Post on 02-Apr-2018
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SETTLEMENTAGREEMENT Case No. 2:15-CV-00426-BRO (JEMX)
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
JOSH CRYSTAL, Individually And On Behalf Of All Others Similarly Situated, Plaintiff, v. MEDBOX, INC., PEJMAN VINCENT MEHDIZADEH, BRUCE BEDRICK, THOMAS IWANSKI, GUY MARSALA, AND DOUGLAS MITCHELL, Defendants.
Case No.: 2:15-CV-00426-BRO (JEMx) CLASS ACTION STIPULATION AND AGREEMENT OF SETTLEMENT
Ex. 1 Pg. 3
Case 2:15-cv-00426-BRO-JEM Document 88-3 Filed 12/18/15 Page 2 of 106 Page ID #:1078
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1. SETTLEMENTAGREEMENT Case No. 2:15-CV-00426-BRO (JEMX)
This Stipulation and Agreement of Settlement dated December 17, 2015 (the
“Settlement Agreement”), embodies a settlement (the “Settlement”) made and
entered into by and among the following Settling Parties: (i) Peter Phan and Paul
Poon (“Lead Plaintiffs”), on behalf of themselves and each of the members of the
Class, as defined herein, on the one hand; and (ii) Medbox, Inc. (“Medbox”),
Pejman Vincent Mehdizadeh (“Mehdizadeh”), Bruce Bedrick (“Bedrick”), Thomas
Iwanski (“Iwanski”), Guy Marsala (“Marsala”), C. Douglas Mitchell (“Mitchell”),
J. Mitchell Lowe (“Lowe”), Ned Siegel (“Siegel”), Timothy Quintanilla
(“Quintanilla”), and Q Accountancy Corporation (“Q Accountancy”) (collectively,
“Defendants”) on the other hand, by and through their counsel of record in the
above-referenced litigation pending in the United States District Court for the
Central District of California (the “Court”). The Settlement Agreement is intended
by the Settling Parties to fully, finally, and forever resolve, discharge, and settle the
Released Claims, upon and subject to the terms and conditions hereof and subject to
the approval of the Court. Throughout this Settlement Agreement, all capitalized
terms used, but not immediately defined, have the meanings given to them in
Section IV.1, below.
I. THE LITIGATION
The following cases were commenced in the United States District Court for
the Central District of California, on or after January 21, 2015:
Abbreviated Case Name Case Number Date Filed
1. Crystal v. Medbox, Inc., et al. 2:15-cv-00426-BRO-JEM 01/21/15
2. Gutierrez v. Medbox, Inc., et al. 2:15-cv-00636-MWF-FFM 01/28/15
3. Donnino v. Medbox, Inc., et al. 2:15-cv-00683-DMG-PJW 01/29/15
Ex. 1 Pg. 4
Case 2:15-cv-00426-BRO-JEM Document 88-3 Filed 12/18/15 Page 3 of 106 Page ID #:1079
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2. SETTLEMENTAGREEMENT Case No. 2:15-CV-00426-BRO (JEMX)
The above-captioned cases, collectively, alleged violations of federal
securities laws as to Medbox, Mehdizadeh, Bedrick, Iwanski, Marsala, and
Mitchell.
Pursuant to an Order dated April 23, 2015, the above-captioned cases were
consolidated for all purposes under the caption, Crystal v. Medbox, Inc., et al., Case
No.: 2:15-CV-00426-BRO (JEMx) (the “Class Action”) (Dkt. No. 33). By that
same Order dated April 23, 2015, the Court appointed Peter Phan and Paul Poon as
Lead Plaintiffs and appointed the law firm of Johnson & Weaver, LLP as lead
counsel for the Class (“Lead Counsel”) (Id.).
On July 27, 2015, Lead Plaintiffs filed their Consolidated Complaint for
Violations of the Federal Securities Laws (the “Consolidated Complaint”) (Dkt.
No. 48). In addition to naming Medbox, Mehdizadeh, Bedrick, Iwanski, Marsala,
and Mitchell as defendants, the Consolidated Complaint added Lowe, Siegel,
Quintanilla, and Q Accountancy as defendants.
Following the filing of the Consolidated Complaint, Lead Plaintiffs and
Defendants attended a mediation on October 16, 2015, and following arm’s-length
negotiations with the assistance of the Hon. Layn R. Phillips (Ret.), Lead Plaintiffs
and Defendants agreed to the Settlement.
II. CLAIMS OF LEAD PLAINTIFFS AND BENEFITS OF THE SETTLEMENT
Lead Plaintiffs and Lead Counsel believe that the claims asserted in the
Consolidated Complaint have merit. However, Lead Plaintiffs and Lead Counsel
recognize and acknowledge the expense and length of continued proceedings
necessary to prosecute the Class Action against Defendants through continued
discovery, trial, and appeals. Lead Plaintiffs and Lead Counsel also have taken into
account the uncertain outcome and the risk of any litigation, especially in complex
actions such as the Class Action, as well as the risks posed by the difficulties and
delays inherent in such litigation. Lead Plaintiffs and Lead Counsel also are aware
Ex. 1 Pg. 5
Case 2:15-cv-00426-BRO-JEM Document 88-3 Filed 12/18/15 Page 4 of 106 Page ID #:1080
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3. SETTLEMENTAGREEMENT Case No. 2:15-CV-00426-BRO (JEMX)
of the possible defenses to the alleged federal securities law violations asserted in
the Consolidated Complaint, and therefore believe that it is desirable that the
Released Claims be fully and finally compromised, settled and resolved with
prejudice and enjoined as set forth herein. Lead Plaintiffs and Lead Counsel
believe that the Settlement set forth in this Settlement Agreement confers
substantial benefits upon the Class in light of the circumstances here. Based on
their evaluation, Lead Plaintiffs and Lead Counsel have determined that the
Settlement set forth in this Settlement Agreement is fair, reasonable, and adequate
and in the best interests of Lead Plaintiffs and the Class.
III. DEFENDANTS’ DENIALS OF WRONGDOING AND LIABILITY
Defendants have denied and continue to deny that they have violated the
federal securities laws or any laws. Defendants accordingly have denied and
continue to deny specifically each and all of the claims and contentions alleged in
the Consolidated Complaint, along with all charges of wrongdoing or liability
against them arising out of any of the conduct, statements, acts or omissions
alleged, or that could have been alleged, in the Consolidated Complaint.
Defendants also have denied and continue to deny, inter alia, the allegations that
any Defendants made any material misstatements or omissions; that any member of
the Class has suffered damages; that the price of Medbox’s common stock was
artificially inflated by reason of the alleged misrepresentations, omissions, or
otherwise; that the members of the Class were harmed by the conduct alleged in the
Consolidated Complaint; or that Defendants knew or were reckless with respect to
the alleged misconduct. In addition, Defendants maintain that they have
meritorious defenses to all claims alleged in the Class Action.
Nonetheless, taking into account the uncertainty, risks, and costs inherent in
any litigation, especially in complex cases, Defendants have concluded that further
conduct of the Class Action could be protracted and distracting. Defendants have,
therefore, determined that it is desirable and beneficial to them that the Class
Ex. 1 Pg. 6
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4. SETTLEMENTAGREEMENT Case No. 2:15-CV-00426-BRO (JEMX)
Action be settled in the manner and upon the terms and conditions set forth in this
Settlement Agreement.
IV. TERMS OF THE SETTLEMENT AGREEMENT AND AGREEMENT OF SETTLEMENT
NOW, THEREFORE, IT IS HEREBY STIPULATED AND AGREED by
and among Lead Plaintiffs (for themselves and the members of the Class), on the
one hand, and Defendants, on the other hand, by and through their respective
counsel or attorneys of record, that, subject to the approval of the Court, in
consideration of the benefits flowing to the Settling Parties from the Settlement set
forth herein, the Class Action and the Released Claims shall be finally and fully
compromised, settled, and released, and the Class Action shall be dismissed with
prejudice, as to all Settling Parties, upon and subject to the terms and conditions of
this Settlement Agreement, as follows.
1. Definitions
As used in the Settlement Agreement the following terms have the meanings
specified below:
1.1 “Authorized Claimant” means a member of the Class who submits a
timely and valid Proof of Claim and Release form to the Claims Administrator and
whose Proof of Claim is not rejected. Only those members of the Class who file a
valid and timely Proof of Claim and Release shall be entitled to receive any
distributions from the Net Settlement Fund.
1.2 “Business Day” means any day except a Saturday or Sunday or other
day on which national banks are authorized by federal law to be closed.
1.3 “Calendar Day” means any day of the week including Saturday,
Sunday, and all other days of the week on which national banks are authorized by
federal law to be closed.
1.4 “Claims Administrator” means the firm of Strategic Claims Services,
which shall administer the Settlement, including sending a mailed notice to Class
Ex. 1 Pg. 7
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5. SETTLEMENTAGREEMENT Case No. 2:15-CV-00426-BRO (JEMX)
Members, arranging for publication of notice, and processing claims filed after the
entry of the Judgment, and such other administrative functions required under this
Settlement Agreement.
1.5 “Class” means all Persons who purchased or otherwise acquired
Medbox common stock between April 2, 2013 and December 29, 2014, inclusive,
and who were damaged thereby. Excluded from the Class are: (a) Persons or
entities who submit valid and timely requests for exclusion from the Class in
accordance with the requirements set forth in the Mailed Notice (as defined and
described in ¶3.1 and ¶3.2, below) and Rule 23 of the Federal Rules of Civil
Procedure; and (b) Defendants and their families, the officers and directors of the
Company, at all relevant times, members of their families and their legal
representatives, heirs, successors, or assigns, and any entity in which Defendants
have or had a controlling interest.
1.6 “Class Action” means the consolidated securities class action pending
in this Court under the caption, Crystal v. Medbox, Inc., et al., Case No.: 2:15-CV-
00426-BRO (JEMx), including, without limitation, all cases consolidated under that
caption.
1.7 “Class Member” means a Person who falls within the definition of the
Class as set forth in ¶1.5 of this Settlement Agreement.
1.8 “Class Period” means the period of time from April 2, 2013, through
December 29, 2014, inclusive.
1.9 “Court” means the United States District Court for the Central District
of California.
1.10 “Defendants” mean Medbox, Inc., Pejman Vincent Mehdizadeh, Bruce
Bedrick, Thomas Iwanski, Guy Marsala, C. Douglas Mitchell, J. Mitchell Lowe,
Ned Siegel, Timothy Quintanilla, and Q Accountancy Corporation, the same
meaning as defined above.
Ex. 1 Pg. 8
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6. SETTLEMENTAGREEMENT Case No. 2:15-CV-00426-BRO (JEMX)
1.11 “Effective Date” means the first date by which all of the events and
conditions specified in ¶7.1 of the Settlement Agreement have been met and have
occurred.
1.12 “Escrow Account” means the interest-bearing account created pursuant
to Section IV.2 herein.
1.13 “Escrow Agent” means Lead Counsel or its designees, who shall
perform the duties as set forth in this Settlement Agreement.
1.14 “Execution Date” means the last date upon which this Settlement
Agreement has been signed by all the signatories hereto through their counsel.
1.15 “Fee and Expense Application” has the same meaning as set forth in
¶6.1 of this Settlement Agreement.
1.16 “Fee and Expense Award” means such amounts as may be awarded by
the Court to Lead Counsel and Plaintiffs’ Counsel to be paid from the Settlement
Fund to compensate Lead Counsel and Plaintiffs’ Counsel for their efforts on behalf
of the Class and reimburse them for their expenses in connection with their
prosecution of the Class Action, which may include some or all of the following:
(i) an award of attorneys’ fees, (ii) reimbursement of expenses incurred in
connection with prosecuting the Class Action, including, without limitation,
expenses attributable to experts and/or consultants retained by Lead Counsel, and
(iii) interest on such attorneys’ fees and expenses at the same rate as earned by the
Settlement Fund, from the date the Court orders such award until the dates paid
from the Settlement Fund.
1.17 “Final” means when the last of the following with respect to the
Judgment approving the Settlement, substantially in the form of Exhibit B attached
hereto, shall occur: (i) the expiration of the time to file a motion to alter or amend
the Judgment under Federal Rule of Civil Procedure 59(e) has passed without any
such motion having been filed; (ii) the expiration of the time in which to appeal the
Judgment has passed without any appeal having been taken; and (iii) if a motion to
Ex. 1 Pg. 9
Case 2:15-cv-00426-BRO-JEM Document 88-3 Filed 12/18/15 Page 8 of 106 Page ID #:1084
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7. SETTLEMENTAGREEMENT Case No. 2:15-CV-00426-BRO (JEMX)
alter or amend is filed or if an appeal is taken, the determination of that motion or
appeal in such a manner as to permit the consummation of the Settlement, in
accordance with the terms and conditions of this Settlement Agreement. For
purposes of this paragraph, an “appeal” shall include any petition for a writ of
certiorari or other writ that may be filed in connection with approval or disapproval
of this Settlement, but shall not include any appeal which concerns only the issue of
attorneys’ fees and expenses or any Plan of Distribution of the Settlement Fund.
1.18 “Final Settlement Approval Hearing” means the final hearing to be
held by the Court to determine whether the proposed Settlement should be
approved as fair, reasonable and adequate; whether an order approving the
Settlement should be entered thereon; whether the Plan of Distribution of the
Settlement Fund should be approved; and whether and in what amounts to award
attorneys’ fees and expenses to Lead Counsel.
1.19 “Gross Settlement Fund” means the Settlement Amount plus all
interest earned thereon.
1.20 “Individual Defendants” means Pejman Vincent Mehdizadeh, Bruce
Bedrick, Thomas Iwanski, Guy Marsala, C. Douglas Mitchell, J. Mitchell Lowe,
Ned Siegel, Timothy Quintanilla, and Q Accountancy Corporation.
1.21 “Judgment” means the judgment and order of dismissal with prejudice
to be rendered by the Court upon approval of the Settlement, substantially in the
form attached hereto as Exhibit B.
1.22 “Lead Counsel” means Johnson & Weaver, LLP or its successor(s).
1.23 “Lead Plaintiffs” mean Peter Phan and Paul Poon.
1.24 “Medbox” means Medbox, Inc., a Nevada corporation, and its present
and former parents, subsidiaries, divisions, and affiliates.
1.25 “Net Settlement Fund” means the portion of the Settlement Fund that
shall be distributed to Authorized Claimants as allowed by the Settlement
Ex. 1 Pg. 10
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8. SETTLEMENTAGREEMENT Case No. 2:15-CV-00426-BRO (JEMX)
Agreement, the Plan of Distribution, or the Court, after provision for the amounts
set forth in ¶5.4 of this Settlement Agreement.
1.26 “Notice and Administration Account” means the interest-bearing
account to be established and maintained by the Claims Administrator from the
Gross Settlement Fund. The Notice and Administration Account may be drawn
upon by the Claims Administrator for Notice and Administration Expenses without
prior approval of the Court.
1.27 “Notice and Administration Expenses” means all expenses incurred
(whether or not paid) in connection with the Settlement administration, and shall
include, among other things, the cost of publishing the Summary Notice (as defined
in ¶3.1, below) in Investor’s Business Daily and on a national business internet wire
service; printing and mailing the Mailed Notice (as defined in ¶3.1-¶3.2, below), as
directed by the Court; and the cost of processing proofs of claim and distributing
the Net Settlement Fund to Class Members who timely submit a valid Proof of
Claim and Release.
1.28 “Person” means an individual, corporation, 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 his, her or its spouses, heirs,
predecessors, successors, representatives, or assignees.
1.29 “Plaintiffs’ Counsel” means any counsel who have appeared on behalf
of any plaintiff in the Class Action.
1.30 “Plan of Distribution,” means a plan or formula of allocation of the
Net Settlement Fund, to be approved by the Court, whereby the Settlement Fund
shall be distributed to Authorized Claimants after payment of Notice and
Administration Expenses of the Settlement, Taxes and Tax Expenses, and such
attorneys’ fees, costs, expenses, and interest, and other expenses as may be awarded
Ex. 1 Pg. 11
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9. SETTLEMENTAGREEMENT Case No. 2:15-CV-00426-BRO (JEMX)
by the Court. Any Plan of Distribution is not part of the Settlement Agreement and
the Released Persons shall have no responsibility or liability with respect thereto.
1.31 “Qualified Settlement Fund” means a fund within the meaning of
Treasury Regulations § 1.468B-1.
1.32 “Released Claims” means any and all claims and causes of action of
every nature and description, whether known or unknown, whether arising under
federal, state, common or foreign law, that arise out of or are related in any way to
(a) Lead Plaintiffs’ or any Class Member’s investments in Medbox securities,
including the purchase, acquisition, sale, or holding of Medbox securities; (b) the
subject matter of the Class Action; or (c) the facts alleged or that could have been
alleged in any complaint filed in the Class Action. Released Claims do not include,
and expressly exclude: (i) claims to enforce the Settlement and/or the terms of this
Settlement Agreement; (ii) any governmental or regulatory agency’s claims in any
criminal or civil action against any Defendants; and (iii) claims in any Shareholder
Derivative Litigations.
1.33 “Released Persons” means each and all of Defendants and each and all
of their present or former parents, subsidiaries, affiliates (as defined in 17 C.F.R.
§210.1-02(b)), successors and assigns, and each and all of the present or former
officers, principals, directors, employees, employers, attorneys, accountants,
auditors, advisors, lenders, insurers, investment bankers, representatives, general
and limited partners and partnerships, subsidiaries, divisions, predecessors,
stockholders, trustees, fiduciaries, consultants, agents, heirs, executors,
administrators, successors, affiliates, and assigns of each of them.
1.34 “Settlement Amount” means (a) One Million Eight Hundred Fifty
Thousand United States Dollars (USD $1,850,000.00) in cash to be paid by means
of check(s), money order(s), or wire transfer(s) to the Escrow Agent pursuant to
¶2.1 of this Settlement Agreement, together with all interest and income earned
thereon and (b) Two Million Three Hundred Thousand (2,300,000) shares of
Ex. 1 Pg. 12
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10. SETTLEMENTAGREEMENT Case No. 2:15-CV-00426-BRO (JEMX)
Medbox common stock that Medbox and Defendant Bedrick shall transfer in
accordance with the provisions set forth in ¶2.2 of this Settlement Agreement.
1.35 “Settlement Brokerage Account” means the account created pursuant
to Section IV.2 herein into which the Settlement Shares shall be transferred by
Medbox and Defendant Bedrick in accordance with the provisions of ¶2.2 of this
Settlement Agreement.
1.36 “Settlement Fund” means the payments to be made in accordance with
¶2.1 and ¶2.2 of this Settlement Agreement.
1.37 “Settlement Shares” means the shares of Medbox common stock that
Medbox and Defendant Bedrick shall transfer in accordance with the provisions of
¶2.2 of this Settlement Agreement.
1.38 “Settling Parties” means, collectively, Defendants and Lead Plaintiffs
on behalf of themselves and the Class Members.
1.39 “Shareholder Derivative Litigations” means all such derivative cases
filed and/or shareholder demands made arising from the facts and circumstances
alleged in the Class Action and/or in the Consolidated Complaint.
1.40 “Unknown Claims” means any Released Claims which Lead Plaintiffs
or any Class Member does not know or suspect to exist in his, her or its favor at the
time of the release of the Released Persons which, if known by him, her or it, might
have affected his, her or its settlement with and release of the Released Persons, 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 Plaintiffs shall expressly and each of the Class
Members shall be deemed to have, and by operation of the Judgment shall have,
expressly waived to the fullest extent permitted by law the provisions, rights, and
benefits of California Civil Code §1542, which provides:
Ex. 1 Pg. 13
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11. SETTLEMENTAGREEMENT Case No. 2:15-CV-00426-BRO (JEMX)
A general release does not extend to claims which the
creditor does not know or suspect to exist in his or her favor at the
time of executing the release, which if known by him or her must
have materially affected his or her settlement with the debtor.
Lead Plaintiffs shall expressly and each of the Class Members shall be deemed to
have, and by operation of the Judgment shall have, expressly waived any and all
provisions, rights, and benefits conferred by any law of any state or territory of the
United States, or principle of common law, which is similar, comparable, or
equivalent to California Civil Code §1542. Lead Plaintiffs and Class Members 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 subject matter of the Released
Claims, but Lead Plaintiffs shall expressly, and each Class Member, 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,
known or unknown, suspected or unsuspected, contingent or non-contingent,
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, whether direct, indirect, or derivative, including, but not limited to, conduct
that 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 Plaintiffs acknowledge, and the Class Members shall be
deemed by operation of the Judgment to have acknowledged, that the foregoing
waiver was separately bargained for and a key element of the Settlement of which
this release is a part.
