INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, CLASS ACTION AGREEMENT OF SETTLEMENT

Transcription

1 Case 2: 87-R-AJW Document 117 Filed 10/04/12 Page 1 of 41 Page ID #: UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA X MARK HENNING, ROMAN ZARETSKI, AND CHRISTIAN STILLMARK, No. CV R (AJWx) INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, CLASS ACTION Plaintiffs, vs. STIPULATION AND AGREEMENT OF SETTLEMENT 10 ORIENT PAPER, INC.; ZHENYONG LIU; Hon. Manuel L. Real 11 WINSTON C. YEN; DAHONG ZHOU; 12 JING HAO; DREW BERNSTEIN; DAVIS Hearing Date: November 5, 2012 ACCOUNTING GROUP, P.C., and EDWIN Time: 10:00 a.m. 13 REECE DAVIS Judge: Hon Manuel L. Real 14 Courtroom: nd floor 15 Defendants X STIPULATION AND AGREEMENT OF SETTLEMENT 20 This Stipulation and Agreement of Settlement (the "Stipulation") dated 21 October 3, 2012 is hereby submitted to the Court pursuant to Rule 23 of the 22 Federal Rules of Civil Procedure. Subject to the approval of the Court, this 23 Stipulation is entered into among Lead Plaintiffs, Mark Henning, Roman Zaretsk 24 and Christian Stillmark (collectively, the "Lead Plaintiffs"), on behalf o 25 themselves and the putative class (collectively, "Plaintiffs"); and Orient Paper, Inc 26 0

2 Case 2: 87-R-AJW Document 117 Filed 10/04/12 Page 2 of 41 Page ID #: ("Orient Paper"), Zhenyong Liu ("Liu"), Winston C. Yen ("Yen"), Dahong Zh 2 ("Zhou"), Jing Hao ("Hao"), and Drew Bernstein ("Bernstein") (the "Orient Pap 3 Defendants", or the "Settling Defendants"), by and through their respecti 4 counsel WHEREAS, a class action complaint styled Henning v. Orient Paper, 6 Inc., 10-CV-5887-VBF-AJWx alleging violations of federal securities laws agains 7 the Orient Paper Defendants and Defendants Davis Accounting Group, P.C 8 ("DAG"), and Defendant Edwin Reece Davis ("E. Davis") (the "Davis 9 Defendants") was filed in the United States District Court for the Central Distric 10 of California (the "Court"); WHEREAS, by Order dated November 18, 2010, Judge Fai 12 appointed Messrs. Henning, Zaretski, and Stillmark as Lead Plaintiffs; WHEREAS, on January, 2011, the Lead Plaintiffs filed the 14 operative consolidated Amended Complaint alleging: (Count 1) violations o 15 Section 10(b) of the Securities Exchange Act of 1934 (the "Exchange Act") agains 16 the Settling Defendants and Defendants DAG and E. Davis; and (Count 2 17 violations of Section 20(a) of the Exchange Act against Defendants Liu, Yen 18 Zhou, Hao, Bernstein and E. Davis; WHEREAS, by order dated July 20, 2011, Judge Fairbank denied 20 Settling Defendants' Motion to Dismiss that the Settling Defendants had previou 21 filed; WHEREAS, on October 14, 2011, Lead Plaintiffs moved to certify 23 class of persons who purchased Orient Paper shares between March, 2009, an 24 August 13, 2010 (the "Class") and to appoint themselves as representatives of th 25 Class (the "Motion for Class Certification"); 26 1

3 Case 2: 87-R-AJW Document 117 Filed 10/04/12 Page 3 of 41 Page ID #: WHEREAS, on March 9, 2012, this case was transferred to Honorable Manuel L. Real, United States District Judge; 8. WHEREAS, on April 2, 2012, Lead Plaintiff Christian Stillm withdrew his request to be appointed as a class representative because of he unexpected work responsibilities requiring him to reside overseas for an exten period of time; 9. WHEREAS, on April 9, 2012, Defendants filed an opposition to Motion for Class Certification; 10. WHEREAS, in recognition of the attendant risks and costs of continued litigation and the benefits of resolving this litigation, the parties hereto desire to settle and resolve any and all actual or potential claims by, between, or among Plaintiffs, on the one hand, and the Settling Defendants, on the other hand, arising out of or relating to the subject matter of this action (the Litigation ), which includes but is not limited to the following allegations by Plaintiffs: The claim that purchases from Orient Paper's largest supplier should have been recognized as related party transactions pursuant to the federal securities laws through August of 2010; The claim that Orient Paper overstated its revenues by 25-50% in 2009 and 2010; The claim that Orient Paper knowingly employed an unlicensed auditor. The Settling Defendants deny any wrongdoing whatsoever, and this Stipulation shall in no event be construed as, or be deemed to be evidence of, an admission or 26 2

4 Case 2: 87-R-AJW Document 117 Filed 10/04/12 Page 4 of 41 Page ID #: concession on the part of any Settling Defendant with respect to any actual or 2 potential claim, liability, wrongdoing, or damage whatsoever, or any infirmity in 3 the defenses that the Settling Defendants have asserted. This Stipulation also shall 4 not be construed as or be deemed to be a concession by the Lead Plaintiffs of any 5 infirmity in the claims asserted in the Litigation. The parties to this Stipulation 6 (the "Settling Parties") wish to settle and compromise any dispute regarding the 7 Litigation or its subject matter, including but not limited to whether the Litigation 8 was filed by the Lead Plaintiffs and defended by the Settling Defendants in good 9 faith and with adequate basis in fact under Rule 11 of the Federal Rules of Civil 10 Procedure. The Settling Parties agree that the Litigation is being voluntarily settle 11 after advice of counsel and that the terms of the Settlement are fair, adequate, and 12 reasonable; WHEREAS, Lead Plaintiffs' Counsel has conducted an investigation 14 relating to the claims and the underlying events and transactions alleged in the 15 Litigation. Lead Plaintiffs' Counsel has analyzed the facts and the applicable law 16 with respect to the claims of the Lead Plaintiffs against Defendants and the 17 potential defenses thereto, which in the Lead Plaintiffs' judgment have provided an 18 adequate and satisfactory basis for the evaluation of an agreement to settle, as 19 described herein; WHEREAS, counsel for the Lead Plaintiff and counsel for the Settli 21 Defendants participated in two full-day mediation conferences with The Honorable 22 Daniel H. Weinstein (Ret.). At and following the mediations, the participants 23 engaged in extensive arm's-length negotiations with each other, such negotiations 24 bearing fruit in this Stipulation;

