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Case 1:03-cv-03475-WSD Document 426 Filed 12/03/2007 Page 1 of 35
UNITED STATES DISTRICT COURTNORTHERN DISTRICT OF GEORGIA
ATLANTA DIVISION
IN RE FRIEDMAN'S, INC. SECURITIES Civil Action No:LITIGATION 1:03-CV-3475-WSD
STIPULATION AND AGREEMENT OF PARTIALSETTLEMENT WITH DEFENDANTS THOMAS WEISEL
PARTNERS, LLC, MCDONALD INVESTMENTS INC.,WEDBUSH MORGAN SECURITIES, INC., JMP SECURITIES,
AND MORGAN JOSEPH & CO. INC
This Stipulation and Agreement of Partial Settlement ("Stipulation") is
submitted pursuant to Rule 23 of the Federal Rules of Civil Procedure. Subject to
the approval of the Court, this Stipulation is entered into among Guerrilla Partners
LP, Ardsley Partners, LP, James E. Parker, Ashley Abernathy, Doug Havel and
James A. Hammann, ("Lead Plaintiffs") and Allan Bortel (collectively with Lead
Plaintiffs, "Plaintiffs") and Defendants Thomas Weisel Partners, LLC, McDonald
Investments Inc., Wedbush Morgan Securities, Inc., JMP Securities, and Morgan
Joseph & Co. Inc (collectively, the "Underwriter Defendants") (collectively with
Plaintiffs, the "Parties"), by and through their respective counsel.
WHEREAS:
A. Beginning on November 14, 2003, thirteen putative class actions
Case 1:03-cv-03475-WSD Document 426 Filed 12/03/2007 Page 2 of 35
alleging violations of federal securities laws — Gaines v. Friedman 's, Inc., No. 403-
228 (S.D. Ga.); Miller v. Friedman's, Inc., No. 1:03cv3476 (N.D. Ga.); Guerrilla
Partners LP v. Friedman 's, Inc., No. 1:03cv3475 (N.D. Ga.); Simons v. Friedman 's,
Inc., No. 1:03cv3495 (N.D. Ga.); DiFilippo v. Friedman's, Inc., No. 1:03cv3511
(N.D. Ga.); Young v. Friedman 's, Inc., No. 1:03cv3524 (N.D. Ga.); Pfeiffer v.
Friedman's, Inc., No. 1:03cv3564 (N.D. Ga.); Pfister v. Friedman's, Inc., No,
1:03cv3760 (N.D. Ga.); Liu v. Friedman's, Inc., No. 1:03cv3776 (M.D. Ga.);
Gastaldo v. Friedman 's, Inc., No. 1:03cv3798 (N.D. Ga.); Snyder v. Friedman 's,
Inc., No. 1:03cv3958 (N.D. Ga.); Bortel v. Friedman 's, Inc., No. 1:04cv0051 (M.D.
Ga.) (adding various defendants and claims under Sections 11 and 12 of the
Securities Act of 1933); and Loftin v. Friedman's, Inc., No. 1:03cv9079 (S.D.N.Y.)
— were filed in this and other Courts and were subsequently consolidated under the
above caption, and are hereinafter referred to as the "Action";
B. Plaintiffs filed a Corrected Consolidated and Amended Class Action
Complaint on September 23, 2004 (the "Complaint"). Plaintiffs generally alleged
that Defendants (as defined below) engaged in conduct that violated the U.S.
