Document:

Exhibit 10.65

 

THIRD AMENDMENT 

TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

 

This Third Amendment To Amended and Restated Loan And
Security Agreement (the “Amendment”)
dated as of April 4, 2005, is entered into by and among CONGRESS FINANCIAL
CORPORATION (WESTERN), a California corporation (“Lender”),
and GUESS ?, INC., a Delaware corporation (“Guess”),
GUESS? RETAIL, INC., a Delaware corporation, and GUESS.COM, INC., a Delaware
corporation, jointly and severally as co-borrowers (each a “Borrower” and collectively, the “Borrowers”), with reference to the
following facts:

 

RECITALS

 

A.            Lender
is extending various secured financial accommodations to the Borrowers upon the
terms of that certain Amended and Restated Loan and Security Agreement dated as
of December 20, 2002, as previously amended by that certain First
Amendment to Amended and Restated Loan and Security Agreement, dated as of February 25,
2003 and that certain Second Amendment to Amended and Restated Loan and
Security Agreement dated as of December 30, 2004 (as the same now exists
or may hereafter be amended, modified, supplement, extended, renewed or
replaced, the “Loan Agreement”).

 

B.            Each
of the Borrowers and the Lender desires to amend the Loan Agreement upon the
terms and conditions set forth herein.

 

C.            Each
of the Borrowers is entering into this Amendment with the understanding and
agreement that, except as specifically provided herein, none of the rights or
remedies of the Lender as set forth in the Loan Agreement are being waived or
modified by the terms of this Amendment.

 

AMENDMENT

 

NOW THEREFORE, in consideration of the foregoing and
for other good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged by each party hereto, the parties hereto hereby agree
as follows:

 

SECTION 1.  Amendment.  Section 1.31 of the Loan Agreement is
hereby amended and restated to read in its entirety as follows:

 

“1.31       ‘Cash Equivalents’ shall mean, at
any time, (a) any evidence of Indebtedness with a maturity date of ninety
(90) days or less issued or directly and fully guaranteed or insured by the
United States of America of any agency or instrumentality thereof; provided,
that the full faith and credit of the United States of America is pledged in
support thereof; (b) certificates of deposit or bankers’ acceptances with
a maturity of ninety (90) days or less of any financial institution that is a
member of the Federal Reserve System having combined capital and surplus and
undivided profits of not less than Two Hundred Fifty Million Dollars
($250,000,000); (c) commercial paper (including variable rate demand
notes) with a maturity of ninety (90) days or less issued by a corporation
(except an Affiliate of any Borrower) organized under the laws of any State of
the United States of America or the District of Columbia and rated at least A-1
by

 

 

Standard & Poor’s Ratings Service, a
division of The McGraw-Hill Companies, Inc.  or at least P-1 by Moody’s Investors
Service, Inc.; (d) repurchase obligations with a term of not more
than thirty (30) days for underlying securities of the types described in
clause (a) above entered into with any financial institution having
combined capital and surplus and undivided profits of not less than Two Hundred
Fifty Million Dollars ($250,000,000); (e) repurchase agreements and
reverse repurchase agreements relating to marketable direct obligations issued
or unconditionally guaranteed by the United States of America or issued by any
governmental agency thereof and backed by the full faith and credit to the
United States of America, in each case maturing within ninety (90) days or less
from the date of acquisition; provided, that the terms of such agreements
comply with the guidelines set forth in the Federal Financial Agreements of
Depository Institutions with Securities Dealers and Others, as adopted by the
Comptroller of the Currency on October 31, 1985; (f) any evidence of
Indebtedness issued by a state, city, town, county or their agencies and paying
interest which is exempt from federal tax, provided that the maturity is ninety
(90) days or less and the Indebtedness is rated at least A-1, SP-1
or AAA by Standard & Poor’s Ratings Service, a division of The McGraw-Hill
Companies, Inc. or at least P-1, MIG-1 or Aaa by Moody’s
Investors Services, Inc.; and (g) investments in money market funds
and mutual funds which invest substantially all of their assets in securities
of the types described in clauses (a) through (f) above.”

 

SECTION 2.  Conditions to Effectiveness.  The effectiveness of this Amendment is
subject to the receipt by Lender of the following:

 

(a)           Counterparts of this Amendment, duly
executed and delivered by each of the parties hereto.

 

(b)           Such other documents related hereto
or in furtherance hereof as Lender may require.

 

SECTION 3.  No Other Changes.  Except as explicitly amended by this
Amendment, all of the terms and conditions of the Loan Agreement shall remain
in full force and effect and shall apply to any Loan or Letter of Credit
Accommodation thereunder.

 

SECTION 4.  Defined Terms.  Unless otherwise defined herein, terms used
in this Amendment that are defined in the Loan Agreement shall have the same
meanings herein as in the Loan Agreement. 
In addition, it is expressly understood that the term Financing
Agreements as used herein or in any other Financing Agreement includes this
Amendment for all purposes, including for the purposes of Section 5
hereof.

 

SECTION 5.  Representations and Warranties.  Each Borrower reaffirms that the
representations and warranties made to Lender in the Loan Agreement and other
Financing Agreements are true and correct in all material respects as of the
date of this Amendment as though made as of such date and after giving effect
to this Amendment.  In addition, each
Borrower makes the following representations and warranties to Lender, which
shall survive the execution of this Amendment.

 

(a)           The execution, delivery and
performance of this Amendment are within each Borrower’s powers, have been duly
authorized by all necessary actions, have received all necessary governmental
approvals, if any, and do not (i) contravene any other contractual
restriction, law or governmental regulation or court decree or order binding on
or affecting any

 

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Borrower or its assets, (ii) violate any Borrower’s
organizational documents or instruments, or (iii) result in, or require
the creation or imposition of, any security interest, mortgage, pledge, lien,
charge or other encumbrance of any nature whatsoever on any of any Obligor’s
assets or properties, including the Collateral, except for liens, security
interests and other encumbrances granted under the Financing Agreements.

 

(b)           This Amendment is the legal, valid
and binding obligation of each Borrower enforceable against each Borrower in
accordance with its terms, except as enforcement may be limited by bankruptcy,
insolvency, moratorium and other similar laws affecting the rights of creditors
generally.

 

(c)           Since the dates of the financial
statements most recently provided by Borrowers to Lender pursuant to Sections
9.6(a)(i) and 9.6(a)(iii) of the Loan Agreement, there has been no
Material Adverse Change.

 

(d)           No event has occurred and is
continuing, after giving effect to this Amendment, which constitutes a Default
or an Event of Default under the Loan Agreement or any other of the Financing
Agreements, or would constitute an Event of Default but for the requirement
that notice be given or time elapse or both.

 

SECTION 6.  Continuing Effect of Financing Agreements.  To the extent of any inconsistencies between
the terms of this Amendment and the Loan Agreement, this Amendment shall
govern.  In all other respects, the Loan
Agreement and other Financing Agreements shall remain in full force and effect
and are hereby ratified and confirmed.

 

SECTION 7.  Governing Laws.  This Amendment, upon becoming effective,
shall be deemed to be a contract made under, governed by, and subject to, and
shall be construed in accordance with, the internal laws of the State of
California.

 

SECTION 8.  No Waiver.  The execution of this Amendment and
acceptance of any other documents related hereto shall not be deemed to be a
waiver of any Event of Default under the Loan Agreement or breach, default or
event of default under any other Financing Agreement, whether or not known to
Lender and whether or not existing on the date of this Amendment.

 

SECTION 9.  Integration.  The Loan Agreement as amended by this
Amendment, together with the other Financing Agreements, incorporates all
negotiations of the parties hereto with respect to the subject matter hereof
and is the final expression and agreement of the parties hereto with respect to
the subject matter hereof and may not be contradicted by evidence of prior,
contemporaneous or subsequent oral agreements of the parties; there are no oral
agreements between the parties.  Without
limiting the foregoing, in the event this Amendment conflicts with the terms of
any letter agreement between Borrowers and Lender, the terms of this Amendment
shall control.

 

SECTION 10.  Reference to and Effect on the Financing
Agreements.

 

(a)           Upon and after the effectiveness of
this Amendment, each reference in the Loan Agreement to “this Agreement”, “hereunder”,
“herein”, “hereof” or words of like import referring to the Loan Agreement, and
each reference in all other documents or agreements

 

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related thereto, including the other Financing
Agreements, to “the Loan Agreement”, “thereof” or words of like import referring
to the Loan Agreement, shall mean and be a reference to the Loan Agreement as
modified and amended hereby.

 

(b)           To the extent that any terms and
conditions in any of the Financing Agreements or any documents or agreements
related thereto shall contradict or be in conflict with any terms or conditions
of the Loan Agreement, after giving effect to this Amendment, such terms and
conditions are hereby deemed modified or amended accordingly to reflect the
terms and conditions of the Loan Agreement as modified or amended hereby.

 

SECTION 11.  Severability.  Any provision of this Amendment which is
prohibited or unenforceable in any jurisdiction shall, as to such provision and
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this
Amendment affecting the validity or enforceability of such provision in any
other jurisdiction.