5 Case 2: 87-R-AJW Document 117 Filed 10/04/12 Page 5 of 41 Page ID #: WHEREAS, based upon the investigation conducted by Lead 2 Plaintiffs' Counsel, Lead Plaintiffs' Counsel has concluded that the terms and 3 conditions of this Stipulation are fair, reasonable, and adequate to Plaintiffs, and in 4 their best interests, and Lead Plaintiffs have agreed to settle the claims asserted in 5 the Litigation pursuant to the terms and conditions of this Stipulation, after 6 considering: (a) the substantial benefits that Plaintiffs will receive from settlement 7 of the Litigation; (b) the attendant risks of litigation; and (c) the desirability of 8 permitting the Settlement to be consummated as provided by the terms of this 9 Stipulation; AND WHEREAS, the Settling Defendants conditionally stipulate, for 11 the limited purposes of this Stipulation and the creation of a settlement class, that 12 the Litigation shall be certified for class treatment under Rule 23 of the Federal 13 Rules of Civil Procedure and that the stipulated settlement class consists of 14 Settlement Class Members, as defined below. The Settling Defendants' conditi 15 stipulation as to the creation of a settlement class is contingent upon the execution 16 of this Stipulation by the Settling Parties and its final approval by the Court. If this 17 Stipulation is for any reason not finally approved, or is otherwise terminated, the 18 Settling Defendants reserve their rights to assert any and all available objections 19 and defenses to certification of any class: 20 NOW THEREFORE, without any admission or concession on the part of the 21 Lead Plaintiffs of any lack of merit in the Litigation whatsoever, and without any 22 admission or concession on the part of the Settling Defendants of any liability, 23 wrongdoing, or lack of merit in the defenses asserted in the Litigation whatsoever, 24 it is hereby STIPULATED AND AGREED, by and among the Settling Parties, 25 through their respective attorneys, subject to approval of the Court pursuant to 26 4

6 Case 2: 87-R-AJW Document 117 Filed 10/04/12 Page 6 of 41 Page ID #: Rule 23(e) of the Federal Rules of Civil Procedure, in consideration of the benefits 2 flowing to the Settling Parties hereto from the Settlement, that any and all claims 3 made, or that could have been made, including all Settled Claims (as defined 4 below), by Plaintiffs against the Released Parties (as defined below) shall be 5 compromised, settled, released, and dismissed with prejudice as provided in this 6 Stipulation and Agreement of Settlement, to the extent as hereafter provided, 7 without costs as to Plaintiffs or Defendants, subject to the approval of the Court, 8 upon and subject to the following terms and conditions: 9 A. CERTAIN DEFINITIONS 10 As used in this Stipulation, the following terms have the 11 specified below: "Attorneys' Fees and Expenses" means the portion of the Gross 13 Settlement Fund approved by the Court for payment to Lead Plaintiffs' Counsel 14 including attorneys' fees, costs, litigation expenses, and fees and expenses o 15 experts (excluding Notice and Administration Expenses) "Authorized Claimant" means any Claimant (as defined below 17 whose claim for recovery has been allowed pursuant to the terms of the Stipulati 18 or by order of the Court "Award to Lead Plaintiffs" means any award by the Court 20 Lead Plaintiffs of reasonable costs and expenses (including lost wages) direc 21 relating to the representation of the Settlement Class pursuant to 15 U.S.C (a)(4) "Claimant" means any Settlement Class Member who files 24 Proof of Claim and Release (as defined below) in such form and manner, a 25 within such time, as set forth in this Stipulation, or as the Court shall prescribe. 26 5

7 Case 2: 87-R-AJW Document 117 Filed 10/04/12 Page 7 of 41 Page ID #: "Claims Administrator" means the accounting and claim 2 administration firm, Strategic Claims Services, Inc., that Lead Plaintiffs' Couns 3 requests be appointed by the Court to administer the Settlement and dissemina 4 notice to the Settlement Class "Court" means the United States District Court for the 6 I District of California District "Defendants" means Orient Paper, Inc., Zhenyong Liu, Winston 8 C. Yen, Dahong Zhou, Jing Hao, Drew Bernstein, Davis Accounting Group, P.C. 9 and Edwin Reece Davis "Effective Date" means the date on which all of the conditi 11 set forth below in paragraph K.1. shall have been satisfied and the Court's Orde 12 and Final Judgment, substantially in the form of Exhibit B hereto, becomes "Final. 13 The Court's Order and Final Judgment shall be deemed to be "Final" when either o 14 the following has occurred: (a) if an appeal or review is not sought by any perso 15 from the Order and Final Judgment, the day following the expiration of the time t 16 appeal or petition from the Order and Final Judgment; or (b) if an appeal or review 17 is sought from the Order and Final Judgment, the day after such Order and Fina 18 Judgment is affirmed or the appeal or review is dismissed or denied and such Orde 19 and Final Judgment is no longer subject to further judicial review "Escrow Account" means the interest-bearing account selecte 21 by the Escrow Agent. The Escrow Account shall be managed by the Escrow Agen 22 for the benefit of Lead Plaintiffs and the Settlement Class until the Effective Date 23 of the Settlement