securities laws during the Class Period (as defined below), in violation of Sections
10(b) and 20(a) of the Securities Exchange Act of 1934 ("Exchange Act"), and Rule
10b-5 promulgated thereunder; and Sections 11, 12(a)(2) and 15 of the Securities
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•
Act of 1933 ("Securities Act");
C. The Complaint did not accuse the Underwriter Defendants of being
participants in any fraud but only named the Underwriter Defendants in claims
under Sections 11 and 12(a)(2) of the Securities Act. Plaintiffs did not assert that
the Underwriters violated Section 10(b) or 20(a) of the Securities Exchange Act of
1934 ("Exchange Act") and only those Class members who have standing to
maintain Section 11 and 12(a)(2) claims have asserted claims against the
Underwriter Defendants;
D. The Defendants, except Victor M. Suglia ("Suglia"), filed motions to
dismiss the Complaint between October 1 and October 27, 2004. On January 14,
2005, while the motions to dismiss were pending, Friedman's, Inc. ("Friedman's" or
the "Company") filed a petition for relief under Chapter 11 of the United States
Bankruptcy Code in the Bankruptcy Court for the Southern District of Georgia,
Savannah Division. The Action was stayed as against Friedman's by operation of
law;
E. By order dated September 7, 2005, the Court disposed of the motions to
dismiss. The Court denied in part and granted in part the motion to dismiss the
Section 10(b) claims against Defendant Ernst & Young LLP ("E&Y) (relating to
uncollectible accounts), dismissing specific allegations related to the 10(b) claims
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against E&Y. The Court denied the motion to dismiss the Section 10(b) claims
against Bradley J. Stinn ("Stinn"), and John Mauro ("Mauro"). The Court denied
the motion to dismiss the Section 11 allegations (and in the case of some defendants,
the 12(a)(2) allegations) against Defendants Sterling B. Brinkley ("Brinkley"), John
E. Cay, III ("Cay"), Robert W. Cruickshank ("Cruickshank"), David B. Parshall
("Parshall"), Mark C. Pickup ("Pickup") (since deceased and no longer a party to
this lawsuit), E&Y, and the Underwriter Defendants, except the Court granted the
motion as to defendant ABN ANTRO Rothschild LLC ("ABN AMRO"), which was
the lead underwriter of the February 6, 2002 Friedman's secondary offering. The
Court denied the motion to dismiss the claims under Section 15 of the Securities Act
against Defendants Stinn, Mauro, and Phillip Ean Cohen ("Cohen"). With respect
to Defendants Douglas Anderson ("Anderson"), Morgan Schiff & Co., MS Jewelers
Corp., and MS Jewelers LP, the Court granted their motions to dismiss in their
entirety;
F. On September 7, 2006, Plaintiffs, Suglia, Stinn, Mauro, Brinldey, Cay,
Cruickshank, Parshall and Anderson (the "Individual Settling Defendants") entered
into a Stipulation and Agreement of Settlement ("Individual Settling Defendants'
Stipulation"), resolving Plaintiffs' claims against the Individual Settling Defendants.
Plaintiffs and the Individual Settling Defendants filed a motion for preliminary
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approval of the Individual Settling Defendants' Stipulation on September 7, 2006;
G. Thereafter, Plaintiffs and E&Y, Cohen and the Underwriter Defendants
continued to litigate the Action. The Parties engaged in numerous arms' length
negotiations over the course of many months, including two formal mediations. The
Parties participated in the first mediation, presided over by Judge Layn Phillips, on
July 11, 2006. The Parties did not resolve Plaintiffs' claims that day, but continued
negotiations and entered into a tentative agreement to settle Plaintiffs' claims
against E&Y following the second mediation, before mediator Frank Jones, Esq., of
Jones, Cork & Miller, LLP, in New York on February 27, 2007;
H. Thereafter, Plaintiffs and the Underwriter Defendants engaged in merits
discovery, but also continued negotiations telephonically. In November 2007,
Plaintiffs and the Underwriter Defendants reached an agreement in principal.
I. The Underwriter Defendants deny any wrongdoing whatsoever and this
Stipulation shall in no event be construed or deemed to be evidence of any
wrongdoing whatsoever by the Underwriter Defendants or an admission or
concession on the part of the Underwriter Defendants with respect to any claim or of
any fault, liability, wrongdoing, or damage whatsoever, or any infirmity in the
defenses that the Underwriter Defendants have asserted. The Parties recognize that
the Action is being voluntarily settled after advice of counsel, and that the terms of
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the Settlement (as defined below) are fair, adequate and reasonable. The Parties
agree not to assert in any forum that the Action was brought by Plaintiffs or
defended by the Underwriter Defendants in bad faith or without a reasonable basis.
The Parties 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 and,
for purposes of the Court's mandatory Rule 11 finding, the Parties shall take, and act
consistently with, the position that no Rule 11 violation occurred. The Parties agree
that the amount paid and the other terms of the Settlement were negotiated at arm's-
length in good faith by the Parties, and reflect a settlement that was reached
voluntarily after consultation with experienced legal counsel. This Stipulation shall
not be construed or deemed to be a concession by any Plaintiff of any infirmity in
the claims asserted in the Action;
J. Plaintiffs' Co-Lead Counsel (as defined below) have conducted an
investigation and engaged in formal discovery relating to the claims and the
underlying events and transactions alleged in the Complaint. Plaintiffs, by their
counsel, have conducted discussions and arm's -length negotiations with counsel for
the Underwriter Defendants with respect to a compromise and settlement of the
Action with a view to settling the dispute and achieving the best relief possible,
consistent with the interests of the Class (as defined below); and
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K. Based upon their investigation, formal discovery and negotiations,
Plaintiffs' Co-Lead Counsel have concluded that the terms and conditions of this
Stipulation are fair, reasonable and adequate to Plaintiffs and the Class, and in their
best interests, and have 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 settling the Action; (b) the
attendant risks of litigation; and (c) the desirability of consummating the Settlement
as provided by this Stipulation.
