments	  	38
				
		  	B.	  	No Inducements	  	38
				
		  	C.	  	No Prior Assignment	  	38
				
		  	D.	  	Plaintiffs Kenneth John Lodge and Judson Lertzman’s Personal Release	  	39
				
		  	E.	  	Counterparts	  	40

  

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 IT IS HEREBY STIPULATED AND AGREED by and between Defendants U.S. HOME SYSTEMS, INC. (hereinafter
individually referred to as “USHS”) and U.S. REMODELERS, INC. (hereafter individually referred to as “USRI,” and collectively with USHS referred to as the “Defendants”) on the one hand, and Plaintiffs KENNETH JOHN
LODGE, JUDSON LERTZMAN, BARBARA GALARO, and MICHAEL HOPKINS on behalf of themselves and each of the other “Class Members,” as defined herein, (collectively “Plaintiffs”), on the other hand, subject to the approval of the Court
pursuant to Rule 23(e) of the Federal Rules of Civil Procedure, that the settlement of this action (“Action” or “Litigation”) shall be effectuated and subject to the following terms and conditions: 
  

	I.	SUMMARY OF SETTLEMENT TERMS 

 Under the terms
of the settlement, Defendants will pay the gross settlement amount of One Million Five Hundred Thousand Dollars ($1,500,000) in exchange for the full and final settlement and release of any and all claims by the Plaintiffs individually and on behalf
of the class that were made, or that could have been made in this Litigation, and subject to the terms and conditions outlined in this agreement. The claims-made settlement will be administered by a third party administrator agreed upon jointly in
writing by the parties. The Defendants conditionally agree to stipulate, solely for the limited purpose of consummating the terms of the settlement contained in this Agreement, to have the Court certify a class of California employees of USRI,
during the Class Period. 
  

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 In addition, Plaintiffs and Class Counsel will seek from the gross settlement amount:
(1) attorney’s fees and costs in the amount of seven hundred fifty thousand dollars ($750,000); and (2) enhancement payments for Plaintiffs Kenneth J. Lodge and Judson Lertzman of twenty thousand dollars ($20,000) and for Plaintiffs
Barbara Galaro and Michael Hopkins of two thousand five hundred dollars ($2,500). Finally, any cost that exceeds ten thousand dollars ($10,000) associated with giving notice to the Class regarding the settlement, processing of any claims, and
remitting payment of any funds claimed pursuant to the procedures outlined herein, will be paid by Class Counsel from the amount they receive from the gross settlement amount. Defendants will pay up to ten thousand dollars ($10,000) to pay for cost
of administration of the settlement contained herein. 
  

	H.	DEFINITIONS 

 As used in this Stipulation and
Settlement Agreement (hereafter the “Agreement”), the following terms shall have the meanings specified below: 
 1.
“Authorized Claimants” means those Class Members who file a valid and timely Claim Form with the Settlement Administrator to register their claim for a Settlement Payment under this Agreement. 
 2. “Claim Form” means the form that will be mailed to Class Members by which Class Members are able to submit claims to the Settlement
Administrator. The Claim Form must contain the name, address, telephone number, and the last four digits of the social security number of the Class Member making the claim, must be 

  

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signed, and must be legible for it to be considered valid. Any claim that is not legible, is unsigned, or does not contain the required information shall be
returned by the Settlement Administrator for additional information, with a notice of deficiency, as provided herein. 
 3. “Class”
or “Class Member” or “Class Members” means any current or former employee of USRI who worked in California during the Class Period and who is a member of any of the two subclasses listed and defined herein. If such person is
incompetent or deceased, “Class” or “Class Member” or “Class Members” means the person’s legal guardian, executor, heir or successor in interest. USHS, as the holding company of USRI, contends that it did not
employ any Class Members. 
 4. “Class Counsel” means, Helmer • Friedman, LLP, 723 Ocean Front Walk, Venice, California 90291.
Telephone No.: (310) 396-7714; Facsimile No.: (310) 396-9215. 
 5. “Class Counsel Fees” means the amount to be paid, after
court approval, to Class Counsel for attorneys’ fees and costs. 
 6. “Class Notice” or “Notice of Settlement” means
the “Notice of Settlement of Class Action, Settlement Hearing, Claim, and Exclusion Procedures” form to be prepared to send to the Class Members after the Court preliminarily approves the settlement contained in the Agreement. 

7. “Class Period” means from July 3, 2003 up to and including the Preliminary Approval Date. 
  

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 8. “Commission Claims Fund” or “CCF” means the five hundred sixty four thousand
dollars ($564,000) designated to pay any valid Claim made by a member of the Commission Subclass. 
 9. “Commission Subclass” means
any Class Member who was paid or should have been paid any commission for any contract or job sold anywhere in California. 
 10.
“Complaint” means the operative Second Amended Class Action Complaint for Damages and Injunctive Relief filed in this Action on February 20, 2009 alleging claims for (1) failure to pay wages in violation of California Labor
Code Sections 200, et seq., (2) Violation of California Labor Code Section 2802, and (3) unfair business acts and practices in violation of California Business and Professions Code §17200, et seq. 
 11. “Counsel for Defendants” or “Defense Counsel” means LANDEGGER | BARON | LAVENANT | INGBER, A Law Corp., 15760 Ventura Boulevard,
Suite 1200, Encino, California 91436. Telephone No.: (818) 986-7561; Facsimile No.: (818) 986-5147. 
 12. “Court” means
the United States District Court, Central District of California, in which the action is currently pending, the Honorable Christina A. Snyder, District Judge, presiding and located at 312 North Spring Street, Los Angeles, California 90012.

  

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 13. “Effective Date” means the later of (a) the date of entry of Order granting final
approval of this Settlement, if no objection to the Settlement is filed, (b) the date on which the time for all appeals from objections to the settlement has passed, if one or more objections to the settlement are filed, and (c) if an
appeal is taken, the date on which any reviewing court issues a decision and the time for further appeal has expired. 
 14.
“Enhancement Payment” means the payment to each Representative Plaintiff for their service to the Class, which is in addition to whatever payment he/she otherwise is entitled to as a Class Member. The Enhancement Payment is subject to
Court approval. 
 15. “Expenses Claims Fund” or “ECF” means the one hundred forty one thousand dollars ($141,000)
designated to pay any valid Claim made by a member of the Expenses Subclass. 
 16. “Expenses Subclass” includes any Class Member
who claims to have incurred any expenses related to or in connection with the selling of contracts or jobs because the Class Members purchased items necessary to discharge the duties of the job or because she or he was told, instructed, directed,
recommended, suggested, or advised to purchase any item to do his or her job by anyone acting on behalf of the Defendants as an agent, employee, officer, supervisor, or manager. 
  

