UNITED STATES DISTRICT COURT MIDDLE DISTRICT OF NORTH CAROLINA
MIDDLE
DISTRICT OF NORTH CAROLINA
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▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, On Behalf of Herself and All Others Similarly
Situated
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Lead
Plaintiff,
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vs.
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Civ.
No. 07-CV-00785-WO-PTS
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SMART
ONLINE, INC., et
al.
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Defendants.
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This Stipulation and Agreement of Settlement, dated as of June
18, 2010, is made and entered into pursuant to Rule 23 of the Federal Rules of
Civil Procedure and contains the terms of a settlement by and among
Lead Plaintiff1on
behalf of herself and Members of the Settlement Class and the Settling
Defendants, through their respective counsel. This Stipulation is intended by
the Settling Parties to fully, finally, and forever resolve, discharge, and
settle the Released Claims against the Released Parties, upon and subject to the
terms and conditions hereof and subject to the approval by the
Court.
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I.
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THE
CLASS ACTION
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On or
after September 7, 2007, a class action, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ Online, Inc., et
al., Civ. No. 07-CV-00785-WO-PTS (the “Action”), was filed in this Court
on October 18, 2007 as a class action alleging on behalf of purchasers of Smart
Online securities during a defined period of time violations of the federal
securities laws. The suit seeks relief on behalf of a class consisting of all
persons who purchased or otherwise acquired the publicly traded securities of
Smart Online, Inc. (“Smart Online” or the “Company”) during the Class Period and
who were damaged thereby. The class action seeks remedies under Section 10(b) of
the Securities Exchange Act of 1934, 15 U.S.C. §78j, and Securities &
Exchange Commission Rule 10b-5, 17 C.F.R. §240.10b-5, thereunder arising out of
the Defendants’ alleged misconduct.
By Order
dated June 24, 2008, the Court appointed ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ as Lead Plaintiff
and approved her selection of ▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇ LLC2
and ▇▇▇▇▇▇ Piven, a Professional Corporation as Lead Counsel for the
Class and S. Ranchor ▇▇▇▇▇▇, III as Liaison Counsel for the Class.
2 At the
time of the appointment ▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇ LLC was known as ▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇, LLC.
1
The
operative complaint in the Action is the Corrected Class Action Complaint filed
September 18, 2008 and captioned Beauregard ▇. ▇▇▇▇▇ Online, Inc., et
al.
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II.
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SETTLING
DEFENDANTS’ DENIALS OF WRONGDOING AND
LIABILITY
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The
Settling Defendants have denied and continue to deny each and all of the claims
and contentions alleged by Lead Plaintiff. The Settling Defendants expressly
have denied and continue to deny all charges of wrongdoing or liability against
them or any of them arising out of any of the conduct, statements, acts or
omissions alleged, or that could have been alleged, in the Action. The Settling
Defendants also have denied and continue to deny, inter alia, the allegations
that Lead Plaintiff or Settlement Class Members have suffered damage, that the
prices of Smart Online securities were artificially inflated by reason of
alleged manipulation, misrepresentations, non-disclosures or otherwise, or that
Lead Plaintiff or the Settlement Class Members were harmed by any of the conduct
alleged in the Action.
Nonetheless,
the Settling Defendants have concluded that further conduct of the Action would
be protracted, expensive, and distracting and that it is desirable that the
Action be fully and finally settled in the manner and upon the terms and
conditions set forth in this Stipulation. The Settling Defendants also have
taken into account the uncertainty and risks inherent in any litigation,
especially in complex cases like the instant Action. The Settling Defendants
have therefore determined that it is desirable that the Action be settled in the
manner and upon the terms and conditions set forth in this
Stipulation.
2
Neither
this Stipulation nor any document referred to herein nor any action taken to
carry out this Stipulation is, may be construed as or may be used as an
admission by or against the Settling Defendants, or any of them, of any fault,
wrongdoing or liability whatsoever. Entering into or carrying out this
Stipulation (or the Exhibits hereto) and any negotiations or proceedings related
hereto shall not in any event be construed as, or be deemed to be evidence of,
an admission or concession with regard to Lead Plaintiff’s claims or contrary to
the Settling Defendants’ denials and defenses, and shall not be offered by any
of the Settling Parties or Settlement Class Members or received in evidence in
any action or proceeding in any court, administrative agency, or other tribunal
for any purpose whatsoever other than to enforce the provisions of this
Stipulation (and the Exhibits hereto) or the provisions of any related agreement
or release, or in any subsequent action against or by the Settling Defendants to
support a defense of res
judicata, collateral estoppel, release, or other theory of claim or issue
preclusion or similar defense.
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III.
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CLAIMS
OF LEAD PLAINTIFF AND BENEFITS OF
SETTLEMENT
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Lead
Plaintiff believes that the claims asserted in the Action have merit. However,
Lead Plaintiff recognizes and acknowledges the expense and length of continued
proceedings which would be necessary to prosecute the Action against the
Defendants through trial and appeal. Lead Plaintiff has also taken into account
the uncertain outcome and the risk of any litigation, especially in complex
matters such as the Action, as well as the difficulties and delays inherent in
such litigation. Lead Plaintiff is also mindful of the inherent problems of
proof of, and possible defenses to, the violations asserted in the Action. Lead
Plaintiff believes that the Settlement set forth in this Stipulation confers
substantial immediate benefits upon and is in the best interest of the
Settlement Class.
3
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IV.
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TERMS
OF STIPULATION AND AGREEMENT OF
SETTLEMENT
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NOW,
THEREFORE, IT IS HEREBY STIPULATED AND AGREED by Lead Plaintiff (for herself and
Settlement Class Members), and the Settling Defendants, by and through their
respective counsel or attorneys of record, that, subject to the approval of the
Court, the Action, and the Released Claims, shall be finally and fully
compromised, settled and released, and the Action shall be dismissed with
prejudice, upon and subject to the terms and conditions of the Stipulation, as
follows.
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1.
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Definitions
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As used
in the Stipulation the following terms have the meanings specified
below:
1.1 “Action”
means Beauregard ▇. ▇▇▇▇▇
Online, Inc., et al., Civ. No.
07-00785-WO-PTS, pending in the United States District Court for the Middle
District of North Carolina;
1.2 “Assignment
Agreement” means the Agreement for Assignment of Claims entered between Smart
Online and Lead Plaintiff, pursuant to which Smart Online assigns its claims
against Sherb & Co., Jesup & Lamont, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇, and ▇▇▇▇▇▇
to Lead Plaintiff for the benefit of the Settlement Class;
1.3 “Authorized
Claimant” means any Settlement Class Member whose claim for recovery has been
allowed pursuant to the terms of the Stipulation;
1.4 “Bar
Order” means the provisions in the Judgments providing that certain claims, as
provided for in 15 U.S.C. §78u-4(f)(7) and under state and federal law and as
set forth in ¶4.3, are permanently and forever barred;
1.5 “Claimant”
means any Class Member who submits a Proof of Claim and Release in such form and
manner, and within such time, as the Court shall prescribe;
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1.6 “Claims
Administrator” means a claims administration firm to be selected by Lead
Plaintiffs’ Counsel;
1.7 “Class
Fee and Expense Application” means an application for distributions from the
Class Settlement Fund for: (a) an award of attorneys’ fees; (b) plus
reimbursement of expenses incurred in connection with prosecuting the Class
Action; (c) reimbursement of time and expenses incurred in administering the
Settlement; (d) plus any interest on such attorneys’ fees and expenses at the
same rate and for the same periods as earned by the Settlement Fund (until paid)
as may be awarded by the Court; and (e) reimbursement of the time and expenses
of Lead Plaintiff in prosecuting the Action;
1.8 “Class
Fee and Expense Award” means Lead Plaintiff’s attorneys’ fees and expenses with
interest thereon, if and to the extent allowed by the Court;
1.9 “Class
Notice and Administration Fund,” means the fund established for the payment of
costs and expenses reasonably and actually incurred in connection with providing
notice to the Settlement Class, identifying and locating Settlement Class
Members, assisting with the filing of claims, administering and distributing the
Net Settlement Fund to Authorized Claimants, processing Proof of Claim and
Release forms and paying escrow fees and costs, if any, pursuant to ¶2.16
below.