2. The Settlement
a. The Settlement Fund
2.1 Within ten (10) Business Days following preliminary approval of the
Settlement by the Court, Medbox shall cause One Hundred Fifty Thousand United
Ex. 1 Pg. 14
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12. SETTLEMENTAGREEMENT Case No. 2:15-CV-00426-BRO (JEMX)
States Dollars (USD $150,000.00) in cash to be paid on behalf of itself, and its
insurers shall cause One Million Seven Hundred Thousand United States Dollars
(USD $1,700,000.00) in cash to be paid on behalf of the Individual Defendants
(collectively, the USD $150,000.00 and USD $1,700,000.00 shall be referred to as
the “Cash Amount”), into the Escrow Account maintained by the Escrow Agent on
behalf of Lead Plaintiffs and the Class.
2.2 Within five (5) Business Days following the Court’s entry of the
Judgment, Medbox shall transfer 2,000,000 shares of its common stock into the
Settlement Brokerage Account maintained by the Escrow Agent on behalf of Lead
Plaintiffs and the Class. Likewise, within five (5) Business Days following the
Court’s entry of the Judgment, Defendant Bedrick shall transfer 300,000 shares of
his common stock into the Settlement Brokerage Account. The Settlement Shares
shall be fully paid, non-assessable and, upon the Court's entry of the Judgment,
exempt from registration under Section 3(a)(10) of the Securities Act of 1933, as
amended, and will be identical in all respects to Medbox’s currently outstanding
shares of common stock. Specifically, the beneficiaries of the Settlement Shares
shall be entitled to all economic benefits of the Settlement Shares upon the deposit
of the Settlement Shares into the Settlement Brokerage Account, including but not
limited to stock or cash dividends; but voting rights of the Settlement Shares shall
not be transferred until the shares are distributed from the escrow. In addition, the
number of shares of Medbox common stock issuable hereunder will be adjusted if,
prior to the issuance of the Settlement Shares, Medbox: (i) declares a dividend in
Medbox common stock on any class of its capital stock; (ii) issues generally to its
stockholders rights, options, or warrants to purchase Medbox common stock at less
than the current market price of the common stock; (iii) subdivides, combines, or
reclassifies its outstanding Medbox common stock; or (iv) distributes generally to
its stockholders evidences of debt, shares of its capital stock, cash, or other assets.
Medbox, with the cooperation of Defendant Bedrick, shall take all necessary and
Ex. 1 Pg. 15
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13. SETTLEMENTAGREEMENT Case No. 2:15-CV-00426-BRO (JEMX)
appropriate action to perfect the exemption of the Settlement Shares from
registration under the federal securities laws by reason of Section 3(a)(10), or other
applicable provisions, of the Securities Act of 1933, and the Judgment submitted to
the Court for its consideration shall expressly state that “any shares issued to pay
the Settlement Shares shall be fully paid, non-assessable and, upon final approval of
the Settlement, exempt from registration under Section 3(a)(10), or other applicable
provisions, of the Securities Act of 1933.” In the event the Court does not make
such a finding, within fifteen (15) Calendar Days following such a determination by
the Court, Counsel for Medbox and Lead Plaintiffs shall, in good faith, meet and
confer to discuss (a) Medbox paying all expenses necessary to register and issue the
Settlement Stock, or (b) Medbox substituting the cash value of the Settlement
Stock, using the closing price on the date of the Court’s determination regarding the
exempt status of the Settlement Shares. Should Medbox and Lead Plaintiffs fail to
reach a resolution regarding the foregoing, they agree to submit the issue to the
Hon. Layn R. Phillips (Ret.) (the “Mediator”) for binding arbitration of the issue.
Any decision rendered by the Mediator must be complied with within fifteen
(15) Calendar Days of such decision. Medbox and Lead Plaintiffs shall bear the
expense of the Mediator proportionally. All costs associated with the transfer of the
Settlement Shares to the Settlement Brokerage Account shall be borne by Medbox.
Lead Plaintiffs and the Class Members shall retain the benefit of any increase and
the risk of any decrease in value of the price of the Settlement Shares. Upon receipt
of the Settlement Shares, the Escrow Agent will have the right to take any measures
they deem appropriate to protect the overall value of the Settlement Shares prior to
distribution to the Authorized Claimants, including, but not limited to, sales of all
or part of the Settlement Shares. Neither the Escrow Agent nor Lead Counsel shall
have liability for any sale, liquidation, transfer, or other disposition of the
Settlement Shares absent gross negligence or willful misconduct, but shall not sell
the Settlement Shares to Lead Counsel. The Escrow Agent shall also have the right
Ex. 1 Pg. 16
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to use the cash component of the Settlement Fund to protect the overall value of the
Settlement Fund. Neither Lead Plaintiffs, the Class Members, nor Defendants shall
have a claim against Lead Counsel or Lead Plaintiffs, or any of their agents, based
on the disposition of the Settlement Stock or distributions made in accordance with
this Settlement Agreement.
2.3 The Cash Amount and Settlement Shares referred to in ¶2.1 and ¶2.2
above, together with any interest and income earned thereon, shall constitute the
Settlement Fund.
2.4 Upon deposit of the Cash Amount pursuant to ¶2.1 hereof into the
Escrow Account, the Escrow Agent, without further approval of Defendants or the
Court, may pay from the Settlement Fund up to $200,000 in Notice and
Administration Expenses associated with the administration of the Settlement
(described herein). The Escrow Agent is expressly authorized to transfer such
funds from the Gross Settlement Fund to the Notice and Administration Account
for Notice and Administration Expenses which shall include, without limitation: the
cost of identifying and locating members of the Class, mailing the Mailed Notice
(as is defined in ¶3.1) and Proof of Claim and Release form and publishing the
Summary Notice (as is defined in ¶3.1) (such amount shall include, without
limitation, the actual costs of publication of the Summary Notice, printing and
mailing the Mailed Notice and Proof of Claim and Release form, and
reimbursement to nominee owners for forwarding notice to their beneficial owners),
soliciting Class claims, 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, and the
administrative expenses incurred and fees charged by the Claims Administrator in
connection with providing notice and processing the submitted claims. Prior to the
Effective Date, any Notice and Administration Expenses exceeding $200,000 shall
require notice to and agreement from Defendants or order of the Court.
Ex. 1 Pg. 17
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2.5 Except for costs associated with their obligation to provide the
information set forth in ¶5.2 related to class notice and any costs associated with the
transfer of the Settlement Shares to the Settlement Brokerage Account pursuant to
¶2.2, under no circumstances will Defendants be required to pay more than the
Settlement Fund pursuant to this Settlement Agreement and the Settlement.
b. The Escrow Agent
2.6 The Escrow Agent shall invest any funds held in the Settlement Fund
in instruments backed by the full faith and credit of the United States Government
or fully insured by the United States Government or an agency thereof and shall
reinvest the proceeds of these instruments as they mature in similar instruments at
their then-current market rates. So long as the Settlement Fund is invested in
accordance with this ¶2.6, all risks related to the investment of the Settlement Fund
shall be borne by the Settlement Fund. In all events, no risk related to the
investment of the Settlement Fund shall be borne by Defendants.
2.7 The Escrow Agent shall not disburse the Settlement Fund except (a) as
provided in the Settlement Agreement, (b) by an order of the Court, or (c) with the
written agreement of counsel for the Settling Parties.
2.8 Subject to further order(s) and/or direction(s) as may be made by the
Court, or as provided in the Settlement Agreement, the Escrow Agent is authorized
to execute such transactions as are consistent with the terms of the Settlement
Agreement. The Settling Parties shall have no responsibility for, interest in, or
liability whatsoever with respect to the actions of the Escrow Agent, or any
transaction executed by the Escrow Agent.
2.9 The Settlement Fund, including any interest earned thereon net of any
taxes on the income thereof, shall be used to pay: (i) attorneys’ fees and expenses,
(ii) taxes and tax expenses, and (iii) Notice and Administration Expenses. The
balance of the Settlement Fund shall be the Net Settlement Fund and shall be
distributed to the Authorized Claimants as set forth in the Plan of Distribution.
Ex. 1 Pg. 18
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Lead Plaintiffs and Class Members shall look solely to the Net Settlement Fund for
payment and satisfaction of any and all Released Claims.
2.10 All funds held by the Escrow Agent shall be deemed in custodia legis
of the Court, and shall remain subject to the jurisdiction of the Court until such time
as such funds shall be distributed pursuant to the Settlement Agreement and/or
further orders of the Court.
2.11 After the Effective Date, Defendants shall have no interest in the Gross
Settlement Fund or in the Net Settlement Fund.
c. Taxes
2.12 Qualified Settlement Fund
(a) The Settling Parties agree to treat the Settlement Fund as being
at all times a “Qualified Settlement Fund” within the meaning of Treas. Reg.
§1.468B-1. In addition, the Escrow Agent shall timely make such elections as
necessary or advisable to carry out the provisions of this ¶2.12, 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 filing to occur.
(b) 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
Settlement Fund (including, without limitation, the returns described in Treas. Reg.
§1.468B-2(k)). Such returns (as well as the election described in ¶2.12(a) hereof)
shall be consistent with this ¶2.12 and in all events shall reflect that all Taxes
(including any estimated Taxes, interest, or penalties) on the income earned by the
Ex. 1 Pg. 19
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17. SETTLEMENTAGREEMENT Case No. 2:15-CV-00426-BRO (JEMX)
Settlement Fund shall be paid out of the Settlement Fund as provided in ¶2.12(c)
hereof.
(c) All (a) Taxes (including any estimated Taxes, interest, or
penalties) arising with respect to the income earned by the Settlement Fund,
including any Taxes or tax detriments that may be imposed upon the Settling
Parties or their counsel with respect to any income earned by the Settlement Fund
for any period during which the Settlement Fund does not qualify as a “Qualified
Settlement Fund” for federal or state income tax purposes (“Taxes”), and
(b) expenses and costs incurred in connection with the operation and
implementation of this ¶2.12 (including, without limitation, expenses of tax
attorneys and/or accountants and mailing and distribution costs and expenses
relating to filing (or failing to file) the returns described in this ¶2.12) (“Tax
Expenses”), shall be paid out of the Settlement Fund; in all events the Settling
Parties and their counsel shall have no liability or responsibility for the Taxes or the
Tax Expenses. The Settlement Fund shall indemnify and hold each of Defendants
and their counsel harmless for Taxes and Tax Expenses (including, without
limitation, Taxes payable by reason of any such indemnification). Further, Taxes
and Tax Expenses shall be treated as, and considered to be, a cost of administration
of the Settlement Fund and shall be timely paid by the Escrow Agent out of the
Settlement Fund without prior order from the Court and 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 amounts,
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(l)(2)); neither Defendants nor their counsel are responsible nor shall
they have any liability therefore. 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 ¶2.12.
Ex. 1 Pg. 20
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18. SETTLEMENTAGREEMENT Case No. 2:15-CV-00426-BRO (JEMX)
(d) For the purpose of this ¶2.12, references to the Settlement Fund
shall include both the Settlement Fund and any earnings thereon.
d. Termination of the Settlement
2.13 In the event that the Class is not certified, or if the Settlement
Agreement: (i) is not approved; (ii) is terminated, cancelled, or fails to become
effective for any reason, including, without limitation, in the event the Judgment is
reversed or vacated following any appeal taken therefrom; or (iii) is successfully
collaterally attacked, the Settlement Fund (including accrued interest) less expenses
actually incurred or due and owing for Notice and Administration Expenses
pursuant to ¶2.4 or ¶2.12, shall be refunded to Defendants and, if applicable, their
insurers pursuant to written instructions from Medbox’s counsel.
3. Preliminary Approval Order and Settlement Hearing
3.1 Promptly after execution of the Settlement Agreement, the Settling
Parties shall submit the Settlement Agreement together with its exhibits (the
“Exhibits”) to the Court and shall apply for entry of an order (the “Preliminary
Approval Order”), substantially in the form of Exhibit A attached hereto,
requesting, inter alia, the preliminary approval of the Settlement set forth in the
Settlement Agreement, certification of the Class for settlement purposes only, and
approval for the mailing of a settlement notice (the “Mailed Notice”) and
publication of a summary notice (the “Summary Notice”), substantially in the forms
of Exhibits A-1 and A-3, respectively, attached hereto.
3.2 The Mailed Notice shall include a proof of claim, substantially in the
form of Exhibit A-2 attached hereto (the “Proof of Claim and Release”), the general
terms of the Settlement set forth in the Settlement Agreement, and shall set forth the
procedure by which Persons who otherwise would be members of the Class may
request to be excluded from the Class. Medbox shall assist Lead Counsel and/or
the Claims Administrator in obtaining, from Medbox’s transfer agent, records of
Ex. 1 Pg. 21
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19. SETTLEMENTAGREEMENT Case No. 2:15-CV-00426-BRO (JEMX)
ownership as necessary to process and administer the Mailed Notice. The cost, if
any, associated with compiling and/or delivering these records from Medbox’s
transfer agent to Lead Counsel or the Claims Administrator shall be borne by
Defendants in accordance with ¶5.2 of this Settlement Agreement.
3.3 Lead Counsel shall request that after notice is given to the Class, the
Court hold the Final Settlement Approval Hearing and approve the Settlement of
the Class Action as set forth herein. At or after the Final Settlement Approval
Hearing, Lead Counsel also shall request that the Court approve the proposed Plan
of Distribution and the Fee and Expense Application.
3.4 The Settling Parties hereby stipulate to certification of the Class,
pursuant to Rule 23(b)(3) of the Federal Rules of Civil Procedure, solely for
purposes of this Settlement Agreement and the Settlement set forth herein. If this
Settlement Agreement is not approved by the Court, however, then (a) Defendants
shall retain all rights to (i) object to and oppose class certification, or (ii) challenge
the standing of Lead Plaintiffs or any other intervening plaintiff; and (b) this
Settlement Agreement and any motion or other papers filed in support of its
approval shall not be offered as evidence of any agreement, admission or
concession that any class should be or remain certified in the Class Action or that
Lead Plaintiffs or any other intervening plaintiff has standing or any legal right to
represent any class.
4. Releases
4.1 Upon the Effective Date, Lead Plaintiffs and each of the Class
Members who have not timely opted out of the Class (whether or not such Class
Members execute and deliver the Proof of Claim and Release forms) and their
predecessors, successors, agents, representatives, attorneys, and affiliates, and the
heirs, executors, administrators, successors, and assigns of each of them shall be
deemed to have, and by operation of the Judgment shall have, fully, finally, and
forever settled, released, relinquished, and discharged the Released Persons from all
Ex. 1 Pg. 22
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20. SETTLEMENTAGREEMENT Case No. 2:15-CV-00426-BRO (JEMX)
Released Claims (including, without limitation, any Unknown Claims), as well as
any other claims arising out of, relating to, or in connection with, the defense,
settlement, or resolution of the Class Action or the Released Claims. Released
Claims do not include, and expressly exclude: (i) claims to enforce the Settlement
and/or the terms of this Settlement Agreement; (ii) any governmental or regulatory
agency’s claims in any criminal or civil action against any Defendants; and
(iii) claims in any Shareholder Derivative Litigations.
4.2 Upon the Effective Date, Lead Plaintiffs and each of the Class
Members who have not timely opted out of the Class (whether or not such Class
Members execute and deliver the Proof of Claim and Release forms), and their
predecessors, successors, agents, representatives, attorneys, and affiliates, and the
heirs, executors, administrators, successors, and assigns of each of them, directly or
indirectly, individually, representatively, or in any other capacity, shall be
permanently barred and enjoined from the assertion, institution, maintenance,
prosecution, or enforcement against Defendants, or any other Released Persons, in
any state or federal court or arbitral forum, or in the court or tribunal of any foreign
jurisdiction, of any and all Released Claims (including, without limitation,
Unknown Claims), as well as any other claims arising out of, relating to, or in
connection with, the defense, settlement, or resolution of the Class Action or the
Released Claims.
4.3 The Proof of Claim and Release form to be executed by Class
Members shall release all Released Claims against the Released Persons and shall
be substantially in the form contained in Exhibit A-2 attached hereto.
4.4 Upon the Effective Date, each of the Released Persons shall be
deemed to have, and by operation of the Judgment shall have, fully, finally, and
forever settled, released, relinquished, and discharged Lead Plaintiffs, each and all
of the Class Members, and Lead Counsel and Plaintiffs’ Counsel from all claims
(including, without limitation, Unknown Claims) arising out of, relating to, or in
Ex. 1 Pg. 23
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21. SETTLEMENTAGREEMENT Case No. 2:15-CV-00426-BRO (JEMX)
connection with, the institution, prosecution, assertion, settlement, or resolution of
the Class Action or the Released Claims.
5. Administration and Calculation of Claims, Final Awards, and Supervision and Distribution of the Settlement Fund
5.1 The Claims Administrator, subject to such supervision and direction of
the Court as may be necessary or as circumstances may require, shall provide notice
of the Settlement to the Class, shall administer and calculate the claims submitted
by Class Members, and shall oversee distribution of the Net Settlement Fund to
Authorized Claimants.
5.2 Within ten (10) Business Days of the Court’s preliminary approval of
this Settlement Agreement, Medbox will use reasonable efforts to cause its transfer
agent to provide to the Claims Administrator in a computer-readable format
acceptable to the Claims Administrator, the last known names and addresses of all
shareholders of record during the Class Period. Medbox shall bear its own expense
of providing such names and addresses.
5.3 Within ten (10) Business Days of Medbox’s transfer agent providing
the Claims Administrator with the last known names and addresses of all
shareholders of record as required by ¶5.2 hereof (the “Notice Date”), the Claims
Administrator will cause to be mailed to all shareholders of record identified by
Medbox’s transfer agent the Mailed Notice, substantially in the form of Exhibit A-1
attached hereto, and a Proof of Claim and Release, substantially in the form of
Exhibit A-2 attached hereto. The Mailed Notice and Proof of Claim and Release
form, as well as the Settlement Agreement, shall also be posted on the Claims
Administrator’s website. Not later than seven (7) Business Days following the
Notice Date, the Summary Notice, substantially in the form of Exhibit A-3 attached
hereto, will also be published once in the national edition of Investor’s Business
Daily and once over a national business internet wire service. The cost of providing
such notice shall be paid out of the Notice and Administration Account. Not later
Ex. 1 Pg. 24
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22. SETTLEMENTAGREEMENT Case No. 2:15-CV-00426-BRO (JEMX)
than thirty-five (35) Calendar Days prior to the Final Settlement Approval Hearing,
Lead Counsel shall serve on Defendants’ counsel and file with the Court proof, by
affidavit or declaration, of such mailing and publishing.
5.4 The Settlement Fund shall be applied as follows:
(a) to pay the Fee and Expense Award, if and to the extent allowed
by the Court;
(b) to pay all the costs and expenses reasonably and actually
incurred in connection with providing notice, including locating Class Members,
soliciting Class claims, 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;
(c) to pay the Taxes and Tax Expenses described in ¶2.12 hereof;
and
(d) to distribute the balance of the Settlement Fund (the “Net
Settlement Fund”) to Authorized Claimants as allowed by the Settlement
Agreement, the Plan of Distribution, or the Court.
5.5 Upon the Effective Date and thereafter, and in accordance with the
terms of the Settlement Agreement, the Plan of Distribution, 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 ¶5.6-¶5.13 hereof.
5.6 Each Person claiming to be an Authorized Claimant shall be required
to submit to the Claims Administrator a completed Proof of Claim and Release
form postmarked by no later than ninety (90) Calendar Days from the Notice Date,
or such other time as may be set by the Court (the “Bar Date”), substantially in the
form of Exhibit A-2 attached hereto, signed under penalty of perjury and supported
by such documents as are specified in the Proof of Claim and Release form and as
are reasonably available to such Person.
Ex. 1 Pg. 25
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5.7 Except as otherwise ordered by the Court, all Class Members who fail
to submit a Proof of Claim and Release form by the Bar Date, or such other period
as may be ordered by the Court, or who file a Proof of Claim and Release form that
is rejected, shall be forever barred from receiving any payments pursuant to the
Settlement Agreement and the Settlement set forth herein, but will in all other
respects be subject to and bound by the provisions of the Settlement Agreement, the
releases contained herein, and the Judgment. Notwithstanding the foregoing, Lead
Counsel may, in their discretion, accept for processing late submitted claims so
long as the distribution of the Net Settlement Fund to Authorized Claimants is not
materially delayed.