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 17. “Judgment” means the judgment entered by the Court pursuant to the terms set forth in this
Agreement finally and fully giving effect to the settlement terms contained in the Agreement. 
 18. “Notice Returns” mean
envelopes containing the Class Notice that were mailed by the Settlement Administrator to Class Members but were undelivered and returned to the Settlement Administrator by the United States Postal Service. 
 19. “Objection to Class Settlement” means any written objection to this settlement filed by Class Members who do not choose to be excluded from
the Class, personally or through an attorney, with the Court as specified in the Class Notice and containing all the information required on the Claim Form. A copy of the Objection to Class Settlement must be mailed to the Claim Administrator and
served upon Class Counsel and Defense Counsel no later than thirty (30) days following the mailing date of the Class Notice, or it shall be deemed invalid and of no force or effect. 
 20. “Personal Release” means the irrevocable and unconditional release, acquittal, and discharge of the Released Persons and all persons and/or
corporate entities acting by, through, under or in concert with any of them, or any of them, from any and all complaints, claims, liabilities, obligations, promises, agreements, controversies, damages, costs, losses, debts and expenses (including
attorneys’ fees and costs actually incurred), of any nature whatsoever, including but not limited to claims arising from the California Constitution; Title VII of the Civil Rights Act of 

  

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1964 (42 U.S.C. §2000e); the California Fair Employment and Housing Act (Cal. Govt. Code §12900 et seq.); the Americans with Disabilities
Act; the Age Discrimination in Employment Act (29 U.S.C. §§621-633a); the Older Workers’ Benefit Protection Act; claims under the California Labor Code; and claims of intentional infliction of emotional distress; defamation and/or
libel, or any other damage to reputation claims; breach of implied contract or for claims of a breach of the covenant of good faith and fair dealing, as well as any other express or implied covenant; or any other statute or common law principle of
similar effect, known or unknown, which the person giving this release now has, owns, or holds, or claims to have, own or hold, or which said person at any time heretofore had, owned, or held, or claimed to have, own, or hold or which said person at
any time hereinafter may have, own, or hold, or claim to have, own, or hold, against each or any of the Released Persons, arising from acts, events, or circumstances occurring on or before the effective date of this Agreement. 
 As to the foregoing claims, the person granting this release expressly waives the benefits of California Civil Code §1542. Civil Code
§1542 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. 
 21. “Preliminary Approval Date” is the date the Court grants preliminary approval of this settlement. 
  

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 22. “Preliminary Approval Order” is the order preliminarily approving the settlement contained
in this Agreement. 
 23. “Qualifying Workweek(s)” means the number of weeks from the date of hire to the date of termination or
the date the Court preliminarily approves the settlement if the employee is still employed when the Court preliminarily approves the settlement, during which the Class Member was employed by any of the Released Persons that falls within the Class
Period. “Qualifying Workweek” does not include the Class Members’ initial two-week training period. The number of Qualifying Workweeks shall be calculated by adding the days between the date in which the Class Member was hired and the
date on which the employment was terminated or the date the Court approves the settlement if the employee is still employed when the Court preliminarily approves the settlement, divided by 7, rounded up to the next whole number. The Claims
Administrator will then subtract the two weeks for the training period. 
 24. “Redirected Notice” means a second Class Notice
mailed by the Settlement Administrator to a new or different address to a Class Member that was obtained by the Settlement Administrator as a result of a Notice Return. 
 25. “Released Claims” means any and all claims, debts, liabilities, demands, obligations, guarantees, costs, expenses, attorneys’ fees, damages or causes of action which relate to any claims which were
alleged or could have been alleged based on the facts in the Complaint filed by the Representative Plaintiffs, on their behalf and 

  

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on behalf of the Class Members in this Action during the Class Period, including the date of preliminary approval of this proposed settlement under any
federal, state or local law, and shall specifically include, but is not limited to, the failure to pay any of the penalties which are or may be available under the California Labor Code, including without limitation penalties under Labor Code
§§ 203, 226, 226.7, 2699 and 1197.1, and Industrial Welfare Commission Wage Orders, any possible violation of Business & Professions Code §17200, and any other claims pertaining to the Class Members which were
alleged, or could have been alleged, in the Complaint or this Action, including, without limitation, all claims for restitution and equitable relief, expenses, commissions, deductions or subtractions from commissions, back overtime pay, regular pay,
wages, liquidated damages, punitive damages, waiting time penalties, penalties of any nature whatsoever, retirement or deferred compensation benefits claimed on account of unpaid overtime, and attorneys’ fees and costs, arising out of the
claims which were alleged in the Complaint. As to the foregoing claims, Representative Plaintiffs, personally and on behalf of the Class, expressly waive the benefits of California Civil Code §1542. Civil Code §1542 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. 
  

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 This release is limited in time to the Class Period covering the Class Members who worked for the
Released Person in the State of California, which were alleged or could have been alleged in the Complaint in the Action. 
 26.
“Released Persons” means U.S. Remodelers, Inc. and/or U.S. Home Systems, Inc. and its respective agents, attorneys, insurers, past, present and future divisions, affiliates, any DBAs, including U.S. Home Services, predecessors, successors,
shareholders, officers, directors, managers, employees, trustees, representatives, administrators, fiduciaries, assigns, subrogees, executors, partners, parents, subsidiaries, privies, and/or any and all persons and/or corporate entities acting by,
through, under or in concert with any of them. 
 27. “Representative Plaintiffs” means Kenneth John Lodge, Judson Lertzman,
Barbara Galaro, and Michael Hopkins and their respective representative(s), heir(s), assign(s), attorney(s) and/or insurer(s). 
 28.
“Request for Exclusion” or “Opt-Out” means a written request by a Class Member to be excluded from the Class and the Settlement containing all the information necessary in the Claim Form. 
 29. “Settlement Administration Costs” means the fees and costs incurred or charged by the Settlement Administrator in connection with the
execution of its duties under this Agreement including, but not limited to: (i) fees and costs associated with preparing, issuing and/or monitoring reports, filings and notices (including the cost of printing and mailing all notices and other
documents to the 

  

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Class) required to be prepared in the course of administering the settlement; (ii) computing the amount of the Settlement Payments, taxes, and any other
payments to be made under this Agreement; (iii) handling inquiries about the calculation of individual Settlement Payments; (iv) establishing and operating a settlement payment center address, and phone number to receive Class Members’
inquiries about the settlement; and (v) remitting any tax deductions or subtractions applicable under the law and/or pursuant to this Agreement and preparing and submitting any filings required by any governmental taxing authority or other
governmental agency. 
 30. “Settlement Administrator” refers to the entity Class Counsel and Counsel for Defendants select to
administer this settlement and act as the Settlement Administrator to process the settlement under the terms of this Agreement. 
 31.
“Settlement Payment” refers to the payment to any Authorized Claimant from either the CCF or the ECF, or both, pursuant to the terms of this Agreement. 
  

	III.	BACKGROUND 

 The original Complaint in this
action (the “Litigation”) was filed on July 3, 2007 in the Los Angeles County Superior Court. A first amended complaint was filed in the Los Angeles County Superior Court on August 3, 2007, and subsequently removed to the United
States District Court for the Central District of California. A second amended complaint was filed in the United States District Court for the Central District of California on February 20, 2009. In the Complaint, Plaintiffs seek 

  

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damages, injunctive relief, costs, attorneys’ fees, punitive damages, interest, and any further relief deemed appropriate by the Court on the basis of
their allegations that, inter alia, Defendants failed to pay wages due, failed to reimburse employees for expenses they incurred, and violated California Business & Professions Code §17200 (prohibiting unfair business acts or
practices). Defendants deny each and every one of the allegations asserted in the Complaint and assert that they have no liability for the claims of the Representative Plaintiffs or the Class, and choose to settle as a means to avoid incurring any
further expenses and attorneys’ fees directly resulting from the Litigation. 
 The Parties have conducted a significant amount of law
and motion practice during the prosecution of this case, including the litigation over a motion to dismiss, a motion to strike, and multiple discovery motions. 
 The Parties have also conducted a significant investigation of the facts and law during the prosecution of this Action. Such discovery and investigation includes: the propounding of extensive written discovery by both
sides; the production of thousands of documents (in both hardcopy and electronic form) by the two original Representative Plaintiffs; the taking of the two original Representative Plaintiffs’ depositions; Deposing five of Defendants’
persons most qualified to testify to a variety of subject matters; mailing of a detailed questionnaire by Class Counsel to the entire Class; review and analysis by Class Counsel and Defense Counsel of the approximately fifty responses to the
questionnaires; the interviewing of dozens of 

  