8 Case 2: 87-R-AJW Document 117 Filed 10/04/12 Page 8 of 41 Page ID #: "Escrow Agent" means the Claims Administrator or its dul appointed agent(s). The Escrow Agent shall perform the duties as set forth in thi Stipulation. 11. "Gross Settlement Fund" means the Settlement Amount plus al interest earned thereon. 12. "Lead Plaintiffs" means Mark Henning, Christian Stillmark and Roman Zaretski. 13. "Lead Plaintiffs' Counsel" means The Rosen Law Firm, P.A. 14. "Net Settlement Fund" means the Gross Settlement Fund, less (i) Attorneys' Fees and Expenses; (ii) Notice and Administration Expenses; (iii) taxes; (iv) any Award to Lead Plaintiffs; and (v) other fees and expenses authorized by the Court. 15. "Notice and Administration Account" means the account to be established from the Gross Settlement Fund and maintained by Lead Plaintiffs Counsel. The Notice and Administration Account may be drawn upon by Lead Plaintiffs' Counsel for Notice and Administration Expenses without further order of the Court. 16. "Notice and Administration Expenses" means all expenses incurred (whether or not paid) in connection with the preparation, printing mailing, and publication of the Notice to the Settlement Class of the proposed settlement, and all expenses of Settlement administration; provided, however, tha none of these expenses shall be deemed to include Attorneys' Fees and Expenses through the Effective Date. All such Notice and Administration Expenses shall be paid from the Gross Settlement Fund

9 Case 2: 87-R-AJW Document 117 Filed 10/04/12 Page 9 of 41 Page ID #: "Order and Final Judgment" means the order and judgmen 2 entered by the Court, including a Bar Order, approving the Settlement 3 dismissing the Litigation as against the Settling Defendants with prejudice 4 without costs to any party "Orient Paper Defendants" means all Defendants except Davi 6 Accounting Group, P.C., and Edwin Reece Davis "Person" means any individual, corporation, partnership 8 limited liability company or partnership, limited partnership, professiona 9 corporation, association, affiliate, joint stock company, trust, estate, unincorporated 10 association, government, or any political subdivision or agency thereof, any othe 11 type of legal or political entity, any legal representative, and, as applicable, thei 12 respective spouses, heirs, predecessors, successors, representatives, and assigns "Plaintiffs" means the Lead Plaintiffs and the Settlement Class "Plan of Allocation" means the plan for allocating the N 15 Settlement Fund (as set forth in the Notice of Pendency and Settlement of C 16 Action (the "Notice"), attached as Exhibit A-1 to the Order of Prelimi 17 Approval of Settlement) to Authorized Claimants after payment of Notice 18 Administration Expenses, Taxes and Tax Expenses, and Attorneys' Fees 19 Expenses. Any Plan of Allocation is not part of the Stipulation and the Released 20 Parties shall have no liability with respect thereto "Released Parties" means Orient Paper Defendants and any o 22 their current, former, or future parents, subsidiaries, affiliates, partners, join 23 venturers, officers, directors, principals, shareholders, members, agents (acting in 24 their capacity as agents), employees, attorneys, trustees, insurers (including Illinoi 25 National Insurance Company and its respective businesses, affiliates, subsidiaries 26 8

10 Case 2:1 -R-AJW Document 117 Filed 10/04/12 Page 10 of 41 Page ID #: parents and affiliated corporations, divisions, predecessors, shareholders, partners, 2 join venturers, principals, insurers, reinsurers, successors and assigns, and their 3 respective past, present and future employees, officers, directors, attorneys 4 accountants, auditors, agents and representatives), reinsurers, advisors 5 accountants, associates, and/or any other individual or entity in which any Orien 6 Paper Defendant has or had a controlling interest or which is or was related to o 7 affiliated with any Orient Paper Defendant, and the current, former, and future 8 legal representatives, heirs, successors-in-interest, or assigns of any Orient 9 Defendant "Settled Claims" means any and all claims, debts, demands 11 liabilities, rights, and causes of action of every nature and description whatsoeve 12 (including, but not limited to, any claims for damages, interest, attorneys' fees 13 expert or consulting fees, and any other costs, expenses, or liabilities whatsoever) 14 whether based on federal, state, local, statutory or common law, or any other law 15 rule, or regulation, whether fixed or contingent, accrued or unaccrued, liquidated or 16 unliquidated, at law or in equity, matured or unmatured, whether class or 17 individual in nature, including both known claims and Unknown Claims (as 18 defined below): (i) that have been asserted in the Litigation by the Lead Plainti 19 and/or Settlement Class Members or any of them against any of the Released 20 Parties, including, without limitation, all statements made by any of the Orien 21 Paper Defendants that Plaintiffs allege in the Litigation were false or misleading 22 or any of the alleged acts, omissions, representations, facts, events, matters 23 transactions, or occurrences asserted in or relating to the Litigation, or otherwise 24 alleged, asserted, or contended in the Litigation; or (ii) that relate to the purchase o 25 Orient Paper securities, including, without limitation, claims for fraud, negligen 26 9