NOW THEREFORE, without any admission or concession on the part of
Plaintiffs of any lack of merit of the Action whatsoever, and without any admission
or concession of any liability or wrongdoing or lack of merit in the defenses
whatsoever by the Underwriter Defendants, it is hereby STIPULATED AND
AGREED, by and among the Parties, through their respective attorneys, subject to
approval of the Court pursuant to Rule 23(e) of the Federal Rules of Civil
Procedure, and in consideration of the benefits flowing to the Parties from the
Settlement, that all Settled Claims (as defined below) as against the Released Parties
(as defined below) and all Settled Defendants' Claims (as defined below) shall be
compromised, settled, released and dismissed with prejudice, upon and subject to
the following terms and conditions:
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CERTAIN DEFINITIONS
1. In this Stipulation, for the purposes of this Settlement, the following
terms shall have the following meanings:
(a) "Authorized Claimant" means a Class Member who submits a
timely and valid Proof of Claim and Release form to the Claims Administrator.
(b) "Claims Administrator" means the firm The Garden City Group,
Inc., P.O. Box 9000, Merrick, NY 11566-9000, which shall administer the
Settlement.
(c) "Class" and "Class Members" mean all persons and entities who
purchased or otherwise acquired the common stock of Friedman's between January
26, 2000 and August 20, 2004, inclusive, and were damaged thereby. Excluded
from the Class are Friedman's, Settling Defendants (as defined below), Non-Settling
Defendant (as defined below), and Other Related Non-parties (as defined below);
members of the immediate family of each of the Settling Defendants, Non-Settling
Defendant, Friedman's, and Other Related Non-parties; any person, firm, trust,
corporation, officer, director or other individual or entity in which the Underwriter
Defendants, any Settling Defendant, Non-Settling Defendant, Other Related Non-
party, or Friedman's has a controlling interest or that is related to or affiliated with
the Underwriter Defendants, any of the Settling Defendants, Non-Settling
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Defendant, Other Related Non-parties, or Friedman's; and the legal representatives,
agents, affiliates, heirs, successors-in-interest or assigns of any such excluded party.
(d) "Class Period" means the period between January 26, 2000 and
August 20, 2004, inclusive.
(e) "Defendants" means E&Y, the Underwriter Defendants, Suglia,
Stinn, Mauro, BrinIdey, Cay, Cruickshank, Parshall, Anderson and Cohen.
(f) "Underwriter Defendants' Counsel" means Sullivan & Cromwell
LLP.
(g) "Effective Date of Settlement" or "Effective Date" means the
date upon which the Settlement contemplated by this Stipulation shall become
effective, as set forth in 1123 below.
(h) "Individual Settling Defendants" means Suglia, Stinn, Mauro,
•Brinkley, Cay, Cruickshank, Parshall, and Anderson.
(i) "Non-Settling Defendant" means Phillip Ean Cohen.
(j) "Notice" means the Notice of Pendency of Class Action and
Proposed Settlements with Certain Defendants, Motion for Attorneys' Fees and
Expenses and Settlement Fairness Hearing, which is to be sent to Class Members in
the form attached hereto as Exhibit 1 to Exhibit A.
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(k) "Order and Final Judgment" means the order the Parties propose
to be entered approving the Settlement in the form attached hereto as Exhibit B.
(1) "Other Related Non-parties" means Crescent Jewelers, Inc.,
EZCorp Inc., Morgan Schiff & Co., Inc., MS Jewelers Corporation, and MS
Jewelers Limited Partnership.
(m) "Preliminary Order" means the Order Preliminarily Approving
Settlement and Providing for Notice in the form attached hereto as Exhibit A.
(n) "Plaintiffs' Co-Lead Counsel" means Chitwood Harley Hanies
LLP, Saxena White P.A., and Schiffrin Barroway Topaz & Kessler, LLP
(o) "Publication Notice" means the Summary Notice of Pendency of
Class Action, Proposed Settlements with Certain Defendants and Settlement
Hearing in the form attached as Exhibit 3 to Exhibit A.
(p) "Registration Statement" means the Shelf Registration Statement
filed by Friedman's with the SEC on or about December 28, 2001, as amended from
time to time, from which the common stock sold in the Company's February 6, 2002
and September 19, 2003 public offerings originate.
(q) "Released Parties" means the Underwriter Defendants and the
current and former general partners, limited partners, principals, directors, officers,
employees, agents, affiliates, attorneys, accountants, insurers, subsidiaries, parents,
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and the legal representatives, heirs, successors in interest or assigns of the
Underwriter Defendants. Released Parties shall be construed to include ABN
AMR() in its capacity as an underwriter of the Company's February 6, 2002
offering. Released Parties shall not be construed to include the Defendant Cohen.
