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Joseph F. Rice (admitted pro hac vice) Richard D. Burbidge (0492)Ann K. Ritter (admitted pro hac vice) Jefferson W. Gross (8339) .Vincent I. Parrett (admitted pro hac vice) BURBIDGE, MITCHELL & GROSS28 Bridgeside Boulevard 215 South State Street, Suite 920Mount Pleasant, SC 29465 Salt Lake City, Utah 84111Telephone: 843-216-9000 Telephone: 801-355-6677Facsimile: 843-216-9450 Facsimile: 801-355-2341
& Liaison Counsel for Lead Plaintiff
William H. Narwold Jeffrey S. Nobel (admitted pro hac vice)
(admitted pro hac vice) Nancy A. Kulesa (admitted pro hac vice)
MOTLEY RICE LLC SCHATZ NOBEL WARD P.C.One Corporate Center 20 Church Street20 Church Street Hartford, CT 06103Hartford, CT 06103 Telephone: 860-493-6292Telephone: 860=882-1681 Facsimile: 860-493-6290Facsimile: 860-882-1682 Counsel for Lead PlaintiffLead Counsel for Lead Plaintiff
Attorneys for Lead Plaintiff and the Settlement Class
IN THE UNITED STATES COURT FOR THE DISTRICT OF UTAHCENTRAL DIVISION
IN RE NPS PHARMACEUTICALS, INC Master File No. 2:06cv00570 PGCSECURITTFS LITIGATION,
District Judge Dale A. Kimball
Magistrate Judge Paul M. Warner
This Document relates to: All Actions
LEAD PLAINTIFF'S MEMORANDUM OF LAW IN SUPPORT OF UNOPPOSEDMOTION FOR (I) PRELIMINARY APPROVAL OF STIPULATION OF
SETTLEMENT; (II) PRELIMINARY CLASS CERTIFICATION; (III) APPROVAL OFFORM AND MANNER OF NOTICE; AND (IV) SCHEDULING A FINAL APPROVAL
HEARING
Case 2:06-cv-00570-DAK-PMW Document 137 Filed 02/26/2009 Page 2 of 22
TABLE OF CONTENTS
TABLE OF AUTHORITIKS
STATEMENT OF ISSUES 1
INTRODUCTION 2
SUMMARY OF ARGUMENT 5
ARGUMENT 6i
I. THE COURT SHOULD PRELIMINARILY APPROVE THE SETTLEMENT 6
A. The Settlement Was Fairly And Honestly Negotiated 7
B. There Are Questions Of Law And Fact About The Outcome Of The Litigation 8
C. The Value Of An Immediate Recovery Outweighs The Possibility Of ReliefAfter Protracted And Expensive Litigation 9
D. Counsel Believe That The Settlement Is Fair And Reasonable 10
H. THE COURT SHOULD PRELIMINARILY GRANT CLASS CERTIFICATION 10
A. The Settlement Class Is Sufficiently Numerous 11
B. Common Questions Of Law And Fact Predominate 12
C. . The Claims Of Lead Plaintiff Are Typical 13
D. Lead Plaintiff And Lead Counsel Are Adequate Representatives 14
E. A Class Action Is Superior 14
III. THE COURT SHOULD APPROVE THE FORM AND MANNER OF NOTICE 15
CONCLUSION 16
I
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TABLE OF AUTHORITIES
CASES
Adamson v. Bowen,855 F.2d 668 (10th Cir. 1988) ' 14
Amchem Products, Inc. v. Windsor,521 U.S. 591 (1997) 11, 12, 15
Anderson v. Albuquerque,690 F.2d 796 (10th Cir. 1982) 11
Ashley v. Regional Transportation District,Civil No. 05-cv-01567-WYD-BNB, 2008 U.S. Dist. LEXIS 13069 (D. Colo. Feb. 11,2008) (unpublished) 7, 8, 10
City Partnership Co. v. Atlantic Acquisition Limited Partnership,100 F.3d 1041 (1st Cir. 1996) 8
City Partnership Co. v. Jones Intercable, Inc.,213 F.R.D. 576 (D. Colo. 2002) 11, 12, 13
Daigle v. Shell Oil Co.,133 F.R.D. 600 (D. Colo. 1990) 12
DeJulius v. New England Health Care Employees Pension Fund,429 F.3d 935 (10th Cir. 2005) 15,16
Desktop Direct, Inc. v. Digital Equipment Corp.,993 F.2d 755 (10th Cir. 1993), aff'd, 511 U.S. 863 (1994) 6
Edgington v. R. G. Dickinson & Co.,139 F.R.D. 183 (D. Kan. 1991) 13
Emig v. American Tobacco Co.,184 F.R.D. 379 (D. Kan. 1998) 12
Esplin v. Hirschi,402 F.2d 94 (10th Cir. 1968) 13,15
Gottlieb v. Wiles,11 F.3d 1004 (10th Cir. 1993) 9
Harding v. Tambrands Inc.,165 F.R.D. 623 (D. Kan. 1996) 12
Harlow v. Sprint Nextel Corp.,No. 08-2222-JWL, 2008 U.S. Dist. LEXIS 102965 (D. Kan. Dec. 10, 2008)(unpublished) 13
In re Integra Realty Resources, Inc.,354 F.3d 1246 (10th Cir. 2004) 7,16
In re Intelcom Group, Inc., Securities Litigation,169 F.R.D. 142 (D. Colo. 1996) 11, 13, 14, 15
ii
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In re Omnivision Technologies, Inc.,559 F. Supp. 2d 1036 (N.D. Cal. 2007) 6, 9, 1.0
In re Prudential Securities Inc. Ltd. Partnerships Litigation,163 F.R.D. 200 (S.D.N.Y. 1995) 6
In re Sprint Corp. ERISA Litigation,443 F. Supp. 2d 1249 (D. Kan. 2006) 8,10
In re Syncor ERISA Litigation,516 F.3d 1095 (9th Cir. 2008) 6
In re Urethane Antitrust Litigation,251 F.R.D. 629 (D. Kan. 2008) 13
Jones v. Nuclear Pharmacy, Inc.,741 F.2d 322 (10th Cir. 1984) 6,7
Lucas v. Kmart Corp.,234 F.R.D. 688 (D. Colo. 2006) 7, 8, 15
Marcus v. Department of Revenue,206 F.R.D. 509 (D. Kan. 2002) 11
Marcus v. Kansas,209 F. Supp. 2d 1179 (D. Kan. 2002) 8,10
Marsden v. Select Medical Corp.,Civil Action 04-4020, slip op. (E.D. Pa. Oct. 5, 2006) 7
McCauley v. Bowen,659 F. Supp. 292 (D. Kan. 1986) 11
Officers for Justice v. Civil Service Commission,688 F.2d 615 (9th Cir. 1982) 6,10
Oppenlander v. Standard Oil Co.,64 F.R.D. 597 (D. Colo. 1974) 10
Rutter & Wilbanks Corp. v. Shell Oil Co.,314 F.3d 1180 (10th Cir. 2002) 7,14
Serfaty v. International Automated Systems, Inc.,180 F.R.D. 418 (D. Utah 1998) 12
Wilkerson v. Martin Marietta Corp.,171 F.R.D. 273 (D. Colo. 1997) 6,10
Zapata v. IBP, Inc.,167 F.R.D. 147 (D. Kan. 1996) 12
STATUTES
15 U.S.C. § 78u-4(a)(7) 16
15 U.S.C. § 78u-t(a)(7) 17
i
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OTHER AUTHORITIES
News Release, Cornerstone Research,Securities Class Action Totals Down in 2007, Finds Cornerstone Research; Numberof Settlements with Estimated Damages above $1 Billion Lowest since 2003, ButMedian Settlement Reaches Highest Level Ever at $9 Million (Mar. 31, 2008) 9
RULES AND REGULATIONS
Fed. R. Civ. P. 23(a)(1) 11
Fed. R. Civ. P. 23(a)(3) 13
Fed. R. Civ. P. 23(a)(4) 14
Fed. R. Civ. P. 23(c)(2)(B) 16
iv
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STATEMENT OF ISSUES,
This Memorandum presents the following issues:
1. Whether this Court should preliminarily approve the Stipulation of Settlement asfair, adequate and reasonable?
2. Whether this Court should preliminarily certify the Settlement Class consisting ofall persons who purchased the common stock of NPS between August 7, 2001,and May 2, 2006?
3. Whether this Court should approve the proposed notice as adequate and schedulea final approval hearing?
i
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INTRODUCTION
After nearly two years of litigation, production of over two million documents and arms-
length mediation, Lead Plaintiff PHARMAw/HEALTH Management Company S.A.
("PHARMA" or "Lead Plaintiff') and the Defendants, NPS Pharmaceuticals, Inc. ("NPS" or
"the Company") and certain of its officers (collectively "Defendants"), have reached a
Stipulation of Settlement (the "Stipulation") in this securities fraud class action.' For purposes
of the settlement only, Defendants will stipulate to certification of the Settlement Class. Given
the financial benefits of the settlement and considering the delay and risk posed by further
litigation, Lead Plaintiff believes that the settlement terms contained in the Stipulation are fair,
reasonable, adequate and in the best interests of the proposed Settlement Class. As such, Lead
Plaintiff respectfully requests that this Court grant its motions for: (I) preliminary approval of
the Stipulation; (II) preliminary certification of the Settlement Class; (III) preliminary approval
of notice; and (IV) scheduling of a final approval hearing.
CONCISE STATEMENT OF FACTS
This is a securities fraud class action against NPS and its officers Hunter Jackson, N.
Anthony Coles, .Edward F. Nemeth, Thomas Marriot, James U. Jensen, Alan Rauch, Morgan R.
Brown, Robert K. Merrell, David L. Clark, Gerard J. Michel, G. Thomas Heath and Alan L.
Mueller (the "Individual Defendants"). The proposed class (the "Settlement Class") consists of
all persons who purchased NPS common stock between August 7, 2001, and May 2, 2006,
inclusive (the "Settlement Class Period"). Defendants, members of the immediate families of the
1 The Stipulation and its accompanying exhibits, attached hereto as Exhibit I, embody and implement thissettlement. The exhibits to the Stipulation include (1) the [Proposed] Preliminary Order attached as Exhibit A to theStipulation; (2) the Proof of Claim and Release, attached as Exhibit B to the Stipulation; (3) the [Proposed] Noticeof Pendency and Proposed Settlement of Class Action (the "Notice"), attached as Exhibit C to the Stipulation; (4)the [Proposed] Summary Notice of Pendency of Settlement Class Action, attached as Exhibit D to the Stipulation;and (5) the [Proposed] Order and Final Judgment, attached as Exhibit E to the Stipulation.
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Individual Defendants, current directors and officers of NPS and the legal representatives, heirs,
successors, or assigns of any such excluded Person are excluded from the Settlement Class.
NPS is a company that discovers, develops and commercializes pharmaceuticals. During
the Settlement Class Period, NPS's leading pharmaceutical candidate was PREOS, an injectible
parathyroid hormone (PTH) designed to treat osteoporosis. Plaintiff alleges that Defendants
publicly represented that PREOS was safe and effective, that FDA-approval was likely, and thati
once approved, the drug would reach a large market of users and be highly profitable. On March
10, 2006, FDA sent the Company an approvable letter for PREOS requesting more information
about the drug's association with hypercalcemia, a dangerous side effect and the efficacy of
PREOS's injection system. On May 2, 2006, the Company confirmed that FDA'had requested
additional studies that would delay PREOS's approval. After each announcement, NPS's stock
price dropped significantly. This litigation followed.
Brian Rolf filed the first complaint on July 12, 2006, and thereafter PHARMA and a
number of other investors filed additional complaints. The Court consolidated the cases on
September 15, 2006, and referred them to Magistrate Judge Warner. z On November 17, 2006,
the Court appointed PHARMA Lead Plaintiff and granted its motion to appoint Motley Rice
LLC ("Motley Rice") as Lead Counsel and Burbidge & Mitchell as Liaison Counsel. On
January 16, 2007, Lead Plaintiff filed its consolidated Amended Complaint (the "Complaint")
against Defendants.
The Complaint alleges that Defendants knew of PREOS's problems, including its
propensity to cause hypercalcemia, but nonetheless intentionally made misleading public
statements throughout the Settlement Class Period touting the drug's safety, efficacy, potential
2 This action was initially assigned to District Judge Paul G. Cassell. Judge Cassell subsequently retired, and onNovember 9, 2007, the case was reassigned to District Judge Dale A. Kimball.
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for FDA-approval and potential market size. According to the Complaint, these misstatements
induced Settlement Class Members to purchase NPS stock at artificially inflated prices. When
the truth about PREOS came to light, the Complaint alleges that NPS's stock price dropped
significantly, damaging the Settlement Class. The Complaint alleges that the foregoing conduct
violated § 10(b) of the Securities Exchange Act of 1934 (the "Exchange Act"), correspondingI
SEC Rule l Ob-5 (Count I), and § 20(a) of the Exchange Act (Count 11).
Defendants moved to dismiss the Complaint on March 19, 2007. The Court denied
Defendants' Motion, and Defendants filed their Answer on July 18, 2007. Shortly thereafter, the
parties commenced discovery. On November 1, 2007, Lead Plaintiff moved for classi
certification. Defendants opposed certification on January 30, 2008, and Lead Plaintiff
submitted its Reply in support of certification, including a 152 page expert report addressing
causation.
While discovery was ongoing and Lead Plaintiff's motion for class certification was
pending, the parties agreed to participate in mediation. Accordingly, on March 19, 2008, the
Court stayed all proceedings. The parties engaged JAMS to facilitate the mediation. Lead
Plaintiff sought, and Defendants produced, over two million documents.
On June 3, 2008, the parties participated in an all-day, in person mediation with the
Honorable Daniel Weinstein serving as mediator. Although they did not initially reach an
agreement, Mr. Weinstein encouraged the parties to continue their discussions. To this end, he
requested that the parties submit additional materials outlining the strengths of their respective
cases. Lead Plaintiff prepared and submitted a comprehensive chronology of its case that
included the most compelling documents from Defendants' production, confidential witness
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interviews and an expert affidavit explaining why Plaintiff believes Defendants knew the FDA
was not likely to approve PREOS quickly.
Through the end of August- 2008, Lead Plaintiff's counsel, Defense Counsel and
Defendants' insurers engaged in ongoing phone negotiations. Mr. Weinstein facilitated and
participated in most of these calls. Ultimately the parties agreed — subject to court approval — to
resolve this case for $15 million. On September 15, 2008, the parties signed a Memorandum of
Understanding, and have now agreed on the precise terms of the Stipulation and accompanying
Exhibits. Defendants have agreed to stipulate to certification of the Settlement Class for
purposes of settlement only.
SUMMARY OF ARGUMENT
The Court should preliminarily approve the settlement. The terms of the Stipulation are
fair, adequate and reasonable and satisfy each of the four "Jones factors" articulated by the Tenth
Circuit. First, counsel fairly and honestly negotiated the terms of the settlement at arms-length.
Second, federal securities laws are complex and the facts of this case are not clear, and thus,
there are questions about the outcome of the litigation. Third, $15 million is a good recovery
when weighed against the possibility of no recovery at all. Finally, the parties and their counsel
agree that the settlement is fair and reasonable.
The Court should also certify the Settlement Class because it meets all of the necessary
requirements of Federal Rule 23(a) and (b)(3). There is no question that the Settlement Class is
sufficiently numerous, and because the Complaint alleges that Defendants directed identical false
and misleading statements to all plaintiffs, common questions of law and fact predominate. Lead
Plaintiff's claims are also typical of those of the Settlement Class because all the claims rely on
the same factual and legal theories and seek redress for the same injury. Neither Lead Counsel
nor Lead Plaintiff possesses any conflicts of interest that prohibit them from adequately
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representing the Settlement Class. Moreover, a class action is a superior way to adjudicate this
action because it allows recovery for all class members and saves judicial time and resources.
Finally, it is well-established that the form and manner of notice here — by mail and
publication — satisfies due process. As such, this Court should approve the notice and set a final
approval hearing for the settlement.
ARGUMENT
I. THE COURT SHOULD PRELIMINARILY APPROVE THE SETTLEMENT
Judicial policy favors settlements. See Desktop Direct, Inc. v. Digital Equip. Corp., 993
F.2d 755, 758 (10th Cir. 1993), aff'd, 511 U.S. 863 (1994) (agreeing that "encouragement of out-
of-court settlements is desirable"); Wilkerson v. Martin Marietta Corp., 171 F.R.D. 273, 284 (D.i
Colo. 1997). This is especially true in complex securities fraud class actions, where trial is rare
and the risk of adverse verdict is significant. In re Omnivision Techs., Inc., 559 F. Supp. 2d
1036, 1047 (N.D. Cal. 2007); see also In re Syncor ERISA Litig., 516 F.3d 1095, 1101 (9th Cir.
2008) (noting that settlements are favored "particularly where complex class action litigation is
concerned"). More importantly, however, there are no "obvious deficiencies" in the fairness of
.the settlement or other reasons to doubt that it will meet the Tenth Circuit's requirements for
final approval. See In re Prudential Sec. Inc. Ltd. P'ships Litig., 163 F.R.D. 200, 209 (S.D.N.Y.
1995) (quoting Manual for Complex Litigation (Third) § 30.41 (1994)).
The decision to approve a settlement is within the sound discretion of the trial court,
Jones v. Nuclear Pharmacy, Inc., 741 F.2d 322, 324 (10th Cir. 1984), and "the universally
applied standard is whether the settlement is fair, adequate and reasonable," Officers for Justice
v. Civil Serv. Comm'n, 688 F.2d 615, 625 (9th Cir. 1982); In re Integra Realty Res., Inc., 354
F.3d 1246, 1266 (10th Cir. 2004). At the preliminary stage, the question is "whether there is any
reason not to notify the class members of the proposed settlement and to proceed with a fairness
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hearing." Lucas v. Kmart Corp., 234 F.R.D. 688, 693 (D. Colo. 2006). The Tenth Circuit
requires courts to consider the following four factors (the "Jones factors") before approving a
settlement:
(1) whether the proposed settlement was fairly and honestly negotiated;
(2) whether serious questions of law and fact exist, placing the ultimate outcome ofthe litigation in doubt;
(3) whether the value of an immediate recovery out-weighs the mere possibility offuture relief after protracted and expensive litigation; and
(4) the judgment of the parties that the settlement is fair and reasonable.
Jones, 741 F.2d at 324; Rutter & Wilbanks Corp. v. Shell Oil Co., 314 F.3d 1180, 1188 (10th Cir.
2002). Because there is no reason to doubt that the settlement satisfies each of the foregoing
prerequisites, the Court should approve it.
A. The Settlement Was Fairly And Honestly Negotiated
There is no doubt the settlement was fairly and honestly negotiated. "The fairness of the
negotiating process is to be examined `in light of the experience of counsel, the vigor with which
the case was prosecuted, and [any] coercion or collusion that may have marred the negotiations
themselves."' Ashley v. Reg'l Transp. Dist., Civil No. 05-cdv-01567-WYD-BNB, 2008 U.S.
Dist. LEXIS 13069, at * 15 (D. Colo. Feb. 11, 2008) (unpublished) (quoting Malchman v. Davis,
706 F.2d 426, 433 (2d Cir. 1983)).
Lead Counsel was well-equipped to litigate this case. See Marsden v. Select Medical
Corp., Civil Action 04-4020, slip op. at 1 n.l (E.D. Pa. Oct. 5, 2006) (unpublished) (attached
hereto as Exhibit 11) (finding that "Motley Rice possess[es] the requisite knowledge and skill in
securities litigation to ably prosecute this matter on behalf of the class."). With the guidance of
Mr. Weinstein, a nationally-recognized mediator, the parties negotiated for three months before
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reaching an agreement. 3 These factors weigh heavily in favor of approval. "When a settlement
is reached by experienced counsel after negotiations in an adversarial setting, there is an initial
presumption that the settlement is fair and reasonable." Marcus v. Kansas, 209 F. Supp. 2d
1179, 1182 (D. Kan. 2002).
Moreover, the parties reached the settlement only after vigorously litigating Defendants'
Motion to Dismiss; briefing the class certification issue; and requiring production by Defendants
of more than two million documents. This too militates in favor of approval. See In re Sprint
Corp. ERISA Litig., 443 F. Supp. 2d 1249, 1260 (D. Kan. 2006) (approving settlement reached
after parties had briefed class certification and begun discovery); see also City P'ship Co. v.
Atlantic Acquisition Ltd. P'ship, 100 F.3d 1041, 1043 (1st Cir. 1996) ("When sufficient
discovery has been provided and the parties have bargained at arms-length, there is a
presumption in favor of the settlement."). In short, the settlement was fairly and honestly
negotiated after sufficient discovery, and there is no evidence of collusion.
