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Case 2:07-cv-00931-DDP-FMO Document 484 Filed 07/30/10 Page 1 of 3 Page ID

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1 BERNSTEIN LITOWITZ BERGER


& GROSSMANN LLP
2 BLAIR A. NICHOLAS (Bar No. 178428)
lairgmblblaw.co
3 LIZH
2ZET LIN (Bar No. 174663)
(elizabethl@blbglaw.com)
4 NIKI L. MENDOZA (Bar No. 214646)
kim@Plaw.com
5 WJ NAMGALDSTON (Bar No. 211114)
(beng@blbglaw.com)
6TAKEO A. KELLAR (Bar No. 234470)
(takeok@blbglaw. com)
7 12481 High Bluff Drive, Suite 300
San Diego, CA 92130
8 Tel: (858 793-0070
Fax: (8583 793-0323
9 -and-
SALVATO RE J. GRAZI )ANO
@
10 LAUREN A. MeMILLEN
11 ^laurenm@blbglaw.com)
285 Avenue of the Americas
12 New York, NY 10019
Tel: (212) 554-1400
13 Fax: (212) 554-1444
14 Lead Counsel for Lead Plaintiff New
York State Teachers’ Retirement System
15
16 UNITED STATES DISTRICT COURT
17 CENTRAL DISTRICT OF CALIFORNIA
18
IN RE NEW CENTURY Case No. 2:07-cv-00931-DDP (FMOx)
19 (Lead Case)
20 NOTICE OF UNOPPOSED
MOTION AND UNOPPOSED
21 MOTION FOR PRELIMINARY
22 APPROVAL OF SETTLEMENTS
23 Date: August 30, 2010
24 Time: 10:00 a.m.
Courtroom: 3
25 Judge: Hon. Dean D. Pregerson
26
27
28

NOTICE OF MOTION
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1 TO ALL PARTIES AND THEIR COUNSEL OF RECORD:


2 PLEASE TAKE NOTICE that, on August 30, 2010, at 10:00 a.m. or as soon
3 thereafter as counsel may be heard, Lead Plaintiff New York State Teachers’
4 Retirement System (“NYSTRS”), and plaintiffs Carl Larson and Charles Hooten
5 (collectively, “Plaintiffs”) will and hereby do move this Court before the
6 Honorable Dean D. Pregerson, United States District Judge, at the United States
7 Courthouse, 312 North Spring Street, Courtroom 3, Los Angeles, California 90012,
8 for an Order, pursuant to Rule 23(e) of the Federal Rules of Civil Procedure,
9 granting Plaintiffs’ unopposed motion for preliminary approval of the proposed
10 Settlements of this action and related relief. Please also note that Plaintiffs intend
11 to seek to shorten time to hear the unopposed motion for preliminary approval of
12 the Settlements. In the event the motion to shorten time is not granted, the
13 unopposed motion for preliminary approval of Settlements shall be heard as
14 noticed on August 30, 2010, at 10:00 a.m.
15 This motion is premised on the accompanying memorandum of points and
16 authorities, the Stipulations of Settlement submitted herewith, and all prior papers
17 and proceedings in this action.
18 The parties have agreed upon a form of [Proposed] Order Preliminarily
19 Approving Settlements And Providing For Notice (“Preliminary Approval Order”),
20 and exhibits thereto, which is submitted herewith.
21
22 Dated: July 30, 2010 Respectfully submitted,
23 BERNSTEIN LITOWITZ BERGER
& GROSSMANN LLP
24
25 /s/ Salvatore J. Graziano
26 SALVATORE J. GRAZIANO

27 BLAIR A. NICHOLAS
ELIZABETH LIN
28 NIKI L. MENDOZA

1 NOTICE OF MOTION
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1 BENJAMIN GALDSTON
TAKEO A. KELLAR
2 12481 High Bluff Drive, Suite 300
San Diego, CA 92130
3 Tel: (858) 793-0070
Fax: (858) 793-0323
4 -and-
SALVATORE J. GRAZIANO
5 LAUREN A. MCMILLEN
1285 Avenue of the Americas
6 New York, NY 10019
Tel: (212) 554-1400
7 Fax: (212) 554-1444
8 Lead Counsel for Lead Plaint ff
The New York State Teachers Retirement
9 System and the Class
10 MARVIN L. FRANK
Murray, Frank & Sailer LLP
11 275 Madison Avenue
12 New York, NY 10016
Tel: (212) 682-1818
13 Fax: (212) 682-1892
14
Counsel for Plaintiff Carl Larson
15
JEFFREY ZWERLING
16 Zwerling, Schachter & Zwerling, LLP
17 41 Madison Avenue
New York, NY 10010
18 Tel: (212) 223-3900
19 Fax: (212) 371-5969

20 Counsel for Plaintiff Charles Hooten


21
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28

2 NOTICE OF MOTION
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1 BERNSTEIN LITOWITZ BERGER


& GROSSMANN LLP
2 BLAIR A. NICHOLAS (Bar No. 178428)
lairblbglaw.com
3 LIZH
2ZET LIN (Bar No. 174663)
(elizabethl@blbglaw.com)
4 NIKI L. MENDOZA (Bar No. 214646)
kim@Plaw.com
5 WJ NAMGALDSTON (Bar No. 211114)
(beng@blbglaw.com)
6TAKEO A. KELLAR (Bar No. 234470)
(takeok@blbglaw. com)
7 12481 High Bluff Drive, Suite 300
San Diego, CA 92130
8 Tel: (858 793-0070
Fax: (8583 793-0323
9 -and-
SALVATO RE J. GRAZI )ANO
@
10 LAUREN A. MeMILLEN
11 ^laurenm@blbglaw.com)
285 Avenue of the Americas
12 New York, NY 10019
Tel: (212) 554-1400
13 Fax: (212) 554-1444
14 Lead Counsel for Lead Plaintiff New
York State Teachers’ Retirement System
15
16 UNITED STATES DISTRICT COURT
17 CENTRAL DISTRICT OF CALIFORNIA
18
IN RE NEW CENTURY Case No. 2:07-cv-00931-DDP (FMOx)
19 (Lead Case)
20 PLAINTIFFS’ MEMORANDUM
OF POINTS AND AUTHORITIES
21 IN SUPPORT OF UNOPPOSED
22 MOTION FOR PRELIMINARY
APPROVAL OF SETTLEMENTS
23
24 Date: August 30, 2010
Time: 10:00 a.m.
25 Courtroom: 3
26 Judge: Hon. Dean D. Pregerson

27
28

PRELIMINARY APPROVAL MOTION


Case No. 2:07-cv-00931-DDP (FMOx)

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1 TABLE OF CONTENTS
2 Page
3 TABLE OF AUTHORITIES iii
4 I. PRELIMINARY STATEMENT 1
5 II. OVERVIEW OF THE LITIGATION 3
6 A. The Consolidated Complaints And
Defendants’ Motions To Dismiss 3
7
B. Discovery 4
8
C. KPMG’s Motion For Summary Judgment 4
9
D. The Extensive Negotiations Leading To The
10 Settlements 5
11 III. THE SETTLEMENTS 6
12 A. Summary Of The Settlements 6
13 B. Reasons For The Settlements 8
14 IV. THE PROPOSED SETTLEMENTS WARRANT
PRELIMINARY APPROVAL 9
15
A. Factors To Be Considered By The Court In
16 The Preliminary Approval Of Class Action
Settlements 9
17
1. The Settlements Were Vigorousl
18 Negotiated And Are Supported Wy
Experienced Counsel 11
19
2. The Substantial Benefits Obtained For
20 The Class, Especially In Light Of
Serious Risks Of Lesser Or No
21 Recovery, Support Approval Of The
Settlements 12
22
3. The Stage Of The Proceedings And
23 Discovery Completed Support
Approval Of The Settlements 14
24
B. The Class Should Be Certified For
25 Settlement Purposes 14
26 1. Numerosity 15
27 2. Commonality 16
28 3. Typicality 17

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1 4. Adequacy 18
2 5. Common Questions Of Law
Predominate And A Class Action Is
3 The Superior Method Of Adjudication 18
4 C. The Proposed Plan Of Allocation Is Fair
And Reasonable 19
5
D. The Notice To The Class Is Adequate 22
6
V. CONCLUSION 24
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1 TABLE OF AUTHORITIES
2 C ASES PAGE ( S)
3 In re Applied Micro Circuits Corp. Sec. Litig.,
2003 U.S. Dist. LEXIS 14492 (S.D. Cal. July 10, 2003) 18
4
Blackie v. Barrack,
5 524 F.2d 891 (9th Cir. 1975) 15
6 Class Plaintiffs v. Seattle,
955 F.2d 1268 (9th Cir. 1992) 9,10,20
7
Conn. Ret. Plans and Trust Funds v. Amgen, Inc.,
8 2009 U.S. Dist. LEXIS 71653 (C.D. Cal. Aug. 12, 2009) 16
9 In re Consol. Pinnacle W. Sec. Litig.,
51 F.3d 194 (9th Cir. 1995) 11
1 0
In re Cooper Cos., Inc. Sec. Litig.,
11 254 F.R.D. 628 (C.D. Cal. 2009) 19
12 Crossen v. CV Therapeutics,
2005 WL 1910928 (N.D. Cal. Aug. 10, 2005) 17
13
Dukes v. Wal-Mart, Inc. ,
14 509 F.3d 1168 (9th C ir. 2007) 18
15 In re Emulex Corp. Sec. Litig. ,
210 F.R.D. 717 (C.D. Cal. 2002) 20
16
In re First Capital Holdings
Corp. Fin. Prods. Sec. Litig .,
17 1992 U.S.-Dist. LEXIS 14337 (C.D. Cal. June 10, 1992) 12
18 Fulford v. Lo itech, Inc.,
2010 U.S.-Dist. LEXIS 29042 (N.D. Cal. Mar. 5, 2010) 11
19
Glass v. UBS Fin. Servs. Inc.,
20 331 Fed. Appx. 452 (9th Cir. 2009) (unpubl.) 20,22
21 Harris v. Palm Springs Alpine Estates, Inc.,
329 F.2d 909 (9th Cir. 1964) 15
22
In re Heritage Bond Litig.,
23 2005 WL 1594403 (C.D. Cal. June 10, 2005) 12
24 In re Immune Response Sec. Liti
497 F. Supp. 2d 1166 (S.D. Caf. 2007) 24
25
In re Juniper Networks Sec. Litig.,
26 264 F.R.D. 584 (N.D. Cal. 2009) 15, 16, 17
27 Kirkorian v. Borelli
695 F. Supp. 449 (N.D. Cal. 1988) 12
2 8

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1 In re LDK Solar Sec. Litig.,


255 F.R.D. 519 (N.D. Cal. 2009) 17, 18, 20
2
In re Me o Fin. Corp. Sec. Litig.,
3 213 F.3d 454 (9th Cir. 2000) 20, 22
4 Mendoza v. United States,
623 F.2d 1338 (9th Cir. 1980) 22
5
Officers for Justice v. Civil Serv. Comm’n,
6 688 F.2d 615 (9th Cir. 1982) 10
7 In re Omnivision Techs.,
559 F. Supp. 2d 1036 (N.D. Cal. 2007) 20, 22
8
In re Oracle Sec. Litig.,
9 1994 WL 502054 (N.D. Cal. June 18, 1994) 22
10 In re Portal Software, Inc. Sec. Litig.,
2007 WL 4171201 (N.D. Cal. Nov. 26, 2007) 24
11
Rodriguez v. W. Publ’g Corp.,
1 2 563 F.3d 948 (9th Cir. 2009) 24
13 Schaefer v. Overland Express Family of Funds,
169 F.R.D. 124 (S.D. Cal. 1996) 18
14
Schwartz v. Harp,
1 5 108 F.R.D. 279 (C.D. Cal. 1985) 16
16 Siemer v. Assocs. First Capital Corp.,
2000 U.S. Dist. LEXIS- 21244 (D. Ariz. Dec. 13, 2000) 16
17
Silber v. Mabon,
1 8 18 F.3d 1449 (9th Cir. 1994) 25
19 In re THQ Inc. Sec. Litig ,
2002U.S. Dist. LEXIS 7753 (C.D. Cal. Mar. 22, 2002) 17
20
Torrisi v. Tucson Elec. Power Co.,
2 1 8 F.3d 1370 (9th Cir. 1993) 10
22 Van Bronkhorst v. Safeco Cor .,
529 F.2d 943 (9th Cir. 1976) 9
23
In re VeriSign Inc. Sec. Litig.,
24 2005 U.S. Dist. LEXIS 10438 (N.D. Cal. Jan. 13, 2005) 16
25 In re Veritas Software Corp. Sec. Litig.,
496 F.3d 962 (9th Cir. 2007) 22
26
In re Wireless Facilities, Inc. Sec. Litig.,
2 7 253 F.R.D. 630 (S.D. Cal. 2008) 17, 22
28 In re WorldCom, Inc. Sec. Litig.,
388 F. Supp. 2d 319 (S.D.N.Y. 2005) 20
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1 S TATUTES AND RULES


2 15 U.S.C.A. §78u-4(a)(7)(A)-(F) 23
3 Fed. R. Civ. P. 23 passim
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1 I. PRELIMINARY STATEMENT
2 Lead Plaintiff, the New York State Teachers’ Retirement System
3 (“NYSTRS”), and plaintiffs Carl Larson and Charles Hooton (collectively,
4 “Plaintiffs”), respectfully submit this Memorandum of Points and Authorities in
5 support of their unopposed motion for the entry of an order (i) granting preliminary
6 approval to the proposed Settlements set forth in the Settlement Stipulations filed
7 concurrently herewith 1 ; (ii) certifying the proposed Class for settlement purposes;
8 (iii) approving the form and manner of giving notice of the proposed Settlements to
9 the Class; and (iv) setting a hearing date for final approval of the Settlements (the
10 “Final Settlement Hearing”). The parties have agreed upon a form of [Proposed]
11 Order Preliminarily Approving Settlements And Providing For Notice
12 (“Preliminary Approval Order”) and exhibits thereto, which is submitted herewith.
13 As set forth in the Settlement Stipulations, the Settlements provide for the
14 collective payment of approximately $125 million in cash (the “Settlement
15 Amount”) plus any and all interest earned thereon (the “Settlement Fund”) for the
16 benefit of the Class, in exchange for dismissal of claims against all Defendants. 2
17
18 1 The three Settlement Stipulations are as follows: (a) Stipulation Of Global
19 Settlement With New Century Officers And Directors (“Global Settlement
Stipulation,” attached as Exhibit 2 hereto), which provides a sum to the Class of
20 $65,077,088 to settle the claims against the New Century director and officer
21 Defendants; (b) Stipulation Of Settlement Between Plaintiffs And KPMG (attached
as Exhibit 3 hereto), which provides a sum of $44,750,000 to settle the claims
22 against auditor Defendant KPMG; and (c) Stipulation Of Settlement Between
23 Plaintiffs And The Underwriter Defendants (attached as Exhibit 4 hereto), which
provides a sum of $15,000,000 to settle the claims against the Underwriter
24 Defendants. The three Settlement Stipulations provide for a total recovery for the
25 Class of approximately $125,000,000 in cash before deduction of Court-approved
26 fees, expenses, and costs.
2 The Defendants include the following: (i) “Individual Defendants” who are
27 former officers and directors of New Century, including Robert K. Cole, Brad A.
28 Morrice, Estate of Edward Gotschall, Patti M. Dodge, Fredric J. Forster, Michael
M. Sachs, Harold A. Black, Donald E. Lange, Terrence P. Sandvik, Richard A.
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1 The proposed Settlements were reached only after extensive litigation and
2 negotiations – including more than eleven in-person mediation sessions and
3 numerous negotiations over the course of more than one year – overseen by an
4 experienced mediator, the Honorable Daniel Weinstein (Ret.) (the “Mediator”),
5 and with the active participation of the Court-appointed Lead Plaintiff NYSTRS,
6 whose General Counsel or Associate General Counsel personally attended each of
7 the mediation sessions. The proposed Settlements represent an outstanding result
8 for Plaintiffs and the Class, particularly in light New Century’s bankruptcy and the
9 risks to the Class if the action continued, including the risks of establishing
10 Defendants’ liability and the Class’s full amount of damages trial and the risks that
11 there would be significantly less funds available to satisfy any judgment or post-
12 trial settlement.
13 By this Motion, Lead Plaintiff respectfully requests that the Court
14 preliminarily approve the Settlements, based on Lead Plaintiff’s evaluation of the
15 facts and applicable law, and its recognition of the substantial risks and expense of
16 continued litigation. At the Final Settlement Hearing, the Court will have before it
17 more extensive motion papers submitted in support of the proposed Settlements,
18 and will then make an ultimate determination of whether the Settlements are fair,
19 reasonable, and adequate under all of the circumstances surrounding the action. At
20 this juncture, Lead Plaintiff requests only that the Court grant preliminary approval
21 of the Settlements so that Notice of the Settlements may be sent to the Class and
22 the Final Settlement Hearing may be scheduled.
23
24
25 Zona, Marilyn A. Alexander, David Einhorn, and William J. Popejoy; (ii)
26 “Underwriter Defendants,” including Bear, Stearns & Co. Inc., Deutsche Bank
Securities Inc., Piper Jaffray & Co., Stifel, Nicolaus & Co., Inc., JMP Securities
27 LLC, Roth Capital Partners, Morgan Stanley & Co., Inc., and Jeffries & Co., Inc.;
28 and (iii) KPMG LLP (“KPMG”). New Century was not named as a defendant due
to its filing of bankruptcy.
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1 II. OVERVIEW OF THE LITIGATION


2 A. The Consolidated Complaints
And Defendants’ Motions To Dismiss
3
4 Beginning on February 8, 2007, numerous related class action complaints
5 were filed in the Central District of California alleging that the Defendants violated
6 the federal securities laws by misrepresenting and failing to disclose adverse facts
7 concerning New Century’s business condition and financial results. On
8 June 26, 2007, the Court entered an Order consolidating all the related actions, and
9 appointed NYSTRS as Lead Plaintiff and Bernstein Litowitz Berger & Grossmann
10 LLP as Lead Counsel. On September 14, 2007, after extensive research and
11 investigation, Plaintiffs filed a consolidated class action complaint. On
12 November 2 and 20, 2007, Defendants filed five separate motions to dismiss.
13 Plaintiffs opposed the motions. Thereafter, on January 31, 2008, the Court
14 dismissed the consolidated complaint with leave to amend.
15 On March 24, 2008, Plaintiffs filed an amended complaint, and two days
16 later the Bankruptcy Examiner published his Final Report concerning his
17 investigation of the facts leading to New Century’s bankruptcy. In the interests of
18 judicial economy, the parties agreed to a schedule for filing Plaintiffs’ Second
19 Amended Complaint. On April 30, 2008, Plaintiffs filed the Second Amended
20 Complaint, asserting claims under Sections 10(b) and 20(a) of the Securities
21 Exchange Act of 1934 (“Exchange Act”) and Sections 11 and 15 of the Securities
22 Act of 1933 (“Securities Act”).
23 On June 2, 2008, Defendants filed six separate motions to dismiss the
24 Second Amended Complaint. Among other things, the Defendants argued that
25 Plaintiffs did not adequately plead the strong inference of scienter required for the
26 Exchange Act claims and that Plaintiffs failed to adequately plead there was loss
27 causation. Plaintiffs opposed these motions on July 7, 2008, and Defendants filed
28 their reply memoranda on July 28, 2008. On September 22, 2008, the Court heard

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1 oral arguments on the Defendants’ motions to dismiss. On December 3, 2008, the


2 Court issued an order denying Defendants’ motions to dismiss.
3 B. Discovery
4 Following the Court’s December 3, 2008 denial of the Defendants’ motions
5 to dismiss, the discovery stay imposed by the Private Securities Litigation Reform
6 Act of 1995 (“PSLRA”) was automatically lifted. Plaintiffs served dozens of
7 requests for production of documents and subpoenas. Following numerous meet
8 and confers over discovery disputes, including the filing of several discovery
9 motions, Plaintiffs ultimately obtained over 38 million pages of documents from
10 the parties and non-parties in this action.
11 Among other things, Plaintiffs received over 35 million pages of documents
12 from the New Century Liquidating Trust, over 2.8 million pages from Defendant
13 KPMG, over 600,000 pages from the Underwriter Defendants, and approximately
14 half a million pages of documents from various third parties. Plaintiffs also
15 produced documents to Defendants, including trade confirmations, brokerage
16 statements, investment manuals, and other materials in their possession concerning
17 New Century. Through their review of these documents, the parties were well
18 informed of the strengths and weaknesses of their positions, their ability to prove
19 their claims and defenses, and they entered into the Settlements having taken these
20 factors into consideration.
21 C. KPMG’s Motion For Summary Judgment
22 On January 13, 2010, Defendant KPMG filed a motion for summary
23 judgment, arguing that Plaintiffs could not establish loss causation in this case for
24 any misstatements concerning the Company’s 2005 financial results. On
25 March 15, 2010, Plaintiffs filed their opposition to KPMG’s motion and a related
26 motion to exclude KPMG’s expert on loss causation. On April 14, 2010, KPMG
27 filed its reply brief as well as three motions to exclude Plaintiffs’ experts on loss
28

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1 causation. KPMG’s motion for summary judgment was pending at the time it
2 reached an agreement in principle to settle with Lead Plaintiff.
3 D. The Extensive Negotiations Leading To The Settlements
4 The Settlements are the result of intensive, arm’s-length negotiations
5 between all parties, involving eleven in-person mediation sessions over more than
6 a one-year time period, as well as extensive direct and indirect negotiations
7 between counsel for the parties that occurred before and after those mediations.
8 Settlement negotiations occurred while litigation was ongoing, including the
9 briefing and discovery related to KPMG’s summary judgment motion, and
10 Plaintiffs’ review of over 38 million pages of documents. The negotiations were
11 particularly complex due to the parties’ disputes over the claims and defenses in
12 the action, New Century’s bankruptcy, the number of defendants in this case, and
13 the existence of claims that were made against certain of the Defendants by the
14 New Century Liquidating Trustee (the “Trustee”), plaintiffs in the related action
15 Kodiak Warehouse LLC, et al. v. Brad A. Morrice, et al., Case No. 08-1265-DDP-
16 FMO (“Kodiak”), and the Securities & Exchange Commission (“SEC”). In the
17 end, the parties were able to reach global settlements on all claims, including not
18 only those claims alleged in the instant class action, but also the claims brought by
19 the Trustee, Kodiak, and the SEC which was necessary to achieve a settlement
20 here.
21 The negotiations commenced on March 11, 2009, when Plaintiffs and
22 certain of the Defendants participated in in-person mediation sessions before the
23 Honorable Daniel Weinstein. The mediations took place over three separate days,
24 on March 11, 12, and 24, 2009, followed by additional negotiations facilitated by
25 the Mediator on March 31, 2009, and May 8, 2009. A second in-person mediation
26 session took place over two days on June 25 and 26, 2009, followed by calls with
27 the Mediator on July 29, 2009, and August 18, 2009. A third in-person mediation
28 session took place on September 14, 2009, followed by a conference call on

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1 October 1, 2009. A fourth in-person mediation session took place on October 26,
2 2009, followed by conference calls and meetings with the Mediator on December
3 29, 2009, and January 13, 2010. A fifth in-person mediation session took place
4 over two days on January 18 and 19, 2010, followed by conference calls on
5 January 19, 2010, January 20, 2010, and February 11, 2010. The parties continued
6 to participate in conference calls with the Mediator thereafter and held final in-
7 person mediation sessions on April 28 and 29, 2010. Although the parties did not
8 fully resolve these matters by April 29, 2010, all parties were close to reaching
9 agreements in principle to settle all of the claims. At that time, Lead Counsel
10 drafted the comprehensive settlement documents. Over May, June, and July 2010,
11 the parties extensively negotiated the specific terms of the settlement documents,
12 including the three Settlement Stipulations, the proposed Preliminary Approval
13 Order, the Class Notice, the Proof of Claim form, the Summary Notice, and the
14 three proposed Judgments.
15 III. THE SETTLEMENTS
16 A. Summary Of The Settlements
17 The parties entered into the Settlement Stipulations to completely resolve the
18 above-captioned action against Defendants. Defendants collectively agreed to pay
19 approximately $125 million in cash to the Class. If the Settlements are approved
20 by the Court, this action will be dismissed with prejudice and Defendants and their
21 related parties will receive the release of claims in the Settlement Stipulations.
22 As part of the Settlements, the parties agreed to the certification of a Class
23 defined as:
24 All persons and entities who purchased or otherwise acquired New
25 Century common stock, New Century Series A Preferred Stock, New
26 Century Series B Preferred Stock, and/or New Century call options
27 and/or who sold New Century put options, during the time period
28 from May 5, 2005, through and including March 13, 2007, either in

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1 the Offerings, pursuant to a registration statement, or in the market,