5.8 Lead Counsel shall cause the Claims Administrator to calculate the
allocation of the Net Settlement Fund of each member of the Class. Following the
Effective Date and upon application to the Court by Lead Counsel, Lead Counsel
shall cause the Claims Administrator to distribute to each Class Member eligible for
a distribution from the Net Settlement Fund his, her, or its pro rata share of the Net
Settlement Fund. The cost of these procedures shall be paid out of the Settlement
Fund.
5.9 This is not a claims-made settlement and, if all conditions of the
Settlement Agreement are satisfied and the Settlement becomes Final, no portion of
the Settlement Fund will be returned to Defendants or their insurance carriers and
Defendants expressly acknowledge that neither Defendants nor their insurer(s) shall
have a reversionary interest in the Settlement Fund. If there is any balance
remaining in the Settlement Fund after six (6) months from the date of the initial
distribution of the Net Settlement Fund whether by reason of tax refunds, uncashed
checks or otherwise), Lead Counsel shall, if feasible, distribute in an equitable and
economical fashion such balance among Authorized Claimants who negotiated the
checks sent to them in the initial distribution. These redistributions shall be
repeated until the balance remaining in the Net Settlement Fund is de minimis (an
Ex. 1 Pg. 26
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24. SETTLEMENTAGREEMENT Case No. 2:15-CV-00426-BRO (JEMX)
amount less than $10,000) and such remaining balance shall then be donated to an
appropriate non-profit organization designated as the Court may direct and approve.
5.10 The Released Persons shall have no responsibility for, interest in, or
liability whatsoever with respect to the distribution of the Net Settlement Fund, the
Plan of Distribution, the determination, administration, or calculation of claims, the
payment or withholding of Taxes, or any losses incurred in connection therewith.
5.11 Defendants shall take no position with respect to the Plan of
Distribution or any other such plan as may be approved by the Court.
5.12 It is understood and agreed by the Settling Parties that any proposed
Plan of Distribution of the Net Settlement Fund including, but not limited to, any
adjustments to an Authorized Claimant’s claim set forth therein, is not a part of the
Settlement Agreement 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 Settlement Agreement, and any order or proceeding
relating to the Plan of Distribution shall not operate to terminate or cancel the
Settlement Agreement or affect the finality of the Court’s Judgment approving the
Settlement Agreement and the Settlement set forth therein, or any other orders
entered pursuant to the Settlement Agreement. Class Members and Defendants
shall be bound by the terms of this Settlement Agreement, irrespective of whether
the Court disapproves or modifies the Plan of Distribution.
5.13 No Person shall have any claim against Lead Plaintiffs, Lead Counsel,
Plaintiffs’ Counsel, Defendants, or their respective counsel, or the Claims
Administrator based on distributions made substantially in accordance with the
Settlement, the Settlement Agreement, and the Plan of Distribution, or otherwise as
further ordered by the Court.
6. Plaintiffs’ Counsel’s Attorneys’ Fees And Expenses
6.1 Lead Counsel may submit an application or applications (the “Fee and
Expense Application”) for distributions to Lead Counsel from the Settlement Fund
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25. SETTLEMENTAGREEMENT Case No. 2:15-CV-00426-BRO (JEMX)
for: (a) an award of attorneys’ fees; plus (b) reimbursement of actual costs and
expenses, including experts or consultants, incurred in connection with prosecuting
the Class Action plus any interest on such attorneys’ fees, costs and expenses at the
same rate and for the same periods as earned by the Gross Settlement Fund (until
paid) as may be awarded by the Court. The Fee and Expense Application may
include a request for an award to Lead Plaintiffs for reimbursement of their
expenses in accordance with 15 U.S.C. §78u-4(a)(4) plus interest at the same rate
and for the same periods as earned by the Gross Settlement Fund (until paid) as
may be awarded by the Court. Lead Counsel reserves the right to make additional
applications for fees and expenses incurred, if necessary. Defendants will take no
position with regard to the Fee and Expense Application.
6.2 The attorneys’ fees and expenses, including the fees and expenses of
experts and consultants, as awarded and ordered by the Court (“Fee and Expense
Award”), shall be payable to Lead Counsel from the Settlement Fund upon the
entry of the Court’s order awarding such fees and expenses. Any attorneys’ fees
awarded pursuant to the Fee and Expense Award shall be paid proportionally from
the Cash Amount and Settlement Shares. Any reimbursement of expenses pursuant
to the Fee and Expense Award shall be paid from the Cash Amount. The Cash
Amount portion of the Fee and Expense Award shall be paid to Lead Counsel
immediately upon execution by the Court of the Judgment, and the Settlement
Shares portion of the Fee and Expense Award shall be delivered to Lead Counsel
within five (5) Business Days after Medbox and Defendant Bedrick transfer the
Settlement Shares to the Escrow Account as set forth in ¶2.2 of this Settlement
Agreement. Medbox and Defendant Bedrick shall use their best reasonable efforts
to assist the transfer of Lead Counsel’s proportionate share of the Settlement
Shares. This provision shall apply notwithstanding timely objections to, potential
for appeal from, or collateral attack on the Settlement. Lead Counsel shall
thereafter have sole authority to allocate the attorneys’ fees amongst other
Ex. 1 Pg. 28
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Plaintiffs’ Counsel in a manner that Lead Counsel in good faith believes reflects the
contributions of such counsel to the prosecution and settlement of the Class Action.
Defendants shall have no obligation to make any payment other than as provided
for herein with respect to funding the Settlement Fund and shall have no
responsibility with respect to the allocation of attorneys’ fees, costs, and expenses
amongst Plaintiffs’ Counsel. Any such awards shall be paid solely by the
Settlement Fund.
6.3 In the event that the Judgment or the order awarding such fees and
expenses paid to Lead Counsel pursuant to ¶6.1 and ¶6.2 is reversed or modified, or
if the Settlement is cancelled or terminated for any reason, then Lead Counsel shall,
in an amount consistent with such reversal or modification, refund such fees,
expenses, and/or costs to the Settlement Fund, plus interest thereon at the same rate
as earned on the Settlement Fund, within fifteen (15) business days from receiving
notice from Medbox’s counsel or from a court of competent jurisdiction. Any
refunds required pursuant to this paragraph shall be the several obligation of each
Plaintiffs’ Counsel to make appropriate refunds or repayments to the Settlement
Fund.
6.4 The procedure for and the allowance or disallowance by the Court of
the Fee and Expense Application, to be paid out of the Settlement Fund (including
the Settlement Shares), are not part of the Settlement set forth in the Settlement
Agreement, 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 this Settlement Agreement; and any order or proceeding relating to the Fee
and Expense Application, or any appeal from any order relating thereto or reversal
or modification thereof, shall not operate to terminate or cancel the Settlement
Agreement, or affect or delay the finality of the Judgment approving the Settlement
Agreement and the Settlement of the Class Action.
Ex. 1 Pg. 29
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27. SETTLEMENTAGREEMENT Case No. 2:15-CV-00426-BRO (JEMX)
6.5 Released Persons shall have no responsibility for any payment of
attorneys’ fees and expenses to Lead Counsel or any Class Member’s counsel over
and above payment of the Settlement Fund.
6.6 Released Persons shall have no responsibility or authority for the
allocation among Plaintiffs’ Counsel or any Class Member’s counsel, and/or any
other Person who may assert some claim thereto, of any Fee and Expense Award
that the Court may make in the Class Action.
7. Conditions of Settlement, Effect of Disapproval, Cancellation, or Termination
7.1 The Effective Date of the Settlement Agreement shall be conditioned
on the occurrence of all of the following events:
(a) Execution of the Settlement Agreement and such other
documents as may be required to obtain final Court approval of the Settlement
Agreement in a form satisfactory to the Settling Parties;
(b) Medbox or its insurers, on behalf of Defendants as provided in
¶2.1 hereof, shall have caused the Cash Amount of the Settlement Fund to be timely
deposited with the Escrow Agent, and Medbox and Defendant Bedrick shall have
caused the Settlement Shares to be timely transferred as provided in ¶2.2 hereof;
(c) The Court has entered the Preliminary Approval Order, as
required by ¶3.1 hereof;
(d) The Court has entered the Judgment that, inter alia, dismisses
with prejudice the Class Action, substantially in the form attached hereto as Exhibit
B; and
(e) The Judgment has become Final, as defined in ¶1.17 hereof.
7.2 Upon the occurrence of all of the events referenced in ¶7.1 hereof, any
and all remaining interest or right of Defendants in or to the Settlement Fund, if
any, shall be absolutely and forever extinguished. If all of the conditions specified
in ¶7.1 hereof are not met, then the Settlement Agreement shall be cancelled and
Ex. 1 Pg. 30
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28. SETTLEMENTAGREEMENT Case No. 2:15-CV-00426-BRO (JEMX)
terminated subject to ¶7.3 hereof unless Lead Counsel and counsel for Defendants
mutually agree in writing to proceed with the Settlement.
7.3 Unless otherwise ordered by the Court, in the event the Settlement
Agreement is terminated or does not become effective for any reason, within ten
(10) Business Days after written notification of such event is sent by counsel for
Defendants or Lead Counsel to the Escrow Agent, the Settlement Fund (including
accrued interest), less expenses which have either been incurred or disbursed for
Notice and Administration Expenses pursuant to ¶2.4 or ¶2.12 hereof, shall be
refunded to Medbox and, if applicable, its insurers pursuant to written instructions
from Medbox’s counsel. At the request of counsel for Defendants, the Escrow
Agent or its designee shall apply for any tax refund owed on the Settlement Fund
and pay the proceeds, after deduction of any expenses incurred in connection with
such application(s) for refund, at the written direction of counsel to Defendants.
7.4 In the event that the Settlement Agreement is not approved by the
Court or the Settlement set forth in the Settlement Agreement is terminated or fails
to become effective in accordance with its terms, the Settling Parties shall be
restored to their respective positions in the Class Action as of the Execution Date of
the Settlement Agreement, with all of their respective claims and defenses
preserved as they existed on that date. In such event, the terms and provisions of
the Settlement Agreement, with the exception of ¶¶1.1-1.40, ¶2.8, ¶¶2.12-2.13,
¶6.3, ¶7.5, and ¶¶8.3-8.4 hereof, shall have no further force and effect with respect
to the Settling Parties and shall not be used in the Class Action or in any other
proceeding for any purpose, and any Judgment or order entered by the Court in
accordance with the terms of the Settlement Agreement shall be treated as vacated,
nunc pro tunc, and the Settling Parties shall be deemed to return to their status as of
the Execution Date of the Settlement Agreement, and shall be required to present an
amended schedule to the Court. No order of the Court or modification or reversal
on appeal of any order of the Court concerning the Plan of Distribution or the
Ex. 1 Pg. 31
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amount of any attorneys’ fees, costs, expenses, and interest awarded by the Court to
Lead Counsel shall constitute grounds for termination of the Settlement Agreement.
7.5 Lead Counsel shall have the right but not the obligation to terminate
the Settlement thirty (30) Calendar Days after Defendants’ failure to timely pay any
portion of the Settlement Amount to the Settlement Fund.
8. Miscellaneous Provisions
8.1 The Settling Parties (a) acknowledge that it is their intent to
consummate this Settlement Agreement; (b) agree to cooperate to the extent
reasonably necessary to effectuate and implement all terms and conditions of the
Settlement Agreement; and (c) agree to exercise their best efforts and to act in good
faith to accomplish the terms and conditions of the Settlement Agreement.
8.2 The parties to this Settlement Agreement intend the Settlement to be a
final and complete resolution of all disputes asserted or which could be asserted by
Lead Plaintiffs and the Class Members against the Released Persons with respect to
the Released Claims and all claims Defendants and Released Persons have asserted
or could assert against Lead Plaintiffs, Class Members, and their attorneys with
respect to the Released Claims. The Settling Parties and their counsel agree that
they shall not assert or allege in any action, proceeding, or claim that any party
hereto violated Rule 11 of the Federal Rules of Civil Procedure, and the Final
Judgment shall contain a finding that all Settling Parties and their counsel complied
with the requirements of Rule 11 of the Federal Rules of Civil Procedure with
respect to the institution, prosecution, defense, and resolution of the Class Action.
The Settling Parties agree that the amount paid to the Settlement Fund and the other
terms of the Settlement were negotiated in good faith by the Settling Parties and
reflect a settlement that was reached voluntarily after consultation with experienced
and competent legal counsel, and with the assistance of an experienced jurist and
mediator, the Hon. Layn R. Phillips (Ret.). The Settling Parties reserve their right
to rebut, in a manner that such party determines to be appropriate, any contention
Ex. 1 Pg. 32
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30. SETTLEMENTAGREEMENT Case No. 2:15-CV-00426-BRO (JEMX)
made in any public forum regarding the Class Action, including that the Class
Action was brought or defended in bad faith or without a reasonable basis.
8.3 The Settlement shall not be deemed an admission by any Settling Party
as to the merits of any claim or defense and neither the Settlement Agreement nor
the Settlement, nor any act performed or document executed pursuant to or in
furtherance of the Settlement Agreement or the Settlement nor any of their terms,
nor any press release or other statement or report by the Settling Parties or by others
concerning this Settlement Agreement or the Settlement or their terms (a) is or may
be deemed to be or may be used as an admission of, or evidence of, the validity of
any Released Claim, or of any wrongdoing or liability of the Released Persons; 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 Released Persons; or (c) is or may be deemed to
be or may be used as an admission or evidence that any claims asserted by Lead
Plaintiffs were not valid or that the amount recoverable was not greater than the
Settlement amount, in any civil, criminal, or administrative proceeding in any court,
administrative agency, or other tribunal. The Released Persons may file the
Settlement Agreement and/or the Judgment 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.
8.4 All agreements made and orders entered during the course of the Class
Action relating to the confidentiality of information shall survive this Settlement
Agreement.
8.5 All of the Exhibits to the Settlement Agreement are material and
integral parts hereof and are fully incorporated herein by this reference.
Ex. 1 Pg. 33
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31. SETTLEMENTAGREEMENT Case No. 2:15-CV-00426-BRO (JEMX)
8.6 The Settlement Agreement 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.
8.7 The Settlement Agreement and the Exhibits attached hereto constitute
the entire agreement among the Settling Parties, and supersede any and all prior
agreements, written or oral, between the Settling Parties. No representations,
warranties, or inducements have been made to any Settling Party concerning the
Settlement Agreement or its Exhibits other than the representations, warranties, and
covenants contained and memorialized in such documents. Except as otherwise
provided herein (or, as between Defendants, in any agreement between them), each
Settling Party shall bear its own fees and costs.
8.8 Neither the Class Members nor Defendants shall be bound by the
Settlement Agreement if the Court modifies material terms thereof, provided,
however, that it shall not be a basis for Class Members to terminate the Settlement
if the Court modifies any proposed Plan of Distribution or criteria for allocation of
the Net Settlement Fund amongst Class Members, or if the Plan of Distribution is
modified on appeal. Nor shall it be a basis to terminate the Settlement Agreement
if the Court disapproves of or modifies the terms of this Settlement Agreement with
respect to attorneys’ fees or expenses or the distribution of the Net Settlement Fund.
Notwithstanding any such modification of the terms or Plan of Distribution or the
Settlement Agreement with respect to attorneys’ fees or expenses, Defendants shall
be entitled to all benefits of the Settlement and shall not, under any circumstances,
be called upon to contribute additional funds to the Settlement Fund.
8.9 Lead Counsel, on behalf of the Class, is expressly authorized by Lead
Plaintiffs to take all appropriate action required or permitted to be taken by the
Class pursuant to the Settlement Agreement to effectuate its terms and also is
expressly authorized to enter into any modifications or amendments to the
Settlement Agreement on behalf of the Class which it deems appropriate.
Ex. 1 Pg. 34
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32. SETTLEMENTAGREEMENT Case No. 2:15-CV-00426-BRO (JEMX)
8.10 Lead Plaintiffs and Lead Counsel represent and warrant that none of
Lead Plaintiffs’ claims or causes of action referred to in the Class Action or this
Settlement Agreement has been assigned, encumbered, or in any manner transferred
in whole or in part.
8.11 Each counsel or other Person executing the Settlement Agreement or
any of its Exhibits on behalf of any Settling Party hereby warrants that such Person
has the full authority to do so.
8.12 In the event of a final order of a court of competent jurisdiction, not
subject to any further proceedings, determining the transfer of the Settlement Fund,
or any portion thereof, by or on behalf of any Defendant to be a preference,
voidable transfer, fraudulent transfer or conveyance, 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 Settlement Fund by or on behalf of any of Defendants, then, at the
election of Lead Counsel, as to the Defendant as to whom such order applies, the
Settlement may be terminated and the releases given and the Judgment entered in
favor of such Defendant shall be null and void. In such instance, the releases given
and the Judgment entered in favor of other Defendants shall remain in full force and
effect. Alternatively, Lead Counsel may elect to terminate the entire Settlement as
to all Defendants and all of the releases given and judgments entered in favor of
Defendants pursuant to the Settlement shall be null and void and Lead Plaintiffs
may proceed as if the Settlement were never entered into.
8.13 This Settlement Agreement shall not be construed more strictly against
one party than another merely by virtue of the fact that it, or any part of it, may
have been prepared by counsel for one of the Settling Parties, it being recognized
that this Settlement Agreement is the result of arm’s-length negotiations between
the parties and all parties have contributed substantially and materially to its
preparation.
Ex. 1 Pg. 35
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33. SETTLEMENTAGREEMENT Case No. 2:15-CV-00426-BRO (JEMX)
8.14 The headings herein are used for the purpose of convenience and are
not intended to have legal effect.
8.15 Medbox shall use its best efforts to provide Lead Plaintiffs with
transfer records, or help Lead Plaintiffs procure transfer records or other
appropriate information that will assist in the identification of Class Members for
the purpose of providing Class Members with notice of the proposed Settlement.
8.16 The Settlement Agreement may be executed in one or more
counterparts. All executed counterparts and each of them shall be deemed to be one
and the same instrument. A complete set of executed counterparts shall be filed
with the Court.
8.17 The Settlement Agreement shall be binding upon, and inure to the
benefit of, the heirs, successors, assigns, executors, administrators, affiliates
(including parent companies), and legal representatives of the Settling Parties
hereto. No assignment shall relieve any party hereto of obligations hereunder.
8.18 The Court shall retain jurisdiction with respect to implementation and
enforcement of the terms of the Settlement Agreement, and all Settling Parties
hereto submit to the jurisdiction of the Court for purposes of implementing and
enforcing the Settlement embodied in the Settlement Agreement.
8.19 Pending approval of the Court of the Settlement Agreement and its
Exhibits, all proceedings in the Class Action shall be stayed and all members of the
Class shall be barred and enjoined from prosecuting any of the Released Claims
against any of the Released Persons.
8.20 This Settlement Agreement and the Exhibits hereto shall be considered
to have been negotiated, executed, and delivered, and to be wholly performed, in
the State of California, and the rights and obligations of the parties to the
Settlement Agreement shall be construed and enforced in accordance with, and
governed by, the internal, substantive laws of the State of California without giving
effect to that State’s choice-of-law principles.
Ex. 1 Pg. 36
Case 2:15-cv-00426-BRO-JEM Document 88-3 Filed 12/18/15 Page 35 of 106 Page ID #:1111
1 8.21 Notices required or permitted by this Stipulation shall be submitted
2 either by overnight mail or in person as follows:
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Notice to Plaintiffs:
Frank J. Johnson JOHNSON & WEA VER, LLP 600 West Broadway Suite 1540 San Diego, CA 92101
Notice to Defendants:
Phillip R. Kaplan MANATT, PHELPS &
PHILLIPS, LLP Park Tower 695 Town Center Drive 14th Floor Costa Mesa, CA 92626
IN WITNESS WHEREOF, the Settling Parties hereto have caused the
Settlement Agreement to be executed, by their duly authorized attorneys, dated
December 17, 2015.
Respectfully submitted,
JOHNSON & WEA VER, LLP FRANK J. JOHNSON SHAWNE. FIELDS
600 West Broadway, Suite 1540 San Diego, CA 92101 Telephone: 619/230-0063 619/255-1856 (fax) frankjuyjohnsonandweaver.com shawnr@johnsonandweaver.com
Lead Counsel for Lead Plaintiffs
34. SETTLEMENT AGREEMENT Case No. 2:15-CV-00426-BRO (JEMx)
Ex. 1 Pg. 37
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Park Tower 695 Town Center Drive, 14th Floor Costa Mesa, CA 92626 Telephone: 714/371-2500 714/371-2550 (fax) PKaplan@manatt.com
Counsel.for D~fendant Medbox, Inc.