11 Case 2:1 -R-AJW Document 117 Filed 10/04/12 Page 11 of 41 Page ID #: misrepresentation, or claims based upon or related in any way to the purchase 2 acquisition, or sale of Orient Paper securities during the Class Period by the Lead 3 Plaintiffs or any Settlement Class Member, on behalf of themselves, their heirs 4 executors, administrators, successors, and assigns against the Released Parties o 5 any of them.. Settled Claims also include any and all claims arising out of, relating 6 to, or in connection with the Settlement or resolution of the Litigation against 7 Released Parties (including Unknown Claims that arise out of, relate to, or are i 8 connection with the Settlement or resolution of the Litigation against the Release 9 Parties), except claims to enforce any of the terms of this Stipulation "Settled Defendants' Claims" means all claims, demands, rights 11 remedies, liabilities, and causes of action of every nature and descripti 12 whatsoever, whether based on federal, state, local, statutory, or common law, 13 any other law, rule, or regulation, including both known and Unknown Claims, tha 14 (i) have been or could have been asserted in the Litigation by the Settling 15 Defendants, or any of them, or the successors and assigns of any of them, agains 16 any of the Lead Plaintiffs, Settlement Class Members, or any of their attorneys, and 17 (ii) arise out of or relate in any way to the institution, prosecution, or Settlement o 18 this Litigation or the Settled Claims, including but not limited to all claims fo 19 malicious prosecution or sanctions. "Settled Defendants' Claims" does not incl 20 claims to enforce any of the terms of this Stipulation "Settlement Class" and "Settlement Class Members" mean, 22 purposes of this Settlement, all persons who purchased or otherwise acquired any 23 common stock of Orient Paper during the period from March, 2009 through and 24 including August 13, 2010, and were allegedly damaged thereby. Excluded from 25 the Settlement Class are Defendants, and all former officers and directors of Orien 26 10

12 Case 2:1 -R-AJW Document 117 Filed 10/04/12 Page 12 of 41 Page ID #: Paper, and such excluded persons' immediate families, legal representatives, heirs, 2 predecessors, successors, and assigns, and any entity in which any excluded person 3 has or had a controlling interest, and any persons who have separately filed actions 4 against one or more of Defendants, based in whole or in part on any claim arising 5 out of or relating to any of the alleged acts, omissions, misrepresentations, facts 6 events, matters, transactions, or occurrences referred to in the Litigation o 7 otherwise alleged, asserted, or contended in the Litigation. Also excluded from the 8 Settlement Class are those persons who file valid and timely requests for exclusion 9 in accordance with the Court's Order of Preliminary Approval of Settlemen 10 ("Preliminary Approval Order") concerning this Stipulation "Settlement Class Distribution Order" means the order entered 12 by the Court, upon application of Lead Plaintiffs' Counsel following the occurrenc 13 of the events identified in paragraph D.13. below, which authorizes the Claim 14 Administrator to distribute the Net Settlement Fund to the Settlement Class. 15. "Settlement Class Period" means the period from March , and August 13, 2010, inclusive. 17. "Settlement" means the settlement contemplated by 18 Stipulation "Settlement Amount" means a fund in the amount 20 $2,000, (Two Million Dollars) "Settlement Hearing" means the final hearing to be held by 22 Court to determine: (1) whether the proposed Settlement should be approved 23 fair, reasonable, and adequate; (2) whether all Settled Claims should be dismi 24 with prejudice; (3) whether an order approving the Settlement should be ent 25 thereon; (4) whether the allocation of the Settlement Fund should be approved; 26 11

13 Case 2:1 -R-AJW Document 117 Filed 10/04/12 Page 13 of 41 Page ID #: (5) whether the application for an award of Attorneys' Fees and Expenses and 2 Award to Lead Plaintiffs should be approved "Unknown Claims" means (a) any Settled Claim that the Le 4 Plaintiffs or any Settlement Class Member does not know or suspect to exist in his 5 her, or its favor at the time of the release of the Released Parties, which if kno 6 by him, her, or it, might have affected his, her, or its decision(s) with respect to 7 Settlement, including, but not limited to, the decision not to object to 8 Settlement, provided such claim arises out of or relates to the purchase or sale 9 Orient Paper securities, and (b) any Settled Defendants' Claims that any Defendan 10 does not know or expect to exist in his, her, or its favor, which if known by him 11 her, or it might have affected his, her, or its decision(s) with respect to the 12 Settlement. With respect to any and all Settled Claims and Settled Defendants 13 Claims, the Settling Parties stipulate and agree that upon the Effective Date, 14 Settling Parties shall expressly waive, and each of the Settlement Class Mem 15 shall be deemed to have waived and by operation of the Order and Final Judgmen 16 shall have waived, any and all provisions, rights, and benefits conferred by any law 17 of any state or territory of the United States, or principle of common law that i 18 similar, comparable, or equivalent to Cal. Civ. Code 1542, which provides: "A 19 general release does not extend to claims which the creditor does not know 20 suspect to exist in his or her favor at the time of executing the release, which 21 known by him or her must have materially affected his or her settlement with t 22 debtor." 23 B. SCOPE AND EFFECT OF SETTLEMENT AND RELEASES The obligations incurred pursuant to this Stipulation shall be in f 25 and final disposition of the Litigation and any and all Settled Claims as against 26 12

14 Case 2:1 -R-AJW Document 117 Filed 10/04/12 Page 14 of 41 Page ID #: Released Parties and any and all Settled Defendants' Claims as against the 2 Plaintiffs, the Settlement Class Members, and their attorneys Pursuant to the Order and Final Judgment, upon the Effective 4 of this Settlement, the Settlement Class Members on behalf of themselves, 5 current and future heirs, executors, administrators, successors, attorneys, insurers 6 agents, representatives, and assigns, and any person they represent, shall, with 7 respect to each and every Settled Claim, release and forever relinquish and 8 discharge, and shall forever be enjoined from prosecuting, all Settled Claims and 9 any and all claims arising out of, relating to, or in connection with the Settlement 10 the Litigation, or the resolution of the Litigation against the Released Parties 11 whether or not such Settlement Class Member executes and delivers the Proof 12 Claim and Release, except claims to enforce any of the terms of this Stipulation 13 Further, all Settlement Class Members on behalf of themselves, their current and 14 future heirs, executors, administrators, successors, attorneys, insurers, agents 15 representatives, and assigns, expressly covenant not to assert any claim or action 16 against any of the Released Parties that: (i) arises out of or relates to the purchase 17 or sale of Orient Paper securities, or (ii) that could have been alleged, asserted, o 18 contended in any forum by the Settlement Class Members or any of them agains 19 any of the Released Parties, arising out of or relating to the purchase or sale o 20 Orient Paper securities, and shall forever be enjoined from commencing 21 instituting, or prosecuting any such claim, so long as such claim relates to 22 purchase or sale of Orient Paper securities The Proof of Claim and Release to be executed by the Settlemen 24 Class Members shall be substantially in the form and content contained in Exhibi 25 A-3 to the Preliminary Approval Order attached hereto as Exhibit A