2 and who, upon disclosure of certain facts alleged in the Complaint,
3 were injured thereby. 3
4 The approximately $125 million of settlement proceeds, after payment of
5 taxes, costs (including costs of providing notice and claims administration),
6 expenses and attorneys’ fees, will be distributed to Class Members pursuant to a
7 Plan of Allocation to fairly allocate the net proceeds of the Settlements to members
8 of the Class who submit acceptable Proof of Claim forms. The proposed Plan of
9 Allocation is set forth in paragraphs 32 through 85 of the proposed Notice to the
10 Class, attached as Exhibit A-1 to the proposed Preliminary Approval Order.
11 The Settlements are documented in three separate Settlement Stipulations
12 entered into by Plaintiffs, on behalf of themselves and the Class, subject to Court
13 approval. 4 First, Plaintiffs have entered into a Settlement Stipulation with
14 Defendant KPMG providing for payment to the Class of $44,750,000. Second,
15 Plaintiffs have entered into a Settlement Stipulation with the Underwriter
16 Defendants for payment to the Class of $15,000,000. Third, Plaintiffs have entered
17 into a Global Settlement Stipulation with the New Century officer and director
18 Defendants providing for payment to the Class of $65,077,088 in cash (as well as
19
20 3 Excluded from the Class are (a) Defendants; (b) members of the immediate
21 families of the Individual Defendants; (c) the subsidiaries and affiliates of
Defendants; (d) any person or entity who was a partner, executive officer, director
22 or controlling person of New Century (including any of its subsidiaries or
23 affiliates) or of any Defendant; (e) any entity in which any Defendant has a
controlling interest; and (f) the legal representatives, heirs, successors and assigns
24 of any such excluded party. Also excluded from the Class are any persons who
25 exclude themselves by filing a request for exclusion in accordance with the
requirements set forth in the Notice.
26 4 Pursuant to the Settlement Stipulations and as explained in the Notice, the three
27 settlement agreements are closely related and, if one of the three settlements should
28 not become final for any reason, it could affect the finality and enforceability of the
other settlements.
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1 other payments to resolve the other claims brought against these Defendants by the
2 SEC, the Trustee, and Kodiak). 5
3 B. Reasons For The Settlements

4 Plaintiffs entered into the Settlements with a thorough understanding of the


5 strengths and weaknesses of the claims asserted in this action. This understanding
6 is based on Lead Counsel’s prosecution of the action, which included, among other
7 things: (a) drafting of detailed complaints after review and analysis of the SEC
8 filings, press releases and other public statements relating to New Century, media
9 and news reports about New Century, publicly available trading data relating to the
10 price and volume of New Century securities, the Examiner’s Report, and other
11 information; (b) interviews with numerous former employees of New Century; (c)
12 extensive briefing on Defendants’ various motions to dismiss and KPMG’s motion
13 for summary judgment; (d) review and analysis of over 38 million pages of
14 documents produced by Defendants and third parties; (e) consultation with loan
15 underwriting, accounting and damages experts; and (f) the drafting of mediation
16 statements and numerous mediation letters and preparing for and participating in
17 numerous mediation sessions and extensive negotiations. Based on the foregoing,
18 Lead Plaintiff has entered into the Settlements with an in-depth understanding of
19 the strengths and weaknesses of Lead Plaintiff’s claims and damages.
20 Although Lead Plaintiff and Lead Counsel believe that the claims asserted
21 against Defendants have merit, they also recognize that there are serious risks as to
22
23
The Global Settlement Stipulation provides for a total of $91,102,331.51 in cash
5

24 and $944,029.49 in other consideration to be paid to resolve all of the claims


25 against the New Century officers and directors by the Class, the SEC, the Trustee
26 and Kodiak. The Global Settlement Stipulation further provides an agreed-to
allocation of these payments to the Class and the plaintiffs in the other pending
27 actions. The Class is receiving over 70% of the amount paid by the New Century
28 officer and director Defendants in the Global Settlement Stipulation, or
$65,077,088 in cash.
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1 whether Plaintiffs would ultimately prevail on the merits, including specifically


2 with regard to proving loss causation. Additionally, there was a very substantial
3 risk that, even if Plaintiffs were to prevail on the merits, the Class might not
4 recover as much as the total Settlement Amount on a judgment. Indeed, because
5 New Century had filed for bankruptcy, the available funds to satisfy any judgment
6 against the New Century officer and director Defendants were diminishing over
7 time. The Settlements represent a substantial all-cash fund for the Class and will
8 eliminate the significant risk that continued litigation might result in a smaller
9 recovery or possibly no recovery at all. As set forth below, the Settlements include
10 payment of the vast amount of the Director and Officer insurance available to
11 satisfy a judgment in this action along with personal contributions from certain of
12 the New Century officer Defendants.
13 For these reasons, Lead Plaintiff and Lead Counsel submit that the
14 Settlements are fair, adequate and reasonable, and warrant preliminary approval.
15 IV. THE PROPOSED SETTLEMENTS
WARRANT PRELIMINARY APPROVAL
16
A. Factors To Be Considered By The Court In The
17 Preliminary Approval Of Class Action Settlements
18 Federal Rule of Civil Procedure 23(e) requires judicial approval for any
19 compromise of claims brought on a class basis. Whether to approve a proposed
20 settlement is within the sound discretion of the district court, which should be
21 exercised in the context of public policy strongly favoring the pretrial settlement of
22 class action lawsuits. See Class Plaintiffs v. Seattle, 955 F.2d 1268, 1276 (9th Cir.
23 1992). “[T]here is an overriding public interest in settling and quieting litigation,”
24 and this is “particularly true in class action suits.” Van Bronkhorst v. Safeco Corp.,
25 529 F.2d 943, 950 (9th Cir. 1976).
26 Recognizing that a settlement represents an exercise of judgment by the
27 negotiating parties, the Ninth Circuit has held that “the court’s intrusion upon what
28 is otherwise a private consensual agreement negotiated between the parties to a

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1 lawsuit must be limited to the extent necessary to reach a reasoned judgment that
2 the agreement is not the product of fraud or overreaching by, or collusion between,
3 the negotiating parties, and that the settlement, taken as a whole, is fair, reasonable
4 and adequate to all concerned.” Officers for Justice v. Civil Serv. Comm’n, 688
5 F.2d 615, 625 (9th Cir. 1982).
6 In considering whether to grant preliminary approval of class action
7 settlements, courts make a preliminary evaluation of the fairness of the settlements
8 prior to issuing notice to the class and prior to holding a final settlement hearing.
9 The general standard by which courts are guided when deciding whether to grant
10 preliminary approval of a class action settlement is whether the proposed
11 settlement falls within the range of what could be found “fair, adequate and
12 reasonable,” so that notice may be given to the proposed class and a hearing for
13 final approval can be scheduled. Class Plaintiffs, 955 F.2d at 1276.
14 At this point, the Court need not answer the ultimate question: whether the
15 Settlements are fair, reasonable and adequate. When the Court makes this ultimate
16 determination at a later point, the Court will be asked to review the following
17 factors: the strength of Plaintiffs’ case; the risk, expense, complexity, and likely
18 duration of further litigation; the risk of maintaining class action status throughout
19 the trial; the amount offered in the Settlements; the extent of discovery completed,
20 and the stage of the proceedings; and the experience and views of counsel. See
21 Torrisi v. Tucson Elec. Power Co., 8 F.3d 1370, 1376 (9th Cir. 1993).
22 The parties here request only that the Court take the first step in the
23 settlement approval process and grant preliminary approval of the proposed
24 Settlements. The proposed Settlements, which provide approximately $125 million
25 in cash for distribution to eligible Class Members before deduction of Court-
26 awarded fees and expenses, are unquestionably beneficial to the Class. Given the
27 complexities of this action and the continued risks if the parties were to proceed,
28

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1 the Settlements represent a reasonable resolution and eliminate the risk that the
2 Class might recover less or nothing at all.
3 As outlined in the proposed Preliminary Approval Order, if the Court grants
4 preliminary approval, Lead Plaintiff, through the Claims Administrator, will notify
5 Class Members of the Settlements by mailing the Notice and Proof of Claim to
6 Class Members. The Notice advises Class Members of the essential terms of the
7 Settlements, information regarding Lead Counsel’s fee and expense application,
8 and the proposed plan for allocating the Settlement proceeds among Class
9 Members. The Notice also sets forth the procedure for objecting to the
10 Settlements, Plan of Allocation or the request for an award of attorneys’ fees and
11 expenses; sets out the procedure for opting out of the Class; and provides specifics
12 on the date, time, and place of the Final Settlement Hearing. The proposed
13 Preliminary Approval Order further requires Lead Plaintiff to cause the Summary
14 Notice to be published once in the national edition of The Wall Street Journal and
15 over the PR Newswire. Because the Notice and Summary Notice fairly apprise
16 Class Members of their rights with respect to the Settlements, they represent the
17 best notice practicable under the circumstances.
18 As summarized below, and as will be detailed further in a subsequent motion
19 for final approval of the Settlements, a preview of the factors considered by courts
20 in granting final approval of class action settlements demonstrates that these
21 Settlements are well within the range of possible approval.
22 1. The Settlements Were Vigorously Negotiated
And Are Supported By Experienced Coun
sel
23
24 There is an initial presumption that the proposed settlement is fair and
25 reasonable when it is the result of arm’s-length negotiations. See Fulford v.
26 Logitech, Inc., 2010 U.S. Dist. LEXIS 29042, at *6 (N.D. Cal. Mar. 5, 2010)
27 (citing In re Consol. Pinnacle W. Sec. Litig., 51 F.3d 194, 197 n.6 (9th Cir. 1995)).
28 In addition, courts recognize that the opinion of experienced counsel

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1 supporting the settlement is entitled to considerable weight. See, e.g., In re


2 First Capital Holdings Corp. Fin. Prods. Sec. Litig., 1992 U.S. Dist. LEXIS
3 14337, at *8 (C.D. Cal. June 10, 1992); Kirkorian v. Borelli, 695 F. Supp. 446, 451
4 (N.D. Cal. 1988). Thus, “the trial judge, absent fraud, collusion, or the like, should
5 be hesitant to substitute its own judgment for that of counsel.” In re Heritage
6 Bond Litig., 2005 WL 1594403, at *9 (C.D. Cal. June 10, 2005).
7 The Settlements are the result of extensive arm’s-length negotiations by
8 experienced counsel which occurred for over one year and through numerous
9 mediation sessions and correspondences facilitated by the Mediator. Based upon
10 Lead Counsel’s familiarity with the factual and legal issues of this action, the
11 investigation performed, the discovery work completed, and the work in preparing
12 for and participating in the mediations, Lead Counsel was ultimately able to
13 negotiate an excellent result for the Class. This result takes into account the
14 defenses of Defendants, and the risks that the action might not survive a motion for
15 summary judgment, that Lead Plaintiff would not prevail at trial or upon appeal, or
16 that there would be less funds available to the Class after a successful result at trial
17 or on appeal than those being agreed to at this time.
18 2. The Substantial Benefits Obtained For The Class,
Especially In Light Of Serious Risks Of Lesser Or
19 No Recovery, Support Approval Of The Settlements
20 Under the terms of the Settlements, Defendants agreed to create a fund
21 consisting of approximately $125 million in cash for the Class. This is a
22 significant recovery, particularly in light of the risks of continued litigation. If the
23 action had continued, Lead Plaintiff faced substantial risks, including establishing
24 Defendants’ liability and the full amount of the Class’s damages at summary
25 judgment or trial. In addition, litigating this complex securities class action to
26 completion would result in significant expense and delay.
27 The recoveries obtained by Lead Counsel through global settlements are also
28 particularly extraordinary in light of the multiple parties involved in the

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1 negotiations. For example, as set forth in detail in the Stipulations, Lead Plaintiff
2 was able to obtain substantial sums from the New Century Insurance Carriers that
3 will be allocated to settle the claims asserted by the Class, the Trustee, and the
4 Kodiak plaintiffs. Of those sums, $65,077,088 in cash will be paid to the Class. 6
5 In addition, the Settlements provide for payment of additional funds by KPMG
6 ($44,750,000 in cash) and the Underwriter Defendants ($15,000,000 in cash)
7 solely for the benefit of the Class.
8 As will be explained in further detail in advance of the Final Settlement
9 Hearing, including through a declaration of Lead Plaintiff’s damages consultant,
10 the total estimated damages calculated by Lead Plaintiff’s damages consultant
11 were in excess of the amounts recovered. In evaluating the Settlements, however,
12 Lead Plaintiff took into account the fact that the Class could have a far less
13 recovery if, for example, KPMG succeeded on its motion for summary judgment
14 because KPMG’s motion threatened to eliminate all claims against KPMG and to
15 greatly reduce damages recoverable against the Underwriter Defendants.
16 Moreover, continued litigation as to the New Century Individual Defendants would
17 have further depleted the available insurance which was the primary source of
18 available recovery as to those Defendants who would have faced continued
19 litigation not only with the Class, but also with the SEC, the Trustee and Kodiak.
20 In sum, these recoveries, totaling nearly $125,000,000 and obtained in the
21 face of a lesser recovery or no recovery at all, support approval of the Settlements.
22
23 6 The break-down of the payments by the Insurance Carriers and the New Century
officers, individually, is set forth in paragraphs nine through eleven of the Global
24 Settlement Stipulation. Lead Plaintiff was able to obtain the vast amount of
25 Director and Officer insurance available to satisfy any judgment, millions of which
had already been expended in defense costs. Paragraph eleven also demonstrates
26 that over 70% of the cash settlement funds contributed by the director and officer
27 Defendants (including the insurance contributions), or $65,077,088, is being
28 allocated to the resolution of the Class claims as opposed to those being allocated
to settle the actions brought by the Trustee and Kodiak.
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1 3. The Stage Of The Proceedings And Discovery


Complete
d Support Approval Of The Settlements
2
3 The stage of the proceedings and discovery completed are additional factors
4 considered by courts when determining the fairness of settlements. See Hanlon v.
5 Chrysler Corp., 150 F.3d 1011, 1026 (9th Cir. 1998). Here, prior to the execution
6 of the Settlement Stipulations, Lead Counsel conducted a thorough investigation of
7 the facts and circumstances, having interviewed dozens of witnesses and searched
8 through and analyzed large amounts of the over 38 million pages of documents
9 obtained through discovery. At the time the Settlements were reached, Lead
10 Plaintiff had briefed the opposition to Defendant KPMG’s motion for summary
11 judgment, which was pending before this Court. There can be no question that at
12 the time the Settlements were reached, Lead Counsel had a clear view of the
13 strengths and weaknesses of the Class’s claims. Additionally, Lead Plaintiff, an
14 institutional investor, monitored this case throughout the course of the litigation
15 and participated in the negotiations of the Settlements. Thus, the proposed
16 Settlements are the product of serious, informed, non-collusive negotiations, are
17 well within the range of possible approval, and do not have any obvious
18 deficiencies. For these and all of the foregoing reasons, the Court should grant
19 preliminary approval of the Settlements and direct that notice of the Settlements be
20 given to members of the Class.
21 B. The Class Should Be Certified
For Settlement Purposes
22
23 The parties have stipulated that the Court may, for settlement purposes only,
24 certify the Class and appoint Plaintiffs as the Class Representatives, and Lead
25 Counsel as the Class Counsel. See Stipulations, ¶2. The Ninth Circuit has long
26 recognized that class actions may be certified for the purpose of settlement only.
27 See Hanlon, 150 F.3d 1011. Classes for the purpose of settlement are recognized
28

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1 under the general scheme of Rule 23, provided that the class is eventually
2 determined to meet the certification requirements under Rule 23. Id.
3 Federal Rule of Civil Procedure 23(a) sets forth four prerequisites to class
4 certification: (1) numerosity; (2) commonality; (3) typicality; and (4) adequacy of
5 representation. In addition, the class must meet one of the three requirements in
6 Rule 23(b).
7 Courts have generally found securities claims to be particularly well-suited
8 for class action status because they allow for the policies behind the securities laws
9 to be enforced in circumstances where there are numerous investors with small
10 individual claims that otherwise would effectively be barred from litigation. See
11 Blackie v. Barrack, 524 F.2d 891, 902 (9th Cir. 1975). This action is no exception
12 and, as explained below, the parties agree that, for purposes of the Settlements, the
13 Class should be certified as satisfying each of the requirements set forth in Rule 23.
14 1. Numerosity

15 Rule 23(a)(1) requires that the class be so numerous that joinder of all class
16 members is impracticable. For purposes of Rule 23(a)(1), “[i]mpracticable does
17 not mean impossible, only that it would be difficult or inconvenient to join all
18 members of the class.” In re Juniper Networks Sec. Litig., 264 F.R.D. 584, 588
19 (N.D. Cal. 2009) (citing Harris v. Palm Springs Alpine Estates, Inc., 329 F.2d 909,
20 913-14 (9th Cir. 1964)). “Numerosity does not presume a strict numerical cut-off.
21 Courts have certified classes whose membership sizes range from less than one
22 hundred to over one hundred thousand.” In re VeriSign Inc. Sec. Litig., 2005 U.S.
23 Dist. LEXIS 10438, at *12 (N.D. Cal. Jan. 13, 2005). “In cases involving
24 securities traded on national stock exchanges, numerosity is practically a given.”
25 Id.; see also Juniper, 264 F.R.D. at 588 (“Some courts have assumed that the
26 numerosity requirement is met in securities fraud suits involving nationally traded
27 stocks.”). Mathematical computation of class size is not a prerequisite for class
28 certification, and the court may use common sense assumptions to support a

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1 finding of numerosity when the class is obviously large. See Schwartz v. Harp,
2 108 F.R.D. 279, 281-82 (C.D. Cal. 1985) (“A failure to state the exact number in
3 the proposed class does not defeat class certification.”).
4 Here, millions of shares of New Century securities were traded during the
5 Class Period. In addition, beneficial holders of New Century securities are
6 believed to number in the thousands and are geographically located throughout the
7 United States, making joinder of all Class Members impractical. Thus, the
8 numerosity element is satisfied.
9 2. Commonality

10 The commonality requirement is satisfied where, as here, there are


11 “questions of law or fact common to the class.” Fed. R. Civ. P. 23(a)(2). There
12 need be only one issue common to class members. Hanlon, 150 F.3d at 1019.
13 Generally, courts have liberally construed the commonality prerequisite, requiring
14 only that “the named plaintiffs share at least one question of fact or law with the
15 grievances of the proposed class.” Siemer v. Assocs. First Capital Corp., 2000
16 U.S. Dist. LEXIS 21244, at *32 (D. Ariz. Dec. 13, 2000). “[A] few factual
17 variations among the class grievances will not defeat commonality so long as class
18 members’ claims arise from ‘shared legal issues’ or ‘a common core of salient
19 facts.’” Conn. Ret. Plans and Trust Funds v. Amgen, Inc., 2009 U.S. Dist. LEXIS
20 71653, at *13 (C.D. Cal. Aug. 12, 2009).
21 Here, questions which are common to the proposed Class include, among
22 others: (i) whether the federal securities laws were violated by Defendants’
23 alleged acts; (ii) whether the Company’s publicly disseminated releases and
24 statements during the Class Period omitted and/or misrepresented material facts;
25 (iii) whether the prices of New Century securities during the Class Period were
26 artificially inflated due to the alleged material nondisclosures and/or
27 misrepresentations; and (iv) whether members of the Class have sustained damages
28 and, if so, what is the appropriate measure of damages. In short, because the core

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1 contention of all Class Members is that they purchased and/or acquired New
2 Century securities at artificially inflated prices, and suffered damages as a result of
3 the alleged securities violations, the commonality requirement of Rule 23(a)(2) is
4 satisfied. See In re Wireless Facilities, Inc. Sec. Litig., 253 F.R.D. 630, 635 (S.D.
5 Cal. 2008) (finding “core issue” in a securities litigation to be plaintiffs’
6 “acquisition of [defendant] common stock at artificially inflated prices”).
7 3. Typicality

8 Rule 23(a)(3) requires that “the claims or defenses of the representative


9 parties are typical of the claims or defenses of the class.” Juniper, 264 F.R.D. at
10 589. Typicality does not require that all members of the Class be identically
11 situated. See Hanlon, 150 F.3d at 1020. “The Ninth Circuit has held that typical
12 claims need only be ‘reasonably coextensive with those of absent class members;
13 they need not be substantially identical.’” Crossen v. CV Therapeutics, 2005 WL
14 1910928, at *4 (N.D. Cal. Aug. 10, 2005) (quoting Hanlon, 150 F.3d at 1020).
15 Like commonality, typicality is interpreted permissively. Juniper, 264 F.R.D. at
16 588. Consequently, differences in the amount of damages, the size or manner of
17 purchase or holding, and the nature of the purchase or holding are insufficient to
18 defeat class certification. See In re LDK Solar Sec. Litig., 255 F.R.D. 519, 530
19 (N.D. Cal. 2009); In re THQ Inc. Sec. Litig., 2002 U.S. Dist. LEXIS 7753, at * 12
20 (C.D. Cal. Mar. 22, 2002); Schaefer v. Overland Express Family of Funds, 169
21 F.R.D. 124, 128-29 (S.D. Cal. 1996).
22 Here, Plaintiffs’ claims and the claims of members of the Class arise from
23 the same alleged conduct by Defendants. Plaintiffs allege that, like the other
24 members of the Class, they purchased and/or acquired New Century securities at
25 prices that were inflated because Defendants, in violation of the federal securities
26 laws, issued false and materially misleading statements and/or omissions. Further,
27 the proof that Plaintiffs would present to establish their claims would also prove
28 the claims of the rest of the Class. See In re Applied Micro Circuits Corp. Sec.