HORWITZ+ ARMSTRONG LLP JOHN R. ARMSTRONG MATTHEWS. HENDERSON
JOHN R. ARMSTRONG
264 7 5 Rancho Parkway South Lake Forest, CA 92630 Telephone: 949/540-6540 949/540-6583 (fax) jarmstrong@horw1tzarmstrong.com inhenderson@horwitzarmstrong.com
Counsel for Defendants Timothy Quintanilla and Q Accountancy Corporation
35. SETTLEMENT AGREEMENT Case No. 2:15-CV-00426-BRO (JEMx)
Ex. 1 Pg. 38
Case 2:15-cv-00426-BRO-JEM Document 88-3 Filed 12/18/15 Page 37 of 106 Page ID #:1113
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35. SETTLEMENTAGREEMENT Case No. 2:15-CV-00426-BRO (JEMX)
MANATT, PHELPS & PHILLIPS, LLP PHILLIP R. KAPLAN
PHILLIP R. KAPLAN Park Tower 695 Town Center Drive, 14th Floor Costa Mesa, CA 92626 Telephone: 714/371-2500 714/371-2550 (fax) PKaplan@manatt.com
Counsel for Defendant Medbox, Inc.
HORWITZ + ARMSTRONG LLP
JOHN R. ARMSTRONG MATTHEW S. HENDERSON
JOHN R. ARMSTRONG
26475 Rancho Parkway South Lake Forest, CA 92630 Telephone: 949/540-6540 949/540-6583 (fax) jarmstrong@horwitzarmstrong.com mhenderson@horwitzarmstrong.com
Counsel for Defendants Timothy Quintanilla and Q Accountancy Corporation
Ex. 1 Pg. 39
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12121 Wils · e Boulevard, Suite 600 Los Angele CA 90025 Telephone: :J 10/899-2070 31Of496-l930 (fax) rrabbat@_enenstein Jaw .com rwenge1~enenste inlaw.com
Counsel for Defendant Pejman Vincent Mehdizadeh
CONANT LAW FIRM, PLC PAUL A. CONANT
PAUL A. CONANT
2398 East Camelback Road, Su ite 925 Phoenix, AZ 850 16 Telephone: 602/508-9010 602/508-90 15 (fax) pau lconant@conantlawfirm.com
Counsel for Defendant Bruce Bedrick
36. SE'rl'LEi\ IENTAGREEi\IENT Case No. 2 : I S-CV-00426-BRO (J EMX)
Ex. 1 Pg. 40
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ENENSTEIN RIBAKOFF La VINA & PHAM,APC
ROBERT A. RABBAT RYANT. WENGER
ROBERT A. RABBAT
12121 Wilshire Boulevard, Suite 600 Los Angeles, CA 90025 Telephone: 310/899-2070 310/496-1930 (fax) rrabbat@enensteinlaw.com rwenger~enensteinlaw .com
Counsel for Defendant Pejman Vincent Mehdizadeh
CONANT LAW FIRM, PLC PAUL~ONANT J \
A~ (11·..,) ~~ULA.~~T
2398 East Camelback Road, Suite 925 Phoenix, AZ 85016 Telephone: 602/508-9010 602/508-9015 (fax) paulconant@conantlawfirm.com
Counsel for Defendant Bruce Bedrick
36. SETTLEMENT AGREEMENT Case No. 2:15-CV-00426-BRO (JEMx)
Ex. 1 Pg. 41
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BIENERT, MILLER & KATZ THOMAS H. BIENERT, JR.
903 Calle Amanecer, uite 350 San Clemente, C 2673 Telephone 949/369-3700 949/369-3701 (fax) tbienert@bmkattomeys.com
LC
Counsel f<?r Defendants Guy Marsala and Douglas Mitchell
FENNEMORE & CRAIG, P.C. PATRICK SHEEHAN
PATRICK SHEEHAN 300 S. Fourth Stree~ Suite 1400 Las Vegas, NV 891ul Telephone: 702/692-8000 702(692-8099 (fax) psheehan@fclaw.com
Counsel for Defendants J Mitchell Lowe and Neef Siegel
GRANT, GENOVESE & BARATTA, LLP GORDON G. MAY
GORDON G. MAY 2030 Main Street, Suite 1600 Irvine CA 92614 Tele2hone: 949/660-1600 ggm@ggb-law.com
Counsel for Defendant Thomas Iwanski
37. SETTLEMENT AGREEMENT Case No. 2:15-CV-00426-BRO (JEMx)
Ex. 1 Pg. 42
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BIENERT, MILLER & KATZMAN, PLC THOMAS H. BIENERT, JR.
THOMAS H. BIENERT, JR. 903 Calle Amanecer, Suite 350 San Clemente, CA. 92673 Telephone 949/369-3700 949/369-3701 (fax) tbienert@bmkattorneys.com
Counsel for Defendants Guy Marsala and Douglas Mitchell
FENNEMORE & CRAIG, P.C. PATRICK SHEEHAN
~KSHEEHAN 300 S. Fourth Street, Suite 1400 Las Vegas, NV 89101 TeleJ?hone: 702/692-8000 702/092-8099 (fax) psheehan@fclaw.com
Counsel for Defendants J Mitchell Lowe and Ned' Siegel
GRANT, GENOVESE & BARATTA, LLP GORDON G. MAY
GORDON G. rvIAY
2030 Main Streeti Suite L600 Irvine CA 92614 Tele2bone: 949/660-1600 ggm@ggb- law.com
Counsel for Defendant Thomas Iwanski
37. SETTLEMENT AGREEMENT Case No. 2:15-CV-00426-BRO (JEMx)
Ex. 1 Pg. 43
Case 2:15-cv-00426-BRO-JEM Document 88-3 Filed 12/18/15 Page 42 of 106 Page ID #:1118
EXHIBIT A
Ex. 1 Pg. 45
Case 2:15-cv-00426-BRO-JEM Document 88-3 Filed 12/18/15 Page 44 of 106 Page ID #:1120
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1.
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
JOSH CRYSTAL, Individually And On Behalf Of All Others Similarly Situated, Plaintiff, v. MEDBOX, INC., PEJMAN VINCENT MEHDIZADEH, BRUCE BEDRICK, THOMAS IWANSKI, GUY MARSALA, and DOUGLAS MITCHELL, Defendants.
Case No.: 2:15-CV-00426-BRO (JEMx) CLASS ACTION Exhibit A [PROPOSED] PRELIMINARY APPROVAL ORDER
[PROPOSED] PRELIMINARY APPROVAL ORDER
WHEREAS, (i) Lead Plaintiffs Peter Phan and Paul Poon (“Lead Plaintiffs”)
and (ii) Medbox, Inc. (“Medbox”), Pejman Vincent Mehdizadeh, Bruce Bedrick,
Thomas Iwanski, Guy Marsala, C. Douglas Mitchell, J. Mitchell Lowe, Ned Siegel,
Timothy Quintanilla, and Q Accountancy Corporation (collectively, “Defendants”)1
have agreed to a settlement of all claims asserted in the Class Action against all of
the Defendants;
WHEREAS, that Settlement was entered into through a Stipulation and
1 Lead Plaintiffs, on behalf of themselves and the Class, and Defendants are
collectively referred to as the “Settling Parties.”
Ex. 1 Pg. 46
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2.
Agreement of Settlement, dated as of December 17, 2015 (the “Settlement
Agreement”), which is subject to review under Rule 23 of the Federal Rules of
Civil Procedure, and which, together with the exhibits thereto, sets forth the terms
and conditions for the proposed Settlement of the claims alleged in the
Consolidated Complaint filed in the Class Action on the merits and with prejudice;
WHEREAS, all capitalized terms used herein shall have the same meaning as
in the Settlement Agreement; and
WHEREAS, this Court having read and considered the Settlement
Agreement, the proposed Notice of Proposed Class Action Settlement (“Mailed
Notice”), the Summary Notice of Proposed Class Action Settlement (“Summary
Notice”), the proposed Proof of Claim and Release, and the [Proposed] Final
Judgment and Order of Dismissal with Prejudice (“Judgment”), and finding that
substantial and sufficient grounds exist for entering this Preliminary Approval
Order:
NOW, THEREFORE, IT IS HEREBY ORDERED, this ___ day of
____________, 2016, that:
1. The Court hereby preliminarily approves the Settlement Agreement
and the Settlement set forth therein, subject to further consideration at the Final
Settlement Approval Hearing described below.
2. Pending further order of the Court, all litigation activity in the Class
Action is hereby stayed, except that which is contemplated herein, in the Settlement
Agreement, or otherwise as is necessary to effectuate the Settlement, and all
hearings, deadlines, and other proceedings in this Class Action, except insofar as
they relate to the Settlement, are hereby taken off calendar.
3. Pursuant to Rule 23(a) and (b)(3) of the Federal Rules of Civil
Procedure and for the purposes of the Settlement only, claims in the Class Action
against the Defendants are hereby preliminarily certified as a class action on behalf
of all Persons who purchased or otherwise acquired Medbox common stock
Ex. 1 Pg. 47
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3.
between April 2, 2013 and December 29, 2014, inclusive, and who were damaged
thereby. Excluded from the Settlement Class are: (1) Defendants and their families,
the officers and directors of the Company, at all relevant times, members of their
families and their legal representatives, heirs, successors, or assigns, and any entity
in which Defendants have or had a controlling interest; (2) any persons who have
separately filed actions against one or more of Defendants, based in whole or in part
on any claim arising out of or relating to any of the alleged acts, omissions,
misrepresentations, facts, events, matters, transactions, or occurrences referred to in
the Class Action or otherwise alleged, asserted, or contended in the Class Action;
and (3) those persons or entities who submit valid and timely requests for exclusion
from the Class in accordance with this Order.
4. This Court finds, preliminarily and for purposes of Settlement only,
that the prerequisites for a class action under Rules 23(a) and (b)(3) of the Federal
Rules of Civil Procedure have been satisfied in that: (a) the number of Class
Members is so numerous that joinder of all members of the Class is impracticable;
(b) there are questions of law and fact common to the Class; (c) the claims of Lead
Plaintiffs are typical of the claims of the Class they seek to represent; (d) Lead
Plaintiffs will fairly and adequately represent the interests of the Class; (e) the
questions of law and fact common to the Class predominate over any questions
affecting only individual members of the Class; and (f) a class action is superior to
other available methods for the fair and efficient adjudication of the controversy.
5. Pursuant to Rule 23 of the Federal Rules of Civil Procedure,
preliminarily and for the purposes of settlement only, Lead Plaintiffs are certified as
the Class representatives on behalf of the Class and Lead Counsel previously
selected by Lead Plaintiffs and appointed by the Court, is hereby appointed as Lead
Counsel for the Class.
6. A hearing pursuant to Federal Rule of Civil Procedure 23(e) (the
“Final Settlement Approval Hearing”) is hereby scheduled to be held before this
Ex. 1 Pg. 48
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4.
Court on [At the Court’s convenience, on or after one-hundred (100) Calendar
Days following the entry of the Preliminary Approval Order]
__________________, 2016 at 1:30 p.m. for the following purposes:
(a) to finally determine whether the Class Action satisfies the applicable
prerequisites for class action treatment under Federal Rules of Civil
Procedure 23(a) and (b) for purposes of settlement;
(b) to determine whether the Settlement is fair, reasonable, and adequate,
and should be approved by this Court;
(c) to determine whether the Judgment as provided under the Settlement
Agreement, and submitted as Exhibit B to the Settlement Agreement, should
be entered, dismissing all claims in the Consolidated Complaint against all of
the Defendants, on the merits and with prejudice, and to determine whether
the release of Released Claims against any and all Released Persons, as set
forth in the Settlement Agreement, should be ordered;
(d) to determine whether the proposed Plan of Distribution for the Net
Settlement Fund is fair and reasonable and should be approved by this Court;
(e) to consider the application of Lead Counsel for an award of attorneys’
fees and expenses; and
(f) to rule upon such other matters as the Court may deem appropriate.
7. The Court reserves the right to approve the Settlement with or without
modification and with or without further notice of any kind. The Court further
reserves the right to enter its Judgment approving the Settlement Agreement and
dismissing the claims in the Consolidated Complaint as to the Defendants, on the
merits and with prejudice, regardless of whether it has approved the Plan of
Distribution or awarded attorneys’ fees and expenses to Lead Counsel.
8. The Court approves the form, substance and requirements of: (a) the
Mailed Notice, (b) the Summary Notice, and (c) the Proof of Claim and Release.
9. Lead Counsel has the authority to enter into the Settlement Agreement
Ex. 1 Pg. 49
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5.
on behalf of the Class and is authorized to act on behalf of the members of the Class
with respect to all acts or consents required by or that may be given pursuant to the
Settlement Agreement or such other acts that are reasonably necessary to
consummate the Settlement.
10. The Court approves the appointment of Strategic Claims Services as
the Claims Administrator, and approves the payment of reasonable administration
costs to the Claims Administrator from the proceeds of the Settlement, not to
exceed $200,000.00 without further Court order.
11. Within ten (10) Business Days of entry of this Order, Defendants are
to arrange for Medbox or its transfer agent to provide to the Claims Administrator
in a computer-readable format acceptable to the Claims Administrator, the last
known names and addresses of all shareholders of record during the Class Period.
12. Within ten (10) Business Days of Medbox’s transfer agent providing
the Claims Administrator with the last known names and addresses of all
shareholders of record as required by ¶11 of this Order (“Notice Date”), the Claims
Administrator shall:
(a) cause to be mailed to all shareholders of record identified by Medbox’s
transfer agent the Mailed Notice, substantially in the form of Exhibit A-1
attached to the Settlement Agreement, and a Proof of Claim and Release,
substantially in the form of Exhibit A-2 attached to the Settlement
Agreement. The Claims Administrator shall also make reasonable efforts to
give notice to nominee owners such as brokerage firms and other persons or
entities who purchased Medbox during the Class Period. Such nominee
purchasers are hereby directed to forward copies of the Mailed Notice and
Proof of Claim and Release to their beneficial owners or to provide the
Claims Administrator with lists of the names and addresses of the beneficial
owners. Promptly upon receipt of any such information from nominee
purchasers, the Claims Administrator shall cause the Mailed Notice and
Ex. 1 Pg. 50
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Proof of Claim and Release to be mailed to such beneficial owners.
Additional copies of the Mailed Notice and Proof of Claim and Release shall
be made available to any record holder requesting the same for the purpose
of distribution to beneficial owners;
(b) cause the Settlement Agreement and the Mailed Notice and Proof of
Claim and Release substantially in the forms submitted as Exhibits A-1 and
A-2 to the Settlement Agreement, respectively, to be posted on the Claims
Administrator’s website; and
(c) cause, not later than seven (7) Business Days following the Notice
Date, the Summary Notice to be published once over a national business
internet wire service and once in Investor’s Business Daily.
13. Not later than thirty-five (35) Calendar Days prior to the Final
Settlement Approval Hearing, Lead Counsel shall serve on Defendants’ counsel and
file with the Court proof, by affidavit or declaration, of such mailing and
publishing.
14. The form and method set forth herein of notifying the Class of the
Settlement and its terms and conditions meet the requirements of due process and
Rule 23 of the Federal Rules of Civil Procedure and Section 21D(a)(7) of the
Exchange Act, 15 U.S.C. § 78u-4(a)(7), as amended by the Private Securities
Litigation Reform Act of 1995; constitutes the best notice practicable under the
circumstances; and shall constitute due and sufficient notice to all persons and
entities entitled thereto. Under no circumstances shall any Class Member be
relieved from the terms of the Settlement, including the releases provided for
therein, based upon the contention or proof that such Class Member failed to
receive actual or adequate notice.
15. To share in the net proceeds of the Settlement in the event the
Settlement is effected in accordance with all of the terms and conditions thereof,
each Class Member shall take the following action and be subject to the following
Ex. 1 Pg. 51
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conditions:
(a) A properly executed Proof of Claim and Release, substantially in the
form submitted as Exhibit A-2 to the Settlement Agreement, shall be
submitted, by first-class mail, postage prepaid, postmarked no later than
ninety (90) Calendar Days from the Notice Date, to the Post Office Box
address listed in the Mailed Notice. Such deadline may be further extended
by Order of this Court. Each Proof of Claim and Release shall be deemed to
have been submitted when postmarked (if properly addressed and mailed by
first-class mail) provided it is actually received before the filing of a motion
for an Order of the Court approving distribution of the Net Settlement Fund.
Any Proof of Claim and Release submitted in any other manner shall be
deemed to have been submitted when it was actually received at the address
designated in the Mailed Notice;
(b) The Proof of Claim and Release submitted by the Class Member must:
(i) be fully and properly completed, without any material deletions or
modifications of any form provided to the Class Member; (ii) state, for the
Class Member, all purchases of Medbox shares during the Class Period,
including the number and price of the shares purchased and the date of each
purchase, the number and price of shares sold during the Class Period; (iii) be
accompanied by adequate documentation to demonstrate the transaction(s)
reported therein, in the form of broker confirmation slips, broker account
statements, an authorized statement from the broker containing the
transactional information found in a broker confirmation slip, or such other
documentation as is deemed adequate by Lead Counsel or the Claims
Administrator; (iv) be executed under penalty of perjury; and (v) be
accompanied, if the person executing the Proof of Claim and Release is
acting in a representative capacity, by a certification of the executor’s current
authority to act on behalf of the Class Member;
Ex. 1 Pg. 52
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8.
(c) Once the Claims Administrator has considered a timely submitted
Proof of Claim and Release, Lead Counsel, through the Claims
Administrator, shall determine, based upon the Plan of Distribution, whether
such claim is valid, deficient, or rejected. For each claim determined to be
either deficient or rejected, the Claims Administrator shall send a deficiency
letter or rejection letter as appropriate, describing the basis on which the
claim was so determined; and
(d) As part of the Proof of Claim and Release, each Class Member shall
submit to the jurisdiction of the Court with respect to the claim submitted.
16. Class Members shall be bound by all determinations and judgments in
the Class Action, whether or not they submit a valid and timely Proof of Claim and
Release and are thereby entitled to share in the net proceeds of the Settlement,
unless such Person(s) request exclusion from the Class in a timely and proper
manner, as hereinafter provided:
(a) A person eligible to be a Class Member, but who wishes to be
excluded from the Class, may request exclusion by mailing the request in
written form, by first-class mail, postage prepaid, postmarked no later than
twenty-one (21) Calendar Days prior to the Final Settlement Approval
Hearing, to the address listed in the Mailed Notice. However, a Class
Member may submit a written revocation of a request for exclusion up until
two (2) Business Days prior to the date of the Final Settlement Approval
Hearing and receive payments pursuant to this Settlement and the Settlement
Agreement provided the Class Member also timely submits a valid Proof of
Claim and Release;
(b) The request for exclusion shall clearly indicate the name and address
of the person seeking exclusion and that the sender specifically requests to be
excluded from the Class;
(c) The request for exclusion shall be executed, under penalty of perjury,
Ex. 1 Pg. 53
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9.
by the person requesting exclusion from the Class, and accompanied, if said
person is acting in a representative capacity, by a certification of the person’s
current authority to act on behalf of the person requesting exclusion from the
Class;
(d) The request for exclusion shall state, for the Class Member, all
purchases of Medbox common stock during the Class Period, including the
number and price of the shares purchased and the date of each purchase, the
number and price of shares sold during the Class Period and the date of each
sale; and
(e) It is also requested that such persons provide their telephone number or
other contact information.
The request for exclusion shall not be effective unless the potential Class Member
provides the required information set forth in this ¶16, and is made within the time
stated above, or the exclusion is otherwise accepted by the Court. Class Members
requesting exclusion from the Class shall not be entitled to receive any payment out
of the Net Settlement Fund as described in the Mailed Notice and Summary Notice.
17. Any Class Member may appear and show cause, if he, she or it has
any, why the proposed Settlement of the Class Action should or should not be
approved as fair, reasonable, and adequate, why a judgment should or should not be
entered thereon, why the Plan of Distribution should or should not be approved
and/or why attorneys’ fees and expenses should or should not be awarded to
counsel for Lead Plaintiffs; provided, however, that no Class Member or any other
Person shall be heard or entitled to contest such matters, unless that Person has
delivered by hand or sent by first-class mail written objections and copies of any
papers and briefs such that they are received on or before twenty-one (21) Calendar
Days prior to the Final Settlement Approval Hearing by: Frank J. Johnson, Johnson
& Weaver, LLP, 600 West Broadway, Suite 1540, San Diego, CA 92101, as Lead
Counsel for Lead Plaintiffs and the Class, and by Phillip R. Kaplan, Manatt, Phelps
Ex. 1 Pg. 54
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10.