 

SECTION 12.  Execution in Counterparts.  This Amendment may be executed by facsimile
and in any number of counterparts, each of which when so executed and delivered
shall be deemed an original and all of which counterparts, taken together,
shall constitute one and the same instrument.

 

SECTION 13.  Section Captions.  The various headings of this Amendment are
inserted for convenience only and shall not affect the meaning or
interpretation of this Amendment or any provisions hereof.

 

SECTION 14.  Successors and Assigns.  This Amendment shall be binding upon and
shall inure to the benefit of the parties hereto and their respective
successors and assigns.

 

[Remainder of this page intentionally
left blank]

 

4

 

IN WITNESS WHEREOF, the parties hereto, intending to
be legally bound hereby, have executed this Amendment as of the date first set
forth above, to become effective in the manner set forth above.

 

	
   

  	
  GUESS ?, INC.,

  
	
   

  	
  as a Borrower

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Frederick G. Silny

  	
   

  
	
   

  	
  Name:

  	
  Frederick G. Silny

  
	
   

  	
  Title:

  	
  Senior Vice President and

  
	
   

  	
   

  	
  Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  GUESS? RETAIL, INC.,

  
	
   

  	
  as a Borrower

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Frederick G. Silny

  	
   

  
	
   

  	
  Name:

  	
  Frederick G. Silny

  
	
   

  	
  Title:

  	
  Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  GUESS.COM, INC.

  
	
   

  	
  as a Borrower

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Frederick G. Silny

  	
   

  
	
   

  	
  Name:

  	
  Frederick G. Silny

  
	
   

  	
  Title:

  	
  Chief Financial Officer 

  
					

 

 

	
   

  	
  CONGRESS FINANCIAL CORPORATION

  (WESTERN), as Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Gary Whitaker

  	
   

  
	
   

  	
  Name:

  	
  Gary Whitaker

  
	
   

  	
  Title:

  	
  Vice PresidentEXHIBIT 10.1

 

UNITED STATES DISTRICT COURT

DISTRICT OF MINNESOTA

 

 

	
   

  	
  :

  	
  Civil Action No. 04-1155

  
	
  IN RE ZOMAX,
  INC. SECURITIES

  	
  :

  	
  (DWF/SRN)

  
	
  LITIGATION

  	
  :

  
	
   

  	
  :

  

 

STIPULATION AND AGREEMENT OF
SETTLEMENT

 

This
Stipulation and Agreement of Settlement dated as of April 25, 2005 (the “Stipulation”)
is made and entered into by and among Lead Plaintiff, Dungan, Ltd. on behalf of
the Class (as hereinafter defined) (collectively referred to hereinafter
as the “Plaintiffs”), and Defendants, Zomax, Inc. (“Zomax”) James T. Anderson
(“Anderson”), James E. Flaherty (“Flaherty”) and Michelle S. Bedard (“Bedard”)
(collectively hereinafter referred to as the “Settling Defendants”), by and
through their respective counsel.

 

WHEREAS:

 

A.                                   The
following action (the “Action”) has been filed against Zomax, Inc. and
certain of its present or former officers and directors:

 

Charles Fazio, individually and on behalf of all others
similarly situated v. Zomax, Inc., James T. Anderson, James E. Flaherty
and Michelle S. Bedard, Civil Action 04-1155(DWF/SRN).

 

B.                                     This
Stipulation is intended to fully, finally, and forever resolve, discharge and
settle the Action and all Settled Claims, as defined herein, with prejudice and
without costs, against the Released Parties, as defined herein.  Upon and subject to the terms and conditions
hereto, this Stipulation is subject to approval by the Court after notice and
hearing;

 

1

 

C.                                     By
Order dated May 25, 2004, the Court appointed Dungan, Ltd. as the Lead Plaintiff,
Schiffrin & Barroway, LLP as Lead Counsel and Zimmerman Reed, PLLP as
Liaison Counsel for the Class;

 

D.                                    On
June 14, 2004 and July 9, 2004, Zomax and Flaherty, respectively,
filed motions to dismiss the initial complaint. 
On July 20, 2004, the Court entered a scheduling order extending
Plaintiffs’ time to respond to the motions to dismiss until after filing the
Consolidated Amended Complaint;

 

E.                                      On
August 13, 2004, Plaintiffs filed their Consolidated Amended Complaint
(the “Complaint”).  The Complaint
alleges, among other things, that from May 25, 2000 through October 18,
2002 the Settling Defendants issued false and misleading press releases and
other statements concerning demand, sales and profitability of Zomax products,
in violation of Sections 10(b) and 20(a) of the Securities Exchange
Act of 1934 and Rule 10b-5 promulgated under Section 10(b).  The Complaint also alleges that while
Settling Defendants issued such statements, Individual Defendants Anderson and
Bedard began selling Zomax common stock, knowing that false and misleading
information had inflated the value of the stock, and reaping proceeds of over
$12.5 million in violation of Section 20(A)(a) of the Exchange Act of
1934.  The Complaint alleges further that
a September 21, 2000 announcement by Zomax that its third quarter 2000
financial results would be lower than the Company had been predicting caused
the price of the stock to drop, but that the violations underlying the
announcement did not become known to the public until an October 18, 2002
announcement by Zomax that it was under investigation by the SEC in connection
with the Individual Defendants’ insider trading during the summer of 2000.  The Complaint alleges that this announcement
also caused the price of Zomax common stock to drop;

 

2

 

F.                                      On
September 19, 2004, Zomax filed its Motion to Dismiss the Consolidated
Amended Complaint in its entirety and on October 12, 2004, Anderson and
Bedard filed their Motion to Dismiss the Consolidated Amended Complaint in its
entirety.  On October 26, 2004,
Settling Defendants and Plaintiffs filed a Joint Stipulation to Suspend Zomax’s
Motion to Dismiss Hearing and Briefing Schedule regarding the Motion to
Dismiss.  By Order dated October 27,
2004, Settling Defendants’ Motion to Dismiss Plaintiffs’ Consolidated Amended
Complaint was suspended so that the parties would have an opportunity to engage
in serious settlement negotiations;

 

G.                                     Lead
Plaintiff and Lead Plaintiff’s Counsel recognize the burden, expense, risk and
uncertain outcome of litigating this Action further, and Lead Plaintiff, on
behalf of itself and other members of the Class desire to settle their
claims against the released parties, on terms and conditions hereafter set
forth and deem said Settlement to be fair, reasonable, adequate and in the best
interest of the Class;

 

H.                                    The
Settling Defendants do not admit the allegations of the Complaint, and further
contend that the Action is barred by applicable statutes of limitation.  Settling Defendants also recognize the
burden, expense, risks and uncertain outcome of litigating this Action further,
and have therefore concluded that it is desirable and beneficial to them that
the claims asserted against them in this Action be settled on the terms and
conditions hereafter set forth;

 

I.                                         The
parties have engaged in extensive discussions and arm’s length negotiations
with respect to a compromise and settlement of the Class Members’ claims
against the Released Parties, as hereafter defined, with a view toward settling
the issues in dispute and achieving the best relief possible consistent with
the interests of the Class.  In agreeing
to this Settlement, Plaintiffs do not concede that any infirmities exist in
their claims, nor do Settling Defendants

 

3

 

concede any infirmities
in their defenses to such claims, or that the claims are valid or have merit;
and

 

J.                                        The
parties have agreed that upon the execution of this Stipulation, Lead Plaintiff
shall conduct discovery to confirm the factual basis for the Settlement (“confirmatory
discovery”) under appropriate safeguards for confidentiality and restrictions
on use if the proposed Settlement ultimately is not achieved.  Zomax will produce for Lead Plaintiff’s
Counsel’s inspection those documents that Zomax produced to the SEC or any
other regulatory body in connection with their earlier investigation(s) related
to the Released Claims, including any transcripts of depositions provided in
connection with said investigations, as well as any requests for production or
other documents outlining the scope of said investigation.  This information shall be made available to
Lead Plaintiff’s Counsel at a site to be determined in the discretion of Zomax’s
Counsel and Lead Plaintiff will complete the review of the documents produced
within 45 days of execution of this Stipulation and receipt of access to the
documents.  The parties have agreed that
if Lead Plaintiff determines that the continuing discovery does not support the
Settlement as fair, reasonable and adequate, Lead Plaintiff has the right to
withdraw from the Settlement by the earlier of 30 days from the completion of
the review, or the hearing on the Preliminary Approval Order.

 

K.                                    Based
upon their investigation to date, Lead Plaintiff’s Counsel conclude that the
terms and conditions of this Stipulation are fair, reasonable and adequate to
Plaintiffs and the Class, and in their best interest, and Lead Plaintiff has
agreed to settle the claims raised in the Action pursuant to the terms and
provisions of this Stipulation, after considering (a) the substantial
benefits that Plaintiffs and the Class will receive from the Settlement; (b) the

 

4

 

attendant risks of litigation;
and, (c) the desirability of permitting the Settlement to be consummated
as provided by the terms of this Stipulation.

