Free Motion for Summary Judgment - District Court of Colorado - Colorado

Case 1:04-cv-00725-RPM

Document 45-17

Filed 07/21/2005

Page 1 of 7

Case 1:04-cv-00725-RPM

Document 45-17

Filed 07/21/2005

Page 2 of 7

O ,,-nsna*o"",1
ATIOINEYS AT I W !0 Wqt Bnod S!*t, SliE 2tlx, CobDblq OUo4i}2lt3,122 bdle 614.?.13\55 jteni/. 6!1121.04?9 Gaw., sstEeiEd Did Dh':(6lO rrr'ull Fh* dbiLy@&tudd4o

4, January 2002

Mr, Patrick Meyerj E. VicePresidgllt Gereral & Counsel TheQuizrro's Colporation l4l5 l,animerShct DenvetCO 80202
Re:

WACERTIFIED MA]L

d-

Insurer: Westchestr In$rance CompaDy Fire ltre Qui2no's Corpor"ation Policy Holder: Manager[eDtProtectionlnsurancePolicy Policy: PolicyNo.: DON648451 ClaimNo,: X390L9630918 Edwad C. Sebesta Claimaiti

DearMJ. Meyers: Fire CompatryC'wes&h!tr), this lelte! On beholfof westchester Insurance policy of the Complaintin the following acknowledgBrceiptuldr the above-!fGenced ("Lawsuit'): ' lawsuit et 1's. EdwardC. Scbsta Richad E- scheden- dl, No. 0lcv6?81, Distlict Coull, City ard CouqtyofDnver, ColorS4! Case rePrsentative ofthe We are dircctingthis lcttsr to you asthc althotizod iDsulance to Insureds the Policy with respect the Lawsuit. To the extentyou arenot actingon behalf under to fonvard a copy ofthis lctter to sucl InsuFdt of any Insueds with respect the Lawsuit,plas for or lheir insurance reprsentatives their infoimation and inform us with whom ve should irt the futureregarding matle!. this communicate

I Wcsthster 23, rcccipt ofyour Augult28,2001ard NovEmbct 2001lcttcrs .clatingto tuthcr actmrdcdgcs iwolvcd h thcproposcd possiblc cl.jtn! by Sandstonc Vcntuci LLC rgaiDltthcnajority slllcholdcr eroup FrruaclioD. who aidd, hnsacrionandolhcrs abatd or assistcd Srolp in cofiiccliot with thcp.oposd tlat Thos thos.lcttcBa! r noliccofporcntialclaim lc$crsdo notcorsritulcaClaimllndclthclolicy, butWcnchc! rcccpls puauantto Subsectionof thcPolicy'! GncnlConditiors Limitatiorb. and 6

07300375

Case 1:04-cv-00725-RPM

Document 45-17

Filed 07/21/2005

Page 3 of 7

O ,,o"*oHADDENt
Mr. Patrick Meyls E. Jar ay 4,2002 Page2

A. Lawsuit The Lawsuit is a purportd classactionon behalfof all sbarclbldcrsofThe Quizno's the Corpofttion ("Company') asof October5, 2001. TheLa*suit namesasdefendants (Ptesident, individuals: RichaJd Schaden E. CEO aDdChailEuo) Companyand the follotrying (Vice P!sidetrlSecretlrya4dDiJector);F ederickH. Sch.der (Director); RichardF. Sohaden Mark I. Brodberg (Dkector):J. Eric Lawerce (Director);Brad.A"Gliffitt (DiFrror); andJoh! J. Todd (Director). 5trd apptoved Thekw'lit alegesthat tte deferda s imprcpedynegotiatd, putsuant1o going-pdvate lransactiotr the Compatry's shareholdersptoposed a recommended to which the Compaay would meryewith Fienzecorporation,a corporatiol wholly ow!d by and Accordhg to dreplaidifq that Defendaots Richa.dE. Schadcn Richad F, Schaden. and proposed consideratiod the Company'sshareholders thc to is transaction for inadequate lho ptoposed tleir fdlciary dDties apppvirg andrecorltnending deferdaD& iD b/ached wcie Feiented with an altriative tla$actioD, padicul.rly in litht ofthe fact that the defendants paid compensation to tbe transaotion ioln anothd party which would havcr.sultcd in grEatcr submitted Proxy Statcment to Company'ssh8rehold66.TbeLawsuitalsoallctes that the wa3 in with th approval ofthe prposed tlansaotion misloadingin shareholders cormectioD sevemlrespects. danage,s ce air iojrmctiverelief. and Plaintiffseeks compntsatory