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putative Class Members by Class Counsel; the preparation and revisions of dozens of putative Class Member declarations; and the production by Defendants of
tens of thousands of pages of documents (in both hardcopy and electronic form) and detailed information relevant to Plaintiffs’ claims, and additional information disclosed in the course of mediation. Furthermore, there have been numerous
in-person and telephonic conferences between the representatives of the Parties addressing numerous discovery issues, including litigating several aspects of the written discovery. Counsel for the parties have investigated the law as applied to the
facts discovered regarding the alleged claims of Plaintiffs and potential defenses thereto, and the potential damages claimed by Plaintiffs, including the review of tens of thousands of pages of payroll, job folders, policies, compensation plans,
and other records produced by Defendants to Class Counsel for the purposes of Litigation and mediation. Class Counsel has also analyzed the documents and information contained therein. 
 Counsel for the respective parties engaged in extensive discussions about the strengths and weaknesses of the claims and defenses. Plaintiffs and
Defendants attended a full day of mediation going into the evening before an experienced and well-regarded mediator, Ms. Susan Haldeman of Gregorio, Haldeman, Piazza, Rotman, Frank & Feder, on January 15, 2009. While the mediation
did not culminate in a settlement on that same day, the parties continued to utilize the services of Ms. Haldeman to continue the settlement discussions. With the efforts of 

  

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all parties and their counsel as well as the invaluable assistance of the mediator, the parties were able to reach a tentative settlement. The terms of the
tentative agreement are contained herein. 
 Plaintiffs and Class Counsel concluded, after taking into account the sharply disputed factual
and legal issues involved in this Litigation, the risks involved in the further prosecution, and the substantial benefits to be received pursuant to the compromise and settlement of the Litigation, as set forth in this Agreement that settlement on
the terms set forth herein is in the best interest of Plaintiffs and the Class and is fair and reasonable. In particular, Class Counsel and their clients understand the risky nature of the class certification process as well as any merit defenses
expected to be raised by the Defendants. 
 In addition, Plaintiffs and Class Counsel realized that the maximum recovery was estimated to be
$986,000 for the commission-based claims, after discovery was obtained into the potential recovery. It was impossible to obtain any meaningful information from the Class allowing the parties to approximate the potential exposure on the failure to
reimburse expenses claim (California Labor Code Section 2802). In light of the risk related to certifying a class, prevailing on a motion for summary judgment and a potential trial, the recovery of one and a half million dollars ($1.5
million) obtained in the case is both reasonable and fair. 
 Similarly, Defendants concluded that there are benefits associated with
settling the Litigation. After taking into account the sharply disputed factual and legal issues 

  

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involved in the Litigation, the expense and burden of protracted Litigation, and their desire to put the controversy to rest, Defendants believe that
settlement on the terms set forth in this Agreement is in their best interest and is fair and reasonable. The Defendants in particular have concluded that the future costs and expenses involved in continuing the Litigation are substantial and choose
to eliminate any further expenses, attorneys’ fees, and risks via this settlement. In particular, given the severely disputed nature of the case, it is expected that additional expenses will be incurred litigating many issues dealing with
discovery as well as the class certification motion. 
 This settlement contemplates (i) entry of an Order preliminarily approving the
settlement and approving certification of a provisional settlement class, composed of two subclasses, and contingent upon final approval of the settlement; (ii) the mailing of a notice of settlement to all Class Members; (iii) the
processing of any claims, objections, and opt-outs by the Settlement Administrator, as well as payment of any valid claims after final approval; and (iv) entry of a Judgment and Order granting final approval of the settlement and dismissal of
Litigation, with prejudice (“Judgment”). 
  

	IV.	SETTLEMENT APPROVAL & IMPLEMENTATION PROCEDURE  

  

	 	A.	Preliminary Approval Of Settlement 

 As soon
as practicable, Class Counsel and Counsel for Defendants will jointly submit this Agreement to the Court for its preliminary approval. Such submission 

  

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will include such motions, pleadings and evidence as may be required for the Court to determine that this Agreement is fair, adequate and reasonable, as
required by Rule 23(e) of the Federal Rules of Civil Procedure. Such submission will also include a Notice of Class Settlement and Claim Form, along with any necessary pleadings. 
  

	 	B.	Conditional Certification of Class 

 Defendants hereby consent, solely for purposes of the settlement set forth in this Agreement, to the conditional certification of the subclasses (the Commission Subclass and the Expense Subclass), to the conditional appointment of Class
Counsel, and to the conditional approval of the Representative Plaintiffs; provided, however, that if the settlement fails to be approved or otherwise fails to be consummated for any reason whatsoever, including but not limited to the Judgment not
becoming final, then Defendants retain all rights previously available to them and any provisional certification of any class, or the adoption of any procedure herein shall be undone and the parties restored to their pre-settlement status as if no
settlement had been reached and no decisions were made pursuant to it, except as otherwise expressly provided herein. In that event, nothing in this Agreement or other papers or proceedings related to the settlement shall be used as evidence or
argument by any party, including any Class Members who opt out, concerning whether or not the Action may properly be maintained as a class action, whether the purported class is ascertainable, or whether Class Counsel or the Representative
Plaintiffs can adequately represent the members of the class under applicable law. 
  

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	 	C.	Cooperation 

 The Parties agree to fully
cooperate with each other to accomplish the terms and requirements of this Agreement, including but not limited to, the execution of such documents and to take such other action as may reasonably be necessary to implement the terms of this
stipulated settlement. Except as otherwise provided herein, neither party nor any of their attorneys or agents shall initiate any communication with any Class Members for the purpose of encouraging or discouraging them to Opt-Out of the Class or
participate in the settlement, to make or not make a claim, or to object to the settlement contained herein unless agreed upon by the other party in writing or if authorized by the Court. This provision in no way limits Class Counsel from
communicating with the Class Representatives, nor does the provision limit Class Counsel from responding to any inquiry initiated by any Class Members. 
 The parties shall promptly submit this Agreement for preliminary approval and determination by the Court as to its fairness, adequacy, and reasonableness. Promptly upon execution of this Agreement, the parties shall
apply to the Court for the entry of a Preliminary Approval Order scheduling a hearing on the question of whether the proposed Class Settlement should be approved as fair, reasonable, and adequate as to the Class Members, and approving as to form and
content of the proposed Class. 
  

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	 	D.	Notice Of Settlement By Mail 

  

	 	1.	Notice by Mail 

 Upon the Court granting preliminary
approval of the settlement contained in this Agreement and before the expiration of thirty (30) days from the Court granting preliminary approval, the Settlement Administrator shall disseminate the Class Notice with Claim Form as described in
this Agreement. 
 Defendants will provide as soon as practicable, but no later than fifteen (15) days after the Court grants
preliminary approval of the settlement, to the Settlement Administrator a list containing the Class Members’ names, last known addresses, last know telephone number and social security number, which will be used to send the Notice of Settlement
and Claim Form to Class Members. Using this list, the Settlement Administrator shall, within thirty (30) days of the Preliminary Approval Date of this settlement, mail the Notice of Settlement via First-Class mail using the United States Postal
Service to the most recent address known for each Class Member. Before mailing the Notice of Settlement, the Settlement Administrator shall review the national change of address registry for all Class Members to determine the most up to date
addresses of all Class Members. If any Notices of Settlement are returned with a forwarding address, the Settlement Administrator will re-mail the Notice of Settlement and Claim Form to the Class Member whose notice was returned. 
  

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 In the event that prior to the final date for any Class member to Opt-Out, any Notice mailed to the Class
Member is returned as having been undelivered by the U.S. Postal Service (“Notice Return”), the Settlement Administrator shall, via skip-tracing, seek an address correction fro such Class Member(s), and send a Redirected Notice to the new
or different address within seven days. Nothing in this paragraph shall be deemed to extend or modify the final date for the submission of a Claim or Opt-Out from participating in the settlement. 
 The Settlement Administrator shall send a reminder postcard on the 30th day after the initial mailing of the Notice of Settlement and Claim Form to all of the original Class Members to whom a Notice of
Settlement and Claim Form was sent. This mailing shall have no effect on the deadline for the Class Member to reply. 
  