(r) "Settled Claims" means all claims, obligations, costs, damages,
losses, and demands whatsoever, rights, liabilities, actions and causes of action of
any nature, known or unknown (including Unknown Claims, as defined below),
suspected or unsuspected, fixed or contingent, in tort or in contract, at law or in
equity, including, without limitation, any claims of fraud, bad faith, breach of
covenant of good faith and fair dealing, or failure to act that: (i) were asserted in the
Complaint, or (ii) could have been asserted in the Complaint, upon the allegations,
transactions, facts, matters, or occurrences, representations or omissions that could
have been included in the Complaint, and that relate to the purchase or acquisition
of Friedman's common stock during the Class Period. "Settled Claims" shall not
include any claim against Cohen. "Settled Claims" shall also not include claims, if
any, against the Released Parties arising under the Employment Retirement Income
Security Act of 1974, 29 U.S.C. § 1001 et seq., which are not otherwise common to
all Class Members.
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(s) "Settled Defendants' Claims"-means all claims (including both
known claims and Unknown Claims), that have been or could have been asserted in
-the Action or any forum by any of the Released Parties against any of the Plaintiffs,
Class Members or their attorneys, arising from or related in any way to the purchase
of Friedman's common stock during the Class Period or the prosecution of any
action or proceeding based on such claims (except for claims to enforce the
provisions of the settlement).
(t) "Settlement" means the partial settlement contemplated by the
Parties in this Stipulation.
(u) "Settling Defendants" means E&Y, Suglia, Stinn, Mauro,
Brinkley, Cay, Cruickshank, Parshall, Anderson and the Underwriter Defendants.
(v) "Unknown Claims" means any claims which any Party does not
know or suspect to exist in such Party's favor arising from or in any way related to
the purchase of Friedman's common stock during the Class Period. This does not
include any claim to enforce the provisions of the Settlement. With respect to any
and all Settled Claims and Settled Defendants' Claims, upon the Effective Date,
Plaintiffs and the Underwriter Defendants shall expressly waive, and Class
Members and Released Parties will be deemed to have waived by operation of the
Order and Final Judgment, the provisions, rights and benefits conferred by any law
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of any state or territory of the United States, or principle of common law, which is
similar, comparable or equivalent to California Civil Code § 1542, which provides:
A general release does not extend to claims which the creditor doesnot know or suspect to exist in his or her favor at the time ofexecuting the release, which if known by him or her must havematerially affected his or her settlement with the debtor.
Plaintiffs and the Underwriter Defendants acknowledge, and Class Members and
Released Parties 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.
SCOPE AND EFFECT OF SETTLEMENT
2. The obligations incurred pursuant to this Stipulation shall be in full and
final disposition of the Action as between the Parties, any and all Settled Claims as
against all Released Parties, and any and all Settled Defendants' Claims.
3. Releases:
(a) Upon the Effective Date of this Settlement, Plaintiffs and Class
Members on behalf of themselves, their heirs, executors, administrators, successors
and assigns, shall, with respect to each and every Settled Claim, release and forever
discharge, and shall forever be enjoined from prosecuting, any Settled Claims
against any of the Released Parties.
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(b) Upon the Effective Date of this Settlement, the Underwriter
Defendants, on behalf of themselves and the Released Parties, shall release and
forever discharge each and every of the Settled Defendants' Claims, and shall
forever be enjoined from prosecuting the Settled Defendants' Claims.
THE SETTLEMENT CONSIDERATION
4. The Underwriter Defendants shall pay $2.5 million ("Cash Settlement
Amount") into an interest-bearing escrow account established by Plaintiffs' Co-
Lead Counsel, as Escrow Agents for the Gross Settlement Fund (i.e., the Cash
Settlement Amount and any interest earned thereon), in the name of the Friedman's
Underwriters Settlement Fund by the later of i) forty-five (45) days following the
execution of this Stipulation or ii) fifteen (15) days following the Court's entry of
the Preliminary Approval Order.
5. Escrow and Distribution:
(a) The Gross Settlement Fund, net of any Taxes (as defined below)
on the income thereof, shall be used to pay: (i) the Notice and Administration Costs
referred to in II 7 hereof; (ii) the attorneys' expense award referred to in '11 8 hereof;
and (iii) the remaining administration expenses referred to in 11 9 hereof. The •
balance of the Gross Settlement Fund after the above payments shall be the "Net
Settlement Fund", which shall be distributed to the Authorized Claimants as
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provided in in 10-12 hereof. The Gross Settlement Fund shall be held in escrow
hereunder prior to the Effective Date by Plaintiffs' Co-Lead Counsel as Escrow
Agents for the Gross Settlement Fund. All funds held by the Escrow Agents shall
be deemed to be in the custody of the Court and shall remain subject to the
jurisdiction of the Court until such time as the funds shall be distributed or returned
to the persons or entities paying the same pursuant to this Stipulation and/or further
order of the Court. The Escrow Agents shall invest any funds in excess of $100,000
in short-term United States Treasury Securities (or a mutual fund invested solely in
such instruments) and shall collect and reinvest all interest accrued thereon. Any
funds held in escrow in an amount of less than $100,000 may be held in an interest-
bearing bank account insured by the FDIC. The Parties agree that the Gross
Settlement Fund is intended to be a Qualified Settlement Fund within the meaning
of Treasury Regulation § 1.468B-I and that the Escrow Agents, as administrators of
the Gross Settlement Fund within the meaning of Treasury Regulation § 1.468B-
2(k)(3), shall be responsible for filing tax returns for the Gross Settlement Fund and
paying from the Gross Settlement Fund any Taxes (as defined below) owed with
respect to the Gross Settlement Fund. The Underwriter Defendants' Counsel agrees
to provide promptly to the Escrow Agents the statement described in Treasury
Regulation § 1.468B-3(e).