 

NOW THEREFORE, without any admission or
concession on the part of Plaintiffs of any lack of merit of the Action or of
any fact alleged in the Action, whatsoever, and without any admission or
concession of any liability or wrongdoing, or lack of merit in the defenses, or
with respect to the merit of any fact alleged by Plaintiffs, whatsoever, by the
Settling Defendants, it is hereby STIPULATED
AND AGREED, subject to approval of the Court, in consideration of
the benefits flowing to the parties hereto from the Settlement, that all
Settled Claims as against the Released Parties shall be fully and forever
comprised, settled, released and dismissed with prejudice, upon and subject to
the following terms and conditions:

 

DEFINITIONS

 

1.                                       As
used in this Stipulation, the following terms shall have the following
meanings:

 

(a)                                  “Authorized
Claimant” means a Class Member (as defined below), who submits a timely
and valid Proof of Claim in such form and manner, and within such time as
specified herein, to the Claims Administrator (as defined below).

 

(b)                                 “Claims
Administrator” means A.B. Data, Ltd. (“A.B. Data”), which shall administer the
Settlement.

 

(c)                                  “Class”
and “Class Members” mean all Persons who purchased or otherwise acquired
Zomax common stock between May 25, 2000 and October 18, 2002,
inclusive.  Excluded from the Class are
Settling Defendants, the officers and directors of the Company, members of
their immediate families and their legal representatives, heirs, successors or
assigns and any entity in which Settling Defendants have or had a controlling
interest.  The

 

5

 

portion of the exclusion
which relates to “successors” or “assigns” is not intended to mean any Persons
who made open market purchases and would otherwise be part of the Class.  Also excluded from the Class are any
putative Class Members who exclude themselves by filing a request for
exclusion in accordance with the requirements set forth in the Notice.

 

(d)                                 “Class Period”
means the period May 25, 2000 to October 18, 2002, inclusive.

 

(e)                                  “Court”
means the United States District Court for the District of Minnesota.

 

(f)                                    “Effective
Date of Settlement” or “Effective Date” is the date defined in paragraph 41 of
the Stipulation.

 

(g)                                 “Final
Judgment and Order” means the order to be entered by the Court approving the
Settlement, in the form attached hereto as Exhibit B.

 

(h)                                 “Gross
Settlement Fund” means the Two Million Two Hundred and Fifty Thousand Dollars
($2,250,000) (the “Settlement Cash”), plus any interest earned thereon, and the
Settlement Shares of 1,500,000 freely tradable shares of Zomax common stock
that Defendant Zomax agrees to contribute to the Settlement.

 

(i)                                     “Individual
Defendants” means James T. Anderson, James E. Flaherty and Michelle S. Bedard.

 

(j)                                     “Lead
Plaintiff” means Dungan Ltd.

 

(k)                                  “Lead
Plaintiff’s Counsel” means the law firm of Schiffrin & Barroway, LLP.

 

(l)                                     “Net
Settlement Fund” means the Gross Settlement Fund, as defined herein, net of any
taxes, as referred to in Paragraph 13, on the income thereof, and net of any

 

6

 

funds or shares used to
pay (i) the notice and administrative costs referred to in paragraph 15,
and (ii) the attorneys’ fees and expense award referred to in paragraphs 16-18.

 

(m)                               “Notice”
means the Notice of Pendency of Class Action on Proposed Settlement and
Motion for Attorneys’ Fees and Expenses, which is to be sent to members of the Class substantially
in the form attached hereto as Exhibit A-1.

 

(n)                                 “Person”
means any individual, corporation, partnership, association, affiliate, joint
stock company, trust, estate, unincorporated association, government and any
political subdivision thereof, and any other type of legal or political entity.

 

(o)                                 “Preliminary
Approval Order” means the order preliminarily approving the Settlement and
directing notice thereof to the Class, which order is in the form attached
hereto as Exhibit A.

 

(p)                                 “Proof
of Claim” means the proposed Proof of Claim and Release in the form attached as
Exhibit A-2.

 

(q)                                 “Publication
Notice” means the summary notice of proposed Settlement and Settlement Hearing
for publication in the form attached as Exhibit A-3.

 

(r)                                    “Released
Parties” means the Settling Defendants, Zomax, Inc., James T. Anderson,
James E. Flaherty, Michelle S. Bedard and their respective present and former
parents, subsidiaries, affiliates, and any of their officers, directors,
partners, employees, agents, representatives, attorneys, advisors, investment
advisors, fiduciaries, insurers and reinsurers, auditors and accountants,
predecessors, heirs, successors and assigns of each of them, and any other Person
in which any of the foregoing has or had a controlling interest or which is or
was related to or affiliated with any of the foregoing.

 

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(s)                                  “Restitution
Fund” means any fund created as a result of any SEC enforcement proceeding or
related settlement, the approval of which is solely in the discretion of the
SEC.

 

(t)                                    “Settled
Claims” means any and all claims, debts, demands, rights or causes of action or
liabilities, including both known claims and Unknown Claims (i) that have
been asserted in this Action by the Class Members or any of them against
any of the Released Parties or (ii) that could have been asserted in any
forum by the Class Members or any of them against any of the Released
Parties which in any way are based on allegations of insider trading,
misrepresentations, omissions, or other disclosure-related claims which could
form the basis of a claimed securities law violation, which allegations are in
respect to acts or omissions during the Class Period and which in any way
relate to the purchase of Zomax stock during the Class Period.  Settled Claims does not include any claims
between Zomax on the one hand, and either Anderson or Bedard on the other hand,
including those claims (whether in contribution, indemnity, under the
securities laws, state law or the like) which in any way arise from the Action,
the facts alleged in the Action, the costs associated with this Settlement or
other costs or losses in any way associated with the facts alleged in the
Action or any other proceeding or investigation, which claims have been and
will continue to be preserved and not in any way impaired hereby, all in
respect to the agreement between Zomax, Anderson and Bedard.  Settled Claims also does not include any
claims which in any way relate to the restatement of financial results
announced by Zomax on March 1, 2005 or any expansion of the restatement to
periods occurring within the Class Period.

 

(u)                                 “Settlement”
means the settlement contemplated by this Stipulation.

 

8

 

(v)                                 “Settling
Defendants” means Zomax, James T. Anderson, James E. Flaherty, Michelle S.
Bedard.

 

(w)                               “Settled
Defendants’ Claims” means any and all claims, rights or causes of action or
liabilities, whether based on federal, state, local, statutory or common law or
any other law, rule or regulation, including both known claims and Unknown
Claims, that have been or could have been asserted in the Action or any forum
by the Settling Defendants or any of them or the successors and assigns of any
of them against the Lead Plaintiff, Class Members or their attorneys,
which arise out of or relate in any way to the institution, prosecution, or
settlement of the Action (except for claims to enforce the Settlement).

 

(x)                                   “Settling
Defendants’ Counsel” mean the law firms of Dorsey & Whitney L.L.P.,
Lindquist & Vennum P.L.L.P. and Greene Espel, P.L.L.P.

 

(y)                                 “Unknown
Claims” means any and all Settled Claims, which the Lead Plaintiff or any Class Member
does not know or suspect to exist in his, her or its favor at the time of the
release of the Released Parties, and any Settled Defendants’ Claims which any
Defendant does not know or suspect to exist in his, her, or its favor, which if
known by him, her or it might have affected his, her, or its decision(s) with
respect to the Settlement.

 

SETTLING DEFENDANTS DO NOT ADMIT ANY

WRONGDOING OR LIABILITY

 

2.                                       The
Settling Defendants make no admission of liability or any fact alleged in the
Action.  In addition, Plaintiffs do not
concede that any infirmities exist in their claims, nor do Settling Defendants
concede any infirmities in their defenses to such claims.

 

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SCOPE AND EFFECT OF SETTLEMENT

 

3.                                       The
obligations incurred pursuant to this Stipulation shall be in full and final
disposition of the Action as against the Settling Defendants and any and all
Settled Claims against any and all Released Parties.

 

4.                                       Upon
the Effective Date of this Settlement, Lead Plaintiff and each Class Member,
on behalf of themselves, their heirs, executors, administrators, successors and
assigns and any Persons they represent, shall be (i) conclusively deemed
to have fully, finally and forever settled, released, relinquished and
discharged all Settled Claims against the Released Parties; (ii) conclusively
deemed to have covenanted not to sue the Released Parties in any action
alleging any Settled Claims and (iii) forever barred from asserting any
Settled Claims against any of the Released Parties.  The releases set forth herein shall release
Settled Claims, including Unknown Claims, as that term is used in Section 1542
of the Civil Code of the State of California, and all Class Members who do
not exclude themselves from the Class and this Settlement will and will be
deemed to expressly waive any and all rights under that statute or similar
statutes of any other jurisdiction.  With
respect to any and all Settled Claims and Settled Defendants’ Claims, the
parties stipulate and agree that upon the Effective Date, the Lead Plaintiff
and the Settling Defendants shall expressly waive, and each Class Member
shall be deemed to have waived, and by operation of the Judgment shall have
expressly waived, any and all provisions, rights and benefits conferred by any
law of any state or territory of the United States, or principle of common law,
which is similar, comparable, or equivalent to Cal. Civ. Code § 1542,
which provides:

 

A
general release does not extend to claims which the creditor does not know or
suspect to exist in his favor at the time of executing the release, which if
known by him must have materially affected his settlement with the debtor.