1.10 “Class
Period” means the period from May 2, 2005 to September 28, 2007,
inclusive;
1.11 “Class
Settlement Fund” means the total settlement consideration, consisting of the
principal amount of $462,500 in cash, plus any interest earned thereon, and the
Smart Online Settlement Stock. The Class Settlement Fund will be paid pursuant
to ¶5.1-5.2 below;
1.12 “Complaint”
means the Corrected Class Action Complaint filed September 18, 2008 and
captioned ▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Online, Inc., et al.;
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1.13 “Court”
means the United States District Court for the Middle District of North
Carolina;
1.14 “Defendants”
means Smart Online and the Individual Defendants;
1.15 “Escrow
Agent” means ▇▇▇▇▇▇ Piven or its successor in interest;
1.16 “Effective
Date” means the first date by which all of the events and conditions specified
in ¶7.1 of the Stipulation have been met and have occurred;
1.17 “Excluded
Defendants” means ▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇ and ▇▇▇▇▇
& Co., LLP;
1.18 “Final”
means the date when the last of the following has occurred with respect to the
Judgment: (a) the date of final affirmance on an appeal of the Judgment, the
expiration of the time for a petition for or a denial of a writ of certiorari to
review the Judgment and, if certiorari is granted, the date of final affirmance
of the Judgment following review pursuant to that grant; or (b) the date of
final dismissal of any appeal from the Judgment or the final dismissal of any
proceeding on certiorari to review the Judgment; or (c) if no appeal is filed,
the expiration date of the applicable time for the filing or noticing of any
appeal from the Judgment. Any proceeding or order, or any appeal or petition for
a writ of certiorari, pertaining solely to any Plan of Allocation and/or
application for or award of attorneys’ fees or expenses, shall not in any way
delay or preclude the Judgment from becoming Final;
1.19 “Individual
Defendants” means ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ (“Sinigaglia”), ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
(“▇▇▇▇▇▇▇▇”), ▇▇▇▇▇ ▇.▇. ▇▇▇▇▇ (“▇▇▇▇▇”), ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ (called “▇▇▇▇▇ ▇▇▇▇▇▇▇” in the Complaint), ▇▇▇▇▇ ▇.
▇▇▇▇ (“Coll”), ▇. ▇▇▇▇▇ ▇▇▇▇▇, ▇▇. (“▇▇▇▇▇”), ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ (“Pouponnot”),
▇▇▇▇▇▇ ▇▇▇▇ (“▇▇▇▇”), ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (“▇▇▇▇▇▇”), ▇▇▇▇▇▇ ▇. ▇▇▇▇ (“▇▇▇▇”),
▇▇▇▇▇ & Co., LLP (“Sherb & Co.”), ▇▇▇▇▇ ▇▇▇▇▇▇▇ (“▇▇▇▇▇▇▇”), ▇▇▇▇ ▇▇▇▇▇▇
(“▇▇▇▇▇▇”), ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ (“▇▇▇▇▇▇”), ▇▇▇▇▇ ▇▇▇▇▇▇ (“▇▇▇▇▇▇”), Maxim Group, LLC
(“Maxim Group”), and Jesup & ▇▇▇▇▇▇ Securities Corp.(“Jesup &
▇▇▇▇▇▇”);
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1.20 “Judgment”
means the final judgment to be rendered by the Court in the Action,
substantially in the form attached hereto as Exhibit B;
1.21 “Lead
Plaintiff” means ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇;
1.22 “Lead
Plaintiff’s Counsel” means ▇▇▇▇▇ ▇.▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇ Piven, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇
▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ (“▇▇▇▇▇▇ Piven”); ▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ &
▇▇▇▇, LLC, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(“KSF”);.
1.23 “Net
Settlement Fund” means the balance of the Class Settlement Fund after payment of
the items set forth in ¶5.1(a)-5.1(d).
1.24 “Notice”
means the settlement notice, substantially in the form of Exhibit A-1 attached
hereto.
1.25 “Nouri
Defendants” means ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, and ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇;
1.26 “Person”
means an individual, corporation, limited liability corporation, professional
corporation, limited liability partnership, partnership, limited partnership,
association, joint stock company, estate, legal representative, trust,
unincorporated association, government or any political subdivision or agency
thereof, and any business or legal entity and their spouses, heirs,
predecessors, successors, representatives, or assignees;
1.27 “Plan
of Allocation” means a plan or formula of allocation (to be described in the
publication for the benefit of Class Members) of the Settlement Fund whereby the
Settlement Fund shall be distributed to Authorized Claimants after payment of
expenses of notice and administration of the Settlement, Taxes and Tax Expenses
and such attorneys’ fees, expenses and interest and amounts to Lead Plaintiff as
may be awarded by the Court. Any Plan of Allocation is not part of the
Stipulation and Defendants shall have no responsibility or liability with
respect thereto;
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1.28 “Preliminary
Approval Order” means the order, substantially in the form of Exhibit A attached
hereto, requesting, inter
alia, the preliminary approval of the Settlement set forth in the
Stipulation, and approval for the publication of the Notice;
1.29 “Released
Claims” means all claims, including Unknown Claims, demands, rights, liabilities
and causes of action, arising out of, relating to, or in connection with, the
purchase or acquisition of Smart Online securities during the Class Period and
the matters alleged or that could have been alleged in the Action, or which
arise from or relate to the allegations in the Complaint, or that have been or
could have been asserted in the Action against the Released Parties, as well as
any claims in connection with the institution, prosecution or settlement of the
Action. It is the express intent of the parties that claims against the Excluded
Defendants are not being released by this Stipulation;
1.30 “Released
Parties” means the Settling Defendants or their past or present subsidiaries,
parents, successors and predecessors, officers, directors, shareholders, agents,
employees, attorneys, advisors, and investment advisors, auditors, accountants
and any person, firm, trust, corporation, officer, director or other individual
or entity in which any Settling Defendant has a controlling interest or which is
related to or affiliated with any Settling Defendant, and the legal
representatives, heirs, successors in interest or assigns of such Settling
Defendant. “Released Parties” expressly does not include Sherb &
Co., ▇▇▇▇▇ & ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇, and/or ▇▇▇▇▇▇.
1.31 “Settlement”
means the settlement between Lead Plaintiff, on behalf of herself and Members of
the Settlement Class, and the Settling Defendants on the terms contained in the
Stipulation and its Exhibits.