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1 Litig., 2003 U.S. Dist. LEXIS 14492, at *13 (S.D. Cal. July 10, 2003) (typicality
2 satisfied where plaintiff acquired securities inflated by the defendant’s false and
3 misleading statements). Additionally, Plaintiffs are not subject to any unique
4 defenses that could make them atypical members of the Class. Therefore,
5 Plaintiffs respectfully submits that this Court should find that Plaintiffs’ claims are
6 typical of the Class.
7 4. Adequacy
8 Rule 23(a)(4) requires that class representatives “fairly and adequately
9 protect the interests of the class.” Fed. R. Civ. P. 23(a)(4). In the Ninth Circuit,
10 the adequacy requirement is met where, as here, the plaintiffs: (1) “do not have
11 conflicts of interest with the proposed class”; and (2) “are represented by qualified
12 and competent counsel.” Dukes v. Wal-Mart, Inc., 509 F.3d 1168, 1185 (9th Cir.
13 2007) (citing Hanlon, 150 F.3d at 1020); see also LDK, 255 F.R.D. at 532. Here,
14 the requirements for adequacy are satisfied.
15 Here, as described above, Plaintiffs have claims that are typical of and
16 coextensive with those of the Class. Plaintiffs, like all Class Members, purchased
17 or otherwise acquired New Century securities at artificially inflated prices during
18 the Class Period as a result of the Defendants’ alleged materially false and
19 misleading statements and/or omissions, and were allegedly damaged thereby.
20 Further, Plaintiffs have retained counsel highly experienced in securities class
21 action litigation and which have successfully prosecuted many securities and other
22 complex class actions throughout the United States. Thus, Plaintiffs are adequate
23 representatives of the Class, and their counsel are qualified, experienced and
24 capable of prosecuting this action, in satisfaction of Rule 23(a)(4).
25 5. Common Questions Of Law Predominate And A
Class Action Is The Superior Method Of Adjudication
26
27 Finally, in addition to the four requirements of Rule 23(a), a class must also
28 satisfy one of the three subparts of Rule 23(b). Here, a class action is superior to

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1 other available methods, as required by Rule 23(b)(3). To ensure that the class
2 action is more efficient than individual actions, Rule 23(b) requires that common
3 issues predominate over issues that are particular to a class representative.
4 Generally, common questions will predominate over any differences between
5 individual class members “[w]hen ‘a common nucleus of misrepresentations,
6 material omissions and market manipulations [exists].’” In re Cooper Cos., Inc.
7 Sec. Litig., 254 F.R.D. 628, 639-40 (C.D. Cal. 2009). Further, the superiority of
8 class actions to address securities fraud has been consistently upheld. Id. at 642.
9 The predominance test is met in this action and a class action is superior to
10 other available methods. The same set of operative facts applies to each Class
11 Member – each Class Member purchased and/or acquired New Century securities
12 during the Class Period at prices alleged to be artificially inflated as a result of
13 Defendants’ false and misleading statements and/or omissions, and was allegedly
14 harmed when the undisclosed facts came to light. If Plaintiffs and each of the
15 Class Members were to bring individual actions, they would each be required to
16 prove the same wrongdoing by Defendants to establish liability. Accordingly, the
17 foregoing, the requirements of Rule 23(a) and (b) are satisfied and there are no
18 issues which would prevent the Court from certifying the Class for settlement
19 purposes and appointing Plaintiffs as class representatives. See Hanlon, 150 F.3d
20 at 1022 (citing 7A Charles Alan Wright, Arthur R. Miller and Mary Kay Kane,
21 Federal Practice & Procedure § 1778 (2d ed. 1986)); see also LDK, 255 F.R.D. at
22 530; In re Emulex Corp. Sec. Litig., 210 F.R.D. 717, 721 (C.D. Cal. 2002)
23 (granting motion for class certification where “[t]he predominant questions of law
24 or fact at issue in this case are the alleged misrepresentation[s] Defendants made
25 during the Class Period and are common to the class”).
26 C. The Proposed Plan Of Allocation Is Fair And Reasonable
27 A plan of allocation should be approved if it is fair, reasonable and adequate.
28 In re Omnivision Techs., 559 F. Supp. 2d 1036, 1045 (N.D. Cal. 2008); Class

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1 Plaintiffs, 955 F.2d at 1284-85. “An allocation formula need only have a
2 reasonable, rational basis, particularly if recommended by experienced and
3 competent class counsel.” In re WorldCom, Inc. Sec. Litig., 388 F. Supp. 2d 319,
4 344 (S.D.N.Y. 2005) (citation omitted). The goal of an equitable plan of allocation
5 is fairness to the class as a whole, taking into consideration the strengths of claims
6 based upon available facts and evidence, as well as the size of the fund to be
7 distributed. See Omnivision, 559 F. Supp. 2d at 1045; see also Glass v. UBS Fin.
8 Servs., 331 Fed. Appx. 452, 454 (9th Cir. 2009) (unpubl.); In re Mego Fin. Corp.
9 Sec. Litig., 213 F.3d 454, 461 (9th Cir. 2000).
10 Here, Lead Plaintiff seeks only preliminary approval of the Plan of
11 Allocation so that Notice of the Plan can be sent to Class Members. At the Final
12 Settlement Hearing, the Court will have before it a more complete record,
13 including additional briefing from Lead Plaintiff, a declaration in support of the
14 Plan by Lead Plaintiff’s damages consultant, and any comments from Class
15 Members, before making a final determination on the Plan of Allocation. As set
16 forth below, the proposed Plan of Allocation plainly meets the standards for
17 preliminary approval.
18 Plaintiffs and Lead Counsel have developed the proposed Plan of Allocation
19 set forth in paragraphs 32 through 85 of the Notice, attached as Exhibit A-1 to the
20 proposed Preliminary Approval Order. The Plan of Allocation provides that Class
21 Members who file timely and valid Proof of Claim forms will receive a pro rata
22 share of the settlement funds based on their recognized losses. The Plan of
23 Allocation was developed in consultation with Lead Plaintiff’s damages expert,
24 Professor H. Nejat Seyhun, Ph.D. It calculates each claimant’s “Recognized Loss
25 Claim,” using a formula that reflects the likely provable damages that could have
26 been obtained had this litigation proceeded to trial.
27 As set forth in the Notice, the Plan of Allocation is based upon the following
28 premises: (1) the market price of New Century securities was artificially inflated;

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1 (2) the degree of inflation varied throughout the Class Period and decreased with
2 each partial disclosure of adverse information; and (3) the value of the Recognized
3 Loss Amount varies depending on when the claimant bought and/or sold the New
4 Century securities.
5 The Plan of Allocation also recognizes differences among the claims
6 applicable to the various settling defendants. First, Securities Act claims were
7 brought (and could only be brought) only on behalf of the Preferred Shares, and
8 not on behalf of the other securities, and only against the Underwriter Defendants.
9 Thus, as explained in the Notice, the net settlement amount being paid by the
10 Underwriter Defendants ($15 million) will be distributed only to Authorized
11 Claimants who purchased Preferred Shares, whereas the net settlement amounts
12 being paid by KPMG and the New Century officers and directors will be
13 distributed to all Authorized Claimants who otherwise have a Recognized Loss
14 Claim under the Plan of Allocation. Second, in the view of experienced Lead
15 Counsel and Lead Plaintiff’s damages consultant, in light of the speculative and
16 derivative nature of options securities, the relative risks of prevailing at trial on
17 behalf of purchasers of Call Options and sellers of Put Options were greater than
18 the risks of prevailing on the claims on behalf of purchasers of common stock and
19 Preferred Shares. Taking this factor into account, the Plan of Allocation allocates a
20 limit of 10% of the overall disbursements from the KPMG and New Century
21 director and officer settlements to Call Options and Put Options, representing a
22 50% discount to what those securities would otherwise potentially receive on a pro
23 rata basis. Differences of this nature among class members are common in
24 securities litigation and are commonly addressed by a plan of allocation in class
25 actions. See Glass, 331 Fed. Appx. at 455 (affirming plan for distributing
26 settlement proceeds that treats various class members differently based on
27 differences in recoverable damages); see also In re Oracle Sec. Litig., 1994 WL
28 502054, at *1 (N.D. Cal. June 18, 1994) (finding it is “reasonable to allocate more

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1 of the settlement to class members with stronger claims on the merits”);


2 Omnivision, 559 F. Supp. 2d at 1045; Mego Fin., 213 F.3d at 461.
3 In sum, the Plan of Allocation has a rational basis, is fully supported by
4 Lead Counsel and Plaintiffs and should be preliminarily approved so that Notice of
5 the Plan can be disseminated to Class Members.
6 D. The Notice To The Class Is Adequate

7 Notice of a proposed settlement must be given to class members in the most


8 practicable manner under the circumstances, describing “the terms of the
9 settlement in sufficient detail to alert those with adverse viewpoints to investigate
10 and to come forward and be heard.” Mendoza v. United States, 623 F.2d 1338,
11 1352 (9th Cir. 1980); see also Fed. R. Civ. P. 23(c)(2)(B). In addition, “every
12 settlement notice must include a statement explaining a plaintiff’s recovery.”
13 Wireless Facilities, 253 F.R.D. at 636 (citing In re Veritas Software Corp. Sec.
14 Litig., 496 F.3d 962, 969 (9th Cir. 2007)).
15 Here, the Notice more than satisfies these standards. Among other things,
16 the Notice informs Class Members of: (1) the amount of the Settlements,
17 determined in the aggregate and on an average per-share basis7; (2) the reasons
18 why the parties propose the Settlements; (3) a statement as to the issues on which
19
20 7For example, the Notice explains that assuming that all Class Members
21 participate in the Settlements, Lead Plaintiff’s damages consultant estimates that
the average distribution per damaged share will be approximately $0.69 per share
22 of New Century common stock, approximately $2.08 per share of New Century
23 Preferred Stock, approximately $0.11 per Call Option, and approximately $0.25
per Put Option, before deduction of Court-approved fees, expenses and costs. This
24 number is calculated by, for each type of security, dividing the relevant gross
25 settlement amount by the number of estimated damages shares or options. This
assumes that 100% of the damaged shares submit valid claim forms. Studies
26 indicate that, in reality however, a substantial percentage of class members may
27 elect to not file claims. To the extent that Class Members do not file claims, the
28 recovery per share for valid claims filed will increase. The actual amount of
recovery per security will depend on how many valid claims are submitted.
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1 the parties disagree with respect to the amount of damages which would have been
2 recoverable at trial; (4) a statement describing Lead Counsel’s intended fee and
3 expense application and support therefor 8 ; and (5) Lead Counsel’s contact
4 information. See 15 U.S.C.A. §78u-4(a)(7)(A)-(F). The Notice also describes the
5 rights of Class Members, including their rights to exclude themselves from the
6 Class or object to the Settlements. 9
7 As detailed in the proposed Preliminary Approval Order and in the Proposed
8 Schedule attached hereto as Exhibit 1, Lead Counsel and the Claims Administrator
9 propose to mail copies of the Class Notice (substantially in the form of Exhibit A-1
10 to the proposed Preliminary Approval Order) and the Proof of Claim form
11 (substantially in the form of Exhibit A-2 to the proposed Preliminary Approval
12 Order) by first class mail to all persons and entities who can be identified from the
13 shareholder lists of New Century, as are in the Trustee’s possession. The Claims
14 Administrator will also mail copies of the Notice to the largest banks and
15 brokerage houses requesting that the Notice be sent to all persons and entities for
16
17 The Notice explains that Lead Counsel has not received any payment for its
8

18 services in pursuing claims against Defendants on behalf of the Class, nor has Lead
19 Counsel been reimbursed for its out-of-pocket expenses. Before the Final
Settlement Hearing, Lead Counsel intends to apply to the Court for an award of
20 attorneys’ fees from the Settlement Fund in an amount not to exceed 12% of the
21 Settlement Amount, and Litigation Expenses not to exceed $4.5 million, plus
interest from the date of funding at the same rate as earned by the Settlement Fund.
22 If the Court approves Lead Counsel’s fee and Litigation Expense application, Lead
23 Plaintiff’s damages consultant estimates that the average cost per damaged share
will not exceed approximately $0.11 per share of common stock, approximately
24 $0.32 per share of Preferred Stock, approximately $0.02 per Call Option, and
25 approximately $0.04 per Put Option.
As explained in the Notice, the Individual Defendants, Insurance Carriers,
9

26 Underwriter Defendants or KPMG may terminate the Settlements if requests for


27 exclusion are received from potential Class Members representing over a certain
28 amount of shares as stated in Supplemental Agreements. Upon request, the
Supplemental Agreements will be submitted under seal for the Court’s review.
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1 whom they acted as nominee purchaser of New Century securities. In addition,


2 Lead Counsel intends to publish a Summary Notice (substantially in the form of
3 Exhibit A-3 to the proposed Preliminary Approval Order) in the national edition of
4 The Wall Street Journal and over the PR Newswire and provide a link to the Notice
5 and the Proof of Claim form, as well as other case documents, on the website
6 created by the Claims Administrator specifically for these Settlements.
7 The proposed notice program fulfills the requirements of due process and
8 satisfies Rule 23(e) because it alerts and informs those members of the Class who
9 can be identified through reasonable efforts of the information set forth above.
10 See, e.g., In re Portal Software, Inc. Sec. Litig., 2007 WL 4171201, at *1 (N.D.
11 Cal. Nov. 26, 2007) (approving similar notice regimen); In re Immune Response
12 Sec. Litig., 497 F. Supp. 2d 1166, 1170 (S.D. Cal. 2007); see also Rodriguez v. W.
13 Publ’g Corp., 563 F.3d 948, 962 (9th Cir. 2009) (“Notice is satisfactory if it
14 ‘generally describes the terms of the settlement in sufficient detail to alert those
15 with adverse viewpoints to investigate and to come forward and be heard’”)
16 (citations omitted); Silber v. Mabon, 18 F.3d 1449, 1452-54 (9th Cir. 1994)
17 (approving notice sent by first class mail as the “best notice practicable”).
18 V. CONCLUSION
19 For all of the above reasons, Lead Plaintiff respectfully requests that this
20 unopposed motion for preliminary approval of Settlements be granted. A proposed
21 schedule of settlement events is attached hereto as Exhibit 1.
22 Dated: July 30, 2010 Respectfully submitted,
23 BERNSTEIN LITOWITZ BERGER
& GROSSMANN LLP
24
25
/s/ Salvatore J. Graziano
26 SALVATORE J. GRAZIANO
27 BLAIR A. NICHOLAS
28 ELIZABETH LIN
NIKI L. MENDOZA
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1 BENJAMIN GALDSTON
TAKEO A. KELLAR
2 12481 High Bluff Drive, Suite 300
San Diego, CA 92130
3 Tel: (858) 793-0070
Fax: (858) 793-0323
4
-and-
5
SALVATORE J. GRAZIANO
6 LAUREN A. MCMILLEN
1285 Avenue of the Americas
7 New York, NY 10019
Tel: (212) 554-1400
8 Fax: (212) 554-1444
9 Lead Counsel for Lead Plaint ff
The New York State Teachers Retirement
10 System and the Class
11
MARVIN L. FRANK
12 Murray, Frank & Sailer LLP
13 275 Madison Avenue
New York, NY 10016
14 Tel: (212) 682-1818
15 Fax: (212) 682-1892

16 Counsel for Plaintiff Carl Larson


17
18 JEFFREY ZWERLING
Zwerling, Schachter & Zwerling, LLP
19 41 Madison Avenue
20 New York, NY 10010
Tel: (212) 223-3900
21 Fax: (212) 371-5969
22 Counsel for Plaintiff Charles Hooten
23
24
25
26
27
28

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TABLE OF CONTENTS TO EXHIBITS TO

PLAINTIFFS' MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF


UNOPPOSED MOTION FOR PRELIMINARY APPROVAL OF SETTLEMENTS

EXHIBIT TITLE
1 Proposed Schedule I
2 Stipulation Of Global Settlement With New Century Officers And Directors y
(with exhibits thereto) p
3 Stipulation Of Settlement Between Plaintiffs And KPMG !,
(with exhibits thereto)
4 Stipulation Of Settlement Between Plaintiffs And The Underwriter Defendants
(with exhibits thereto)

{
Case 2:07-cv-00931-DDP-FMO Document 484-2 Filed 07/30/10 Page 1 of 2 Page ID
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Y

i
r

a
i

EXHIBIT 1
TO UNOPPOSED MOTION FOR PRELIMINARY e
APPROVAL OF SETTLEMENTS

1- PROPOSED SCHEDULE
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PROPOSED SCHEDULE
If the Court grants preliminary approval of the proposed Settlements, the
parties respectfully submit the following schedule for the Court's consideration:
Event Time for Compliance Deadline if
preliminary
approval granted
Aug. 30, 2010
Deadline for mailing the 5 business days after the September 7, 2010
Notice to Class Members entry of the Preliminary
("Notice Date") Approval Order
(Preliminary Approval
Order, ¶6a)
Deadline for publishing 5 business days after the September 14, 2010
Summary Notice Notice Date (Preliminary
Approval Order, ¶6b)
Filing of briefs in support of 28 days before the Final October 12, 2010
final approval of the Approval Hearing
Settlements, Plan of (Preliminary Approval
Allocation, and Lead Order, ¶11)
Counsel's fee and expense
request !
Receipt Deadline for Requests 21 calendar days before October 18, 2010
for Exclusions and Objections the Final Approval
Hearing (Preliminary
Approval Order, T¶ 12,
19)
Filing of reply memoranda in 7 calendar days before November 1, 2010
response to any objections to the Final Approval
the Settlements Hearing
Final Approval Hearing 100 days following filing November 8, 2010
of Stipulations 10:00 a.m.
(Preliminary Approval
Order, ¶ 10)
Deadline for submitting Proofs 120 calendar days January 5, 2011
of Claim following the Notice
Date (Preliminary
Approval Order, ¶16)

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EXHIBIT 2
TO UNOPPOSED MOTION FOR PRELIMINARY
APPROVAL OF SETTLEMENTS

-1-
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8
STIPULATION OF GLOBAL SETTLEMENT
9 WITH NEW CENTURY OFFICERS AND DIRECTORS
10

11

12

13

14
l
15

16

17

18

19

20

21

22

23

24

25

26

27
i
28

D/O STIPULATION OF SETTLEMENT


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1 This Stipulation of Settlement (all capitalized terms are defined in paragraph


2 1 below) is entered into as of July 23, 2010, between and among: Class Plaintiffs
3 (on behalf of themselves and the Class), the Trustee, and Kodiak, on the one hand;
4 and Class Individual Defendants, Trustee Litigation Defendants, Kodiak Litigation
i,
5 Defendants, and David Kenneally, on the other hand, by and through their

6 respective counsel to resolve the following actions:


7 • Avi Gold v. Brad A. Morrice et al., a/k/a, In re New Century, Case
8 No. 2:07-cv-00931-DDP-FMO (C.D. Cal.);
• The New Century Liquidating Trust and Reorganized New Century
9 Warehouse Corporation v. Robert K Cole, et al. (In re New Century
10 TRS Holdings, Inc.), Case No. 09-50882-KJC (Bankr. D. Del.); and
• Kodiak Warehouse LL C, et al. v. Brad A. Morrice, et al., Case No. 08-
11 1265-DDP-FMO (C.D. Cal.)
12
This Stipulation will be submitted in the Consolidated Class Action pursuant
13
to Rule 23 of the Federal Rules of Civil Procedure, and is subject to the approval of
14
the Consolidated Class Action Court. This Stipulation embodies a global
15
settlement among the Parties, and is intended by the Parties to settle all Settled
16
Class Claims, all Settled Trustee Claims, and all Settled Kodiak Claims against the
17
Settling Individuals. The settlement of the Trustee Litigation and the Kodiak
18
Litigation are not subject to the approval of the courts hearing such litigations, but i
19 f
both settlements are conditioned upon the occurrence of the Effective Date.
20
WHEREAS:
21
A. New Century was founded in 1995 and operated through its
22
subsidiaries as a mortgage finance company from 1995 through 2007;
23
B. On February 7, 2007, New Century announced publicly that it needed
24
to restate its earnings for the first three quarters of 2006;
25
C. Beginning on or about February 8, 2007, securities class action
26
complaints were filed in the United States District Court for the Central District of
27
California and the actions were consolidated into the Consolidated Class Action by
28
order dated June 26, 2007;
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I
1 D. On April 2, 2007, New Century and the other Debtors filed for
2 bankruptcy in the Bankruptcy Court under Chapter 11 of the Bankruptcy Code;
3 E. By Order dated June 26, 2007, the Consolidated Class Action Court
4 appointed the Lead Class Plaintiff for the Consolidated Class Action and approved j
5 the selection of Bernstein Litowitz Berger & Grossmann LLP as Lead Counsel for
6 the Class;
7 F. On September 14, 2007, Class Plaintiffs filed their complaint in the
8 Consolidated Class Action asserting claims against Class Defendants under the
9 Exchange Act and the Securities Act on behalf of the Class; f

10 G. Beginning on November 2, 2007, Class Defendants filed motions to


11 dismiss the complaint in the Consolidated Class Action, which Class Plaintiffs
12 opposed on December 14, 2007;
13 H. By Order dated January 31, 2008, the Consolidated Class Action
14 Court granted the motions to dismiss with leave to amend the complaint;
15 I. On March 24, 2008, Class Plaintiffs filed their Amended Class
16 Complaint, alleging claims against Class Defendants pursuant to the Securities Act
17 and the Exchange Act;
18 J. Pursuant to stipulation, on April 30, 2008, Class Plaintiffs filed their
19 Second Amended Class Complaint, alleging claims against the Class Defendants
20 pursuant to the Securities Act and the Exchange Act;
21 K. Beginning on June 2, 2008, Class Defendants filed motions to dismiss
22 the Second Amended Class Complaint, which Class Plaintiffs opposed on July 7,
23 2008;
24 L. In July 2008, the Bankruptcy Court approved a plan of liquidation of
25 the Debtors' assets, which was later modified with the Bankruptcy Court's
26 approval. Pursuant to the plan of liquidation, the Trust was created and the Trustee
27 was appointed to liquidate the Debtors' assets, including the claims asserted in the
28 Trustee Litigation;

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1 M. On November 7, 2008, Kodiak commenced the Kodiak Litigation;


2 N. Following a hearing, by Order dated December 3, 2008, the
3 Consolidated Class Action Court substantially denied Class Defendants' motions to
4 dismiss;
5 O. Beginning on January 26, 2009, Class Defendants answered the
6 Second Amended Class Complaint;
7 P. On April 1, 2009, the Trustee commenced the Trustee Litigation in the
8 Bankruptcy Court against the Trustee Litigation Defendants for alleged breach of
9 fiduciary duty, waste of corporate assets, unjust enrichment, and claims under
10 Chapter 5 of the Bankruptcy Code;
11 Q. Pursuant to successive stipulations and orders of the Bankruptcy
12 Court, the parties to the Trustee Litigation agreed to a forbearance of discovery and

13 any other litigation activity and to an extension of the time for the Trustee

14 Litigation Defendants to move, answer or otherwise respond to the complaint in


15 the Trustee Litigation to allow the parties the opportunity to explore a consensual
16 resolution of the Trustee Litigation;
17 R. The Parties have participated in mediation sessions and additional
18 discussions before the Honorable Daniel Weinstein, and subsequently were able to
19 reach agreements in principle to settle the Officer And Director Litigations, on the
20 terms set forth in this Stipulation;

21 S. The Settling Individuals deny any wrongdoing whatsoever and this


22 Stipulation shall in no event be construed or deemed to be evidence of or an

23 admission or concession on the part of any Settling Individual with respect to any
24 claim or of any fault or liability or wrongdoing or damage whatsoever, or any

25 infirmity in the defenses that the Settling Individuals have or could have asserted.
26 The Officer And Director Litigations are being settled voluntarily after receiving

27 sufficient advice of counsel, and the Parties believe that the tenns of the Settlement

28 are fair, adequate and reasonable. This Stipulation shall not be construed or

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1 deemed to be a concession by any Plaintiff of any infirmity in the claims asserted


2 in the Officer And Director Litigations;

3 T. Counsel for Plaintiffs have each conducted an extensive investigation


4 and/or thorough discovery relating to its respective clients' (or client's) claims and

5 the underlying events and transactions alleged in the Officer And Director

6 Litigations. Such counsel has each analyzed the evidence it has adduced through
7 discovery or otherwise and has researched the applicable law with respect to the
8 claims asserted and the potential defenses thereto;
9 U. Based upon their investigation and/or discovery as set forth above,
10 Plaintiffs and their counsel have each concluded that the terms and conditions of
11 this Stipulation are fair, reasonable and adequate including, with respect to Class
12 Plaintiffs and their counsel, to the other members of the Class, and in their best
13 interests, and each agreed to settle its claims in the Officer And Director Litigations
14 pursuant to the terms and provisions of this Stipulation, after considering (1) the
15 benefits that the Plaintiffs will receive from the Settlement, (2) the attendant risks

16 of litigation, and (3) the desirability of permitting the Settlement to be


17 consummated as provided by the terms of this Stipulation; and

18 V. The recitals and prefatory phrases and paragraphs set forth above are
1 9 incorporated in full and made part of this Stipulation.
20 NOW THEREFORE, without any admission or concession on the part of
21 Plaintiffs of any lack of merit of the Officer And Director Litigations whatsoever,

22 and without any admission or concession of any liability or wrongdoing or lack of

23 merit in the defenses whatsoever by the Settling Individuals, it is hereby


24 STIPULATED AND AGREED, by and among the Parties, through their respective

25 counsel, subject where applicable to approval of the Consolidated Class Action


26 Court pursuant to FRCP 23(e), in consideration of the benefits flowing to the

27 Parties from the Settlement, that all Settled Claims as against the Released Officers

28 And Directors and all Settling Individuals' Claims as against the Class Plaintiffs

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1 and all other Class Members, the Trust, the Trustee, Alan M. Jacobs individually,
2 the Debtors, the Debtors' Estates, the Plan Advisory Committee, and Kodiak shall

3 be compromised, settled, released and dismissed with prejudice, upon and subject

4 to the following terms and conditions:


5 DEFINITIONS
6 1. As used in this Stipulation, the following terms have the following
7 meanings:
8 a) "Amended Class Complaint" means the amended consolidated
9 class action complaint filed by the Class Plaintiffs in the Consolidated Class Action

10 Court.
11 b) "Authorized Claimant" means a Class Member who submits a
12 timely and valid Proof of Claim Form and all required documentation to the
13 Claims Administrator, in accordance with the requirements established by the Plan

14 of Allocation approved by the Consolidated Class Action Court, that is approved


15 for payment from the Class Net Settlement Fund.

16 c) `Bankruptcy Code" means Title 11 of the United States Code.


1 7 d) "Bankruptcy Court" means the United States Bankruptcy Court
18 for the District of Delaware before which the Debtors filed for bankruptcy and

19 which is hearing the Trustee Litigation.


20 e) "Claim" means a completed and signed Proof of Claim Form
21 submitted to the Claims Administrator in accordance with the instructions on the
22 Proof of Claim Form.

23 f) "Claim Form" or "Claim Form and Release" or "Proof of Claim


24 Form" means the form, substantially in the form attached hereto as Exhibit 2 to

25 Exhibit A, that a Claimant or Class Member must complete should that Claimant or

26 Class Member seek to share in a distribution of the Class Net Settlement Fund.

27

28

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1 g) "Claimant" means a person or entity that submits a Claim Form 9

2 to the Claims Administrator seeking to share in the proceeds of the Class Net
3 Settlement Fund.
4 h) "Claims Administrator" means the firm of Analytics
5 Incorporated.
6 1) "Class" means all persons and entities who purchased or
7 otherwise acquired New Century common stock, New Century Series A Preferred
8 Stock, New Century Series B Preferred Stock, and/or New Century call options
9 and/or who sold New Century put options, during the time period from May 5,
1.0 2005, through and including March 13, 2007, either in the Offerings, pursuant to a
11 registration statement, or in the market, and who, upon disclosure of certain facts
12 alleged in the Complaint, were injured thereby. Excluded from the Class are (a)
13 Class Defendants; (b) members of the immediate families of the Class Individual
14 Defendants; (c) the subsidiaries and affiliates of Class Defendants; (d) any person
15 or entity who was a partner, executive officer, director or controlling person of
16 New Century (including any of its subsidiaries or affiliates) or of any Class
17 Defendant; (e) any entity in which any Class Defendant has a controlling interest;
18 and (f) the legal representatives, heirs, successors and assigns of any such excluded
19 party. Also excluded from the Class are any persons who exclude themselves by
20 filing a request for exclusion in accordance with the requirements set forth in the
21 Notice.
22 j) "Class Defendants" means the Underwriter Defendants, KPMG
23 and the Class Individual Defendants.
24 k) "Class Distribution Order" means an order entered by the
25 Consolidated Class Action Court authorizing and directing that the Class Net
26 Settlement Fund be distributed, in whole or in part, to Authorized Claimants.
27 1) "Class Escrow Account" means an account maintained to hold
28 the Class Settlement Fund, which shall be controlled exclusively by Lead Counsel,

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1 shall be deemed to be in the custody of the Consolidated Class Action Court, and
P
2 shall remain subject to the jurisdiction of the Consolidated Class Action Court until

3 such time as the funds are distributed or returned pursuant to the terms of this

4 Stipulation and/or further order of the Consolidated Class Action Court.

5 m) "Class Individual Defendants" means Robert K. Cole, Brad A.