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(b) All (i) taxes on the income of the Gross Settlement Fund and (ii)
expenses and costs incurred in connection with the taxation of the Gross Settlement
Fund (including, without limitation, expenses of tax attorneys and accountants)
(collectively, "Taxes") shall be paid out of the Gross Settlement Fund and shall be
considered to be a cost of administration of the Settlement and shall be timely paid
by the Escrow Agents without prior order of the Court.
ADMINISTRATION
6. The Claims Administrator shall administer the Settlement subject to the
jurisdiction of the Court. The Underwriter Defendants shall have no responsibility
for the administration of the Settlement and shall have no liability to the Class in
connection with such administration. The Underwriter Defendants' Counsel shall
cooperate in the administration of the Settlement to the extent reasonably necessary
to effectuate its terms, but shall have no liability to the Class in connection with
such administration.
7. Plaintiffs' Co-Lead Counsel may pay from the Cash Settlement
Amount, with the approval of the Court, the reasonable costs and expenses
associated with identifying Class Members and effecting by mail Notice and
Publication Notice to the Class, and the administration of the Settlement, including
without limitation, the actual costs of publication, printing and mailing the Notice,
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reimbursements to nominee owners for forwarding notice to their beneficial owners,
and the administrative expenses incurred and fees charged by the Claims
Administrator in connection with providing notice and processing the submitted
claims. The Claims Administrator shall submit expenses associated with the
administration of the Settlement Fund to the Court in a timely manner so that
expenses in a particular calendar year can be deducted from interest income earned
in such calendar year.
ATTORNEYS' EXPENSES
8. Plaintiffs' Co-Lead Counsel will apply to the Court for an award from
the Gross Settlement Fund of attorneys' fees and expenses. To the extent the Court
permits, such amounts as are awarded by the Court, plus accrued interest in an
appropriate amount, shall be payable from the Gross Settlement Fund to Plaintiffs'
Co-Lead Counsel immediately upon award, notwithstanding the existence of any
timely filed objections thereto, or potential for appeal therefrom, or collateral attack
on the Settlement or any part thereof, subject to Plaintiffs' Co-Lead Counsel's
undertaking, in writing, to repay within 10 days the amount of attorneys' fees
received and attributable on a percentage basis to the $2.5 million paid by the
Underwriter Defendants, with interest, to the Gross Settlement Fund if and when, as
a result of any appeal and/or further proceedings on remand, or successful collateral
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attack, the Settlement, or the fee or expense award, is reduced or reversed. This
obligation on the part of Plaintiffs' Co-Lead Counsel may be summarily enforced
by Order of the Court.
ADMINISTRATION EXPENSES
9. Plaintiffs' Co-Lead Counsel will apply to the Court, on notice to the
Underwriter 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, if the Effective Date has occurred, directing payment of the Net
Settlement Fund to Authorized Claimants.
DISTRIBUTION TO AUTHORIZED CLAIMANTS
10. 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 1 to Exhibit A, or in such other Plan of Allocation as the
Court approves).
11. The Plan of Allocation proposed in the Notice is not a necessary term
of this Stipulation, and it is not a condition of this Stipulation that any particular
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Plan of Allocation be approved. Any Plan of Allocation presented to the Court for
approval shall provide for the calculation of Recognized Claims arising out of
purchases in the Offerings under the statutory scheme at §15 U.S.C. § 77(k)(e).
12. Each Authorized Claimant shall be allocated a pro rata share of the Net
Settlement Fund based on his, her or its Recognized Claim compared to the total
Recognized Claims of all accepted claimants. This is not a claims-made settlement.
The Underwriter Defendants shall not be entitled to get back any of the settlement
monies once the Settlement becomes final The Underwriter Defendants shall have
no involvement in reviewing claims and no responsibility or liability for any
allocation or disbursement of Settlement Fund proceeds.