B. There Are Serious Questions Of Law And Fact About The Outcome Of TheLitigation
The parties have "reasonably conclude[d] that there are serious questions of law and fact
that ... could significantly impact" the case, and thus, settlement is a favorable alternative to
continued litigation. See Lucas, 234 F.R.D. at 693-94; Ashley, 2008 U.S. Dist. LEXIS 13069, at
* 18 ("doubt augurs in favor settlement because settlement creates a certainty of some recovery"
(quoting In re Qwest Intl, Inc. Sec. Litig., Civil Case No. 01-cv-01451-REB-CBS, et al., 2006
U.S. Dist. LEXIS 71039, at * 16-* 17 (D. Colo. Sept. 28, 2006) (unpublished)). The risk of an
adverse finding against the Settlement Class is not insignificant. This is a complex case
3 Mr. Weinstein has handled some of the largest securities fraud cases in history and his credentials are publiclyavailable at http://www.jamsadr.com/neutralsBio.asp?NeutralED=1785.
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involving the conduct of multiple defendants over a five year period. See Ashley, 2008 U.S.
Dist. LEXIS 13069, at *18-19. When the parties reached an agreement, the Court had not yet
certified a class, and Defendants had raised numerous arguments regarding loss causation and
whether class certification should be denied on that basis. Scienter and loss causation,'moreover,
present complex issues of proof for Lead Plaintiff. See Omnivision, 559 F. Supp. 2d at 1047.
Finally, in securities fraud cases a favorable jury verdict is not guaranteed. See id. (noting that
"[p]laintiffs have won only three of eleven [securities fraud] cases to reach verdicts since 1996").
In short, this case was far from a "slam dunk," and the unresolved factual and legal issues could
have prevented any recovery.i
C. The Value Of An Immediate Recovery Outweighs The Possibility Of ReliefAfter Protracted And Expensive Litigation
The monetary value of the settlement must be compared to "the possibility of some
greater relief at a later time, taking into account the additional risks and costs that go hand in
hand with protracted litigation." Gottlieb v. Wiles, 11 F.3d 1004, 1015 (10th Cir. 1993),
abrogated on other ground by Devlin v. Scardelleti, 536 U.S. 1 (2002). The Settlement Fund of
$15 million is more than sufficient, when weighed against costly and time-consuming litigation
that would ensue absent settlement.
First, $15 million is well-within the reasonable range of adequate securities fraud
settlements. Fifteen million dollars is higher than the median settlement value for securities class
actions in 2007 ($9 million). See News Release, Cornerstone Research, Securities Class Action
Totals Down in 2007, Finds Cornerstone Research; Number of Settlements with Estimated
Damages above $1 Billion Lowest since 2003, But Median Settlement Reaches Highest Level
Ever at $9 Million (Mar. 31, 2008) (attached hereto as Exhibit R. It is irrelevant that this
represents only a portion of the Class damages, because "the essence of settlement is
9i
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compromise." See Wilkerson, 171 F.R.D. at 284; Officers for Justice, 688 F.2d at 628 ("[i]t is
well-settled law that a cash settlement amounting to only a fraction of the potential recovery does
not per se render the settlement inadequate or unfair").
Second, like all complex class cases, litigating this case through trial would be costly,
time-consuming and present a risk that the Settlement Class could walk away empty-handed.
See Omnivision, 559 F. Supp. 2d at 1041-42. When considered against these inherent
uncertainties, see discussion supra Part I.B., settlement is an attractive option. See In re Sprint,
443 F. Supp. 2d at 1261. As one court aptly observed, it is sometimes better "to take the bird in
the hand instead of the prospective flock in the bush." Oppenlander v. Standard Oil Co., 64
F.R.D. 597, 624 (D. Colo. 1974) (citations and quotations omitted).
D. Counsel Believes That The Settlement Is Fair And Reasonable
Lead Counsel and Defense Counsel reached this settlement after arms length negotiations
and both "genuinely believe" that it represents a good outcome for all parties. In re Sprint, 443
F. Supp. 2d at 1261. Defendants will obtain a release of the relevant claims and will avoid the
uncertainty associated with a potentially adverse verdict. Similarly, Lead Plaintiff and the
Settlement Class are guaranteed monetary recovery and avoid the possibility of losing at
summary judgment or trial. Against this background Counsel's opinion "is entitled considerable
weight" and supports approval of the settlement. See Ashley, 2008 U.S. Dist. LEXIS 13069, at
*21 (quoting Lucas, 234 F.R.D. at 695); Marcus, 209 F. Supp. 2d at 1182-83.
H. THE COURT SHOULD PRELIMINARILY GRANT CLASS CERTIFICATION
The proposed Settlement Class includes all persons who purchased the common stock of
NPS between August 7, 2001, and May 2, 2006, and excludes Defendants, the current officers
and directors of NPS, their immediate families and their legal representatives, heirs, successors
or assigns. As a general matter, "securities claims are particularly well suited for class action
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status ...." In re Intelcom Group, Inc., Sec. Litig., 169 F.R.D. 142, 144 (D. Colo. 1996); accord
City P'ship Co. v. Jones Intercable, Inc., 213 F.R.D. 576, 590 (D. Colo. 2002). The instant case
is no different. Because it meets the prerequisites of Rule 23(a) and (b)(3), the Court should
preliminarily certify the Settlement Class.
"[T]he `settlement only' class has become a stock device," and "all Federal Circuits have
recognized [its] utility ..." Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 618 (1997) (internal
citations omitted). This Court has broad discretionary authority over class actions. Anderson v.
Albuquerque, 690 F.2d 796, 799 (10th Cir. 1982). Even so, the Court must carefully consider
each element of Rule 23 prior to certification. See Amchem, 521 U.S. at 620 (Rule 23
"demand[s] undiluted, even heightened attention in the settlement context"). The Court,
however, need not determine "whether the class, if tried, would present intractable management
problems," since there will be no trial. Amchem, 521 U.S. at 620 (citing Fed. R. Civ. P.
23(b)(3)(D)). In sum, the proposed class in this case must satisfy the numerosity, commonality,
typicality and adequacy requirements of Rule 23(a), as well as Rule 23(b)(3)'s predominance and
superiority requirements.
A. The Settlement Class Is Sufficiently Numerous
There is no question that the proposed Settlement Class is "so numerous that joinder of
all members is impracticable." Fed. R. Civ. P. 23(a)(1). The "key factor" in determining
numerosity is the size of the class. See Marcus v. Dep't of Revenue, 206 F.R.D. 509, 511 (D.
Kan. 2002). Although there is no bright line rule, plaintiff must demonstrate "a large number."
McCauley v. Bowen, 659 F. Supp. 292, 295 (D. Kan. 1986). The Court must also consider the
geographic dispersion of the class. See Daigle v. Shell Oil Co., 133 F.R.D. 600, 603 (D. Colo.
1990).
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The Settlement Class encompasses all claims, nationwide of purchasers ofNPS common
stock over a four-year period. The proposed Claims Administrator, Garden City Group, Inc.,
estimates that there are at least 65,000 potential Settlement Class Members. A class of this size,
when distributed geographically over the world, plainly satisfies Rule 23(a)(1). See, e.g., Jones
Intercable, 213 F.R.D. at 590 (certifying securities fraud class action with approximately 52,000
class members); Serfaty v. Int'l Automated Systems, Inc., 180 F.R.D. 418, 420 (D. Utah 1998)
("even where the number of persons who bought stock during the class period is unknown,
numerosity can be assumed where the number of shares traded is so great that common sense
dictates the class is very large" (citations and quotations omitted)); Zapata v. IBP, Inc., 167
F.R.D. 147, 157 (D. Kan. 1996) (finding that a class of 5,000 to 7,000 was sufficiently
numerous).
B. Common Questions Of Law And Fact Predominate
The proposed class also squarely satisfies Rule 23(a)'s commonality requirement and
23(b)(3)'s predominance requirement. The predominance inquiry is "far more demanding,"
Amchem, 521 U.S. at 624, and thus, it subsumes the question of commonality, Harding V.
Tambrands' Inc., 165 F.R.D. 623, 627 (D. Kan. 1996). Consequently, "there is no reason to
separately analyze commonality" and the following analysis establishes that the Settlement Class
satisfies both criteria. Emig v. Am. Tobacco Co., 184 F.R.D. 379, 385 (D. Kan. 1998).
. Predominance and commonality are satisfied where "there is a common nucleus of
operative facts relevant to the dispute and those common questions represent a significant aspect
of the case which can be resolved for all members ... in a single adjudication." Harlow v. Sprint
Nextel Corp., No. 08-2222-JJWL, 2008 U.S. Dist. LEXIS 102965, at *8 (D. Kan. Dec. 10, 2008)
(unpublished) (citations and quotations omitted). The Court must compare "the relationship
between common and individual questions," Edgington v. R.G. Dickinson & Co., 139 F.R.D.
12
Case 2:06-cv-00570-DAK-PMW Document 137 Filed 02/26/2009 Page 18 of 22
183, 190 (D. Kan. 1991), and "the critical test is whether there is material variation in elements
like the representations made by defendants to different members of a plaintiff class or the
degrees of reliance by members of the class," Esplin v. Hirschi, 402 F.2d 94, 99 (10th Cir. 1968)
(holding that common question predominated in Rule lOb-5 securities fraud claims) (internal
quotations omitted).
The Complaint here alleges that Defendants directed and disseminated an identical series
of false and misleading statements to all purchasers of NPS common stock and that these
statements artificially inflated the stock's price. Moreover, the Settlement Class relies on the
fraud-on-the-market theory, and thus, "individual questions of reliance are eliminated."
Intelcom, 169 F.R.D. at 147. Against this background, common questions predominate. See id.
at 148 (finding predominance where "the claims involve[d] a common scheme affecting the
entire class which is the hallmark of securities fraud class actions"); Jones 7ntercable, 213 F.R.D.
at 582 (finding predominance where the claims involved "material misstatements or omissions
common to the entire class").
C. The Claims Of Lead Plaintiff Are Typical
Lead Plaintiff's claims and defenses are "typical" of those of the Class. Fed. R. Civ. P.
23(a)(3). Typicality requires "that the class representative be a part of the class and possess the
same interest and suffer the same injury as class members." In re Urethane Antitrust Litig., 251
F.R.D. 629, 640 (D. Kan. 2008). The facts surrounding all claims need not be identical, but the
claims of the class representative and the class must be "based on the same legal or remedial
theory." Adamson v. Bowen, 855 F.2d 668, 676 (10th Cir. 1988). Here, in fact, Lead Plaintiff's
claims are virtually indistinguishable from those of the Settlement Class. Lead Plaintiff, like all
Settlement Class Members, alleges that it sustained damage when it purchased NPS common
stock at inflated prices. The same course of conduct that putatively gave rise to Lead Plaintiff's
13
Case 2:06-cv-00570-DAK-PMW Document 137 Filed 02/26/2009 Page 19 of 22
injury — Defendants' allegedly false and misleading statements — gave rise to every Settlement
Class Members' injury. Finally, federal securities law is the legal basis for all Settlement Class
Members' claims. Thus, the typicality requirement is satisfied. See Intelcom, 169 F.R.D. at 148-
49.
D. Lead Plaintiff And Lead Counsel Are Adequate Representatives
Lead Plaintiff and Motley Rice will "fairly and adequately protect the interests of the
class." Fed. R. Civ. P. 23(a)(4). The adequacy requirement ensures that both the class
representative and its counsel (a) do not have impermissible conflicts of interest with the
Settlement Class and (b) will vigorously prosecute the action for the Settlement Class. See
Rutter & Wilbanks, 314 F.3d at 1187-88. Because Lead Plaintiff has the same claims as all
Settlement Class Members, it also has the same interests. There are no separate sub-classes, nor
do the Settlement Class Members' interests diverge based on unique circumstances. Thus,
neither Lead Plaintiff nor Motley Rice has any impermissible conflicts of interest with the
Settlement Class. Motley Rice, moreover, has and will continue to vigorously pursue the best
interests of the Settlement Class. As discussed supra, Motley Rice has extensive experience
prosecuting complex class actions, including securities fraud class actions and has devoted
significant time and resources to resolving this case. In short, Rule 23(a)(4) adequacy is
satisfied.
E. A Class Action Is Superior
The superiority prong of Rule 23(b)(3) is also satisfied. A class action is superior where
it serves the primary goals of Rule 23, namely, "economies of time, effort, and expense," without
sacrificing fairness. See Amchem, 521 U.S. at 615. "[T]he superiority of class actions in large
securities fraud [cases] is well recognized." Intelcom, 169 F.R.D. at 149. Cases such as this
squarely advance the efficiency and fairness concerns underlying Rule 23 because many
14
Case 2:06-cv-00570-DAK-PMW Document 137 Filed 02/26/2009 Page 20 of 22
individual claims would be so small as to make it economically infeasible for shareholders to
pursue them alone. See Esplin, 402 F.2d at 101 (explaining that an "action on behalf of more
than 200 defrauded securities purchaser presents a particularly appropriate situation for a class
action"). Moreover, litigating each case individually would force the parties to repeatedly
relitigate the same issues and present the same evidence, and thus, would be "grossly inefficient
and wasteful of judicial resources." Intelcom, 169 F.R.D. at 149 (quoting Joseph v. Gen. Motors
Corp., 109 F.R.D. 635, 642 (D. Colo. 1986)). In sum, Rule 23(b)(3) is satisfied, and the Court
should preliminarily approve class certification.
M. THE COURT SHOULD APPROVE THE FORM AND MANNER OF NOTICE
The proposed Notice and Summary Notice, attached as Exhibits C and D to the
Stipulation, respectively, satisfy due process, the federal rules and the PSLRA. The hallmark of
the notice inquiry ... is reasonableness." Lucas, 234 F.R.D. at 696 (quoting Sallenbarger v.
Mountain States Tel. & Tel. Co., 121 F.R.D. 417, 436 (D.N.M. 1988)). To satisfy due process
notice must be "reasonably calculated, under all the circumstances, to apprise interested parties
of the pendency of the action and afford them an opportunity to present their objections."
De-Julius v. New England Health Care Employees Pension Fund, 429 F.3d 935, 944 (10th Cir.
2005) (quoting Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 314 (1950)).
"Nevertheless, this due process right does not require actual notice to each party intended to be
bound by the adjudication of a representative action." DeJulius, 429 F.3d at 944.
More specifically, the federal rules require the court to "direct the best notice that is
practicable" to "all members who can be identified through reasonable effort." Fed. R. Civ. P.
23(c)(2)(B). The notice must:
clearly and concisely state in plain, easily understood language:
(i) the nature of the action;
15
Case 2:06-cv-00570-DAK-PMW Document 137 Filed 02/26/2009 Page 21 of 22
(ii) the definition of the class certified;(iii) the class claims, issues, or defenses;(iv) that a class member may enter an appearance through an attorney if the
member so desires;(v) that the court will exclude from the class any member who requests
exclusion;(vi) the time and manner for requesting exclusion; and(vii) the binding effect of a class judgment on members under Rule 23(c)(3).
Id. In securities fraud class actions, the PSRLA imposes additional requirements for notice. See
15 U.S.C. § 78u-4(a)(7) (listing requirements).
Lead Plaintiff proposes two forms . of notice. The Notice will be sent by mail to all
identifiable Settlement Class Members at their last known address, and the Summary Notice will
be published in Business Wire for those Settlement Class Members whose addresses cannot be
identified. This is sufficient under Rule g. See,23( c) e.g., DeJulius, 429 F.3d at 947; Integra, 354
F.3d at 1261 (finding the notice by publication and mail was sufficient). Substantively, the
Notices satisfy Rule 23(c): they describe the action and define the Settlement Class; they
describe the claims, issues and defenses; they notify Settlement Class Members of their rights to
appear, object, and opt-out; and they clearly explain the binding nature of the settlement. (See
generally Exhibits C and D). Consistent with the PSLRA, the Notices also provide the relevant
statements of recovery; potential outcomes of the case; fees and expenses sought; attorney
information; and the reasons for the Settlement. See 15 U.S.C. § 78u-t(a)(7). In short, the
Notices satisfy all the statutory and due process requirements, and give absent Settlement Class
Members reasonable notices of their rights, and the Court should approve them.
CONCLUSION
In summary, the proposed Stipulation is fair and adequately resolves this litigation. Lead
Plaintiff and Lead Counsel have served, and will continue to serve, as adequate representatives
for the Settlement Class, and the Settlement Class meets each of the Rule 23 requirements for
16
Case 2:06-cv-00570-DAK-PMW Document 137 Filed 02/26/2009 Page 22 of 22
certification. The proposed Notices likewise, satisfy the federal rules and the PSLRA. Thus,
Lead Plaintiff respectfully requests that this Court approve the Stipulation, certify the Settlement
Class, order that Notice be issued, and schedule a final approval hearing.
DATED: February 26, 2009. /s/ William H. NarwoldJoseph F. Rice (admitted pro hac vice)Ann K. Ritter (admitted pro hac vice)Vincent I. Parrett (admitted pro hac vice)28 Bridgeside BoulevardMount Pleasant, SC 29465Telephone: 843-216-9000Facsimile: 843-216-9450
&William H. Narwold(admitted pro hac vice)MOTLEY RICE LLCOne Corporate Center20 Church StreetHartford, CT 06103Telephone: 860-882-1681Facsimile- 860-882-1682Lead Counsel for Lead Plaintiff
Richard D. Burbidge (0492)Jefferson W. Gross (8339)BURBIDGE, MITCHELL & GROSS215 South State Street, Suite 920Salt Lake City, Utah 84111Telephone: 801-355-6677Facsimile: 801-355-2341Liaison Counsel for Lead Plaintiff
Jeffrey S. Nobel (admitted pro hac vice)Nancy A. Kulesa (admitted pro hac vice)SCHATZ NOBEL WARD P.C.20 Church StreetHartford, CT 06103Telephone: 860-493-6292Facsimile: 860-493-6290Counsel for Lead Plaintiff
17
Case 2:06-cv-00570-DAK-PMW Document 137-2 Filed 02/26/2009 Page 2 of 36
Raymond J. Etcheverry (1010) Joseph F. Rice admitted pro hacp ( p vice)Kent O. Roche (2783) Ann K. Ritter (admitted pro hac vice)Michael P. Petrogeorge (8870) Vincent 1. Parrett (admitted pro hac vice)PARSONS BEHLE & LATIMER
28 Brid eside Boulevard201 S. Main Street, Suite 1800 gSalt Lake City, Utah 84111 Mount Pleasant, SC 29465Telephone: (801) 532-1234 Telephone: 843-216-9000Facsimile: (801) 536-6111 Facsimile: 843-216-9450
Paul H. Dawes (admitted pro hac vice) William H. NarwoldMichele F. Kyrouz (admitted pro hac vice) (admitted pro hac vice)LATHAM & WATKINS LLP140 Scott Drive MOTLEY RICE LLCMenlo Park, California 94025 One Corporate CenterTelephone: (650) 328-4600 20 Church StreetFacsimile- (650) 463-2600 Hartford, CT 06103
Attorneys for Defendants Telephone: 860-882-1681Facsimile: 860-882-1682
Lead Counsel for Lead Plaintiff
Richard D. Burbidge (0492) Jeffrey S. Nobel (admitted pro hac vice)Jefferson W. Gross (8339) Nancy A. Kulesa (admitted pro hac vice)BURBIDGE, MITCHELL & GROSS SCHATZ NOBEL 17ARD P.C.215 South State Street, Suite 920 20 Church StreetSalt Lake City, Utah 84111 Hartford, CT 06103Telephone: 801-355-6677 Telephone: 860-493-6292Facsimile: 801-355-2341 Facsimile- 860-493-6290
Liaison Counsel for Lead Plaintiff Counsel for Lead Plaintiff
IN THE UNITED STATES DISTRICT COURTDISTRICT OF UTAH, CENTRAL DIVISION
STIPULATION OF SETTLEMENTIN RE NPS PHARMACEUTICALS, INC Master File No. 2:06cv00570 DAK PWSECURITIES LITIGATION, (Consolidated with 2:06cv00597 TS,
2:06cv00647 DB, 2:06cv00648 BSJ and2:06cv00699 TS)
This Document relates to: All Actions Judge Dale A. Kimball
S M692204.1 1
Case 2:06-cv-00570-DAK-PMW Document 137-2 Filed 02/26/2009 Page 3 of 36i
This Stipulation of Settlement dated as of February 24, 2009 (the "Stipulation"), is made
and entered into by and among the following Settling Parties (as defined further in Section III
hereof) to the above-entitled Litigation: (i) the Lead Plaintiff (on behalf of itself and each of the
Settlement Class Members), by and through its counsel of record in the Litigation; and
(ii) Defendants, by and through their counsel of record in the Litigation. The Stipulation is
entered into pursuant to Federal Rule of Civil Procedure 23(e) and 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.
I. THE LITIGATION
On and after July 12, 2006, the following putative securities fraud class actions were filed
in the United States District Court for the District of Utah against NPS Pharmaceuticals, Inc.
("NPS") and certain of its officers and directors:
Case Name Case No. Date FiledRoffe v. NPS Pharmaceuticals, Inc.
2:06cv00570 PGC 7/12/06Baird v. NPS Pharmaceuticals, Inc.
2:06cv00597 TS 7/20/06Leventhal v. NPS Pharmaceuticals, Inc.
2:06cv00647 DB 8/4/06Skubella v. NPS Pharmaceuticals, Inc.