 

10

 

Lead Plaintiff and
Settling Defendants acknowledge, and Class Members by operation of law
shall be deemed to have acknowledged, that the inclusion of “Unknown Claims” in
the definition of Settled Claims and Settled Defendants’ Claims was separately
bargained for and was a key element of the Settlement.

 

5.                                       If
the Settlement is approved by the Court, the Final Judgment and Order will
dismiss the Litigation as against the Settling Defendants with prejudice, and
will bar and permanently enjoin all Plaintiffs and each Class Member,
regardless of whether such Class Member has submitted a Proof of Claim and
Release, from prosecuting the Settled Claims against any of the Released
Parties.  Plaintiffs and Class Members
shall be conclusively deemed to have released any and all Settled Claims
against the Released Parties, and to have agreed to the bar, reduction and the
related provisions in the immediately following paragraph.

 

6.                                       It
is agreed that upon the Effective Date, the pertinent provisions of the Public
Securities Litigation Reform Act of 1995 (“PSLRA”) relating to settlement
discharge (15 U.S.C. § 78u-4(f)(7)(A&B)) will apply to this
Settlement, and pursuant thereto, and pursuant to the parties’ agreement, the
Final Judgment and Order will bar all future claims for contribution (arising
out of or in any way related to the Settled Claims) by any Person against the
Released Parties.  Additionally, it is
agreed that the Final Judgment and Order will permanently enjoin all Persons,
including any Persons who may in the future assert any third party or cross
claim against any Released Party, from instituting or prosecuting any action,
claim, crossclaim, third-party claim or proceeding against any Released Party
for equitable, partial, comparative, or complete contribution, subrogation,
and/or indemnity, however denominated, arising out of or relating in any way to
the Settled Claims.  It is further agreed
that the Court will find that all such claims, including any future third party
or cross claims, are fully extinguished, discharged,

 

11

 

satisfied and made
unenforceable.  To assure the
effectiveness of the bar and discharge agreements and orders provided here, and
to assure the Released Parties of a final and global resolution of the Settled
Claims, it is agreed that the Final Judgment and Order will order that any
future claim or resulting verdict for or on behalf of any Plaintiff or Class Member
arising out of or relating in any way to the Settled Claims, which claim or
resulting verdict is against any non-party which has asserted any claim
relating to or arising out of any Settled Claim against a Released Party, will
be reduced in an amount that corresponds to the greater of (i) the
percentage (up to and including 100%) of responsibility of that Released Party
or (ii) the amount paid by or in behalf of that Released Party in respect
to this Settlement.  The Court shall
retain jurisdiction over the parties hereto and over the Class Members in
respect to enforcing and administering the Stipulation, including the
enforcement of the releases and the bar/reduction agreement and orders provided
for herein.  Notwithstanding anything to
the contrary in this paragraph 6, however, the Court’s order will not impair
the preservation of claims as between Zomax, Anderson and Bedard as provided in
the “Settled Claims” definition at paragraph 1(t) of this Stipulation.

 

THE SETTLEMENT CONSIDERATION

 

7.                                       In
full and final settlement of the claims in this Action, the Defendant Zomax
shall provide to the Class a total consideration of $2,250,000 in cash,
plus 1,500,000 shares (the “Settlement Shares”) of freely tradable shares of
Zomax common stock (collectively, the Settlement Cash with any interest
thereon, and the Settlement Shares, shall be referred to as the “Gross
Settlement Fund” or the “Settlement Fund”) and shall be provided as follows:

 

(a)                                  Within
three (3) business days from the date of execution of the Court’s Final
Judgment and Order, Settling Defendants, pursuant to an Escrow Agreement, shall
deposit $2,250,000 (less any amounts advanced for administrative costs pursuant
to paragraph 7(b) of this Stipulation) in cash into an interest bearing
Escrow Account (the “Cash Settlement Fund”),

 

12

 

at Wells Fargo Bank,
pursuant to an Escrow Agreement which is governed by this Stipulation and which
is agreeable to Lead Plaintiff’s Counsel and counsel to Zomax, or as ordered by
the Court.  Interest earned on the Cash
Settlement fund while held in escrow shall accrue for the benefit of the
ultimate recipients of the Settlement Fund.

 

(b)                                 Within
fifteen (15) business days of the Court’s execution of the Preliminary Approval
Order, and upon an itemized estimate of the costs of Notice and Administration
of the Settlement, Defendant, Zomax will advance to A.B. Data the amount of
such estimate up to $100,000, to be used to pay such costs (including the fees
of A.B. Data) as they are incurred. 
Should the Settlement not consummate, any amounts not so used or
required to pay costs incurred shall belong to Defendant Zomax.

 

(c)                                  With
respect to Settlement Shares, in accordance with the timetable described in (d) below,
the Class shall receive 1,500,000 shares of freely tradable Zomax common
stock, less any shares awarded by the Court and issued by Zomax to Lead Plaintiff’s
Counsel as attorneys’ fees (the “Net Settlement Shares”).  The Settlement Shares shall be duly and
validly issued fully paid, non-assessable, and free from all liens and
encumbrances.  To the extent that there
occurs (or the record date occurs for) any stock splits, reclassifications or
stock dividends with respect to Zomax common stock or any change or conversion
of Zomax common stock into other securities prior to the issuance of stock in
the Settlement, then the 1,500,000 shares shall be treated as if they are, as
of the date hereof, fully issued and outstanding and shall be treated the same
as all other shares of Zomax common stock currently issued and outstanding as
of the date hereof.

 

(d)                                 Subsequent
to the Effective Date, Zomax shall issue and deliver the Net Settlement Shares
to the Authorized Claimants, in whole or in part, within ten (10) business
days

 

13

 

of receipt of written
instructions from the Claims Administrator in accordance with paragraph 34
below and the signing of the Order of Distribution authorizing the
allocation.  Zomax shall bear all costs
of issuing such shares, including the costs associated with registering (if
necessary), printing and issuing shares certificates, as well as any costs
necessary to make the shares freely tradable.

 

(e)                                  The
parties hereto stipulate, and shall ask the Court to find in the Final Judgment
and Order, among other things, that the issuance of stock in consideration of
this Settlement is in reliance upon and subject to the exemption from
registration under Section 3(a)(10) of the Securities Act of 1933 and
any applicable provisions of states’ securities laws and is based on this Court’s
approval of the issuance and Settlement as fair, both substantively and
procedurally, to those to whom the stock will be issued.  In the event the stock issuance is not exempt
from registration under the Securities Act of 1933 or any state securities
laws, Zomax will pay all expenses necessary to register the shares accordingly.

 

8.                                       Zomax
warrants that, as of the date of this Stipulation, it is not insolvent, nor
will payment of the Cash Settlement Fund or distribution of the Non-Cash
Consideration render Zomax insolvent within the meaning of and/or for the
purposes of the United States Bankruptcy Code. 
If a case is commenced in respect of Zomax under Title 11 of the United
States Code (Bankruptcy), or a trustee, receiver or conservator is appointed
under any similar law, and in the event of the entry of a final order of a
court of competent jurisdiction determining the payment of the Gross Settlement
Fund and any accrued interest, or any portion thereof, to be a preference,
voidable transfer, fraudulent transfer or similar transaction, then, at the
election of Lead Plaintiff’s Counsel, the parties shall jointly move the Court
to vacate and set aside the releases given and Final Judgment and Order entered
in favor of the Settling Defendants pursuant to this

 

14

 

Stipulation, and the
Stipulation shall be null and void, and the parties hereto shall be restored to
their respective positions in the litigation immediately prior to October 29,
2004.

 

9.                                       No
part of the Gross Settlement Fund shall constitute, nor shall they be construed
or treated as constituting, a payment in lieu of fines, penalties, forfeitures
or punitive recoveries.

 

10.                                 Upon
the Effective Date, all remaining interest or right of each of the Settling
Defendants in the Gross Settlement Fund shall be absolutely and forever
extinguished except as provided in this Stipulation.

 

THE SETTLEMENT FUND

 

11.                                 All
funds held in the Escrow Account shall remain subject to the jurisdiction of
the Court until such time as the funds shall be distributed to the Class or
returned to Defendant Zomax pursuant to this Stipulation and/or further order
of the Court.  Any funds in excess of
$100,000 shall be invested in short term United States Agency or Treasury
Securities, and shall collect and reinvest all interest accrued thereon.  In the event any funds held in the Escrow
Account are less than $100,000, then such amount may be held in an interest
bearing account of the Escrow Agent, insured by the FDIC.  The Settling Defendants shall bear no risk
related to the investment of the Cash Settlement Fund, and once it is delivered
to the Escrow Account, Settling Defendants are fully relieved of any risk of
loss, all such risk being that of the Claims Administrator, Lead Plaintiff’s
Counsel and/or the Class.

 

12.                                 Subject
to further order and/or directions as may be made by the Court or pursuant to
written direction by the parties to this Stipulation, the Claims Administrator
is authorized to execute such transactions on behalf of the Lead Plaintiff and
the Class as are consistent with the terms of this Stipulation.