15 Case 2:1 -R-AJW Document 117 Filed 10/04/12 Page 15 of 41 Page ID #: Pursuant to the Order and Final Judgment, upon the Effective 2 of this Settlement, Defendants shall release and forever discharge each and 3 one of the Settled Defendants' Claims, and shall forever be enjoined 4 prosecuting the Settled Defendants' Claims as against any of the Lead Plaintiffs 5 Settlement Class Members, or their attorneys, including but not limited to claim 6 for malicious prosecution or sanctions. 7 C. THE SETTLEMENT CONSIDERATION 8 1. Subject to the terms of this Stipulation, the sum of $2,000,000 9 (Two Million Dollars) shall be paid into the Escrow Account within ten (10 10 business days after the Court issues the Preliminary Approval Order. Tha 11 payment shall constitute the Settlement Amount. The Settlement Amount shall be 12 paid exclusively by the Orient Paper Defendants The Gross Settlement Fund, net of any Taxes (as defined below 14 on the income thereof and any Tax Expenses (as defined below), shall be used to 15 pay: (i) the Notice and Administration Expenses as authorized by this Stipulation 16 (ii) Attorneys' Fees and Expenses authorized by the Court; (iii) any Award to Lead 17 Plaintiffs authorized by the Court; and (iv) other fees and expenses authorized by 18 the Court. The balance of the Gross Settlement Fund remaining after the above 19 payments shall be the Net Settlement Fund, which shall be distributed to the 20 Authorized Claimants in accordance with this Stipulation Any sums required to be held in escrow hereunder shall be held 22 the Escrow Agent for the benefit of the Lead Plaintiffs and the Settlement Cl 23 until the Effective Date. Until the date the Order and Final Judgment is entered, 24 payments made from the Settlement Fund shall require the signature of 25 authorized representative of both the Escrow Agent and Defendants' counsel. Af 26 14

16 Case 2:1 -R-AJW Document 117 Filed 10/04/12 Page 16 of 41 Page ID #:26 1 the Order and Final Judgment is entered, payments made from the Settlement 2 shall require only the signature of an authorized representative of the Es 3 Agent and shall not require the signature of Defendants' counsel s authoriz 4 representative. All funds held by the Escrow Agent shall be deemed to be 5 custodia legis and shall remain subject to the jurisdiction of the Court until suc 6 time as the funds shall be distributed or returned pursuant to this Stipulation and/ 7 further order of the Court. Other than amounts disbursed for providing notice 8 the Settlement Class, customary administration costs, and Taxes and Tax Expenses 9 and the Attorneys Fee and Expenses (which shall be paid to Lead Plaintiffs 10 Counsel within two business days after the Court executes an order awarding such 11 fees and expenses), the Settlement Fund shall not be distributed until the Effective 12 Date. The Escrow Agent shall not disburse the Gross Settlement Fund, or 13 portion thereof, except as provided in this Stipulation, or upon Order of the Court The Escrow Agent shall invest any funds in excess of $150,000 i 15 short-term United States Treasury Securities (or a mutual fund invested solely i 16 such instruments), and shall collect and reinvest all interest accrued thereon. 17 funds held in escrow in an amount of less than $150,000 may be held in a 18 account insured to the extent possible by the FDIC. Interest earned on the m 19 deposited into the Escrow Account shall be part of the Gross Settlement Fund The Notice and Administration Expenses shall be paid from the 21 Gross Settlement Fund. In order to pay Notice and Administration Expenses 22 $100,000 shall be withdrawn from the Gross Settlement Fund and deposited into a 23 Notice and Administration Account upon the entry of the Preliminary 24 Order. Any monies from the Notice and Administration Fund that remain 25 administration shall be returned to the Net Settlement Fund. The Notice 26 15

17 Case 2:1 -R-AJW Document 117 Filed 10/04/12 Page 17 of 41 Page ID #:26 1 Administration Account may be drawn upon by Lead Plaintiffs' Counsel for Notice 2 and Administration Expenses only after Court approval for each specific payment. 3 The Notice and Administration Account shall be administered solely by the 4 Escrow Agent. Any taxes or other expenses incurred in connection with the Notice 5 and Administration Account shall be paid from the Notice and Administration 6 Account or from the remainder of the Gross Settlement Fund. The Release 7 Parties shall not have any obligation for payment of taxes or other expense 8 associated with the Notice and Administration Account. Notice an 9 Administration Expenses in excess of $100,000 shall not be paid out of the Gros 10 Settlement Fund until after the Effective Date. In no event shall an amount mor 11 than the Settlement Amount be paid for Notice and Administration Expenses, an 12 in no event shall the Released Parties be responsible to pay any amount for Notic 13 and Administration Expenses The Settling Defendants shall have access to all records of 15 Escrow Account, and upon request made to the Escrow Agent, shall receive 16 of all records of disbursements, deposits, and statements of accounts After the Effective Date, the Released Parties shall have no interes 18 in the Gross Settlement Fund or in the Net Settlement Fund. The Released P 19 shall not be liable for the loss of any portion of the Settlement Fund, nor have a 20 liability, obligation, or responsibility for the payment of claims, taxes, legal fees, 21 any other expenses payable from the Gross Settlement Fund. 22 D. ADMINISTRATION AND CALCULATION OF CLAIMS, FINAL 23 AWARDS, AND DISTRIBUTION OF NET SETTLEMENT FUND The Claims Administrator shall administer and calculate 25 claims that shall be allowed and oversee distribution of the Net Settlement 26 16