	 	2.	Notice by Internet 

 Class Counsel shall post the
Class Notice with the Claim Form and Opt-Out instructions as described in this Agreement on their law firm’s website: www.helmerfriedman.com. 
  

	 	E.	Claim Form 

 The Settlement Administrator
shall mail along with the Notice of Settlement the Claim Form to Class Members. There is to be one Claim Form for claiming under either or both subclasses. 
  

 19 
 STIPULATION AND SETTLEMENT AGREEMENT 








 To be valid, the Class Member, or his or her authorized representative, must provide all the required
information in the Claim Form, must be legible, and must sign the Claim Form. The information required from a Class Member making a claim is: name, address, telephone number and last four digits of his or her social security number. To be timely,
the signed Claim Form must be returned to the Settlement Administrator postmarked no later than forty five (45) calendar days after the original date of mailing the Claim Form, as reflected in the Claim Form and on the Notice of Settlement.
Claim Forms that are postmarked later than forty five (45) calendar days after the original date of mailing the Notice of Settlement and Claim Form will be accepted prior to final approval hearing if, and only if, the Class Member (i) is
seriously ill or incapacitated, or (ii) failed to receive the Claim Form within forty five (45) calendar days from the original date of mailing the Claim Form due to an incorrect address, and (iii) provides sufficient indicia to the
Settlement Administrator to that effect. Any Class Member who adequately demonstrates that he or she was seriously ill or incapacitated or did not receive notice may request at any time prior to the final approval hearing date from the Settlement
Administrator a Notice of Settlement and Claim Form and shall have up to thirty (30) calendar days from the mailing date to reply, except that if the final approval hearing date is scheduled to be held in less than thirty (30) calendar days,
the Class Member shall have up to the day of the final approval hearing date to submit a Claim Form. 
  

 20 
 STIPULATION AND SETTLEMENT AGREEMENT 








 The Settlement Administrator shall provide a self-addressed, postage prepaid, envelope with the notice to
each Class Member for returning the Claim Form to the Settlement Administrator. The Settlement Administrator shall have the right to contact any claimant to request additional information for purposes of determining the validity of any claim and may
respond to requests from claimants for assistance in completing the Claim Form. Any Claim Form that contains insufficient information, is unsigned, or is illegible shall be returned to the Class Member to cure the deficiency as set forth above. If
the deficiency is not timely cured within the forty five (45) days allowed to make a Claim, the Claim Form shall be deemed invalid and shall not be counted as a valid Claim Form. 
 Any person who fails to submit a valid and timely Claim Form shall not receive an individualized Settlement Payment from this settlement. Class Members
who fail to submit a valid and timely Claim Form are still bound by this Agreement, unless they submit a timely request to be excluded from the settlement. In the event Class Counsel and Defendants are unable to resolve any such disputes regarding
the acceptability of submitted Claim Forms, the Settlement Administrator shall decide the issue, and either party may seek assistance from the Court if they do not agree with the Settlement Administrator’s decision. 
  

	 	F.	Exclusion (“Opt-Outs”) 

 Any Class
Member who wishes to be excluded from the settlement outlined herein must mail to the Settlement Administrator a written statement expressing his 

  

 21 
 STIPULATION AND SETTLEMENT AGREEMENT 








 
or her desire to be excluded from the settlement, and any such statement shall include the name (and former names, if any), current address, telephone
number, and last four digits of his or her social security number to confirm the Class Members’ identity. Class Members will be permitted by the Settlement Administrator to explain any discrepancy in social security numbers, and shall be
treated as any other deficiency in the claim. 
 Any Class Member who wishes to be excluded from the settlement must submit a request to be
excluded from the settlement to the Settlement Administrator, Class Counsel and Defendants’ Counsel postmarked no later than thirty (30) calendar days after the original date of the Settlement Administrator’s mailing of the Class
Notice of Settlement (the “Opt-Out Period”). Any Class Member who submits a valid and timely request to be excluded from the settlement shall no longer be a member of the Class, shall be barred from participating in this settlement, shall
be barred from objecting to this settlement, and shall receive no benefit from this settlement. 
 If a Class Member submits to the
Settlement Administrator a timely and valid Claim Form and a timely request to be excluded from the settlement, the Settlement Administrator shall contact the Class Member to determine which option they prefer. If the Settlement Administrator cannot
reach the Class Member, the Claim Form shall govern and the Request for Exclusion shall be deemed null and void. 
  

 22 
 STIPULATION AND SETTLEMENT AGREEMENT 








 If more than two percent (2%) of the Class submits timely and valid Requests for Exclusions from the
settlement during the Opt-Out Period outlined herein, Defendants shall have the option, in their sole discretion, notwithstanding any other provisions of this Agreement, to withdraw from this Agreement (“Right To Withdraw”), whereupon the
Agreement shall be null and void for any and all purposes and may not be used or introduced in the Litigation or any other proceeding. However, if Defendants exercise their Right To Withdraw, Defendants will be responsible for all Settlement
Administration Costs. The Settlement Administrator shall notify Class Counsel and Counsel for Defendants of the number of timely opt-outs seven (7) business days after the close of the Opt-Out Period. If Defendants elect to exercise their Right
to Withdraw under this provision, Defendants will so notify Class Counsel and the Court no later than fourteen (14) business days after receiving notice of the number of opt-outs from the Settlement Administrator following the expiration of the
Opt-Out Period. 
  

	 	G.	Declaration Of Compliance 

 As soon as
practicable, but no later than fifteen (15) business days following the close of the Claims filing period, the Settlement Administrator shall provide Class Counsel and Counsel for Defendants with a declaration attesting to completion of the
notice process set forth in this Section (Section IV), including an explanation of efforts to resend undeliverable notices returned with forwarding addresses, and a summary of claims filed, disputed claims, and opt outs, which declaration shall be
filed with the Court by Class Counsel along with their papers requesting final approval of the Settlement. 
  

 23 
 STIPULATION AND SETTLEMENT AGREEMENT 









	 	H.	Sufficient Notice 

 Compliance with the
procedures described in this Section (Section IV) shall constitute due and sufficient notice to Class Members of this settlement and the Final Fairness and Approval Hearing, shall satisfy the requirements of due process, and nothing else shall be
required of the named Plaintiffs, Class Counsel, Defendants, Counsel for Defendants, or the Settlement Administrator to provide additional notice of the settlement and the Final Fairness and Approval Hearing, unless expressly ordered by the Court.

  

	 	I.	Objections To Settlement 

 Any Class Member
wishing to object to the approval of this settlement shall inform the Court, Class Counsel, and Counsel for Defendants in writing of his or her intent to object by following the procedure set forth in the Notice of Settlement within thirty
(30) calendar days of mailing of the Notice of Settlement and Claim Form. Class Members are forever barred from objecting to the settlement if they do not file and serve written objections within thirty (30) calendar days of the mailing of
the Notice of Settlement and Claim Form. Any Class Member to whom the Notice of Settlement is re-mailed because the initial mailing did not reach him or her, that Class Member shall have fifteen (15) days from the date of mailing to submit an
appropriate response, including objections. Any Class Member who submits an Objection to Class Settlement must also submit the Claim Form timely to participate in the class settlement should the objection be overruled. 
  

 24 
 STIPULATION AND SETTLEMENT AGREEMENT 









	 	J.	Final Fairness And Approval Hearing 

 At the
Final Approval Hearing, the Representative Plaintiffs, Class Counsel, and Counsel for Defendants shall ask the Court to give final approval to this Agreement and the settlement contained herein. At this hearing, the Court will consider and rule upon
any Objections to Settlement submitted, whether timely or not. Upon granting final approval of settlement contained herein, the Court shall also enter a Final Judgment and Order dismissing with prejudice all claims and implementing the Release
contained in Section VI of this Agreement as to Plaintiffs and all Class Members who did not timely opt-out of the settlement outlined in this Agreement. The Release contained in Section VI of this Agreement shall enter into effect concurrently with
the issuance of the Final Judgment and Order granting final approval. 
  