ADMINISTRATION OF THE SETTLEMENT
13. Any member of the Class who does not submit a valid Proof of Claim
and Release form ("Proof of Claim") will not be 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 and the Settlement, including the terms of the judgment to
be entered in the Action and the releases provided for herein, and will be barred
from bringing any action against the Released Parties concerning the Settled
Claims.
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14. The Claims Administrator shall process the Proofs of Claim (see
attached Exhibit 2 to Exhibit A) and, after entry of the Class Distribution Order,
distribute the Net Settlement Fund to the Authorized Claimants. Except for their
obligation to cause payment of the Cash Settlement Amount as provided herein, the
Underwriter Defendants shall have no liability, obligation or responsibility for the
administration of the Settlement or disbursement of the Net Settlement Fund.
Plaintiffs' Co-Lead Counsel shall have the right, but not the obligation, to waive
what they deem to be formal or technical defects in any Proofs of Claim submitted
in the interests of achieving substantial justice.
15. For purposes of determining the extent, if any, to which a Class
Member shall be entitled to be treated as an Authorized Claimant and be able to
participate in the Net Settlement Fund, the following conditions shall apply:
(a) Each Class Member shall be required to submit a Proof of Claim,
substantially in the form attached as Exhibit 2 to Exhibit A, to the Claims
Administrator at the Post Office Box indicated in the Notice, postmarked not later
than 30 days after the date of the Settlement Fairness Hearing, 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
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such Class Member is approved), but shall in all other respects be bound by all of
the terms of this Stipulation and the Settlement, including the terms of the judgment
to be entered in the Action and the releases provided for herein, and will be barred
from bringing any action against the Released Parties concerning the Settled Claims;
(b) The Proof of Claim submitted by each Class Member must
satisfy the following conditions: (i) it must be properly completed, signed and
submitted in a timely manner in accordance with the provisions of the preceding
subparagraph; (ii) for Class Members who purchased more than a number of shares
of Friedman's common stock during the Class Period, as stated in the Preliminary
Order, it must be accompanied by adequate supporting documentation for the
transactions reported therein, in the form of broker confirmation slips, broker
account statements, an authorized statement from the broker containing the
transactional information found in a broker confirmation slip, or such other
documentation as is deemed adequate by Plaintiffs' Co-Lead Counsel; (iii) if the
person executing the Proof of Claim is acting in a representative capacity, a
certification of his or her current authority to act on behalf of the Class Member
must be included in the Proof of Claim; and (iv) the Proof of Claim must be
complete and contain no material deletions or modifications of any of the printed
matter contained therein;
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(c) Each Proof of Claim shall be submitted to and reviewed by the
Claims Administrator, who shall determine in accordance with this Stipulation and
the approved 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 Proofs of Claim submitted. The Claims Administrator 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
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 20 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. If a dispute concerning a claim cannot be
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otherwise resolved, Plaintiffs' Co-Lead Counsel shall thereafter present the request
for review to the Court; and
(f) The administrative determinations of the Claims Administrator
accepting and rejecting claims shall be presented to the Court, on notice to the
Underwriter Defendants' Counsel, for approval by the Court in the Class
Distribution Order.
16. Each claimant shall be deemed to have submitted to the jurisdiction of
the Court with respect to the claimant's claim, and the claim will be subject to
investigation and discovery under the Federal Rules of Civil Procedure, provided
that such investigation and discovery shall be limited to that claimant's status as a
Class Member and the validity and amount of the claimant's claim. No discovery
shall be allowed on the merits of the Action or Settlement in connection with
processing of the Proofs of Claim.
17. Payment pursuant to this Stipulation shall be deemed final and
conclusive against all Class Members. All Class Members whose claims are not
approved by the Court 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 judgment to be entered in the Action and the
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releases provided for herein, and will be barred from bringing any action against the
Released Parties concerning the Settled Claims.
18. All proceedings with respect to the administration, processing and
determination of claims described in .5 15 of this Stipulation and the determination
of all controversies relating thereto, including disputed questions of law and fact
-with respect to the validity of claims, shall be subject to the jurisdiction of the
Court.
19. 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 therefore 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 therefore has expired; and (iv)
all costs of administration have been paid.
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TERMS OF ORDER FOR NOTICE AND HEARING
20. Promptly after this Stipulation has been fully executed, Plaintiffs' Co-
Lead Counsel and the Underwriter Defendants' Counsel jointly shall apply to the
Court for entry of the Preliminary Order in the form annexed hereto as Exhibit A.
The Parties shall use their best efforts to obtain final approval of the Settlement.
TERMS OF ORDER AND FINAL JUDGMENT
21. If the Settlement contemplated by this Stipulation is approved by the
Court, counsel for the Parties shall request that the Court enter an Order and Final
Judgment substantially in the form annexed hereto as Exhibit B.