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1.32 “Settlement
Class” means all Persons who purchased or otherwise acquired publicly traded
securities of Smart Online between May 2, 2005 through September 28, 2007,
inclusive. Excluded from the Settlement Class are (a) the Individual
Defendants, officers, directors, and employees during the Class Period of Smart
Online, Maxim Group, Sherb & Co., and Jesup & ▇▇▇▇▇▇; (b) the immediate
family, legal representatives, heirs, and assigns, of any excluded Person; and
(c) any entity in which any excluded Person has or had a controlling
interest. Also excluded from the Settlement Class are those Persons
who timely and validly request exclusion from the Settlement Class pursuant to
the Notice of Pendency and Settlement of Class Action to be sent to Settlement
Class Members;
1.33 “Settlement
Class Member” or “Member of the Settlement Class” means a Person who falls
within the definition of the Settlement Class set forth above;
1.34 “Settlement
Hearing” means a hearing held by the Court to consider and determine whether an
order approving the Settlement as fair, reasonable and adequate and Final
Judgment should be entered thereon dismissing the Action with
prejudice;
1.35 “Settling
Defendants” means Smart Online and collectively the following
Defendants: Maxim Group, the Nouri Defendants, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇,
▇▇▇▇▇, ▇▇▇▇, ▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇, and ▇▇▇▇;
1.36 “Settling
Parties” means, collectively, each of the Settling Defendants and Lead Plaintiff
on behalf of herself and the Members of the Settlement Class;
1.37 “Smart
Online” means Smart Online, Inc. and/or their past or present subsidiaries,
parents, successors and predecessors, officers, directors, shareholders, agents,
employees, attorneys, advisors, and investment advisors but expressly does not
include the Excluded Defendants;
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1.38 “Smart
Online Settlement Stock” means the number of shares of Smart Online common stock
that will be issued and delivered in accordance with ¶2.1 hereof;
1.39 “Stipulation”
means this Stipulation and Agreement of Settlement, dated as of June 18,
2010.
1.40 “Supplemental
Agreement” means the separate agreement executed between Lead Plaintiff’s
Counsel and counsel for the Settling Defendants setting forth an option for
Smart Online to terminate the Settlement in the event that Settlement Class
Members who purchased or otherwise acquired more than a certain number of Smart
Online shares during the Class Period choose to exclude themselves from the
Settlement Class and a procedure for Lead Plaintiffs’ Counsel to sell any Smart
Online Settlement Stock pursuant to ¶ 2.7;
1.41 “Taxes”
means taxes arising with respect to the income earned by the cash portion of the
Class Settlement Fund, including any Taxes or tax detriments that may be imposed
upon the Defendants or their respective counsel with respect to any income
earned by the cash portion of the Class Settlement Fund for any period during
which the cash portion of the Class Settlement Fund does not qualify as a
“qualified settlement fund” for federal or state income tax
purposes;
1.42 “Tax
Expenses” means expenses and costs incurred in connection with the operation and
implementation of ¶2.18 of the Stipulation (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
¶2.18);
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1.43 “Unknown
Claims” means any Released Claims which Lead Plaintiff and each Settlement Class
Member, respectively, does not know or suspect to exist in his, her or its favor
at the time of the release of the Released Parties, which, if known by him, her
or it, might have affected his, her or its settlement with, and release of, the
Released Parties, or might have affected his, her or its decision not
to object to this Settlement. With respect to any and all Released Claims, the
Settling Parties stipulate and agree that, upon the Effective Date, Lead
Plaintiff and Settling Defendants, shall be deemed to have, and by operation of
the Judgments shall have, waived the provisions, rights and benefits of
California Civil 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.
Lead
Plaintiff and Settling Defendants, shall be deemed to have, and by operation of
the Judgments shall have, 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
California Civil Code §1542. Lead Plaintiff and Defendants may hereafter
discover facts in addition to or different from those which he, she or it now
knows or believes to be true with respect to the Released Claims, but
Lead Plaintiff and Settling Defendants, upon the Effective Date, shall be deemed
to have, and by operation of the Judgment shall have, fully, finally, and
forever settled and released any and all Released Claims, respectively, known or
unknown, suspected or unsuspected, contingent or non-contingent, accrued or
unaccrued, whether or not concealed or hidden, which now exist, or heretofore
have existed upon any theory of law or equity now existing or coming into
existence in the future, including, but not limited to, conduct which is
negligent, intentional, with or without malice, or a breach of any duty, law or
rule, without regard to the subsequent discovery or existence of such different
or additional facts. Lead Plaintiff, Settlement Class Members, and Settling
Defendants shall be deemed by operation of the Judgment to have acknowledged
that the foregoing waivers were separately bargained for and are key elements of
the Settlement of which this release is a part.
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2.
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The
Settlement
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a.
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Smart
Online Settlement Stock
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2.1 The
Smart Online Settlement Stock will consist of one million, five hundred thousand
(1,500,000) freely tradeable shares of Smart Online common stock. The number of
shares constituting the Smart Online Settlement Stock will be adjusted to
account for stock splits, reverse stock splits and other similar action taken by
Smart Online before distribution to the Settlement Class Members. If Smart
Online is sold, is acquired, or merges prior to distribution of the Smart Online
Settlement Stock to the Settlement Class Members, the shares will be treated for
purposes of any corporate transaction as if they had been issued, distributed,
and outstanding, and will receive the same proportionate treatment as other
shares of Smart Online common stock.
2.2 The
Smart Online Settlement Stock shall be contributed to the Settlement Fund as
follows: (1) Smart Online will issue and distribute one million, four hundred,
and seventy-five thousand (1,475,000) shares of Smart Online common stock to
Lead Plaintiff’s Counsel pursuant to instructions provided by Lead Plaintiff’s
Counsel within ten (10) business days after the Court enters the Judgment; (2)
▇▇▇▇▇ ▇▇▇▇▇ will transfer twenty-five thousand (25,000) shares of Smart Online
Common stock to Lead Plaintiff’s Counsel pursuant to instructions provided by
Lead Plaintiff’s Counsel within ten (10) business days after the Court enters
the Judgment.
2.3 There
will be two distributions of the Smart Online Settlement Stock from the
Settlement Fund: (1) the distribution made as part of any awards by the Court
pursuant to the Class Fee and Expenses Application to Lead Plaintiff’s Counsel
and (2) the distribution to Authorized Claimants following claims
administration. Until distribution to Settlement Class Members, Class
Lead Counsel agrees to vote the shares of Smart Online Settlement Stock in the
same proportion as those voted by the shares that are not Smart Online
Settlement Stock and that are eligible to vote on any matter presented to
shareholders for such a vote and, if requested by Smart Online, to enter into a
voting trust agreement so providing. Lead Plaintiff’s Counsel and Smart Online
shall use best efforts to enable the Smart Online Settlement Stock to be issued
by electronic distribution.
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2.4 No
fractional shares of Smart Online Settlement Stock will be issued. The
calculation of the number of shares to be distributed will be rounded up or down
to the nearest whole share.
2.5 The
Smart Online Settlement Stock shall be registered or exempt from the
registration requirements of the Securities Act of 1933 under Section 3(a)(10)
of the Securities Act of 1933. The Smart Online Settlement Stock shall be freely
tradable, shall not constitute “restricted securities” under the Securities Act
of 1933 and may be sold or transferred by recipients thereof who are not
affiliates of Smart Online (as that term is defined in Rule 144 of the
Securities Act of 1933) or recipients deemed to be underwriters under the
Securities Act of 1933 without registration under Section 5 of the Securities
Act of 1933 or compliance with Rule 144.