2:06cv00648 BSJ 8/4/06McCormick v. NPS Pharmaceuticals, Inc.
2:06cv00699 TS 8/21/06
These actions were consolidated for all purposes by an Order dated September 14, 2006
as In re NPS Pharmaceuticals, Inc. Securities Litigation (the "Litigation"). On November 17,
2006, the Court appointed PHARMAJwHEALTH Management Company S.A. as Lead Plaintiff,
and approved its selection of Motley Rice, LLC to serve as Lead Counsel and Burbridge &
Mitchell to serve as Liaison Counsel in the Litigation.
The operative complaint is the Consolidated Amended Complaint for Violation of the
Federal Securities Laws (the "Complaint"), filed January 16, 2007. The Complaint alleges
violations of §§10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder on
^I
2SM692204.1
III
Case 2:06-cv-00570-DAK-PMW Document 137-2 Filed 02/26/2009 Page 4 of 36
behalf of a class of all purchasers of the publicly-traded securities of NPS between August 7,
2001 and May 2, 2006.
On March 19, 2007, Defendants moved to dismiss the Complaint. On July 3, 2007, the
Court denied that motion. On August 1, 2007, the Court entered a scheduling order setting a trial
date for the action on April 20, 2009. On November 1, 2007, Lead Plaintiff filed its motion to
certify the class of shareholders that it seeks to represent in the action. On January 30, 2008,
Defendants filed an opposition to that motion. On February 29, 2008, Lead Plaintiff filed its
reply brief in support of the motion for class certification. On March 20, 2008, the Court entered
a stipulation by the parties and order staying the action pending mediation on June 3, 2008.
H. DE *ENDANTS' DENIALS OF WRONGDOING AND LIABILITY
Defendants have denied and continue to deny each and all of the claims and contentions
alleged by Lead Plaintiff in the Litigation. Defendants have expressly denied and continue to
deny 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 Litigation.
Defendants have also denied and continue to deny, inter alia, the allegations that Lead Plaintiff
or the alleged class has suffered damage, that the prices of NPS common stock were artificially
inflated by reasons of alleged misrepresentations, non-disclosures or otherwise, and that Lead
Plaintiff or the alleged class were harmed by the conduct alleged in the Complaint. Defendants
believe that the evidence developed to date supports their position.
Nonetheless, Defendants have concluded that further conduct of the Litigation would be
protracted and expensive, and that it is desirable that the Litigation be fully and finally settled on
a class-wide basis and in the manner and upon the terms and conditions set forth in this
Stipulation. Defendants have also taken into account the uncertainty and risks inherent in any
litigation, especially in complex cases like the Litigation. Defendants have, therefore,
determined that it is desirable and beneficial to them that the Litigation be settled in the manner
and upon the terms and conditions set forth in this Stipulation.
3SM692204.1
Case 2:06-cv-00570-DAK-PMW Document 137-2 Filed 02/26/2009 Page 5 of 36
III. CLAIMS OF LEAD PLAINTI.rY AND BENEFITS OF SETTLEMENT
Lead Plaintiff believes that the claims asserted in the Litigation have merit and that the
evidence developed to date supports the claims. However, Lead Plaintiff recognizes and
acknowledges the expense and length of continued proceedings necessary to prosecute the
Litigation against Defendants through trial and through appeals. Lead Plaintiff has also taken
into account the uncertain outcome and the risk of any litigation, especially in complex actions
such as the Litigation, as well as the difficulties and delays inherent in such litigation. Lead
Plaintiff is also mindful of the inherent problems of proof, and possible defenses to the securities
law violations asserted in the Litigation. Lead Plaintiff believes that the settlement set forth in
the Stipulation confers substantial benefits upon the Settlement Class. Based on their evaluation,
Lead Plaintiff and Lead Counsel have determined that the settlement set forth in the Stipulation
is in the best interests of Lead Plaintiff and the Settlement Class.
IV. TERMS OF STIPULATION AND AGREEMENT OF SETTLEMENT
NOW, THEREFORE, IT IS HEREBY STIPULATED AND AGREED by and among
Lead Plaintiff (for itself and the Settlement Class Members) and Defendants, by and through
their respective counsel or attorneys of record, that, subject to the approval of the Court, the
Litigation and the Released Claims shall be finally and fully compromised, settled and released,
and the Litigation shall be dismissed with prejudice, as to all Settling Parties, upon and subject to
the terms and conditions of the Stipulation, as follows.
1. Definitions
As used in the Stipulation, the following terms have the meanings specified below:
1.1 "Authorized Claimant" means any Settlement Class Member whose claim for
recovery has been allowed pursuant to the terms of the Stipulation.
1.2 "Claimant" means any Settlement Class Member who files a Proof of Claim in
such form and manner, and within such time, as the Court shall prescribe.
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Case 2:06-cv-00570-DAK-PMW Document 137-2 Filed 02/26/2009 Page 6 of 36
1.3 "Claims Administrator" means The Garden City Group, Inc., or any successor
agreed upon between the Settling Parties and approved by the Court.
1.4 "NPS" means NPS Pharmaceuticals, Inc.
1.5 "Defendants" means NPS and the Individual Defendants.
1.6 "Effective Date" means the date when all of the conditions and events specified in
9C 7.1 of the Stipulation have been met and have occurred.
1.7 "Escrow Agent" means Garden City Group, Inc. or successor entity duly
appointed to carry out the duties of Escrow Agent set forth herein.
1.8 "Final" means when the last of the following with respect to the Judgment
approving the Stipulation, substantially in the form of Exhibit E 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, which
date shall be deemed to be thirty (30) days following the entry of the Judgment, unless the date
to take such an appeal shall have been extended by Court order or otherwise, or unless the 30th
day falls on a weekend or a Court holiday, in which case the date for purposes of this Stipulation
shall be deemed to be the next business day after such 30th day; and (iii) if such motion to alter
or amend is filed or if an appeal is taken, immediately after the determination of that motion or
appeal so that it is no longer subject to any further judicial review or appeal whatsoever, whether
by reason of affirmance by a court of last resort, lapse of time, voluntary dismissal of the appeal
or otherwise, and in such a manner as to permit the consummation of the settlement substantially
in accordance with the terms and conditions of this Stipulation. 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 that
concerns only the issue of attorneys' fees and reimbursement of costs or the Plan of Allocation of
the Settlement Fund.
SFF692204.1 5
Case 2:06-cv-00570-DAK-PMW Document 137-2 Filed 02/26/2009 Page 7 of 36
i
1.9 "Individual Defendants" means Hunter Jackson, N. Anthony Coles, Edward F.
Nemeth, David L. Clark, Morgan R. Brown, Gerard J. Michel, Alan Rauch, Thomas Marriott, G.
Thomas Heath, James U. Jensen, Robert K. Merrell, and Alan L. Mueller.
1.10 "Judgment" means the judgment to be rendered by the Court, substantially in the
form attached hereto as Exhibit E.
1.11 "Lead Counsel" means Motley Rice LLP.
1.12 "Liaison Counsel" means Burbridge & Mitchell.
1.13 "Lead Plaintiff" means PHARMA/wHEALTH Management Company S.A.
1.14 "Net Settlement Fund" means the balance of the Settlement Fund remaining for
distribution to the Settlement Class after the expenses, costs, taxes and fees referenced in I5.2(a)-(d) have been paid.
1.15 "Notice" means the Notice of Pendency and Proposed Settlement of Class Action
substantially in the form of Exhibit C hereto.
1.16 "Notice Order" means the preliminary order as approved by the Court for mailing
and publication as defined in 13.1 hereof and substantially in the form of Exhibit A hereto.
1.17 "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
their spouses, heirs, predecessors, successors, representatives, or assignees.
1.18 "Plan of Allocation" means a plan or formula of allocation of the Settlement Fund
whereby the Net Settlement Fund shall be distributed to Authorized Claimants. Any Plan of
Allocation is not part of the Stipulation and Defendants and their Related Parties shall have no
responsibility therefore or liability with respect thereto.
1.19 "Proof of Claim" means the form substantially in the form attached as Exhibit B
hereto.
1.20 "Related Parties" means each of a Defendant's past or present directors, officers,
employees, partners, insurers, co-insurers, reinsurers, agents, controlling shareholders, attorneys,
6SF1692204.1
Case 2:06-cv-00570-DAK-PMW Document 137-2 Filed 02/26/2009 Page 8 of 36
accountants, auditors, advisors, investment advisors, personal or legal representatives,
predecessors, successors, parents, subsidiaries, divisions, joint ventures, assigns, spouses, heirs,
related or affiliated entities, any entity in which a Defendant has a controlling interest, any
members of an Individual Defendant's immediate family, or any trust of which an Individual
Defendant is the settlor or which is for the benefit of an Individual Defendant's family.
1.21 "Released Claims" shall collectively mean all claims (including "Unknown
Claims" as defined in 11.28 hereof), demands, rights, liabilities and causes of action of every
nature and description whatsoever, known or unknown, whether or not concealed or hidden,
asserted or that might have been asserted, including, without limitation, claims for negligence,
gross negligence, breach of duty of care and/or breach of duty of loyalty, fraud, breach of
fiduciary duty, or violations of any state or federal statutes, rules or regulations or common law
principles, by Lead Plaintiff or any Settlement Class Member against Defendants or their Related
Parties arising out of, relating to, or in connection with the purchase and/or sale of the publicly-
traded securities of NPS by Lead Plaintiff or any Settlement Class Member during the Settlement
Class Period. Released Claims does not include claims, rights or causes of action or liabilities
related to the enforcement of the settlement, including, without limitation, any of the terms of
this Stipulation or orders or judgments issued by the Court in connection with the settlement.
1.22 "Released Defendants' Claims" means all claims (including "Unknown Claims"
as defined in 11.28 hereof), demands, rights, liabilities and causes of action of every nature and
description whatsoever, known or unknown, whether or not concealed or hidden, asserted or that
might have been asserted, including, without limitation, claims for negligence, gross negligence,
breach of duty of care and/or breach of duty of loyalty, fraud, breach of fiduciary duty, or
violations of any state or federal statutes, rules or regulations or common law principles, by
Defendants against Lead Plaintiff, any Settlement Class Member, or their Related Parties arising
out of, relating to, or in connection with the institution, prosecution or settlement of the
Litigation. Released Defendants' Claims does not include claims, rights or causes of action or
liabilities related to the enforcement of the settlement, including, without limitation, any of the
7SM692204.1
Case 2:06-cv-00570-DAK-PMW Document 137-2 Filed 02/26/2009 Page 9 of 36
terms of this Stipulation or orders or judgments issued by the Court in connection with the
settlement.
1.23 "Settlement Class" means all Persons who purchased the common stock of NPS
Pharmaceuticals, Inc. between August 7, 2001 and May 2, 2006. Excluded from the Settlement
Class are Defendants; members of the immediate families of the Individual Defendants, current
directors and officers of NPS and the legal representatives, heirs, successors, or assigns of any
such excluded Person. Also excluded from the Settlement Class are those Persons who timely
and validly request exclusion from the Settlement Class pursuant to the Notice of Pendency and
Proposed Settlement of Class Action..
1.24 "Settlement Class Member" means a Person who falls within the definition of the
Settlement Class as set forth above.
1.25 "Settlement Class Period" means the period between August 7, 2001 and May 2,
2006.
1.26 "Settlement Fund" means the principal amount of Fifteen Million ($15,000,000)
in cash to be paid to the Escrow Agent pursuant to IM 2.2-2.3 of this Stipulation, plus all interest
earned thereon pursuant to In 2.2, 2.3, 2.5 and 2.9.
1.27 "Settling Parties" means, collectively, each of the Defendants, and Lead Plaintiff
on behalf of itself and the Settlement Class Members.
1.28 "Unknown Claims" shall mean all claims, demands, rights, liabilities, and causes
of action of every nature and description which Lead Plaintiff or any Settlement Class Member
does not know or suspect to exist in his, her or its favor at the time of the release of the Released
Claims which, if known by him, her or it, might have affected his, her or its decision with respect
to the settlement, or might have affected his, her or its decision not to object to this settlement.
Unknown Claims shall also mean all claims, demands, rights, liabilities, and causes of action of
every nature and description which Defendants do not know or suspect to exist in his, her or its
favor at the time of the release of the Released Defendants' Claims which, if known by him, her
or it, might have affected his, her or its decision with respect to the settlement. With respect to
8sF\692204.1
Case 2:06-cv-00570-DAK-PMW Document 137-2 Filed 02/26/2009 Page 10 of 36
any and all Released Claims, the Settling Parties stipulate and agree that, upon the Effective
Date, Lead Plaintiff shall expressly waive, and each of the Settlement Class Members shall be
deemed to have waived, and by operation of the Judgment shall have waived, 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,
including that section itself, which provides:
A general release does not extend to claims which the creditor doesnot know or suspect to exist in his or her favor at the time of executing therelease, which if known by him or her must have materially affected his orher settlement with the debtor.
Lead Plaintiff and Settlement 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 Plaintiff shall expressly fully, finally and forever
settle and release, and each Settlement 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,
including, but not limited to, conduct which is negligent, intentional, with or without malice, or a
breach of any duty, law or rule, without regard to the subsequent discovery or existence of such
different or additional facts. Lead Plaintiff acknowledges, and the Settlement 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.
With respect to any and all Released Defendants' Claims, the Settling Parties stipulate
and agree that, upon the Effective Date, Defendants shall expressly waive and by operation of
the Judgment shall have waived, all provisions, rights and benefits conferred by any law of any
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Case 2:06-cv-00570-DAK-PMW Document 137-2 Filed 02/26/2009 Page 11 of 36
state or territory of the United States, or principle of common law, which is similar, comparable
or equivalent to California Civil Code § 1542, including that section itself, which provides:
A general release does not extend to claims which the creditor doesnot know or suspect to exist in his or her favor at the time of executing therelease, which if known by him or her must have materially affected his orher settlement with the debtor.
Defendants may hereafter discover facts in addition to or different from those which he,
she or it now knows or believes to be true with respect to the subject matter of the Released
Defendants' Claims, but Defendants shall expressly fully, finally and forever settle and release,
and by operation of the Judgment shall have, fully, finally, and forever settled and released, any
and all Released Defendants' 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,
including, but not limited to, conduct which is negligent, intentional, with or without malice, or a
breach of any duty, law or rule, without regard to the subsequent discovery or existence of such
different or additional facts. Defendants acknowledge 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. Certification of a Settlement Class
2.1 For the purposes of this Stipulation only and subject to approval by the Court of
this settlement, the Settling Parties stipulate to certification of a Settlement Class as defined in 9[
1.23 above. In so doing, Defendants agree for purposes of this Settlement that the Settlement
Class meets each applicable prerequisite to certification under Federal Rule of Civil Procedure
23. By so agreeing, Defendants do not waive or prejudice in any way their right to later oppose
certification of a class on any grounds, if the Settlement is terminated for any reason.
b. The Settlement Fund
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i
2.2 As provided in 9[ 2.3 . below, Defendants shall cause to be paid the sum of Fifteen
Million Dollars ($15,000,000) (the "Settlement Amount") within the time set forth in 12.3,
below, into an interest-bearing account maintained by the Escrow Agent in settlement of the
Litigation.
2.3 Subject to the terms of this Stipulation, Defendants' D&O insurance carriers
("Insurers") shall collectively pay the Settlement Amount into the interest-bearing account
maintained by the Escrow Agent within 30 days following entry of the Court's order
preliminarily approving the settlement. Defendants' counsel shall email a copy of the Court's
order to the Insurers on the day it is received. If for any reason the Insurers do not pay the
Settlement Amount, this Stipulation shall terminate; Defendants are not required to pay the
Settlement Amount absent payment from the Insurers.
C. The Escrow Agent
2.4 Lead Counsel shall enter an escrow agreement, consistent with this Stipulation,
authorizing and directing the duly appointed Escrow Agent, at a minimum, to perform all duties
delegated herein to the Escrow Agent, and will not authorize or direct the Escrow Agent to take
any action prohibited by this Stipulation.
2.5 The Escrow Agent shall be authorized and directed to invest 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 to reinvest the proceeds of
these instruments as they mature in similar instruments at their then-current market rates.
Defendants shall not bear any responsibility for or liability related to the investment of the
Settlement Fund by the Escrow Agent.
2.6 The Escrow Agent shall be authorized and directed to disburse the Settlement
Fund only as provided in the Stipulation, by an order of the Court, or with the written agreement
of counsel for Defendants and Lead Counsel.
11SM6922Q4.1
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2.7 Subject to further order and/or direction as may be made by the Court, the Escrow
Agent shall be authorized and directed by Lead Counsel to execute such transactions on behalf of
the Settlement Class Members as are consistent with the terms of the Stipulation.
2.8 All funds held by the Escrow Agent shall remain subject to the jurisdiction of the
Court, until such time as such funds shall be distributed pursuant to the Stipulation and/or further
order(s) of the Court.
2.9 Lead Counsel shall authorize and direct the Escrow Agent, within thirty (30) days
after payment of the Settlement Fund, to establish a "Class Notice and Administration Fund,"
with up to $200,000 from the Settlement Fund in it. Lead Counsel shall authorize and direct the
Escrow Agent to use the Class Notice and Administration Fund to pay costs and expenses
reasonably and actually incurred in connection with providing notice to the Settlement Class,
locating Settlement Class Members, assisting with the filing of claims, administering and
distributing the Settlement Fund to Authorized Claimants, processing Proof of Claim and
Release forms and paying escrow fees and costs, if any. The Class Notice and Administration
Fund may also be invested and earn interest as provided for in 12.5 of this Stipulation. In no
event shall Defendants have any responsibility for or liability with respect to the Escrow Agent
or its actions, or the Class Notice and Administration Fund. Any costs or expenses expended for
notice or claims administration in excess of $200,000 shall be paid from the Settlement Fund,
subject to approval of Lead Counsel
d. Taxes
2.10.1 The Settling Parties agree to treat the Settlement Fund as being at all times a
"qualified settlement fund" within the meaning of Treas. Reg. §468B-1, and Lead Counsel
agrees to authorize and direct the Escrow Agent to treat the Settlement Fund as being at all times
a "qualified settlement fund" within the meaning of Treas. Reg. §468B-1. In addition, the
Escrow Agent shall be authorized and directed to timely make such elections as necessary or
advisable to carry out the provisions of this section, including the "relation-back election" (as
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defined in Treas. Reg. §468B-1) back to the earliest permitted date. Such elections shall be
made in compliance with the procedures and requirements contained in such regulations.
2.10.2 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 be authorized and directed to 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. §468B-2(k)). Such returns (as well as the election
described above) shall be consistent with this section and in all events shall reflect that all Taxes
(including any estimated Taxes, interest or penalties) on the income earned by the Settlement
Fund shall be paid out of the Settlement Fund as provided herein.
2.10.3 All Taxes and Tax Expenses shall be paid out of the Settlement Fund; in no event
shall Defendants or their Related Parties have any responsibility for or liability with respect to
the Taxes or the Tax Expenses. The Settlement Fund shall indemnify and hold each of
Defendants and their Related Parties 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 out of the Settlement Fund without prior order from the Court and
the Escrow Agent shall be authorized and directed (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. §468B-2(1)(2). 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
Stipulation.
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2.10.4 For the n references to the Settlement Fund shall includepurposerpose of this section,
both the Settlement.Fund and the Class Notice and Administration Fund and shall also include
any earnings thereon.
e. Termination of Settlement
2.11 In the event that the Stipulation is not approved, or is tei-uainated, canceled, or
fails to become effective for any reason, the Settlement Fund and the Class Notice and
Administration Fund (in each case, including accrued interest), less expenses actually incurred
and properly due and owing in connection with the settlement provided for herein, shall be
refunded pro rata to Defendants' Insurers, as provided in 17.3 below.
3. Notice Order and Settlement Hearing
3.1 Promptly after execution of the Stipulation, the Settling Parties shall submit the
Stipulation together with its exhibits to the Court and shall apply for entry of the Notice Order,
requesting, inter alia, the preliminary approval of the settlement set forth in the Stipulation;
preliminary certification of the Settlement Class; approval for mailing the Notice substantially in
the form of Exhibit C hereto; publication of a summary notice substantially in the form of
Exhibit D hereto; and approval of the Fee and Expense Application. Lead Counsel also intends
to request approval to make a payment to Lead Plaintiff for its reasonable costs and expenses and
Defendants take no position on that request. The Notice shall include the general terms of the
settlement set forth in the Stipulation, the proposed Plan of Allocation, the general terms of the
Fee and Expense Application and the date of the Settlement Hearing.
3.2 The Settling Parties shall request that after notice is given, the Court hold a
hearing (the "Settlement Hearing") and approve the settlement of the Litigation as set forth
herein. At or after the Settlement Hearing, Lead Counsel also will request that the Court approve
the proposed Plan of Allocation, the Fee and Expense Application and the request for reasonable
costs and expenses of Lead Plaintiff to be paid.