SUPPLEMENTAL AGREEMENT
22. Simultaneously herewith, Plaintiffs' Co-Lead Counsel and the
Underwriter Defendants' Counsel are executing a "Supplemental Agreement"
setting forth certain conditions under which this Settlement may be terminated by
the Underwriter Defendants if more than a certain percentage of the shares
purchased in the February 6, 2002 and September 19, 2003 offerings by potential
Class Members exclude themselves from the Class or if any of the Lead Plaintiffs
opt-out of the Class. The Supplemental Agreement shall be filed under seal prior to
the Settlement Fairness Hearing. In the event of a termination of this Settlement
pursuant to the Supplemental Agreement, this Stipulation shall become null and
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void and of no further force and effect and the provisions of 1125 shall apply.
Notwithstanding the foregoing, the Stipulation shall not become null and void as a
result of the election by the Underwriter Defendants to exercise their option to
withdraw from the Stipulation pursuant to the Supplemental Agreement until the
conditions set forth in the Supplemental Agreement have been satisfied.
EFFECTIVE DATE OF SETTLEMENT, WAIVER OR TERMINATION
23. The Effective Date of Settlement shall be the date when all the
following shall have occurred:
(a) Payment by the Underwriter Defendants of the Cash Settlement
Amount as provided for in if 4;
(b) entry by the Court of the Preliminary Order substantially in the
form annexed hereto as Exhibit A;
(c) 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
(d) entry by the Court of an Order and Final Judgment, substantially
in the form as proposed by the Parties in Exhibit B hereto, and the expiration of any
time for appeal or review of such Order and Final Judgment, or, if any appeal is
filed and not dismissed, after such Order and Final Judgment is upheld on appeal in
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all material respects and is no longer subject to review upon appeal or review by
writ of certiorari, or, in the event that the Court enters an order and final judgment in
a form other than provided herein ("Alternative Judgment") and none of the Parties
who has the right to do so elects to terminate this Settlement, the date that such
Alternative Judgment becomes final and no longer subject to appeal or review.
24. The Underwriter Defendants' Counsel or Plaintiffs' Co-Lead Counsel
shall have the right to terminate the Settlement and this Stipulation by providing
written notice of their election to do so ("Termination Notice") to all other Parties
within 30 days of: (i) the Court's declining to enter the Preliminary Order in any
material respect; (ii) the Court's refusal to approve this Stipulation or any material
part of it; (iii) the Court's declining to enter the Order and Final Judgment in any
material respect; (iv) the date upon which the Order and Final Judgment is modified
or reversed in any material respect by the Eleventh Circuit Court of Appeals or the
United States Supreme Court, except with respect to any award of attorneys' fees
and costs to Plaintiffs' counsel; or (v) the date upon which an Alternative Judgment
is modified or reversed in any material respect by the Eleventh Circuit Court of
Appeals or the United States Supreme Court, except with respect to any award of
attorneys' fees and costs to Plaintiffs' counsel. Plaintiffs' Co-Lead Counsel shall
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also have the right to terminate this Settlement if the payment provided for in If 4 of
this Stipulation is not timely made.
25. Except as otherwise provided herein, in the event the Settlement is
terminated or fails to become effective for any reason, then the Parties shall be
deemed to have reverted to their respective status in the Action as of November 1,
2007 and, except as otherwise expressly provided, the Parties shall proceed in all
respects as if this Stipulation and any related orders had not been entered, and any
portion of the Cash Settlement Amount previously paid or caused to be paid by the
Underwriter Defendants, together with any interest earned thereon, less any Taxes
due with respect to such income, and less costs of administration and notice
incurred and paid or payable from the Cash Settlement Amount shall be returned to
the persons or entities paying the same. The return of such portion of the Cash
Settlement Amount shall be made within 10 business days of the failure of any of
the requirements to the Effective Date to have occurred.
NO ADMISSION OF WRONGDOING
26. This Stipulation, whether or not consummated, and any proceedings
taken pursuant to it:
(a) shall not be asserted, offered or received against the Underwriter
Defendants as evidence of or construed as or deemed to be evidence of (i) any
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wrongdoing whatsoever, or (ii) any presumption, concession, or admission by the
Underwriter Defendants with respect to the truth of any fact alleged by any of the
Plaintiffs or (iii) the validity of any claim that has been or could have been asserted
in the Action or in any litigation, or (iv) the deficiency of any defense that has been
or could have been asserted in the Action or in any litigation, or (v) any liability,
negligence, fault, or wrongdoing of the Underwriter Defendants, or (vi) any
presumption, concession or admission of any fault, misrepresentation or omission
with respect to any statement or written document approved or made by the
Underwriter Defendants;
(b) shall not be asserted, offered or received against the Underwriter
Defendants 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 the Underwriter Defendants, 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 Underwriter Defendants may refer to it
to effectuate the liability protection granted to them hereunder;
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(c) shall not be construed against the Underwriter Defendants 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
(d) shall not be construed as or received in evidence as an admission,
concession or presumption against Plaintiffs, any of the Class Members, or
Plaintiffs' Co-Lead Counsel that any of their claims are without merit, or that any
defenses asserted by the Underwriter Defendants have any merit, or that damages
recoverable under the complaints would not have exceeded the Gross Settlement
Fund.