 

15

 

TAX TREATMENT OF THE SETTLEMENT FUND

 

13.                                 (a)                                  The
parties and A.B. Data hereto agree that the Settlement Fund is intended to be a
Qualified Settlement Fund within the meaning of Treasury Regulation § 1.468B-1.  The Claims Administrator and, as required,
the parties hereto shall jointly and timely make such elections as necessary or
advisable to carry out the provisions of this paragraph 13(a), including the “relation-back
election” (as defined in Treasury Regulation §1.468B-1) back to the earliest
permitted date.  Such elections shall be
made in compliance with the procedures and requirements contained in such
regulations.  It shall be the responsibility
of the Claims Administrator to timely and properly prepare and deliver the
necessary documentation for signature by all necessary parties, and thereafter
to cause the appropriate filing to occur.

 

(b)                                 For
the purposes of § 468B of the Internal Revenue Code of 1986, as amended,
and the regulations promulgated thereunder, the “administrator” as defined in § 1.468B-2(k)(3) shall
be A.B. Data.  The Claims Administrator
shall timely and properly file informational and other tax returns necessary or
advisable with respect to the Cash Settlement Fund (including without
limitation the returns described in Treasury Regulation § 1.468B-2(k and 1)),
if applicable.  Defendant Zomax agrees to
provide promptly to A.B. Data the statement described in Treasury Regulation § 1.468B-3(e).  Such returns (as well as the election
described in paragraph 13(a)) shall be consistent with this paragraph 13 and in
all events shall reflect that all taxes (including any estimated taxes,
interest or penalties) on the income earned by the Cash Settlement Fund shall be
paid out of the Cash Settlement Fund as provided in paragraph 13(c) hereof.

 

(c)                                  All
(i) taxes (including any estimated taxes, interest or penalties) arising
with respect to the income earned by the Cash Settlement Fund, including any
taxes or tax detriments that may be imposed upon Settling Defendants with
respect to any income earned by

 

16

 

the Cash Settlement Fund
for any period during which the Cash Settlement Fund does not qualify as a “qualified
settlement fund” for federal or state income tax purposes (“Taxes”), and (ii) expenses
and costs incurred in connection with the operation and implementation of this
paragraph 13 (including, without limitation, expenses of tax attorneys and/or
accountants and mailing and distribution costs and expenses relating to filing
(or failing to file) the returns described in this paragraph 13) (“Tax Expenses”),
shall be paid out of the Cash Settlement Fund, in all events the Settling
Defendants and their insurers shall have no liability or responsibility for the
Taxes or the Tax Expenses or the filing of any tax returns or other documents
with the Internal Revenue Service or any other state or local taxing
authority.  The Settlement Fund shall
indemnify and hold Settling Defendants and their insurers harmless for Taxes
and Tax Expenses (including, without limitation, taxes payable by reason of any
such indemnification).  Further, Taxes
and Tax Expenses shall be treated as, and considered to be, a cost of
administration of the settlement and shall be timely paid by the Settlement
Administrator out of the Net Settlement Fund without prior order from the Court
and the Settlement Administrator shall be obligated (notwithstanding anything
herein to the contrary) to withhold from distribution to Plaintiffs any funds
necessary to pay such amounts including the establishment for adequate reserves
for any Taxes and Tax Expenses (as well as any amounts that may be required to
be withheld under Treasury Regulation § 1.468B-2(1)(2)); Settling
Defendants and their insurers are not responsible and shall have no liability
therefore or for any reporting requirements that may relate thereto.

 

(d)                                 The
parties hereto agree to cooperate with the Settlement Administrator, each
other, and their tax attorneys and accountants to the extent reasonably
necessary to carry out the provisions of this paragraph 13.

 

17

 

SETTLEMENT DISBURSEMENTS

 

14.                                 All
costs of administering the Settlement, including but not limited to Notice for
the Action, administering and distributing the Gross Settlement Fund, and taxes
and other expenses, are the sole responsibility of the Plaintiffs and shall be
paid out of the Gross Settlement Fund, as provided herein.  The remainder of the Gross Settlement Fund
after the payment of the above amounts, as well as attorneys’ fees and expenses
shall constitute the “Net Settlement Fund,” which shall be distributed to the
Authorized Claimants.

 

COSTS OF NOTICE AND CLAIMS
ADMINISTRATION

 

15.                                 A
portion of the Cash Settlement Fund shall be used to pay costs and expenses in
providing proper Notice of Settlement in this Action, the fees and expenses of
the Claims Administrator, the costs and expenses of administering this
Settlement, including without limitation, costs and expenses necessary to
secure court approval of the Stipulation, such as expert affidavits, and the
processing and payment of claims, and all taxes.  Notice and administration costs and the fees
of the Claims Administrator, up to $100,000, shall be advanced from the Cash
Settlement Fund, following entry of the Preliminary Approval Order as provided
in Para. 7(b).  Costs exceeding $100,000
shall be paid from the Cash Settlement Fund after the Effective Date upon
invoices provided to counsel to the parties.

 

ATTORNEYS’ FEES

 

16.                                 A
portion of the Gross Settlement Fund shall be used to pay the attorneys’ fees
of Plaintiffs’ Counsel and to reimburse them for expenses and costs, including
the fees and expenses of experts and consultants, in an amount to be approved
by the Court.

 

17.                                 Lead
Plaintiff’s Counsel will apply to the Court for an award from the Gross
Settlement Fund of attorneys’ fees not to exceed thirty percent (30%) of the
Gross Settlement Fund, including Thirty Percent (30%) of the Cash Settlement Fund
and Thirty Percent (30%) of

 

18

 

the Gross Settlement
Shares, plus interest, and reimbursement of expenses.  Lead Plaintiff’s Counsel shall decide the
allocation of attorneys’ fees among counsel for the Class.  Lead Plaintiff’s Counsel shall not seek
attorneys’ fees from any other source other than the Gross Settlement
Fund.  It is further understood and
agreed that Plaintiffs and the Class expressly waive any and all rights to
recover or seek any attorneys’ fees, expenses or costs from the Settling
Defendants in connection with the Action, aside from any application that they
may make for an award from the Gross Settlement Fund.  Any appeal relating solely to the award of
attorneys’ fees or expenses shall not affect the occurrence of the Effective
Date.

 

18.                                 The
attorneys’ fees, expenses and costs, including any shares of Zomax common stock
awarded, shall be payable to Lead Plaintiff’s Counsel from the Escrow Account
or as issued to Lead Plaintiff’s Counsel by Zomax three business days following
the entry of the Final Judgment and Order. 
Such amount and shares shall be so paid only if Defendant Zomax informs
the Claims Administrator that Zomax has received from Lead Plaintiff’s Counsel
a bond or letter of credit, issued by a national bank in an amount necessary to
guarantee the return of such amount (with interest earned thereon) and shares,
to the Gross Settlement Fund in the event that the Effective Date does not
occur, or the judgment and/or order making such fee and expense award is
reversed or modified, or the Stipulation is canceled or terminated for any
other reason, or if the dismissal with prejudice of this Action does not become
final.  If Lead Plaintiff’s Counsel does
not provide a bond or a letter of credit and therefore does not so receive said
amount and shares respecting such attorneys’ fees and costs, the same shall be
paid to Lead Plaintiff’s Counsel within three (3) business days of the
Effective Date.  No later than 60 days
following entry of the Preliminary Approval Order, Zomax shall advise Lead
Plaintiff’s Counsel of the number of days advance notice that will be required
for receipt of such bond or letter of

 

19

 

credit and instructions
for issuance of the shares in order to issue any shares awarded by three
business days following the entry of the Final Judgment and Order or the
Effective Date.  If the Effective Date
does not occur, or the judgment and/or order making such fee and expense award
is reversed or modified, or the Stipulation is canceled or terminated for any
other reason, or if the dismissal with prejudice of this Action or the Related
Actions does not become final (any such occurrence being a “Reimbursement Event”),
and attorneys’ fees, expenses and costs have been paid to any extent, Lead
Plaintiff’s Counsel shall within ten (10) business days after receiving
written notice from Settling Defendants’ Counsel or from a court of appropriate
jurisdiction of any Reimbursement Event, refund to the Gross Settlement Fund,
the fees, expenses and costs previously paid to them, plus the interest earned
therefrom, in an amount consistent with such Reimbursement Event.  Furthermore, Lead Plaintiff’s Counsel as a
condition of receiving such fees, expenses and costs, on behalf of itself and
each partner, agrees that the law firm and its partners are subject to the
jurisdiction of the Court for the purpose of enforcing the provisions of this
paragraph.

 

19.                                 The
Released Parties, the Settling Defendants’ and Counsel for any of the Released
Parties or the Settling Defendants shall not have any responsibility for, and
no liability whatsoever with respect to, any payment to Lead Plaintiff’s
Counsel or any other counsel or Person who receives payment from the Gross
Settlement Fund or claims entitlement to receive such payment.

 

20.                                 The
procedure for the allowance or disallowance by the Court of any attorneys’
fees, costs and expenses, including the fees of experts and consultants to be
paid out of the Gross Settlement Fund, are not part of the Settlement set forth
in the Stipulation and are to be considered by the Court separately from the
Court’s consideration of the fairness, reasonableness

 

20

 

and adequacy of the
Settlement set forth in the Stipulation, and any order or proceedings relating
solely to the payment of any fees, costs or expenses, or any fee and/or expense
application, or any appeal from any order relating thereto or reversal or
modification thereto shall not operate to terminate or cancel the Stipulation
or affect or delay the finality of the judgment approving the Stipulation and
the settlement of the Action set forth herein.