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4. Releases
4.1 Upon the Effective Date, Lead Plaintiff and each of the Settlement Class
Members shall be deemed to have, and by operation of the Judgment shall have, fully, finally,
and forever released, relinquished and discharged all Released Claims against Defendants and
their Related Parties. This release applies to Settlement Class Members whether or not such
Settlement Class Member executes and delivers a Proof of Claim and Release form. Upon the
Effective Date, Defendants and their Related Parties shall be deemed to have fully, finally, and
forever released, relinquished and discharged all Released Defendants' Claims against Lead
Plaintiff, the Settlement Class Members and their counsel.
4.2 The Proof of Claim and Release to be executed by Settlement Class Members
shall release all Released Claims against Defendants and their Related Parties and shall be
substantially in the form contained in Exhibit B hereto.
4.3 Upon the Effective Date, all Settlement Class Members and anyone claiming
through or on behalf of any of them, will be forever barred and enjoined from commencing,
instituting, prosecuting, or continuing to prosecute any action or other proceeding in any court of
law or equity, arbitration tribunal, or administrative forum, asserting the Released Claims against
any of Defendants, and their Related Parties.
4.4 Upon the Effective Date, Defendants and their Related Parties will be forever
barred and enjoined from commencing, instituting, prosecuting, or continuing to prosecute any
action or other proceeding in any court of law or equity, arbitration tribunal, or administrative
forum, asserting the Released Defendants' Claims against Lead Plaintiff, the Settlement Class
Members and their counsel.
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5. Administration and Calculation of Claims, Final Awards andSupervision and Distribution of Settlement Fund
5.1 The Claims Administrator shall be authorized and directed to administer and
calculate the claims submitted by Settlement Class Members.
5.2 The Settlement Fund shall be applied as follows:
(a) to pay the Taxes and Tax Expenses described in 1 2.10 hereof
(b) to pay all the costs and expenses reasonably and actually incurred in
connection with providing notice, locating Settlement Class Members, assisting with the filing of
claims, administering and distributing the Settlement Fund to Authorized Claimants, processing
Proof of Claim and Release forms and paying escrow fees and costs, if any;
(c) to pay Lead Counsel's attorneys' fees and expenses (the "Fee and Expense
Award"), to the extent allowed by the Court;
(d) to pay Lead Plaintiff an amount for its reasonable costs and expenses, to
the extent allowed by the Court; and
(e) after the Effective Date, to distribute the Net Settlement Fund to
Authorized Claimants as allowed by the Stipulation, the Plan of Allocation, or the Court.
5.3 Upon the Effective Date and thereafter, and in accordance with the terms of the
Stipulation, the Plan of Allocation, or such further approval and further order(s) of the Court as
may be necessary or as circumstances may require, the Claims Administrator shall distribute the
Net Settlement Fund to Authorized Claimants, subject to and in accordance with the terms of the
Stipulation.
5.4 Within ninety (90) days after the mailing of the Notice, or such other time as may
be set by the Court, each Person claiming to be an Authorized Claimant shall be required to
submit to the Claims Administrator a completed Proof of Claim and Release, substantially in the
form of Exhibit B hereto.
5.5 Unless otherwise ordered by the Court, all Settlement Class Members who fail to
timely submit a Proof of Claim and Release within such period, or such other period as may be
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Case 2:06-cv-00570-DAK-PMW Document 137-2 Filed 02/26/2009 Page 18 of 36
ordered by the Court, or otherwise allowed, shall be forever barred from receiving any payments
pursuant to the Stipulation and the settlement set forth herein, but will in all other respects be
subject to and bound by the provisions of the Stipulation, the releases contained herein, and the
Judgment.
5.6 The Net Settlement Fund shall be distributed to the Authorized Claimants
substantially in accordance with a Plan of Allocation to be described in the Notice and approved
by the Court. If there is any balance remaining in the Net Settlement Fund after six (6) months
from the date of distribution of the Net Settlement Fund, Lead Counsel shall, if feasible,
reallocate such balance among Authorized Claimants in an equitable and economic fashion.
Thereafter, any balance which still remains in the Net Settlement Fund shall be donated to a non-
profit organization mutually agreed upon by Lead Counsel and Defendants' counsel.
5.7 This is not a claims-made settlement and, if all conditions of the Stipulation are
satisfied and the settlement becomes Final, no portion of the Settlement Fund will be returned to
Defendants or their insurers. Defendants and their Related Parties shall have no responsibility
for, or liability whatsoever with respect to the distribution of the Net Settlement Fund, the Plan
of Allocation, the determination, administration, or calculation of claims, the payment or
withholding of Taxes or Tax Expenses, or any losses incurred in connection therewith.
5.8 No Person shall have any claim against Lead Counsel, the Claims . Administrator
the Escrow Agent or other entity designated by Lead Counsel based on distributions made
substantially in accordance with the Stipulation and the settlement contained herein, the Plan of
Allocation, or further order(s) of the Court.
5.9 It is understood and agreed by the Settling Parties that any proposed Plan of
Allocation 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 Stipulation and is to be
considered by the Court separately from the Court's consideration of the fairness, reasonableness
and adequacy of the settlement set forth in the Stipulation, and any order or proceeding relating
to the Plan of Allocation shall not operate to terminate or cancel the Stipulation or affect or delay
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Case 2:06-cv-00570-DAK-PMW Document 137-2 Filed 02/26/2009 Page 19 of 36
the finality of the Court's Judgment approving the Stipulation and the settlement set forth therein
(including the releases contained therein), or any other orders entered pursuant to the Stipulation.
5.10 The Net Settlement Fund shall be distributed to Authorized Claimants by the
Claims Administrator only after the Effective Date and only after all of the following have
occurred: (i) all claims have been processed, and all Claimants whose claims have been rejected
or disallowed, in whole or in part, have been notified and provided the opportunity to be heard
concerning such rejection or disallowance; (ii) all objections with respect to all rejected or
disallowed claims have been resolved by the Court, and all appeals there from have been
resolved or the time therefor has expired; (iii) all matters with respect to attorneys' fees, costs
and disbursements have been resolved by the Court, all appeals there from have been resolved or
the time therefor has expired; (iv) all costs of administration have been paid; and (v) the Court
has issued its Judgmenf.
6. Lead Counsel's Attorneys' Fees and Reimbursement of Expenses
6.1 Lead Counsel may submit an application or applications (the "Fee and Expense
Application") for distributions to them from the Settlement Fund for: (a) an award of attorneys'
fees; plus (b) reimbursement of actual costs and expenses, including the fees of any experts or
consultants, incurred in connection with prosecuting the Litigation, plus any interest on such
attorneys' fees and expenses at the same rate and for the same periods as earned by the
Settlement Fund (until paid), as may be awarded by the Court. Lead Counsel reserve the right to
make additional applications for fees and expenses incurred.
6.2 The attorneys' fees and expenses, as awarded by the Court, shall be paid to Lead
Counsel from the Settlement Fund, as ordered, immediately after the Court executes an order
awarding such fees and expenses. In the event that the Effective Date does not occur, or the
Judgment or the order making the Fee and Expense Award is reversed or modified, or the
Stipulation is canceled or terminated for any other reason, and in the event that the Fee and
Expense Award has been paid to any extent, then Lead Counsel shall within five (5) business
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Case 2:06-cv-00570-DAK-PMW Document 137-2 Filed 02/26/2009 Page 20 of 36
days from receiving notice from Defendants' counsel or from a court of appropriate jurisdiction,
refund to the Settlement Fund the fees and expenses previously paid to them from the Settlement
Fund plus interest thereon at the same rate as earned by the Settlement Fund in an amount
consistent with such reversal or modification.
6.3 The procedure for and the allowance or disallowance by the Court of any
applications by Lead Counsel for attorneys' fees and expenses, including the fees of experts and
consultants, to be paid out of the Settlement Fund, are not part of the settlement set forth in the
Stipulation, and are to be considered by the Court separately from the Court's consideration of
the fairness, reasonableness and adequacy of the settlement set forth in the Stipulation, and any
order or proceedings 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
Stipulation, or affect or delay the finality of the Judgment approving the Stipulation and the
settlement of the Litigation set forth therein (including the releases contained therein).
6.4 Defendants and their Related Parties shall have no responsibility for or liability
with respect to any payment of attorneys' fees and expenses to Lead Counsel over and above
payment from the Settlement Fund.
7. Conditions of Settlement, Effect of Disapproval, Cancellation orTermination
7.1 The Effective Date of the Stipulation shall be conditioned on the occurrence of all
of the following events:
(a) Defendants' insurers have timely made their contributions to the Settlement Fund
as required by 12.3 hereof;
(b) Defendants have not exercised their option to terminate the Stipulation pursuant
to 17.7 hereof;
(c) the Court has entered the Notice Order, as required by 9C 3.1 hereof;
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(d) the Court has entered the Judgment, or a judgment substantially in the form of
Exhibit E hereto; and, i
(e) the Judgment has become Final, as defined in 9[ 1.8 hereof.
7.2 Upon the occurrence of all of the events referenced in 17.1 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 9[ 7.1 hereof are not met, then the
Stipulation shall be canceled and terminated subject to 9[ 7.4 hereof, unless Lead Counsel and
counsel for Defendants mutually agree in writing to proceed with the Stipulation.
7.3 Unless otherwise ordered by the Court, in the event the Stipulation shall
terminate, or be canceled, or shall not become effective for any reason, then within ten (10)
business days after written notification of such event is sent by counsel for Defendants to Lead
Counsel and in accordance with the terms of 12.11 hereof, the Settlement Fund (including
accrued interest), plus any amount then remaining in the Class Notice and Administration Fund
(including accrued interest), less expenses and any costs and/or taxes which have either been
disbursed pursuant to 1 2.10 hereof or are determined to be chargeable to the Class Notice and
Administration Fund, shall be refunded by the Escrow Agent to the respective entities that
contributed to the Settlement Fund, pursuant to written instructions from counsel for NPS or its
successor-in-interest. At the written request of counsel to NPS, Lead Counsel shall instruct the
Escrow Agent or its designee to apply for any tax refund owed on the Settlement Fund and pay
the proceeds, after deduction of any fees or expenses incurred in connection with such
application(s) for refund, to the respective entities that contributed to the Settlement Fund.
7.4 In the event that the Stipulation is not approved by the Court or the settlement set
forth in the Stipulation is terminated or fails to become effective in accordance with its terms, the
Settling Parties shall be restored to their respective positions in the Litigation as of the date this
Stipulation was fully executed. In such event, the terms and provisions of the Stipulation, with
the exception of IN 2.9, 2.10, 2.11, 7.3-7.5, and 8.3 hereof, shall have no further force and effect
with respect to the Settling Parties and shall not be used in this Litigation or in any other
20SR692204.1
Case 2:06-cv-00570-DAK-PMW Document 137-2 Filed 02/26/2009 Page 22 of 36
proceeding for any purpose, and any judgment or order entered by the Court in accordance with
the terms of the Stipulation shall be treated as vacated, nunc pro tunc. No order of the Court or
modification or reversal on appeal of any order of the Court concerning the Plan of Allocation or
the amount of any attorneys' fees, costs, expenses and interest awarded by the Court to Lead
Counsel shall constitute grounds for cancellation or termination of the Stipulation.
7.5 If the Effective Date does not occur, or if the Stipulation is terminated pursuant to
its terms, neither Lead Plaintiff nor Lead Counsel shall have any obligation to repay any amounts
actually and properly disbursed from the Class Notice and Administration Fund. In addition, any
expenses already incurred and properly chargeable to the Class Notice and Administration Fund
at the time of such termination or cancellation, but which have not been paid, shall be paid by the
Escrow Agent in accordance with the terms of the Stipulation prior to the balance being refunded
in accordance with 9['9[ 2.11 and 7.3 hereof.
7.6 If a case is commenced in respect to any Defendant under Title 11 of the United
States Code (Bankruptcy), or a trustee, receiver or conservator is appointed under any similar
law, and in the event of the entry of a final order of a court of competent jurisdiction determining
the transfer of the Settlement Fund, or any portion thereof, by or on behalf of such Defendant to
be a preference, voidable transfer, fraudulent transfer or similar transaction, then, at Lead
Plaintiff's option, as to such Defendant, the releases given in favor of such Defendant pursuant to
this Stipulation shall be null and void and Lead Plaintiff and such Defendant shall be restored to
their respective positions in the Litigation immediately prior to the execution of this Stipulation.
7.7 Defendants shall have, in their sole and absolute discretion, the option to
withdraw from and terminate the settlement set forth in the Stipulation and to render the
Stipulation null and void if the aggregate number of shares of NPS's common stock purchased
during the Settlement Class Period by Settlement Class Members who would otherwise be
entitled to participate as Members of the Settlement Class, but who timely and validly request
exclusion from the Settlement Class, equals or exceeds a certain percentage of the number of
21SF\692204.1
Case 2:06-cv-00570-DAK-PMW Document 137-2 Filed 02/26/2009 Page 23 of 36
shares of NPS's common stock traded during the Settlement Class Period, as set forth in a
separate agreement between the Settling Parties ("Separate Agreement").
7.8 Unless otherwise ordered by the Court, to be valid, a request for exclusion must
contain the information requested in the Notice of Pendency and Proposed Settlement. Any
requests for exclusion must be postmarked no later than 21 calendar days prior to the hearing on
final approval of the settlement.
7.9 The Claims Administrator shall be directed to provide copies of any requests for
exclusion from the Settlement Class to Lead Counsel and Defendants' Counsel simultaneously
and promptly, and in no event later than 14 calendar days before the Settlement Hearing.
7.10 Lead Counsel may attempt to cause retraction of any exclusion requests by
potential Settlement Class Members prior to the hearing. If Defendants have exercised their
option to withdraw from and terminate the Settlement based on 91 7.7 above, and if Lead Counsel
succeeds in causing the retraction of a sufficient number of requests for exclusion such that the
remaining requests do not exceed the amounts stated in the Separate Agreement, Defendants'
notice of withdrawal automatically shall be deemed a nullity. Unless otherwise ordered by the
Court, to retract a prior request for exclusion, a potential Settlement Class Member'must provide
to Defendants' Counsel, at least seven (7) calendar days before the Settlement Hearing, or any
adjournment thereof, a written notice signed by the potential Settlement Class Member stating
his, her or its desire to retract the request for exclusion from the Settlement Class.
7.11 Any dispute between Lead Counsel and Defendants concerning the interpretation
or application of 919[ 7.7-7.10 shall be presented to the Court for resolution upon the application of
either party.
7.12 No request for exclusion shall be filed with the Court unless and until a dispute
among the Settling Parties hereto concerning its interpretation or application arises and in that
event it shall be filed and maintained with the Court under seal. The terms and conditions of the
Separate Agreement may be disclosed to the Court but shall otherwise be kept confidential and
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Case 2:06-cv-00570-DAK-PMW Document 137-2 Filed 02/26/2009 Page 24 of 36
shall not be disclosed, unless otherwise agreed upon in writing by the Settling Parties or ordered
by the Court, to any other Person other than Related Parties of Defendants.
8. Miscellaneous Provisions
8.1 The Settling Parties (a) acknowledge that it is their intent to consummate this
agreement; and (b) agree to cooperate to the extent reasonably necessary to effectuate and
implement all terms and conditions of the Stipulation and to exercise their reasonable best efforts
to accomplish the foregoing terms and conditions of the Stipulation.
8.2 The Settling Parties intend this settlement to be a final and complete resolution of
all disputes between them with respect to the Litigation. The settlement compromises claims
which are contested and shall not be deemed an admission by any Settling Party as to the merits
of any claim or defense. The Settling Parties agree that during the course of the Litigation the
parties and their respective counsel did not violate Federal Rule of Civil Procedure 11. While
retaining their right to deny liability, Defendants 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 competent legal
counsel. The Settling Parties reserve their right to rebut, in a manner that such party determines
to be appropriate, any contention made in any public forum that the Litigation was brought or
defended in bad faith or without a reasonable basis.
8.3 Neither the Stipulation nor the settlement contained therein, nor any act
performed or document executed pursuant to or in furtherance of the Stipulation or the
settlement: (a) is or may be deemed to be or may be used as an admission of, or evidence of, the
validity of any Released Claim or Released Defendants' Claim, or of any wrongdoing or liability
of Defendants or their Related Parties or Lead Plaintiff or Settlement Class Members; 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 Defendants or their Related Parties in any civil, criminal or administrative proceeding in
any court, administrative agency or other tribunal. Defendants and/or their Related Parties, Lead
23SF\692204.1
Case 2:06-cv-00570-DAK-PMW Document 137-2 Filed 02/26/2009 Page 25 of 36
Plaintiff or Settlement Class Members may file the Stipulation 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 Litigation
relating to the confidentiality of information shall survive this Stipulation, pursuant to their
terms.
8.5 All of the exhibits to the Stipulation are material and integral parts hereof and, are
fully incorporated herein by this reference.
8.6 The Stipulation may be amended or modified only by a written instrument signed
by or on behalf of all Settling Parties or their respective successors-in-interest.
8.7 The Stipulation and the exhibits attached hereto, along with the Separate
Agreement referenced above, constitute the entire agreement among the Settling Parties hereto
and no representations, warranties or inducements have been made to any party concerning the
Stipulation or its exhibits other than the representations, warranties and covenants contained and
memorialized in such documents. Except as otherwise provided herein, each party shall bear its
own costs.
8.8 Lead Counsel, on behalf of the Settlement Class, are expressly authorized by the
Lead Plaintiff to take all appropriate action required or permitted to be taken by the Settlement
Class pursuant to the Stipulation to effectuate its terms and also are expressly authorized to enter
into any modifications or amendments to the Stipulation on behalf of the Settlement Class which
they deem appropriate.
8.9 Each counsel or other Person executing the Stipulation or any of its exhibits on
behalf of any party hereto hereby warrants that such Person has the full authority to do so.
24SM692204.1
Case 2:06-cv-00570-DAK-PMW Document 137-2 Filed 02/26/2009 Page 26 of 36
8.10 The Stipulation may be executed in one or more counterparts. All executed
counterparts and each of them shall be deemed to be one and the same instrument. A complete
set of original executed counterparts shall be filed with the Court.
8.11 The headings used herein are used for the purpose of convenience only and are
not meant to have legal effect.
8.12 The waiver by any party of any breach of this Stipulation shall not be deemed a
waiver of any other prior or subsequent breach of this Stipulation.
8.13 The Stipulation shall be binding upon, and inure to the benefit of, the successors
and assigns of the Settling Parties hereto.
8.14 The Settling Parties shall request that the Court retain jurisdiction with respect to
implementation and enforcement of the terms of the Stipulation, and all parties hereto submit to
the jurisdiction of the Court for purposes of implementing and enforcing the settlement
embodied in the Stipulation.
8.15 The Stipulation and the exhibits hereto shall be considered to have been
negotiated, executed and delivered, and to be wholly performed, in- the State of Utah, and the
rights and obligations of the Settling Parties to the Stipulation shall be construed and enforced in
accordance with, and governed by, the internal; substantive laws of the State of Utah without
giving effect to that State's choice-of-law principles.
IN WITNESS WHEREOF, the Settling Parties hereto have caused the Stipulation to be
executed by their duly authorized attorneys.
Respectfully submitted,
Dated: February 2009 MOTLEY RICE LLC
William H. Narwold (admitted pro T
BURBIDGE, MITCHELL & GROSSJefferson W. Gross
Attorneys for Lead Plaintiff
25SF1692204.1
i
Case 2:06-cv-00570-DAK-PMW Document 137-2 Filed 02/26/2009 Page 27 of 36E
Dated: February, 2009 L • ' TWA KINS LLP
Michele F. Kyrou (ad 0 tted pro hac vice)
PARSONS BEHLE & LATIMERRaymond J. Etcheverry
Attorneys for Defendants
26SN1692204.1
Case 2:06-cv-00570-DAK-PMW Document 137-2 Filed 02/26/2009 Page 28 of 36
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Case 2:06-cv-00570-DAK-PMW Document 137-2 Filed 02/26/2009 Page 29 of 36
IN THE UNITED STATES DISTRICT COURTDISTRICT OF UTAH, CENTRAL, DIVISION
IN RE NPS PHARMA.C:EUTICALS, INC .SECURITIES LITIGATION,
Case No. 2:06cv00570 PGC
This Document relates to: All Actions .
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[PROPOSED] PRELIMINARY ORDER APPROVING MOTION FOR(I) PRELIMINARY APPROVAL OF STIPULATION OF SETTLEMENT;
(a) PRELIMINARY CLASS CERTIFICATION;(III) APPROVAL OF FORM AND MANNER OF NOTICE; AND
(IV) SCHEDULING A FINAL APPROVAL HEARINGIN CONNECTION WITH SETTLEMENT PROCEEDINGS,
WHEREAS, on February 24, 2009, the parties to the above-entitled Litigation (the
"Litigation") entered into a Stipulation of Settlement (the "Stipulation")'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 Complaint on the merits and with prejudice; and
WHEREAS, the Court having read and considered the Stipulation and the accompanying
exhibits; and the parties to the Stipulation having consented to the entry of this Order; and all
capitalized terms used herein having the meanings defined in the Stipulation.