MISCELLANEOUS PROVISIONS
27. All of the exhibits attached hereto are hereby incorporated by reference
as though fully set forth herein.
28. The Underwriter Defendants warrant, as to the payments made by or on
behalf of them pursuant to 4 above, that they were not insolvent, nor did, nor will,
the payment required to be made by or on behalf of them render the Underwriter
Defendants insolvent within the meaning of and/or for the purposes of the United
States Bankruptcy Code, including §§ 101 and 547 thereof. This warranty is made
by the Underwriter Defendants and not by such Underwriter Defendants' Counsel.
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29. If a case is commenced in respect to the Underwriter Defendants under
the United States Bankruptcy Code, 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 transfer of money to the Gross
Settlement Fund or any portion thereof by or on behalf of the Underwriter
Defendants to be a preference, voidable transfer, fraudulent transfer or similar
transaction and any portion thereof is required to be returned, and such amount is
not promptly deposited to the Gross Settlement Fund by any of the Settling
Defendants, then, at the election of Plaintiffs' Co-Lead Counsel, the Parties shall
jointly move the Court to vacate and set aside the releases given and judgment
entered in favor of the Underwriter Defendants pursuant to this Stipulation, which
releases and judgment shall be null and void, and the Parties shall be restored to
their respective positions in the Action as of November 1, 2007 and any cash
amounts in the Gross Settlement Fund shall be returned as provided 25 above.
30. This Stipulation may not be modified or amended, nor may any of its
provisions be waived except by a writing signed by all the Parties or their
successors in interest.
31. The headings herein are used for the purpose of convenience only and
are not meant to have legal effect.
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32. 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 and expenses to Plaintiffs' Co-Lead Counsel and enforcing the terms of this
Stipulation.
33. 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.
34. This Stipulation and its exhibits and the Supplemental Agreement
constitute the entire agreement among the Parties concerning the Settlement of the
Action, and no representations, warranties, or inducements have been made by any
Party hereto concerning this Stipulation and its exhibits and the Supplemental
Agreement other than those contained and memorialized in such documents.
35. 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.
36. This Stipulation shall be binding upon, and inure to the benefit of, the
successors and assigns of the Parties.
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37. 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 Georgia without regard to conflicts of laws, except to
the extent that federal law requires that federal law governs.
38. 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 have contributed
substantially and materially to the preparation of this Stipulation.
39. 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.
40. Plaintiffs' Co-Lead Counsel and the Underwriter Defendants' Counsel
agree to cooperate fully with one another in seeking Court approval of the
Preliminary Order, the Stipulation and the Settlement, 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.
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-
Dated: December 3, 2007 CHITWOOD HARLEY HARNES LLP
By: 64ed.. (44 WE.Martin II) . LchitwoodGregory E. KellerMeryl W. Edelstein
1230 Peachtree Street, NE2300 Promenade IIAtlanta, GA 30309Telephone: (404) 873-3900Facsimile: (404) 876-4476Plaintiffs' Co-Lead Counsel
Dated: December 3, 2007 SCHIFFRIN BARROWAY TOPAZ &ICESSLER, LLP
BY: I„A dr: ZivitzKay E. SicklesChristopher Nelson
280 King of Prussia RoadRadnor, PA 19087Telephone: (610) 667-7706Facsimile: (610) 667-7056Plaintiffs' Co-Lead Counsel
Dated: December 3, 2007 SAXENA WHITE PA.
BY: Veph P',/14/1,-( / /4-fMay S. SttxenaChristopher S. JonesJoseph E. White
2424 N. Federal Hwy., Suite 257Boca Raton, FL 33431Telephone: (561) 394-3399Facsimile: (561) 394-3382Plaintiffs' Co-Lead Counsel
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Case 1:03-cv-03475-WSD Document 426 Filed 12/03/2007 Page 35 of 35
Dated: December 3, 2007 SUL(177,R :0,
By: Robert A. Sacks
1888 Century Park EastLos Angeles, CA 90067Telephone: (310) 712-6600
Jason de BrettevilleArnie D. RooneySULLIVAN & CROMW-ELL LLP1870 Embarcadero RoadPalo Alto, CA 94303Telephone: (650) 461-5600Facsimile: (650) 461-5700
Attorneys for Defendants Thomas WeiselPartners, LLC, McDonald InvestmentsInc., Wedbush Morgan Securities, Inc.,JMP Securities, and Morgan Joseph &Co. Inc
35