2.6 Smart
Online agrees to request an exemption for the Smart Online Settlement Stock from
the registration requirements of the securities laws of those states where an
Authorized Claimant resides and that do not have a self-executing exemption for
securities issued with court approval in connection with the compromise of a
claim. In the event that Smart Online’s request is denied by one or more such
states, Lead Plaintiff’s Counsel shall sell, in accordance with ¶ 2.7 of
the Stipulation, the Smart Online Settlement Stock that is allocated to that
Authorized Claimant under the Plan of Allocation and distribute the cash
proceeds instead. Lead Plaintiff’s Counsel shall have no liability for any sale,
liquidation, transfer or other disposition of the Smart Online Settlement Stock
pursuant to this section absent gross negligence or willful
misconduct.
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2.7 Upon
receipt of the Smart Online Settlement Stock, Lead Plaintiff’s Counsel will have
the right to take any measures they deem appropriate to protect the overall
value of the Smart Online Settlement Stock prior to distribution to Authorized
Claimants including, but not limited to, sales of all or part of the Smart
Online Settlement Stock into the market or in a private sale transaction. Lead
Plaintiff’s Counsel shall also have the right to use the cash component of the
Class Settlement Fund to protect the overall value of the Class Settlement
Fund.
2.8 To
the extent that Lead Plaintiff’s Counsel decides to sell any Smart Online
Settlement Stock pursuant to ¶ 2.7, it shall do so in accordance with the
Supplemental Agreement. Smart Online agrees to indemnify, up to a
limit of $2500.00, Lead Plaintiffs’ Counsel or the Claims Administrator for
fees, expenses, or costs it may incur, if any, in complying with the reporting
requirements of section 13 of the Securities Exchange Act of 1934, 15 U.S.C.
§ 78m, and Regulation 13D-G thereunder, if any, as a result of the
contribution of the Smart Online Settlement Stock to the Settlement Fund
pursuant to ¶ 2.2.
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b.
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Cash
Contribution
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2.9 The
amount of Three Hundred and Fifty Thousand Dollars ($350,000) in cash shall be
paid by Smart Online into an interest bearing account designated by Class Lead
Counsel in installments of Seventy Five Thousand Dollars ($75,000) to be paid
within ten (10) business days of the date of execution of this Stipulation and
additional installments of One Hundred Thousand Dollars ($100,000), One Hundred
Thousand ($100,000) and Seventy Five Thousand Dollars ($75,000) to be paid on
the 90th,
180th, and
270th day
anniversary of the execution of this Stipulation respectively or such sooner
periods at Smart Online’s option until the full amount of Three Hundred and
Fifty Thousand Dollars ($350,000) has been paid.
2.10 The
amount of One Hundred and Twelve Thousand and Five Hundred ($112,500) in cash
shall be paid by Maxim Group into an interest bearing account designated by Lead
Plaintiff’s Counsel within twenty (20) business days of the date of execution of
this Stipulation.
14
2.11 The
Settling Parties agree that the financial institution designated by Lead
Plaintiff’s Counsel is acceptable to them.
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c.
|
Assignment
of Claims
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2.12 On
and as of March 26, 2010, and subject to the terms and conditions of the
Assignment Agreement, Smart Online hereby irrevocably sells, transfers, conveys
and assigns to the Lead Plaintiff for the benefit of the Settlement Class, all
right, title, and interest in any and all claims Smart Online may have under
federal or state law against ▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇, Jesup & ▇▇▇▇▇▇
and/or Sherb & Co. Smart Online shall receive no payment or
remuneration with respect to any recovery that may result from the assertion,
litigation, arbitration, settlement or trial of the assigned
claims.
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d.
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The
Escrow Agent
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2.13 Upon
receipt, the Escrow Agent shall invest any cash portion of the Class Settlement
Fund in instruments backed by the full faith and credit of the United States
Government or insured by the United States Government or an agency thereof and
shall reinvest the proceeds of those instruments as they mature in similar
instruments at their then current market rates.
2.14 The
Escrow Agent shall not disburse the Class Settlement Fund except as provided in
the Stipulation, by an order of the Court, or with the written agreement of
counsel for Lead Plaintiff, Smart Online, and Settling Defendants.
2.15 Subject
to further order and/or direction as may be made by the Court, the Escrow Agent
is authorized to execute such transactions as are consistent with the terms of
the Stipulation.
2.16 All
funds held by the Escrow Agent shall be deemed and considered to be in custodia legis of the Court
and shall remain subject to the jurisdiction of the Court.
15
2.17 The
Escrow Agent shall establish the Class Notice and Administration Fund and
deposit One Hundred and Fifty Thousand Dollars ($150,000) from the cash portion
of the Settlement Fund into it. The Class Notice and Administration
Fund shall be used to pay costs and expenses reasonably and actually incurred in
connection with providing notice to the Settlement Class, identifying and
locating Settlement Class Members, assisting with the filing of claims,
administering and distributing the Net Settlement Fund to Authorized Claimants,
processing Proof of Claim and Release forms and paying escrow fees and costs, if
any. The Class Notice and Administration Fund shall also be invested
and earn interest as provided for in ¶2.13 of this Stipulation. Any
portion of the Class Notice and Administration Fund remaining after payment of
the aforesaid costs and expenses shall revert to the Settlement Fund and become
part of the Net Settlement Fund.
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e.
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Taxes,
Tax Expenses and Related
Matters
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2.18 The
Settling Parties and the Escrow Agent agree to treat the cash portion of the
Class Settlement Fund as being at all times a “qualified settlement fund” within
the meaning of Treas. Reg. §§1.468B-1 through 1.468B-5. In addition, the Escrow
Agent shall timely make such elections as are necessary or advisable to carry
out the provisions of this ¶2.18, including the “relation-back election” (as
defined in Treas. Reg. §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 Escrow Agent to timely and properly prepare and deliver the necessary
documentation for signature by all necessary parties, and thereafter to cause
the appropriate filings to occur.
16
2.19 For
the purpose of §468B of the Internal Revenue Code of 1986, as amended, and the
regulations promulgated thereunder, the “administrator” shall be the Escrow
Agent. The Escrow Agent shall timely and properly file all informational and
other tax returns necessary or advisable with respect to the cash portion of the
Class Settlement Fund (including without limitation the returns described in
Treas. Reg. §1.468B-2(k)(l)). Such returns (as well as the election described in
¶2.18) shall be consistent with this ¶2.19 and in all events shall reflect that
all Taxes (including any estimated Taxes, interest or penalties) on the income
earned by the cash portion of the Class Settlement Fund shall be paid out of the
cash portion of the Class Settlement Fund as provided in ¶2.19(a)
hereof.
(a) All
(i) Taxes (including any estimated Taxes, interest or penalties), and (ii) Tax
Expenses shall be paid out of the cash portion of the Class Settlement Fund; in
all events the Defendants and their respective counsel shall not have any
liability or responsibility for any Taxes or any 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 Escrow Agent shall indemnify and hold
harmless the Defendants, and their respective counsel 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 Class Settlement Fund and
shall be timely paid by the Escrow Agent out of the Class Settlement Fund
without prior order from the Court. The Escrow Agent shall be obligated
(notwithstanding anything herein to the contrary) to withhold from distribution
to Authorized Claimants any funds necessary to pay such Taxes and Tax Expenses
including the establishment of adequate reserves for any Taxes and Tax Expenses
(as well as any amounts that may be required to be withheld under Treas. Reg.