 

ADDITIONAL FUNDING OF THE SETTLEMENT

THROUGH RESTITUTION

 

21.                                 The
parties will cooperate in an effort to obtain the approval of the SEC to agree
to maximize the amount of any civil penalty paid by Zomax pursuant to any SEC
enforcement proceeding, arising from the Released Claims, to be made available
as a Restitution Fund for the benefit of shareholders, including the Lead
Plaintiff and the Class Members. 
These same parties hereto recognize that there has been no completion of
any settlement of any such SEC enforcement proceeding and that any decision
respecting a Restitution Fund is solely within the discretion of the SEC, and
none of the Settling Defendants have any responsibility in the event that any
such settlement or Restitution Fund is not consummated.  Defendant Zomax and Lead Plaintiff and its
Counsel agree further that if such a fund is created, and Class Members
are permitted to share in the distribution of such funds, this sharing will
serve only to increase such Class Members’ recoveries and Defendant Zomax
will make no effort to offset against the amounts to be provided to the
Settlement Fund any amounts it pays as a civil penalty which could be part of a
Restitution Fund.

 

ADMINISTRATION

 

22.                                 The
Claims Administrator shall administer the Settlement subject to the
jurisdiction of the Court.  Except as
stated in this paragraph, the Settling Defendants (and the Settling Defendants’
Counsel) shall have no responsibility for the administration of the

 

21

 

Settlement and shall have
no liability to the Class in connection with such administration of the
Settlement.  Zomax, within three business
days following the Preliminary Approval Order, shall provide to the Claims
Administrator, subject to a Confidentiality Agreement attached hereto as Exhibit     
and as provided in the Preliminary Approval Order, attached hereto as Exhibit A,
the identities of the Class Members in respect to the facilitation of the
Notice.

 

23.                                 No
Authorized Claimant shall have any claim against the Lead Plaintiff or Lead Plaintiff’s
Counsel based on any distributions made in accordance with or as contemplated
by this Stipulation, and in no event shall any Authorized Claimant have any
claim against any Settling Defendant, Released Party or Defendants’ Counsel in
respect to any distributions or use of the Cash Settlement Fund at such time as
it is delivered to the Escrow Account.

 

24.                                 Subsequent
to the Effective Date, Lead Plaintiff’s Counsel will apply to the Court, on
notice to Settling Defendants’ Counsel, for an Order (the “Class Distribution
Order”) approving the Claims Administrator’s administrative determinations
concerning the acceptance and rejection of the claims submitted herein and
approving any fees and expenses not previously applied for, including the fees
and expenses of the Claims Administrator, and directing payment of the Net
Settlement Fund to Authorized Claimants.

 

DISTRIBUTION TO AUTHORIZED CLAIMANTS

 

25.                                 The
Claims Administrator shall determine each Authorized Claimant’s pro  rata
share of the “Net Settlement Fund” based upon each Authorized Claimant’s
Recognized Claim (as defined in the Plan of Allocation described in the Notice
annexed hereto as Exhibit A-1, or in such other Plan of Allocation as the
Court approves).

 

26.                                 The
Plan of Allocation proposed in the Notice is not a necessary term of this
Stipulation and it is not a condition of this Settlement that that Plan of
Allocation be approved as

 

22

 

long as the Plan of
Allocation to be used to distribute the Settlement has been approved by the
Court.

 

27.                                 Each
Authorized Claimant shall be allocated a pro  rata share of the
Net Settlement Fund based on his or her Recognized Claim compared to the total
Recognized Claims of all Authorized Claimants. 
Lead Plaintiff’s Counsel shall have the discretion to request the Court
to preclude recovery by Authorized Claimants who will receive less than $5 or
less than 3 shares of Zomax common stock as their pro rata share of the Net
Settlement Fund.  In addition,
calculations of Recognized Claims resulting in fractional shares shall be paid
in cash rather than shares.  The Settling
Defendants shall have no interest in the Settlement Fund from and after the
Effective Date.  The Settling Defendants
shall have no involvement in or responsibility for reviewing or challenging the
distributions of the proceeds of the Net Settlement fund to Authorized
Claimants so long as the distributions are in accordance with the Plan of
Distribution and any orders of the Court.

 

28.                                 Any
Class Member who does not submit a valid Proof of Claim will not be an
Authorized Claimant entitled to receive any of the proceeds from the Net
Settlement Fund, but will otherwise be bound by all of the terms of this
Stipulation, including the terms of the Final Judgment and Order to be entered
in the Action and the releases, bars and reductions provided for herein and in
such Final Judgment and Order.

 

29.                                 Except
for their obligation to pay the Settlement Amount into the Escrow Account, and
to cooperate in the production of information with respect to the
identification of Class Members from Zomax’s shareholder transfer records,
as provided herein, Settling Defendants shall have no liability, obligation or
responsibility for the administration or disbursement of the Net Settlement
Fund.  Lead Plaintiff’s Counsel shall
have the right, but not

 

23

 

the obligation, to direct
the Claims Administrator to waive what they deem to be formal or technical
defects in any Proof of Claim submitted in the interests of achieving
substantial justice.

 

30.                                 For
purposes of determining the extent, if any, to which a Class Member shall
be entitled to be treated as an “Authorized Claimant”, the following conditions
shall apply:

 

(a)                                  Each
Class Member shall be required to submit a Proof of Claim (see attached Exhibit 2
to Exhibit A), supported by such documents as are designated therein,
including proof of the Claimant’s loss, or such other documents or proof as
Lead Plaintiff’s Counsel, in their discretion, may deem acceptable;

 

(b)                                 All
Proofs of Claim must be submitted by the date specified in the Notice unless
such period is extended by Order of the Court. 
Any Class Member who fails to submit a Proof of Claim by such date
shall be forever barred from receiving any payment pursuant to this Stipulation
(unless, by Order of the Court a later submitted Proof of Claim by such Class Member
is approved), but shall in all other respects be bound by all of the terms of
this Stipulation, including the terms of the Final Judgment and Order to be
entered in the Action and the releases and bars provided for herein and in such
Final Judgment and Order.  This provision
does not affect the possible benefits which could be available to Class Members
from any Restitution Fund as discussed in ¶ 21 above.  Provided that it is received before the
motion for the Class Distribution Order is filed, a Proof of Claim shall
be deemed to have been submitted when posted, if received with a postmark
indicated on the envelope and if mailed by first-class mail and addressed in
accordance with the instructions thereon. 
In all other cases, the Proof of Claim shall be deemed to have been
submitted when actually received by the Claims Administrator;

 

24

 

(c)                                  Each
Proof of Claim shall be submitted to and reviewed by the Claims Administrator,
under the supervision of Lead Plaintiff’s Counsel, who shall determine in
accordance with this Stipulation and the Plan of Allocation the extent, if any,
to which each claim shall be allowed, subject to review by the Court pursuant
to subparagraph (e) below;

 

(d)                                 Proofs
of Claim that do not meet the submission requirements may be rejected.  Prior to rejection of a Proof of Claim, the
Claims Administrator shall communicate with the claimant in order to remedy the
curable deficiencies in the Proof of Claims submitted.  The Claims Administrator, under supervision
of Lead Plaintiff’s Counsel, shall notify, in a timely fashion and in writing,
all claimants whose Proofs of Claim they propose to reject in whole or in part,
setting forth the reasons therefore, and shall indicate in such notice that the
claimant whose claim is to be rejected has the right to a review by the Court
or its designee if the claimant so desires and complies with the requirements
of subparagraph (e) below;

 

(e)                                  If
any claimant whose claim has been rejected in whole or in part desires to
contest such rejection, the claimant must, within twenty (20) calendar days
after the date of mailing of the notice required in subparagraph (d) above,
serve upon the Claims Administrator a notice and statement of reasons
indicating the claimant’s grounds for contesting the rejection along with any
supporting documentation, and requesting a review thereof by the Court or its
designee.  If a dispute concerning a
claim cannot be otherwise resolved, Lead Plaintiff’s Counsel shall thereafter
present the request for review to the Court or the Court’s designee as ordered
by the Court; and

 

(f)                                    The
administrative determinations of the Claims Administrator accepting and
rejecting claims shall be presented to the Court, on notice to Settling
Defendants’ Counsel, for approval by the Court or its designee in the Class Distribution
Order.

 

25

 

31.                                 Each
claimant shall be deemed to have submitted to the jurisdiction of the Court
with respect to the Claimant’s claim and with respect to the release, bar and
reduction provisions provided for in this Stipulation and the Final Judgment
and Order.

 

32.                                 Payment
pursuant to this Stipulation and the Class Distribution Order shall be
deemed final and conclusive against all Class Members.  All Class Members whose claims are not
payable pursuant to this Stipulation and the Class Distribution Order
shall be barred from participating in distributions from the Net Settlement
Fund, but otherwise shall be bound by all of the terms of this Stipulation,
including the terms of the Final Judgment and Order to be entered in the Action
and the releases provided for herein, shall be barred from bringing any action
against the Released Parties concerning the Settled Claims, and shall be
subject to the bar and reduction provisions as provided in this Stipulation and
the Final Judgment and Order.