6 Morrice, Estate of Edward Gotschall, Patti M. Dodge, Fredric J. Forster, Michael
7 M. Sachs, Harold A. Black, Donald E. Lange, Terrence P. Sandvik, Richard A.
8 Zona, Marilyn A. Alexander, David Einhorn, and William J. Popej oy.
9 n) "Class Member" means a person or entity that is a member of
10 the Class and does not exclude himself, herself or itself by filing a request for
11 exclusion in accordance with the requirements set forth in the Notice.

12 o) "Class Net Settlement Fund" means the Class Settlement Fund


13 less: (i) any Taxes; (ii) any Notice and Administration Costs associated with the

14 Consolidated Class Action; (iii) any attorneys' fees awarded by the Consolidated

15 Class Action Court; and (iv) any Litigation Expenses awarded by the Consolidated

16 Class Action Court.

17 p) "Class Officer And Director Settlement Amount" means the


18 sum of $65,077,088 which shall be paid into the Class Escrow Account as set forth

19 in paragraph 11 c below.
20 q) "Class Period" means the period from May 5, 2005, through
21 and including March 13, 2007.

22 r) "Class Plaintiffs" means Lead Class Plaintiff New York State


23 Teachers' Retirement System and plaintiffs Carl Larson and Charles Hooten, on
24 behalf of themselves and the Class.
25 s) "Class Plaintiffs' Counsel" means Lead Counsel and all other
26 counsel who, at the direction and under the supervision of Lead Counsel, represent

27 Class Members in the Consolidated Class Action.


28

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1 t) "Class Settlement Fund" means the Class Officer And Director


2 Settlement Amount, and any and all interest earned thereon, which interest shall be

3 paid into the Class Escrow Account as set forth in paragraphs 11 and 12 below.
4 u) "Consolidated Class Action" means Avi Gold a Brad A.
5 Morrice, et al., a/k/a, In re New Century, Case No. 2:07-cv-00931-DDP-FMO
6 (C.D. Cal.), and cases consolidated therein.
7 v) "Consolidated Class Action Court" means the United States
8 District Court for the Central District of California hearing the Consolidated Class

9 Action.
10 w) "DCP Distributions" means the deferred compensation amounts
11 referenced under the DCP Settlement Agreement as Target Distributions and which

12 pursuant to that agreement have been held by the Trustee pending the resolution

13 and conclusion of the Trustee Litigation.


14 x) "DCP Settlement Agreement" means the settlement agreement
15 entered into as of July 2009 by and among the Trustee, on the one hand, and the Ad

16 Hoc Committee of Beneficiaries of the New Century Financial Corporation


i

17 Deferred Compensation Plan and SERP, on the other hand.


18 y) "DCP Settlement Contributions" means those payments set
19 forth below in paragraphs 9b and 11.
20 z) "Debtors" means New Century Financial Corporation (f/k/a
21 New Century REIT, Inc.), a Maryland corporation; New Century TRS Holdings,
22 Inc. (f/k/a New Century Financial Corporation), a Delaware corporation; New

23 Century Mortgage Corporation (f/k/a JBE Mortgage) (d/b/a NCMC Mortgage


24 Corporate, New Century Corporation, and New Century Mortgage Ventures, LLC),

25 a California corporation; NC Capital Corporation, a California corporation;


26 Home123 Corporation (f/k/a The Anyloan Corporation, 1800anyloan.com, and

27 Anyloan.com), a California corporation; New Century Credit Corporation (f/k/a

28 Worth Funding Incorporated), a California corporation; NC Asset Holding, L.P.

-8- D/O STIPULATION OF SETTLEMENT


Case No. 2;07-cv-00931-DDP (FMOx)
Case 2:07-cv-00931-DDP-FMO Document 484-3 Filed 07/30/10 Page 11 of 56 Page ID
#:10855

1 (f/k/a NC Residual II Corporation), a Delaware limited partnership; NC Residual


2 III Corporation, a Delaware corporation; NC Residual IV Corporation, a Delaware

3 corporation; New Century R.E.O. Corp., a California corporation; New Century


4 R.E.O. II Corp., a California corporation; New Century R.E.O. III Corp., a
5 California corporation; New Century Mortgage Ventures, LLC (d/b/a Summit

6 Resort Lending, Total Mortgage Resource, Select Mortgage Group, Monticello I

7 Mortgage Services, Ad Astra Mortgage, Midwest Home Mortgage, TRATS


8 Financial Services, Elite Financial Services, and Buyers Advantage Mortgage), a

9 Delaware limited liability company; NC Deltex, LLC, a Delaware limited liability


10 company; NCoral, L.P., a Delaware limited partnership; and New Century
11 Warehouse Corporation, a California corporation.

12 aa) "Debtors' Estates" means the bankruptcy estates of the Debtors


13 created as a result of the Debtors' petitions under Chapter 11 of Title 11 of the

14 United States Bankruptcy Code.

15 bb) "Distribution Defendants" means Kevin M. Cloyd, Stergios


16 Theologides, Joseph F. Ecluoth, Jr., Brad A. Morrice and Patti M. Dodge.

17 cc) "Dodge Credit" means a $45,000 credit for Patti M. Dodge


18 representing the release of her affirmative claims, including a priority claim, under

19 this Stipulation.
2 0 dd) "Effective Date" means the date on which all the following
21 shall have occurred: (a) payment of the monies into the Global Escrow Account

22 has been made pursuant to paragraph 9a below; (b) the Consolidated Class Action
23 Court has entered the Officer And Director Judgment, substantially in the form

24 annexed hereto as Exhibit B, which has become Final; (c) the Consolidated Class
25 Action Court has entered the KPMG Judgment and the Underwriter Judgment,

26 which have become Final; (d) a judgment has been entered by the court in the

27 separate action entitled Securities and Exchange Commission a Morrice, et al.,


28 SACV 09-01426 (C.D. Cal. Santa Ana); and (e) notices of dismissal with prejudice

-9- D/O STIPULATION OF SETTLEMENT


Case No. 2:07-ev-0093 1 -DDP (FMOx)

Case 2:07-cv-00931-DDP-FMO Document 484-3 Filed 07/30/10 Page 12 of 56 Page ID
#:10856

1 and without costs to any party have been executed in the Trustee Litigation and the
2 Kodiak Litigation and delivered to counsel designated by the Kodiak Litigation

3 Defendants and the Trustee Litigation Defendants to be held pursuant to paragraph

4 53.
5 ee) "Escrow Agent" means the financial institution selected by
6 Lead Counsel, with the consent of the Trustee, which consent shall not be
i
7 unreasonably withheld, to serve as escrow agent.
8 fo "Escrow Agreement(s)" means the agreement(s) (1) among (1)
9 Lead Counsel and the Trustee and (ii) the Escrow Agent setting forth the terms
10 under which the Escrow Agent shall maintain the Global Escrow Account, and (2)
m
11 between (i) Lead Counsel and (ii) the Escrow Agent setting forth the terms under

12 which the Escrow Agent shall maintain the Class Escrow Account.

13 gg) "Exchange Act" means the Securities Exchange Act of 1934.


14 hh) "Final" means: (i) that the time for appeal or appellate review
15 of the order or judgment has expired; or (ii) if there has been an appeal, (a) that the

16 appeal has been decided without causing a material change in the order or

17 judgment; or (b) that the order or judgment has been upheld on appeal and is no
18 longer subject to appellate review by further appeal or writ of certiorari.
19 ii) "Global Escrow Account" means an account maintained to hold
20 the Global Officer And Director Settlement Amount, which shall be controlled

21 exclusively by Lead Counsel and the Trustee and deemed to be in the custody of

22 the Consolidated Class Action Court and shall remain subject to the jurisdiction of

23 the Consolidated Class Action Court until such time as the funds are distributed or
24 returned pursuant to the terms of this Stipulation and/or further order of the

25 Consolidated Class Action Court.


26 jj) "Global Officer And Director Settlement" or "Settlement"
27 means the settlement embodied in this Stipulation Of Global Settlement With New

28 Century Officers And Directors ("Global Officer And Director Stipulation").

-10- D/O STIPULATION OF SETTLEMENT


Case No. 2:07-ev-00931-DDP (FMOx)

Case 2:07-cv-00931-DDP-FMO Document 484-3 Filed 07/30/10 Page 13 of 56 Page ID
#:10857

1 kk) "Global Officer And Director Settlement Amount" means the


2 sum of $92,046,361 as set forth in paragraph 9 below, as Settlement of the
3 Consolidated Class Action, the Trustee Litigation, and the Kodiak Litigation.
4 11) "Insurance Carriers" means the following insurance carriers
5 who issued the indicated policies of insurance ("Policies") to New Century and/or
6 its various subsidiaries, affiliates, directors, officers and other "Insureds" or
7 "Assureds" as defined in the Policies:
8 (1) American Specialty Lines Insurance Co.
pursuant to policy number 672-43-85;
9
(2) ACE American Insurance Company
10 pursuant to policy numbers DUX
G21
66120A 002 and DOX G21661338001;
11
(3) Those Underwriters at Lloyd's of London
12 and Companies subscribin to Policy
numbers FD0604467 and FD0
604994;
13
(4) Axis Reinsurance Company, pursuant to
14 policy numbers RNN 727183 and RNN
727184;
15
(5) Starr Excess Liability Insurance Company,
16 Ltd., pursuant to policy number 4121)07;
17 (6) XL Specialty Insurance Co. pursuant to
policy number ELU092906-06;
18
(7) Liberty Mutual Insurance Company
19 pursuant to policy number 0735p51-016;
20 (8) Navigators Insurance Companyypursuant to
Dolicy numbers NY06DOL I 577NV and
21 NY06DOL149583NV;
22 (9) Arch Insurance Company pursuant to policy
number AID0016066-00;
23
(10) Continental Casualty Company pursuant to
24 policy number 389355; and
25 (11) The Hartford (Twin City Fire Insurance
Co.),pursuant to policy number 00 DA
26 0234015-06.
27 "Insurance Carriers" also includes the present, former and future parents, divisions,
28 subsidiaries and affiliates of the insurance carriers listed above, and any of their

-11- D/O STIPULATION OF SETTLEMENT


Case No. 2:07-ev-00931-DDP (FMOx)

Case 2:07-cv-00931-DDP-FMO Document 484-3 Filed 07/30/10 Page 14 of 56 Page ID
#:10858

1 past, present or future owners, assigns, administrators, directors, partners,

2 principals, officers, employees, agents, receivers, trustees, attorneys, insurers,


3 reinsurers, and their respective predecessors, successors and assigns, and
4 representatives of any of them, and all persons acting by, through, under or in

5 concert with any of them with respect to their respective Policies. Insurance
6 Carriers and Policies do not include Philadelphia Indemnity Insurance Company

7 under policy number PHSD219056.


8 mm) "Kodiak" means Kodiak Warehouse LLC, Kodiak Warehouse
9 JPM Capital LLC, Kodiak CDO1 Ltd., Kodiak CDO Management LLC, and
10 Kodiak Funding LP.

11 nn) "Kodiak Litigation" means the action Kodiak Warehouse LLC,


12 et al. v. Brad A. Morrice, et al. (Case No. 08-1265-DDP-FMO) commenced on
13 November 7, 2008, against the Kodiak Litigation Defendants by Kodiak in the
14 United States District Court for the Central District of California.

15 oo) "Kodiak Litigation Defendants" means Robert K. Cole, Brad A.


16 Morrice, Estate of Edward Gotschall, Patti M. Dodge, and Jeffrey D. Goldberg.

17 pp) "Kodiak Settlement Amount" means the sum of $6,000,000


18 which shall be paid to Kodiak as set forth below in paragraph 11 a.

1 9 qq) "KPMG" means KPMG LLP.


20 rr) "KPMG Judgment" means a judgment entered in the
21 Consolidated Class Action Court which, among other things, includes a release by

22 KPMG and the other Released Auditor Parties of any and all claims and causes of

23 action of every nature and description, whether known or Unknown Claims against
24 any of the Settling Individuals, whether arising under federal, state, common or

25 foreign law, that arise out of or relate in any way to the institution, prosecution, or

26 settlement of the claims which were asserted in the Officer And Director

27 Litigations, or that arise out of or relate in any way to New Century (including any
28 of its subsidiaries and affiliates), the Trust, the Trustee, the Debtors, or the Debtors'

-12- D/O STIPULATION OF SETTLEMENT


Case No. 2:07-ev-00931-DDP (FMOx)
Case 2:07-cv-00931-DDP-FMO Document 484-3 Filed 07/30/10 Page 15 of 56 Page ID
#:10859
i
1 Estate, except for (1) an allowed priority claim in the amount of $5,000 pursuant to
2 proof of claim no. 2385 filed by Fredric J. Forster in the Bankruptcy Court against
3 Debtors' Estates and (ii) any and all claims arising out of or in connection with the

4 defense and subsequent settlement of the Schroeder v. New Century Holdings, Inc.
5 (Adversary Proceeding No. 07-51598(KJC)) and the Philadelphia Indemnity
6 Arbitration, including, but not limited to (a) claims for benefits under any
7 insurance programs or policies to which the Settling Individuals are entitled, (b)

8 claims for advancement, indemnification, contribution, reimbursement or other


9 payments whether based on law, the Debtors' certificate or articles of
10 incorporation, bylaws, or other contract or agreement.
11 ss) "Lead Class Plaintiff' means the New York State Teachers'
12 Retirement System.

13 tt) "Lead Counsel" means the law f-nn of Bernstein Litowitz


14 Berger & Grossmann LLP.

15 uu) "Litigation. Expenses" means the costs and expenses incurred


16 by Class Plaintiffs' Counsel in connection with commencing and prosecuting the
17 Consolidated Class Action, for which Lead Counsel intends to apply to the

18 Consolidated Class Action Court for reimbursement from the Class Settlement
19 Fund.
20 vv) "New Century" means New Century Financial Corporation.
21 ww) "Notice" means the Notice of Pendency of Class Action and
22 Proposed Settlement, Settlement Fairness Hearing and Motion for Attorneys' Fees

23 and Reimbursement of Litigation Expenses, substantially in the form attached


24 hereto as Exhibit 1 to Exhibit A, which is to be sent to members of the Class.

25 xx) "Notice and Administration Costs" means the costs, fees and
26 expenses that are incurred by the Claims Administrator and Lead Counsel in

27 connection with (i) providing notice to the Class; and (ii) administering the claims

28 process in connection with the Consolidated Class Action.

-13- D/O STIPULATION OF SETTLEMENT


Case No. 2:07-cv-0093 1 -DDP (FMOx)

Case 2:07-cv-00931-DDP-FMO Document 484-3 Filed 07/30/10 Page 16 of 56 Page ID
#:10860

1 yy) "Offerings" means the public offerings pursuant to which New


2 Century Series A and B Preferred Stock were offered to the public in June 2005
3 and August 2006.
4 zz) "Officer And Director Judgment' means the judgment,
5 substantially in the form attached hereto as Exhibit B, to be entered pursuant to
6 Rule 54(b) of the Federal Rules of Civil Procedure approving the Settlement.
7 aaa) "Officer And Director Litigations" means the Consolidated
8 Class Action, Trustee Litigation, and Kodiak Litigation.

9 bbb) "Parties" means the Plaintiffs and the Settling Individuals.


10 ccc) "Philadelphia Indemnity Arbitration" means the claims filed
11 with the American Arbitration Association by the Trustee against Philadelphia
12 Indemnity Insurance Company to pay and indemnify, in accordance with the terms

13 of the applicable insurance policy, New Century, its successor-in-interest, the New

14 Century Liquidating Trust, and Harold A. Black, Fredric J. Forster, Donald E.

15 Lange, and Michael M. Sachs, the full amount of defense costs that each have

16 incurred in the defense and subsequent settlement of Schroeder v. New Century


17 Holdings, Inc. (Adversary Proceeding No. 07-51598 (KJC)), and to pay and
Is reimburse their other insurable losses as agreed to in said insurance policy.
19 ddd) "Plaintiffs" means Class Plaintiffs, the Trustee, and Kodiak.
20 eee) "Plan Advisory Committee" means the post confirmation
21 committee, and its current and former members in their capacity as such, formed in

22 accordance with Second Amended Joint Chapter 11 Plan of Liquidation of the

23 Debtors and the Official Committee of Unsecured Creditors dated as of April 23,

24 2008, and modified as of September 30, 2009.

25 fff) "Plan of Allocation" means the proposed plan of allocation of


26 the Class Net Settlement Fund set forth in the Notice.

27 ggg) "Preliminary Approval Order" means the order, substantially in


28 the form attached hereto as Exhibit A, to be entered by the Consolidated Class

-14- D/O STIPULATION OF SETTLEMENT


Case No. 2:07-ev-00931-DDP (FMOx)

Case 2:07-cv-00931-DDP-FMO Document 484-3 Filed 07/30/10 Page 17 of 56 Page ID


#:10861

1 Action Court preliminarily approving the Global Officer And Director Settlement
2 and directing notice to be provided to the Class.
3 hhh) "Released Auditor Parties" means KPMG and its affiliates, r
4 heirs, predecessors, successors, assigns, partners, employees and agents.
5 iii) "Released Officers And Directors" means: (i) the Settling
6 Individuals; and (ii) all directors, officers, employees, and other natural persons
7 affiliated with New Century (including any of its subsidiaries and affiliates)
8 included in the definition of "Assured" or "Insured" as defined in the Policies and

9 any and all of their respective heirs, executors, administrators, predecessors,


10 successors and assigns, employees, agents and retained professionals. "Released
11 Officers And Directors" does not include KPMG or the Underwriter Defendants.
12 jjj) "Released Underwriter Parties" means the Underwriter
13 Defendants and any and all of their respective parent companies, subsidiaries, E
14 affiliates, heirs, executors, administrators, predecessors, successors and assigns,

15 and any and all of their current and former officers, directors, employees, agents
16 and attorneys. "Released Underwriter Parties" does not include any Defendants
17 other than the Underwriter Defendants..
18 k d^,) "Second Amended Class Complaint" or "Complaint" means the
19 second amended consolidated class action complaint filed by the Class Plaintiffs in
E

20 the Consolidated Class Action Court on or about April 30, 2008.


21 111) "Securities Act" means the Securities Act of 1933.
22 mmm) "Series A Preferred Stock" means New Century 9.125%
23 Series A Cumulative Redeemable Preferred Stock.
24 nnn) "Series B Preferred Stock" means New Century 9.75% Series B
25 Cumulative Redeemable Preferred Stock.
26 000) "Settled Claims" means the Settled Class Claims, Settled
27 Trustee Claims, and Settled Kodiak Claims, but does not include claims relating to
28 the enforcement of the Settlement.

-15- D/O STIPULATION OF SETTLEMENT


Case No. 2;07-ev-00931-DDP (FMOx)

Case 2:07-cv-00931-DDP-FMO Document 484-3 Filed 07/30/10 Page 18 of 56 Page ID
#:10862

1 ppp) "Settled Class Claims" means any and all claims and causes of
2 action of every nature and description, whether known or Unknown Claims,
3 whether arising under federal, state, common or foreign law, that Class Plaintiffs or

4 any other member of the Class (a) asserted in the Consolidated Class Action, or (b)
5 could have asserted in any forum that arise out of or are based upon the allegations,
6 transactions, facts, matters or occurrences, representations or omissions involved,
7 set forth, or referred to in. the Consolidated Class Action, and that arise out of or

8 relate to the purchase of New Century common stock, New Century Series A

9 Preferred Stock, New Century Series B Preferred Stock, and/or New Century call
10 options and/or the sale of New Century put options during the Class Period.
11 Settled Class Claims does not include claims relating to the enforcement of the

12 Settlement.

13 qqq) "Settled Kodiak Claims" means any and all claims and causes
14 of action of every nature and description, whether known or Unknown Claims,

15 whether arising under federal, state, common or foreign law, that Kodiak (a)

16 asserted in the Kodiak Litigation, or b) could have asserted in any forum that arise

17 out of or are based upon the allegations, transactions, facts, matters or occurrences,
18 representations or omissions involved, set forth, or referred to in the Kodiak
19 Litigation, or that arise out of or relate in any way to New Century (including any

20 of its subsidiaries and affiliates), the Debtors or the Debtors' Estates. Settled
21 Kodiak Claims does not include claims relating to the enforcement of the
22 Settlement.

23 rrr) "Settled Trustee Claims" means any and all claims and causes
24 of action of every nature and description, whether known or Unknown Claims,

25 whether arising under federal, state, common or foreign law, that the Trustee (a)

26 asserted in the Trustee Litigation; (b) could have asserted in any forum that arise

27 out of or are based upon the allegations, transactions, facts, matters or occurrences,

28 representations or omissions involved, set forth or referred to in the Trustee

-16- D/O STIPULATION OF SETTLEMENT


Case No. 2:07-ev-0093 1 -DDP (FMOx)

Case 2:07-cv-00931-DDP-FMO Document 484-3 Filed 07/30/10 Page 19 of 56 Page ID


#:10863

1 Litigation or that arise out of or relate in any way to New Century (including any

2 of its subsidiaries and affiliates), the Trust, the Trustee, the Debtors, or the Debtors'
3 Estates, except that the Settled Trustee Claims expressly excludes claims or causes
4 of action (i) asserted in, arising from, in connection with, or in any way related to
5 the Philadelphia Indemnity Arbitration; (ii) asserted by or that may in the future be
6 asserted by the Trustee and Trust against the Released Officers And Directors
7 (other than the Settling Individuals) that do not arise from and are not based upon
8 any actual or alleged Wrongful Act, as that term is defined in the Policies,
9 including the Adversary Proceeding Alan M. Jacobs, as Liquidating Trustee of the
10 New Century Liquidating Trust a Daniel R Sussman, et al. (In re New Century TRS
11 Holdings, Inc. (Adv. Proc. No. 09-50883 (KJC)); or (iii) asserted by the Trust and
12 Trustee against Carl A. Vernon, Gregory J. Schroeder, and Daniel P. Sussman; or
13 (c) ever had, now has, claims to have or may in the future have against the
1.4 Insurance Carriers arising from, in connection with or in any way related to the
15 Policies. Settled Trustee Claims does not include claims relating to the
16 enforcement of the Settlement.
17 sss) "Settlement" or "Global Officer And Director Settlement"
18 means the settlement embodied in this Stipulation of Global Settlement with New
19 Century Officers and Directors ("Global Officer And Director Stipulation").
20 ttt) "Settlement Hearing" or "Final Approval Hearing" means the
21 hearing set by the Consolidated Class Action Court under Rule 23(e)(1)(c) of the
22 Federal Rules of Civil Procedure to consider final approval of the Settlement.
23 uuu) "Settling Individuals" means Class Individual Defendants,
24 Trustee Litigation Defendants, Kodiak Litigation Defendants, and David Kenneally
25 and any and all of their respective heirs, executors, administrators, predecessors,
26 successors and assigns, employees, agents and retained professionals (other than
27 KPMG and the Underwriter Defendants).
28

-17- D/O STIPULATION OF SETTLEMENT


Case No. 2:07-ev-00931-DDP (FMOx)

Case 2:07-cv-00931-DDP-FMO Document 484-3 Filed 07/30/10 Page 20 of 56 Page ID


#:10864

1 vvv) "Settling Individuals' Claims" means any and all claims and
2 causes of action of every nature and description, whether known or Unknown
3 Claims, whether arising under federal, state, common or foreign law, that arise out
4 of or relate in any way to the institution, prosecution, or settlement of the claims
5 which were asserted in the Officer And Director Litigations against the Settling

6 Individuals, or that arise out of or relate in any way to New Century (including any
e
7 of its subsidiaries and affiliates), the Tnist, the Trustee, the Debtors, or the Debtors'
8 Estates, except for (i) an allowed priority claim in the amount of $5,000 pursuant

9 to proof of claim no. 2385 filed by Fredric J. Forster in the Bankruptcy Court
10 against Debtors' Estates and (ii) any and all claims arising out of or in connection

11 with the defense and subsequent settlement of the Schroeder a New Century

12 Holdings, Inc. (Adversary Proceeding No. 07-51598(KJC)) and the Philadelphia


13 Indemnity Arbitration, including, but not limited to (a) claims for benefits under
14 any insurance programs or policies to which the Settling Individuals are entitled, or
15 (b) claims for advancement, indemnification, contribution, reimbursement or other
16 payments whether based on law, the Debtors' certificate or articles of
17 incorporation, bylaws, or other contract or agreement. Settling Individuals' Claims

18 does not include claims relating to the enforcement of the Settlement.