NOW, THEREFORE, IT IS HEREBY ORDERED, this day of
2009 that:
Case 2:06-cv-00570-DAK-PMW Document 137-2 Filed 02/26/2009 Page 30 of 36
1. For the purposes of this Order, the Court adopts and incorporates by reference all
terms defined in the Stipulation attached hereto as Exhibit i
2. The Court hereby preliminarily certifies for the purposes of settlement only and
subject to further consideration at the Settlement Hearing described below, pursuant to Rules
23(b)(3) and 23(e) of the Federal Rules of Civil Procedure, a class consisting of all persons who
purchased the common stock of NPS Pharmaceuticals, Inc. ("NPS") between August 7, 2001,
and May 2, 2006, inclusive (the "Settlement Class Period"), and who were allegedly damaged
thereby (the "Settlement Class"). Defendants, members of the immediate families of the
Individual Defendants, current directors and officers of NPS and the legal representatives, heirs,
successors, or assigns of any such excluded Person are excluded from the Settlement Class.
3. The Court hereby finds that pursuant to Rule 23(a) and (b)(3), for purposes of
settlement only and subject to further consideration at the Settlement Hearing described below,
that:
(a) the Settlement Class is so numerous that joinder is impracticable; and
(b) there are questions of law or fact common to the Settlement Class; and
(c) the claims or defenses of Lead Plaintiff are typical of the Settlement ClassMembers;
(d) Lead Plaintiff PHARMA/wHEALTH Management Company, S.A.("PHARMA' or "Plaintiff') and Lead Counsel for the Settlement Class MotleyRice LLC ("Motley Rice") will adequately protect the interests of the SettlementClass; and
(e) questions of law or fact common to all Settlement Class Memberspredominate over individual issues and class adjudication is superior to othermethods for fairly and efficiently adjudicating the claims of the Settlement ClassMembers.
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4. A hearing (the "Settlement Hearing") pursuant to Rule 23(e) of the Federal Rules
of Civil Procedure is hereby scheduled to be held before the Court on , 2009,
at _ ^ _,.m. for the following purposes: j
(a) to finally determine whether this action satisfies the applicableprerequisites for class action treatment under Rules 23(a) and (b)(3) of the FederalRules of Civil Procedure;
(b) to determine whether the proposed settlement is fair, reasonable, andadequate, and should be approved by the Court;
(c) to determine whether the Order and Final Judgment as provided under theStipulation should be entered, dismissing the Complaint filed herein, on the meritsand with prejudice, and to determine whether the release by the Settlement Classof the Released Claims, as set forth in the Stipulation, should be provided to theReleased Persons;
(d) to determine whether the proposed Plan of Allocation for the proceeds ofthe settlement is fair and reasonable, and should be approved by the Court;
(e) to consider Lead Counsel's application for an award of attorneys' fees andreimbursement of costs and expenses;
(f) to consider Lead Counsel's request to reimburse to Lead Plaintiff's costsand expenses; and
(g) to rule upon such other matters as the Court may deem appropriate.
5. The Court reserves the right to approve the Stipulation with or without
modification and with or without further notice of any kind. The Court further reserves the right
to enter its Order and Final Judgment approving the Stipulation and dismissing the Complaint on
the merits and with prejudice regardless of whether it has approved the Plan of Allocation or
awarded attorneys' fees and expenses.
6. The Court approves, for purposes of settlement only and subject to further
consideration at the Settlement Hearing, the form, substance and requirements of the Notice of
Pendency of Class Action and Proposed Settlement (the "Notice') and the Proof of Claim form,
annexed hereto as Exhibits _ and _ respectively.
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Case 2:06-cv-00570-DAK-PMW Document 137-2 Filed 02/26/2009 Page 32 of 36
7. The Court approves, for the purposes of settlement only and subject to further
consideration at the Settlement Hearing, the appointment of Garden City Group, Inc. as the
Claims Administrator. The Claims Administrator shall cause the Notice and the Proof of Claim,
substantially in the forms annexed hereto, to be mailed, by first class mail, postage prepaid, on or
before , 2009 (the "Notice Date' ); to all Settlement Class Members who can
be identified with reasonable effort. Pursuant to the terms of the Stipulation, Defendants shall
cause NPS's transfer records and shareholder information to be made available to the Claims
Administrator for the purpose of identifying and giving notice to the Settlement Class. The
Claims Administrator shall use reasonable efforts to give notice to nominee purchasers such as
brokerage firms and other persons or entities who purchased NPS common stock during the
Settlement Class Period as record owners but not as beneficial owners. Such nominee
purchasers are directed, within seven (7) days of their receipt of the Notice, to either forward
copies of the Notice and Proof of Claim to their beneficial owners, or to provide the Claims
Administrator with lists of the names and addresses of the beneficial owners, and the Claims
Administrator is ordered to send the Notice and Proof of Claim promptly to such identified
beneficial owners. Nominee purchasers who elect to send the Notice and Proof of Claim to their
beneficial owners shall send a statement to the Claims Administrator confirming that the mailing
was made as directed. Plaintiff s Lead Counsel shall, seven days before the Settlement Hearing,
file with the Court proof of mailing of the Notice and Proofs of Claim.
8. The Court, for purposes of settlement only and subject to further consideration at
the Settlement Hearing, approves the form of Publication Notice in substantially the form and
content annexed hereto as Exhibit _ and directs that Plaintiff's Lead Counsel shall cause the
Publication Notice to be published in and transmitted over
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within ten days after the Notice-Date. Plaintiff s Lead Counsel shall file proof of publication of
the published notice with the Court seven days before the Settlement Hearing.
9. The Court, for purposes of settlement only and subject to further consideration at
the Settlement Hearing, finds that the form and content of the Notice, and the method set forth
herein of notifying the Settlement Class of the Stipulation and its terms and conditions, meet the
requirements of Rule 23 of the Federal Rules of Civil Procedure, Section 21D(a)(7) of the
Securities Exchange Act of 1934, 15 U.S.C. § 78u-4(a)(7) as amended by the Private Securities
Litigation Reform Act of 1995, and due process, constitute the best notice practicable under the
circumstances, and shall constitute due and sufficient notice to all persons and entities entitled
thereto.
10. In order to be entitled to participate in the Net Settlement Fund, in the event the
settlement is effected in accordance with the terms and conditions set forth in the settlement,
each Settlement Class Member shall take the following actions and be subject to the following
conditions:
(a) A properly executed Proof of Claim (the "Proof of Claim"), substantiallyin the form attached hereto as Exhibit 2, must be submitted to the ClaimsAdministrator, at the Post Office Box indicated in the Notice, postmarked notlater than , 2009. Such deadline may be further extended byCourt Order. Each Proof of Claim shall be deemed to have been submitted whenpostmarked (if properly addressed and mailed by first class mail, postage prepaid)provided such Proof of Claim is actually received prior to the motion for an orderof the Court approving distribution of the Net Settlement Fund. Any Proof ofClaim submitted in any other manner shall be deemed to have been submittedwhen it was actually received at the address designated in the Notice.
(b) The Proof of Claim submitted by each Settlement Class Member mustsatisfy the following conditions: (i) it must be properly completed, signed andsubmitted in a timely manner in accordance with the provisions of the precedingsubparagraph; (ii) it must be accompanied by adequate supporting documentationfor the transactions reported therein, in the form of broker confirmation slips,
! broker account statements, an authorized statement from the broker containing the- transactional information found in a broker confirmation slip, or such other
documentation as may be deemed adequate; (iii) if the person executing the Proof
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Case 2:06-cv-00570-DAK-PMW Document 137-2 Filed 02/26/2009 Page 34 of 36
of Claim is acting in a representative capacity, a certification of his currentauthority to act on behalf of the Settlement Class Member must be included in theProof of Claim; and (iv) the Proof of Claim must be complete and contain nomaterial deletions or modifications of any of the printed matter contained thereinand must be signed under penalty of perjury.
(c) As part of the Proof of Claim, each Settlement Class Member shall submitto the jurisdiction of the Court with respect to the claim submitted, and shall(subject to effectuation of the Settlement) release all Released Claims against theDefendants and their Related Parties as provided in the Stipulation.
11. Settlement Class Members shall be bound by all determinations and judgments in
this Litigation, whether favorable or unfavorable, unless such persons request exclusion from the
Settlement Class in a timely and proper manner, as hereinafter provided. A Settlement Class
Member wishing to make such request shall mail the request in written form by first class mail
postmarked no later than twenty-one (21) calendar days prior to the Settlement Hearing to the
address designated in the Notice. Such request for exclusion shall clearly indicate the name,
address and telephone number of the person seeking exclusion, that the sender requests to be
excluded from the Settlement Class in the In re NPS Pharmaceuticals, Inc. Securities Litigation,
and must be signed by such person. Such persons requesting exclusion are also directed to state:
the date(s), price(s), and the type(s) and amount(s) of all purchases and sales of NPS common
stock during the Settlement Class Period. The request for exclusion shall not be effective unless
it provides the required information and is made within the time stated above, or the exclusion is
otherwise accepted by the Court.
12. Settlement Class Members requesting exclusion from the Settlement Class shall
not be entitled to receive any payment out of the Net Settlement Fund as described in the
Stipulation and Notice.
13, The Court will consider comments and/or objections to the Stipulation, the Plan
of Allocation, or the request for an award of attorneys' fees and reimbursement of costs and
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Case 2:06-cv-00570-DAK-PMW Document 137-2 Filed 02/26/2009 Page 35 of 36
expenses only if such comments or objections and any supporting papers are filed in writing with
the Clerk of the Court, United States District Court for the District of Utah, 350 South Main
Street, Salt Lake City, Utah 84101-2180, and copies of all such papers are served, on or before
fourteen days before Settlement Hearing upon each of the following: William H. Narwold, Esq.,
Motley Rice LLC, One Corporate Center, 20 Church Street, 17th Floor, Hartford, Connecticut
06103, on behalf of the Class Representatives and the Class; and Michele F. Kyrouz, Latham &
Watkins LLP,140 Scott Drive, Menlo Park, California 94025 on behalf of the Defendants.
Attendance at the hearing is not necessary; however, persons wishing to be heard are required to
indicate in their written objection their intention to appear at the hearing. Persons who intend to
object to the Stipulation, the Plan of Allocation, and/or counsel's application for an award of
attorneys' fees and reimbursement of costs and expenses are not required to present any
evidence. However, if they intend to object such persons must include in their written objections
whether they intend to present any evidence,. and if so, must provide the identity of any witnesses
they may call to testify and exhibits they intend to introduce into evidence at the Settlement
Hearing. Settlement Class Members do not need to appear at the hearing or take any other action
to indicate their approval.
14. Pending final determination of whether the Stipulation should be approved, the
Settlement Class Representatives, all Settlement Class Members, and each of them, and anyone
who acts or purports to act on their behalf, shall not institute, commence or prosecute any action
which asserts any of the Released Claims against any Released Persons.
15. As provided in the Stipulation, Plaintiff s Lead Counsel may authorize and direct
the Escrow Agent to pay taxes and the reasonable fees and costs associated with giving notice to
the Settlement Class and the review of claims and administration of the Stipulation out of the
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Case 2:06-cv-00570-DAK-PMW Document 137-2 Filed 02/26/2009 Page 36 of 36
Gross Settlement Fund without further order of the Court or approval from Defendants or their
co»nsel.
16. If: (a) the settlement is terminated by Defendants pursuant to paragraph 7.7 of the
Stipulation; or (b) any specified condition to the Stipulation is not satisfied and the settlement is
terminated as provided in paragraph 7.3 of the Stipulation, then, in any such event, the
Stipulation, including any amendment(s) thereof, and this Preliminary Order shall be null and
void, of no further force or effect, and without prejudice to any party, and may not be introduced
as evidence or referred to in any actions or proceedings by any person or entity, and each party
shall be restored to his, her or its respective position immediately prior to the execution of the
Stipulation.
17. The Court retains exclusive jurisdiction over the Litigation to consider all further
matters arising out of or connected with the settlement.
Dated: Salt Lake City, Utah 2009
Honorable Judge Dale A. KimballUNITED STATES DISTRICT JUDGE
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Case 2:06-cv-00570-DAK-PMW Document 137-3 Filed 02/26/2009 Page 1 of 40
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Case 2:06-cv-00570-DAK-PMW Document 137-3 Filed 02/26/2009 Page 2 of 40
Must be PostmarkedNPS Pharmaceuticals, Inc. Securities Litigation
c/o The Garden City Group, Inc. \ pCNo Later Than PO Box 9329
II
\ I- J2009 Dub lin, OH 43017.42291
III ^IIIIII^^I^ I^IIIIIIIIIIIII^IIII I^I^^ II IIII^ IIIIII^II^ III1-866-396-6613
Claim Number: Control Number:
PROOF OF CLAIM AND RELEASE
YOU MUST COMPLETE THIS CLAIM FORM BY , 2009 TO BE ELIGIBLE TO SHARE IN THE SETTLEMENT.
TABLE OF CONTENTSPAGE #
SECTION A - CLAIMANT INFORMATION 2
SECTION B - NPS COMMON STOCK 3
SECTION C - RELEASE AND SIGNATURE 4
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QUESTIONS? PLEASE CALL 1-866.396-6613 OR VISIT WWW.GARDENCITYGROUP.COM
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Case 2:06-cv-00570-DAK-PMW Document 137-3 Filed 02/26/2009 Page 3 of 40
2 IIIIIIIIIIIIIIIIIIIIIII II 111111i IIIIIIIIIIIIIIIIIII IIIIIIII SECTION A - CLAIMANT INFORMATION
Claimant Name(s) (as you would like the name(s) to appear on the check, if eligible for payment):
Last 4 digits of Claimant Social Security Numberfraxpayer ID Number:
Name of the Person you would like the Claims Administrator to Contact Regarding This Claim (if different from the Claimant Name(s) listed above):
Claimant or Representative Contact Information:The Claims Administrator will use this information for all communications relevant to this Claim (including the check, If eligiblefor payment). If this information changes, you MUST notify the Claims Administrator in writing at the address above.
Street Address:
City:
State and Zip Code:
Country (Other than U.S.):
Daytime Telephone Number: ( - Evening Telephone Number: ( -
Email Address: I I(Email address Is not required, but if you provide it you authorize the Claims Administrator to use it In providing you with Information relevant to this claim.)
IF YOU FAIL TO SUBMIT A COMPLETE CLAIM BY , 2009 YOUR CLAIM IS SUBJECT TO REJECTIONOR YOUR PAYMENT MAY BE DELAYED.
NOTICE REGARDING ELECTRONIC FILES: Certain claimants with large numbers of transactions may request, or maybe requested, to submit information regarding their transactions in electronic files. All Claimants MUST submit amanually signed paper Claim Form listing all their transactions, whether or not they also submit electronic copies. if youwish to file your claim electronically, you must contact the Claims Administrator at 1-866-396-6613, or visit itswebsite at www.gardencitygroup.com, to obtain the required file layout. No electronic files will be considered to have beenproperly submitted unless the Claims Administrator issues to the Claimant a written acknowledgment of receipt andacceptance of electronically submitted data.
NOTE: Separate Proofs of Claim should be submitted for each separate legal entity (for example, a claim from JointOwners should not include separate transactions of just one of the Joint Owners, an Individual should not combine his orher IRA transactions with transactions made solely in the Individual's name). Conversely, a single Proof of Claim shouldbe submitted on behalf of one legal entity including all transactions made by that entity no matter how many separateaccounts that entity has (for example, a Corporation with multiple brokerage accounts should include all transactions madein NPS common stock during the Class Period on one Proof of Claim, no matter how many accounts the transactions were
made in.)
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3 IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII IIIIIIIIIIIII IIIiISECTION B - NPS COMMON STOCK
Persons who received NPS common stock during the Settlement Class Period other than by purchase are not eligible
to submit claims for those transactions, and all purchases must be documented.
1. BEGINNING HOLDINGS: At the close of business on August 6, 2001, 1 owned Ishares of NPS common stock. (If none, write "zero" or "0." If other than zero,
must be documented.)
2. PURCHASES: I made the following purchases of NPS common stock betweenAugust 7, 2001 and May 2, 2006, inclusive (if none, write "zero" or "0." If other than
zero, must be documented.)
Date(s) of Purchase Number of Shares Purchase Price Aggregate Cost
List Chronologically) of Common Stock Per Share of (including commissions,
(Month/DaylYear)(g y Purchased Common Stock taxes, and fees)
1 I1 II$ I.O I$ I•^
1 II I Is I C.] I$ 1.11
ll 11$ 1.01$ I.C^I I I U s I.n I $ 1.0
3. PURCHASES: Number of shares of NPS common stock purchased during the periodbetween May 3, 2006 and July 31, 2006, inclusive, (If none, write "zero" or
If other than zero, must be documented.)
4. SALES: I made the following sales of NPS common stock between August 7, 2001and July 31, 2006, inclusive (If none, write "zero" or "0." If other than zero, must be
documented.)
Number of Shares of Sale Price Amount ReceivedData ro) of Sala Per Share of (net of commissions,
(Month/DaylYear)(List Chronologically) Common Stock Sold
Common Stock taxes, and fees)
II 11$ I.0 I s I. n
II 11 s I.01$ IT
^ l l U s I. I$ 1.01 ,. , I^ II $ I. I s IT
! 5. UNSOLD HOLDINGS: At the close of business on July 31, 2006, 1 ownedshares of NPS common stock. (If none, write "zero" or "0:' If other than zero, must be I
documented.)IF YOU NEED ADDITIONAL SPACE TO UST YOUR TRANSACTIONS YOU MUST
PHOTOCOPY THIS PAGE AND CHECK THIS BOX CIIF YOU DO NOT CHECK THIS BOX THESE ADDITIONAL PAGES WILL NOOT, BE REVIEWED
Case 2:06-cv-00570-DAK-PMW Document 137-3 Filed 02/26/2009 Page 5 of 40
4 Illllllll 1111 1111111 111 ll lllllllll 111111 111 lllllllll SECTION E - RELEASE AND SIGNATURE
1. 1 affirm that I purchased NPS common stock between August 7, 2001 and May 2, 2006, inclusive. (Do not submit this Proof of Claimif you did not purchase NPS common stock during this period).
2. By submitting this Proof of Claim, I state that 1 believe in good faith that:
• I am a Settlement Class Member as defined above and in the Notice of Pendency of Class Action and Proposed Settlement,Motion for Attorneys' Fees and Settlement Hearing (the "Notice"); or
• I am acting for such person (Note: If you are acting in a representative capacity on behalf of a Settlement Class Member (e.g.,as an executor, administrator, trustee, or other representative), you must submit evidence of your current authority to act onbehalf of that Settlement Class Member. Such evidence would include, for example, letters testamentary, letters ofadministration, or a copy of the trust documents.)
I further state that I believe in good faith that:• I may not be a Settlement Class Member; and
• i am not a Defendant in the litigation that is the subject of this settlement or anyone excluded from the Net Settlement Fund;and
• I elect to participate in the proposed settlement described in the Notice and have not filed a request for exclusion.
3. 1 consent to the jurisdiction of the Court with respect to all questions concerning the validity of this Proof of Claim. I understand andagree that my claim may be subject to Investigation and discovery under the Federal Rules of Civil Procedure, provided that suchInvestigation and discovery shall be limited to my status as a Settlement Class Member and the validity and amount of my claim. Nodiscovery shall be allowed on the merits of the litigation or settlement in connection with processing of the Proofs of Claim.
4. Where requested below, I have set forth all relevant information regarding each of my purchases and/or sales of NPS common stockduring the Class Period. I agree to furnish additional information (including transactions in other NPS securities) to the ClaimsAdministrator, If requested to do so.
5. In support of my claim i have enclosed photocopies of the stockbroker's confirmation slips, stockbroker's statements, or otherdocuments evidencing each relevant purchase, sale or retention of NPS common stock. (IF ANY SUCH DOCUMENTS ARE NOT INYOUR POSSESSION, PLEASE OBTAIN A COPY OR EQUIVALENT DOCUMENTS FROM YOUR BROKER BECAUSE THESEDOCUMENTS ARE NECESSARY TO PROVE AND PROCESS YOUR CLAIM.)
6. 1 understand that the information contained in this Proof of Claim is subject to such verification as required by the ClaimsAdministrator or directed by the Court, and I agree to cooperate In any such verification. (The information requested herein Is designedto provide the minimum amount of information necessary to process most claims. The Claims Administrator may request additionalinformation to efficlently and reliably calculate your Recognized Claim. The Claims Administrator may condition acceptance of the claimupon the production of additional Information, including, where applicable, information concerning transactions in any derivatives of thesubject securities, e.g. option contracts.)
7. By operation of law, upon the Effective Date as defined in the Settlement, my decision not to exclude myself (or "opt-out') from thesettlement constitutes a full and complete release and discharge of the Released Claims as to all Defendants and their Related Partieson behalf of me, my past or present subsidiaries, parents, successors, predecessors, officers, partners, directors, agents, employees,attorneys, advisors, Investment advisors, insurers, auditors, accountants, legal representatives, heirs, executors, trustees,administrators, and assigns.