18 Case 2:1 -R-AJW Document 117 Filed 10/04/12 Page 18 of 41 Page ID #: under the supervision of Lead Plaintiffs' Counsel, and subject to appeal to, and 2 jurisdiction of, the Court. The Released Parties shall have no liability, obligation 3 or responsibility for the administration of the Gross Settlement Fund or Ne 4 Settlement Fund, or for the distribution of the Net Settlement Fund Except as otherwise provided below, on and after the Effecti 6 Date, the Gross Settlement Fund shall be applied as follows: 7 a. To the extent not paid from the Notice a 8 Administration Account, to pay following an order of the Court approving a 9 such payment, the expenses incurred in connection with providing notice 10 Settlement Class Members, administering and distributing the Net Settlement Fu 11 to Settlement Class Members, processing Proofs of Claim, processing requests f 12 exclusion, escrow fees and costs, and any applicable taxes; 13 b. Subject to the approval and further order(s) of th 14 Court, the Net Settlement Fund shall be allocated to Authorized Claimants as s 15 forth in paragraph F. below. 16 c. After the Claims Administrator calculates 17 recognized losses of each Authorized Claimant, Lead Plaintiffs' Counsel shall file 18 motion for distribution of the Settlement Fund with the Court listing eac 19 Authorized Claimant, the amount of each claim that Lead Plaintiffs' Couns 20 believes should be allocated and distributed to each such Authorized Claiman 21 accounting for all Notice and Administration Expenses, and requesting C 22 approval to distribute the Settlement Fund to the Authorized Claimants and 23 any further Notice and Administration expenses Each Settlement Class Member wishing to participate in th 25 Settlement shall be required to submit a Proof of Claim and Release (i 26 17

19 Case 2:1 -R-AJW Document 117 Filed 10/04/12 Page 19 of 41 Page ID #: substantially the form set forth in Exhibit A-3 hereto, which inter alia releases a 2 Settled Claims against all Released Parties), signed under penalty of perjury by th 3 beneficial owner(s) of the securities that are the subject of the Proof of Claim an 4 Release, or by someone with documented authority to sign for the benefici 5 owners and supported by such documents as specified in the instruction 6 accompanying the Proof of Claim and Release All Proofs of Claim must be postmarked or received within 8 time prescribed in the Preliminary Approval Order unless otherwise ordered by 9 Court. Any Settlement Class Member who fails to submit a properly comple 10 Proof of Claim within such period as shall be authorized by the Court shall 11 forever barred from receiving any payments pursuant to this Stipulation or 12 the Net Settlement Fund (unless Lead Plaintiffs' Counsel in its discretion d 13 such late filing to be a formal or technical defect, or unless by Order of the Court 14 later submitted Proof of Claim by such Settlement Class Member is approved), b 15 will in all other respects be subject to the provisions of this Stipulation and Ord 16 and Final Judgment, including, without limitation, the release of the Settled Claim 17 and dismissal of the Litigation. Provided that it is received before the motion 18 the Settlement Class Distribution Order is filed, a Proof of Claim shall be 19 to have been submitted when posted if received with a postmark indicated on 20 envelope and if mailed by first-class mail and addressed in accordance with 21 instructions thereon. In all other cases, the Proof of Claim shall be deemed to h 22 been submitted when actually received by the Claims Administrator Each Proof of Claim shall be submitted to the Clai 24 I Administrator who shall determine, under the supervision of Lead Plaintiffs 25 Counsel, in accordance with this Stipulation and any applicable orders of 26 18

20 Case 2:1 -R-AJW Document 117 Filed 10/04/12 Page 20 of 41 Page ID #: Court, the extent, if any, to which each claim shall be allowed, subject to appeal to 2 the Court. No later than seven (7) days prior to disbursement of the Net Settlemen 3 Fund, Lead Plaintiffs' Counsel shall provide the Settling Defendants with a list 4 Proofs of Claim received by the Claims Administrator indicating which Proofs 5 Claim have been allowed by the Claims Administrator Following notice to the Orient Paper Defendants counsel 7 Lead Plaintiffs' Counsel shall have the right, but not the obligation, to waive wha 8 they deem to be formal or technical defects in any Proofs of Claim filed, where 9 doing so is in the interest of achieving substantial justice Proofs of Claim that do not meet the filing requirements 11 be rejected. Prior to rejection of a Proof of Claim, the Claims Administrator sh 12 communicate with the Claimant in order to remedy curable deficiencies in 13 Proof of Claim submitted. The Claims Administrator, under the supervision 14 I Lead Plaintiffs' Counsel, shall notify in a timely fashion and in writing, 15 Claimants whose Proofs of Claim they propose to reject in whole or in part, settin 16 forth the reasons thereof, and shall indicate in such notice that the Claimant whos 17 claims are to be rejected has the right to review by the Court if the Claimant 18 desires and complies with the requirement of paragraph D.8. below If any Claimant whose claim has been rejected in whole or 20 part desires to contest such rejection, the Claimant must, within twenty (20) da 21 after the date of mailing of the notice required by paragraph D.7. above, serve u 22 the Claims Administrator a notice and statement of reasons indicating 23 Claimant's ground for contesting the rejection along with any 24 documentation, and requesting a review thereof by the Court. If a di C