19 www)"Stipulation" or "Stipulation of Settlement" means this
20 Stipulation of Settlement.
21 xxx) "Summary Notice" means the publication notice, substantially
22 in the form attached hereto as Exhibit 3 to Exhibit A, to be published as set forth in

23 the Preliminary Approval Order.


24 yyy) "Supplemental Agreement" means the supplemental agreement
25 between Lead Class Plaintiff and the Class Individual Defendants referenced in
26 paragraph 39-40 below.

27 zzz) "Taxes" means: (1) all federal, state and/or local taxes of any
28 kind on any income earned by the funds contained in the Global Escrow Account

-18- D/O STIPULATION OF SETTLEMENT


Case No. 2:07-ev-00931-DDP (FMOx)

Case 2:07-cv-00931-DDP-FMO Document 484-3 Filed 07/30/10 Page 21 of 56 Page ID
#:10865

1 and/or Class Escrow Account; and (ii) the reasonable expenses and costs incurred

2 by Lead Counsel in connection with determining the amount of, and paying, any
3 taxes owed on the interest earned on the funds in the Global Escrow Account
4 and/or Class Escrow Account (including, without limitation, reasonable expenses

5 of tax attorneys and accountants).

6 aaaa) "Trust" means the New Century Liquidating Trust and


7 Reorganized New Century Warehouse Corporation.
8 bbbb) "Trustee" means Alan M. Jacobs, as Liquidating Trustee of the
9 New Century Liquidating Trust and Plan Administrator of the Reorganized New
10 Century Warehouse Corporation.
11 cccc) "Trustee Litigation" means the adversary proceeding The New
12 Century Liquidating Trust and Reorganized New Century Warehouse Corp. by and
13 through Alan M. Jacobs, Liquidating Trustee and Plan Administrator v. Robert K

14 Cole, et al. (In re New Century TRS Holdings, Inc) (Adv. Proc. No. 09-50882
15 (KJC)) commenced on April 1, 2009, against the Trustee Litigation Defendants by

16 the Trustee in the Bankruptcy Court.

17 dddd) "Trustee Litigation Defendants" means Robert C. Cole, Brad A.


18 Morrice, the Estate of Edward Gotschall, Marilyn A. Alexander, Harold A. Black,

19 Fredric J. Forster, Donald E. Lange, William J. Popejoy, Michael M. Sachs,


20 Richard A. Zona, David Einhom, Patrick Flanagan, Kevin M. Cloyd, Patti M.

21 Dodge, Joseph F. Eckroth, Jr., and Stergios Theologides.


22 eeee) "Trustee Settlement Amount" means the sum of $20,969,273
23 which shall be paid to the Trustee as set forth below in paragraph l lb.

24 ffff) "Underwriter Defendants" means Bear, Stearns & Co. Inc., now
25 known as J.P. Morgan Securities Inc., Deutsche Bank Securities Inc., Piper Jaffray
26 & Co., Stifel, Nicolaus & Co., Inc., JMP Securities LLC, Roth Capital Partners,

27 Morgan Stanley & Co., Inc., and Jefferies & Company, Inc.
28

-19- D/O STIPULATION OF SETTLEMENT


Case No. 2:07-cv-00931-DDP (FMOx)
Case 2:07-cv-00931-DDP-FMO Document 484-3 Filed 07/30/10 Page 22 of 56 Page ID
#:10866

1 gggg) "Underwriter Judgment" means a judgment entered in the


2 Consolidated Class Action Court which, among other things, includes a release by
3 Underwriter Defendants and the other Released Underwriter Parties of each and

4 every claim against any of the Settling Individuals, whether arising under federal,
5 state, common or foreign law, arising out of or based upon the allegations,

6 transactions, facts, matters or occurrences, representations or omissions involved,

7 set forth, or referred to in the Consolidated Class Action.


8 hhhh) "Unknown Claims" means any and all Settled Claims that (i)
9 Class Plaintiffs or any Class Member; (ii) the Trustee; or (iii) Kodiak does not
10 know or suspect to exist in his, her or its favor at the time of the release of the
11 Released Officers And Directors and the Insurance Carriers, and any Settling
12 Individuals' Claims that any Settling Individual does not know or suspect to exist

13 in his, her or its favor, which if known by him, her or it might have affected his, I
14 her or its decision(s) with respect to the Settlement. With respect to any and all

15 Settled Claims and Settling Individuals' Claims, the Parties stipulate and agree that

16 upon the Effective Date, the Class Plaintiffs and each Class Member, the Trustee,
17 Kodiak, and the Settling Individuals shall expressly waive and each shall be

18 deemed to have waived, and upon the Consolidated Class Action Court's issuance

19 of the Officer And Director Judgment shall have expressly waived, any and all
20 provisions, rights and benefits conferred by any law of any state or territory of the
21 United States, or principle of common law, that is similar, comparable, or

22 equivalent to Cal. Civ. Code § 1542, which provides;

2 3 A general release does not extend to claims which the


24 creditor does not know or suspect to exist in his or her
25 favor at the time of executing the release, which if known
26 by him or her must have materially affected his or her
27 settlement with the debtor.
28

-20- D/O STIPULATION OF SETTLEMENT


Case No. 2:07-ev-00931-DDP (FMOx)

Case 2:07-cv-00931-DDP-FMO Document 484-3 Filed 07/30/10 Page 23 of 56 Page ID


#:10867

1 Class Plaintiffs, the Trustee, Kodiak, and the Settling Individuals acknowledge, and
2 each Class Member by operation of law shall be deemed to have acknowledged,

3 that the inclusion of "Unknown Claims" in the definitions of Settled Class Claims,

4 Settled Trustee Claims, Settled Kodiak Claims, and Settling Individuals' Claims

5 was separately bargained for and was a key element of the Settlement.

6 CLASS CERTIFICATION OF CONSOLIDATED CLASS ACTION


7 2. Class Plaintiffs and the Class Individual Defendants stipulate and
8 agree to: (a) certification of the Consolidated Class Action as a class action

9 pursuant to Rules 23(a) and 23(b)(3) of the Federal Rules of Civil Procedure on
10 behalf of the Class; (b) appointment of Class Plaintiffs as representatives of the
11 Class; and (c) appointment of Lead Counsel as counsel for the Class pursuant to

12 Rule 23(g) of the Federal Rules of Civil Procedure. Following execution of this

13 Stipulation, Class Plaintiffs, with the consent of the Class Defendants, shall apply

14 to the Consolidated Class Action Court for entry of the Preliminary Approval
15 Order, which will certify the Consolidated Class Action to proceed as a class

16 action. The Class Defendants shall have the right to withdraw their consent to

17 class certification and the appointment of representatives and counsel for the Class
18 in the event that the Officer And Director Judgment does not become Final.
19 RELEASE OF CLAIMS
20 3. The Parties understand and agree that the obligations incurred
21 pursuant to this Stipulation shall be in full and final disposition of the Officer And

22 Director Litigations; and, upon the Effective Date, shall fully and finally release

23 any and all Settled Claims as against all Released Officers and Directors and the
24 Insurance Carriers and shall also release as against the Class Plaintiffs and all other

25 Class Members, the Trust, the Trustee, Alan M. Jacobs individually, the Debtors,
26 the Debtors' Estates, the Plan Advisory Committee, and Kodiak, any and all

27 Settling Individuals' Claims, and shall also fully and finally release other claims as

28 set forth below.

-21- D/O STIPULATION OF SETTLEMENT


Case No. 2:07-ev-00931-DDP (FMOx)

Case 2:07-cv-00931-DDP-FMO Document 484-3 Filed 07/30/10 Page 24 of 56 Page ID
#:10868

1 4. Upon the Effective Date, Class Plaintiffs and members of the Class,
2 the Trustee, and Kodiak hereby release, waive, discharge and dismiss each and

3 every of the Settled Class Claims, Settled Trustee Claims, and Settled Kodiak
4 Claims, respectively, as against each and every Released Officer And Director and

5 the Insurance Carriers, and shall be deemed by this agreement and/or operation of }
6 law to forever be enjoined from prosecuting any or all of the Settled Class Claims,
7 Settled Trustee Claims and Settled Kodiak Claims, respectively, against each and
8 every Released Officer And Director and the Insurance Carriers.

9 5. Upon the Effective Date, the Settling Individuals hereby release,


10 waive, discharge and dismiss, and shall be deemed by this agreement and/or

11 operation of law to forever be enjoined from prosecuting each and every of the
12 Settling Individuals' Claims against Class Plaintiffs and all other Class Members,

13 the Trust, the Trustee, Alan M. Jacobs individually, the Debtors, the Debtors'
14 Estates, the Plan Advisory Committee, and Kodiak, and their respective heirs,
15 predecessors, successors, assigns, employees, agents and retained professionals.
16 6. Upon the Effective Date, the .Settling Individuals hereby release,
17 waive, discharge and dismiss, and shall be deemed by this agreement and/or
18 operation of law to forever be enjoined from prosecuting each and every Settling
1 9 Individuals' Claim against KPMG and the other Released Auditor Parties, provided
20 and conditioned upon the Settling Individuals receiving substantively reciprocal

21 releases from KPMG and the Released Auditor Parties, and conditioned on KPMG

22 being required pursuant to the KPMG Judgment to promptly offer to other former
23 New Century officers or directors with whom KPMG has entered into a tolling

24 agreement related to New Century substantially similar substantively reciprocal


25 releases.
26 7. Upon the Effective Date, the Settling Individuals hereby release,
27 waive, discharge and dismiss, and shall be deemed by this agreement and/or

28 operation of law to forever be enjoined from prosecuting any claim against any and

-22- D/O STIPULATION OF SETTLEMENT


Case No. 2:07-cv-00931-DDP (FMOx)

Case 2:07-cv-00931-DDP-FMO Document 484-3 Filed 07/30/10 Page 25 of 56 Page ID


#:10869

1 all of the Underwriter Defendants and the other Released Underwriter Parties
2 whether arising under federal, state, common or foreign law, arising out of or based
3 upon the allegations, transactions, facts, matters or occurrences, representations or
4 omissions involved, set forth, or referred to in the Consolidated Class Action,
5 provided and conditioned upon the Settling Individuals receiving substantively
6 reciprocal releases from the Underwriter Defendants and the other Released
7 Underwriter Parties.
8 8. Upon the Effective Date, Kodiak hereby releases, waives, discharges
9 and dismisses, and shall be deemed by this agreement and/or operation of law to
1.0 forever be enjoined from prosecuting each and every of the Settled Kodiak Claims
11 as against KPMG and the other Released Auditor Parties, provided and conditioned
12 upon Kodiak receiving substantively reciprocal releases from KPMG.

13 THE SETTLEMENT CONSIDERATION


14 9. The Global Officer And Director Settlement Amount shall be paid as
15 follows:
16 a. Within fourteen (14) calendar days after entry of the Preliminary
17 Approval Order, the Settling Individuals shall pay and/or cause to be paid
is into the Global Escrow Account a total of $91,102,331.51 in cash as
19 follows:
20 1) The Settling Individuals shall cause the Insurance Carriers to
21 pay the amount of $90,960,516 in cash. This amount includes a
22 $250,000 credit to Morrice, a $450,000 credit to Dodge, and a
23 $150,000 credit to Kenneally in partial satisfaction of amounts
24 owed pursuant to any prospective SEC judgments in SEC v.
25 Morrice, et al., Case No. 09-1426-DDP (the "SEC Action").
26 These credits, however, shall not be applied towards penalties
27 owed pursuant to the referenced SEC judgments;
28

-23- D/O STIPULATION OF SETTLEMENT


Case No. 2:07-cv-00931-DDP (FMOx)
Case 2:07-cv-00931-DDP-FMO Document 484-3 Filed 07/30/10 Page 26 of 56 Page ID
#:10870

1 2) David Kenneally shall pay $32,500 pursuant to any prospective


2 judgment entered in the SEC Action; and
3 3) Two of the Settling Individuals (neither of whom is a Class
4 Individual Defendant) shall pay a combined total of $109,315.51 in
5 cash (in allocated amounts agreed upon and communicated to the
6 Trustee), which shall be designated as part of the consideration for
7 settlement of the Trustee Litigation.
8 b. Upon the Effective Date, an additional $944,029.49 shall be paid as
9 follows:
10 1) A total of $541,345 shall be released from the DCP Distribution of
11 Brad Morrice; I

12 2) A total of $100,000 shall be paid by or on behalf of Patti Dodge as


13 follows:
14 a. $55,000 shall be released from the DCP Distribution of Patti I
15 Dodge; and
16 b. The Dodge Credit shall be applied; and
17 3) A total of $302,684.49 shall be released from the DCP
18 Distributions of three other Settling Individuals (none of whom is a
19 Class Individual Defendant), pursuant to an allocation agreed upon
20 among themselves and communicated to the Trustee, which shall
21 be designated as part of the consideration for settlement of the
22 Trustee Litigation.
23 10. Upon the Effective Date, and simultaneous with the release by the
24 Trustee of the DCP Settlement Contributions pursuant to paragraph 9b, the

25 balance, if any, of the DCP Distribution for each Distribution Defendant (after

26 deducting such Distribution Defendant's DCP Settlement Contribution) will be

27 distributed to each Distribution Defendant, net of taxes withheld by reason of both

28 the DCP Settlement Contribution and the balance, if any, of the DCP Distribution.

-24- D/O STIPULATION OF SETTLEMENT


Case No. 2:07-cv-00931-DDP (FMOx)
Case 2:07-cv-00931-DDP-FMO Document 484-3 Filed 07/30/10 Page 27 of 56 Page ID
#:10871

1 The Trustee shall issue or cause to be issued a form W-2 or 1099, as appropriate,
2 with respect to such distribution (including the DCP Settlement Contribution)

3 made to or on behalf of each Distribution Defendant, The Distribution Defendants


4 and Trustee agree that such distributions (including the DCP Settlement

5 Contributions) for tax purposes shall be treated as payment of compensation. Each

6 Distribution Defendant agrees that the distributions (including the DCP Settlement

7 Contributions) will be subject to the appropriate bonus tax rate for all appropriate
8 federal, state and local taxes related to such distributions. All taxes arising from
9 the DCP Distributions shall be borne by the Distribution Defendants; the Trustee
I
10 and the Trust shall have no liability for any taxes associated with these
11 distributions.

12 11. The settlement funds deposited in the Global Escrow Account


13 pursuant to paragraph 9a shall be held until the Effective Date, at which time the
s
14 funds in the Global Escrow Account and the DCP Settlement Contributions shall

15 be released and the Global Officer And Director Settlement Amount shall be
16 allocated and distributed as follows:

17 a. $6,000,000 of the Global Officer And Director Settlement Amount shall


18 be paid to Kodiak from the Global Escrow Account and designated as
19 consideration for settlement of Kodiak's claims against the Kodiak
20 Litigation Defendants in the Kodiak Litigation;
21 b. $20,969,273 of the Global Officer And Director Settlement Amount shall
22 be paid to the Trustee, consisting both of $20,025,243.51 from the Global
23 Escrow Account and $944,029.49 from the DCP Settlement
24 Contributions (including the Dodge Credit), and designated as
25 consideration for the settlement of the Trustee's claims against the
26 Trustee Litigation Defendants in the Trustee Litigation; and
27 c. $65,077,088 of the Global Officer And Director Settlement Amount shall
28 be transferred from the Global Escrow Account into the Class Escrow

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Case No. 2:07-cv-00931-DDP (FMOx)

Case 2:07-cv-00931-DDP-FMO Document 484-3 Filed 07/30/10 Page 28 of 56 Page ID


#:10872

1 Account and designated as consideration for the settlement of the Class


2 Plaintiffs' claims against the Class Individual Defendants in the
3 Consolidated Class Action.
4 d. Included in the amounts set forth in this paragraph is a total of
5 $1,523,845 paid by or on behalf of Morrice ($791,345), Dodge
6 ($550,000), and Kenneally ($182,500) in satisfaction of amounts owed
7 pursuant to any prospective SEC judgments in the SEC Action and which
8 will be distributed pursuant to this Stipulation of Settlement.
9 12. Interest that accrues on the funds held in the Global Escrow Account
10 prior to their distribution to the Plaintiffs hereunder shall be allocated pro rata

11 among the Plaintiffs based on funds distributed from the Global Escrow Account to
12 such Plaintiffs pursuant to paragraph 11 a-c. Escrow fees, Taxes and tax

13 preparation fees and costs incurred under the Escrow Agreement for the Global

14 Escrow Account shall be allocated pro rata among the Plaintiffs in the same

15 manner as interest.

16 13. If any portion of the Global Officer And Director Settlement Amount
17 is not paid in the timeframe as designated above in paragraph 9a, Plaintiffs shall,
18 upon their unanimous agreement, have the option to: (i) terminate the Global

19 Officer And Director Settlement; or (ii) seek to enforce this Stipulation of


20 Settlement, including seeking interest on unpaid portions of the Global Officer And

21 Director Settlement Amount, as against those Parties or Insurance Carriers who


22 have not complied with their payment obligations as set out in paragraph 9a. Any

23 Party or Insurance Carrier may seek the assistance of the Hon. Daniel Weinstein

24 for resolution of any disputes relating to this paragraph, but seeking or not seeking

25 such assistance does not preclude all otherwise available legal remedies.
26 14. The costs of all Taxes and tax preparation and escrow fees and related
27 fees in connection with the Global Officer And Director Settlement Amount while
28 it is in the Global Escrow Account may be paid directly out of the Global Escrow

-26- D/O STIPULATION OF SETTLEMENT


Case No. 2:07-cv-0093 1 -DDP (FMOx)

Case 2:07-cv-00931-DDP-FMO Document 484-3 Filed 07/30/10 Page 29 of 56 Page ID
#:10873

1 Account without further order of the Court in accordance with the Escrow M

r
2 Agreement for the Global Escrow Account.
f

3 USE OF CLASS SETTLEMENT FUNDS


4 15. The Class Settlement Fund shall be used to pay: (i) any Taxes payable
5 on the Class Settlement Fund; (ii) any Notice and Administration Costs; (iii) any

6 attorneys' fees awarded by the Consolidated Class Action Court; and (iv) any
7 Litigation Expenses awarded by the Consolidated Class Action Court. The balance

8 remaining in the Class Settlement Fund, after payment of items (I)-(iv), shall be
9 distributed to Authorized Claimants as provided below.
10 16. The Escrow Agent shall invest any funds in the Global Escrow
11 Account and the Class Escrow Account in United States Treasury Bills (or a
12 mutual fund invested solely in such instruments) and shall collect and reinvest all

13 interest accrued thereon, except that any residual cash balances of less than

14 $100,000 may be invested in money market mutual funds comprised exclusively of

15 investments secured by the full faith and credit of the United States.
16 17. The Class Plaintiffs and the Class Defendants agree that the Class
17 Settlement Fund is intended to be a Qualified Settlement Fund within the meaning
18 of Treasury Regulation § 1.46813-1 and that Lead Counsel, as administrator of the
19 Class Settlement Fund within the meaning of Treasury Regulation § 1.46813-
20 2(k)(3), shall be solely responsible for filing or causing to be filed all informational
21 and other tax returns as may be necessary or appropriate (including, without

22 limitation, the returns described in Treasury Regulation § 1.468B-2(k)) for the

23 Class Settlement Fund. Such returns shall be consistent with this paragraph and in
24 all events shall reflect that all Taxes on the income earned on the Class Settlement

25 Fund shall be paid out of the Class Settlement Fund as provided by paragraph 18

26 below. Lead Counsel shall also be solely responsible for causing payment to be

27 made from the Class Settlement Fund of any Taxes owed with respect to the Class

28 Settlement Fund. Upon written request, the Class Individual Defendants will

-27- D/O STIPULATION OF SETTLEMENT


Case No. 2:07-ev-00931-DDP (FMOx)

Case 2:07-cv-00931-DDP-FMO Document 484-3 Filed 07/30/10 Page 30 of 56 Page ID


#:10874

1 provide promptly to Lead Counsel any statements or information required for tax r
2 purposes, including the statement described in Treasury Regulation § 1.468B-3(e).
3 Lead Counsel, as administrator of the Class Settlement Fund within the meaning of
4 Treasury Regulation § 1.468B-2(k)(3), shall timely make such elections as are

5 necessary or advisable to carry out this paragraph, including, as necessary, making


6 a "relation back election," as described in Treasury Regulation § 1.468B-10), to
7 cause the Qualified Settlement Fund to come into existence at the earliest
8 allowable date, and shall take or cause to be taken all actions as may be necessary

9 or appropriate in connection therewith.


10 18. All Taxes on the Class Settlement Fund shall be paid out of the Class
11 Settlement Fund, and shall be timely paid by the Escrow Agent pursuant to the

12 disbursement instructions to be set forth in the Escrow Agreement between Lead


1
13 Counsel and the Escrow Agent, and without prior Order of the Consolidated Class
14 Action Court. Any tax returns prepared for the Class Settlement Fund (as well as
I
15 the election set forth therein) shall be consistent with the previous paragraph and in
16 all events shall reflect that all Taxes (including any interest or penalties) on the
i
17 income earned by the Class Settlement Fund shall be paid out of the Class
18 Settlement Fund as provided herein. The Class Settlement Fund shall indemnify

19 and hold all Settling Individuals and Insurance Carriers harmless for any Taxes and
i
20 related expenses of any kind whatsoever (including without limitation, taxes 1
21 payable by reason of any such indemnification), if any, payable by the Settling

22 Individuals or the Insurance Carriers by reason of any income earned on the Class

23 Settlement Fund. The Settling Individuals and the Insurance Carriers shall notify

24 the Escrow Agent promptly if they receive any notice of any claim for Taxes

25 relating to the Class Settlement Fund and, for the avoidance of doubt, in such case

26 the Settling Individuals and the Insurance Carriers will have no recourse against

27 the Trust, Trustee, Alan M. Jacobs individually, the Debtors, the Debtors' Estates,
28 the Plan Advisory Committee, or Kodiak.

-28- D/O STIPULATION OF SETTLEMENT


Case No. 2:07-cv-0093 1 -DDP (FMOx)

Case 2:07-cv-00931-DDP-FMO Document 484-3 Filed 07/30/10 Page 31 of 56 Page ID
#:10875

1 19. This is not a claims-made settlement. Once the Effective Date occurs,
2 neither the Settling Individuals, the Insurance Carriers, nor any other Settling
3 Individuals nor any other person or entity that contributed to the Global Officer

4 And Director Settlement Amount on their behalf, will have the right or ability to
5 get back any of the Global Officer And Director Settlement Amount or any interest

6 accrued thereon, irrespective of the number of Claims filed, the collective amount

7 of losses of Authorized Claimants, the percentage of recovery of losses, or the

8 amounts to be paid to Authorized Claimants from the Class Net Settlement Fund.
9 20. The Claims Administrator shall discharge its duties under Lead
10 Counsel's supervision and subject to the jurisdiction of the Consolidated Class
11 Action Court. Except as otherwise provided herein, no other Party shall have

12 responsibility whatsoever for the administration of the Global Officer And Director

13 Settlement, and no other Party shall have liability whatsoever to any person,

14 including, but not limited to, the Class Members, in connection with any such I

15 administration. Lead Counsel shall cause the Claims Administrator to mail the

16 Notice and Proof of Claim Form to those members of the Class at the address of

17 each such person as set forth in the records of New Century or its transfer agent(s),
18 or who otherwise may be identified through further reasonable effort. Lead

19 Counsel will cause to be published the Summary Notice pursuant to the terms of
20 the Preliminary Approval Order or whatever other form or manner might be

21 ordered by the Consolidated Class Action Court. For the purpose of identifying

22 and providing notice to the Class, promptly upon execution of this Stipulation, the

23 Trustee shall provide to the Claims Administrator (at no cost to the Global Escrow
24 Account, Lead Counsel or the Claims Administrator) any New Century shareholder

25 lists in his possession as appropriate for providing notice to the Class, in electronic

26 fonn (if available). The Trustee shall make no representation as to the accuracy or

27 completeness of such shareholder lists.