 25 
 STIPULATION AND SETTLEMENT AGREEMENT 









	 	K.	Class Composition, Payment and Distribution of Funds, Subclasses and Formulas for Payment 

 Class Composition, payment and distribution of the Commission Claim Fund and Expense Claims Fund, and formulas for such payments shall be made pursuant to
the following provisions: 
  

	 	1.	General Provisions for Distribution of Settlement Funds to the Class 

 The Class is composed of two subclasses: the Commission Subclass and the Expenses Subclass. Defendants shall pay up to one million five hundred thousand
dollars ($1,500,000) to settle the lawsuit, and shall pay up to ten thousand dollars ($10,000) to pay for costs associated with the administration of the settlement. Under no circumstance will the Defendants be responsible for any additional funds.
Payment shall be made only to Authorized Claimants, pursuant to the manner provided in this Agreement and this section, in particular. Within a reasonable time not to exceed thirty (30) days from the Preliminary Approval Date, Defendants shall
provide the total net sales in California for the Class Period, the net sales for each Class Member who consummated a sale in California during the Class Period, and the number of Qualifying Workweeks for each Class Member and for the Class, or
sufficient information for the Settlement Administrator to make that determination. 
  

	 	2.	Payment of Class Counsel Fees, Enhancements and Settlement Administration Costs 

 The Class will be paid from the remainder of the settlement amount of one million five hundred thousand dollars ($1,500,000) minus Class Counsel Fees and
Enhancement Payments to the Class Representatives. The Plaintiffs and Class Counsel will request, and Defendants do not to oppose, seven hundred fifty thousand dollars ($750,000) from the settlement amount as Class Counsel Fees, twenty 

  

 26 
 STIPULATION AND SETTLEMENT AGREEMENT 








 
thousand dollars ($20,000) each for Plaintiffs Judson Lertzman and Kenneth John Lodge, and two thousand five hundred dollars ($2,500) each for Plaintiffs
Barbara Galaro and Michael Hopkins as Enhancement Payments. Class Counsel Fees and Enhancement Payment are subject to review and approval of the Court. 
 The following formula illustrates and shall be used to determine the amounts to be distributed: 
  

				
	 Settlement Amount:
	  	$	1,500,000.00
	 Class Counsel Fees (minus):
	  	$	750,000.00
	 Total Enhancements (minus):
	  	$	45,000.00
	 Amount Distributable to Class:
	  	$	705,000.00

 Of the seven hundred five thousand dollars ($705,000.00) distributable to the Class, the parties
have agreed to direct five hundred sixty four dollars ($564,000 or 80% of the funds) to the Commission Claims Fund and one hundred forty one thousand dollars ($141,000 or 20% of the funds) to the Expenses Claims Fund. 
 Payment to each Authorized Claimant shall be allocated as follows: any settlement funds paid to any Class Member from the CCF shall be attributed to
wages, to be reported on an IRS W-2 Form with legally required tax deductions, and any settlement funds paid from the ECF shall be attributed to the reimbursement of expenses, to be reported on an IRS 1099 Form. The parties and each Class Member
shall be responsible for any tax consequences of the settlement or payment of funds pursuant to this Agreement, including the payment of any applicable tax deductions or obligation as if paying through payroll. Defendants shall bear their own fees
and costs of every kind in connection with the action and the negotiation of the settlement of this action. 
  

 27 
 STIPULATION AND SETTLEMENT AGREEMENT 









	 	3.	Distribution of Funds to the Commission Subclass 

 In order to fairly distribute the settlement funds to Class Members for alleged unlawful deductions that were taken from their commissions during the Class Period, Class Counsel and Defense Counsel, with the
assistance of an experienced mediator, arrived at a formula designed to fairly determine each Authorized Claimant’s pro-rata payment from the $564,000 Commission Claim Fund (“CCF”). The formula is based on the relative amount of the
Authorized Claimant’s total net sales as compared to Defendants’ total net sales. Specifically, each Authorized Claimant’s pro-rata payment is calculated by multiplying the $564,000 CCF by the ratio obtained by dividing the total
amount of the Authorized Claimant’s individual net sales during the Class Period by the total amount of Defendants’ net sales in California during the Class Period. Mathematically, the Authorized Claimant’s payment is calculated as
follows: 
 Authorized Claimant’s payment = $564,000 (CCF) X (Authorized Claimant’s individual net sales during Class Period
÷ Defendants’ total net sales in California during Class Period) 
 For example, if it is determined that the total amount of
Defendants’ net sales in California during the Class Period was $120 million and an Authorized Claimant generated $500,000 in net sales during the Class Period, that Authorized Claimant payment from the Commission Claims Fund would be
$2,350.00. The following illustrates the calculation to determine the payment to the Authorized Claimant: 
 Payment = $564,000 X ($500,000
÷ $120,000,000) = $2,350.00 
  

 28 
 STIPULATION AND SETTLEMENT AGREEMENT 









	 	4.	Distribution of Funds to the Expenses Claims Subclass 

 In order to fairly distribute the settlement funds to Class Members for alleged reimbursable expenses they incurred during the Class Period, Class Counsel and Defense Counsel, with the assistance of an experienced
mediator, arrived at a formula designed to fairly determine each Authorized Claimant’s pro-rata payment from the $141,000 Expenses Claims Fund (“ECF”). The formula is based on the relative amount of the Authorized Claimant’s
Qualifying Workweeks worked as compared to the total Qualifying Workweeks worked by the Class Members as a whole. Specifically, each Authorized Claimant’s pro-rata payment is calculated by multiplying the $141,000 ECF by the ratio obtained by
dividing the total number of the Authorized Claimant’s Qualifying Workweeks by the total Qualifying Workweeks worked by the Class Members as a whole during the Class Period. Mathematically, the Authorized Claimant’s payment is calculated
as follows: 
 Authorized Claimant’s payment = $141,000 (ECF) X (Authorized Claimant’s Qualifying Workweeks ÷ Total
Qualifying Workweeks worked by the Class) 
 For example, if it is determined that the Class, as a whole, worked 30,000 Qualifying Workweeks
and an Authorized Claimant worked 104 Qualifying Workweeks, the Authorized Claimant’s payment from the Expenses Claims Fund would be $488.80. The following illustrates the calculation to determine the payment to the Authorized Claimant:

 Payment = $141,000.00 X (104 ÷ 30,000) = $488.8 
  

 29 
 STIPULATION AND SETTLEMENT AGREEMENT 









	 	5.	Payment of Class Counsel Fees and Class Representative Enhancements 

 The Plaintiffs and Class Counsel will request, and Defendants agree not to oppose, the payment by Defendants from the settlement amount of twenty thousand
dollars ($20,000) each to Plaintiffs Judson Lertzman and Kenneth John Lodge, and two thousand five hundred ($2,500) each for Plaintiffs Barbara Galaro and Michael Hopkins as Enhancement Payments. Class Counsel believes, and Defendants do not
challenge, that such an award to the Class Representatives as Enhancement Payment is reasonable. The Plaintiffs and Class Counsel will request, and Defendants agree not to oppose, the payment by Defendants from the gross settlement amount of seven
hundred fifty thousand dollars ($750,000) to Class Counsel for Class Counsel Fees. Class Counsel believes, and Defendants do not challenge, that such an award to Class Counsel is reasonable. 
 Class Counsel Fees and Class Representative Enhancement Payments, whether they are awarded as requested or reduced by the Court at its discretion, shall
be paid by the Defendants. Under no circumstances shall the Defendants be required to pay more in Class Counsel Fees and/or Enhancement Payments than specified in this paragraph. 
  