21 Case 2:1 -R-AJW Document 117 Filed 10/04/12 Page 21 of 41 Page ID #: concerning a claim cannot be otherwise resolved, Lead Plaintiffs' Counsel 2 thereafter present the request for review to the Court The administrative determination of the Claims Admi 4 accepting and rejecting claims shall be presented to the Court, on notice to 5 Settling Defendants' Counsel, for approval by the Court in the Settlement C 6 Distribution Order Each Claimant shall be deemed to have submitted to 8 jurisdiction of the Court with respect to the Claimant's claim, and the claim will 9 subject to investigation and discovery under the Federal Rules of Civil 10 provided that such investigation and discovery shall be limited to that 11 status as a Settlement Class Member and the validity and amount of the 12 claim. No discovery shall be allowed on the merits of the Litigation or Settlemen 13 in connection with processing of the Proofs of Claim Payment pursuant to this Stipulation shall be deemed final 15 conclusive against all Settlement Class Members. All Settlement Class 16 whose claims are not approved by the Court shall be barred from participating i 17 distributions from the Net Settlement Fund, but are otherwise bound by all of th 18 terms of the Order and Final Judgment to be entered in the Litigation and 19 releases provided for herein, and will be barred from bringing any action agains 20 the Released Parties arising out of or relating to the Settled Claims All proceedings with respect to the administration, processing 22 and determination of claims described by this paragraph of this Stipulation and the 23 determination of all controversies relating thereto, including disputed questions o 24 law and fact with respect to the validity of claims, shall be subject to the 25 jurisdiction of the Court

22 Case 2:1 -R-AJW Document 117 Filed 10/04/12 Page 22 of 41 Page ID #: The Net Settlement Fund shall be distributed to A 2 Claimants by the Claims Administrator upon application to the Court by Lea 3 Plaintiffs' Counsel for a Settlement Class Distribution Order only after all of th 4 following having occurred: (i) the Effective Date; (ii) all claims have bee 5 processed, and all Claimants whose claims have been rejected or disallowed, i 6 whole or in part, have been notified and provided the opportunity to be he 7 concerning such rejection or disallowance; (iii) all objections with respect to 8 rejected or disallowed claims have been resolved by the Court, and all appe 9 therefrom have been resolved or the time therefor has expired; (iv) all matters wi 10 respect to Attorneys' Fees and Expenses, costs, and disbursements have 11 resolved by the Court, and all appeals therefrom have been resolved or the 12 therefor has expired; and (v) all costs of administration have been paid If any funds remain in the Net Settlement Fund by reason 14 uncashed checks or otherwise, then, after the Claims Administrator has 15 reasonable and diligent efforts to have Settlement Class Members who are enti 16 to participate in the distribution of the Net Settlement Fund cash their di 17 checks, any balance remaining in the Net Settlement Fund one (1) year after 18 initial distribution of such funds shall be re-distributed, after payment of 19 unpaid costs or fees incurred in administering the Net Settlement Fund for such 20 distribution, to Settlement Class Members who have cashed their checks and w 21 would receive at least $10.00 from such re-distribution. If any funds shall 22 in the Net Settlement Fund six months after such re-distribution, then such balanc 23 shall be contributed to the Legal Aid Foundation of Los Angeles or any not-for 24 profit successor of it C

23 Case 2:1 -R-AJW Document 117 Filed 10/04/12 Page 23 of 41 Page ID #: Before the Effective Date, Lead Plaintiffs' Counsel shall 2 with the Court a declaration under penalty of perjury describing how notice of 3 Settlement was given to the Settlement Class and listing the names and addres 4 of all persons to whom individual notice of the Settlement was mailed. 5 E. TAX TREATMENT 6 1. The Parties agree to treat the Gross Settlement Fund as being a 7 all times a qualified settlement fund within the meaning of Treasury Regulation B-1 and Section 468B of the Internal Revenue Code, as amended, for the 9 taxable years of the Gross Settlement Fund, beginning with the date it is crea 10 In addition, the Escrow Agent and, as required, the Settling Parties, shall joi 11 and timely make such elections as are necessary or advisable to carry out th 12 provisions of this paragraph, including the "relation-back election" (as defined i 13 Treas. Reg B-1(j)(2)) back to the earliest permitted date. Such election 14 shall be made in compliance with the procedures and requirements contained i 15 such regulations. It shall be the responsibility of Lead Plaintiffs' Counsel to timel 16 and properly prepare and deliver the necessary documentation for signature by 17 necessary parties, and thereafter to cause the appropriate filing to occur For purposes of Section 468B of the Internal Revenue Code, 19 amended, and the regulations promulgated thereunder, the "administrator" shall 20 Lead Plaintiffs' Counsel. Lead Plaintiffs' Counsel shall timely and properly file 21 tax returns necessary or advisable with respect to the Gross Settlement Fund, a 22 make all required tax payments, including deposits of estimated tax payments i 23 accordance with Treas. Reg B-2(k). Such returns (as well as the electio 24 described in paragraph E.1. hereof) shall be consistent with this paragraph an 25 reflect that all taxes (including any interest or penalties) on the income earned b 26 22

24 Case 2:1 -R-AJW Document 117 Filed 10/04/12 Page 24 of 41 Page ID #: the Gross Settlement Fund shall be paid out of the Gross Settlement Fund 2 provided in paragraph E.3. hereof All (i) taxes (including any interest or penalties) arising wit 4 respect to the income earned by the Gross Settlement Fund, including any taxes o 5 tax detriments that may be imposed upon the Settling Defendants with respect t 6 any income earned by the Gross Settlement Fund for any period during which th 7 Gross Settlement Fund does not qualify as a qualified settlement fund for Federa 8 or state income tax purposes ("Taxes"); and (ii) expenses and costs incurred i 9 connection with the operation and implementation of this paragraph (including 10 without limitation, expenses of tax attorneys and/or accountants, and mailing 11 distribution costs and expenses relating to filing (or failing to file) the ret 12 described in this paragraph) ("Tax Expenses"), shall be paid out of the G 13 Settlement Fund. In all events, the Released Parties shall have no liability 14 Taxes or the Tax Expenses, and Lead Plaintiffs and Lead Plaintiffs' Counsel agree 15 to indemnify and hold the Released Parties harmless for Taxes and Tax Expenses 16 Further, Taxes and Tax Expenses shall be treated as, and considered to be, a cost 17 administration of the Settlement and shall be timely paid by the Escrow Agent 18 of the Gross Settlement Fund without prior order from the Court. The Escr 19 Agent shall be obligated (notwithstanding anything herein to the contrary) 20 withhold from distribution to the Settlement Class Members any funds necessary 21 pay such Taxes and Tax Expenses, including the establishment of adequ 22 reserves for any Taxes and Tax Expenses (as well as any amounts that may 23 required to be withheld under Treas. Reg. 1468B-2(l)(2)). The Released Parti 24 shall have no responsibility or liability therefor. The Settling Parties hereto agr 25 to cooperate with the Escrow Agent, each other, and their tax attorneys a 26 23