 

33.                                 The
Net Settlement Fund shall be distributed to Authorized Claimants by the Claims
Administrator only after the Effective Date and after: (i) all Claims have
been processed, and all claimants whose Claims have been rejected or
disallowed, in whole or in part, have been notified and provided the
opportunity to be heard concerning such rejection or disallowance; (ii) all
objections with respect to all rejected or disallowed claims have been resolved
by the Court, and all appeals therefrom have been resolved or the time for all
potential appeals therefrom has expired; (iii) all matters with respect to
attorneys’ fees, costs, and disbursements have been resolved by the Court, all
appeals therefrom have been resolved or the time for all potential appeals
therefrom has expired; and (iv) all costs of administration have been
paid.

 

34.                                 The
Claims Administrator shall calculate the number of Settlement Shares to be
distributed to the Class Members. 
Upon completion of those calculations, the Claims Administrator shall
advise Settling Defendants’ Counsel and Lead Plaintiff’s Counsel of the

 

26

 

number of Settlement
Shares to be distributed to each Class Member.  Settling Defendants’ Counsel shall
thereafter, promptly upon receipt of that information, distribute the
Settlement Shares to the Claims Administrator, to distribute to the Class Members
in accordance with paragraph 7(c) and (d).

 

35.                                 If
any portion of the Net Settlement Fund, either cash or shares of freely tradable
Zomax common stock, remain in the Net Settlement Fund by reason of return mail,
uncashed checks or otherwise, including the return of certificates of Zomax
common stock, then the following steps shall be taken one (1) year after
the initial distribution of the Net Settlement Fund:

 

(a)                                  The
Claims Administrator shall confirm that it has made all reasonable and diligent
efforts to have Authorized Claimants who are entitled to participate in the
distribution of the Net Settlement Fund cash their distribution checks or claim
ownership of their shares of freely tradable Zomax common stock;

 

(b)                                 The
Claims Administrator shall sell, without further Order of the Court, any and
all unclaimed Settlement Shares, the proceeds of which, along with any
unclaimed Settlement Cash, will become Unclaimed Settlement Cash to be
distributed in accordance with subparagraph (c) below;

 

(c)                                  The
Claims Administrator, proportionate to the initial distribution, shall
re-distribute any Unclaimed Settlement Cash, after payment of any unpaid costs
or fees incurred in administering the Net Settlement Fund for such
re-distribution, to Class Members who have cashed their checks and who
would receive at least $5.00 or 3 shares of Zomax common stock from such
re-distribution;

 

27

 

(d)                                 If
after six months after such re-distribution any funds shall remain of the
Unclaimed Settlement Cash, Lead Plaintiff’s Counsel shall make an application
to the Court to distribute the sum of the unpaid residue in two equal parts to
the YMCA of Greater Minneapolis and to the Four Diamonds Fund.

 

PRELIMINARY APPROVAL ORDER

 

36.                                 Within
45 days of the execution of this Stipulation, and pending completion of
confirmatory discovery, the parties shall file this Stipulation and all of its
Exhibits along with an application for the Preliminary Approval Order in the
form annexed hereto as Exhibit A.

 

TERMS OF FINAL JUDGMENT AND ORDER

 

37.                                 If
the Settlement is approved by the Court, counsel for the parties shall request
that the Court enter a Final Judgment and Order in the form annexed hereto as Exhibit B.

 

RIGHT OF EXCLUSION AND OBJECTION

 

38.                                 Any
Person may seek to be excluded from the Class and the Settlement provided
for by this Stipulation by submitting a written request for exclusion, which
request must state the dates during the Class Period on which the Person
purchased Zomax shares, the number and price of such shares so purchased, and
the date, number and price respecting the sale of such shares so
purchased.  Any request for exclusion
must be submitted to the Claims Administrator twenty (20) days before the Final
Hearing Date established by the Court. 
Any Person so excluded shall not be bound by the terms of the
Stipulation, nor entitled to any of its benefits, and shall not be bound by any
Final Judgment and Order and/or other order of the Court entered herein,
whether pursuant to this Stipulation or otherwise.  Any request for exclusion failing to comply
with the requirements of this paragraph will be invalid, and the Person shall
not be excluded and will be bound by all of the orders and releases as if such
Person had made no request for exclusion.

 

28

 

39.                                 Any
Class Member who does not exclude himself, herself, or itself from the Class and
the Settlement shall have the right to submit written objections concerning the
Settlement, and/or Lead Plaintiff’s Counsel’s application for attorneys’ fees,
expenses and costs, which objections shall state all of the reasons for the
objections (e.g., a mere
statement that “I object” shall not be deemed sufficient).  Any written objections, and any briefs,
affidavits or other evidence submitted in support thereof must be filed with
the Clerk of the Court by the date set forth in the Court’s Preliminary
Approval Order.  All Persons desiring to
attend the Final Settlement Approval Hearing and be heard as objectors must
have filed written objections as provided herein, as a condition of appearing
and being heard at such hearing.  Any Class Member
who does not timely file written objections to the Settlement pursuant to this
paragraph and the Notice shall not be permitted to object to the Settlement at
the Final Settlement Approval Hearing, and shall be foreclosed from objecting
to, challenging or otherwise seeking review of the Settlement by appeal or
otherwise, in this Action or in any other action.

 

SUPPLEMENTAL AGREEMENT

 

40.                                 Simultaneously
herewith, Lead Plaintiff’s Counsel and Settling Defendants’ Counsel are
executing a “Supplemental Agreement” setting forth certain conditions under
which this Settlement may be terminated at the sole election of Zomax based on
the degree to which Persons request exclusion from the Class and the
Settlement.  Specifically, in order for a
request for exclusion to be effective, the Person seeking exclusion must submit
a written request for exclusion which is signed by the person requesting
exclusion and contains the dates, prices and amounts of all Zomax shares
purchased and sold during the Class Period.  This request and information must be
submitted to the Claims Administrator twenty (20) days before the Final Hearing
Date established by the Court.  The
Supplemental Agreement shall not be filed prior to the deadline for submitting
exclusion requests unless a dispute arises as to its terms.  In the event

 

29

 

of termination of this
Settlement pursuant to the Supplemental Agreement, this Stipulation shall
become null and void and of no further force and effect and the provisions of
paragraph 43 shall apply. 
Notwithstanding the foregoing, this Stipulation shall not become null
and void as a result of the election by Zomax to exercise its option to
terminate the Settlement pursuant to the Supplemental Agreement until the
conditions set forth in the Supplemental Agreement have been satisfied.

 

EFFECTIVE DATE OF SETTLEMENT, WAIVER
OR TERMINATION

 

41.                                 The
Effective Date of Settlement shall be the date when all the following shall
have occurred:

 

(a)                                  The
Settlement has not been terminated under paragraphs 40 or 43; and

 

(b)                                 Approval
by the Court of the Settlement, following notice to the Class and a
hearing, as prescribed by Rule 23 of the Federal Rules of Civil
Procedure; and the entry of the Final Judgment and Order in the form set forth
in Exhibit B hereto; and

 

(c)                                  The
later of (i) the expiration of any time for appeal or review of such Final
Judgment and Order with no appeal or review having been noticed; or (ii) if
any appeal is taken and not dismissed, after such Final Judgment and Order is
upheld on appeal in all material respects and is no longer subject to review
upon appeal or review by writ of certiorari or otherwise.  The appeal of an order solely relating to the
award of attorneys’ fees and expenses shall not prevent the Effective Date from
occurring except as to any obligation concerning the payment of such fees and
expenses, as long as there is no appeal of the Final Judgment and Order
approving the Settlement.

 

42.                                 Upon
occurrence of the Effective Date, any and all remaining interest or right of
the Settling Defendants in or to the Gross Settlement Fund, if any, shall be
absolutely and forever extinguished except as provided in this Stipulation.

 

30

 

43.                                 Settling
Defendants’ Counsel or Lead Plaintiff’s Counsel shall have the unconditional
right to terminate the Settlement and this Stipulation if (a) Lead
Plaintiff determines after the review of confirmatory discovery, as referenced
in Para. J above, that the Settlement is not fair, reasonable and adequate; (b) the
Court enters a preliminary approval order that is not in the form annexed
hereto as Exhibit A hereto except as such order is consented to by all
parties in writing or on the record (in which case such order shall be regarded
as the Preliminary Approval Order); (c) the Court enters a Final Judgment
and Order in the Action that is not in the form set forth in Exhibit B
annexed hereto except as such Final Judgment and Order is consented to by all
parties in writing or on the record (in which case such order shall be regarded
as the Final Judgment and Order); or (d) the Court enters a Final Judgment
and Order and appellate review is sought and, on such appeal, the Final
Judgment and Order is modified or reversed. 
Settling Defendants’ Counsel or Lead Plaintiff’s Counsel shall provide
written notice of their intent to terminate the Settlement and this Stipulation
to all other parties hereto within thirty (30) calendar days of the occurrence
of any of the events referenced above. 
For purposes of this provision, a disallowance or modification limited
solely to the award of attorneys’ fees, costs and expenses requested by Lead
Plaintiff’s Counsel shall not be deemed a modification or disapproval of the
Settlement or Final Judgment and Order.