§1.468B-2(1)(2)); neither the Defendants nor their respective counsel are
responsible to pay such Taxes and Tax Expenses, nor shall they have any
liability or responsibility therefor. The Settling Parties hereto agree to
cooperate with the Escrow Agent, each other, and their tax attorneys and
accountants to the extent reasonably necessary to carry out the provisions of
this ¶2.19.
17
(b) For
the purpose of this ¶2.19, references to the Class Settlement Fund shall include
both the cash portion of the Class Settlement Fund, if any, and the Class Notice
and Administration Fund and shall also include any interest
thereon.
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f.
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Termination
of Settlement
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2.20 In
the event that the Effective Date does not occur or the Settlement is not
approved or is terminated for any reason, the Settlement Fund shall be refunded
as described in ¶7.4 below.
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3.
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Preliminary
Approval, Preliminary Approval Orders and Settlement
Hearing
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3.1 Promptly
after execution of this Stipulation by all parties hereto, the Settling Parties
shall submit the Stipulation together with its Exhibits to the
Court. After filing the Stipulation, the Settling Parties shall apply
for entry of the Preliminary Approval Order requesting, inter alia, the preliminary
approval of the Settlement set forth in the Stipulation, and approval for the
publication of the Notice, which shall include the general terms of the
Settlement set forth in the Stipulation, and, as applicable, the Plan of
Allocation, the general terms of the Class Fee and Expense Application as
defined in ¶6.1 below, and the date of the Settlement Hearing as defined
below. Lead Plaintiff’s Counsel shall be responsible for overseeing
the notice provided to the Settlement Class.
3.2 The
Settling Parties shall request that after the Notice is disseminated, the Court
hold the Settlement Hearing to consider and determine whether an
order approving the Settlement as fair, reasonable and adequate and Final
Judgment should be entered thereon dismissing the Action with
prejudice. At or after the Settlement Hearing, Lead Plaintiff’s
Counsel also will request that the Court approve the Plan of Allocation and Lead
Plaintiff’s Counsel will request that the Court approve their proposed
application for an award of attorneys’ fees and expenses.
18
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Releases
and Bar Orders
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4.1 Upon
the Effective Date, Lead Plaintiff and each of the Settlement Class Members
shall be deemed to have, and by operation of the Judgment entered in the Action
shall have, fully, finally, and forever released, relinquished and discharged
all Released Claims against the Released Parties, whether or not such Settlement
Class Member executes and delivers a proof of claim and release.
4.2 Upon
the Effective Date, each of the Released Parties shall be deemed to have, and by
operation of the Judgment entered in the Action, shall have, fully, finally, and
forever released, relinquished and discharged each and all of the Settlement
Class Members and Lead Plaintiff and their counsel from all claims, including
Unknown Claims, arising out of, relating to, or in connection with the
institution, prosecution, assertion, settlement or resolution of the Action or
the Released Claims.
4.3 The
Judgment in the Action will contain a Bar Order as required by section 21D(f)(7)
of the Securities Exchange Act of 1934, 15 U.S.C. §78u-4(f)(7) and shall be as
broad as permitted by state or federal law, and shall permanently and forever
bar from filing, instituting, prosecuting, or maintaining, directly or
indirectly, in any capacity, any claims for contribution or any other claim
asserted against any Settling Defendant, whether based in tort, contract, or any
other theory, arising from, based upon, or related to any fact or circumstance
involved in the Action or in any pleading or any other paper filed therein, or
the subject matters of the Action, whether such claim be legal or equitable,
known or unknown, foreseen or unforeseen, matured or unmatured, accrued or
unaccrued, or asserted under state, federal, or common law.
4.4 Upon
the Effective Date, in consideration for the sum of ten dollars ($10) and for
other good consideration received, Smart Online shall be deemed to have, and by
operation of the Judgment entered in the Action, shall have, fully, finally, and
forever released, relinquished and discharged Maxim Group and its counsel from
all Released Claims, including Unknown Claims.
19
4.5 Upon
the Effective Date, in consideration for the sum of ten dollars ($10) and for
other good consideration received, Maxim Group shall be deemed to have, and by
operation of the Judgment entered in the Action, shall have, fully, finally, and
forever released, relinquished and discharged Smart Online and its counsel from
all Released Claims, including Unknown Claims.
4.6 Pending
the Court’s determination of whether the Settlement should be approved and
applied in the Action, all proceedings and all further activity between the
Settling Parties regarding or directed towards the Action, and save for those
activities and proceedings relating to this Stipulation and the Settlement and
the continued prosecution of Action against the Excluded Defendants, shall be
stayed.
4.7 Pending
the Court’s determination of whether the Settlement should be approved, neither
Lead Plaintiff, nor any of the Settling Class Members shall commence, maintain
or prosecute against the Settling Defendants, any action or proceeding in any
court or tribunal asserting any of the Released Claims.
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5.
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Administration
and Calculation of Claims, Final Awards and Supervision and Distribution
of the Class Settlement Fund
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5.1 The
Claims Administrator, subject to such supervision and direction of the Court
and/or Lead Plaintiff’s Counsel as may be necessary or as circumstances may
require, shall administer and calculate the claims submitted by Settlement Class
Members and shall oversee distribution of the Net Settlement Fund (defined
below) to Authorized Claimants. The Class Settlement Fund shall be
applied as follows:
20
(a) to
pay all the costs and expenses reasonably and actually incurred in connection
with providing notice, identifying and locating Settlement Class Members,
assisting with the filing of claims, administering and distributing the Class
Settlement Fund to Authorized Claimants, processing Proof of Claim and Release
forms and paying escrow fees and costs, if any, to the extent these costs and
expenses are not paid by the Class Notice and Administration Fund;
(b) to
pay the Taxes and Tax Expenses described in ¶¶2.18 and 2.19 above;
(c) to
pay to Lead Plaintiff’s attorneys’ fees and expenses with interest thereon (the
“Class Fee and Expense Award”), if and to the extent allowed by the
Court;
(d) to
reimburse the time and expenses of Lead Plaintiff in the Action, if and to the
extent allowed by the Court; and
(e) subject
to the provisions of ¶5.2(c) below, to distribute the Net Settlement Fund to
Authorized Claimants as allowed by the Stipulation, the Plan of Allocation, or
the Court.
5.2 Upon
the Effective Date and thereafter, and in accordance with the terms of the
Stipulation, the Plan of Allocation, or such further approval and further
order(s) of the Court as may be necessary or as circumstances may require, the
Net Settlement Fund shall be distributed to Authorized Claimants, subject to and
in accordance with the following:
(a) Within
one hundred and twenty (120) days after the dissemination of notice or such
other time as may be set by the Court, each Person claiming to be an Authorized
Claimant shall be required to submit to the Claims Administrator a completed
Proof of Claim and Release, substantially in the form of Exhibit A-2 attached
hereto, signed under penalty of perjury and supported by such documents as
specified in the Proof of Claim and Release and as are reasonably available to
the Authorized Claimant.