 30 
 STIPULATION AND SETTLEMENT AGREEMENT 








 The Court’s ruling on the request for Class Counsel Fees and Enhancement Payment shall not affect
the enforceability of this Agreement or the terms contained herein. Payment of the Court-approved Class Counsel Fees and Enhancement Payments shall be made within thirty (30) days of the Effective Date, except that payment to Class Counsel
and/or the Enhancement Payments shall be made directly to Class Counsel by Defendants. 
  

	 	6.	Payment of Settlement Administration Costs 

 Defendants shall pay up to ten thousand dollars ($10,000) of the Settlement Administration Costs. Class Counsel shall pay the remainder of the Settlement Administrative Costs, if any, from their Class Counsel Fees.

  

	 	L.	The Settlement Administrator 

 Class Counsel
and Defendants will designate and retain an experienced Settlement Administrator to process this settlement. The Settlement Administrator will administer the settlement including, but not limited to, distributing the Class Notice of Settlement and
Claim Form, calculating and directing the disbursements for claims against and payments from the CCF and ECF, and handling inquiries about the calculation of individual settlement payments to the Class pursuant to the terms contained in this
Agreement. The Settlement Administrator shall establish a settlement payment center address, telephone number, and facsimile number to receive and timely process Class Members’ inquiries about the Class Notice of Settlement, Claim Forms,
Requests for Exclusion and Objections, and process the payments to the Class under the terms of this Agreement. 
  

 31 
 STIPULATION AND SETTLEMENT AGREEMENT 








 The Settlement Administrator shall notify the Defendants of all amounts due pursuant to valid and timely
Claim Forms submitted to the Settlement Administrator within ten (10) business days following the Effective Date, and Defendants shall cause any funds claimed in excess of the security deposit to be transferred to a settlement account set up by
the Settlement Administrator within fourteen (14) business days of such notice. 
 The Settlement Administrator is empowered to mail the
Notice of Settlement to the Class, process the Claim Forms, calculate the amounts payable to any Authorized Claimant based on the information to be provided by Defendants under the terms of this Agreement, investigate any problems with the mailing
of the Class Notice, the Claim Forms, and disseminate any information relating to the settlement to any Class Member. 
 The Settlement
Administrator shall not disburse the settlement funds except as provided herein, as ordered by the Court, or as agreed upon, in writing, by Defense Counsel and Class Counsel. Subject to further orders and/or directions as may be made by the Court,
the Settlement Administrator is authorized to execute such transactions on behalf of the Class Members as are consistent with the terms of this Agreement. 
  

 32 
 STIPULATION AND SETTLEMENT AGREEMENT 









	 	M.	Time For Disbursement 

 Within sixty
(60) days of the Effective Date, the Settlement Administrator shall cause to be paid all of the claims made by the Class Members under this Agreement. Payment to any Authorized Claimant will be in the form a check issued for an amount
calculated using the formulas contained in this Agreement, minus any deductions required by law. Defendants shall only be obligated to pay the Court-approved Class Counsel Fees, the Court-approved Enhancement Payments, any timely and validly made
Claims, any Settlement Administration Costs, as detailed herein, and any employer payroll taxes that normally would apply to the Defendants as employers. Any deduction for wages that normally would apply to the Class Members is to be borne by the
Class Members from the value of their claim. Any unclaimed funds shall revert back to Defendants. Any settlement checks remaining uncashed after ninety (90) calendar days after being issued shall be deemed null and void, with any such funds
upon which those check are issued reverting to Defendants, along with any interest earned thereon. 
  

	 	N.	Taxes 

  

	 	1.	Withholding and Reporting Requirements. 

 The Settlement Administrator shall be responsible for ensuring that all taxes associated with the Agreement are timely paid to the appropriate tax authorities. The Settlement Administrator’s responsibilities
include the following: (i) filing all Federal, state and local employment tax deduction, (ii) to timely and proper filing of 

  

 33 
 STIPULATION AND SETTLEMENT AGREEMENT 








 
all required Federal, state and local forms (e.g., 1099s, W-2s, etc.) with the appropriate taxing authorities, and (iii) completion of any other steps
necessary for compliance with any tax obligations of the settlement under Federal, state and/or local law, as applicable. To verify the Settlement Administrator’s compliance with the foregoing withholding and reporting requirements, as soon as
administratively practicable, the Settlement Administrator shall furnish Class Counsel and Counsel for Defendants with copies of all forms detailing the payment of taxes (including all 1099 and W-2 information returns) sufficient to prove that such
payments were properly remitted. The Settlement Administrator shall provide, if Defendants so chose, a final accounting adequate to demonstrate full compliance with all tax withholding, payment and reporting obligations. 
  

	 	2.	Determination and Payment of Taxes 

 The Settlement Administrator shall determine the amount of any withholding or taxes to be withheld from each Authorized Claimant’s settlement payment. All such withholdings shall be remitted by the Settlement Administrator to the
proper governmental taxing authorities. Each Class Member shall be responsible for any tax consequences of any funds paid out to each Class Member pursuant to this Agreement. 
  

	 	O.	Circular 230 Disclaimer 

 Each party to this
Agreement (for purposes of this section, the “Acknowledging Party”; and each party to this Agreement other than the 

  

 34 
 STIPULATION AND SETTLEMENT AGREEMENT 








 
Acknowledging Party, an “Other Part)”) acknowledges and agrees that (1) no provision of this Agreement, and no written communication or
disclosure between or among the parties or their attorneys and other advisers, is or was intended to be, nor shall any such communication or disclosure constitute or be construed or be relied upon as, tax advice within the meaning of United States
Treasury Department Circular 230 (31 CFR Part 10, as amended); (2) the Acknowledging Party (a) has relied exclusively upon his, her or its own, independent legal and tax advisers for advice (including tax advice) in connection with this
Agreement, (b) has not entered into this Agreement based upon the recommendation of any other party or any attorney or advisor to any other party, and (c) is not entitled rely upon any communication or disclosure by any attorney or adviser
to any other party to avoid any tax penalty that may be imposed on the Acknowledging Party; and (3) no attorney or adviser to any other party has imposed any limitation that protects the confidentiality of any such attorney’s or
adviser’s tax strategies (regardless of whether such limitation is legally binding) upon disclosure by the Acknowledging Party of the tax treatment or tax structure of any transaction, including any transaction contemplated by this Agreement.

  

	V.	LIMITATIONS ON USE OF THIS SETTLEMENT 

  

	 	A.	No Admission 

 Neither the acceptance nor the
performance by Defendants of the terms contained in this Agreement nor any of the related negotiations or proceedings is or shall be claimed to be, construed as, or deemed a precedent or an admission by Defendants of the truth of any allegations in
the Complaint. 
  

 35 
 STIPULATION AND SETTLEMENT AGREEMENT 









	 	B.	Non-Evidentiary Use 

 Neither this Agreement
nor any of its terms, nor any statements or conduct in the negotiation or drafting of it, shall be offered or used as evidence by Plaintiffs, any Class Member (including any individual who requested to be excluded from the Class), Defendants, or
their respective counsel, in the Litigation, except as its reasonably necessary to effectuate its purpose and terms. This Agreement may be used by the Defendants and/or the Released Persons to prove or defend against any claim released herein by any
Class Member in any judicial, quasi-judicial, administrative or governmental proceeding. 
  

	 	C.	Nullification 

 If the Court for any reason
does not approve this Settlement, this Agreement shall be considered null and void and all parties to this settlement shall stand in the same position, without prejudice, as if the settlement had been neither entered into nor filed with the Court.
Invalidation of any material portion of this settlement shall invalidate this settlement in its entirety unless the parties agree in writing that the remaining provisions shall remain in full force and effect. 
  