28

-29- D/O STIPULATION OF SETTLEMENT


Case No. 2:07-ev-00931-DDP (FMOx)

Case 2:07-cv-00931-DDP-FMO Document 484-3 Filed 07/30/10 Page 32 of 56 Page ID


#:10876

1 21. Lead Counsel may pay from the Global Escrow Account or the Class
0

2 Escrow Account, without further approval from the other Parties or further order of
3 the Consolidated Class Action Court, the Notice and Administration Costs actually
4 incurred. Such amounts will be deducted as expenses from the Class Officer And

5 Director Settlement Amount. Such costs and expenses shall include, without

6 limitation, the actual costs of publication, printing and mailing the Notice,

7 reimbursements to nominee owners for forwarding the Notice to their beneficial{

8 owners of New Century securities, the administrative expenses incurred and fees
9 charged by the Claims Administrator in connection with providing Notice and

10 processing the submitted claims, and the fees, if any, of the Escrow Agent. In the
11 event that the Global Officer And Director Settlement is terminated pursuant to the

12 terms of this Stipulation, all amounts contributed to the Global Escrow Account

13 shall be returned or repaid to the Settling Individuals, Insurance Carriers and all
i
14 other persons and entities who or which contributed to the Global Escrow Account
15 on their behalf, less all Notice and Administration Costs paid or incurred, including
16 any related fees, as set forth in paragraph 41 below.
17 CLASS ATTORNEYS' FEES AND LITIGATION EXPENSES
18 22. Lead Counsel will apply to the Consolidated Class Action Court for a
19 collective award of attorneys' fees to Class Plaintiffs' Counsel related to settlement

20 of the Consolidated Class Action. Lead Counsel also will apply to the

21 Consolidated Class Action Court for reimbursement of Litigation Expenses, which

22 may include reimbursement of the expenses of Class Plaintiffs in accordance with

23 15 U.S.C. § 78u-4(a)(4). No other Party shall ta pe any position with respect to

24 Lead Counsel's applications or awards discussed in this paragraph. Such matters

25 are not the subject of any agreement between the Parties other than what is set
26 forth in this Stipulation. Lead Counsel will not calculate attorneys' fees based

27 upon, or seek attorneys' fees or expenses with respect to, any disgorgement or

28 penalties obtained by the Securities and Exchange Commission in the SEC Action.

-30- D/O STIPULATION OF SETTLEMENT


Case No. 2:07-cv-0093 1 -DDP (FMOx)

Case 2:07-cv-00931-DDP-FMO Document 484-3 Filed 07/30/10 Page 33 of 56 Page ID
#:10877

1 23. Any attorneys' fees and Litigation Expenses that are awarded by the
2 Consolidated Class Action Court shall be paid from the Global Escrow Account to
3 Lead Counsel, with the Consolidated Class Action Court's approval, immediately
4 upon award, notwithstanding the existence of any timely filed objections thereto,
5 or potential for appeal therefrom, or collateral attack on the Settlement or any part

6 thereof, subject to Lead Counsel's obligation to pay back any such amount if, as a

7 result of any appeal, further proceeding or successful collateral attack, the


8 attorneys' fee or Litigation Expense award is amended, modified or does not

9 become Final, or if the Effective Date does not occur or the Settlement is
10 terminated for any reason. Such amounts will be deducted from the Class Officer

11 And Director Settlement Amount. Lead Counsel shall make the appropriate refund
12 or repayment in full no later than ten (10) business days after receiving from the

13 Settling Individuals' counsel or from a court of appropriate jurisdiction notice of

14 the termination of the Settlement or notice of any reduction of the award of


15 attorneys' fees and/or Litigation. Expenses. An award of attorneys' fees and/or

16 Litigation Expenses is not a necessary term of this Stipulation and is not a


17 condition of this Stipulation.

18 24. Lead Counsel shall have the sole authority to allocate the
19 Consolidated Class Action Court-awarded attorneys' fees among Class Plaintiffs'
20 Counsel in a manner which it, in good faith, believes reflects the contributions of
21 such counsel to the prosecution and settlement of the Consolidated Class Action.

22 The Settling Individuals shall have no responsibility for any such allocation and

23 shall not be liable for any claims relating to such allocation.

24 25. The attorneys' fees and Litigation Expenses discussed herein are
25 exclusive of any attorneys' fees or litigation expenses related to the settlement of

26 the Trustee Litigation or Kodiak Litigation. Each side and each party in the

27 Trustee Litigation and the Kodialc Litigation shall bear his, her or its own

28 attorneys' fees and costs.

-31- D/O STIPULATION OF SETTLEMENT


Case No. 2:07-cv-00931-DDP (FMOx)

Case 2:07-cv-00931-DDP-FMO Document 484-3 Filed 07/30/10 Page 34 of 56 Page ID


#:10878
I
1 CLAIMS ADMINISTRATOR OF THE CLASS SETTLEMENT FUND
s
2 26. The Claims Administrator shall administer the process of receiving,
3 reviewing and approving or denying Claims of Class Members under Lead
4 Counsel's supervision and subject to the jurisdiction of the Consolidated Class
5 Action Court. Other than the Trustee's obligation to provide New Century's
6 shareholder lists, as provided herein, none of the Settling Individuals, nor the
7 Trustee, nor Kodiak, shall have any responsibility for, involvement in or liability
8 for providing notice to the Class, the administration of the Class claims in the

9 Consolidated Class Action, or the allocation of the Class Net Settlement Fund. The
10 Parties and their respective counsel shall cooperate in the administration of the

11 Settlement to the extent reasonably necessary to effectuate its terms.

12 27. The allocation of the Class Net Settlement Fund among Authorized
13 Claimants shall be subject to a Plan of Allocation to be proposed by Lead Counsel
14 and approved by the Consolidated Class Action Court. Class Individual

15 Defendants shall take no position with respect to such proposed Plan of Allocation;

16 such Plan of Allocation is a matter separate and apart from the proposed Settlement
17 herein, and any decision by the Consolidated Class Action Court concerning the
18 Plan of Allocation shall not affect the validity or finality of the proposed

19 Settlement.

2 0 28. The Claims Administrator shall receive Claims and determine first,
21 whether the Claim is a valid Claim, in whole or part, and second, each Authorized
22 Claimant's pro rata share of the Class Net Settlement Fund as set forth in the Plan

23 of Allocation set forth in the Notice attached hereto as Exhibit 1 to Exhibit A, or in


24 such other plan of allocation as the Consolidated Class Action Court approves.

25 29. The Plan of Allocation proposed in the Notice is not a necessary term
26 of this Stipulation and it is not a condition of this Stipulation that any particular

27 plan of allocation be approved by the Consolidated Class Action Court.


28

-32- D/O STIPULATION OF SETTLEMENT


Case No. 2:07-cv-00931-DDP (FMOx)
Case 2:07-cv-00931-DDP-FMO Document 484-3 Filed 07/30/10 Page 35 of 56 Page ID
#:10879

1 30. Any Class Member who does not submit a valid Claim Form will not
2 be entitled to receive any distribution from the Class Net Settlement Fund but will
3 otherwise be bound by all of the terms of this Stipulation and Settlement, including
4 the terms of the Officer And Director Judgment to be entered in the Consolidated

5 Class Action and the releases provided for herein, and will be permanently barred

6 and enjoined from bringing any action, claim, or other proceeding of any bind
7 against any Released Officer And Director concerning any Settled Claim.
8 31. Lead Counsel shall be responsible for supervising the administration
9 of the settlement of the claims in the Consolidated Class Action and disbursement
10 of the Class Net Settlement Fund. No other Party shall have any liability,

11 obligation or responsibility whatsoever for the administration of the Settlement or

12 disbursement of the Class Net Settlement Fund. No other Party shall be permitted

13 to review, contest or object to any Claim Form or any decision of the Claims

14 Administrator or Lead Counsel with respect to accepting or rejecting any Claim

15 Form or Claim for payment by a Class Member. Lead Counsel shall have the right,

16 but not the obligation, to waive what they deem to be formal or technical defects in
17 any Claim Forms submitted in the interests of achieving substantial justice.
18 32. For purposes of determining the extent, if any, to which a Class
19 Member shall be entitled to be treated as an Authorized Claimant, the following
20 conditions shall apply:

21 a. Each Class Member shall be required to submit a Claim Form


22 and Release, substantially in the form attached hereto as Exhibit 2 to Exhibit A,

23 supported by such documents as are designated therein, including proof of the


24 Claimant's loss, or such other documents or proof as the Claims Administrator or

25 Lead Counsel, in their discretion, may deem acceptable, by the date set by the
26 Consolidated Class Action Court;

27 b. Each Claim Form shall be submitted to and reviewed by the


28 Claims Administrator, under the supervision of Lead Counsel, who shall determine

-33- D/O STIPULATION OF SETTLEMENT


Case No. 2:07-cv-0093 1 -DDP (FMOx)

Case 2:07-cv-00931-DDP-FMO Document 484-3 Filed 07/30/10 Page 36 of 56 Page ID


#:10880

1 in accordance with this Stipulation the extent, if any, to which each Claim shall be

2 allowed, subject to review by the Consolidated Class Action Court pursuant to


3 subparagraph (d) below;
4 C. Claim Forms that do not meet the submission requirements may
5 be rejected. Prior to rejecting a Claim in whole or in part, the Claims
6 Administrator shall communicate with the Claimant in writing, to give the
7 Claimant the chance to remedy any curable deficiencies in the Claim Form
i
8 submitted. The Claims Administrator, under the supervision of Lead Counsel,

9 shall notify, in a timely fashion and in writing, all Claimants whose Claim the
10 Claims Administrator proposes to reject in whole or in part, setting forth the
11 reasons therefor, and shall indicate in such notice that the Claimant whose Claim is

12 to be rejected has the right to a review by the Consolidated Class Action Court if
13 the Claimant so desires and complies with the requirements of subparagraph (e)
14 below;

15 d. If any Claimant whose Claim has been rejected in whole or in


16 part desires to contest such rejection, the Claimant must, within twenty (20) days
17 after the date of mailing of the notice required in subparagraph (c) above, serve
18 upon the Claims Administrator a notice and statement of reasons indicating the
19 Claimant's grounds for contesting the rejection along with any supporting

20 documentation, and requesting a review thereof by the Consolidated Class Action


21 Court. If a dispute concerning a Claim cannot be otherwise resolved, Lead

22 Counsel shall thereafter present the request for review to the Consolidated Class

23 Action Court; and

24 e. The administrative determinations of the Claims Administrator


25 accepting and rejecting Claims shall be presented to the Consolidated Class Action

26 Court, on notice to the Class Individual Defendants' counsel, for approval by the

27 Consolidated Class Action Court in the Class Distribution Order.


28

-34- D/O STIPULATION OF SETTLEMENT


Case No. 2:07-cv-0093 1 -DDP (FMOx)

Case 2:07-cv-00931-DDP-FMO Document 484-3 Filed 07/30/10 Page 37 of 56 Page ID
#:10881
a
1 33. Each Claimant shall be deemed to have submitted to the jurisdiction
2 of the Consolidated Class Action Court with respect to the Claimant's Claim, and
3 the Claim will be subject to investigation and discovery under the Federal Rules of
4 Civil Procedure, provided that such investigation and discovery shall be limited to
5 that Claimant's status as a Class Member and the validity and amount of the
6 Claimant's Claim. No discovery shall be allowed on the merits of this
7 Consolidated Class Action or this Settlement in connection with the processing of
8 Claim Forins.
9 34. Lead Counsel will apply to the Consolidated Class Action Court, on
10 notice to the Class Individual Defendants, for a Class Distribution Order: (i)
11 approving the Claims Administrator's administrative determinations concerning

12 the acceptance and rejection of the Claims submitted; (ii) approving payment of
13 any additional unpaid or anticipated administration fees and expenses associated
14 with the administration of the Settlement from the Class Escrow Account; (iii) if
15 the Effective Date has occurred, directing payment of the Class Net Settlement
16 Fund to Authorized Claimants from the Class Escrow Account; and (iv) other relief
17 as appropriate.
18 35. Payment pursuant to the Class Distribution Order shall be final and
19 conclusive against all Class Members. All Class Members whose Claims are not
20 approved by the Consolidated Class Action Court shall be barred from
21 participating in distributions from the Class Net Settlement Fund, but otherwise
22 shall be bound by all of the terms of this Stipulation and the Settlement, including
23 the terms of the Officer And Director Judgment to be entered in this Consolidated
24 Class Action and the releases provided for therein, and will be permanently barred
25 and enjoined from bringing any action against any and all Released Officers And
26 Directors concerning any and all of the Settled Claims.
27 36. All proceedings with respect to the administration, processing and
28 determination of Claims and the determination of all controversies relating thereto,

-35- D/O STIPULATION OF SETTLEMENT


Case No. 2:07-ev-00931-DDP (FMOx)

Case 2:07-cv-00931-DDP-FMO Document 484-3 Filed 07/30/10 Page 38 of 56 Page ID


#:10882

1 including disputed questions of law and fact with respect to the validity of Claims,
2 shall be subject to the jurisdiction of the Consolidated Class Action Court.
3 TERMS OF THE JUDGMENT
4 37. If the Settlement contemplated by this Stipulation is approved by the
5 Consolidated Class Action Court, the Parties shall request that the Consolidated

6 Class Action Court enter the Officer And Director Judgment, substantially in the
7 form annexed hereto as Exhibit B, pursuant to Rule 54(b) of the Federal Rules of

8 Civil Procedure.
9 WAIVER OR TERMINATION
10 38. Within thirty (30) days of. (a) the Consolidated Class Action Court's
11 declining to enter, without leave to resubmit, the Preliminary Approval Order in
12 any material respect; (b) the Consolidated Class Action Court's refusal to approve

13 this Stipulation or any material part of it; (c) the Consolidated Class Action Court's
14 declining to enter the Officer And Director Judgment in any material respect; or (d)

15 the date upon which the Officer And Director Judgment is modified or reversed in

16 any material respect by the Court of Appeals or the Supreme Court, the Parties and

17 the Insurance Carriers each shall have the right to terminate the Settlement and this
18 Stipulation by providing written notice to all other Parties of an election to do so.
19 However, any decision with respect to an application for attomeys' fees or

20 Litigation Expenses, or with respect to any plan of allocation, shall not be


21 considered material to the Settlement and shall not be grounds for termination.

22 39. In addition, if Class Members who purchased or acquired more than a


23 certain number of shares during the Class Period properly elect to exclude

24 themselves from the Class in accordance with the requirements for requesting

25 exclusion provided in the Notice, as specified in a separate Supplemental

26 Agreement Between Class Plaintiff And The Class Individual Defendants, the

27 Class Individual Defendants and the Insurance Carriers shall have the option, as set

28 out in the Supplemental Agreement, to terminate this Settlement and Stipulation.

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#:10883

1 In the event that the option to terminate the Settlement is exercised and not

2 withdrawn as set forth in paragraph 40 below, the entire Settlement set forth herein
3 is terminated, including the settlement of the Consolidated Class Action, the
4 Trustee Litigation and the Kodiak Litigation.
5 40. Lead Counsel and the Class Individual Defendants' counsel shall
6 request jointly that the deadline for submitting exclusions from the Class be at least
7 twenty-one (21) days prior to the Final Approval Hearing. Copies of all timely
8 requests for exclusion from the Class received by the Claims Administrator (or
9 other person designated to receive exclusion requests) shall be provided to Lead
10 Counsel, Class Individual Defendants' counsel, and counsel for the Insurance
11 Carriers no later than fifteen (15) days prior to the Final Approval Hearing. If the
12 threshold stated in the Supplemental Agreement is reached, the Class Individual

13 Defendants and the Insurance Carriers shall have until 5:00 p.m. PDT of the

14 seventh day before the Final Approval Hearing to inform Lead Counsel, in writing,

15 that they elect to exercise their option to terminate the Settlement and this

16 Stipulation. Lead Counsel shall have the right to communicate with the holders of
17 such shares and, if a sufficient number of them withdraw in writing their requests

18 for exclusion such that the total number of shares purchased. during the Class

19 Period represented by the remaining "opt outs" represents less than the threshold,
20 the notice of termination shall be deemed withdrawn.
21 41. Except as otherwise provided herein, in the event that the Effective
22 Date does not occur or the Settlement is terminated, the Parties shall be deemed to

23 have reverted to their respective status in the Officer And Director Litigations
24 immediately prior to May 5, 2010, and, except as otherwise expressly provided, the

25 Parties shall proceed in all respects as if this Stipulation and any related orders had
26 not been entered. If the Effective Date does not occur or the Settlement is

27 terminated, the settlement consideration paid under paragraphs 9a2 and 9a3 shall

28 be returned in full, and the remaining portion of the Settlement consideration

-37- D/O STIPULATION OF SETTLEMENT


Case No. 2:07-cv-00931-DDP (FMOx)

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#:10884
E

1 previously paid, less any amounts paid or incurred for Notice and Administration
2 Costs actually incurred and paid or payable and/or Taxes paid or owing, shall
3 revert to the Insurance Carriers in proportion to the cash amounts each contributed

4 to the Global Escrow Account under paragraph 9al, within fourteen (14) business
5 days after written notification of such event by Lead Counsel or any of the Settling
6 Individuals to the Escrow Agent, pursuant to the terms of the Escrow Agreement.
7 NO ADMISSION OF WRONGDOING
8 42. This Stipulation, whether or not consummated, and any proceedings
9 taken pursuant to it:
10 a. shall not be offered or received against any of the Released
I
11 Officers And Directors as evidence of, or construed as, or deemed to be evidence
12 of any presumption, concession, or admission by any of the Released Officers And

13 Directors with respect to the truth of any fact alleged by Plaintiffs or the validity of
14 any claim that was or could have been asserted against any of the Released

15 Officers And Directors in the Officer And Director Litigations or in any litigation,
16 or of any liability, negligence, fault, or other wrongdoing of any kind of any of the

17 Released Officers And Directors;


18 b. shall not be offered or received against any of the Released
19 Officers And Directors as evidence of a presumption, concession or admission of
20 any fault, misrepresentation or omission with respect to any statement or written

21 document approved or made by any of the Released Officers And Directors, or


22 against the Plaintiffs or any Class Members as evidence of any infirmity in the

23 claims of Plaintiffs or the other Class Members;

24 C. shall not be offered or received against any of the Released


25 Officers And Directors, or against the Plaintiffs or any other Class Members, as
26 evidence of a presumption, concession or admission with respect to any liability,
27 negligence, fault or wrongdoing of any kind, or in any way referred to for any

28 other reason as against any of the Released Officers And Directors, in any other

-38- D/O STIPULATION OF SETTLEMENT


Case No. 2:07-ev-00931-DDP (FMOx)

Case 2:07-cv-00931-DDP-FMO Document 484-3 Filed 07/30/10 Page 41 of 56 Page ID
#:10885

1 civil, criminal or administrative action or proceeding, other than such proceedings


2 as may be necessary to effectuate the provisions of this Stipulation; provided,
3 however, that if this Stipulation is approved by the Consolidated Class Action
4 Court, the Settling Individuals, any other Released Officer And Director, or any
5 Class Member may refer to it to effectuate the protection from liability granted
6 them hereunder;
7 d. shall not be construed against any of the Released Officers And
8 Directors, Plaintiffs or any other Class Members as an admission, concession, or

9 presumption that the consideration to be given hereunder represents the amount


10 which could be or would have been recovered after trial;

11 e. shall not be construed against Plaintiffs or any other Class


12 Members as an admission, concession, or presumption that any of their claims are

13 without merit or that damages recoverable under the Officer And Director
14 Litigations would not have exceeded the Officer And Director Settlement Amount;

15 and

16 £ shall not be construed as or received in evidence as an


17 admission, concession or presumption that class certification is appropriate in this
18 Consolidated Class Action, except for purposes of this Settlement.

19 MISCELLANEOUS PROVISIONS
20 43. Pursuant to the Class Action Fairness Act of 2005 ("CAFA"), 28
21 U.S.C. § 1715(b), not later than ten (10) days after the Global Officer And Director

22 Settlement is filed in the Consolidated Class Action Court, Settling Individuals

23 shall cause to be served upon the appropriate State official of each State and the

24 Attorney General of the United States a CAFA Notice. The Parties will request
25 that, pursuant to 28 U.S.C. § 1715(d), the Final Approval Hearing be scheduled for
26 no earlier than ninety (90) days following the deadline for Settling Individuals to
27 serve the CAFA Notice as stated in this paragraph. Any failure by Settling

28 Individuals to comply with the CAFA Notice requirements will not provide

-39- D/O STIPULATION OF SETTLEMENT


Case No. 2:07-cv-00931-DDP (FMOx)

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#:10886
a
9

1 grounds for delay of the Final Approval Hearing or entry of the Officer And
2 Director Judgment.
3 44. All of the exhibits attached hereto are hereby incorporated by
4 reference as though fully set forth herein.
5 45. The Settling Individuals and Insurance Carriers each warrant that, as
6 to the payments made by or on behalf of him, her or it, at the time of such 1
7 payment, he, she or it was not insolvent, nor did nor will the payment required to

8 be made by or on behalf of him, her or it render him, her or it insolvent, within the

9 meaning of and/or for the purposes of the Bankruptcy Code, including §§ 101 and
10 547 thereof. This representation is made by the Settling Individuals and the
11 Insurance Carriers and not by their counsel,

12 46. In the event of the entry of a final order of a court of competent


13 jurisdiction determining the transfer of money to the Global Escrow Account or

14 any portion thereof by or on behalf of any of the Settling Individuals or the


15 Insurance Carriers to be a preference, voidable transfer, fraudulent transfer or

16 similar transaction pursuant to the Bankruptcy Code, and any portion thereof is

17 required to be returned, and such amount is not promptly deposited to the Global
18 Escrow Account by others, then, at the election of Plaintiffs, Plaintiffs may move
19 the Consolidated Class Action Court to vacate the Officer And Director Judgment
20 in whole or in part; the Parties shall be restored to their respective positions in the
21 Officer And Director Litigations immediately prior to May 5, 2010; and any cash
22 amounts in the Global Escrow Account shall be returned as provided in paragraph

23 41 above.
24 47. The Parties intend this Settlement to be a final and complete
25 resolution of all disputes asserted or which could be asserted by the Plaintiffs, any
i
26 other Class Members and their attorneys against all Released Officers And

27 Directors with respect to all Settled Claims. Accordingly, the Parties agree not to

28 assert that the Consolidated Class Action, Trustee Litigation, or Kodiak Litigation

-40- D/O STIPULATION OF SETTLEMENT


Case No. 2:07-ev-0093 1 -DDP (FMOx)

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#:10887

1 was brought or defended in bad faith or without a good faith basis. The Parties
2 hereto shall assert no claims of any violation of Rule 11 of the Federal Rules of
3 Civil Procedure relating to the prosecution, defense, or settlement of the Officer
4 And Director Litigations. The Parties agree that the amount paid and the other

5 terms of this Settlement were negotiated at arm's-length in good faith by the


6 Parties, including a mediation conducted by a professional mediator, and reflect a
7 settlement that was reached voluntarily after consultation with experienced legal
8 counsel.

9 48. While retaining their rights to deny that the claims asserted in the
10 Officer And Director Litigations were meritorious, the Settling Individuals in any
11 statement made to any media representative (whether or not for attribution) will
12 not deny that the Officer And Director Litigations were commenced and

13 prosecuted in good faith. Similarly, while retaining their rights to deny that the

14 defenses in the Officer And Director Litigations were meritorious, the Class

15 Plaintiffs, Trustee, and Kodiak in any statement to any media representative

16 (whether or not for attribution) will not deny that the Officer And Director
17 Litigations were defended in good faith. In all events, the Parties shall refrain from
18 any accusations of wrongful or actionable conduct by any Party concerning the

19 prosecution and resolution of the Officer And Director Litigations, and shall not
20 otherwise suggest that the Settlement constitutes an admission of any claim or
21 defense alleged.

22 49. This Stipulation may not be modified or amended, nor may any of its
23 provisions be waived except by a writing signed by all signatories hereto or their

24 successors-in-interest.

25 50. The headings herein are used for the purpose of convenience only and
26 are not meant to have legal effect.

27 51. The administration and consummation of this Settlement as embodied


28 in this Stipulation shall be under the authority of the Consolidated Class Action

-41- D/O STIPULATION OF SETTLEMENT


Case No. 2:07-ev-00931-DDP (FMOx)

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#:10888

1 Court, and the Consolidated Class Action Court shall retain jurisdiction for the
2 purpose of entering orders providing for awards of attorneys' fees and Litigation

3 Expenses to Lead Counsel and enforcing the terms of this Stipulation as it concerns

4 the Consolidated Action. After the Effective Date, the Bankruptcy Court shall have
5 and retain jurisdiction in the Trustee Litigation for purposes of enforcing the terms

6 of this Stipulation as between the Trustee and Trustee Litigation Defendants, and
7 the court hearing the Kodiak Litigation shall have and retain jurisdiction in the
8 Kodiak Litigation for purposes of enforcing the terms of this Stipulation as

9 between Kodiak and Kodiak Litigation Defendants.


10 52. Upon the Effective Date and to the extent not already withdrawn: (a)
11 the Settling Individuals will be deemed to have withdrawn with prejudice the
12 claims identified in the schedule annexed hereto as Exhibit C that have been filed

13 or scheduled in the Bankruptcy Court against the Debtors' Estates; and (b) Arch

14 Insurance Company will be deemed to have withdrawn with prejudice proof of

15 claim no. 2329 filed in the Bankruptcy Court against the Debtors' Estates. Upon
16 the Effective Date, proof of claim no. 2385 filed by Fredric J. Forster in the
i
17 Bankruptcy Court against the Debtors' Estate shall be allowed as a priority claim in
18 the amount of $5,000.00.
19 53. Upon the Effective Date, the notices of dismissal in the Trustee
20 Litigation and Kodiak Litigation held by counsel designated by the Kodiak

21 Litigation Defendants and the Trustee Litigation Defendants shall be filed in the

22 Trustee Litigation and Kodiak Litigation, respectively. If the Effective Date does

23 not occur or the Settlement is terminated, the notices of dismissal shall not be filed
24 and shall be returned to counsel for Trustee and Kodiak, respectively.