& Phillips, LLP, Park Tower, 695 Town Center Drive, 14th Floor, Costa Mesa, CA
92626, as Defendants’ Counsel designee. Any such objections, papers, and briefs
shall also be filed with the Clerk of the United States District Court for the Central
District of California, Western Division, on or before twenty-one (21) Calendar
Days prior to the Final Settlement Approval Hearing. Any objection must include:
(a) the full name, address and phone number of the objecting Class Member; (b) a
list of all of the Class Member’s transactions involving Medbox common stock
during the Class Period; (c) a written statement of all grounds for the objection; (d)
identify any case, by name, court, and docket number, in which the objector or his
attorney, if any, has objected to a settlement in the last three years; and (e) the
objector’s signature, even if represented by counsel. Class Members intending to
object and present evidence at the Final Settlement Approval Hearing must include
in their written objections the identity of any witnesses they may call to testify and
exhibits they intend to introduce into evidence at the hearing. Any Class Member
who does not make his, her or its objection in the manner provided shall be deemed
to have waived such objection and shall forever be foreclosed from making any
objection to the fairness or adequacy of the settlement as set forth in the Settlement
Agreement, to the Plan of Distribution, or to the award of attorneys’ fees and
expenses to Lead Counsel, unless otherwise ordered by the Court.
18. 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, until such time as such funds shall be distributed pursuant to the Settlement
Agreement and/or further order(s) of the Court.
19. All papers in support of the Settlement, the Plan of Distribution, and
request by Lead Counsel for an award of attorneys’ fees and expenses, shall be filed
and served thirty-five (35) Calendar Days prior to the Final Settlement Approval
Hearing. Any reply in further support of the Settlement, the Plan of Distribution,
any application by Lead Counsel for attorneys’ fees and expenses, and any other
Ex. 1 Pg. 55
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11.
matter including, but not limited to, a response to an objection, if any, shall be filed
and served by Lead Counsel seven (7) Calendar Days prior to the Final Settlement
Approval Hearing.
20. All expenses incurred in identifying and notifying Class Members, as
well as administering the Settlement Fund, shall be paid as set forth in the
Settlement Agreement. In the event the Settlement is not approved by the Court, or
otherwise fails to become effective, neither Lead Plaintiffs nor any of their counsel
shall have any obligation to repay any amounts incurred or properly disbursed
pursuant to ¶2.4 or ¶2.12 of the Settlement Agreement.
21. In the event that the Settlement is not consummated pursuant to its
terms, the Settlement Agreement, except as otherwise provided therein, including
any amendment(s) thereto, and this Order, shall be null and void, of no further force
or effect, and without prejudice to any Settling Party, and each Settling Party shall
be restored to their, his, her, or its respective position as it existed as of the
Execution Date of the Settlement Agreement.
22. Neither the Settlement Agreement, nor this Order, nor any of their
terms or provisions, nor any of the negotiations or proceedings connected with it,
nor any act performed or document signed in connection with the Settlement, shall,
in this or any other court, administrative agency, arbitration forum or other tribunal,
constitute or be construed as an admission or concession of, or evidence of, or be
deemed to create any inference of, the truth of any of the allegations in the Class
Action, or of any liability, fault, or wrongdoing of any kind on the part of any of the
Settling Parties.
23. The Court reserves the right to continue or adjourn the Final
Settlement Approval Hearing without any further notice to Class Members, and
retains jurisdiction over the Class Action to consider all further applications arising
out of or connected with the Settlement. The Court may approve the Settlement,
with such modifications as may be agreed to by the Settling Parties, if appropriate,
Ex. 1 Pg. 56
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12.
without further notice to the Class.
SO ORDERED this _________ day of ___, 2016.
___________________________________
HON. BEVERLY REID O’CONNELL
UNITED STATES DISTRICT JUDGE
Ex. 1 Pg. 57
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EXHIBIT A-1
Ex. 1 Pg. 58
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1. NOTICE OF PROPOSED CLASS ACTION
SETTLEMENT Case No. 2:15-CV-00426-BRO (JEMX)
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
JOSH CRYSTAL, Individually And On Behalf Of All Others Similarly Situated, Plaintiff, v. MEDBOX, INC., PEJMAN VINCENT MEHDIZADEH, BRUCE BEDRICK, THOMAS IWANSKI, GUY MARSALA, and DOUGLAS MITCHELL, Defendants.
Case No.: 2:15-CV-00426-BRO (JEMx) CLASS ACTION Exhibit A-1 Notice of Proposed Class Action Settlement
A Federal Court Authorized This Notice.
This Is Not A Solicitation From A Lawyer.
If you purchased or otherwise acquired shares of Medbox, Inc. common
stock between April 2, 2013, and December 29, 2014, inclusive, and incurred
damages and are not otherwise excluded from the Class (see Question 6 below),
you could receive a payment from a class action settlement.1
1 This Notice incorporates by reference the definitions in the Stipulation and
Agreement of Settlement dated as of December 17, 2015 (“Settlement
Agreement”), and all capitalized terms used, but not defined herein, shall have the
same meanings as in the Settlement Agreement. The Settlement Agreement can be
obtained at www.strategicclaims.net.
Ex. 1 Pg. 59
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2. NOTICE OF PROPOSED CLASS ACTION
SETTLEMENT Case No. 2:15-CV-00426-BRO (JEMX)
NOTICE OF PENDENCY OF CLASS ACTION. Please be advised that
your rights may be affected by a putative class action lawsuit pending in this Court
(the “Class Action”) if you purchased or otherwise acquired shares of Medbox, Inc.
common stock between April 2, 2013, and December 29, 2014, inclusive.
NOTICE OF SETTLEMENT. Please also be advised that the Court-
appointed Lead Plaintiffs, Peter Phan and Paul Poon, on behalf of themselves and
the Class (defined below), have reached a settlement of the Class Action with
Defendants Medbox, Inc. (“Medbox” or the “Company”), Pejman Vincent
Mehdizadeh, Bruce Bedrick, Thomas Iwanski, Guy Marsala, C. Douglas Mitchell,
J. Mitchell Lowe, Ned Siegel, Timothy Quintanilla, and Q Accountancy
Corporation for total consideration of One Million Eight Hundred Fifty Thousand
United States Dollars (USD $1,850,000.00) in cash and Two Million Three
Hundred Thousand (2,300,000) shares of Medbox common stock, that will resolve
all claims in the Class Action (the “Settlement”).
This Notice explains important rights you may have, including possible receipt
of compensation from the Settlement. Your legal rights are affected whether
or not you act. Please read this Notice carefully.
SUMMARY OF KEY PROVISIONS AND REASONS FOR SETTLEMENT
Security and Time Period: Medbox common stock (stock symbol: MDBX)
purchased or otherwise acquired between April 2, 2013, and December 29, 2014,
inclusive (the “Class Period”). Excluded from the Class are: (1) Defendants and
their families, the officers and directors of the Company, at all relevant times,
members of their families and their legal representatives, heirs, successors, or
assigns, and any entity in which Defendants have or had a controlling interest;
(2) any Persons who have separately filed actions against one or more of
Defendants, based in whole or in part on any claim arising out of or relating to any
of the alleged acts, omissions, misrepresentations, facts, events, matters,
transactions, or occurrences referred to in the Class Action or otherwise alleged,
Ex. 1 Pg. 60
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3. NOTICE OF PROPOSED CLASS ACTION
SETTLEMENT Case No. 2:15-CV-00426-BRO (JEMX)
asserted, or contended in the Class Action; and (3) those persons or entities who
submit valid and timely requests for exclusion pursuant to this Notice.
Settlement Fund: USD $1,850,000.00 (One Million Eight Hundred Fifty
Thousand United States Dollars) in cash and 2,300,000 (Two Million Three
Hundred Thousand) shares of Medbox common stock. Your recovery will depend
on the number of shares of Medbox common stock you, and other Class Members
who file claims, purchased and sold and the prices at which you, and the other Class
Members who file claims, purchased and sold those shares. Based on the
information currently available to Lead Plaintiffs and the analysis performed by
their damages expert, it is estimated that if Class Members submit claims for 100%
of the shares eligible for distribution under the Plan of Distribution (described
below), the estimated average value of the distribution per share of common stock
will be $0.21 per share, before deduction of Court-approved fees and expenses,
including the cost of notifying Class Members and settlement administration and
any attorneys’ fees and expenses awarded by the Court to counsel for Lead
Plaintiffs, based on a valuation of the stock component of the Settlement at
$0.014 per share, the closing price of Medbox common stock on December 17,
2015. The Plan of Distribution is included in this Notice and may be modified by
the Court without further notice. Historically, actual claims rates are less than
100%, which result in higher distributions per share. A Class Member’s actual
recovery will be a proportion of the Net Settlement Fund (the Settlement Fund less
Taxes and Tax Expenses, Notice and Administration Expenses, and attorneys’ fees
and expenses awarded to Lead Counsel) determined by that claimant’s recognized
claim as compared to the total recognized claims of all Class Members who submit
valid Proof of Claim and Release forms.
Reasons for Settlement: Avoids the costs and risks associated with
continued litigation, including the danger of no recovery.
Ex. 1 Pg. 61
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4. NOTICE OF PROPOSED CLASS ACTION
SETTLEMENT Case No. 2:15-CV-00426-BRO (JEMX)
Lead Plaintiffs believe that the claims asserted in the Class Action have merit
and that the facts developed to date support the claims asserted. Nevertheless, Lead
Plaintiffs recognize and acknowledge the uncertain outcome and the risk of any
litigation, especially in complex actions such as the Class Action, as well as the
difficulties and delays inherent in such litigation. Lead Plaintiffs and their counsel
believe that the Settlement provides the Class with a substantial benefit now in lieu
of engaging in further litigation, with the risk of no recovery.
Defendants have denied, and continue to deny, all charges of wrongdoing or
liability against them arising out of any of the claims alleged in the Class Action.
Nonetheless, Defendants have concluded that further conduct of the Class Action
would be uncertain, protracted, and expensive, and that it is desirable that the Class
Action be fully and finally settled in the manner and upon the terms and conditions
set forth in the Settlement Agreement. Defendants also have taken into account
risks inherent in any litigation, especially in complex cases like the Class Action.
If the Case Had Not Settled: Continuing with the case could have resulted
in dismissal at the pleadings stage, no class being certified, or dismissal on the
merits at summary judgment, trial or on appeal. The two sides vigorously disagree
on both liability and the amount of money that could have been won if Lead
Plaintiffs prevailed at trial. The Settling Parties disagree about, among other things:
(1) whether there was any wrongdoing on the part of Defendants; (2) whether
Defendants made any material, false, misleading, or otherwise actionable
statements under the federal securities laws; (3) whether class certification is
appropriate; (4) whether the price of Medbox common stock was artificially
inflated during the Class Period and the amount of any such alleged inflation;
(5) the extent that various facts alleged by Lead Plaintiffs influenced the trading
price of Medbox common stock during the Class Period; and (6) the method for
determining whether, and the extent to which, purchasers of Medbox common stock
suffered injury and damages that could be recovered at trial.
Ex. 1 Pg. 62
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5. NOTICE OF PROPOSED CLASS ACTION
SETTLEMENT Case No. 2:15-CV-00426-BRO (JEMX)
Attorneys’ Fees and Expenses: Lead Counsel have not received any
payment for their work or expenses incurred in investigating the facts, prosecuting
this Class Action, and negotiating the Settlement on behalf of Lead Plaintiffs and
the Class. Lead Counsel will ask the Court for attorneys’ fees not to exceed 30% of
the Settlement Fund and expenses not to exceed $100,000 to be paid from the
Settlement Fund.
If the above amounts are requested and approved by the Court, then the
average cost per share of common stock will be approximately $0.07 per share,
making the estimated recovery per share after fees and expenses approximately
$0.14.
Dismissal and Releases: If the proposed Settlement is approved, the Court
will enter a Final Judgment and Order of Dismissal with Prejudice (the
“Judgment”). The Judgment will dismiss the Released Claims with prejudice as to
the Released Persons, which include Defendants, Lead Plaintiffs, and their
respective related parties (including, but not limited to, their parents, subsidiaries
and affiliates, and all of their employees, directors and officers). The Judgment will
provide that all Class Members shall be deemed to have released and forever
discharged all Released Claims (to the extent Class Members have such claims)
against all Released Persons. The terms of the releases, including the meaning of
the term “Released Claims,” are set forth in the Proof of Claim and Release form
that is enclosed with the Notice.
Deadlines:
Submit Proof of Claim and Release form: _______________, 2016
File Objection: _______________, 2016
Request Exclusion: _______________, 2016
Final Settlement Approval Hearing: _______________, 2016
Ex. 1 Pg. 63
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6. NOTICE OF PROPOSED CLASS ACTION
SETTLEMENT Case No. 2:15-CV-00426-BRO (JEMX)
More Information: www.strategicclaims.net or
Claims Administrator:
Medbox, Inc. Securities Litigation
c/o Strategic Claims Services
600 N. Jackson St., Suite 3
Media, PA 19063
Telephone: (866) 274-4004
Facsimile: (610) 565-7985
Email: info@strategicclaims.net
Lead Counsel:
Frank J. Johnson
JOHNSON & WEAVER, LLP
600 West Broadway
Suite 1540
San Diego, CA 92101
Telephone: (619) 230-0063
Facsimile: (619) 255-1856
Email: frankj@johnsonandweaver.com
Your legal rights are affected whether you act, or don’t act. Please read this
Notice carefully.
YOUR LEGAL RIGHTS AND OPTIONS IN THIS SETTLEMENT:
SUBMIT A CLAIM The only way to receive a payment. Proof of Claim
and Release forms must be submitted by _________,
2016.
OBJECT You may write to the Court if you do not like this
Settlement, the Plan of Distribution, or the request for
attorneys’ fees and expenses. You cannot object to
the Settlement unless you are a member of the Class
and do not validly exclude yourself. Any objections
must be filed with the Court and received by counsel
by _____________, 2016.
Ex. 1 Pg. 64
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7. NOTICE OF PROPOSED CLASS ACTION
SETTLEMENT Case No. 2:15-CV-00426-BRO (JEMX)
EXCLUDE YOURSELF Get no payment. This is the only option that allows
you to participate in another lawsuit against
Defendants for the legal claims being released in this
case. Exclusions must be postmarked by
___________, 2016.
GO TO A HEARING You may ask to speak in Court about the fairness of
the Settlement. The Final Settlement Approval
Hearing is currently scheduled for ______________,
2016, at 1:30 p.m.2
DO NOTHING Get no payment. Give up your rights.
You may submit a Proof of Claim and Release or object, or do both, or do
nothing. However, if you timely exclude yourself, that is the only thing you
can do: you may not object in writing, you may not appear at the Final
Settlement Approval Hearing to state any objections, and you may not submit
a Proof of Claim and Release.
If you object and do not request exclusion, you will remain a member of the
Class, and if the Court approves the Settlement, you will be bound by the
terms of the Settlement in the same way as Class Members who do not
object.
Unless you timely request exclusion from the Class, or unless the Court
rejects the proposed Settlement, you are bound by the Settlement Agreement
and its release, whether or not you submit a Proof of Claim and Release or
object.
These rights and options are explained in this Notice. Please take careful
note of the deadlines to exercise them, as set forth above.
The Court presiding over this case must decide whether to approve the
Settlement. Payments will be made only if the Court approves the Settlement
and, if there are any appeals, after appeals are resolved. Please be patient.
2 The date and/or time of the Final Settlement Approval Hearing may change
without further notice to the Class. If you plan on attending the Final Settlement
Approval Hearing, please check the website, www.strategicclaims.net, or call Lead
Counsel at (619) 230-0063 to confirm that the date and/or time has not changed.
Ex. 1 Pg. 65
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8. NOTICE OF PROPOSED CLASS ACTION
SETTLEMENT Case No. 2:15-CV-00426-BRO (JEMX)
The Court has authorized this Notice, but no money will be paid to anyone
until the Court holds the Final Settlement Approval Hearing on __________,
2016. The Court has not decided the merits of this case.
WHAT THIS NOTICE CONTAINS
BASIC INFORMATION
1. Why did I receive this notice package?
2. What is this lawsuit about?
3. Why is this a class action?
4. Why is there a settlement?
WHO IS IN THE SETTLEMENT
5. How do I know if I am part of the Settlement?
6. What are the exceptions to being included?
7. I am still not sure if I am included.
THE SETTLEMENT BENEFITS – WHAT YOU GET
8. What does the Settlement provide?
9. How much will my payment be?
PROPOSED PLAN OF DISTRIBUTION OF THE NET SETTLEMENT FUND
TO AUTHORIZED CLAIMANTS
RECOGNIZED LOSS FORMULA
FURTHER INFORMATION APPLICABLE TO ALL CLAIMANTS
HOW YOU OBTAIN A PAYMENT – SUBMITTING A CLAIM FORM
10. How will I obtain a payment?
11. When will I receive my payment?
12. What am I giving up to receive a payment?
EXCLUDING YOURSELF FROM THE CLASS ACTION SETTLEMENT
13. How do I get out of the Class?
14. If I do not exclude myself, can I sue Defendants for the same thing
later?
15. If I exclude myself, can I receive money from the Class Action
Settlement?
Ex. 1 Pg. 66
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9. NOTICE OF PROPOSED CLASS ACTION
SETTLEMENT Case No. 2:15-CV-00426-BRO (JEMX)
THE LAWYERS REPRESENTING YOU
16. Do I have a lawyer in this case?
17. How will the lawyers be paid?
OBJECTING TO THE SETTLEMENT
18. How do I tell the Court that I do not like the Settlement?
19. What is the difference between objecting and excluding myself from
the Settlement?
THE COURT’S SETTLEMENT HEARING
20. When and where will the Court decide whether to approve the
Settlement?
21. Do I have to come to the hearing?
22. May I speak at the hearing?
IF YOU DO NOTHING
23. What happens if I do nothing at all?
GETTING MORE INFORMATION
24. Are there more details about the Settlement?
BASIC INFORMATION
1. Why did I receive this Notice package?
You or someone in your family may have purchased or otherwise acquired
Medbox common stock between April 2, 2013, and December 29, 2014, inclusive,
and incurred damages.
The Court directed that you be sent this Notice because you have a right to
know about a proposed settlement of a class action lawsuit, and about all of your
options, before the Court decides whether to approve the Settlement. If the Court
approves the Settlement, and after any objections or appeals are resolved, the
Claims Administrator appointed by the Court will make the payments to those
Persons who timely submit claims in the manner described below.
This package explains the lawsuit, the Settlement, your legal rights, what
benefits are available, who is eligible for them, and how to get them.
Ex. 1 Pg. 67
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10. NOTICE OF PROPOSED CLASS ACTION
SETTLEMENT Case No. 2:15-CV-00426-BRO (JEMX)
The Court in charge of the case is the United States District Court for the
Central District of California, Western Division, and the case is known as Crystal v.
Medbox, Inc., et al., Case No. 2:15-CV-00426-BRO (JEMx). The United States
District Court Judge overseeing the Class Action is the Hon. Beverly Reid
O’Connell. The persons that lead the Class Action, Peter Phan and Paul Poon, are
called Lead Plaintiffs, and the Company and the individuals they sued are called
Defendants.
2. What is this lawsuit about?
This Class Action alleges that Medbox and certain of its current and former
officers and directors violated the federal securities laws by issuing a series of
untrue or materially misleading statements, or omitted material facts to make such
statements not false and misleading, related to, among other things, Medbox’s
questionable accounting practices which ultimately led to Medbox having to restate
eleven consecutive quarters of financial statements, as well as investigations into
Medbox and certain of its former officers and directors by the U.S. Department of
Justice and the U.S. Securities and Exchange Commission. Lead Plaintiffs allege
that, as a result of these untrue or materially misleading statements or omissions,
the price of Medbox common stock was artificially inflated during the Class Period.
Lead Plaintiffs allege that, through several partial revelations of the truth regarding
the Company’s accounting practices, Class Members suffered damages as a result
of declines in the price of Medbox common stock.
Defendants deny all of Lead Plaintiffs’ allegations and further deny that they
did anything wrong. Defendants also deny that Lead Plaintiffs or the Class suffered
damages or that the price of Medbox common stock was artificially inflated by
reasons of alleged misrepresentations, non-disclosures or otherwise.
3. Why is this a class action?
In a class action, one or more people called class representatives (in this case,
the Court appointed Peter Phan and Paul Poon as Lead Plaintiffs), sue on behalf of
people who have similar claims. All of these people and/or entities are called a
class or class members. One judge – in this case United States District Court Judge
Beverly Reid O’Connell – resolves the issues for all class members, except for
those who exclude themselves from the class.