I declare under penalty of perjury under the laws of the United States of America that the foregoing information supplied by theundersigned is true and correct.
Executed this day of In(Month/Year) (City) (State/Country)
(Sign your name here)
(Type or print your name here)
(Joint owner sign your name here)
! (Joint owner type or print your name here)
(Capacity of persons signing, e.g., Beneficial
1 Purchaser, Executor or Administrator)
Case 2:06-cv-00570-DAK-PMW Document 137-3 Filed 02/26/2009 Page 6 of 40
ACCURATE CLAIM PROCESSING TAKES A SIGNIFICANT AMOUNT OF TIME.THANK YOU FOR YOUR PATIENCE.
REMINDER CHECKLIST• II
1. Please fill out this form in its entirety.
2. Don't forget to sign page 4 of this form.
3. For an overview of what constitutes adequate supporting documentationplease visit www.gardencitygroup.com/cases/filingtips.html.
4. DO NOT SEND ORIGINALS OF ANY SUPPORTING DOCUMENTS.
5. The Claims Administrator will acknowledge receipt of your Proof of Claim bymail, within 45 days. Your Claim is not deemed filed until you receive anacknowledgment postcard. If you do not receive an acknowledgment postcardwithin 45 days, please call the Claims Administrator toll. free at1-866-396-6613.
6. If you move, please send us your new address.
7. , Do not use highlighter on the Proof of Claim form or supportingdocumentation.
8. Please make a copy of your completed form for your records.
THIS PROOF OF CLAIM MUST BE POSTMARKED NO LATER THAN , 2009 AND MUST BE MAILED TO:
NPS Pharmaceuticals, Inc. Securities Litigationc/o The Garden City Group, Inc.
PO Box 9329Dublin, OH 43017-4229
Case 2:06-cv-00570-DAK-PMW Document 137-3 Filed 02/26/2009 Page 8 of 40
IN Tym UNITED STATES DISTRICT COURTDISTRICT OF UTAH, CENTRAL DIVISION
IN RE NPS PHARMACEUTICALS, INCSECURITIES LITIGATION,
Case No. 2:06cv00570 PGC
This Document relates to: All Actions
[PROPOSED] NOTICE OF PENDENCY ANDPROPOSED SETTLEMENT OF CLASS ACTION
TO: ALL PERSONS WHO PURCHASED THE COMMON STOCK OF NPSPHARMACEUTICALS, INC. ("NPS") BETWEEN AUGUST 7, 2001, AND MAY
2, 2006, INCLUSIVE, AND WHO WERE DAMAGED TH VREBY (THE."SETTLEMENT CLASS").
A FEDERAL COURT AUTHORIZED THIS NOTICE.
THIS IS NOT A SOLICITATION.
YOUR LEGAL RIGHTS MAY BE AFFECTED WHETHER YOU ACT OR NOT.PLEASE READ THIS NOTICE CAREFULLY.
Purpose of Notice
The purpose of this Notice is to inform you of a proposed settlement of the Litigation'al class member, may have' hts that you, as a potentialdescribed below. This Notice describes rig y p
under the proposed settlement and the steps you must take to exercise and preserve those rights.This Notice is not an opinion by the Court as to the merits of any claims or defenses asserted byany party in this Litigation, or the fairness or adequacy of the proposed settlement.
Notice of Settlement Hearing
® The settlement resolves a securities fraud lawsuit concerning PREOS (the "Litigation"),an injectible drug designed by NPS to treat osteoporosis. Lead Plaintiff alleges that
Case 2:06-cv-00570-DAK-PMW Document 137-3 Filed 02/26/2009 Page 9 of 40
during the Settlement Class Period, NPS made false and misleading statements toinvestors about PREOS's (1) safety and effectiveness; (2) prospects for Food and DrugAdministration ("FDA") approval and (3) potential profitability. Lead Plaintiff furtheralleges that these statements artificially inflated the price of NPS's publicly-traded
j securities, and that when the truth became known caused the price of NPS's securities todrop, damaging investors.
• The Stipulation of Settlement (the "Stipulation') provides a $15 million (Fifteen MillionU.S. Dollars) cash fund for the benefit of investors who were damaged as a result of theirpurchase of NPS common stock between August 7, 2001, and May 2, 2006 ("SettlementClass Members").
The Honorable Dale A. Kimball, United States District Judge, District of Utah, will holda hearing on , 2009 at _ a.m./p.m. in Courtroom # _, (the"Settlement Hearing"). At the Settlement Hearing, the Court will determine (1) whetherthe settlement of the Litigation for $15 million (Fifteen Million U.S. Dollars) and theproposed "Plan of Allocation" are fair, adequate and reasonable and (2) whether LeadCounsel's application for an award of attorneys' fees, costs and expenses andreimbursement of Lead Plaintiff s costs and expenses, should be approved and paid fromthe Settlement Fund.
To share in the settlement proceeds, you must submit a valid Proof of Claim and Release(attached herewith) establishing that you are a Settlement Class Member within 90 daysafter the mailing of the Notice, or such other time as may be set by the Court.
6 If you desire to exclude yourself from the Settlement Class or object to the settlement orthe fee and expense awards, your written request for exclusion in writing or yourobjection must be filed with the Court and postmarked no later than 21 calendar daysprior to the Settlement Hearing.
o The Court in charge of this case has not yet approved the settlement. Payments will onlybe made if and when the Court approves the settlement and the Court's Judgmentbecomes Final (as defined in $11.8 and 1.10 of the Stipulation). Please be patient.
o Capitalized terms herein are fully defined the Stipulation.
YOUR. LEGAL RIGHTS AND OPTIONS IN THIS SETTLEMENT:
SUBMIT A CLAIM The only way to get a payment.
FORMBY , 2009
EXCLUDE YOURSELF Get no payment. This is the only option that allows you to
BY , 2009 ever be part of any other lawsuit against Defendants and theirRelated Parties about the Released Claims.
OBJECT BY Write the Court and explain why you believe the settlement is
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, 2009 objectionable.
GO TO A YWARING ON Appear in Court and ask to voice your objections to the
, 2009 settlement.
DO NOTHING Get no payment. Give up your rights.
Potential Settlement Class Member Recovery
Pursuant to the Stipulation, the parties have established a fund consisting of $15,000,000 (FifteenMillion U.S. Dollars) in cash (the "Settlement Fund"), plus any interest earned on that amountafter it is deposited. Lead Plaintiff estimates that there were approximately 49,720,421 shares ofNPS common stock traded during the Settlement Class Period which may have been damaged.Lead Plaintiff estimates that the average recovery per damaged share of NPS common stockunder the settlement will be approximately 30¢, before deduction of Court-awarded attorneys'fees and expenses. A Settlement Class Member's actual recovery will be a proportion of the NetSettlement Fund determined by that claimant's Recognized Claim as compared to the totalRecognized Claims of all Settlement Class Members who submit valid Proofs of Claim. SomeSettlement Class Members may receive more or less than this amount depending on a number offactors, including (1) the number of claims submitted; (2) when the Settlement Class Memberpurchased NPS common stock; (3) whether the Settlement Class Member continued to hold thestock at the end of the Settlement Class Period; and (4) if the Settlement Class Member sold thestock, when they sold it and the price they received. For more complete information on yourRecognized Claim, see the "Plan of Allocation" on page 17.
Potential Outcome of Case
The parties disagree over liability and damages, as well as (at the very least) the followingspecific issues: (a) whether Defendants made any misstatements or omissions; (b) theappropriate economic model for determining how much, if at all, NPS common stock wasartificially inflated; (c) the amount by which NPS common stock was artificially inflated, if atall; (d) the effect of various market forces, including general market and industry conditions, onthe trading prices of NPS common stock during the Settlement Class Period; (e) the extent towhich the Company's allegedly false and/or misleading statements influenced, if at all, thetrading prices of NPS common stock; and (f) whether the statements made or facts allegedlyomitted were material or otherwise actionable under the federal securities laws. Defendants denyany fault, liability, or wrongdoing whatsoever, and deny that the Settlement Class Members havesuffered any damages. The Court has not, and if the Stipulation is approved, will not resolvethese disputed issues.
Attorneys' Fees and Costs
i' At the inception of the Litigation, the Court appointed Motley Rice LLC ("Motley Rice" or
"Lead Counsel") as Lead Counsel and has now preliminarily approved Motley Rice as counselfor the Settlement Class. Lead Counsel is moving the Court to award attorneys' fees in an
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amount not greater than one-fourth (25 1/o) of the Settlement Fund, and for reimbursement ofapproximately $ 208,000.00 for expenses incurred prosecuting the Litigation. The requested feesand expenses amount to an average of 8¢ per damaged share. Lead Counsel may also apply tothe Court for reimbursement of the Settlement Class Representative's (i.e., Lead Plaintiff)reasonable costs and expenses (including lost wages) incurred representing the Settlement Class.Lead Counsel has expended considerable time and effort prosecuting this case on a completelycontingent fee basis. Lead Counsel has advanced the expenses of the litigation, in theexpectation that if it was successful in obtaining a recovery for the Settlement Class it would bepaid from such recovery. In this type of litigation it is customary for counsel to be awarded apercentage of the common fund recovery as its attorneys' fees.
Further Infonnation
To obtain further information concerning the Litigation and this Notice you may contact therepresentative for Lead Counsel: Lance V. Oliver, Esq. Motley Rice LLC, 28 BridgesideBoulevard, Mount Pleasant, South Carolina, 29465 (843) 216-9618.
Reasons for Settlement
The principal reason Lead Plaintiff is settling is that it provides the Settlement Class with aguaranteed and immediate recovery. This benefit must be compared to the risk of no recoveryafter a contested trial and likely appeals, all of which could take years to resolve.
The principal reason Defendants are settling is to eliminate the expense, risks, and uncertainoutcome of the litigation. Defendants nonetheless deny all allegations of fault, liability, or
wrongdoing whatsoever.
[END OF COVER PAGE]
WHAT THIS NOTICE CONTAINS I
I
Table of Contents
Page
SUMMARY NOTICE 1
Potential Settlement Class Member Recovery 3
Potential Outcome of the Case 3
Attorneys' Fees and Costs 3
4Further Information
Reasons for Settlement 4
4
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BASIC INFORMATION 7
1. Why did I get this notice package? 7
2. What is this Litigation about? 7
3. Why is there a settlement? 8
WHO IS IN THE SETTLEMENT CLASS 9
4. How do I know if I am part of the Settlement Class? 9
5. Are there exceptions to being included? 9
6. What if I am still not sure if I am included? 9
THE SETTLEMENT BENEFITS — WHAT YOU GET 10
7. What does the settlement provide? 10
8. How much will my payment be? 10
HOW YOU GET A PAYMENT — SUBMITTING A PROOF OF CLAIM FORM 10
9. How can I get a payment? 10
10. When would I get my payment? 11
11. What am I giving up to get a payment or stay in the SettlementClass? 11
EXCLUDING YOURSELF FROM THE SETTLEMENT CLASS 11
12. How do I get out of the proposed Settlement Class? 11
13. If I do not exclude myself, can I sue Defendants and their Related12Parties for the same thing later?
14. If I exclude myself, can I get money from the proposed settlement? 12
THE LAWYERS REPRESENTING YOU 12
j 15. Do I have a lawyer in this case? 12
16. How will the lawyers be paid? 13
OBJECTING TO THE SETTLEMENT 13
17. How do I tell the Court that I do not like the proposed settlement? 13
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18. What is the difference between objecting and excluding? 14
THE COURT' S SETTLEMENT HEARING 14
19. When and where will the Court decide whether to approve theproposed settlement? 14
20. Do I have to come to the Settlement Hearing? 15
21. May I speak at the Settlement Hearing? 15
IF YOU DO NOTHING 16
22. What happens if I do nothing at all? 16
GETTING MORE INFORMATION 16
23. Are there more details about the proposed settlement? 16
24. How do I get more information? 16
PLAN OF ALLOCATION OF NET SETTLEMENT FUND AMONG SETTLEMENTCLASS MEMBERS 17
SPECIAL NOTICE TO SECURITIES BROKERS AND OTHER NOMINEES 19
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BASIC INFORMATION
1. Why did I get this notice package?
You or someone in your family may have purchased NPS common stock between August 7,2001, and May 2, 2006, inclusive, and may have been damaged thereby.
The Court directed that this Notice be sent to Settlement Class Members because they have aright to know about a proposed settlement of the Litigation, and their options, before the Courtdecides whether to approve the settlement. If the Court approves the settlement, if and when theCourt approves the settlement and the Court's Judgment becomes Final (as defined in 111.8 and1_.10 of the Stipulation), a Court-appointed administrator will make the payments to SettlementClass Members.
This package explains the Litigation, the settlement, Settlement Class Members' relevant legalrights, what benefits are available, who is eligible, and how to get them.
2. What is this Litigation about?
The Court in charge of the case is the United States District Court for the District of Utah,Central Division, and the case is styled In re NPS Pharmaceuticals, Inc. Securities Litigation,
Case No. 2:06cv00570 PGC.
The case was filed on July 12, 2006, against Defendants, on behalf of all injured investors whopurchased NPS's common stock between August 7, 2001, and May 2, 2006. The complaintalleges violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the"Exchange Act"), 15 U.S.C. §§ 78j(b) and 78t(a), and Rule lOb-5 promulgated there under, 17C.F.R. § 240.10b-5. On November 17, 2006, the Court designated PHARMA/WHEALTHManagement Company, S.A. ("PHARMA."), a Luxemburg corporation that invests funds in thehealthcare, biotech and pharmaceutical sectors, as Lead Plaintiff ("Lead Plaintiff') pursuant tothe Private Securities Litigation Reform Act of 1995 CTSLRA." ). In the same Order, the Courtappointed Motley Rice LLC ("Motley Rice" or "Lead Counsel") Lead Counsel and Burbidge &Mitchell as Liaison Counsel.
Defendants are NPS and certain of its executive officers and directors (collectively"Defendants") during the Settlement Class Period: Hunter Jackson, Chief Executive Officer andChairman of the Board; N. Anthony Coles, President, Chief Operating Officer and BoardMember; Edward F. Nemeth, Vice President and Chief Scientific Officer; Thomas Marriott, VicePresident of Development and Research; James U. Jensen, Vice President for CorporateDevelopment and Legal Affairs; Alan Rauch, Senior Vice President of Clinical Research andMedical Affairs and Chief Medical Officer; Morgan R. Brown, Senior Vice President of
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Finance; Robert K. Merrell, Chief Financial Officer and Treasurer; David L. Clark, VicePresident of Corporate Affairs; Gerard J. Michel, Chief Financial Officer; G. Thomas Heath,Senior Vice President of Marketing and Sales and Alan L. Mueller Vice President of DrugDiscovery (the "Individual Defendants").
The Consolidated Amended Complaint (the "Complaint') alleges that during the SettlementClass Period Defendants publicly misrepresented PREOS's safety, efficacy, potential market isize, and prospects for FDA approval. The Complaint alleges that these misstatements andomissions induced Settlement Class Members to buy NPS common stock at artificially inflatedprices during the Settlement Class Period, and when the true facts carne to light, Settlement ClassMembers were damaged because the value of NPS's stock plummeted.
Plaintiff alleges that the foregoing conduct violated the federal securities laws, and seeks moneydamages against Defendants. Defendants deny all allegations of misconduct in the Complaint,and deny having engaged in any wrongdoing whatsoever.
3. Why is there a settlement?
On March 19, 2007, Defendants moved to dismiss the Complaint pursuant to Rule 12(b)(6) ofthe Federal Rules of Civil Procedure and on July 3, 2007, the Court denied Defendants' Motionto Dismiss. Defendants have answered the Complaint; denied Plaintiff's claims; assertednumerous affirmative defenses and contend that they are not liable to Plaintiff and have donenothing wrong.
After the Court denied Defendants' Motion to Dismiss, the parties commenced discovery. OnMarch 19, 2008, the Court stayed all proceedings so the parties could engage in mediation.
Mediation is the process whereby the parties to a lawsuit engage a neutral third party to evaluatethe claims and facilitate settlement discussions. With the help of a mediator, Lead Counsel,Defense Counsel and Defendants' insurers engaged in ongoing phone negotiations through theend of August 2008. Ultimately the parties agreed — subject to court approval — to settle the case
for $15 million.
The Court has preliminarily approved the settlement and class certification. The Court has notfinally approved this settlement, and any recovery herein is subject to such approval. The Courtdid not finally decide the claims in favor of Plaintiff or Defendants. Assuming the Court finallyapproves the settlement (see page 14), the Settlement Class Members will receive compensationwithout running the risks and cost of continued litigation, a contested trial and appeals. Lead
t is best for all Settlement Class Members.' 'Plamff and its counsel believe the settlement
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WHO IS IN THE SETTLEMENT CLASSi
To see if you will get money from this settlement, you must first determine whether you are aSettlement Class Member.
4. How do I know if I am part of the Settlement Class?
The Settlement Class is defined as: all persons who purchased the common stoclt of NPSPharmaceuticals, Inc. between August 7, 2001, and May 2, 2006, inclusive, and who weredamaged thereby.
5. Are there exceptions to being included?
Defendants, members of the immediate families of the Individual Defendants, current directorsand officers of NPS and the legal representatives, heirs, successors, or assigns of any suchexcluded Person are excluded from the Settlement Class.
If one of your mutual funds purchased NPS common stock during the Settlement Class Period,that alone does not make you a Settlement Class Member. You are a Settlement Class Memberonly if you directly purchased NPS common stock during the Settlement Class Period. Checkyour investment records or contact your broker to see if you purchased NPS common stockduring the Settlement Class Period.
Ifyou sold NPS common stock during the Settlement Class Period, that alone does not make youa Settlement Class Member. You are a Settlement Class Member only if you purchased NPS
common stock during the Settlement Class Period.
6. What if I am still not sure if I am included?
If you are still not sure whether you are a Settlement Class Member, you can call The Claims
Administrator at 1-866-396-6613 or visit www.npssettlement.com for more information. Oryou can fill out and return the Proof of Claim form described on page 11, in question 10, to see if
you qualify.
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THE SETTLEMENT BENEFITS — WHAT YOU GET
7. What does the settlement provide?
In exchange for the settlement and dismissal of the Litigation, Defendants agreed to create a $15million (Fifteen Million U.S. Dollars) fund to be divided, after fees, expenses, taxes andadministration costs, among all Settlement Class Members who send in valid Proof of Claimforms.
8. How much will my payment be?
Your share of the fund will depend on the total Recognized Claims represented by the validProof of Claim forms that Settlement Class Members send in, the type and amounts of NPSsecurities you purchased, how much you paid for them, when you purchased them and whetheror when you sold them, and if so for how much.
You can calculate your Recognized Claim in accordance with the formula shown below in thePlan of Allocation. It is unlikely that you will get a payment for the entire value of yourRecognized Claim. After all Settlement Class Members have sent in their Proof of Claim forms,the payment you get will be a part of the Net Settlement Fund equal to your Recognized Claimdivided by the total of everyone's Recognized Claims. See the Plan of Allocation beginning on
page 17 for more information on your Recognized Claim.
HOW YOU GET A PAYMENT — SUBMITTING A PROOF OF CLAIM FORM
9. How can I get a payment?
iTo qualify for a payment, you must send in a Proof of Claim form. A Proof of Claim form isbeing circulated with this Notice. You may also get a Proof of Claim form on the Internet at
www.npssettlement.com. Read the instructions carefully, fill out the Proof of Claim form,include all the documents the form asks for, sign it, and mail it postmarked no later than , 2009.
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10. When would I get my payment?
The Court will hold a hearing on , 2009, to decide whether to finally approvethe settlement. Even if the Court finally approves the settlement, there may be appeals. It isalways uncertain whether these appeals can be resolved, and resolving them can take time,perhaps more than a year. It also takes time for all the Proofs of Claim to be processed. Pleasebe patient.
11. What am I giving up to get a payment or stay in the Settlement Class?
Unless you exclude yourself, you are staying in the Settlement Class, and that means that, uponthe "Effective Date," you will release all "Released Claims" (as fully defined in 111.21 and 1.28of the Stipulation) against the Defendants and their "Related Parties." Generally, if you remain amember of the Settlement Class you will release all claims you have against Defendants arisingout of, relating to, or in connection with the purchase and/or sale of the publicly-traded securitiesof NPS during the Settlement Class Period.
If you remain a member of the Settlement Class, all of the Court's orders will apply to you andlegally bind you.
EXCLUDING YOURSELF FROM THE SETTLEMENT CLASS
If you do not want a payment from the settlement, but you want to keep any right you may haveto sue or continue to sue Defendants and their Related Parties, on your own, about the ReleasedClaims, then you must take steps to preserve those rights and exclude yourself from theSettlement Class. This is called excluding yourself — or is sometimes referred to as "opting out"of the Settlement Class. NPS may withdraw from and terminate the settlement if putativeSettlement Class Members who purchased in excess of a certain number of NPS common stockexclude themselves from the Settlement Class.