25 54. The waiver by one Party of any breach of this Stipulation by any other
26 Party shall not be deemed a waiver of any other prior or subsequent breach of this

27 Stipulation.

28

-42- D/O STIPULATION OF SETTLEMENT


Case No. 2:07-cv-0093 1 -DDP (FMOx)

Case 2:07-cv-00931-DDP-FMO Document 484-3 Filed 07/30/10 Page 45 of 56 Page ID
#:10889

1 55. This Stipulation and its exhibits constitute the entire agreement among
2 the Parties hereto concerning the matters set forth herein, and no representations,
3 warranties, or inducements have been made by any Party hereto concerning this
4 Stipulation and its exhibits other than those contained and memorialized in such
5 documents.
6 56. This Stipulation may be executed in one or more original and/or faxed
7 counterparts. All executed counterparts and each of them shall be deemed to be

8 one and the same instrument provided that counsel for the signatories of this
9 Stipulation shall exchange among themselves copies of original signed
10 counterparts.

11 57. This Stipulation shall be binding upon, and inure to the benefit of, the
12 successors and assigns of the Parties hereto.

13 58. The construction, interpretation, operation, effect and validity of this


14 Stipulation, and all documents necessary to effectuate it, shall be governed by the

15 internal laws of the State of California without regard to conflicts of laws, except

16 to the extent that federal law requires that federal law govern.

17 59. This Stipulation shall not be construed more strictly against one Party
18 than another merely by virtue of the fact that it, or any part of it, may have been

19 prepared by counsel for one of the Parties, it being recognized that it is the result of
20 arm's-length negotiations between the Parties and all Parties have contributed
21 substantially and materially to the preparation of this Stipulation.

22 60. All counsel and any other person executing this Stipulation and any of
23 the exhibits hereto, or any related Settlement documents, warrant and represent that

24 they have the full authority to do so and that they have the authority to take

25 appropriate action required or permitted to be taken pursuant to the Stipulation to

26 effectuate its terms.

27 61. The Parties and their counsel agree to cooperate fully with one
28 another in seeking Court approval of the Preliminary Approval Order, the

-43- D/O STIPULATION OF SETTLEMENT


Case No. 2:07-cv-0093 1 -DDP (FMOx)

Case 2:07-cv-00931-DDP-FMO Document 484-3 Filed 07/30/10 Page 46 of 56 Page ID
#:10890

i
G
1 Stipulation and this Settlement, and to use best efforts to promptly agree upon and
2 execute all such other documentation as may be reasonably required to obtain final
r
3 approval by the Consolidated Class Action Court of the Settlement and to
4 effectuate its terms.
5 62. If any Party is required to give notice to any other Party under this
6 Stipulation, such notice shall be in writing and shall be deemed to have been duly
7 given upon receipt of hand delivery or facsimile transmission with confirmation of
8 receipt.
t
9 DATED AS OF: July 23, 2010 BERNSTEIN LITOWITZ IF, ERGER
10
& GROS MANN ids

11

12
AL ATORE . GRAZIANO
13

14
BI^AIR A, NICHOLAS f
ELIZABETH LIN
15 NIKI L. MENDOZA
BENJAMIN GALDSTON
16
TAI,' EO A. KELLAR
12481 High Bluff Drive, Suite 300
17
San Diego, CA 92130
Tel: 858 793-0070
18 Fax: (858) 793-0323
-and-
19
SALVATORE J. GRAZIANO
LAUREN A. MCMILLEN
20 1285 Avenue of the Americas
New York, NY 10019
21 Tel: (212) 554-1400
Fax: (212) 554-1444
22

23 MURRAY, FRANK & SAILER LLP


MARVIN L. FRANK
24 275 Madison Avenue, Suite 801
New York, NY 10016
25 Tel: 212 682-1818
Fax; 212 682-1892
26

27

28

-44- D/O STIPULATION OF SETTLEMENT


Case No. 2:07-cv-00931-DDP (FMOx)

Case 2:07-cv-00931-DDP-FMO Document 484-3 Filed 07/30/10 Page 47 of 56 Page ID


#:10891
"

t ZWERLING, SCHACHTER
& ZWERLING LLP
2 JE:I FREY C. ZWERLING
41 Madison Avenue
3 New York, NY 10010
T'el:212) 223-3900
4 Fax: (212
) 371 - 5969
5 Lead C'otinsel for Lead Plaintiff The New I

Fork State Teachers ' Retirement` S i)stem and


6 the Class, and Plaintif s Carl Larson and
Charles Hooten
7

8 MUS-G, ER, TOLLE;S & OLS LLP


9

9.

u
11 JOHN V. SPIEGEL ,^
KATHLEEN M. MCDOW L
KEVIN S. ALLR.ED
2 355 South Grand Avenue, 35 th Floor
13
Los A. eles, CA 90071-1560
Tel: 213 683-9100
14 Fax: (213) 687-3702
15 Attorneys for Defendants Brad A. Moa"rice,
Patti Af Dodge, Kevin M. Clo d, Patrick
16 Flana an, Stergios Theologi es, and Joseph
F, Eclol oth, Jr.
17

1.8 SI<.ADDEN, ARPS, SLATE, MEAGHER


1 & FL,OM LLP

20 i

21 JACK P. DICANIO
22 300 S. Grand Avenue, Suite 3400
Los An eles, CA 90071-3144
23 Tel: (2 3) 687-5000
Fax: (213) 687-5600
24
Attorneysfor Defendant Estate of Edward
25 Gotschall
26

27

28

T...___
-45- DJO STIPULATION OF SETTLEMENT
Case No. 2:07-cv-00931-DDP (FN40x)

Case 2:07-cv-00931-DDP-FMO Document 484-3 Filed 07/30/10 Page 48 of 56 Page ID
#:10892

1 ZWERLING, SCHACHTER
& ZWERLING LLP
2 JEFFREY C. ZWERLING
41 Madison Avenue
3 New York, NY 10010
Tel: 212 223-3900
4 Fax: (212) 371-5969 C
5 Lead Counsel for Lead Plaintiff The New
York State Teachers Retirement System and
6 the Class, and Plaintiffs Carl Larson and
Charles Hooten
7
8 MUNGER, TOLLES & OLSON LLP
9 I

10 .
11 JOHN W. SPIEGEL
KATHLEEN M. MCDOWELL
12 KEVIN S. ALLRED ch
355 South Grand Avenue, 35 Floor
13 Los An eles, CA 90071- 1560
Tel: 213 683-9100
14 Fax: (213) 687-3702
15 4ttorneys for Defendants Brad A. Morrice,
Patti M Dodge, Kevin M. Clod, Patrick
16 s, and Joseph
Flanaggan, Stergios Theologide
F. Eckroth, Jr.
17

18 SKADDEN, ARPS, SLATE, MEAGHER


& FLOM LLP
19
20
21
P. DICANIO
22 Grand Avenue, Suite 3400
ibsAnfeles, CA 90071 -3144
23 Tel: (2 3) 687-5000
Fax: ( 213) 687-5600
24
Attorneys or Defendant Estate of Edward
25 Gotschallf
26
27

28

-h5- D/O STIPULATION OF SETTLEMENT


Case No. 2:07-ev-00931-DDP (FMOx)

Case 2:07-cv-00931-DDP-FMO Document 484-3 Filed 07/30/10 Page 49 of 56 Page ID


#:10893

NIA
1 LATH: & WATKINS LLP
2
3 A
4 NNY A. ABASCAL
ETHAN J. BROWN
5 355 South Grand Avenue, Suite 100
Los Angeles, CA 90071-1560
6 Tel: (213) 485-1234
7 Fax: (213) 891-8763

8 Attorneys for Defendant Robert K. Cole


4
9

10 CROWELL & MORING LLP


11
12
JOHN CROUCHLEY
13
515 South Flower Street, 40`h Floor
14 Los Angeles, California 90071-2258
Tel: (213) 622-4750
15
Fax: (213) 622 -2690
i
16
Attorneys for David Kenneally
17

18 GIBSON DUNN & CRUTCHER LLP


19

20
MERYL L. YOUNG
21
WAYNE W. SMITH
22 3161 Michelson Drive
23 Irvine, CA 92612
Tel: (949) 451-4038
24 Fax: (949) 451-4220
25
Attorneys for Defendants Marilyn A,
26 Alexander, Harald A. Black, David Einhorn,
Fredric. J. Forster, Donald E. Lange,
27 Michael M. Sachs, Terrence P. Sandvik, And
Richard A. Zona
28

-46- D/O STIPULATION OF SETTLEMENT


Case No. 2:07-cv00931-DDP (FMCx)

Case 2:07-cv-00931-DDP-FMO Document 484-3 Filed 07/30/10 Page 50 of 56 Page ID {


#:10894

1 LATHAM & WATKINS LLP


2

3
MANNY A. ABASCAL......^v,__ . 1
4 ETHAN J. BROWN
5 355 South Grand Avenue, Suite 100 j
E Los Angeles, CA 90071-1560
6 {a Tel: (213) 485-1234

7
Fax: (213) 891-8763
i

8 Attorneys for Defendant Robert K. Cole


9

10 CROWELL & MORING LLP j


11 °^

J'01 1 CROUCHE Y
13 51.5 South Flower Street, 40'h Floor
14 Los Angeles, California 90071-2258
Tel: (213) 622-4750
15 ;
Fax: (213) 622-2690
16
Attorneys for David Kenneally
17

18 GIBSON DUNK & CRUTCHER LLP


19
j
20
M ERYL L, YOUNG
21 '
WAYNE W. SMITH i
22 3161 Michelson Drive
Irvine, CA 92612
23
Tel: (949) 451-4038
24 { tax: (949) 451-4220
ij

25
Attorneys for cferidants Marilyn .A.
26 Alexander, J-Darold A. Black, David Einhorn,
Fredric J, Forster, .Donald L. Lange,
27 Michael M. Sachs, Terrence P. Sandvik, And
Richard A. Zona
28

46- D/O STIPULATION OF SETTLEMENT


Case No. 2:.07 -cv-00931-DDP (FMOx) {
Case 2:07-cv-00931-DDP-FMO Document 484-3 Filed 07/30/10 Page 51 of 56 Page ID
#:10895

1 LATHAM & WATKINS LLP


2
3
MANNY A. ABASCAL
4 ETHAN J. BROWN
5 355 South Grand Avenue, Suite 100
Los Angeles, CA 90071-1560
6 Tel: (213) 485-1234
7 Fax: (213) 891-8763

8 Attorneys far Defendant Robert K. Cole


9
10 CROWELL & MORING LLP
11

12
JOHN CROUCHLEY
13
515 South Flower Street, 40 th Floor
14 Los Angeles, California 90071-2258
Tel: (213) 622-4750
15
Fax: (213) 622-2690
16
Attorneys for David Kenneally
17

18 , GIBS ON D ," & CR C ► R LLP


19
t^....

MERYLJYO
21
WAYN . S111 4
22 3161 Michelson Drive
Irvine, CA 92612
23
Tel: (949) 451-4038
24 Fax: (949) 451-4220

25 Attorneys for Defendants Marilyn A.


26 Alexander, Harold A. Black, David Einhorn,
Fredric J. Forster, Donald E. Lange,
27 Michael M. Sachs, Terrence P. Sandvik, And
Richard A. Zona
28

46- D/O STIPULATION OF SETTLEMENT


Case No. 2:07-ev-00931-DDP (FMOx)
Case 2:07-cv-00931-DDP-FMO Document 484-3 Filed 07/30/10 Page 52 of 56 Page ID
#:10896

RUS MILI SAND & SMITH

4
RONALD RUS
2211 Michelson Drive Seventh Floor
Irvine CA 926 12.104
Tel: (49) 752-7100
6 Fax: (949) 252-1514
7 alttor neys fbr Defendant William J; PcpejoJ
8,
9 MORR.ISON : FOERSTER I:..I.,I'
10

DAN MA.RMALE.FSKY
12 SAMANTHA. P. GOODMAN
13 555 West Fifth Street, Suite 3500
Los Angeles, CA 90013-1024 E
14
Tel: 213-892-5200
1.5 Fax: 213-892-5454
,16 AttorneysfbrJqffreyD. Goldberg
17

.18
I-IAHN HE,SSEN ELP
1
I
20 i
21 JOHN P, McCAHEY
MARK S. INTDELIC,`ATO
22
MARIA A. AR ^SOTT
23 488 Madison Avenue
New York, NY 10022
24 Tel: (2121) 478-7420
Fax: (2 t 478-7400
2
attorneys for° the .Nevi Century Liquidating
26 Trust and Reorganized New Century
27 Warehouse Corporation, by and through
..Tan M, Jacobs, Liquidaling Trustee and
2.8 Ilan administrator
-47- DIO STIPULATION OF SETTLEMFNT
Case Igo, 2V-cv.. 00931-DDP (FMOx)
i

Case 2:07-cv-00931-DDP-FMO Document 484-3 Filed 07/30/10 Page 53 of 56 Page ID
#:10897

K.C_15 .4IIH11 A.ND d: S.1 !11`l l i

2} qp
3 X

221 1 Michelson Drive, Seventh Floor


5 Irvine, CA 92612-1043
'1 ej: (949) 752-7100
6 Fav (949) 252-1514
41torne -l'br Dr-.^` rad arti k'illimn ). I'ojxjoy

t 11 `'1. ^ f11 F C) 1:; R f I--^ R LLP


1 tl

11
i ,I
W , IM A L F, I{ 'KY
SAMAN I I =I, '. GO )OMAN
13 ' 555 West 1" I fth Strect, Suite 3 500
Los Angeles, CA 90013-1024
l l
Te1: 213-892-5200
15 Fax: 213-892-5454
1.6
1tt rr ^s c ^°.1 ;fPey D, Goldberg
1?

i
I bk 1-I i 1-11 , S 1 ^:N I..1. P

^. _...
21 J01-IN 1 1 . McCA.1 fE '
22 MARK S, INUELIC IyC
MARIA A, ARNO'1 T
23 488 Madison Avenue
New gook NY 10022
241 Tel: (21.2)4 -78-7420
Fax: (212) 478-7100
2
<Ittor°are^}-^,s-^`'rrr• the t"^'ew C.c,na.ra t- .I icit.rccicr^ira„
2
Irtisl ct.rrdRe°org aniz, ec1Neiv (;'emur),
27 War•cr/rera;a-se C'otporrat on., kp and dirougla
^1lcarz M* Jacobs,
bs, I^ic, uidating ..'note and
2
Plan pfd adnislrnto r

_a{7- )!C) S I-IPULATION OF s[ I l i l"IME 1'


C asi^, No. 2!07,(-v- ,t( 9,', 4-DIX, (}a;MOX)

Case 2:07-cv-00931-DDP-FMO Document 484-3 Filed 07/30/10 Page 54 of 56 Page ID
#:10898

1 RUS MILIBAND & SMITH


2
3
4 RONALD RUS
2211 Michelson Drive Seventh Floor
5 Irvine CA 92612-104'3
Tel: (^49) 752-7100
6 Fax: (949) 252-1514 i
7 Attorneys for Defendant William J Popejoy
8
9 MORRISON & FOERSTER LLP
10
i
11
DAN MARMALEFSKY
12 SAMANTHA P. GOODMAN
13 555 West Fifth Street, Suite 3500
Los Angeles, CA 90013-1024
14
Tel: 213-892-5200
15 Fax: 213-892-5454

16
Attorneys for Jeffrey D. Goldberg
17 k
r

18
HAHN & HESSEN LLP
19

20
Jn
21 JO P. McCAHEY
MARK S. INDELICATO
22
MARIA A. ARNOTT
23 488 Madison Avenue
New York, NY 10022
24 Tel: (212_) 478-7420
Fax: (212) 478-7400
25
Attorneys for the New Century Liquidating
26 Trust and Reorganized New Century
27 Warehouse Corporation, by and through
Alan M. Jacobs, Liquidating Trustee and
28 Plan Administrator
-47- D/O STIPULATION OF SETTLEMENT
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#:10899

1
WINSTON & STRAWN LLP II

P
2

4 STEVEN D. ATLEE
333 S. Grand Avenue
5 Los Any CA 90071-1543
Tel: (21 6Y5-1827
6 Fax: (21J) 615-1750
7 Attorneys for Kodiak Warehouse LLC,
Kodiak Warehouse JPM Capital LLC,
8
Kodiak CDOI Ltd., Kodiak CDO
9 Management LLC, and Kodiak Funding LP
10
TUCKER ELLIS & WEST LLP 1

11

12
Agreed to as to paragraph 52 only,

13

14 ALEC H. BOYD
135 Main Street Suite 700
15 San Francisco, GSA 94105
Tel: (415) 617--2232
16 Fax: (415) 617-2409
17 Attorneys for Arch Insurance Company
F

18

19

20

21

22

23

24

25

26

27

28

-48- D/O STIPULATION OF SETTLEMENT J

Case No. 2;07-ev-00931-DDP (FMOx)


Case 2:07-cv-00931-DDP-FMO Document 484-3 Filed 07/30/10 Page 56 of 56 Page ID


#:10900

1 WINSTON & STRAWN LLP

2
3
4 STEVEN D. ATLEE
333 S. Grand Avenue
5 Las Angeles CA 90071-1543
Tel: 213)) 6^5-1827
6 Fax: (213) 615-1750
7 Attorneys for Kodiak Warehouse LLC,
Kodiak Warehouse JPM Capital LLC,
8 Kodiak CDOI Ltd., Kodiak CDO
9 Management LLC, and Kodiak Funding LP
10
TUCKER ELLIS & WEST LLP
11
Agreedto as to 1 graph 52 only,
12

13
ALEC H. BOYD
14 135 Main Street S ite 700
15 San Francisco ^A 94105
Tel: (415) 60-2232
16 Fax: (415) 617-2409

17 Attorneys for Arch Insurance Company

18

19

20

21

22

23

24

25

26

27

28

-48- D/O STIPULATION OF SETTLEMENT


Case No. 2:07-cv-00931-DDP (FMOx)
Case 2:07-cv-00931-DDP-FMO Document 484-4 Filed 07/30/10 Page 1 of 117 Page ID
#:10901

EXHIBIT A
TO GLOBAL OFFICER AND DIRECTOR STIPULATION j-
I

Case 2:07-cv-00931-DDP-FMO Document 484-4 Filed 07/30/10 Page 2 of 117 Page ID
#:10902
i
1 BERNSTEIN LITOWITZ BERGER
& GROSSMANN LLP
2 BLAIR A. NICHOLAS (Bar No. 178428)
blairn blMllaw.c
3 LIZA E LINar No. 174663)
(elizabethlblb law.com)
4 NIKI L. M NDOZA (Bar No. 214646)
nikim Mplaw.coV
5 ENJA GALDON (Bar No. 211114)
benMlblbqaw.com)
6 AIA.^, L (Bar No. 234470)
eok blbgaw.com)
7 M81 &1g1.h- Bluff Drive, Suite 300
San Dlego, CA 92130
8 Tel: 858 793-0070
Fax: ^858^ 793-0323
9 -and-
SALVATO RE J. GRAZI ANO
10 Ls )
AUREN Tb M 1 MILLEN
11^1aurentngb1bgjaw.com)
285 Avenue of the Americas
12 New York, NY 10019
Tel: (212) 554-1400
13 Fax: (212) 554-1444
14 Lead Counsel for Lead Plaintiff New
York State Teachers' Retirement System
15

16

17 UNITED STATES DISTRICT COURT


18 CENTRAL DISTRICT OF CALIFORNIA
19
IN RE NEW CENTURY Case No. 2:07-cv-00931-DDP (FMOx)
20 (Lead Case)
21
[PROPOSED] ORDER
22 PRELIMINARILY APPROVING
SETTLEMENTS AND
23 PROVIDING FOR NOTICE
24 EXHIBIT A

25 Judge: Hon. Dean D. Pregerson


26

27

28
[PROPOSED] ORDER PRELIM. APPROVING
SETTLEMENTS AND PROVIDING FOR NOTICE
Case No. 2:07-ev-00931-DDP (FMOx)

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1 WHEREAS, Lead Plaintiff New York State Teachers' Retirement System


2 ("Lead Plaintiff'), and Plaintiffs Carl Larson and Charles Hooten, on behalf of
3 themselves and all others similarly situated (collectively with Lead Plaintiff,
4 "Plaintiffs") and the Individual Defendants,' the Underwriter Defendants, 2 and
5 KPMG LLP ("KPMG") (collectively "Defendants") (collectively, with
6 Defendants, the "Parties"), have reached agreements to settle the above-captioned
7 litigation (the "Consolidated Action"), and Plaintiffs have applied to the Court
8 pursuant to Rule 23(e) of the Federal Rules of Civil Procedure for an order
9 preliminarily approving the Settlements in accordance with the Stipulations of
10 Settlement, 3 which, together with the exhibits annexed thereto, set forth the terms
11 and conditions for the proposed Settlements regarding the Consolidated Action,
12
13 I
"Individual Defendants" or "Class Individual Defendants" means Robert K.
14 Cole, Brad A. Morrice, Estate of Edward Gotschall, Patti M. Dodge, Fredric J.
15 Forster, Michael M. Sachs, Harold A. Black, Donald E. Lange, Terrence P.
Sandvilc, Richard A. Zona, Marilyn A. Alexander, David Einhorn, and William J.
16 Popejoy.
17 2 "Underwriter Defendants" means Bear, Stearns & Co. Inc., Deutsche Bank
18 Securities Inc., Piper Jaffray & Co., Stifel, Nicolaus & Co., Inc., JMP Securities
LLC, Roth Capital Partners, Morgan Stanley & Co., Inc., and Jeffries & Co., Inc.
19 3 The terms of the proposed settlement with the Underwriter Defendants is set
20 forth in the Stipulation Of Settlement Between Plaintiffs And The Underwriter
Defendants (the "Underwriter Stipulation" or the "Underwriter Settlement"); the
21 terms of the proposed settlement with KPMG is set forth in the Stipulation Of
22 Settlement Between Plaintiffs And KPMG LLP (the "KPMG Stipulation" or
23 "KPMG Settlement"); and the proposed settlement with the Individual Defendants
is set forth in the Stipulation Of Global Settlement With New Century Officers
24 And Directors (the "Global Officer And Director Settlement" or "Global Officer
25 And Director Stipulation"). The Global Officer And Director Stipulation contains
proposed settlements in this Consolidated Action, and related Trustee Litigation
26 and Kodiak Litigation (as defined in the Global Officer And Director Stipulation),
27 The Global Officer And Director Stipulation, the Underwriter Stipulation and the
KPMG Stipulation are referred to collectively as the "Stipulations," "Stipulations
28 of Settlement," or the "Settlements."
[PROPOSED] ORDER PRELIM. APPROVING
4- SETTLEMENTS AND PROVIDING FOR NOTICE
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1 and for dismissal of the Consolidated Action with prejudice as against all of the
2 Defendants and their related parties, upon the terms and conditions set forth
3 therein; and the Court having read and considered the Stipulations and the exhibits
4 annexed thereto;
5 NOW, THEREFORE, IT IS HEREBY ORDERED:
6 1. This order (the "Notice Order" or "Preliminary Approval Order")
7 hereby incorporates by reference the definitions in the Stipulations unless
8 otherwise indicated, and all terms with initial capitalization not otherwise defined
9 herein shall have the same meanings as set forth in the Stipulations. Any
10 inconsistencies between the Stipulations and the Notice of Pendency of Class
11 Action and Proposed Settlements, Settlement Fairness Hearing, and Motion for
12 Attorneys' Fees and Reimbursement of Litigation Expenses ("Notice") will be
13 controlled by the language of the Stipulations.
E

14 2. The Court hereby preliminarily approves the Settlements as being fair,


15 reasonable and adequate to the Class, pending a final hearing on the Settlements.
16 CLASS CERTIFICATION
17 3. The Court hereby certifies, pursuant to Rules 23(a) and 23(b)(3) of the
18 Federal Rules of Civil Procedure, a Class defined as follows:
19 all persons and entities who purchased or otherwise acquired New
Century common stock, New Century Series A Preferred stock, New
20 Century Series B Preferred Stock, and/or New Century call options
and/or who sold New Century put options, during the time period
21 from May 5, 2005, through and including March 13, 2007, either in
the Offerings, pursuant to a registration statement, or in the market,
22 and who, upon disclosure of certain facts alleged in the Complaint,
were injured thereby. Excluded from the Class are (a) Defendants; b
23 members of the immediate families of the Individual Defendants,, c^
the subsidiaries and affiliates of Defendants; (d) any person or entity
24 who was a partner, executive officer, director or controllinperson of
New Cen (including any of its subsidiaries or affiliates or of any
25 Defendant; e) any entity in which any Defendant has a controlling
interest; and (f) the legal representatives heirs, successors and assigns
26 of any such excluded party. Also excluded from the Class are any
persons who exclude t-Iemselves by filing a request for exclusion In
27 accordance with the requirements set forth In the Notice.
28
[PROPOSED] ORDER PRELIM. APPROVING
-2- SETTLEMENTS AND PROVIDING FOR NOTICE
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1 4. The Court finds that the prerequisites for a class action under Rules
2 23(a) and (b)(3) of the Federal Rules of Civil Procedure have been satisfied in that:
3 (a) the number of Class Members is so numerous that joinder of all members
4 thereof is impracticable; (b) there are questions of law and fact common to the
5 Class; (c) the claims of Lead Plaintiff New York State Teachers' Retirement
6 System ("NYSTRS") and Plaintiffs Carl Larson and Charles Hooten are typical of
7 the claims of the Class they seek to represent; (d) Plaintiffs have fairly and
8 adequately represented the interests of the Class; (e) the questions of law and fact
9 common to the members of the Class predominate over any questions affecting E