21
(b) Except
as otherwise ordered by the Court, all Settlement Class Members who fail to
timely submit a Proof of Claim and Release within such period, or such other
period as may be ordered by the Court, or otherwise allowed, and all Settlement
Class Members whose claims are not approved by the Court (in the event the same
are rejected in whole or in part by the Claims Administrator and the Court
resolves the dispute involved) shall be forever barred from receiving any
payment pursuant to this Stipulation and the Settlement set forth herein, but
will in all other respects be subject to and bound by the provisions of this
Stipulation, the releases contained herein, and the Judgments and be enjoined
and barred from bringing any action against any of the Settling Defendants
asserting any of the Released Claims.
(c) The
Net Settlement Fund shall be distributed to the Authorized Claimants
substantially in accordance with a Plan of Allocation to be described in the
Class Notice and approved by the Court. However, if there is any
balance remaining in the Net Settlement Fund after six (6) months from the date
of distribution of such Net Settlement Fund (whether by reason of tax refunds,
uncashed checks or otherwise), to the extent Lead Plaintiff’s Counsel determines
it is economically feasible such balance shall be reallocated among and
distributed to Authorized Claimants in an equitable and economic
fashion. Thereafter, any remaining balance should be donated to an
appropriate 501(c)(3) non-profit organization(s) to be selected by Lead
Plaintiff’s Counsel.
5.3 The
Plan of Allocation shall be proposed by Lead Plaintiff’s Counsel, and the
Settling Defendants shall take no position with respect to the proposed Plan of
Allocation or such plan as may be approved by the Court except as provided in
this paragraph. Lead Plaintiff’s Counsel and the Settling Defendants
agree that in the interests of preserving value for the Settlement Class, the
Plan of Allocation shall provide that, to the extent shares of Smart Online
Settlement Stock are to be distributed to Settlement Class Members, the Smart
Online Settlement Stock shall be distributed to the Authorized Claimants in
amounts and over time periods determined by Lead Plaintiff’s Counsel to be in
the best interests of the Settlement Class as a whole. Lead Plaintiff’s Counsel
agrees to consult in good faith with Smart Online regarding any plan for
distributing shares of Smart Online Settlement Stock to Authorized
Claimants.
22
5.4 No
Person shall have any claim against Lead Plaintiff, Lead Plaintiff’s Counsel,
any claims administrator, any agent designated by Settling Defendants,
Defendants’ Counsel, or their respective counsel, based on the investment or
distributions made substantially in accordance with this Stipulation and the
Settlement contained herein, the Plan of Allocation, or further orders of the
Court.
5.5 It
is understood and agreed by the Settling Parties that the proposed Plan of
Allocation including, but not limited to, any adjustments to an Authorized
Claimant’s claim set forth therein, is not a part of the Stipulation and is to
be considered by the Court separately from the Court’s consideration of the
fairness, reasonableness and adequacy of the Settlement set forth in the
Stipulation, and any order or proceeding relating to the Plan of Allocation
shall not operate to terminate or cancel the Stipulation or affect the finality
of the Court’s Judgment approving the Stipulation and the Settlement set forth
therein, or any other orders entered pursuant to the
Stipulation.
23
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6.
|
Lead
Plaintiff’s Counsel’s Attorneys’ Fees and Reimbursement of Expenses and
Reimbursement of Lead Plaintiffs
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6.1 Lead
Plaintiff’s Counsel may submit one or more Class Fee and Expense Applications
for distributions from the Class Settlement Fund for: (a) an award of attorneys’
fees; (b) plus reimbursement of expenses incurred in connection with prosecuting
the Class Action; (c) plus any interest on such attorneys’ fees and expenses at
the same rate and for the same periods as earned by the Settlement Fund (until
paid) as may be awarded by the Court; (d) reimbursement of the time and expenses
of Lead Plaintiff in prosecuting the Action; and (e) reimbursement of Lead
Plaintiff’s Counsel’d fees and expenses in administering the Settlement. Lead
Plaintiff’s Counsel reserve the right to make additional applications for fees
and expenses incurred. Settling Defendants will take no position with
respect to the Class Fee and Expense Application and such matters are not the
subject of any agreement between the Settling Parties other than the terms set
forth in the Stipulation.
6.2 The
Class Fee and Expense Award shall be transferred to Lead Plaintiff’s Counsel
from the Class Settlement Fund as Ordered, immediately after the Court executes
a written Order awarding such fees and expenses, notwithstanding the existence
of any timely filed objections thereto, or potential appeal therefrom, subject
to the obligation of each counsel to make appropriate repayments to the Class
Settlement Fund as more particularly set forth below in ¶6.3. Lead
Plaintiff’s Counsel shall allocate the attorneys’ fees amongst counsel in the
Class Action in a manner in which Lead Plaintiff’s Counsel in good faith believe
reflects the respective contributions of such counsel to the prosecution and
settlement of the Action.
24
6.3 In
the event that the Effective Date does not occur, or the order making the Class
Fee and Expense Award is reversed or modified, or the Stipulation is terminated
for any reason, and in the event that the Class Fee and Expense Award has been
paid to any extent, then any of Lead Plaintiffs’ counsel who have received a
payment shall, within five (5) business days from Lead Plaintiff’s Counsel
receiving notice from Settling Defendants’ Counsel or from a court of
appropriate jurisdiction, refund to the Class Settlement Fund the fees and
expenses previously paid to them from the Class Settlement Fund, plus interest
thereon at the same rate as earned by the Class Settlement Fund, in an amount
consistent with such reversal or modification. In the event shares of Smart
Online Settlement Stock are distributed to Class Lead Counsel as part of any
Class Fee and Expense Award and Class Lead Counsel sells some or all of those
shares before termination of the Settlement, to fulfill their return obligation
herein, Lead Plaintiff’s Counsel shall, at Lead Plaintiff’s Counsel’s option,
return the actual cash amounts they received in exchange for the sale of such
shares sold (less brokerage commissions, taxes or transaction costs actually
paid) irrespective of the then current market price of Smart Online shares and
any shares they still hold as unsold, or return an equal number of shares as
they were awarded by the Court. The return obligation set forth in this
paragraph is the obligation of all Lead Plaintiff’s counsel who receive a
payment in the Action. Each such Lead Plaintiff’s counsel’s law firm,
as a condition of receiving such fees and expenses, on behalf of itself and each
partner and/or shareholder of it, agrees that the law firm and its partners
and/or shareholders are subject to the jurisdiction of the Court for the purpose
of enforcing the provisions of this subparagraph. Without limitation, each such
law firm and its partners and/or shareholders agree that the Court may, upon
application of Settling Defendants on notice to Lead Plaintiff’s Counsel,
summarily issue orders, including, but not limited to, judgments and attachment
orders, and may make appropriate findings of or sanctions for contempt, against
them or any of them should such law firm fail timely to repay fees, expenses and
interest pursuant to this ¶6.3 of this Stipulation.
6.4 The
procedure for and the allowance or disallowance by the Court of any applications
by Lead Plaintiff’s counsel for attorneys’ fees and expenses to be paid out of
the Class 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 and adequacy of the Settlement set
forth in the Stipulation, and any order or proceeding relating either to the
Class Fee and Expense Application or the Fee and Expenses, or any
appeal from any order relating thereto or reversal or modification thereof,
shall not operate to terminate or cancel the Stipulation, or affect or delay the
finality of the Judgment in the Action.