 

44.                                 Except
as otherwise provided herein, in the event the Settlement is terminated or if
the Effective Date does not occur for any reason, then the Settlement shall be
without force and effect upon the rights of the parties, none of its terms
shall be effective or enforceable, and no findings or orders in respect thereto
(including any findings or orders relative to a settlement class) shall be used
in any proceedings.  In such event, (a) except
to the extent costs of notice and administration have been incurred or expended
pursuant to the provisions herein; the balance

 

31

 

remaining in the Gross
Settlement Fund, including any amounts of any fees previously awarded to Lead
Plaintiff’s Counsel and paid out of the Gross Settlement Fund, less any notice
or administration expenses incurred prior to such termination, and less any
taxes payable on the income of the Gross Settlement Fund, shall be returned to
Zomax; and (b) the parties shall revert to their litigation positions
immediately prior to October 29, 2004, with all rights in respect to
motions to dismiss and responses thereto being preserved.  If the Settlement is terminated, the Claims
Administrator shall forthwith return the balance of the Gross Settlement Fund
to Defendant Zomax.

 

NO ADMISSION OF WRONGDOING

 

45.                                 This
Stipulation, whether or not consummated, and any proceedings or findings taken
pursuant to it:

 

(a)                                  Shall
not be offered or received against the Settling Defendants or any Released
Party as evidence of, or construed as, or deemed to be, evidence of any
presumption, concession, or admission by any of the Settling Defendants or any
Released Party with respect to any fact or issue whatsoever, including any
claim of the existence of a class, alleged by Plaintiffs, or the validity of
any claim that had been or could have been asserted in the Action or in any
litigation, or the deficiency of any defense that has been or could have been
asserted in the Action or in any litigation, or of any liability, negligence,
fault, or wrongdoing of the Settling Defendants or any Released Party;

 

(b)                                 Shall
not be offered or received against the Settling Defendants or any Released
Party as evidence of a presumption, concession or admission of any fault,
misrepresentation or omission with respect to any statement or written document
approved or made by any Settling Defendant, or against the Lead Plaintiff or
the Class as evidence of any infirmity in the claims of the Lead Plaintiff
or the Class;

 

32

 

(c)                                  Shall
not be offered or received against the Settling Defendants, any Released Party
or against the Lead Plaintiff or the Class as evidence of a presumption,
concession or admission with respect to any liability, negligence, fault or
wrongdoing, or in any way referred to for any other reason as against any of
the parties to this Stipulation, in any other civil, criminal or administrative
action or proceeding, other than such proceedings as may be necessary to
effectuate the provisions of this Stipulation; provided, however, that if this
Stipulation is approved by the Court, the Settling Defendants or any Released
Party may refer to it to effectuate the liability protection granted them hereunder;

 

(d)                                 Shall
not be construed against the Settling Defendants, any Released Party or the
Lead Plaintiff or the Class as an admission or concession that the
consideration to be given hereunder represents the amount which could be or
would have been recovered after trial; and,

 

(e)                                  Shall
not be construed as or received in evidence as an admission, concession or
presumption against the Lead Plaintiff, the Class or any Class Member
that any of their claims are without merit or that damages recoverable under the
Complaint would not have exceeded the Gross Settlement Fund.

 

(f)                                    Shall
not be construed against the Settling Defendants, any Released Party or the
Lead Plaintiff or the Class as an admission or concession that any alleged
class exists or should be subject to certification under Rule 23 of the
Federal Rules of Civil Procedure.

 

MISCELLANEOUS PROVISIONS

 

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

 

47.                                 The
parties to this Stipulation intend the Settlement to be a final and complete
resolution of all disputes asserted or which could be asserted by the Class Members
against the Released Parties with respect to the Settled Claims.  Accordingly, the Lead Plaintiff, by its

 

33

 

counsel, on behalf of the
Class, and the Settling Defendants agree not to assert in any forum that the
litigation was brought by Plaintiffs or defended by the Settling Defendants in
bad faith or without a reasonable basis. 
The parties hereto shall assert no claims of any violation of Rule 11
of the Federal Rules of Civil Procedure relating to the prosecution,
defense, or settlement of the Action. 
The parties hereto agree that the amount paid and the other terms of the
Settlement were negotiated at arm’s length and in good faith by the parties,
and reflect a Settlement that was reached voluntarily after consultation with
experienced legal counsel.

 

48.                                 This
Stipulation may not be modified or amended, nor may any of its provisions be
waived except by a writing signed by all parties hereto or their
successors-in-interest, or an agreement of all parties on the record of the
Court.

 

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

 

50.                                 The
administration and consummation of the Settlement as embodied in this
Stipulation shall be under the authority of the Court and the Court shall
retain jurisdiction for the purpose of entering orders providing for awards of
attorneys’ fees, expenses and costs to Lead Plaintiff’s Counsel and enforcing
the terms of this Stipulation.

 

51.                                 The
waiver by one party of any breach of this Stipulation by any other party shall
not be deemed a waiver of any other prior or subsequent breach of this Stipulation.

 

52.                                 This
Stipulation and the exhibits attached hereto, and the Supplemental Agreement,
constitute the entire agreement among the parties hereto concerning the
Settlement of the Action, and no representations, warranties, or inducements
have been made by any party hereto concerning this Stipulation or its exhibits
other than those contained and memorialized in such documents.

 

34

 

53.                                 This
Stipulation may be executed in one or more counterparts.  All executed counterparts and each of them
shall be deemed to be one and the same instrument provided that counsel for the
parties to this Stipulation shall exchange among themselves original signed
counterparts.

 

54.                                 This
Stipulation shall be binding upon, and inure to the benefit of, the successors
and assigns of the parties hereto, provided that no assignment by any party
hereto shall operate to relieve such party of its obligations thereunder.  The construction, interpretation, operation,
effect and validity of this Stipulation, and all documents necessary to
effectuate it, shall be governed by the internal laws of the State of Minnesota
without regard to conflicts of laws, except to the extent that federal law
requires that federal law governs.

 

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

 

56.                                 All
counsel and any other Person executing this Stipulation and any of the exhibits
hereto, or any related settlement documents, warrant and represent that they
have the full authority to do so and that they have the authority to take
appropriate action required or permitted to be taken pursuant to the
Stipulation to effectuate its terms.

 

57.                                 Lead
Plaintiff’s Counsel and Settling Defendants’ Counsel agree to cooperate fully
with one another in seeking Court approval of the Order for Notice and Hearing,
the Stipulation, and to promptly agree upon and execute all such other
documentation as may be reasonably required to obtain final approval by the
Court of the Settlement.

 

35

 

58.                                 None
of the Plaintiffs nor Settling Defendants, nor counsel for any of them, will
make any public statement or comment to the press, either directly or
indirectly, regarding the Action, Settlement or Stipulation which disparages
the other or the merits of the claims or defenses which were or could have been
asserted in the Action

 

59.                                 Upon
the Effective Date, the Lead Plaintiff and Lead Plaintiff’s Counsel shall
return to Zomax all documents and other information, including all copies
thereof, received during confirmatory discovery.

 

36

 

IN WITNESS WHEREOF, the parties hereto,
intending to be legally bound hereby, have caused this Stipulation, to be
executed, by their duly authorized attorneys, as of the day and year first
above written.

 

	
   

  	
   /s/
  Michael K. Yarnoff

  
	
   

  	
  SCHIFFRIN &
  BARROWAY, LLP

  
	
   

  	
  MICHAEL K.
  YARNOFF

  
	
   

  	
  KAY E. SICKLES

  
	
   

  	
  280 King of
  Prussia Road

  
	
   

  	
  Radnor, PA 19087

  
	
   

  	
   

  
	
   

  	
  Lead
  Plaintiff’s Counsel

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   /s/
  Richard B. Solum

  
	
   

  	
  DORSEY &
  WHITNEY LLP

  
	
   

  	
  RICHARD B. SOLUM

  
	
   

  	
  50 South Sixth
  Street, Suite 1500

  
	
   

  	
  Minneapolis, MN
  55402-1498

  
	
   

  	
   

  
	
   

  	
  Counsel
  for Settling Defendant Zomax

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   /s/
  William Michael, Jr.

  
	
   

  	
  William Michael, Jr.

  
	
   

  	
  Lindquist &
  Vennum PLLP

  
	
   

  	
  4200 IDS

  
	
   

  	
  80 South 8th
  Street

  
	
   

  	
  Minneapolis, MN
  55402

  
	
   

  	
   

  
	
   

  	
  Counsel
  for Individual Defendants James T.

  Anderson and Michelle E. Bedard

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   /s/ Andrew
  M. Luger

  
	
   

  	
  Andrew M. Luger

  
	
   

  	
  Greene Espel,
  P.L.L.P.

  
	
   

  	
  200 South Sixth
  Street, Suite 1200

  
	
   

  	
  Minneapolis, MN
  55402

  
	
   

  	
   

  
	
   

  	
  Counsel
  for Individual Defendant James E.

  Flaherty

  

 

37

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