B. Pclicy policy June 200l tsJune24, 24, for ThePolicyis a,clainls-made cffective theFeriod 2002C?olicy"). and Securities Pursuant lnsudng to Claus oftheDirectors, A Offrcers Company Pe$orN shall certair Prt Westchester payorlbebalfoflDsnred Liability Cor'rage ofthe Polioy, a[d whicht]rcInsured ar Lossfor whichtheIlsuredPerso[s rct indemnifi.d theCornpany by against themdurilg the Persons to of be..melsgallyobligated payby leason a Clailnfustmade ofthe Compatry PolicyPeriod,Insudng B shall Clause states Westchesler payo! behalf that gral and to PerBoDs whichthe crtain for whichthcCompany ! indrltrification thelDsured loss a8ainst Insu.ed lcgallyobligatcd payby reason a Claimfirstmade of tlerrl Persorrbecomc to drall dllling thePolioy. L$uringClauleC states Wostch.stcr payoflbchalfofthcCompany that to ofa certain LosswhichtheCompany bec.mes legallyobligated payby reason Securities against Company Claimlirst made the dlnirEthePolicyPeriod.

07300376

Case 1:04-cv-00725-RPM

Document 45-17

Filed 07/21/2005

Page 4 of 7

O r.-n"*ur-DEN,,t i
Mr. Patrick Meyers E. 4, January 2002 Page 3

an ThePolicyprovides aggEgale ofliability of $4rnillionfor all Lo6s resulting limit the fromall Claims made first dudng PolicyPedod is subject a $50,000 and to retention uder Insudng B pursuant EndoBement 6, to Clauses alrdC for each Securities However, No. Claim, theaggregate ofliability is reduced $2.5millio! andtheretention limit unde! to Insudng Clauses with B andC is increaaed $250,000 respect ary Claim{s) fo to whicl iDwhole in partarises or and outofthe facts,circwnsteces situations described theJanirary 1999 in 5, trotice lcttrby tbe Compaoy RoyalInrurancc to Company under Roy6l's Management Assuralcc PolicyNo. HP606493. believes theLawsuit wholeo! in partarises ofthe facts, that Westchester in ort circumstances siiuations and described lheJatuary I 999noticeletterto Royalatrdther"forE in 5, thloweraggrcgate ofliability andhigher lirnit dcscribed EndoBemeni 6 applies in No. letention shall to theLawsuil Westchester nolbeliablefor anyamouot withintheapplicable retsntion or limit in excss ofthe applicable of liability. Tssues C. Coverage Thefollowingdiscussion summarizes acfual potential and issues vadous coverage under thoPolicywith respeot theLawsuit.Thisdiscussion b6sed to is uponlhunsubstantialed allegations theLawslit andis notintended suggest those have in to allegations anylegalor factual merit. Thisdiscussio! alao intended beexhalstiv exclusive. is to or not for Wrongftl Acts, against InluredPersons certain Claims ELsl,thePolicyo y covrs whicl aredeiaedjn thePolicyasvariour itr acis, rrrols or oD srior! by I'sufdPc.sotls their (10)stats westchcster ootbeliablefor capacity such.ln addilio&Exclusio! as that shall A as Losson accomtof anyClaimfor a Wrongful by Insured in Act Persons theii capacity a dire.tor,ollicer,tsustee employee other Entityor the or ofanyorgardzatiotr thaoanOutside the Company. aresult no coyeragc afford.d As is undcr Policyfor Claiesagails_tlnsured for wrongdoing a capacity thal a! a dLector olncerofihe Compaly. in Prsons alleged or other Defendants Richard Schaden Richard Schader notcovrod E, utder thePolicy Thus, and F. arc to theextenl lrwsuit asserts the claims in theircapacity sbareholders as ofthe against them in Company, direcio$,o{nce$or shareholdeF a.s ofFienze Corp.or asaparticipant or bcrle ficiaryoflhg proposed transaction. Second, Exclusion (O states Wsichestg rot be liableund6Insudng A that shall Clauses A andC for Losson account anyClaim of arising ofor attributable any to bascd upon, oul Wrongful committed theInsured actual by Act kno{ldge nature u,ith or with ofits wrongfid judgmeltor adjudication to caus intnt damage a filal andnon-appealable if to advelse the Insured stablishs thcInsured that includes committed a Wrongful TheLawsuit ruch Act. allcgations whichmayresultin such ajudgbent adjudication, whichwent Westche,iter or in ,ot beliableundr slall IDsuring ClauJes or C for Lossdesoibed A withinthisExclusion.