	VI.	RELEASE 

 It is the desire of the
Representative Plaintiffs, Class Members, and Defendants to fully, finally, and forever settle, compromise, and discharge disputes 

  

 36 
 STIPULATION AND SETTLEMENT AGREEMENT 








 
and claims arising from or related to this action. Upon the final approval by the Court of this Agreement and by operation of the Agreement’s terms, and
except as to such rights or claims as may be created by this Agreement, all Class Members who do not submit valid and timely written Requests for Exclusion (Opt Out), fully release and discharge the Released Persons from all Released Claims, whether
known or unknown during the Class Period. Plaintiffs and Defendants stipulate and agree that the consideration paid to the Class Members pursuant to this Agreement compensates the Class Members for all wages, including any expenses, salary,
commissions, earnings or any other pay for labor rendered and performed by them, and penalties due to them arising from the claims alleged in the Complaint. As such, and to the extent that they may apply, Defendants are not liable, and Plaintiffs do
not claim, any penalties pursuant to PAGA of 2004 (Labor Code §§2699, et seq.) because Class Members are not “aggrieved employees” for purposes of PAGA. Defendants and Plaintiffs further stipulate and agree that even if
any Class Member is considered or determined to be an “aggrieved employee” for purposes of the PAGA and that the Representative Plaintiffs have complied with the administrative aspects of the PAGA, said Class Member waives any potential
right to any penalty prescribed by the PAGA relating to the Released Claims. 
  

 37 
 STIPULATION AND SETTLEMENT AGREEMENT 









	VII.	MISCELLANEOUS PROVISIONS 

  

	 	A.	Amendments 

 The terms and provisions of this
Agreement may be amended only by a written agreement which is both (1) signed by the named Plaintiffs, Class Counsel, Defendants, and Counsel for Defendants and (2) approved by the Court. 
  

	 	B.	No Inducements 

 Plaintiffs and Defendants
acknowledge that they are entering into this Agreement as a free and voluntary act without duress or undue pressure or influence of any kind or nature whatsoever and that neither Plaintiffs nor Defendants have relied on any promises, representations
or warranties regarding the subject matter hereof other than as set forth in this Agreement. 
  

	 	C.	No Prior Assignment 

 The parties hereto
represent, covenant, and warrant that they have not directly or indirectly, assigned, transferred, encumbered, or purported to assign, transfer, or encumber to any person or entity any portion of any liability, claim, demand, action, cause of action
or rights herein released and discharged except as set forth herein. If any claims are made by any Class Member between and the start of the Class Period and the date in which the Court approves the settlement outlined in this Agreement as final,
such a claim will be deemed covered and released by the individual Class Member making the claim unless such Class Member has timely exercised the right to be excluded from this Agreement under the terms set forth herein. Any Class Member covered by
this Agreement will be barred from proceeding with any such claim. 
  

 38 
 STIPULATION AND SETTLEMENT AGREEMENT 









	 	D.	Plaintiffs Kenneth John Lodge and Judson Lertzman’s Personal Release 

 As part of the Agreement, Plaintiffs Kenneth John Lodge and Judson Lertzman grant the Released Persons the Personal Release, as that term is defined in
Section II of this Agreement, in exchange for the consideration contained herein, including but not limited to the Enhancement Payment. 
 To
the extent that the Personal Release releases rights under the Age Discrimination in Employment Act (ADEA) (29 U.S.C. §§621-633a), as amended, and to the extent that such statute requires that a party releasing such rights be provided
twenty-one days to review the agreement, Plaintiff Judson Lertzman agrees to waive the twenty-one days to review the Agreement, understands and agrees that he will be afforded ample opportunity to review said Agreement and consult his attorneys to
have this provision and the Agreement explained. To the extent that ADEA affords a person covered under the statute a seven-day period within which to revoke the release of any ADEA covered claim, Plaintiff Judson Lertzman agrees to notify Defense
Counsel, personally or through counsel, in writing via fax or registered U.S. Mail, return receipt requested, of his revocation of the ADEA-covered claims within the seven-day revocation period. Revocation of the ADEA-covered claims by Plaintiff
Judson Lertzman revokes his right to receive any 

  

 39 
 STIPULATION AND SETTLEMENT AGREEMENT 








 
Enhancement Payment detailed in this Agreement. The Agreement will be enforceable irrespective of Plaintiff Judson Lertzman’s revocation of his ADEA
claims, who will still be covered under the other general provisions of this Agreement and the Personal Release as it applies to all other claims. This term is a negotiated and material term of this Agreement. 
 Plaintiffs Kenneth John Lodge and Judson Lertzman initial this provision to signal understanding of the terms and their significance. 
  

							
	 INITIALS:
	 	 /s/ Kenneth J. Lodge
	  		  	  

		 	Kenneth J. Lodge	  		  	Judson Lertzman

  

	 	E.	Counterparts 

 This Agreement, and any
amendments hereto, may be executed in any number, of counterparts, each of which when executed and delivered shall be deemed to be an original and all of which taken together shall constitute but one and the same instrument. This Agreement will
become effective on the date when the last person signs and dates it. 
  

 40 
 STIPULATION AND SETTLEMENT AGREEMENT 








 IN WITNESS WHEREOF, the parties hereto execute this Agreement and have caused this Agreement to be
executed by their duty authorized representatives. 
  

							
	 	 	 	 	 	 	PLAINTIFFS & CLASS REPRESENTATIVES
				
	Date:	 	 07/06/2009
	 		 	 /s/ KENNETH JOHN LODGE

		 		 		 	KENNETH JOHN LODGE,
		 		 		 	Personally and as class representative
				
	Date:	 	  
	 		 	  

		 		 		 	JUDSON LERTZMAN,
		 		 		 	Personally and as class representative
				
	Date:	 	  
	 		 	  

		 		 		 	BARBARA GALARO,
		 		 		 	Personally and as class representative
				
	Date:	 	  
	 		 	  

		 		 		 	MICHAEL HOPKINS,
		 		 		 	Personally and as class representative
				
		 		 		 	HELMER • FRIEDMAN, LLP
				
	Date:	 	  
	 		 	  

		 		 		 	ANDREW H. FRIEDMAN,
		 		 		 	Class Counsel
				
		 		 		 	U.S. REMODELERS, INC. AND U.S. HOME SYSTEMS, INC.
				
	Date:	 	  
	 		 	  

		 		 		 	MURRAY GROSS,
		 		 		 	President and CEO of Defendants
				
		 		 		 	LANDEGGER, BARON, LAVENANT & INGBER
				
	Date:	 	  
	 		 	  

		 		 		 	OSCAR E. RIVAS,
		 		 		 	Defendants’ Counsel

  

 41 
 STIPULATION AND SETTLEMENT AGREEMENT 








 
Enhancement Payment detailed in this Agreement. The Agreement will be enforceable irrespective of Plaintiff Judson Lertzman’s revocation of his ADEA
claims, who will still be covered under the other general provisions of this Agreement and the Personal Release as it applies to all other claims. This term is a negotiated and material term of this Agreement. 
 Plaintiffs Kenneth John Lodge and Judson Lertzman initial this provision to signal understanding of the terms and their significance. 
  

							
	 INITIALS:
	 	  
	  		  	 /s/ Judson Lertzman

		 	Kenneth J. Lodge	  		  	Judson Lertzman

  

	 	E.	Counterparts 

 This Agreement, and any
amendments hereto, may be executed in any number, of counterparts, each of which when executed and delivered shall be deemed to be an original and all of which taken together shall constitute but one and the same instrument. This Agreement will
become effective on the date when the last person signs and dates it. 
  

 42 
 STIPULATION AND SETTLEMENT AGREEMENT 








 IN WITNESS WHEREOF, the parties hereto execute this Agreement and have caused this Agreement to be
executed by their duty authorized representatives. 
  