Ex. 1 Pg. 68
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11. NOTICE OF PROPOSED CLASS ACTION
SETTLEMENT Case No. 2:15-CV-00426-BRO (JEMX)
4. Why is there a settlement?
The Court did not decide in favor of Lead Plaintiffs or Defendants. Instead,
both sides agreed to a Settlement. This permits them to avoid the cost, delay, and
uncertainty of a trial, and permits eligible Class Members who submit valid claims
to receive some compensation rather than risk ultimately receiving nothing. Lead
Plaintiffs and their attorneys believe the Settlement is best for all Class Members.
Defendants have concluded that further defense of the Class Action would be
protracted and expensive, and that it is desirable that the Class Action be fully and
finally settled in the manner and upon the terms and conditions set forth in the
Settlement Agreement. Defendants also have taken into account the uncertainty
and risks inherent in any litigation, especially in complex cases such as the Class
Action.
WHO IS IN THE SETTLEMENT
To see if you will receive money from this Settlement, you first have to
determine if you are a possible Class Member.
5. How do I know if I am part of the Settlement?
The potential Class includes all persons or entities who purchased or
otherwise acquired shares of Medbox common stock between April 2, 2013,
and December 29, 2014, inclusive.
6. What are the exceptions to being included?
You are excluded from the Class if: (1) you are a Defendant; any parent or
subsidiary, present or former director, officer, or subsidiary of Medbox; any entity
in which any excluded Person has a controlling interest; their legal representatives,
heirs, successors and assigns; or any immediate family member of a Defendant;
(2) you are a person or entity who has separately filed actions against one or more
of Defendants, based in whole or in part on any claim arising out of or relating to
any of the alleged acts, omissions, misrepresentations, facts, events, matters,
transactions, or occurrences referred to in the Class Action or otherwise alleged,
asserted, or contended in the Class Action; or (3) you are a person or entity who
submits a valid and timely request for exclusion pursuant to this Notice.
Ex. 1 Pg. 69
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12. NOTICE OF PROPOSED CLASS ACTION
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7. I am still not sure if I am included.
If you are still not sure whether you are included, you can ask for free help.
You can call 1-866-274-4004 or visit www.strategicclaims.net for more
information; or, you can call Frank J. Johnson of Johnson & Weaver, LLP at 1-619-
230-0063 for more information; or you can fill out and return the Proof of Claim
and Release form described in Question 10 to see if you qualify.
THE SETTLEMENT BENEFITS — WHAT YOU GET
8. What does the Settlement provide?
The Settlement will result in a payment of USD $1,850,000.00 (One Million
Eight Hundred Fifty Thousand United States Dollars) in cash (“Cash Amount”) and
2,300,000 (Two Million Three Hundred Thousand) shares of Medbox common
stock (“Settlement Shares,” and collectively with the Cash Amount, the “Settlement
Amount”). The Settlement Amount, plus interest earned on the Cash Amount from
the date it is deposited into an escrow account to fund the Settlement (the
“Settlement Fund”), less costs, fees, and expenses (the “Net Settlement Fund”), will
be divided among all eligible Class Members who send in valid Proofs of Claim
and Release forms (“Authorized Claimants”). Costs, fees, and expenses include
Court-approved attorneys’ fees and expenses, the costs of notifying Class Members
of the Settlement, including the costs of printing and mailing this Notice, the cost of
publishing newspaper notice in Investor’s Business Daily, the cost associated with
issuing the Internet wire service notice, the costs of claims administration, and taxes
on the Settlement Fund.
9. How much will my payment be?
The payment you receive will reflect your pro rata share of the Net
Settlement Fund. Your share of the Net Settlement Fund will depend on the
number of valid Proofs of Claim and Release forms that Class Members send in,
the number of shares of Medbox common stock you purchased during the Class
Period, and the timing of your purchases and sales. Depending on the number of
eligible shares that participate in the Settlement, and when those shares were
purchased and sold, the estimated average payment will be approximately $0.21 for
each damaged share, assuming a claims rate of 100% of damaged shares, before
deduction of Court-approved fees and expenses, with the stock value as of the end
of trading on December 17, 2015 ($0.014/share). The number of claimants who
send in claims varies widely from case to case. If fewer than anticipated Class
Members send in valid Proof of Claim and Release forms, you could receive
Ex. 1 Pg. 70
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SETTLEMENT Case No. 2:15-CV-00426-BRO (JEMX)
additional money. You will not receive a payment, however, if your proportionate
share of the Net Settlement Fund is less than $10.00.
You can calculate your Recognized Claim in accordance with the formula
shown below in the proposed Plan of Distribution, which was formulated following
consultation with Lead Plaintiffs’ damages expert. After all Class Members have
sent in their Proof of Claim and Release forms, the payment you receive will reflect
your Recognized Claim in relation to the Recognized Claims of all Persons
submitting valid Proof of Claim and Release forms. The Recognized Claim is not
the amount of the payment that you can expect, but is used to determine how the
Net Settlement Fund is to be allocated among all Persons submitting Proof of
Claims and Release forms.
PROPOSED PLAN OF DISTRIBUTION OF THE NET SETTLEMENT
FUND TO AUTHORIZED CLAIMANTS
The purpose of the Plan of Distribution is to allocate Settlement proceeds
equitably to those Class Members who suffered economic losses resulting from the
alleged misrepresentations and omissions by Defendants in the Class Period. The
Plan of Distribution is a matter separate and apart from the proposed Settlement,
and any decision by the Court concerning the Plan of Distribution shall not affect
the validity or finality of the proposed Settlement. The Court may approve the Plan
of Distribution with or without modifications agreed to among the Settling Parties,
or another plan of distribution, without further notice to Class Members. Any
orders regarding a modification of the Plan of Distribution will be posted to the
Claims Administrator’s website, www.strategicclaims.net.
One requirement for eligibility to share in the allocation of the Net
Settlement Fund is that Class Members must have purchased Medbox common
stock in the Class Period, from April 2, 2013, through December 29, 2014,
inclusive. Federal securities laws allow investors to recover for losses caused by
disclosures which corrected Defendants’ previous misleading statements and
omissions, but not for losses caused by broad market conditions or by other events
unrelated to the alleged securities fraud. Therefore, another requirement for
eligibility is that the Class Member held Medbox common stock at the time its price
declined due to a disclosure of information which corrected an allegedly misleading
statement or omission. Lead Plaintiffs and Lead Counsel have identified the
following dates of such price declines: February 18 and 19, 2014 (price declines
following February 18, 2014 publication of a report by Citron Research accusing
Medbox of keeping three sets of books and of inflating market capitalization by
fraud), November 3, 4, and 5, 2014 (price declines following revelations
Ex. 1 Pg. 71
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concerning, among other things, that a committee of the Company’s Board of
Directors was formed to investigate a letter from a former employee to the U.S.
Securities and Exchange Commission alleging wrongdoing by a former officer of
Medbox, and disclosure that the U.S. Department of Justice had served a grand jury
subpoena on Medbox’s accountants in August 2014), and December 31, 2014
(price decline following Medbox’s press release of December 30, 2014, disclosing
that Medbox would be restating its financial statements and that the Company was
in default of debt covenants). If the stock was purchased and then sold before
February 18, 2014, or purchased and then sold between consecutive dates above,
those transactions are excluded from consideration in allocation of the Settlement
proceeds.
The Claims Administrator shall determine each Authorized Claimant’s pro
rata share of the Net Settlement Fund based upon each Authorized Claimant’s
Recognized Claim. Please Note: The Recognized Claim formula, set forth below,
is not intended to be an estimate of the amount of what a Class Member might have
been able to recover after a trial, nor is it an estimate of the amount that will be paid
to Authorized Claimants pursuant to the Settlement. The Recognized Claim
formula is the basis upon which the Net Settlement Fund will be proportionately
allocated to the Authorized Claimants. To the extent there are sufficient funds in
the Net Settlement Fund, each Authorized Claimant will receive an amount equal to
the Authorized Claimant’s Recognized Claim. If, however, the amount in the Net
Settlement Fund is not sufficient to permit payment of the total Recognized Claim
of each Authorized Claimant, then each Authorized Claimant shall be paid the
percentage of the Net Settlement Fund that each Authorized Claimant’s Recognized
Claim bears to the total Recognized Claims of all Authorized Claimants (i.e., “pro
rata share”). Payment in this manner shall be deemed conclusive against all
Authorized Claimants.
If there is any balance remaining in the Settlement Fund after six (6) months
from the date of the initial distribution of the Net Settlement Fund whether by
reason of tax refunds, uncashed checks or otherwise), Lead Counsel shall, if
feasible, distribute in an equitable and economical fashion such balance among
Authorized Claimants who negotiated the checks sent to them in the initial
distribution. However, no Authorized Claimant will receive a redistribution if his,
her, or its proportionate share of the Net Settlement Fund is less than $10.00. These
redistributions shall be repeated until the balance remaining in the Net Settlement
Fund is de minimis (an amount less than $10,000) and such remaining balance shall
then be donated to an appropriate non-profit organization designated as the Court
may direct and approve.
Ex. 1 Pg. 72
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15. NOTICE OF PROPOSED CLASS ACTION
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RECOGNIZED LOSS FORMULA (1) Recognized Claim for Medbox common stock purchased or otherwise
acquired during the Class Period (i.e., April 2, 2013 to December 29,
2014, inclusive) will be calculated as follows:
(A) For shares purchased or otherwise acquired during the Class Period
and sold during the Class Period, the Recognized Claim per share
will be the lesser of: (1) the inflation per share upon purchase (as
set forth in Inflation Table A below) less the inflation per share
upon sale (as set forth in Inflation Table A below); or (2) the
purchase price per share minus the sales price per share.
(B) For shares purchased or otherwise acquired during the Class Period
and sold during the period December 30, 2014 through March 29,
2015, inclusive, the Recognized Claim will be the lesser of: (1) the
inflation per share upon purchase (as set forth in Inflation Table A
below); or (2) the difference between the purchase price per share
and the average closing stock price as of the date of sale provided
in Table B below.
(C) For shares purchased or otherwise acquired during the Class Period
April 2, 2013 through December 29, 2014 inclusive, and retained as
of March 29, 2015, the Recognized Claim will be the lesser of: (1)
the inflation per share upon purchase (as set forth in Inflation Table
A below); or (2) the purchase price per share minus $3.343 per
share.
3 Pursuant to Section 21(D)(e)(1) of the Private Securities Litigation Reform Act of
1995, “in any private action arising under this title in which the plaintiff seeks to
establish damages by reference to the market price of a security, the award of
damages to the plaintiff shall not exceed the difference between the purchase or sale
price paid or received, as appropriate, by the plaintiff for the subject security and
mean trading price of that security during the 90-day period beginning on the date
on which the information correcting the misstatement or omission that is the basis
for the action is disseminated.” $3.34 per share was the mean (average) daily
closing trading price of Medbox’s common stock during the 90-day period
beginning on December 30, 2014 and ending on March 29, 2015.
Ex. 1 Pg. 73
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16. NOTICE OF PROPOSED CLASS ACTION
SETTLEMENT Case No. 2:15-CV-00426-BRO (JEMX)
INFLATION TABLE A Medbox Common Stock Purchased or Acquired During the Class Period
Period Inflation
April 2, 2013 to February 17, 2014, inclusive $9.85 per share
February 18, 2014 $7.71 per share
February 19, 2014 to November 2, 2014, inclusive $5.59 per share
November 3, 2014 $4.06 per share
November 4, 2014 $3.62 per share
November 5, 2014 to December 30, 2014, inclusive $0.65 per share
December 31, 2014 and after $0.00 per share
TABLE B
Date
Closing
Price
Avg.
Closing
Price
Date
Closing
Price
Avg.
Closing
Price
12/30/2014 $6.39 $6.39
2/13/2015 $1.44 $4.68
12/31/2014 $5.58 $5.99
2/17/2015 $1.84 $4.59
1/2/2015 $6.21 $6.06
2/18/2015 $2.14 $4.52
1/5/2015 $6.75 $6.23
2/19/2015 $2.03 $4.45
1/6/2015 $6.30 $6.25
2/20/2015 $2.21 $4.39
1/7/2015 $6.26 $6.25
2/23/2015 $2.14 $4.32
1/8/2015 $6.22 $6.24
2/24/2015 $2.03 $4.26
1/9/2015 $6.45 $6.27
2/25/2015 $1.92 $4.20
1/12/2015 $6.68 $6.32
2/26/2015 $1.83 $4.15
1/13/2015 $6.14 $6.30
2/27/2015 $1.81 $4.09
1/14/2015 $6.07 $6.28
3/2/2015 $1.86 $4.04
1/15/2015 $6.01 $6.26
3/3/2015 $1.80 $3.98
1/16/2015 $6.00 $6.24
3/4/2015 $2.38 $3.95
1/20/2015 $6.00 $6.22
3/5/2015 $2.05 $3.90
1/21/2015 $5.94 $6.20
3/6/2015 $2.16 $3.87
1/22/2015 $5.10 $6.13
3/9/2015 $2.08 $3.83
1/23/2015 $4.64 $6.04
3/10/2015 $1.97 $3.79
1/26/2015 $4.87 $5.98
3/11/2015 $1.97 $3.75
1/27/2015 $4.89 $5.92
3/12/2015 $1.92 $3.72
1/28/2015 $4.62 $5.86
3/13/2015 $1.97 $3.68
1/29/2015 $4.25 $5.78
3/16/2015 $1.97 $3.65
1/30/2015 $4.11 $5.70
3/17/2015 $1.79 $3.61
2/2/2015 $4.08 $5.63
3/18/2015 $1.66 $3.58
2/3/2015 $3.98 $5.56
3/19/2015 $1.65 $3.54
2/4/2015 $3.28 $5.47
3/20/2015 $1.49 $3.51
Ex. 1 Pg. 74
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17. NOTICE OF PROPOSED CLASS ACTION
SETTLEMENT Case No. 2:15-CV-00426-BRO (JEMX)
Date
Closing
Price
Avg.
Closing
Price Date
Closing
Price
Avg.
Closing
Price
2/5/2015 $2.29 $5.35
3/23/2015 $1.57 $3.47
2/6/2015 $1.56 $5.21
3/24/2015 $1.48 $3.44
2/9/2015 $2.29 $5.11
3/25/2015 $1.40 $3.40
2/10/2015 $1.88 $4.99
3/26/2015 $1.41 $3.37
2/11/2015 $1.79 $4.89
3/27/2015 $1.65 $3.34
2/12/2015 $1.60 $4.78
FURTHER INFORMATION APPLICABLE TO ALL CLAIMANTS To the extent a claimant had a trading gain or “broke even” from his, her or
its overall transactions in Medbox shares during the Class Period, the value of the
Recognized Claim will be zero and the claimant will not be entitled to a share of the
Net Settlement Fund. To the extent that a claimant suffered a trading loss on his,
her or its overall transactions in Medbox shares during the Class Period, but that
trading loss was less than the Recognized Claim calculated above, then the
Recognized Claim shall be limited to the amount of the claimant’s actual trading
loss. The purchase and sales prices exclude any brokerage commissions, transfer
taxes, or other fees.
For purposes of calculating your Recognized Claim, the date of purchase,
acquisition or sale is the “contract” or “trade” date and not the “settlement” or
“payment” date. The receipt or grant by gift, inheritance or operation of law of
Medbox shares shall not be deemed a purchase, acquisition or sale of Medbox
shares for the calculation of an Authorized Claimant’s Recognized Claim. The
covering purchase of a short sale is not an eligible purchase.
For purposes of calculating your Recognized Claim, all purchases,
acquisitions and sales shall be matched on a First In, First Out (“FIFO”) basis in
chronological order. Therefore, on the Proof of Claim and Release enclosed with
this Notice, you must provide all of your purchases and acquisitions of Medbox
shares during the time period from April 2, 2013 through and including March 29,
2015.
Notwithstanding any of the above, receipt of Medbox common stock during the
Class Period in exchange for common stock of any other corporation or entity shall
not be deemed a purchase or sale of Medbox common stock.
Ex. 1 Pg. 75
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18. NOTICE OF PROPOSED CLASS ACTION
SETTLEMENT Case No. 2:15-CV-00426-BRO (JEMX)
Upon receipt of Medbox Settlement Shares, Lead Counsel will have the right to
take any measures they deem appropriate to protect the overall value of the
Settlement Shares prior to distribution to the Authorized Claimants, including, but
not limited to, sales of all or part of the Settlement Shares. Lead Counsel shall have
no liability for any sale, liquidation, transfer, or other disposition of the Settlement
Shares absent gross negligence or willful misconduct. Lead Counsel shall also
have the right to use the cash component of the Settlement Fund to protect the
overall value of the Settlement Fund.
Payment pursuant to the Plan of Distribution approved by the Court shall be
conclusive against all Authorized Claimants. No Person shall have any claim
against Defendants, Defendants’ Counsel, Lead Plaintiffs, Lead Counsel or the
Settlement Administrator or other agent designated by Lead Counsel based on the
distributions made substantially in accordance with the Stipulation and the
Settlement contained therein, the Plan of Distribution, or further orders of the
Court. Each claimant shall be deemed to have submitted to the jurisdiction of the
Court with respect to the claimant’s Proof of Claim and Release. All Persons
involved in the review, verification, calculation, tabulation, or any other aspect of
the processing of the claims submitted in connection with the Settlement, or
otherwise involved in the administration or taxation of the Settlement Fund or the
Net Settlement Fund shall be released and discharged from any and all claims
arising out of such involvement, and all Class Members, whether or not they are to
receive payment from the Net Settlement Fund, will be barred from making any
further claim against the Net Settlement Fund beyond the amount allocated to them
as provided in any distribution orders entered by the Court.
Class Members who do not submit a timely request for exclusion and do not
submit an acceptable Proof of Claim and Release form by the deadline for
submitting claims, will not share in the recovery, but nevertheless will be bound by
the Settlement and the Judgment entered by the Court dismissing the Class Action.
Distributions will be made to Authorized Claimants after all claims have been
processed and after the Court has finally approved the Settlement.
HOW YOU OBTAIN A PAYMENT — SUBMITTING A CLAIM FORM
10. How will I obtain a payment?
To qualify for payment, you must be an eligible Class Member, send in a
valid Proof of Claim and Release form, and properly document your claim as
requested in the Proof of Claim and Release form. A Proof of Claim and Release
Ex. 1 Pg. 76
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19. NOTICE OF PROPOSED CLASS ACTION
SETTLEMENT Case No. 2:15-CV-00426-BRO (JEMX)
form is enclosed with this Mailed Notice. You may also get a Proof of Claim and
Release form on the internet at www.strategicclaims.net. Read the instructions
carefully, fill out the Proof of Claim and Release form, include the documents the
form asks for, sign it, and mail it in the enclosed envelope postmarked no later than
__________, 2016.
11. When will I receive my payment?
The Court will hold a Final Settlement Approval Hearing on __________,
2016, at 1:30 p.m., to decide whether to approve the Settlement. If the Court
approves the Settlement, there may be appeals. It is always uncertain whether or
when these appeals will be resolved, and resolving them can take time, perhaps
more than a year. Even if no appeals are filed, it will take several months for the
Claims Administrator to process all of the Proofs of Claim and Release forms and
determine the ultimate distribution amounts.
12. What am I giving up to receive a payment?
Unless you timely exclude yourself from the Class by the __________, 2016
deadline, you are staying in the Class, and that means that you cannot sue, continue
to sue, or be part of any other lawsuit against Defendants about the same issues in
this case or about issues that could have been asserted in this case. It also means
that all of the Court’s orders will apply to you and legally bind you and you will
release your Released Claims in this case against Defendants and the Released
Persons.
“Released Claims” means any and all claims and causes of action of every
nature and description, whether known or unknown, whether arising under federal,
state, common or foreign law, that arise out of or are related in any way to (a) Lead
Plaintiffs’ or any Class Member’s investments in Medbox securities, including the
purchase, acquisition, sale, or holding of Medbox securities; (b) the subject matter
of the Class Action; or (c) the facts alleged or that could have been alleged in any
complaint filed in the Class Action. Released Claims do not include, and expressly
exclude: (i) claims to enforce the Settlement and/or the terms of this Settlement
Agreement; (ii) any governmental or regulatory agency’s claims in any criminal or
civil action against any Defendants; and (iii) claims in any Shareholder Derivative
Litigations.
“Unknown Claims” means any Released Claims which Lead Plaintiffs or any
Class Members do not know or suspect to exist in his, her or its favor at the time of
the release of the Released Persons which, if known by him, her or it, might have
Ex. 1 Pg. 77
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20. NOTICE OF PROPOSED CLASS ACTION
SETTLEMENT Case No. 2:15-CV-00426-BRO (JEMX)
affected his, her or its settlement with and release of the Released Persons, or might
have affected his, her or its decision not to object to or to seek exclusion from this
Settlement, and include, without limitation, any such claims, rights, benefits or
provisions released or waived pursuant to ¶1.40 of the Settlement Agreement.