07300377

Case 1:04-cv-00725-RPM

Document 45-17

Filed 07/21/2005

Page 5 of 7

O r.-nsnaHADDENt
Mr. PatrickE. Meyers Jarlntary 4,2002 4 Page

thrt shall Ihid, ExclusionA (7) states Westche.ster Dotbe liable underINuring Clauses A or C for Irss or! ac.ount ofany Claimbased upon,aiising out oq oi attributable th lnsurod to gaininSin faot anyprofit remrmeration fiflancial adyarttage $'hich theInsurcdwasqot or to legally entided. The lnwsuit includesallgatiods sorueo!.ll ofthe deftdantsgainad that profit, remuneralion filancial advadagcasdesrribedb this ExolusioD.To th xtelt any or defendanr lnsuredin fact rcalizedsuchpro6t remrmeratiod finallcial advantage, or Westchester shallnot be liable unde!InsudugClauses or C fo! Lossincunedby suchInsuredin comectiotr A \dth tl& Lawsuit. 6hallnot be liable uoderInsudngClarrso tbat E9ll!lh, ExclusionA (12) Etates Wesrchester C for Iass ot accountofaDy ClaiE based upor\ adsingout of, o! athibutableto the actualor ploposedpa)mEstby lhe Corryaly ofallegedly inadquatc consideratio!itr coDDction thc with Cornpaoy's purohase Securities of issued the Company, this Exclusiotrdoesnoi apply to by bul DefenseCostr. Thepioposediranractioneffectivlyresultr in the Companyp fthasing its Sccuritiosat all.godly inadquatc consideratio4 which eventno entity coverago i! under lnsuring ClauseC shall apply with respect any settlBentorjudgmnt ofsuoh claims. to Fifth, the Lawsuit alleges vadoust]?es ofwrorrgdoingasdseekscertainreliefwhich may be deemed uqiDlurdbleutrdtr ryplicablelavr, irl which eventWestchestcr shalltrot be liabl to precluderinsurance the extB applicablelaw thaefor. coverage to 9 Sl h, pursuant Subsection ofthe Policy's GeneralConditionsandLimitations, coverage undcrtlre Policy i6 in excess ofthc amountof anyotherinsurance applicableto the Lawsuit- Westchester rcquesis lhc ltsurcis givc notioeoftho Lawsuit to RoFl Insulancc rhat CompanyundrRoyal's Manageme Assoranoe Policy No. HP 606493,oonsisrqr.}viththe Company'sJanuary5, 1999noticc letterto Royal underthat Policy. Pleasc proviile to us a copy of suchnotice andaoy response Royalto thatnotic. by seventh.cost6incultd by the Insureds cldply wi$ any injunctiveor oihe! equitable to relief arenot a Covrcdl,oss utrderthe Policy ard will mt be paid by Westohester. D. r\eferse Afengcmant Westchetef, understafilsthat the following defendadt ltrsureds haveretaincdthe respective firms asdefense law connsel the Lawsuit. ill