12. How do I get out of the proposed Settlement Class?
To exclude yourself from the Settlement Class, you must send a signed letter by mail stating thatyou "request exclusion from the Settlement Class in In re NPS Pharmaceuticals, Inc. Securities
Litigation, Case No. 2:06cv00570 PGC." Your letter should also state the date(s), price(s), andthe type(s) and amounts) of all your purchases and sales of NPS common stock during the
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Settlement Class Period. In addition, be sure to include your name, address, telephone number,and your signature. You must mail your exclusion request postmarked no later than , 2009 or 21 calendar days prior to the Settlement Hearing to:
NPS Pharmaceuticals, Inc. Securities Litigationc/o The Garden City Group, Inc.
P.O. Box 9329Dublin, OR 43017-4229
1-866-396-6613
You cannot exclude yourself by telephone or by e-mail. If you ask to be excluded, you will notget any settlement payment, and you cannot object to the settlement. You will not be legallybound by anything that happens in this lawsuit, and you may be able to sue (or continue to sue)Defendants and their Related Parties in the future.
13. If I do not exclude myself, can I sue Defendants and their Related Parties for the samething later?
No. Unless you exclude yourself, you give up ally rights to sue Defendants and their RelatedParties for any and all Released Claims. If you have a pending lawsuit speak to your lawyer inthat case immediately. You must exclude yourself from this , Settlement Class to continue yourown lawsuit. Remember, the exclusion deadline is , 2009.
14. If I exclude myself, can I get money from the proposed settlement?
No. If you exclude yourself, do not send in a Proof of Claim form to ask for any money. Butyou may exercise any right you may have to sue, continue to sue, or be part of a different lawsuitagainst Defendants and their Related Parties concerning the Released Claims.
THE LAWYERS REPRESENTING YOU
15. Do I have a lawyer in this case?
The Court appointed the law firm of Motley Rice in Hartford, CT and Mt. Pleasant, SC torepresent all Settlement Class Members. These lawyers are called Plaintiff's Lead Counsel. Youwill not be separately charged for these lawyers. The Court will determine the amount of LeadCounsel's fees and expenses, which will be paid from the Gross Settlement Fund. If you want tobe represented by your own lawyer, you may hire one at your own expense.
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16. How will the lawyers be paid?
Lead Counsel are moving the Court to award attorneys' fees from the Gross Settlement Fund inan amount not greater than one-fourth (25%) of the Gross Settlement Fund and forreimbursement of approximately $208,000 for their costs and expenses, plus interest at the samerate as earned by the Gross Settlement Fund.
Lead Counsel may also move the Court to award a payment to the Settlement ClassRepresentative for its reasonable costs and expenses (including lost wages) directly relating to itsrepresentation of the Settlement Class.
Lead Counsel, without further notice to the Settlement Class, will subsequently apply to theCourt for payment of the Claims Administrator's fees and expenses incurred in connection withgiving notice, administering the settlement and distributing the settlement proceeds to themembers of the Settlement Class.
OBJECTING TO THE SETTLEMENT
You can tell the Court that you do not agree with the settlement or some part of it.
17. How do I tell the Court that I do not like the proposed settlement?
If you are a Settlement Class Member you can object to the settlement or any of its terms, theproposed Plan of Allocation and/or the application by Lead Counsel for an award of fees andexpenses. You may write to the Court setting out your objection. You may give reasons whyyou think the Court should not approve any or all of the settlement terms or arrangements. TheCourt will consider your views if you file a proper objection within the deadline identified, andaccording to the following procedures. The Court may approve the settlement even if youobject.
To object, you must send a signed letter stating that you object to the proposed settlement in In
re NPS Pharmaceuticals, Inc. Securities Litigation, Case No. 2:06cv00570 PGC. Be sure toinclude your name, address, telephone number, and your signature, identify the date(s), price(s),and the type(s) and amount(s) of all purchases and sales of NPS securities you made during theSettlement Class Period, and state the reasons why you object to the settlement. Your objectionmust be filed with the Court and served on all the following counsel on or before 2009 or 21 calendar days prior to the Settlement Hearing:
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COURT PLAINTIFF'S LEAD DEFENDANTS' COUNSELCOUNSEL
Clerk of the Court William H. Narwold Michele F. Kyrouz
United States District Court Motley Rice LLC Latham & Watkins LLP
for the District of Utah One Corporate Center 140 Scott Drive
350 South Main Street 20 Church Street, 17th Floor Menlo Park, California 94025
Salt Lake City, Utah 84101- Hartford, CT 061032180
Lance V. OliverMotley Rice LLC28 Bridgeside Blvd.Mount Pleasant, SC 29465
You do not need to go to the Settlement Hearing to have your written objection considered bythe Court. At the Settlement Hearing, any Settlement Class Member who has not previouslysubmitted a request for exclusion from the Settlement Class and who has complied with theprocedures set out in this question and question 21 below for filing with the Court and providingto the counsel for Plaintiff and Defendants a statement of an intention to appear at the SettlementHearing may also appear and be heard, to the extent allowed by the Court, to state any objectionto the settlement, the Plan of Allocation or Plaintiff's Lead Counsel's motion for an award ofattorneys' fees and reimbursement of expenses. Any such objector may appear in person orarrange, at that objector's expense, for a lawyer to represent the objector at the SettlementHearing.
18. What is the difference between objecting and excluding?
Objecting is simply telling the Court that you do not like something about the proposedsettlement. You can object only if you stay in the Settlement Class. Excluding yourself is tellingthe Court that you do not want to be part of the Class. If you exclude yourself, you have no basisto object because the case no longer affects you.
THE COURT'S SETTLEMENT HEARING
The Court will hold a hearing to decide whether to approve the proposed settlement. You mayattend and you may ask to speak, but you do not have to.
19. When and where will the Court decide whether to approve the proposed settlement?
The Court will hold a Settlement Hearing at_: _ M. on day, 2009, at the United States District Court for the District of Utah, 350 South Main Street SaltLake City, Utah 84101-2180. At this hearing the Court will consider whether the settlement isfair, reasonable and adequate. At the Settlement Hearing, the Court also will consider the
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i
proposed Plan of Allocation for the proceeds of the settlement and the application of Plaintiff'sLead Counsel for attorneys' fees and reimbursement of expenses. The Court will take intoconsideration any written objections filed in accordance with the instructions at question 17. TheCourt also may listen to people who have properly indicated, within the deadline identified i
above, an intention to speak at , the hearing; but decisions regarding the conduct of the hearing
will be made by the Court. See question 21 for more information about speaking at the hearing.The Court may also decide how much to pay to Plaintiff's Lead Counsel. After the hearing, theCourt will decide whether to approve the settlement. Plaintiff s Lead Counsel does not knowhow long these decisions will take.
You should be aware that the Court may change the date and time of the Settlement Hearing.Thus, if you want to come to the hearing, you should check with Plaintiff s Lead Counsel beforecoming to be sure that the date and/or time has not changed.
20. Do I have to come to the hearing?
No. Plaintiff's Lead Counsel will answer any questions the Court may have. But, you arewelcome to come at your own expense. If you send an objection, you do not have to come toCourt to talk about it. As long as you filed your written objection on time, the Court willconsider it. You may also pay your own lawyer to attend, but it is not necessary for your lawyerto attend. Settlement Class Members do not need to appear at the hearing or take any otheraction to indicate their approval.
21. May I speak at the Settlement Hearing?
If you object to the settlement, you may ask the Court for permission to speak at the SettlementHearing. To do so, you must include with your objection (see question 17 above) a statementstating that it is your "Notice of Intention to Appear in In re 1VPS Pharmaceuticals, Inc.
.Securities Litigation, Case No. 2:06cv00570 PGC." Persons who intend to object to thesettlement, the Plan of Allocation, and/or Lead Counsel's application for an award of attorneys'
fees and expenses and who desire to present evidence at the Settlement Hearing must include intheir written objections the identity of any witnesses they may call to testify and exhibits theyintend to introduce into evidence at the Settlement Hearing. You cannot speak at the hearing ifyou excluded yourself from the Settlement Class or if you have not provided written notice ofyour intention to speak at the Settlement Hearing by the deadline identified, and in accordancewith the procedures described herein.
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IF YOU DO NOTHING
22. What happens if I do nothing at all?
If you do nothing, you will get no money from the settlement and you will be precluded fromstarting a lawsuit, continuing with a lawsuit, or being part of any other lawsuit againstDefendants and their Related Parties about the Released Claims in this case, ever again. Toshare in the Net Settlement Fund you must submit a Proof of Claim form (see question 9). Tostart, continue or be a part of any other lawsuit against Defendants and their Related Partiesabout the Released Claims in this case you must exclude yourself from this Settlement Class (seequestion 12).
GETTING MORE INFORMATION
23. Are there more details about the proposed settlement?
This notice summarizes the settlement. More details are in the Stipulation dated February 24,2009. You can get a copy of the Stipulation by writing to William H. Narwold, Esq., MotleyRice LLC, One Corporate Center, 20 Church Street, 17th Floor, Hartford, CT 06103, or byvisiting www.npssettlement.com .
You also can call the Claims Administrator at 1-866-396-6613 toll free; write to the ClaimsAdministrator at:
NPS Pharmaceuticals, Inc. Securities Litigationc/o The Garden City Group, Inc.
P.O. Box 9329Dublin, OH 43017-4229;
or visit the website at www.npssettlement.com, where you will find answers to commonquestions about the settlement, a Proof of Claim form, plus other information to help youdetermine whether you are a Settlement Class Member and whether you are eligible for a
payment.
24. How do I get more information?
For even more detailed information concerning the'matters involved in this Litigation, pleaseins the Stipulation, the Orders entered by the Court and other papers filed in
the pleadings,̂ref
gP
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the case. These documents may be inspected at the Office of the Clerk of the United StatesDistrict Court for the District of Utah, 350 South Main Street Salt Lake City, Utah 84101-2180,during regular business hours.
PLAN OF ALLOCATION OF NET SETTLEMENT FUNDAMONG SETTLMENT CLASS MEMBERS
General Overview of the Plan: The $15,000,000 (Fifteen Million U.S. Dollars) Settlement Fundand the interest earned thereon shall be the Gross Settlement Fund. The Gross Settlement Fund,less all taxes, approved costs, fees and expenses (the "Net Settlement Fund") shall be distributedto members of the Settlement Class who submit acceptable Proofs of Claim ("AuthorizedClaimants").
The Claims Administrator shall determine each Authorized Claimant's pro rata share of the NetSettlement Fund based upon each Authorized Claimant's "Recognized Claim." The RecognizedClaim formula is not intended to be an estimate of the amount of what a Settlement ClassMember might have been able to recover after a trial; nor is it an estimate of the amount that willbe paid to Authorized Claimants pursuant to the settlement.
Basis of the Plan: The proposed Plan of Allocation (the "Plan") reflects the proposition allegedin the Complaint: that the prices of NPS securities were artificially inflated during theSettlement Class Period because Defendants made false and misleading statements concerningPREOS.
Plaintiffs damages expert opined that NPS's common stock (1) traded in a developed andefficient market during the Settlement Class Period and (2) that the market price of NPScommon stock was artificially inflated by approximately $8.04 during the Settlement ClassPeriod because of Defendants' allegedly-false and misleading statements and omissionsconcerning PREOS. The Plan is based on these opinions. Each Settlement Class Member'sDamages and recovery, however, will vary depending on any number of factors, including whenthe Settlement Class Member purchased and/or sold NPS common stock, the purchase price paidand the sales price received, and various financial assumptions. If you desire further explanationor have questions about the Plan, please consult the sources identified in question number 23.
The Plan: For shares of NPS common stock (NASDAQ ticker: NPSP) purchased during theSettlement Class Period, "Recognized Claims" will be calculated as follows:
To the extent there are sufficient funds in the Net Settlement Fund, each Authorized Claimant
i will receive an amount equal to the Authorized Claimant's entire Recognized Loss. However, ifthe amount in the Net Settlement Fund is not sufficient to permit payment of the totalRecognized Loss of each Authorized Claimant, then each Authorized Claimant shall be paid thepercentage that each Authorized Claimant's Claim bears to the total of the claims of allAuthorized Claimants. Payment in this manner shall constitute payment in full and completecompensation for all Authorized Claimant's Recognized Losses.
However, if the Authorized Claimant made a profit on a sale of NPS common stock purchasedbetween August 7, 2001 and May 2, 2006 (the "Settlement Class Period") (i.e., the sales price
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per share of NPS common stock was higher than the purchaseprice per share of NPS commonstock), then the Recognized Loss for those shares of common stock shall be zero, and any suchprofits will be offset against the Recognized Loss, if any, from any other Settlement Class Periodpurchases of NPS common stock.
For Settlement Class Members who held NPS common stock before the Settlement Class Periodor made multiple purchases or sales during the Settlement Class Period, the first-in, first-out("FIFO") method will be applied to such holdings, purchases and sales for purposes ofcalculating a Recognized Claim. Under the FIFO method, each sale of NPS common stock willbe matched, in chronological order, first against NPS common stock held at the beginning of theSettlement Class Period. The remaining sales of NPS common stock during the Settlement ClassPeriod will then be matched, in chronological order, against purchases of NPS common stockexecuted during the Settlement Class Period. A purchase or sale of NPS common stock shall bedeemed to have occurred on the "contract" or "trade" date as opposed to the "settlement" or"payment" date.The amount of an Authorized Claimant's Recognized Loss shall be determined as follows:
(1) For each share of NPS common stock purchased or otherwise acquired between August7, 2001 and March 9, 2006, inclusively:
(a) that an Authorized Claimant sold prior to March 10, 2006, the AuthorizedClaimant shall have no "Reco gnized Loss."
(b) that an Authorized Claimant sold between March 10, 2006 and the market closeon May 2, 2006, inclusively, the Recognized Loss per share shall be equal to the lesser
of (a) the difference between (x) purchase price paid per share (excluding commissions)and (y) the proceeds received on sale per share (excluding commissions) or (b) $4.84 pershare (i.e., the market adjusted price decline on March 10, 2006).
(c) that an Authorized Claimant sold during the period between May 3, 2006 andJuly 31, 2006, the Recognized Loss per share shall be equal to the lesser of (a) thedifference between (x) purchase price paid per share (excluding commissions) and (y)$4.99 per share or (b) the difference between (x) purchase price paid per share (excludingcommissions) and (y) the proceeds received on sale per share (excluding commissions)or (c) $8.04 per share (i.e., the total market adjusted price decline for the entireSettlement Class Period).
(d) that an Authorized Claimant sold or retained after July 31, 2006, the lesser of (a)the difference between (x) purchase price paid per share (excluding commissions) and (y)$4.99 per share or (b) $8.04 per share (i.e., the total market adjusted price decline for theentire Settlement Class Period).
(2) For each share of NPS common stock purchased or otherwise acquired between March10, 2006 and the market close on May 2, 2006, inclusively:
(a) that an Authorized Claimant sold prior to the market close on May 2, 2006, theAuthorized Claimant shall have no "Recognized Loss."
18
Case 2:06-cv-00570-DAK-PMW Document 137-3 Filed 02/26/2009 Page 26 of 40
(b) that an Authorized Claimant sold during the period between May 3, 2006 andJuly 31, 2006, the Recognized Loss per share shall be equal to the lesser of (a) thedifference between (x) purchase price paid per share (excluding commissions) and (y)$4.99 per share or (b) the difference between (x) purchase price paid per share (excludingcommissions) and (y) the proceeds received on sale per share (excluding commissions)or (b) $3.20 per share (i. e., the market adjusted decline on May 3, 2006).
(c) that an Authorized Claimant sold or retained after July 31, 2006, the lesser of (a)the difference between (x) purchase price paid per share (excluding commissions) and (y)$4.99 per share or (b) $3.20 per share (i.e., the total market adjusted price decline onMay 3, 2006).
Settlement Class Members who do not submit valid Proofs of Claim will not share in thesettlement proceeds. Settlement Class Members who do not submit acceptable Proofs of Claimwill nevertheless be bound by the Stipulation and the Order and Final Judgment of the Courtdismissing this Litigation.
Distributions will be made to Authorized Claimants after (1) the Effective Date (as fully definedin % 1.6 of the Stipulation) and (2) all claims have been processed. If any funds remain in the NetSettlement Fund by reason of un-cashed distributions or otherwise, then, after the ClaimsAdministrator has made reasonable and diligent efforts to have Settlement Class Members whoare entitled to participate in the distribution of the Net Settlement Fund cash their distributions,any balance remaining in the Net Settlement Fund six (6) months after the initial distribution ofsuch funds shall be re-distributed to Settlement Class Members who have cashed their initialdistributions and who would receive at least $10.00 from such re-distribution, after payment ofany unpaid costs or fees incurred in administering the Net Settlement Fund for such re-distribution. If after six months after such re-distribution any funds shall remain in the NetSettlement Fund, then such balance shall be contributed to non-sectarian, not-for-profit,501(c)(3) organization(s) agreed upon by Plaintiff s Lead Counsel and Counsel for Defendants.
SPECIAL NOTICE TO SECURITIES BROKERS AND OTITER NOMINEES
If you purchased NPS common stock (NASDAQ ticker: NPSP) between August 7, 2001 andMay 2, 2006, inclusive, for the beneficial interest of any person or organization other thanyourself, the Court has directed that, WITHIN SEVEN (7) DAYS OF YOUR RECEIPT OFTHIS NOTICE, you either (a) provide to the Claims Administrator the name and last knownaddress of each person or organization for whom or which you purchased those NPS sharesduring such time period or (b) request additional copies of this Notice and the Proof of Claimform, which will be provided to you free of charge, and within seven (7) days mail the Noticeand Proof of Claim form directly to the beneficial owners of those NPS shares. If you choose tofollow alternative procedure (b), the Court has directed that, upon such mailing, you send astatement to the Claims Administrator confirming that the mailing was made as directed. Youare entitled to reimbursement from the Settlement Fund of your reasonable expenses actuallyincurred in connection with the foregoing, including reimbursement of postage expense and thecost of ascertaining the names and addresses of beneficial owners. Those expenses will be paidupon request and submission of appropriate supporting documentation. All communicationsconcerning the foregoing should be addressed to the Claims Administrator:
i
+. 19
Case 2:06-cv-00570-DAK-PMW Document 137-3 Filed 02/26/2009 Page 27 of 40
NPS Pharmaceuticals, Inc. Securities Litigationc/o The Garden City Group, Inc.
P.O. Box 9329Dublin, OH 43017-4229
1-866-396-6613
Dated: Salt Lake City, Utah , 2009
By Order of the CourtCLERK OF THE COURT
20
Case 2:06-cv-00570-DAK-PMW Document 137-3 Filed 02/26/2009 Page 29 of 40
Privileged & Confidential Settlensent Coninzunication2/25/2009
IN TH C UNITED STATES DISTRICT COURTDISTRICT OF UTAH, CENTRAL DIVISION
IN RE NPs PHARMACEUTICALS, INCSECURITIES LITIGATION,
Case No. 2:06cv00570 PGC
This Document relates to: All Actions
[PROPOSED] SUMMARY NOTICE OF PENDENCY OF SETTLEMENT CLASSACTION, PROPOSED SETTLEMENT AND SETTLEMENT HEARING
TO: ALL PERSONS WHO PURCHASED THE COMMON STOCK. OF NPSPHARMACEUTICALS, INC. ("NPS") BETWEEN AUGUST 7, 2001 AND MAY 2,2006, INCLUSIVE, AND WHO WERE DAMAGED THEREBY (THE"SETTLEMENT CLASS").
YOU ARE HEREBY NOTIFIED, PURSUANT TO RULE 23 OF THE FEDERAL
RULES OF CIVIL, PROCEDURE AND BY ORDER OF THE COURT THAT A
SETTLEMENT OF THE ABOVE-CAPTIONED ACTION IN THE AMOUNT OF $15,000,000
(FIFTEEN MILLION U.S. DOLLARS) IN CASH HAS BEEN REACHED, SUBJECT TO
FINAL COURT APPROVAL. A HEARING WILL BE HELD BEFORE THE HONORABLE
JUDGE DALE A. KIMBALL, UNITED STATES DISTRICT JUDGE IN THE UNITED
STATES DISTRICT COURT FOR THE DISTRICT OF UTAH, 350 SOUTH MAIN STREET,
SALT LAKE CITY, UTAH 84101-2180, AT M., ON 12009
TO DETERMINE, AMONG OTHER THINGS, WHETHER THE PROPOSED SETTLEMENT
SHOULD BE APPROVED AS FAIR, REASONABLE, AND ADEQUATE, AND TO
Case 2:06-cv-00570-DAK-PMW Document 137-3 Filed 02/26/2009 Page 30 of 40
Privileged & Confidential Settlement Communication2/25/2009
CONSIDER THE APPLICATION OF PLAINTIFF'S COUNSEL FOR ATTORNEYS' FEES
AND RERvEBURSEMENT OF COSTS AND EXPENSES.
IF YOU ARE A MEMBER OF THE SETTLEMENT 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 Pendency of
Class Action and Proposed Settlement, Motion for Attorneys' Fees and Settlement Hearing and a
Proof of Claim form, you may obtain copies of these documents by contacting the Claims
Administrator:
NPS Pharmaceuticals, Inc. Securities Litigationc/o The Garden City Group, Inc.