25 Case 2:1 -R-AJW Document 117 Filed 10/04/12 Page 25 of 41 Page ID #: accountants to the extent reasonably necessary to carry out the provisions of this 2 paragraph. 3 F. ALLOCATION OF NET SETTLEMENT FUND 4 1. The Plan of Allocation is based upon Lead Plaintiffs' Counsel 5 assessment of the merits and the relative strengths and weaknesses, includi 6 recoverable damages, of the claims of the Settlement Class Members The Settling Defendants do not and shall not take any positi 8 as to the proposed Plan of Allocation The Released Parties shall have no responsibility for and 10 obligations or liabilities of any kind whatsoever in connection with the 11 determination, administration, calculation, or payment of claims to Settlemen 12 Class Members The Settling Defendants shall have no involvement in 14 solicitation of, or review of Proofs of Claim, or involvement in the administratio 15 process itself, which shall be conducted by the Claims Administrator in accordanc 16 with this Stipulation and the Order and Final Judgment to be entered by the Cour 17 No Claimant or Authorized Claimant shall have any claim against the Release 18 Parties or their counsel based on, or in any way relating to, the distributions from 19 either the Gross Settlement Fund or the Net Settlement Fund No Authorized Claimant shall have any claim against Lead 21 Plaintiffs' Counsel or the Claims Administrator based on, or in any way relating to 22 the distributions from the Net Settlement Fund that have been made substantially in 23 accordance with this Stipulation and any applicable orders of the Court Any change in the allocation of the Net Settlement 25 ordered by the Court shall not affect the validity or finality of this Settlement

26 Case 2:1 -R-AJW Document 117 Filed 10/04/12 Page 26 of 41 Page ID #: G. OBLIGATIONS OF AND LIMITATIONS OF LIABILITY OF 2 ESCROW AGENT 3 The Escrow Agent shall not be responsible for the payment of a 4 sums due to Authorized Claimants or other Persons, except to the extent 5 maintaining account of and properly paying sums as required by this Stipulation 6 the limited extent that such sums have been delivered into the Escrow Account 7 Notice and Administration Account as required by this Stipulation. The Escr 8 Agent shall be liable only for acts of gross negligence or willful misconduct. 9 H. LEAD PLAINTIFFS' COUNSEL'S REQUEST FOR AN AWARD 10 OF ATTORNEYS' FEES AND EXPENSES Lead Plaintiffs' Counsel intends to submit an application to 12 Court, on notice to counsel for the Settling Defendants, for the payment 13 Attorneys' Fees and Expenses, including: (i) an award of attorneys' fees up to 14 third of the Settlement Amount; (ii) reimbursement of litigation costs 15 expenses, plus interest, including fees and expenses of experts, incurred i 16 connection with the prosecution of the Litigation; and (iii) an Award to 17 Plaintiffs (for reimbursement of time and expenses) Any attorneys' fees and costs and Award to Lead 19 awarded by the Court shall be paid from the Gross Settlement Fund within 20 business days after the Court executes an order awarding such fees and expenses 21 Lead Plaintiffs' Counsel may thereafter allocate the attorneys' fees among othe 22 Plaintiffs' counsel in a manner in which Lead Plaintiffs' Counsel in good faith 23 believe reflects the contributions of such counsel to the initiation, prosecution, 24 resolution of the Litigation. If, and when, as a result of any appeal and/or fu 25 proceedings on remand, or successful collateral attack, the Attorneys' Fee 26 25

27 Case 2:1 -R-AJW Document 117 Filed 10/04/12 Page of 41 Page ID #: Expense award is overturned or lowered, or if the settlement is terminated or is 2 approved by the Court, or if there is an appeal and any order approving t 3 settlement does not become final and binding upon the Class, then, within five ( 4 business days from receiving notice from Defendants' counsel or from a court 5 appropriate jurisdiction, Lead Plaintiffs' Counsel shall refund to the Settlemen 6 Fund such fees and expenses previously paid to them from the Settlement Fund 7 plus interest thereon at the same rate as earned on the Settlement Fund in 8 amount consistent with such reversal or modification. Each such Plaintiffs 9 counsel's law firm receiving fees and expenses, as a condition of receiving suc 10 fees and expenses, on behalf of itself and each partner and/or shareholder of i 11 agrees that the law firm and its partners and/or shareholders are subject to 12 jurisdiction of the Court for the purpose of enforcing the provisions of thi 13 paragraph Lead Plaintiffs' Counsel waives the right to make an additi 15 application or applications for payment from the Gross Settlement Fund for fee 16 and expenses incurred after the Settlement Hearing. The other Settling Partie 17 shall take no position on any application concerning Lead Plaintiffs' Counsel 18 request or award of attorneys' fees and reimbursement of expenses, or Award t 19 Lead Plaintiffs It is agreed that the procedure for and the allowance 21 disallowance by the Court of any applications by Lead Plaintiffs' Counsel fo 22 Attorneys' Fees and Expenses, including fees for experts and consultants to be paid 23 out of the Gross Settlement Fund, and any order or proceeding relating thereto 24 shall not operate to terminate or cancel this Stipulation or affect its finality, and