07300378

Case 1:04-cv-00725-RPM

Document 45-17

Filed 07/21/2005

Page 6 of 7

O;--nnnaHADDEN,,t )
Mr. Patdck Meyels E. January 2002 4, Page 5

nefendantInsureds

Defense Counsel

Company

?ipe!,Ma$ury,Rudnick Wolfe & (NewYorD Brobeck, Phleger Harrisorr & Ll-P (Denver) Moyg Giles,O'KeefgVmeier& Gorel (Denver)

SpecialComllittee DilcctorDefeodants

Richaid E. Schader\RichardF. Schaden [andFienzeCorporation]

'We6tch6tr conseots these to defensc counselsubject the following: lo 1 . Eachlaw firm rtrustchargo only rasonable oecessory aodexpenses. fees atrd ln that regald,W6tchesterqua*ionsthe necessity New Yo* counselto fo! defendlitigarion in DeBveiaodlhs!fo!reserves dght to withhold the rcimbuBement ofcertai! havel costswhich may be deemed rmreasonable or unnecessary. Alro, Wertchestr questions reasonableness lhe ofthe hourly rate. oharged al leastthe Brobecklaw flm (ia up to $580pe! houf), by provideto us thc proposed Pleas hourly ratsfor the Pip[ Ma6ury law firm, Costsincured by theselan,frnls in colmection with non litigation matlersare not covred undrthe Policy. For example, scrvices or rendeacd axpcnses incurrcdin connection with the Company's proxy statment shareholder or meetingor witb rspec( shareholder !o appraisal rights arenot covered.

3. Westchester reserving ofits rights anddBfeDses explfied below. is all as
Westchester acknowledges rcceiptofyo!. DeceE$er1?,2001ttterwhich encloses copiesof invoicsftom thesethreelaw fims for services and rendered exonses ircurcd itr Novembd, 200t. Because aggregatc th6 arnoult ofthose invoicesis lesstba! the $250,000 tetentionapplicableto thel-awsuit,Wstchester defe. until a laterdateits analysis will oftbose invoicesfor purposcs ofevaluatingwhetherthe feesandexpenses refernced thereinare leasonable ncaessary. and

07300379

Case 1:04-cv-00725-RPM

Document 45-17

Filed 07/21/2005

Page 7 of 7

o ooou"ooo"N,"O '
Mr. PatrickE,Meyers Iawary 4,2002 Page 6

of D. Reservation Riqhts rqepectntlly W.stchester taserverall of its ights ald dcf.nsslrnderthc Policy and availableat lalv with respect this matter,includingwithoul limitltio!, the right to limit or deny to upouanyoftho aohal or potentialcoverage ooverago the Lawsuitbased for issuessutnfiffized and above,as.,vellasany additioaallerlrls,coadi],ions, exclusions provisiodsofthe Policy which set to aredetermild to be applicablc the Lawsuil Thediscussion forth aboveis prcmisdupon kno$,rrfacts,andarcby necessity subjectto change the allegationsil the Lawsuit andprcsently as additionalallegalionsafld fack aredeveloped cometo the attertioDofwestchester. or with Pleasc kepus closelyadvised ofmaterial dvelopments respect the Lawsuig to iachding but llot liElited to the following: l.

plgsdillgs, briefs, without of motiolls related atd inoluding Copies anymaterial for limitationanymotions dismiss motions summaryjudgmerf; to aod and scheduling orders courtorders rulirgs,iocluding or Copies anymatodal of g|Irllmary judgment; rulingsorl anymotion dismiss dolion for and to

3.

mediaiions 6ettlcmeot or offers; PriorlDticeofatrysettlemed negotiatioas, its and defense counsel complted Feliminaryliability analysis has Noticcwhen u.ith discussioN defense counsel defons stratcgy, thatwernayarrange so rcgardhg analysis strates/. that and

us. please conlact Ifyou havcqueslions regarding matler tbis

Sincerely, ARTER HADDENLT} &

Qffuz

Dan,lr Bailey

KemettrD. Milbauer
10571n6153

07300380