“Released Persons” means each and all of Defendants and each and all of
their present or former parents, subsidiaries, affiliates (as defined in 17 C.F.R.
§210.1-02(b)), successors and assigns, and each and all of the present or former
officers, principals, directors, employees, employers, attorneys, accountants,
auditors, advisors, lenders, insurers, investment bankers, representatives, general
and limited partners and partnerships, subsidiaries, divisions, predecessors,
stockholders, trustees, fiduciaries, consultants, agents, heirs, executors,
administrators, successors, affiliates, and assigns of each of them.
EXCLUDING YOURSELF FROM THE CLASS ACTION SETTLEMENT
If you do not want a payment from the Class Action Settlement, but you want
to keep the right to sue or continue to sue Defendants on your own for the Released
Claims in the Class Action, then you must take steps to get out of the Class. This is
called excluding yourself, or is sometimes referred to as “opting out” of the Class.
13. How do I get out of the Class?
To exclude yourself from the Class, you must send a letter by first-class mail
stating that you want to be excluded from Crystal v. Medbox, Inc., et al., Case No.
2:15-CV-00426-BRO (JEMx). You must include your name, address, telephone
number, your signature, and the number of shares of Medbox common stock you
purchased or acquired between April 2, 2013, and December 29, 2014, inclusive,
the number of shares of common stock sold during this time period, if any, the
dates of such purchases and/or sales, and the price paid or received per share for
each purchase or sale. You must mail your exclusion request postmarked no later
than __________, 2016 to:
Medbox, Inc. Securities Litigation
c/o Strategic Claims Services
600 N. Jackson St., Suite 3
Media, PA 19063
You cannot exclude yourself on the phone or by e-mail. Any request for
exclusion must also be signed by the Person requesting exclusion, under penalty of
perjury, and accompanied, if said Person is acting in a representative capacity, by a
Ex. 1 Pg. 78
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21. NOTICE OF PROPOSED CLASS ACTION
SETTLEMENT Case No. 2:15-CV-00426-BRO (JEMX)
certification of the Person’s current authority to act on behalf of the Person
requesting exclusion from the Class. Requests for exclusion will not be valid if
they are not received within the time stated above unless the Court orders
otherwise. If you ask to be excluded, you are not eligible to receive any settlement
payment, and you cannot object to the Class Action Settlement. You will not be
legally bound by anything that happens in the Class Action lawsuit.
14. If I do not exclude myself, can I sue Defendants for the same thing
later?
No. Unless you exclude yourself from the Class, you give up any right to sue
Defendants or the Released Persons for the Released Claims in the Settlement. If
you have a pending lawsuit against any of Defendants, speak to your lawyer in that
case immediately. Remember, the exclusion deadline is __________, 2016.
15. If I exclude myself, can I receive money from the Settlement?
No. If you exclude yourself, do not send in a Proof of Claim and Release
form to ask for any money. Once you exclude yourself, you will receive no cash
payment or any other benefit provided for in the Settlement even if you also submit
a Proof of Claim and Release form. However, a Class Member may submit a
written revocation of a request for exclusion up until two (2) Business Days prior to
the date of the Final Settlement Approval Hearing and receive payments pursuant to
this Settlement and the Settlement Agreement provided the Class Member also
timely submits a valid Proof of Claim and Release form.
THE LAWYERS REPRESENTING YOU
16. Do I have a lawyer in this case?
The Court appointed the law firm Johnson & Weaver, LLP to represent you
and other Class Members. These lawyers are called Lead Counsel. You will not be
personally liable for the fees and expenses incurred by these lawyers. If you want
to be represented by your own lawyer, you may hire one at your own expense.
17. How will the lawyers be paid?
Lead Counsel will ask the Court for attorneys’ fees of up to 30% of the
Settlement Fund and for expenses up to $100,000, which were advanced in
connection with the Class Action. If awarded, the cost would be $0.07 per share.
This compensation, as may be approved by the Court, will be paid from the
Ex. 1 Pg. 79
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22. NOTICE OF PROPOSED CLASS ACTION
SETTLEMENT Case No. 2:15-CV-00426-BRO (JEMX)
Settlement Fund. Class Members are not personally liable for any such fees or
expenses. To date, Lead Counsel have not received any payment for their services
in conducting this Class Action on behalf of Lead Plaintiffs and the Class, nor have
counsel been paid for their expenses. The fee requested will compensate Lead
Counsel for their work in achieving the Settlement Fund and is within the range of
fees awarded to class counsel under similar circumstances in other cases of this
type. The Court may award less than this amount.
OBJECTING TO THE SETTLEMENT
You can tell the Court that you do not agree with the Settlement, the Plan of
Distribution, or Lead Counsel’s request for an award of attorneys’ fees and
expenses.
18. How do I tell the Court that I do not like the Settlement?
If you are a Class Member (and you have not excluded yourself), you can
object to the Settlement if you do not like any part of it, including the Plan of
Distribution and the request for attorneys’ fees and expenses. You can state the
reasons why you think the Court should not approve the Settlement, the request for
attorneys’ fees and expenses, or the Plan of Distribution, and the Court will
consider your views. To object, you must send a signed letter saying that you
object to the Settlement in Crystal v. Medbox, Inc., et al., Case No. 2:15-CV-
00426-BRO (JEMx). Be sure to include your full name, address, telephone
number, your signature (the objection must be signed by the objector even if
represented by counsel), a list of all of your transactions involving Medbox
common stock during the Class Period (between April 2, 2013, and December 29,
2014, inclusive), identify any case, by name, court, and docket number, in which
you or your attorney, if any, has objected to a settlement in the last three years, and
the reasons you object to the Settlement, the request for attorneys’ fees and
expenses, or the Plan of Distribution. The motions in support of the Settlement and
the request for attorneys’ fees will be filed no later than, _____________, 2016, and
they will be available from Lead Counsel, the Claims Administrator or the Court.
(The Claims Administrator’s contact information is listed in Section 24, below.)
Any objection must be sent by first-class mail or hand delivered such that it is
received by each of the following no later than _______________, 2016:
Ex. 1 Pg. 80
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23. NOTICE OF PROPOSED CLASS ACTION
SETTLEMENT Case No. 2:15-CV-00426-BRO (JEMX)
Court:
Clerk of the Court
United States District Court
Central District of California
Western Division
312 North Spring Street, Room G-8
Los Angeles, CA 30012-4701
Lead Counsel:
Frank J. Johnson
JOHNSON & WEAVER, LLP
600 West Broadway, Suite 1540
San Diego, CA 92101
Defendants’ Counsel Designee:
Phillip R. Kaplan
MANATT, PHELPS & PHILLIPS, LLP
Park Tower
695 Town Center Drive, 14th Floor
Costa Mesa, CA 92626
If you object to the Settlement, the Plan of Distribution, and/or Lead
Counsel’s request for an award of attorneys’ fees and expenses, you are submitting
to the jurisdiction of the Court with respect to the subject matter of the Settlement.
Any Class Member who does not make his, her or its objection in the manner
provided for herein shall be deemed to have waived such objection and shall
forever be foreclosed from making any objection to the fairness or adequacy of the
Settlement as reflected in the Settlement Agreement, to the Plan of Distribution,
and/or to the application by Lead Counsel for an award of attorneys’ fees and
expenses.
19. What is the difference between objecting and excluding myself
from the Settlement?
Objecting is telling the Court that you do not like something about the
proposed Settlement. You can object only if you stay in the Class. Excluding
yourself is telling the Court that you do not want to be part of the Class. If you
Ex. 1 Pg. 81
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24. NOTICE OF PROPOSED CLASS ACTION
SETTLEMENT Case No. 2:15-CV-00426-BRO (JEMX)
exclude yourself, you have no basis to object because the case no longer applies to
you.
THE COURT’S SETTLEMENT HEARING
The Court will hold a hearing to decide whether to approve the Settlement.
You may attend and you may ask to speak, but you do not have to.
20. When and where will the Court decide whether to approve the
Settlement?
The Court will hold a Final Settlement Approval Hearing on _________,
2016 at 1:30 p.m., at the United States District Court, Central District of California,
Western Division, 312 North Spring Street, Courtroom 14, Los Angeles, CA
90012-4701. At this hearing the Court will consider whether the Settlement is fair,
reasonable, and adequate. If there are objections, the Court will consider them.
The Court will also consider how much money from the Settlement Fund will be
allocated to pay Lead Counsel for their work on the Class Action and to reimburse
their expenses, and whether the Plan of Distribution is fair, reasonable and
adequate. The Court may decide these issues at the hearing or take them under
consideration for a later decision.
21. Do I have to come to the Hearing?
No. Lead Counsel will answer questions the Court may have. But, you are
welcome to come at your own expense. If you send an objection, you do not have
to come to Court to talk about it. As long as you mailed your written objection on
time, the Court will consider it. You may also pay your own lawyer to attend, but it
is not necessary. Persons who intend to object and desire to present evidence at the
Final Settlement Approval Hearing must include in their written objections the
identity of any witnesses they may call to testify and exhibits they intend to
introduce into evidence at the Final Settlement Approval Hearing.
22. May I speak at the hearing?
You may ask the Court for permission to speak at the Final Settlement
Approval Hearing. To do so, you must send a letter saying that it is your intention
to appear in Crystal v. Medbox, Inc., et al., Case No. 2:15-CV-00426-BRO (JEMx).
Be sure to include your name, address, telephone number, your signature, and a list
of all of your transactions involving Medbox common stock during the Class Period
(between April 2, 2013, and December 29, 2014, inclusive). Your notice of
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25. NOTICE OF PROPOSED CLASS ACTION
SETTLEMENT Case No. 2:15-CV-00426-BRO (JEMX)
intention to appear must be received no later than _____________, 2016, by the
Clerk of the Court, Lead Counsel and Defendants’ Counsel Designee, at the three
addresses listed in Question 18.
IF YOU DO NOTHING
23. What happens if I do nothing at all?
If you do nothing, you will get no money from this Settlement. But, unless
you exclude yourself, you will be bound by the Judgment and will not be able to
start a lawsuit, continue with a lawsuit, or be part of any other lawsuit against
Defendants about the same issues in this case.
GETTING MORE INFORMATION
24. Are there more details about the Settlement?
This Notice summarizes the proposed Settlement. More details are in the
Settlement Agreement dated as of December 17, 2015. You can obtain a copy of
the Settlement Agreement or more information about the Settlement by contacting
Lead Counsel:
Frank J. Johnson
JOHNSON & WEAVER, LLP
600 West Broadway
Suite 1540
San Diego, CA 92101
Telephone: (619) 230-0063
Facsimile: (619) 255-1856
Email: frankj@johnsonandweaver.com
or the Claims Administrator:
Medbox, Inc. Securities Litigation
c/o Strategic Claims Services
600 N. Jackson St., Suite 3
Media, PA 19063
Telephone: (866) 274-4004
Facsimile: (610) 565-7985
Email: info@strategicclaims.net
or by visiting www.strategicclaims.net.
Ex. 1 Pg. 83
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26. NOTICE OF PROPOSED CLASS ACTION
SETTLEMENT Case No. 2:15-CV-00426-BRO (JEMX)
You can also obtain a copy from the Clerk’s office during regular business hours:
Clerk of the Court
United States District Court
Central District of California
Western Division
312 North Spring Street, Room G-8
Los Angeles, CA 30012-4701
DO NOT TELEPHONE THE COURT REGARDING THIS NOTICE
SPECIAL NOTICE TO NOMINEES The Court has ordered that if you held any Medbox common stock purchased
or acquired between April 2, 2013, and December 29, 2014, inclusive, as nominee
for a beneficial owner, then, within twenty (20) days after you receive this Notice,
you must either: (1) send a copy of this Notice by first-class mail to all such
Persons; or (2) provide a list of the names and addresses of such Persons to the
Claims Administrator: Medbox, Inc. Securities Litigation
c/o Strategic Claims Services
600 N. Jackson St., Suite 3
Media, PA 19063
Telephone: (866) 274-4004
Facsimile: (610) 565-7985
Email: info@strategicclaims.net If you choose to mail the Notice and Proof of Claim and Release yourself,
you may obtain from the Claims Administrator (without cost to you) as many
additional copies of these documents as you will need to complete the mailing. Regardless of whether you choose to complete the mailing yourself or elect
to have the mailing performed for you, you may obtain reimbursement for
administrative costs actually incurred in connection with forwarding the Mailed
Notice and which would not have been incurred but for the obligation to forward
the Mailed Notice, upon submission of appropriate documentation to the Claims
Administrator.
DATED: ___________
BY ORDER OF THE UNITED STATES DISTRICT COURT FOR THE CENTRAL DISTRICT OF CALIFORNIA, WESTERN DIVISION
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EXHIBIT A-2
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PROOF OF CLAIM AND RELEASE Case No. 2:15-CV-00426-BRO (JEMX)
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
JOSH CRYSTAL, Individually And On Behalf Of All Others Similarly Situated, Plaintiff, v. MEDBOX, INC., PEJMAN VINCENT MEHDIZADEH, BRUCE BEDRICK, THOMAS IWANSKI, GUY MARSALA, and DOUGLAS MITCHELL, Defendants.
Case No.: 2:15-CV-00426-BRO (JEMx) CLASS ACTION Exhibit A-2 Proof of Claim and Release
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1. PROOF OF CLAIM AND RELEASE Case No. 2:15-CV-00426-BRO (JEMX)
Deadline for Submission: ________________, 2016
IF YOU PURCHASED THE COMMON STOCK OF MEDBOX, INC.
(“MEDBOX”) DURING THE PERIOD FROM APRIL 2, 2013 THROUGH
DECEMBER 29, 2014, INCLUSIVE (“CLASS PERIOD”), YOU ARE A “CLASS
MEMBER” AND YOU MAY BE ENTITLED TO SHARE IN THE
SETTLEMENT PROCEEDS.
IF YOU ARE A CLASS MEMBER, YOU MUST COMPLETE AND SUBMIT
THIS FORM IN ORDER TO BE ELIGIBLE FOR ANY SETTLEMENT
BENEFITS.
YOU MUST COMPLETE AND SIGN THIS PROOF OF CLAIM AND
RELEASE AND MAIL IT BY FIRST-CLASS MAIL, POSTMARKED NO
LATER THAN ____________, 2016, TO STRATEGIC CLAIMS SERVICES,
THE CLAIMS ADMINISTRATOR, AT THE FOLLOWING ADDRESS:
Medbox, Inc. Securities Litigation
c/o Strategic Claims Services
P.O. Box 230
600 N. Jackson St., Ste. 3
Media, PA 19063
Tel.: 866-274-4004
Fax: 610-565-7985
YOUR FAILURE TO SUBMIT YOUR CLAIM BY _____________, 2016, WILL
SUBJECT YOUR CLAIM TO REJECTION AND PRECLUDE YOU FROM
RECEIVING ANY MONEY IN CONNECTION WITH THE SETTLEMENT OF
THE CLASS ACTION. DO NOT MAIL OR DELIVER YOUR CLAIM TO THE
COURT OR TO ANY OF THE PARTIES OR THEIR COUNSEL AS ANY SUCH
CLAIM WILL BE DEEMED NOT TO HAVE BEEN SUBMITTED. SUBMIT
YOUR CLAIM ONLY TO THE CLAIMS ADMINISTRATOR.
CLAIMANT’S STATEMENT
1. I (we) purchased Medbox common stock and was (were) damaged thereby. (Do
not submit this Proof of Claim and Release if you did not purchase Medbox
common stock during the designated Class Period).
2. By submitting this Proof of Claim and Release, I (we) state that I (we) believe in
good faith that I am (we are) a Class Member as defined above and in the Notice
Ex. 1 Pg. 87
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2. PROOF OF CLAIM AND RELEASE Case No. 2:15-CV-00426-BRO (JEMX)
of Proposed Class Action Settlement (the “Mailed Notice”), or am (are) acting
for such person(s); that I am (we are) not a Defendant in the Class Action or
anyone excluded from the Class; that I (we) have read and understand the
Mailed Notice; that I (we) believe that I am (we are) entitled to receive a share
of the Net Settlement Fund, as defined in the Mailed Notice; that I (we) elect to
participate in the proposed Settlement described in the Mailed Notice; and that I
(we) have not filed a request for exclusion. (If you are acting in a representative
capacity on behalf of a Class Member [e.g., as an executor, administrator,
trustee, or other representative], you must submit evidence of your current
authority to act on behalf of that Class Member. Such evidence would include,
for example, letters testamentary, letters of administration, or a copy of the trust
documents.)
3. I (we) consent to the jurisdiction of the Court with respect to all questions
concerning the validity of this Proof of Claim and Release. I (we) understand
and agree that my (our) claim may be subject to investigation and discovery
under the Federal Rules of Civil Procedure, provided that such investigation and
discovery shall be limited to my (our) status as a Class Member(s) and the
validity and amount of my (our) claim. No discovery shall be allowed on the
merits of the Class Action or Settlement in connection with processing of the
Proof of Claim and Release.
4. I (we) have set forth where requested below all relevant information with respect
to each purchase of Medbox common stock during the Class Period, and each
sale, if any, of such common stock. I (we) agree to furnish additional
information to the Claims Administrator to support this claim if requested to do
so.
5. I (we) have enclosed photocopies of the stockbroker’s confirmation slips,
stockbroker’s statements, or other documents evidencing each purchase, sale or
retention of Medbox common stock listed below in support of my (our) claim.
(IF ANY SUCH DOCUMENTS ARE NOT IN YOUR POSSESSION, PLEASE
OBTAIN A COPY OR EQUIVALENT DOCUMENTS FROM YOUR
BROKER BECAUSE THESE DOCUMENTS ARE NECESSARY TO PROVE
AND PROCESS YOUR CLAIM.)
6. I (we) understand that the information contained in this Proof of Claim and
Release is subject to such verification as the Claims Administrator may request
or as the Court may direct, and I (we) agree to cooperate in any such
verification. (The information requested herein is designed to provide the
minimum amount of information necessary to process most simple claims. The
Claims Administrator may request additional information as required to
efficiently and reliably calculate your recognized claim. In some cases, the
Claims Administrator may condition acceptance of the claim based upon the
Ex. 1 Pg. 88
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3. PROOF OF CLAIM AND RELEASE Case No. 2:15-CV-00426-BRO (JEMX)
production of additional information, including, where applicable, information
concerning transactions in any derivative securities such as options.)
7. Upon the occurrence of the Court’s approval of the Settlement, as detailed in the
Mailed Notice, I (we) agree and acknowledge that my (our) signature(s) hereto
shall effect and constitute a full and complete release, remise and discharge by
me (us) and my (our) current, past and future trusts, estates, beneficiaries, heirs,
joint tenants, tenants in common, executors, administrators, trustees,
predecessors, successors, partners, spouses, parents, subsidiaries, affiliates,
attorneys, consultants, experts, brokers, creditors, insurers, agents,
representatives, and assigns, and any person that any of them represents, of all of
the Released Claims (as defined in the Stipulation and Agreement of Settlement
dated December 17, 2015 (the “Settlement Agreement”)), each of the Released
Persons (as defined in the Settlement Agreement), and all claims arising out of,
relating to, or in connection with the Settlement, the Class Action, and/or the
resolution of the Class Action against each of the Released Persons.
8. NOTICE REGARDING ELECTRONIC FILES: Certain claimants with large
numbers of transactions may request, or may be requested, to submit
information regarding their transactions in electronic files. All claimants MUST
submit a manually signed paper Proof of Claim and Release listing all their
transactions whether or not they also submit electronic copies. If you wish to
file your claim electronically, you must contact the Claims Administrator at 1-
866-274-4004 or visit its website at www.strategicclaims.net to obtain the
required file layout. No electronic files will be considered to have been properly
submitted unless the Claims Administrator issues to the claimant a written
acknowledgment of receipt and acceptance of electronically submitted data.