25
6.5 The
Settling Defendants shall have no responsibility for, and no liability
whatsoever with respect to, the allocation among counsel for any Lead Plaintiff
in the Action, and/or any other Person who may assert some claim thereto, of any
fee and expense award that the Court may make in the Action.
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|
7.
|
Conditions
of Settlement, Effect of Disapproval, Cancellation or
Termination
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7.1 This
Stipulation, the Settlement and the Effective Date shall be conditioned on the
occurrence of all of the following events:
(a) Smart
Online, ▇▇▇▇▇ ▇▇▇▇▇, and Maxim Group shall have paid or caused to be paid the
consideration making up the Class Settlement Fund as required by ¶¶2.1 to 2.10
above;
(b) Smart
Online shall have signed and delivered to Lead Plaintiff’s Counsel the
Assignment Agreement;
(c) The
Board of Directors of Smart Online will have reviewed and approved the
Stipulation;
(d) The
Court has entered the Preliminary Approval Order, as required by ¶3.1,
above;
(e) Smart
Online has not exercised its option to terminate the Stipulation pursuant to
¶7.2 hereof;
(f) The
Court has entered the Judgment in the Class Action in substantially the form of
Exhibit B attached hereto, respectively; and
26
(g) the
Judgment has become Final.
7.2 Smart
Online shall have the option to terminate the Settlement in the event that
Settlement Class Members who purchased or otherwise acquired more than a certain
number of Smart Online shares during the Class Period choose to exclude
themselves from the Settlement Class, as set forth in the Supplemental
Agreement. The Supplemental Agreement will not be filed with the
Court unless and until a dispute arises between the Class Lead Plaintiffs and
Class Settling Defendants concerning its interpretation or
application.
7.3 Smart
Online and Lead Plaintiff shall each have the right to terminate the settlement
if the Settlement is not approved by the Court within eight (8) months following
the Settlement Hearing. In the event either Party wishes to terminate
the Settlement on this ground, the terminating Party may do so by providing
written notice of such termination to the other Party and such termination, if
not withdrawn, shall be effective ten (10) business days
thereafter.
7.4 In
the event the Settlement is not approved or the Stipulation shall terminate or
shall not become effective for any reason, within ten (10) business days after
written notification of such event is sent by counsel for the Settling
Defendants or Lead Plaintiff’s Counsel to the Escrow Agent, the Smart Online
Settlement Stock, together with any proceeds from the sale or other disposition
of Smart Online Settlement Stock pursuant to ¶2.7, shall be returned to Smart
Online and ▇▇▇▇▇ ▇▇▇▇▇ in proportion to their respective contributions to the
Settlement Fund as set forth in ¶¶ 2.2 hereto and the cash component of the
Settlement Fund (including accrued interest), plus any amount then remaining in
the Class Notice and Administration Fund (including accrued interest), less
expenses and costs which have either been disbursed pursuant to ¶¶ 2.17 to
2.19 hereto, or are chargeable to the Class Notice and Administration Fund shall
be refunded by the Escrow Agent to Smart Online and Maxim Group in proportion to
their respective cash contributions to the Settlement Fund as set forth in
¶¶ 2.9 to 2.10 hereto. Under no circumstances shall Lead Plaintiff or Lead
Plaintiff’s Counsel be responsible for, or required to reimburse or return any
amounts disbursed or incurred for notice to Settlement Class Members or
administration of the Settlement whether such amounts are disbursed from the
Class Notice and Administration Fund or the Class Fee and Expenses Award. At the
request of counsel for Settling Defendants, the Escrow Agent or its designee
shall apply for any tax refund owed to the Class Settlement Fund and pay the
proceeds, after deduction of any reasonable fees or expenses incurred in
connection with such application(s) for refund to Smart Online and Maxim Group
in proportion to the respective contributions to the Settlement Fund as set
forth in ¶¶ 2.2 to 2.10 hereto.
27
7.5 In
the event that the Stipulation or Settlement is not approved by the Court or the
Settlement set forth in the Stipulation is terminated for any reason, the
Settling Parties shall be restored to their respective positions in the Action
as the date of this Stipulation, and all negotiations, proceedings, documents
prepared and statements made in connection herewith shall be without prejudice
to the Settling Parties, shall not be deemed or construed to be an admission by
any Settling Party of any act, matter or proposition and shall not be used in
any manner or for any purpose in any subsequent proceeding in the Action or in
any other action or proceeding. In such event, the terms and
provisions of the Stipulation, with the exception of ¶¶1.1-1.43, 2.11-2.20,
7.1-7.8 and 8.4 herein, shall have no further force and effect with respect to
the Settling Parties and shall not be used in the Action or in any other
proceeding for any purpose, and any Judgments or orders entered by the Court in
accordance with the terms of the Stipulation shall be treated as vacated, nunc
pro tunc. The Settling
Parties agree that in the event that the Stipulation or Settlement is not
approved by the Court or the Settlement set forth in the Stipulation is
terminated for any reason, neither Lead Plaintiff nor any of the Settling Class
Members shall commence, maintain or prosecute any of the Released Claims against
the Settling Defendants, in any court or tribunal for a period of sixty (60)
days and, during this sixty (60) day period, the Settling Parties shall engage
in good faith negotiations to reach a new resolution of all outstanding issues
between them, including the Released Claims.
28
7.6 If
the Effective Date does not occur, or if the Stipulation is terminated for any
reason, neither Lead Plaintiff nor any of Lead Plaintiff’s Counsel shall have
any obligation to repay any amounts actually and properly disbursed from or
chargeable for notice to Settlement Class Members or administration of the
Settlement. In the event the amounts remaining at the time of such termination
are insufficient to pay the cost of notice to the Settlement Class Members and
administration of the Settlement properly incurred, Lead Plaintiff’s Counsel
shall pay such amounts from the Class Fee and Expense Award prior to the return
of the balance of the Class Fee and Expense Award as provided in paragraph 6.3
above. In addition, any expenses already incurred and properly chargeable to the
Class Notice and Administration Fund pursuant to ¶2.17 hereof at the time of
such termination or cancellation but which have not been paid, shall be paid by
the Escrow Agent in accordance with the terms of the Stipulation prior to the
balance being refunded.
7.7 Maxim
Group shall have the option to exclude itself from the Settlement in the event
that Settlement Class Members who purchased or otherwise acquired more than a
certain number of Smart Online shares during the Class Period choose to exclude
themselves from the Settlement Class, as set forth in the Supplemental
Agreement. Maxim Group shall be entitled to exercise its option to withdraw from
the settlement only if Maxim Group provides lead Plaintiffs’ Counsel and Smart
Online with written notice of its withdrawal from the settlement and files that
notice with the Court within four (4) days prior to the Settlement
Hearing. In the event that Maxim Group opts to exclude itself from
the Settlement:
29
(a) Maxim
Group and Lead Plaintiff shall be restored to their respective positions in the
Action as the date of this Stipulation, and all negotiations, proceedings,
documents prepared and statements made in connection herewith shall be without
prejudice to them, shall not be deemed or construed to be an admission by either
Maxim Group or Lead Plaintiff of any act, matter or proposition and shall not be
used in any manner or for any purpose in any subsequent proceeding in the Action
or in any other action or proceeding.