							
	 	 	 	 	 	 	PLAINTIFFS & CLASS REPRESENTATIVES
				
	Date:	 	  
	 		 	  

		 		 		 	KENNETH JOHN LODGE,
		 		 		 	Personally and as class representative
				
	Date:	 	   07/06/2009
	 		 	 /s/ JUDSON LERTZMAN

		 		 		 	JUDSON LERTZMAN,
		 		 		 	Personally and as class representative
				
	Date:	 	  
	 		 	  

		 		 		 	BARBARA GALARO,
		 		 		 	Personally and as class representative
				
	Date:	 	  
	 		 	  

		 		 		 	MICHAEL HOPKINS,
		 		 		 	Personally and as class representative
				
		 		 		 	HELMER • FRIEDMAN, LLP
				
	Date:	 	  
	 		 	  

		 		 		 	ANDREW H. FRIEDMAN,
		 		 		 	Class Counsel
				
		 		 		 	U.S. REMODELERS, INC. AND U.S. HOME SYSTEMS, INC.
				
	Date:	 	  
	 		 	  

		 		 		 	MURRAY GROSS,
		 		 		 	President and CEO of Defendants
				
		 		 		 	LANDEGGER, BARON, LAVENANT & INGBER
				
	Date:	 	  
	 		 	  

		 		 		 	OSCAR E. RIVAS,
		 		 		 	Defendants’ Counsel

  

 43 
 STIPULATION AND SETTLEMENT AGREEMENT 








 IN WITNESS WHEREOF, the parties hereto execute this Agreement and have caused this Agreement to be
executed by their duty authorized representatives. 
  

							
	 	 	 	 	 	 	PLAINTIFFS & CLASS REPRESENTATIVES
				
	Date:	 	  
	 		 	  

		 		 		 	KENNETH JOHN LODGE,
		 		 		 	Personally and as class representative
				
	Date:	 	  
	 		 	  

		 		 		 	JUDSON LERTZMAN,
		 		 		 	Personally and as class representative
				
	Date:	 	 7-2-09
	 		 	 /s/ BARBARA GALARO

		 		 		 	BARBARA GALARO,
		 		 		 	Personally and as class representative
				
	Date:	 	  
	 		 	  

		 		 		 	MICHAEL HOPKINS,
		 		 		 	Personally and as class representative
				
		 		 		 	HELMER • FRIEDMAN, LLP
				
	Date:	 	  
	 		 	  

		 		 		 	ANDREW H. FRIEDMAN,
		 		 		 	Class Counsel
				
		 		 		 	U.S. REMODELERS, INC. AND U.S. HOME SYSTEMS, INC.
				
	Date:	 	  
	 		 	  

		 		 		 	MURRAY GROSS,
		 		 		 	President and CEO of Defendants
				
		 		 		 	LANDEGGER, BARON, LAVENANT & INGBER
				
	Date:	 	  
	 		 	  

		 		 		 	OSCAR E. RIVAS,
		 		 		 	Defendants’ Counsel

  

 44 
 STIPULATION AND SETTLEMENT AGREEMENT 








 IN WITNESS WHEREOF, the parties hereto execute this Agreement and have caused this Agreement to be
executed by their duty authorized representatives. 
  

							
	 	 	 	 	 	 	PLAINTIFFS & CLASS REPRESENTATIVES
				
	Date:	 	  
	 		 	  

		 		 		 	KENNETH JOHN LODGE,
		 		 		 	Personally and as class representative
				
	Date:	 	  
	 		 	  

		 		 		 	JUDSON LERTZMAN,
		 		 		 	Personally and as class representative
				
	Date:	 	  
	 		 	  

		 		 		 	BARBARA GALARO,
		 		 		 	Personally and as class representative
				
	Date:	 	 7-17-09
	 		 	 /s/ MICHAEL HOPKINS

		 		 		 	MICHAEL HOPKINS,
		 		 		 	Personally and as class representative
				
		 		 		 	HELMER • FRIEDMAN, LLP
				
	Date:	 	  
	 		 	  

		 		 		 	ANDREW H. FRIEDMAN,
		 		 		 	Class Counsel
				
		 		 		 	U.S. REMODELERS, INC. AND U.S. HOME SYSTEMS, INC.
				
	Date:	 	  
	 		 	  

		 		 		 	MURRAY GROSS,
		 		 		 	President and CEO of Defendants
				
		 		 		 	LANDEGGER, BARON, LAVENANT & INGBER
				
	Date:	 	  
	 		 	  

		 		 		 	OSCAR E. RIVAS,
		 		 		 	Defendants’ Counsel

  

 45 
 STIPULATION AND SETTLEMENT AGREEMENT 








 IN WITNESS WHEREOF, the parties hereto execute this Agreement and have caused this Agreement to be
executed by their duty authorized representatives. 
  

							
	 	 	 	 	 	 	PLAINTIFFS & CLASS REPRESENTATIVES
				
	Date:	 	  
	 		 	  

		 		 		 	KENNETH JOHN LODGE,
		 		 		 	Personally and as class representative
				
	Date:	 	  
	 		 	  

		 		 		 	JUDSON LERTZMAN,
		 		 		 	Personally and as class representative
				
	Date:	 	  
	 		 	  

		 		 		 	BARBARA GALARO,
		 		 		 	Personally and as class representative
				
	Date:	 	  
	 		 	  

		 		 		 	MICHAEL HOPKINS,
		 		 		 	Personally and as class representative
				
		 		 		 	HELMER • FRIEDMAN, LLP
				
	Date:	 	 07-07-09
	 		 	 /s/ ANDREW H. FRIEDMAN

		 		 		 	ANDREW H. FRIEDMAN,
		 		 		 	Class Counsel
				
		 		 		 	U.S. REMODELERS, INC. AND U.S. HOME SYSTEMS, INC.
				
	Date:	 	  
	 		 	  

		 		 		 	MURRAY GROSS,
		 		 		 	President and CEO of Defendants
				
		 		 		 	LANDEGGER, BARON, LAVENANT & INGBER
				
	Date:	 	  
	 		 	  

		 		 		 	OSCAR E. RIVAS,
		 		 		 	Defendants’ Counsel

  

 46 
 STIPULATION AND SETTLEMENT AGREEMENT 








 IN WITNESS WHEREOF, the parties hereto execute this Agreement and have caused this Agreement to be
executed by their duty authorized representatives. 
  

							
	 	 	 	 	 	 	PLAINTIFFS & CLASS REPRESENTATIVES
				
	Date:	 	  
	 		 	  

		 		 		 	KENNETH JOHN LODGE,
		 		 		 	Personally and as class representative
				
	Date:	 	  
	 		 	  

		 		 		 	JUDSON LERTZMAN,
		 		 		 	Personally and as class representative
				
	Date:	 	  
	 		 	  

		 		 		 	BARBARA GALARO,
		 		 		 	Personally and as class representative
				
	Date:	 	  
	 		 	  

		 		 		 	MICHAEL HOPKINS,
		 		 		 	Personally and as class representative
				
		 		 		 	HELMER • FRIEDMAN, LLP
				
	Date:	 	  
	 		 	  

		 		 		 	ANDREW H. FRIEDMAN,
		 		 		 	Class Counsel
				
		 		 		 	U.S. REMODELERS, INC. AND U.S. HOME SYSTEMS, INC.
				
	Date:	 	 7/13/09
	 		 	 /s/ MURRAY GROSS

		 		 		 	MURRAY GROSS,
		 		 		 	President and CEO of Defendants
				
		 		 		 	LANDEGGER, BARON, LAVENANT & INGBER
				
	Date:	 	 7/13/09
	 		 	 /s/ OSCAR E. RIVAS

		 		 		 	OSCAR E. RIVAS,
		 		 		 	Defendants’ Counsel

  

 47 
 STIPULATION AND SETTLEMENT AGREEMENT