Ex. 1 Pg. 89
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4. PROOF OF CLAIM AND RELEASE Case No. 2:15-CV-00426-BRO (JEMX)
I. CLAIMANT INFORMATION
Name:
Address:
City: State: Zip Code:
Foreign Provence: Foreign Country:
Day Phone: Evening Phone:
Email:
Social Security Number (for
individuals):
OR Taxpayer Identification Number (for
estates, trusts, corporations, etc.):
II. SCHEDULE OF TRANSACTIONS IN MEDBOX COMMON STOCK
Initial Holdings:
A. State the total number of shares of Medbox common stock, if any, owned at
the start of trading on April 2, 2013, long or short (must be documented):
Purchases:
B. Separately list each and every purchase of Medbox common stock during the
period from April 2, 2013 through March 28, 2015, inclusive, and provide
the following information (must be documented):
Trade Date
(List
Chronologically)
(Month/Day/Year)
Number of
Shares
Purchased
Price per
Share
Total Cost
(Excluding
Commissions,
Taxes, and Fees)
Ex. 1 Pg. 90
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5. PROOF OF CLAIM AND RELEASE Case No. 2:15-CV-00426-BRO (JEMX)
Sales:
C. Separately list each and every sale of Medbox common stock during the
period from April 2, 2013 through March 28, 2015, inclusive and provide the
following information (must be documented):
Trade Date
(List
Chronologically)
(Month/Day/Year)
Number of
Shares Sold
Price per
Share
Amount Received
(Excluding
Commissions,
Taxes, and Fees)
Ending Holdings:
D. State the total number of shares of Medbox
common stock owned at the close of trading
on March 28, 2015, long or short (must be
documented).
If additional space is needed, attach separate, numbered sheets, giving all
required information, substantially in the same format, and print your name
and Social Security or Taxpayer Identification Number at the top of each
sheet.
III. SUBSTITUTE FORM W-9
Request for Taxpayer Identification Number:
Enter Taxpayer Identification Number below for the Beneficial Owner(s). For most
individuals, this is your Social Security Number. The Internal Revenue Service
(“I.R.S.”) requires such Taxpayer Identification Number. If you fail to provide this
information, your claim may be rejected.
Social Security Number (for
individuals) OR
Taxpayer Identification Number
(for estates, trusts, corporations, etc.)
Ex. 1 Pg. 91
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6. PROOF OF CLAIM AND RELEASE Case No. 2:15-CV-00426-BRO (JEMX)
IV. CERTIFICATION
I (we) certify that I am (we are) NOT subject to backup withholding under the
provisions of Section 3406(a)(1)(c) of the Internal Revenue Code because: (a) I am
(we are) exempt from backup withholding, or (b) I (we) have not been notified by
the I.R.S. that I am (we are) subject to backup withholding as a result of a failure to
report all interest or dividends, or (c) the I.R.S. has notified me (us) that I am (we
are) no longer subject to backup withholding.
NOTE: If you have been notified by the I.R.S. that you are subject to backup
withholding, please strike out the language that you are not subject to backup
withholding in the certification above.
UNDER THE PENALTIES OF PERJURY UNDER THE LAWS OF THE
UNITED STATES OF AMERICA, I (WE) CERTIFY THAT ALL OF THE
INFORMATION I (WE) PROVIDED ON THIS PROOF OF CLAIM AND
RELEASE FORM IS TRUE, CORRECT, AND COMPLETE.
Signature of claimant (If this claim is being made
on behalf of joint claimants, then each must sign):
________________________________________
(Signature)
________________________________________
(Signature)
________________________________________
(Capacity of person(s) signing, e.g., beneficial
purchaser(s), executor, administrator, trustee, etc.)
Check here if proof of authority to file is
enclosed.
(See Item 2 under Claimant’s Statement)
Date: ____________________
Ex. 1 Pg. 92
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7. PROOF OF CLAIM AND RELEASE Case No. 2:15-CV-00426-BRO (JEMX)
THIS PROOF OF CLAIM AND RELEASE MUST BE POSTMARKED NO
LATER THAN ______________, 2016 AND MUST BE MAILED TO:
Medbox, Inc. Securities Litigation
c/o Strategic Claims Services
P.O. Box 230
600 N. Jackson St., Ste. 3
Media, PA 19063
Tel.: 866-274-4004
Fax: 610-565-7985
A Proof of Claim and Release received by the Claims Administrator shall be
deemed to have been submitted when posted, if mailed by ____________, 2016,
and if a postmark is indicated on the envelope and it is mailed first-class and
addressed in accordance with the above instructions. In all other cases, a Proof of
Claim and Release shall be deemed to have been submitted when actually received
by the Claims Administrator.
You should be aware that it will take a significant amount of time to process fully
all of the Proofs of Claim and Releases and to administer the Settlement. This work
will be completed as promptly as time permits, given the need to investigate and
tabulate each Proof of Claim and Release. Please notify the Claims Administrator
of any change of address.
REMINDER CHECKLIST
o Please be sure to sign this Proof of Claim and Release on page __. If this
Proof of Claim and Release is submitted on behalf of joint claimants, then
both claimants must sign.
o Please remember to attach supporting documents. Do NOT send any stock
certificates. Keep copies of everything you submit.
o Do NOT use highlighter on the Proof of Claim and Release or any supporting
documents.
o If you move after submitting this Proof of Claim and Release, please notify
the Claims Administrator of the change in your address.
Ex. 1 Pg. 93
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EXHIBIT A-3
Ex. 1 Pg. 94
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1. SUMMARY NOTICE Case No. 2:15-CV-00426-BRO (JEMX)
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
JOSH CRYSTAL, Individually And On Behalf Of All Others Similarly Situated, Plaintiff, v. MEDBOX, INC., PEJMAN VINCENT MEHDIZADEH, BRUCE BEDRICK, THOMAS IWANSKI, GUY MARSALA, and DOUGLAS MITCHELL, Defendants.
Case No.: 2:15-CV-00426-BRO (JEMx) CLASS ACTION Exhibit A-3 Summary Notice of Proposed Class Action Settlement
SUMMARY NOTICE OF PROPOSED CLASS ACTION SETTLEMENT
TO: ALL PERSONS WHO PURCHASED OR OTHERWISE ACQUIRED
SHARES OF COMMON STOCK OF MEDBOX, INC. BETWEEN APRIL 2,
2013 AND DECEMBER 29, 2014, INCLUSIVE, AND INCURRED DAMAGES
(THE “CLASS”).
YOU ARE HEREBY NOTIFIED, pursuant to an Order of the United States
District Court for the Central District of California, Western Division, that a
hearing will be held on _______________, 2016 at 1:30 p.m. in Courtroom 14
before the Honorable Beverly Reid O’Connell, United States District Judge for the
Central District of California, Western Division, 312 North Spring Street, Los
Ex. 1 Pg. 95
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2. SUMMARY NOTICE
Case No. 2:15-CV-00426-BRO (JEMX)
Angeles, CA 90012-4701 (the “Final Settlement Approval Hearing”) for the
purpose of determining: (1) whether the proposed Settlement consisting of the sum
of One Million Eight Hundred Fifty Thousand United States Dollars
(USD $1,850,000.00) in cash (the “Cash Amount”) and Two Million Three
Hundred Thousand (2,300,000) shares of Medbox, Inc. (“Medbox”) common stock
(the “Settlement Shares,” collectively with the Cash Amount, the “Settlement
Fund”) should be approved by the Court as fair, reasonable, adequate, and in the
best interests of the Class; (2) whether the proposed plan to distribute the
Settlement proceeds is fair and reasonable and should be approved by the Court;
(3) whether Lead Counsel’s application for an award of attorneys’ fees (of not more
than 30% of the Settlement Fund) and reimbursement of expenses (of not more than
$100,000) should be approved by the Court; and (4) whether the Court should
approve the release of Released Claims against any and all Released Persons and
dismiss the Class Action with prejudice.
IF YOU ARE A MEMBER OF THE CLASS DESCRIBED ABOVE,
YOUR RIGHTS WILL BE AFFECTED AND YOU MAY BE ENTITLED TO
SHARE IN THE SETTLEMENT FUND. If you have not yet received the full
printed Notice of Proposed Class Action Settlement (the “Mailed Notice”) and a
copy of the Proof of Claim and Release form, you may obtain copies of these
documents by downloading them from www.strategicclaims.net, or by contacting:
Medbox, Inc. Securities Litigation
c/o Strategic Claims Services
600 N. Jackson St., Suite 3
Media, PA 19063
Telephone: (866) 274-4004
Facsimile: (610) 565-7985
Email: info@strategicclaims.net
If you are a member of the Class, to share in the distribution of the Net
Settlement Fund, you must submit a Proof of Claim and Release no later than
_______________, 2016, establishing that you are entitled to recovery. Unless you
Ex. 1 Pg. 96
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3. SUMMARY NOTICE
Case No. 2:15-CV-00426-BRO (JEMX)
submit a written exclusion request, you will be bound by any judgment rendered in
the Class Action whether or not you make a claim. If you desire to be excluded
from the Class, you must submit a request for exclusion postmarked no later
than_______________, 2016, in the manner and form explained in the detailed
Mailed Notice to the Claims Administrator.
Any objection to the Settlement, Plan of Distribution, or Lead Counsel’s
request for an award of attorneys’ fees and reimbursement of expenses must be
made in writing setting forth the objection in the manner and form explained in the
detailed Mailed Notice, and must be provided to the Court and the Settling Parties
such that it is received by each of the following no later than _______________,
2016, at the following addresses:
Clerk of the Court
United States District Court
Central District of California
Western Division
312 North Spring Street, Room G-8
Los Angeles, CA 30012-4701 Frank J. Johnson
JOHNSON & WEAVER, LLP
600 West Broadway, Suite 1540
San Diego, CA 92101
Telephone: (619) 230-0063
Facsimile: (619) 255-1856 Lead Counsel for Plaintiffs and the Class Phillip R. Kaplan
MANATT, PHELPS & PHILLIPS, LLP
Park Tower
695 Town Center Drive, 14th Floor
Costa Mesa, CA 92626
Telephone: (714) 371-2500
Facsimile: (714) 371-2550
Counsel for Medbox, Inc. and Defendants’ Counsel Designee
Ex. 1 Pg. 97
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4. SUMMARY NOTICE
Case No. 2:15-CV-00426-BRO (JEMX)
If you have any questions about the Settlement, you may call or write to Lead
Counsel:
Frank J. Johnson JOHNSON & WEAVER, LLP 600 West Broadway Suite 1540 San Diego, CA 92101 Telephone: (619) 230-0063
Facsimile: (619) 255-1856
Email: frankj@johnsonandweaver.com
PLEASE DO NOT CONTACT THE COURT OR THE CLERK’S OFFICE
REGARDING THIS NOTICE.
DATED: __________ BY ORDER OF THE COURT
UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA WESTERN DIVISION
Ex. 1 Pg. 98
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EXHIBIT B
Ex. 1 Pg. 99
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1.
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
JOSH CRYSTAL, Individually And On Behalf Of All Others Similarly Situated, Plaintiff, v. MEDBOX, INC., PEJMAN VINCENT MEHDIZADEH, BRUCE BEDRICK, THOMAS IWANSKI, GUY MARSALA, and DOUGLAS MITCHELL, Defendants.
Case No.: 2:15-CV-00426-BRO (JEMx) CLASS ACTION Exhibit B [PROPOSED] FINAL JUDGMENT AND ORDER OF DISMISSAL WITH PREJUDICE
[PROPOSED] FINAL JUDGMENT AND ORDER OF DISMISSAL WITH PREJUDICE
This matter came before the Court for a hearing pursuant to the Preliminary
Approval Order (“Order”) dated ____________, 2016, on the application of the
Settling Parties for approval of the Settlement set forth in the Stipulation and
Agreement of Settlement dated as of December 17, 2015 (the “Settlement
Agreement”). Due and adequate notice having been given to the Class as required
in said Order, and the Court having considered all papers filed and proceedings had
herein and otherwise being fully informed in the premises and good cause
Ex. 1 Pg. 100
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2.
appearing therefore, IT IS HEREBY ORDERED, ADJUDGED, AND DECREED
that:
1. This Judgment incorporates by reference the definitions in the
Settlement Agreement, and all terms used herein shall have the same meanings as
set forth in the Settlement Agreement, unless otherwise set forth herein.
2. This Court has jurisdiction over the subject matter of the Class Action
and over all parties to the Class Action, including all members of the Class.
3. Pursuant to Rule 23 of the Federal Rules of Civil Procedure, and solely
for purposes of the Settlement, the Court hereby finally certifies a Class defined as:
“all Persons who purchased or otherwise acquired Medbox, Inc. common stock
between April 2, 2013 and December 29, 2014, inclusive, and who were damaged
thereby. Excluded from the Class are: (1) Defendants and their families, the
officers and directors of the Company, at all relevant times, members of their
families and their legal representatives, heirs, successors, or assigns, and any entity
in which Defendants have or had a controlling interest; (2) any persons who have
separately filed actions against one or more of Defendants, based in whole or in part
on any claim arising out of or relating to any of the alleged acts, omissions,
misrepresentations, facts, events, matters, transactions, or occurrences referred to in
the Class Action or otherwise alleged, asserted, or contended in the Class Action;
and (3) those persons or entities who submitted valid and timely requests for
exclusion from the Class in accordance with this Order, a list of whom is attached
hereto as Exhibit A.” With respect to the Class, this Court finds, solely for the
purposes of the Settlement, that the prerequisites for a class action under Rules
23(a) and (b)(3) of the Federal Rules of Civil Procedure have been satisfied.
4. Pursuant to Rule 23 of the Federal Rules of Civil Procedure, Lead
Plaintiffs are certified as the Class representatives and Lead Counsel previously
selected by Lead Plaintiffs and appointed by the Court is hereby appointed as Lead
Counsel for the Class.
Ex. 1 Pg. 101
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3.
5. Pursuant to Rule 23 of the Federal Rules of Civil Procedure, the Court
hereby approves the Settlement set forth in the Settlement Agreement as fair,
reasonable, and adequate. The Court further finds that the Settlement set forth in
the Settlement Agreement is the result of good-faith, informed, arm’s-length
negotiations between competent, experienced counsel representing the interests of
the respective Settling Parties. The Court further finds that the record is sufficiently
developed and complete to have enabled the Settling Parties to have adequately
evaluated and considered their positions. Accordingly, the Settlement embodied in
the Settlement Agreement is hereby finally approved in all respects.
6. The Court hereby authorizes and directs implementation and
performance of all the terms and provisions of the Settlement Agreement, as well as
the terms and provisions hereof. The Court hereby dismisses the Class Action and
all Released Claims of the Class with prejudice and without costs as to any party,
except as and to the extent provided in the Settlement Agreement and herein.
7. Upon the Effective Date, Lead Plaintiffs, and each and every Class
Member, for themselves, and anyone claiming (now or in the future) through or on
behalf of any of them, shall be deemed to have, and by operation of this Judgment
shall have, fully, finally, and forever waived, released, relinquished, discharged,
and dismissed each and every one of the Released Claims (including Unknown
Claims) against each and every one of the Released Persons, whether or not such
Class Member executes and delivers the Proof of Claim and Release form, and
whether or not such Class Member shares in the Settlement Fund. The Settling
Parties acknowledge, and the Class Members shall be deemed by operation of law
and of this Judgment to have acknowledged, that the foregoing waiver of Unknown
Claims and of the provisions, rights and benefits of § 1542 of the California Civil
Code was separately bargained for and is a material element of the Settlement of
which the release in this paragraph is a part.
Ex. 1 Pg. 102
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4.
8. All Class Members are hereby forever barred and enjoined from
prosecuting any of the Released Claims against any of the Released Persons.
9. Upon the Effective Date, each of the Released Persons shall be
deemed to have, and by operation of this Judgment shall have, fully, finally, and
forever released, relinquished, and discharged Lead Plaintiffs, each and all of the
Class Members, Lead Counsel, and Plaintiffs’ 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 Class Action or the Released
Claims.
10. The distribution of the Mailed Notice and the Summary Notice, as
provided for in the Order, given to the Class was the best notice practicable under
the circumstances, including the Mailed Notice to all Class Members who could be
identified through reasonable effort. Said notice provided the best notice
practicable under the circumstances of those proceedings and of the matters set
forth therein, including the proposed Settlement set forth in the Settlement
Agreement, to all Persons entitled to such notice, and said notice fully satisfied the
requirements of Rule 23 of the Federal Rules of Civil Procedure, Section 21D(a)(7)
of the Securities Exchange Act of 1934, the requirements of due process, and any
other applicable law. Thus, it is hereby determined that all Class Members are
bound by this Judgment.
11. Pursuant to Section 3(a)(10) of the Securities Act of 1933, any shares
issued to pay the Settlement Shares shall be fully paid, non-assessable and, upon
final approval of the Settlement, exempt from registration under Section 3(a)(10),
or other applicable provisions, of the Securities Act of 1933, and will be identical in
all respects to Medbox, Inc.’s currently outstanding shares of common stock.
12. The Court hereby finds that the proposed Plan of Distribution is a fair
and reasonable method to allocate the Net Settlement Fund among Authorized
Claimants.
Ex. 1 Pg. 103
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13. Neither the Settlement Agreement nor the Settlement contained herein,
nor any act performed or document executed pursuant to or in furtherance of the
Settlement Agreement or the Settlement is or may be deemed to be or may be used
as an admission of, or evidence of: (a) the validity of any Released Claim, or of any
liability, negligence, gross negligence, recklessness, deliberate recklessness, fault or
other wrongdoing of any kind; or (b) any liability, fault, misrepresentation or
omission with respect to any statement or written document; or (c) the validity or
invalidity of any claims asserted by Lead Plaintiffs or the amount of any
recoverable damages in connection with those claims; or (d) any infirmity in the
defenses that have been or could have been asserted in this Class Action. The
provisions set forth in this ¶13 (a)-(d) above each apply with respect to any civil,
criminal, or administrative proceeding in any court, administrative agency or other
tribunal. The Released Persons may file the Settlement Agreement and/or the
Judgment 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.
14. Without affecting the finality of this Judgment in any way, this Court
hereby retains continuing jurisdiction over: (a) implementation of this Settlement
and any award or distribution of the Settlement Fund, including interest earned
thereon; (b) disposition of the Settlement Fund; (c) hearing and determining
applications for attorneys’ fees, interest, and expenses in the Class Action; and
(d) all parties hereto for the purpose of construing, enforcing, and administering the
Settlement Agreement.
15. Pursuant to Section 21D(c)(1) of the Private Securities Litigation
Reform Act of 1995, the Court finds that during the course of the Class Action, the
Settling Parties and their respective counsel at all times complied with each of the
requirements of Rule 11 of the Federal Rules of Civil Procedure, and that the Class
Ex. 1 Pg. 104
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Action was not brought for any improper purpose and is not unwarranted by
existing law or legally frivolous.
16. The Court hereby GRANTS Lead Counsel’s request for attorneys’ fees
in the Cash Amount of $_________ and _________ shares of Medbox, Inc.
common stock, as well as reimbursement of reasonable and necessary expenses
incurred in the prosecution of the Class Action in the amount of $_____________,
together with the interest earned thereon for the same time period and at the rate
earned by the Settlement Fund until paid. Said fees shall be allocated among
Plaintiffs’ Counsel by Lead Counsel in a manner which, in their good-faith
judgment, reflects each counsel’s contribution to the institution, prosecution, and
resolution of the Class Action. The Court finds that the amount of fees awarded is
fair and reasonable in light of the time and labor required, the novelty and difficulty
of the case, the skill required to prosecute the case, the experience and ability of the
attorneys, awards in similar cases, the contingent nature of the representation and
the result obtained for the Class.
17. Any order approving or modifying the Plan of Distribution or Lead
Counsel’s application or award of attorneys’ fees and expenses, shall not disturb or
affect the finality of this Judgment, the Settlement Agreement, the Settlement
contained therein, nor any act performed or document executed to or in furtherance
of the Settlement Agreement or the Settlement.
18. In the event that the Settlement does not become effective in
accordance with the terms of the Settlement Agreement, or the Effective Date does
not occur, or in the event that the Settlement Fund, or any portion thereof, is
returned to Defendants or their insurers, then this Judgment shall be rendered null
and void to the extent provided by and in accordance with the Settlement
Agreement and shall be vacated and, in such event, all orders entered and releases
delivered in connection herewith shall be null and void to the extent provided by
and in accordance with the Settlement Agreement and the Settling Parties shall be
Ex. 1 Pg. 105
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restored to their respective positions in the Class Action as of the Execution Date of
the Settlement Agreement.
19. Without further order of the Court, the Settling Parties may agree to
reasonable extensions of time to carry out any of the provisions of the Settlement
Agreement.
20. This Court finds, for purposes of the Federal Rules of Civil Procedure,
that there is no just reason for delay and expressly directs the Clerk of the Court to
enter this Judgment as set forth herein immediately. This Judgment is a final
judgment in the Class Action as to all claims asserted therein at any time and as to
all of the Class Member’s Released Claims against the Released Persons.
21. Judgment shall be, and hereby is, entered dismissing the Class Action
in its entirety with prejudice.
SO ORDERED this _________ day of ___, 2016.
___________________________________
HON. BEVERLY REID O’CONNELL
UNITED STATES DISTRICT JUDGE
Ex. 1 Pg. 106
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