(b) Any
cash contribution of Maxim Group to the Settlement Fund pursuant to ¶ 2.10
shall be refunded by the Escrow Agent to MaximGroup, less Maxim Group’s
proportionate amount of any administrative costs and expenses already incurred
pursuant to ¶ 5.1(a) at the time that Maxim Group gives notice to exclude
itself from the Settlement pursuant to ¶ 7.7.
(c) There
shall be no effect on the other Settling Defendants or their respective
obligations under the Stipulation and the releases given and the Judgments
entered in favor of other Settling Defendants shall remain in full force and
effect.
7.8 The
Settling Parties agree that, with respect to any Settling Defendant, in the
event of a final order of a court of competent jurisdiction, not subject to any
further proceedings, determining the transfer of the Class Settlement Fund, or
any portion thereof, by or on behalf of such Settling Defendant to be a
preference, voidable transfer, fraudulent transfer or similar transaction under
Title 11 of the United States Code (Bankruptcy) or applicable state law
and any portion thereof is required to be refunded and such amount is not
promptly deposited in the Class Settlement Fund by any other Defendant, then, at
the election of Lead Plaintiff’s Counsel, as to such Class Settling Defendant,
the releases given and the Judgments entered in favor of such Settling Defendant
pursuant to the Stipulation shall be null and void. The releases
given and the Judgments entered in favor of other Settling Defendants shall
remain in full force and effect.
30
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8.
|
Miscellaneous
Provisions
|
8.1 The
Settling Parties: (a) acknowledge that it is their intent to
consummate the terms and conditions of this Stipulation; and (b) agree to
cooperate to the extent reasonably necessary to effectuate and implement all
terms and conditions of the Stipulation and to exercise their best efforts to
accomplish the foregoing terms and conditions of the Stipulation.
8.2 As more fully set forth in the
Assignment Agreement, Settling Defendants agree to reasonably cooperate with
Lead Plaintiff in the prosecution of her claims (including any assigned claims)
against the Excluded Defendants in the Action or other proceedings relating to
or arising therefrom including in the case of each of the Settling Defendants
except for Maxim Group providing documents and other information reasonably
requested by Lead Plaintiff (which shall be treated as part of a joint
prosecution undertaking with Lead Plaintiff or otherwise as required to permit
Lead Plaintiff access to privileged documents relevant to the assigned claims
without waiving privilege as to any third party).
8.3 Each
Settling Defendant warrants as to himself, herself or itself that, at the time
any of the payments provided for herein are made by or on behalf of himself,
herself or itself, the payment will not render him, her or it insolvent. This
representation is made by each Settling Defendant as to himself, herself or
itself and is not made by any counsel for the Settling Defendants.
8.4 The
Settling Parties intend this Settlement to be a final and complete resolution of
all disputes among them with respect to the Action, provided,
however, that it is the express
intent of the Parties to this Stipulation that Excluded Defendants are not
Settling Defendants for purposes of this Stipulation and that claims of Lead
Plaintiff, Settlement Class Members, and/or Smart Online against the Excluded
Defendants are not being released by this Stipulation. The Settlement
compromises claims that are contested and shall not be deemed an admission by
any Settling Party as to the merits of any claim or defense. While
the Settling Defendants deny that any wrongdoing or liability to Settlement
Class Members with respect to the Action, the Settling Parties agree and the
Judgment in the Action will state, that the Action were filed, prosecuted and
defended in good faith and in accordance with the applicable law and Federal
Rules of Civil Procedure, including Rule 11 of the Federal Rules of Civil
Procedure, and are being settled voluntarily after consultation with competent
legal counsel. Smart Online may issue a press release announcing the
Settlement, but may not contradict the above language.
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8.5 Neither
the Stipulation nor the Settlement, nor any act performed or document executed
pursuant to or in furtherance of the Stipulation or the Settlement: (a) is or
may be deemed to be or may be used as an admission of, or evidence of, the
validity of any Released Claims, or of any wrongdoing or liability of the
Settling Defendants; or (b) is or may be deemed to be or may be used as an
admission of, or evidence of, any fault or omission of any of the Settling
Defendants in any civil, criminal or administrative proceeding in any court,
administrative agency or other tribunal. The Settling Defendants may
file the Stipulation and/or the Judgment in related litigation as evidence of
the Settlement, or in any action that may be brought against them in order to
support a defense or counterclaim based on principles of res judicata, collateral
estoppel, release, good faith settlement, judgment bar or reduction or any other
theory of claim preclusion or issue preclusion or similar defense or
counterclaim.
8.6 All
agreements made and orders entered during the course of the Action relating to
the confidentiality of information shall survive this Stipulation.
8.7 All
of the Exhibits to this Stipulation are material and integral parts hereof and
are fully incorporated herein by this reference.
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8.8 This
Stipulation may be amended or modified only by a written instrument signed by or
on behalf of all Settling Parties or their respective
successors-in-interest.
8.9 This
Stipulation and the Exhibits attached hereto, and the Supplemental Agreement
constitute the entire agreement among the Settling Parties and no
representations, warranties or inducements have been made to any party
concerning the Stipulation, its Exhibits, or the Supplemental Agreement other
than the representations, warranties and covenants contained and memorialized in
such documents. The Stipulation supersedes and replaces any prior or
contemporaneous writing, statement or understanding. Except as
otherwise provided herein, each Party shall bear its own costs.
8.10 Counsel
for the Settling Parties are expressly authorized by their respective clients to
take all appropriate Action required or permitted to be taken pursuant to the
Stipulation to effectuate its terms and conditions.
8.11 Each
counsel or other Person executing this Stipulation or any of its Exhibits on
behalf of any party hereto hereby warrants that such Person has the full
authority to do so.
8.12 The
Stipulation may be executed in one or more counterparts. All executed
counterparts including facsimile counterparts and each of them shall be deemed
to be one and the same instrument. A complete set of original
executed counterparts shall be filed with the Court by Lead Plaintiff’s
Counsel.
8.13 This
Stipulation shall be binding upon, and inure to the benefit of, the Settling
Parties and their respective successors, assigns, heirs, spouses, marital
communities, executors, administrators and legal
representatives.
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8.14 Without
affecting the finality of the Judgment entered in accordance with this
Stipulation, the Court shall retain jurisdiction with respect to implementation
and enforcement of the terms of the Stipulation and Judgment, and the Settling
Parties hereto submit to the jurisdiction of the Court for purposes of
implementing and enforcing the Settlement embodied in the Stipulation and
Judgment.
8.15 This
Stipulation and the Exhibits hereto shall be considered to have been negotiated,
executed and delivered, entered into, and to be wholly performed, in the State
of North Carolina, and the rights and obligations of the Settling Parties to the
Stipulation shall be construed and enforced in accordance with, and governed by,
the internal, substantive laws of the State of North Carolina without giving
effect to that State’s choice of law principles.
IN
WITNESS WHEREOF, the parties hereto have caused the Stipulation to be executed,
by their duly authorized attorneys, dated as of June 18, 2010.
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AKIN
GUMP ▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇ LLP
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P.O.
Box 1151
Raleigh,
NC 27602
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Attorneys
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LLC
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One Prudential
Plaza
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PIVEN
A
PROFESSIONAL CORPORATION
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Counsel
for Lead Plaintiff and the Class
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▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, III
(N.C.
State Bar #21022)
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