P.O. Box 9329Dublin, OH 43017-4229
1-866-396-6613
Inquiries, other than requests for the forms of Notice and Proof of Claim, may be made
to Plaintiff s Lead Counsel:
William H. Narwold Lance V. Oliver, Esq.Motley Rice LLC Motley Rice LLCOne Corporate Center 28 Bridgeside Boulevard20 Church Street, 17th Floor Mount Pleasant, SC 29465
Hartford, CT 06103 Tel: (843) 216-9000
Tel: (860) 882-1681
To participate in the settlement, you must submit a Proof of Claim no later than
2009. If you are a Settlement Class Member and do not exclude yourself
from the Settlement Class, you will be bound by the Order and Final Judgment of the Court. To
exclude yourself from the Settlement Class, you must submit a request for exclusion to NPS
Pharmaceuticals, Inc. Securities Litigation at the address noted above postmarked no later
than , 2009. Any objections to the settlement must be filed by
2
Case 2:06-cv-00570-DAK-PMW Document 137-3 Filed 02/26/2009 Page 31 of 40
Privileged & Confidential Settlement Communication2/25/2009
, 2009. If you are a Settlement Class Member and do not submit a proper
Proof of Claim, you will not share in the settlement but you nevertheless will be bound by the
Order and Final Judgment of the Court.
You may obtain further information by contacting the Claims Administrator.
By Order of The Court
3 i
Case 2:06-cv-00570-DAK-PMW Document 137-3 Filed 02/26/2009 Page 33 of 40
i
IN THE UNITED STATES DISTRICT COURTDISTRICT OF UTAH, CENTRAL DIVISION
i
IN RE NPS PHARMACEUTICALS, INCSECURITIES LITIGATION,
Case No. 2:06cv00570 PGC
This Document relates to: All Actions
(PROPOSEDI ORDER AND FINAL JUDGMENT
On the day of , 2009, the Court held a hearing determine: (1)
whether the terms and conditions of the Stipulation of Settlement dated February 24, 2009 (the
".Stipulation") are fair, reasonable, and adequate for the settlement of all claims asserted by the
Settlement Class against Defendants in the Complaint in the above-captioned litigation (the
"Litigation"), including the release of Defendants, and should be approved; (2) whether
judgment should be entered dismissing the Complaint on the merits and with prejudice in favor
of the Defendants and as against all persons or entities who are members of the Settlement Class
herein who have not requested exclusion there from; (3) whether to approve the Plan of
Allocation as a fair and reasonable method to allocate the settlement proceeds among the
^ r members of the Settlement Class; (4) whether and in what amount to award the Lead Plaintiff
reimbursement of costs and expenses; and (5) whether and in what amount to award Plaintiff's
Lead Counsel fees and reimbursement of expenses.
i
i
Case 2:06-cv-00570-DAK-PMW Document 137-3 Filed 02/26/2009 Page 34 of 40
i
The Court has considered all matters submitted at the hearing and otherwise; and it
appears that a notice of the Settlement Hearing, substantially in the form approved by the Court,i
was mailed to all persons or entities reasonably identifiable, who purchased the common stock of
NPS Pharmaceuticals, Inc. (" NPS") between August 7, 2001, and May 2, 2006, inclusive (the
"Settlement Class Period"), except those persons or entities excluded from the definition of the
Settlement Class, as shown by the records ofNPS's transfer agent, at the respective addresses set
forth in such records, and that a summary notice of the Settlement Hearing, substantially in the
form approved by the Court, was published in and transmitted over
pursuant to the specifications of the Court; and the Court has considered Lead
Counsel's request for an award of attorneys' fees and expenses and determined that such request
is fair and reasonable.
NOW, THEREFORE, THE COURT MAKES THE FOLLOWING FINDINGS OF
FACT AND HEREBY ORDERS THAT:
L For the purposes of this Order, the Court adopts and incorporates by reference all
terms defined in the Stipulation attached hereto as Exhibit _.
2. The Court has jurisdiction over the subject matter of the Litigation, the Lead
Plaintiff, all Settlement Class Members, and the Defendants.
3. The Court finds that the prerequisites for a class action under Federal Rules of
Civil Procedure 23 (a) and (b)(3) have been satisfied in that: (a) the number of Settlement Class
Members is so numerous that joinder of all members thereof is impracticable; (b) there are
questions of law and fact common to the Settlement Class; (c) the claims of the Lead Plaintiff are
typical of the claims of the Settlement Class; (d) the Lead Plaintiff and Plaintiff s Lead Counsel
have and will fairly and adequately represent the interests of the Settlement Class; (e) the
2
Case 2:06-cv-00570-DAK-PMW Document 137-3 Filed 02/26/2009 Page 35 of 40
questions of law and fact common to the members of the Settlement Class predominate over any
questions affecting only individual members of the Settlement Class; and (f) a class action is
superior to other available methods for the fair and efficient adjudication of the Litigation.
4. Pursuant to Rule 23 of the Federal Rules of Civil Procedure, this Court hereby
finally certifies this action as a class action on behalf of all persons who purchased NPS common
stock between August 7, 2001, and May 2, 2006, inclusive, and who were damaged thereby.3
Defendants, the executive officers and directors of NPS during the Settlement Class Period,
members of their immediate families and their legal representatives, heirs, successors or assigns
and any entity in which Defendants have or had a controlling interest are excluded from the
Settlement Class. Also excluded from the Settlement Class are the persons and/or entities who
validly requested exclusion from the Settlement Class as listed on Exhibit . annexed hereto.
5. Pursuant to Rule 23 of the Federal Rules of Civil Procedure, this Court hereby
finally certifies Lead Plaintiff PHARMA/wHEALTH Management Company, S.A.
('PHARMN' or "Plaintiff') as Settlement Class Representative and confirms the appointment of
Motley Rice as Settlement Class Counsel. The Court also confirms the appointment of Garden
City Group Inc. as the Claims Administrator and Escrow Agent.
6. Notice of the pendency of this Litigation as a class action and of the proposed
Stipulation was given to all Settlement Class Members who could be identified with reasonable
effort. The form and method of notifying the Settlement Class of the pendency of the action as a
class action and of the terms and conditions of the proposed Stipulation met the requirements of
Rule 23 of the Federal Rules of Civil Procedure, Section 211)(a)(7) of the Securities Exchange
Act of 1934, 15 U.S.C. § 78u-4(a)(7) as amended by the Private Securities Litigation Reform Act
of 1995, due process, and any other applicable law, constituted the best notice practicable under
3
Case 2:06-cv-00570-DAK-PMW Document 137-3 Filed 02/26/2009 Page 36 of 40
the circumstances, and constituted due and sufficient notice to all persons and entities entitled
thereto.
7. The Stipulation is not an admission by Defendants of, and this Order and Final
Judgment is not a finding of, the validity of any claims in the Litigation or of any wrongdoing by
the Defendants. Neither this Order and Final Judgment, nor the Stipulation, nor any document
referred to therein, nor any action taken to cant' out the settlement, is or may be construed as or
may be used as an admission by or against any of Defendants or their Related Parties of any
fault, wrongdoing or liability whatsoever, and neither this Order and Final Judgment, nor the
Stipulation, nor any document referred to therein shall be offered or received in evidence in any
action or proceeding against any of Defendants or their Related Parties in any court,
administrative agency, arbitration or other tribunal for any purpose whatsoever, other than to
enforce the provisions of this Order and Final Judgment or the Stipulation. Neither this Order
and Final Judgment, nor the Stipulation, nor any document referred to therein, nor any action
taken to carry out the settlement, is or may be construed as or received in evidence as an
admission, concession or presumption against the proposed Settlement Class Representatives or
any of the Settlement Class Members that any of their claims are without merit, or that any
defenses asserted by Defendants have any merit, or that damages recoverable under the
Complaint would not have exceeded the Gross Settlement Fund.
8. The settlement is approved as fair, reasonable, and adequate, and the Settlement
Class Members and the parties are directed to consummate the settlement in accordance with the
terms and provisions of the Stipulation.
9. The Complaint is hereby dismissed with prejudice and without costs as against
any party.
4
Case 2:06-cv-00570-DAK-PMW Document 137-3 Filed 02/26/2009 Page 37 of 40
I
10. The Settlement Class Representatives and members of the Settlement Class on
behalf of themselves, their past or present subsidiaries, parents, successors, predecessors,
officers, directors, agents, employees, attorneys, advisors, investment advisors, insurers, auditors,
and accountants, legal representative, heirs, executors, trustees, administrators, and assigns shall
hereby release and forever discharge each and every on of the Released Claims, and shall hereby
forever be enjoined from prosecuting the Released Claims against any of Defendants or their
Related Parties.
11. The Settlement Class Representative and all Settlement Class Members, whether
or not they file a Proof of Claim within the time provided for, and whether or not they receive
any distributions from the Settlement Fund, are permanently barred, enjoined and restrained from
commencing, prosecuting or asserting the Released Claims.
12. Each of Defendants, on behalf of themselves and their Related Parties, shall
hereby release and forever discharge each and every one of the Released Defendants' Claims,
and shall hereby forever be enjoined from prosecuting the Released Defendants' Claims against
the Settlement Class Representative, all Settlement Class Members and their counsel.
13. To the maximum extent permitted by law, the Court hereby bars (a) any action or
claim for contribution or indemnification arising out of the Litigation against any of Defendants
and (b) any action or claim for contribution or indemnification arising out of the Litigation by or
on behalf of any of Defendants.
14. Other than those responsibilities designated in the Stipulation to Released Persons
and their counsel in conjunction with the administration, execution and completion of this
settlement, the Released Persons and their counsel shall have no responsibility for, interest in, or
liability whatsoever with respect to, the investment or distribution of the Settlement Fund, the
5
Case 2:06-cv-00570-DAK-PMW Document 137-3 Filed 02/26/2009 Page 38 of 40
Plan of Allocation, the determination, administration, calculation or payment of Settlement Class
Members' claims, the payment or withholding of any local, state or federal governmental charge,
levy, or tax lawfully imposed thereon, or any losses incurred in connection therewith.
15. The Plan of Allocation is approved as fair and reasonable, and Plaintiff's Lead
Counsel and the Claims Administrator are directed to administer the settlement in accordance
with the terms and provisions of the Stipulation.
16. Upon review of the record, the Court finds that all parties and their counsel have
complied with each requirement of Rule 11(b) of the Federal Rules of Civil Procedure as to
every complaint, responsive pleading, and dispositive motion herein.
17. ' Plaintiff's Lead Counsel and Liaison Counsel are hereby awarded % of
the Gross Settlement Fund in fees, which sum the Court finds to be fair and reasonable, and
$ in reimbursement of expenses, which expenses shall be paid-to Plaintiff s Lead
Counsel and Liaison Counsel from the Gross Settlement Fund with interest from the date such
Gross Settlement Fund was funded to the date of payment at the same net rate that the Gross
i Settlement Fund earns. The award of attorneys' fees shall be allocated among Plaintiff s Lead
Counsel Liaison Counsel in a fashion which, in the opinion of Plaintiff s Lead Counsel, fairly
compensates the attorneys for its respective contributions in the prosecution of the Litigation.
18. Settlement Class Representative PHARMA. is hereby awarded
$ Such award is for reimbursement of this plaintiff's reasonable costs and
expenses (including lost wages) directly related to their representation of the Settlement Class.
19. In making this award of attorneys' fees and reimbursement of expenses to be paid
from the Gross Settlement Fund, the Court has considered and found that:
6
Case 2:06-cv-00570-DAK-PMW Document 137-3 Filed 02/26/2009 Page 39 of 40
(a) the settlement has created a fund of $15 million (Fifteen Million U.S.
Dollars) in cash that is already on deposit, plus interest thereon, and that numerous Settlement
Class Members who submit acceptable Proofs of Claim will benefit from the settlement createdI
by Settlement Class Counsel;i
(b) Over copies of the Notice were disseminated to putative
ISettlement Class Members indicating that Class Counsel were moving for attorneys' fees in an
amount not greater than one-fourth (25%) of the Gross Settlement Fund and for reimbursement
of expenses in the approximate amount of $ and no objections were filed against the
terms of the proposed Stipulation or the ceiling on the fees and expenses requested by Settlement
Class Counsel contained in the Notice;
(c) Settlement Class Counsel have conducted the litigation and achieved the
settlement with skill, perseverance and diligent advocacy;
(d) The Litigation involves complex factual and legal issues and was actively
prosecuted over four years and, in the absence of a settlement, would involve further lengthy
proceedings with uncertain resolution of the complex factual and legal issues;
(e) Had Settlement Class Counsel not achieved the settlement there would
remain a significant risk that the Settlement Class Representatives and . the Settlement Class may
have recovered less or nothing from Defendants;
(f) Settlement Class Counsel have devoted over hours, with a
lodestar value of $ , to achieve the settlement; and
(g) The amount of attorneys' fees awarded and expenses reimbursed from the
Settlement Fund are fair and reasonable and consistent with awards in similar cases.
7
Case 2:06-cv-00570-DAK-PMW Document 137-3 Filed 02/26/2009 Page 40 of 40
20. The Court reserves jurisdiction, without affecting the finality of this Judgment,
over the parties and the Settlement Class Members for all matters relating to this Litigation,
including the administration, interpretation, effectuation or enforcement of the Stipulation and
this Order and Final Judgment, and including any application for fees and expenses incurred in
connection with administering and distributing the settlement proceeds to the members of the
Settlement Class.
21. Without further order of the Court, the parties may agree to reasonable extensions
of time to carry out any of the provisions of the Stipulation.i
Dated: Salt Lake City, Utah 2009
Honorable Dale A. KimballUNITED STA'1ES DISTRICT JUDGE
8
Case 2:06-cv-00570-DAK-PMW Document 137-4 Filed 02/26/2009 Page 2 of 2
IN THE UNITED STATES DISTRICT COURTFOR THE EASTERN DISTRICT OF PENNSYLVANIA
CLIFFORD C. MARSDEN and MING XU, CIVIL ACTIONIndividually and on Behalf of All.Others Similarly Situated, 04-4020
Plaintiffs,
V.
SELECT MEDICAL CORP., MARTINJACKSON, ROBERT A. ORTENZIO,ROCCO ORTENZIO, and PATRICIA RICE,
Defendants.
ORDER
AND NOW,this 5th day of October, 2006, upon consideration of
co-Lead Plaintiff Capital Invest, die Kapitalanlagegesellschaft
der Bank Austria Creditanstalt Gruppe GmbH for account of its
funds C 43 and GF 5's ("Capital Invest") Motion to Add Motley
Rice LLC as Co-Lead Counsel (Doc. No. 43) , it is hereby ORDERED
that the Motion is GRANTED.'
BY THE COURT:
S/J. CURTIS JOYNER
J. CURTIS JOYNER, J.
' The Private Securities Litigation Reform Act requiresthat the Court approve the Lead Plaintiff's selection of classcounsel. See 15 U.S.C. § 78u-4(a)(3)(B)(v). The materialsattached in support of Capital Invest's motion demonstrate to theCourt's satisfaction that Motley Rice LLC possess the requisiteknowledge and skill in securities litigation to ably prosecutethis matter on behalf of the class. In this matter, CapitalInvest is co-Lead Plaintiff with James Shaver and Frank C.Bagatta. See February 16, 2005 Order (Doc. No. 13). Neitherthese co-Lead Plaintiffs nor Defendants have opposed the
j appointment of Motley Rice LLC as co-lead counsel.
Case 2:06-cv-00570-DAK-PMW Document 137-5 Filed 02/26/2009 Page 2 of 3
CORNERSTONE RFESEARCH.
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Tell 902,91 ambbFaX 202;9128999
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NEWS RELEASE / FOR IMMEDIATE RELEASE
Contact: John [email protected]
Dr. Laura [email protected]
Securities Class Action Settlement Totals Down 60 Percent in 2007, Finds Cornerstone Research
Number of Settlements with Estimated Damages above $1 Billion Lowest since 2003,But Median Settlement Reaches Highest Level Ever at $9 Million
Washington, DC, March 31, 2008 – A report released today by Cornerstone Research finds that thenumber of securities class action cases settled last year rose 21 percent, from 92 in 2006 to 111 in 2007.The total value of these settlements, however, plummeted 60 percent from the all-time high of $17.2 billionreported in 2006 to $7 billion in 2007. More than 70 percent of this drop was due to the largest settlementin history, the now $7.2 billion Enron case settlement, the majority of which was approved in 2006.
Aggregate settlements in 2007 are dramatically influenced by the $3.2 billion Tyco Internationalsettlement, which accounts for almost 45 percent of the total value of settlements approved in 2007, and isthe third largest case settlement in history behind Enron and WorldCom ($6.2 billion). Tyco was the onlysettlement approved in 2007 to exceed $1 billion (compared with four in 2006, excluding Enron) and isonly the seventh settlement in history above $1 billion.
Overall, the number of settlements in excess of $1 .00 million declined from fourteen in 2006 to only nine in2007. In sharp contrast to the decrease in settlements in excess of $100 million, middle range settlements—those of $10-20 million—increased in 2007. In 2006 such settlements accounted for just over 10 percent ofthe total; in 2007 they accounted for nearly 25 percent. In addition, in 2007 settlements for less than $5million declined to about 35 percent of the total. As a result, the median settlement spiked to $9 million—the highest amount to date. (The median represents the point at which half the data points are greater andhalf are smaller; the midpoint.)
"For the past several years a relatively small number of settlements in excess of $100 million have been thefocus of attention in analyses of securities, case settlements, even though more than half of securities casescontinued to settle for less than $10 million. What will be interesting going forward is to see whether theupward shift emerging from the 2007 data for more typical cases persists into future years," said Dr. LauraSimmons, a senior advisor to Cornerstone Research and an author of the report.
Estimated damages are by far the most important determinant of settlement amounts. For purposes of thereport, "estimated damages" are based on a highly simplified model historically used by plaintiffs toestimate the amount of shares damaged and the amount of alleged stock price inflation. Following theunusually high average estimated damages for settled cases in 2006, 2007 saw a return to the 2003-05average. While 2006 had eighteen settlements with estimated damages in excess of $5 billion, 2007 hadjust ten: In 2007 only 24 percent of settlements (twenty-seven cases) involved estimated damages of $1billion or more—the lowest percentage since 2003. Boson; MA.
Los Angela.; CA
Menlo . Park,. CA,,
New YP&, NYSan Francisco.; GA.
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Case 2:06-cv-00570-DAK-PMW Document 137-5 Filed 02/26/2009 Page 3 of 3
Cornerstone Research 2007 Securities Class Action Settlements Report / Page 2
"It seems clear that the aggregate dollar value of settlements over the next two or three years is likely todecline significantly because the inventory of large cases in the pipeline just isn't there. The interestingopen question is whether the subprime crisis will cause an uptick in securities fraud settlement activity thatmight, given settlement cycles in the litigation industry, only become apparent three to five years fromnow," said Stanford Law School Professor Joseph Grundfest, director of the Securities Class ActionClearinghouse (sponsored in cooperation with Cornerstone Research), co-director of the Rock Center onCorporate Governance, and former commissioner of the Securities and Exchange Commission.
Institutional investor involvement continued to increase, with almost 60 percent of cases settled in 2007including institutions as lead plaintiffs. Typically, cases involving institutional investors as lead plaintiffs,particularly public pension plans, are associated with significantly higher settlement amounts, evencontrolling for other factors that affect settlement amounts.
As in 2006, accounting issues continued to be included in the allegations of more than 55 percent of allsettled cases. But for the second year in a row, the percentage of cases involving allegations of financialstatement restatements declined, representing just 30 percent of settlements in 2007.
The report also notes the waning dominance, on a combined basis, of two prominent plaintiff class actionlaw firms —Lerach Coughlin Stoia Geller Rudman & Robbins (now known as Coughlin Stoia GellerRudman & Robbins) and Milberg Weiss Bershad & Schulman (now known as Milberg)— in terms of thenumber of cases settled. Until 2007 the two firms had long served as lead or co-lead plaintiff counsel inmore than half of securities class action settlements, but in 2007 their combined share slipped to 46 percent.
Finally, the number of settled cases involving companion derivative actions has been increasing in recentyears. More than 55 percent of cases settled in 2007 were accompanied by the filing of a derivative action,compared with 45 percent in 2006 and 35 percent in 2005. While the settlement of a derivative action doesnot necessarily result in a cash payment, settlements for class actions accompanied by derivative cases aresignificantly higher than for cases not involving them.
A full copy of Cornerstone Research's Securities Class Action Settlements: 2007 Review and Analysis isavailable at securities.comerstone.com . In addition, Dr. Simmons and Professor Grundfest are available forinterviews.
Cornerstone Research provides financial and economic analysis in litigation and regulatory proceedings,with a focus on securities, antitrust, intellectual property, financial institutions, energy, and accounting.Cornerstone Research also cosponsors Stanford Law School's Securities Class Action Clearinghouse, theleading source of data and analysis on the financial and economic characteristics of securities class actionlitigation. Information about Cornerstone Research's consulting services is available atwww.comerstone.com.
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