10 only individual members of the Class; and (f) a class action is superior to other
11 available methods for the fair and efficient adjudication of the controversy.
12 5. Pursuant to Rule 23 of the Federal Rules of Civil Procedure, Plaintiffs
13 are certified as Class Representatives and Lead Counsel Bernstein Litowitz Berger
14 & Grossmann LLP is certified as Class Counsel.
15 6. The Court appoints the firm of Analytics Incorporated ("Claims
16 Administrator") to supervise and administer the notice procedure as well as the
17 processing of claims as more fully set forth below:
18 a. Within five (5) business days after entry of this Order, the
19 Claims Administrator shall cause a copy of the Notice and the Proof of Claim and
20 Release (the "Claim Form"), annexed hereto respectively as Exhibits 1 and 2, to be
21 mailed by first-class mail, postage prepaid, to all members of the Class at the
22 address of each such Class Member as set forth in the records of New Century or
23 its transfer agent, or who are identified by further reasonable efforts (the "Notice
24 Date"). Lead Counsel shall, at or before the Settlement Hearing, file with the
25 Court proof of mailing of the Notice and Claim Form; and
26 b. A summary notice ("Summary Notice"), annexed hereto as
27 Exhibit 3, shall be published once each in the national edition of The Wall Street
28 Journal and over the PR Newswire within five (5) business days of the mailing of
[PROPOSED] ORDER PRELIM. APPROVING
-3- SETTLEMENTS AND PROVIDING FOR NOTICE
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1 the Notice. Lead Counsel shall, at or before the Settlement Hearing, file with the
2 Court proof of publication of the Summary Notice.
3 7. The Court approves the form of Notice and Summary Notice
4 (together, the "Notices") and Claim Form, and finds that the procedures established
5 for publication, mailing and distribution of such Notices substantially in the
6 manner and form set forth in paragraph 6 of this Order meet the requirements of
7 Rule 23 of the Federal Rules of Civil Procedure, the Private Securities Litigation
8 Reform Act of 1995, and due process, and constitute the best notice practicable
9 under the circumstances.
10 8. For the purpose of identifying and providing notice to the Class, the
11 Trustee and the Underwriter Defendants shall provide to the Claims Administrator
12 the information as agreed to in the Global Officer And Director Stipulation and the
13 Underwriter Stipulation, respectively.
14 9. Nominees who purchased or otherwise acquired New Century stock
15 for beneficial owners who are Class Members are directed to: (a) request within
16 fourteen (14) days of receipt of the Notice additional copies of the Notice and the
17 Claim Form from the Claims Administrator for such beneficial owners; or (b) send
18 a list of the names and addresses of such beneficial owners to the Claims
19 Administrator within fourteen (14) days after receipt of the Notice. If a nominee
20 elects to send the Notice to beneficial owners, such nominee is directed to mail the
21 Notice within fourteen (14) days of receipt of the copies of the Notice from the
22 Claims Administrator, and upon such mailing, the nominee shall send a statement
23 to the Claims Administrator confirming that the mailing was made as directed, and
24 the nominee shall retain the list of names and addresses for use in connection with
25 any possible future notice to the Class. Upon full compliance with this Preliminary
26 Approval Order, including the timely mailing of Notice to beneficial owners, such
27 nominees may seek reimbursement of their reasonable expenses actually incurred
28 in complying with this Preliminary Approval Order by providing the Claims
[PROPOSED] ORDER PRELIM. APPROVING
-4- SETTLEMENTS AND PROVIDING FOR NOTICE
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#:10907

1 Administrator with proper documentation supporting the expenses for which


2 reimbursement is sought and reflecting compliance with these instructions,
3 including timely mailing of the Notice, if the nominee elected or elects to do so.
4 Such properly documented expenses incurred by nominees in compliance with the
5 terms of this Preliminary Approval Order shall be paid from the Settlement Fund.
6 HEARING: RIGHT TO BE HEARD
7 10. There shall be a hearing on [November 8, 2010, or November 15,
8 2010] [100 days from filing of stipulations], 2010, at 10:00 a.m. (the "Settlement
9 Hearing") at which time the Court shall address the fairness, reasonableness and
10 adequacy of the Settlements, the fairness and reasonableness of the Plan of
11 Allocation, and Lead Counsel's application for attorneys' fees and payment of
12 Litigation Expenses. The Settlement Hearing shall be held before this Court at the
13 United States District Court for the Central District of California, 312 North Spring
14 Street, Courtroom 3, 2nd Floor, Los Angeles, California 90012.
15 11. Papers in support of the Settlements, the Plan of Allocation, and Lead
16 Counsel's application for attorneys' fees and payment of Litigation Expenses shall
17 be filed on or before twenty-eight (28) days prior to the Settlement Hearing.
18 12. Any member of the Class may appear at the Settlement Hearing and
19 show cause why the proposed Settlements embodied in the Stipulations should or
20 should not be approved as fair, reasonable and adequate, and/or to present
21 opposition to the Plan of Allocation or to the application of Lead Counsel for
22 attorneys' fees and payment of Litigation Expenses. However, no Class Member
23 shall be heard or entitled to contest the approval of the terms and conditions of the
24 Settlements, or the terms of the Plan of Allocation or the application by Lead
25 Counsel for an award of attorneys' fees and payment of Litigation Expenses unless
26 that Class Member (1) has served written objections, including the basis therefor, as
27 well as copies of any papers (including proof of all purchases or acquisitions of
28 New Century stock or options during the Class Period) and/or briefs in support of
[PROPOSED] ORDER PRELIM. APPROVING
-5- SETTLEMENTS AND PROVIDING FOR NOTICE
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1 his, her or its position upon the following counsel such that it is received on or [
2 before twenty-one (21) days prior to the Settlement Hearing: Salvatore J.
3 Graziano, Esq., Bernstein Litowitz Berger & Grossmann LLP, 1285 Avenue of the
r
4 Americas, New York, NY 10019; Kathleen M. McDowell, Esq., Munger, Tolles & f
5 Olson, 355 South Grand Avenue, 35th Floor, Los Angeles, CA 90071-1560; John
6 S. Durrant, Paul, Hastings, Janofsky & Walker LLP, 515 South Flower Street, 25th
7 Floor, Los Angeles, CA 90071; and Michael L. Rugen, Sidley Austin LLP, 555
8 California St., Suite 2000, San Francisco, CA 94104-1715; and (ii) filed said
9 objections, papers and briefs with the Clerk of the United States District Court for
10 the Central District of California on or before twenty-one (21) days before the 3
11 Settlement Hearing. Any Class Member who does not make his, her or its
12 objection in the manner provided for herein shall be deemed to have waived such
13 objection and shall forever be foreclosed from making any objection to the fairness
14 or adequacy of the Settlements as incorporated in the Stipulations, to the Plan of
15 Allocation or to the application by Lead Counsel for an award of attorneys' fees
16 and payment of Litigation Expenses unless otherwise ordered by the Court. The
17 manner in which a notice of objection should be prepared, filed and delivered shall
18 be stated in the Notice.
19 13. If approved, all Class Members will be bound by the proposed
20 Settlements provided for in the Stipulations, and by any judgment or determination
21 of the Court affecting Class Members, regardless of whether or not a Class
22 Member submits a Claim Fonn.
23 14. Any member of the Class may enter an appearance in the
24 Consolidated Action, at their own expense, individually or through counsel of their
25 own choice. If they do not enter an appearance, they will be represented by Lead
26 Counsel.
27 15. The Court reserves the right to adjourn or continue the Settlement
28 Hearing, or any adjournment or continuance thereof, without any further notice to
[PROPOSED] ORDER PRELIM. APPROVING
-6- SETTLEMENTS AND PROVIDING FOR NOTICE
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1 Class Members and to approve the Stipulations and/or Plan of Allocation with
2 modification and without further notice to Class Members.
3 CLAIMS PROCESS
4 16. In order to be entitled to participate in the Settlements, a Class
5 Member must complete and submit a Claim Form in accordance with the
6 instructions contained therein and/or in the Notice. To be valid and accepted,
7 Claim Forms submitted in connection with the Settlements must be postmarked no
8 later than 120 days after the Notice date (unless by Order of the Court, late-filed
9 Claim Forms are accepted).
10 17. Any Class Member who does not timely submit a valid Claim Form
11 shall not be entitled to share in the Settlement Fund, unless otherwise ordered by
12 the Court, but nonetheless shall be barred and enjoined from asserting any of the
13 settled claims and shall be bound by any judgment or determination of the Court
14 affecting the Class Members.
15 18. As set forth in the Stipulations, Defendants and their related parties
16 shall have no responsibility whatsoever for the administration of the Settlements or
i
17 the disbursement of the Net Settlement Fund and shall not be permitted to review,
18 contest or object to any Claim Form or any decision of the Claims Administrator or
19 Lead Counsel with respect to accepting or rejecting any Claim Form or Claim for
20 payment by a Class Member.
21 REQUEST FOR EXCLUSION FROM THE CLASS
22 19. Any requests for exclusion must be submitted such that they are
23 received no later than twenty-one (21) days before the date of the Settlement
24 Hearing. To be valid, each request for exclusion must (1) state the name and
25 address of the person or entity requesting exclusion; (ii) state that such person or
26 entity requests exclusion from the Class in In re New Century, 07-CV-00931-DDP
27 (FMOx); (iii) be signed by the person or entity requesting exclusion; (iv) provide a
28 telephone number for that person or entity; and (v) provide the date(s), price(s),
[PROPOSED] ORDER PRELIM. APPROVING
-7- SETTLEMENTS AND PROVIDING FOR NOTICE
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f
1 and number(s) of shares of all purchases, acquisitions, and sales of New Century
2 Securities during the Class Period. Requests for exclusion will not be valid if they f
3 do not include the information set forth above and are not received within the time
4 stated above, unless the Court otherwise determines. Copies of all timely requests I

5 for exclusion from the Class received by the Claims Administrator (or other person
6 designated to receive exclusion requests) shall be provided to Lead Counsel and
7 Individual Defendants' Counsel, counsel for the Insurance Carriers (as defined in
8 the Global Officer And Director Stipulation), counsel for KPMG, and counsel for
Q

9 the Underwriter Defendants, no later than fifteen (15) days prior to the Settlement
10 Hearing. All persons who submit valid and timely requests for exclusion in the
11 manner set forth in this paragraph shall have no rights under the Stipulations, shall
12 not share in the distribution of the Net Settlement Fund, and shall not be bound by
13 the Stipulations or any final judgment.
14 20. As set forth in the Stipulations, Defendants and their related parties
15 shall have no responsibility or liability whatsoever with respect to the Plan of
16 Allocation or Lead Counsel's application for an award of attorneys' fees and
17 payment of Litigation Expenses. The Plan of Allocation and Lead Counsel's
18 application for an award of attorneys' fees and payment of Litigation Expenses will
19 be considered separately from the fairness, reasonableness and adequacy of the
i
20 Settlements. At or after the Settlement Hearing, the Court will determine whether
21 Lead Counsel's proposed Plan of Allocation should be approved, and the amount
22 of attorneys' fees and Litigation Expenses to be awarded to Lead Counsel. Any
23 appeal from any orders relating to the Plan of Allocation or Lead Counsel's
24 application for an award of attorneys' fees and Litigation Expenses, or reversal or
25 modification thereof, shall not operate to terminate or cancel the Settlements, or
26 affect or delay the finality of the judgment to be entered pursuant to Rule 54(b) of
27 the Federal Rules of Civil Procedure approving the Settlements and the settlement
28 of the Consolidated Action set forth therein.
[PROPOSED] ORDER PRELIM. APPROVING
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1 21. Only Class Members and Lead Counsel shall have any right to any
2 portion of, or any rights in the distribution of, the settlement funds except as
3 provided in the Stipulations or otherwise ordered by the Court.
4 22. All funds held by the escrow agent selected by Lead Counsel to
5 maintain the escrow account(s) for the Settlements ("Escrow Agent") shall be
6 deemed and considered to be in custodia legis and shall remain subject to the
7 jurisdiction of the Court until such time as such funds shall be distributed pursuant
8 to the Stipulations and/or further Order of the Court.
9 23. Lead Counsel or its agents are authorized and directed to prepare any
10 tax returns required to be filed for the escrow account maintained to hold the
i
11 settlement funds pursuant to the terms of the Stipulations and to cause any Taxes
12 due and owing to be paid from the escrow account(s) without further Order of the
13 Court, and to otherwise perform all obligations with respect to Taxes and any
14 reportings or filings in respect thereof as contemplated by the Stipulations without
15 further Order of the Court.
16 24. As set forth in the Stipulations, Lead Counsel may pay from the
17 escrow account(s), without further approval from Defendants or further Order of
18 the Court, the costs, fees and expenses that are incurred by the Claims
19 Administrator and Lead Counsel in connection with (i) providing notice to the
20 Class; and (ii) administering the claims process in connection with the
21 Consolidated Action ("Notice and Administration Costs") actually incurred. Such
22 costs and expenses shall include, without limitation, the actual costs of publication,
23 printing and mailing the Notice, reimbursements to nominee owners for forwarding
24 the Notice to their beneficial owners, the administrative expenses incurred and fees
25 charged by the Claims Administrator in connection with providing Notice and
26 processing the submitted claims, and the fees, if any, of the Escrow Agent. In the
27 event that any of the Settlements are terminated pursuant to the terms of the
28
[PROPOSED] ORDER PRELIM. APPROVING
-9- SETTLEMENTS AND PROVIDING FOR NOTICE
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1 Stipulations, all Notice and Administration Costs paid or incurred, including any
2 related fees, shall not be returned or repaid as set forth in the Stipulations.
3 25. The Stipulations and Settlements set forth therein, whether or not
4 consummated, and any proceedings taken pursuant to the Stipulations and
5 Settlements:
6 a. shall not be offered or received against any of the Released
7 Parties4 as evidence of, or construed as, or deemed to be evidence of any
8 presumption, concession, or admission by any of the Released Parties with respect
9 to the truth of any fact alleged by Plaintiffs 5 or the validity of any claim that was or
10 could have been asserted against any of the Released Parties in the Consolidated
11 Action, the Trustee Litigation, or the Kodiak Litigation (as defined in the Global
12 Officer And Director Stipulation) or in any litigation, or of any liability,
13 negligence, fault, or other wrongdoing of any kind of any of the Released Parties;
14 b. shall not be offered or received against any of the Released
15 Parties as evidence of a presumption, concession or admission of any fault,
16 misrepresentation or omission with respect to any statement or written document
17 approved or made by any of the Released Parties, or against the Plaintiffs or any
18 Class Members as evidence of any infirmity in the claims of Plaintiffs or the other
19 Class Members;
20 C. shall not be offered or received against any of the Released
21 Parties, or against the Plaintiffs or any other Class Members, as evidence of a
22 presumption, concession or admission with respect to any liability, negligence,
23
24 4
Herein "Released Parties" includes: (1) the Released Officers And Directors (as
25 defined in the Global Officer And Director Stipulation); (ii) the Released Auditor
26 Parties (as defined in the KPMG Stipulation); and (iii) the Released Underwriter
Parties (as defined in the Underwriter Stipulation).
27 5 "Plaintiffs" in this paragraph 25 includes Class Plaintiffs, the Trustee, and Kodiak
28 (as defined in the Global Officer And Director Stipulation).
[PROPOSED] ORDER PRELIM. APPROVING
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1 fault or wrongdoing of any kind, or in any way referred to for any other reason as
2 against any of the Released Parties, in any other civil, criminal or administrative
3 action or proceeding, other than such proceedings as may be necessary to
4 effectuate the provisions of the Stipulations; provided, however, that if the
5 Stipulations are approved by the Court, Defendants, any other Released Party, or
6 any Class Member may refer to the Settlements and Stipulations to effectuate the
7 protection from liability granted them hereunder;
8 d. shall not be construed against any of the Released Parties,
9 Plaintiffs or any other Class Members as an admission, concession, or presumption
10 that the consideration to be given hereunder represents the amount which could be
11 or would have been recovered after trial;
12 e. shall not be construed against Plaintiffs or any other Class
13 Members as an admission, concession, or presumption that any of their claims are
14 without merit or that damages recoverable under the Consolidated Action, the
15 Trustee Litigation and the Kodiak Litigation would not have exceeded the amount
16 of the Settlements; and
17 f. shall not be construed as or received in evidence as an
18 admission, concession or presumption that class certification is appropriate in this
19 Consolidated Action, except for purposes of the Settlements.
20 26. Except as otherwise provided in the Stipulations, there shall be no
21 distribution of any of the net settlement fund for any of the Settlements to any
22 Class Member until a plan of allocation is finally approved and the Court issues a
23 Class Distribution Order.
24 \\
25 1\
26 \\
27
28
[PROPOSED] ORDER PRELIM. APPROVING
-11- SETTLEMENTS AND PROVIDING FOR NOTICE
Case No. 2:07-cv-00931-DDP (FMOx)
Case 2:07-cv-00931-DDP-FMO Document 484-4 Filed 07/30/10 Page 14 of 117 Page ID
#:10914 a

1 The Court retains jurisdiction of this Consolidated Action to consider all


2 further applications arising out of or connected with the proposed Settlements, and
3 as otherwise warranted.
4 IT IS SO ORDERED.
5 DATED:

6 THE HONORABLE DEAN D. PREGERSON


7 UNITED STATES DISTRICT COURT JUDGE
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
[PROPOSED] ORDER PRELIM. APPROVING
-12- SETTLEMENTS AND PROVIDING FOR NOTICE
Case No. 2:07-cv-0093 1 -DDP (FMOx)
Case 2:07-cv-00931-DDP-FMO Document 484-4 Filed 07/30/10 Page 15 of 117 Page ID
#:10915

EXHIBIT A-1 TO EXHIBIT A


TO GLOBAL OFFICER AND DIRECTOR STIPULATION

Case 2:07-cv-00931-DDP-FMO Document 484-4 Filed 07/30/10 Page 16 of 117 Page ID
#:10916

1 BERNSTEIN LITOWITZ BERGER


& GROSSMANN LLP
2 BLAIR A. NICHOLAS (Bar No. 178428)
airblbglaw.com)
3 UIZAWET H LIN (Bar No. 174663)
(elizabethlblbglaw.com) i
4 NIKI L. M NDOZA (Bar No. 214646) d
kim
5 UNJAU GALDON (Bar No. 211114)
((ben blbglaw.com
6 TAI- A. KELLA (Bar No. 234470)
blbglaw.com)
(takeokligh
7 2481 Bluff Drive, Suite 300
San Diego, CA 92130
8 Tel: (858) 793-0070
Fax: (858) 793-0323
9 -and-
SALVATORE J. GRAZIANO
10 (sgraziano@blbglaw.com
LAUREN A. MCMILLE
11^laurenm@blbglaw.com)
285 Avenue of the Americas
12 New York, NY 10019
Tel: 212 554-1400
13 Fax: (212) 554-1444

14 Lead Counsel for Lead Plaintiff New


York State Teachers' Retirement System
15

16

17 UNITED STATES DISTRICT COURT


18 CENTRAL DISTRICT OF CALIFORNIA
19 IN RE NEW CENTURY Case No. 2:07-cv-0093 1 -DDP (FMOx)
(Lead Case)
20

21 NOTICE OF PENDENCY OF
CLASS ACTION AND PROPOSED
22 SETTLEMENTS, SETTLEMENT
FAIRNESS HEARING AND
23 MOTION FOR ATTORNEYS'
FEES AND REIMBURSEMENT
24 OF LITIGATION EXPENSES
25
Judge: Hon. Dean D. Pregerson
26
27
I
28
I
NOTICE OF PENDENCY OF CLASS ACTION
Case No. 07-00931

' I

Case 2:07-cv-00931-DDP-FMO Document 484-4 Filed 07/30/10 Page 17 of 117 Page ID


#:10917
f
1 A Federal Court authorized this Notice. This is not a solicitation from a lawyer.
2 NOTICE OF PENDENCY OF CLASS ACTION: Please be advised that your rights
3 may be affected by a class action lawsuit pending in this Court (the
4 "Consolidated Action") if, during the period from May 5, 2005, through and
5 including March 13, 2007, you purchased or acquired Common Stock,
f

6 9.125% Series A Cumulative Redeemable Preferred Stock ("Series A


7 Preferred Stock"), 9.75% Series B Cumulative Redeemable Preferred Stock

8 ( "Series B Preferred Stock"), and/or Call Options and/or sold Put Options of Y

9 New Century Financial Corporation ("New Century" or the "Company").


10
11 NOTICE OF SETTLEMENTS: Please also be advised that the Court-appointed
12 Lead Plaintiff, New York State Teachers' Retirement System ("Lead
a
13 Plaintiff") and Plaintiffs Carl Larson and Charles Hooten (collectively
I
14 "Plaintiffs"), on behalf of the Class (as defined below), have reached three
15 proposed settlements ( "Settlements") of the Consolidated Action as follows: a
16 settlement with the Underwriter Defendants' in the amount of $15,000,000.00;
17 a settlement with KPMG LLP ("KPMG") in the amount of $44,750,000.00;
18 and a settlement with the Individual Defendants 2 in which the Class will

19 receive $65,077,088.00. 3 The total cash amount of the Class's recovery equals
20

21 ' "Underwriter Defendants" means Bear, Stearns & Co. Inc., Deutsche Bank
Securities Inc., Piper Jaffray & Co., Stifel, Nicolaus & Co., Inc., JMP Securities
22
LLC, Roth Capital Partners, Morgan Stanley & Co., Inc., and Jeffries & Co., Inc.
23 ("Underwriter Defendants").
2 "Individual Defendants" means Robert K. Cole, Brad A. Morrice, Estate of
24
Edward Gotschall, Patti M. Dodge, Fredric J. Forster, Michael M. Sachs, Harold
25
A. Black, Donald E. Lange, Terrence P. Sandvik, Richard A. Zona, Marilyn A.
26 Alexander, David Einhorn, and William J. Popejoy. "Defendants" means the
Underwriter Defendants, the Individual Defendants, and KPMG.
27
3 The $65,077,088.00 includes funds recovered by the Securities and Exchange
28 Commission in a civil enforcement action entitled SEC v. Mor rice et al., Case No.

-1- NOTICE OF PENDENCY OF CLASS ACTION


Case No. 07-0093 t

Case 2:07-cv-00931-DDP-FMO Document 484-4 Filed 07/30/10 Page 18 of 117 Page ID E


#:10918

1 $124,827,088.00. The terms of the Settlements are set forth in the ^I

2 Stipulations.4
3 This Notice explains important rights you may have, including your possible
4 receipt of cash from the Settlements. Your legal rights will be affected
5 whether or not you act. Please read this Notice carefully!
6

7 1. Description of the Consolidated Action and the Class: Lead


8 Plaintiff alleges that Defendants made false and misleading statements and/or
9 omitted material information to investors during the Class Period. Defendants
10 deny all allegations, and deny that investors were damaged as a result of any such e
11 alleged statements or omissions. This Notice relates to three proposed Settlements
12 regarding claims against the Individual Defendants, the Underwriter Defendants,

13 and KPMG (collectively "Defendants") in the Consolidated Action. The proposed


14 Settlements, if approved by the Court, will resolve all claims and potential claims
15 of Class Members against the Defendants and the other applicable Released Parties E_.
16 (as identified below), and will provide relief to all persons and entities who
17 purchased or otherwise acquired New Century Common Stock, Series A Preferred
1 8 Stock, Series B Preferred Stock (Series A Preferred Stock and Series B Preferred
19 Stock are collectively referred to as "Preferred Stock"), and/or New Century Call
20 Options and/or who sold New Century Put Options, during the time period from
21

22 09-1426-DDP, commenced on December 7, 2009, in the United States District


23 Court for the Central District of California (the "SEC Action").
4 All capitalized terms that are not defined herein shall have the meaning
24
ascribed to them in the Stipulations. "Stipulations" means the Stipulation Of
25 Global Settlement With New Century Officers And Directors (the "Global Officer
26 And Director Stipulation" or "Global Officer And Director Settlement");
Stipulation Of Settlement Between Plaintiffs And The Underwriter Defendants (the
27 "Underwriter Stipulation" or "Underwriter Settlement"); and Stipulation Of
Settlement Between Plaintiffs And KPMG LLP (the "KPMG Stipulation" or
28 "KPMG Settlement").
-2- NOTICE OF PENDENCY OF CLASS ACTION
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#:10919

1 May 5, 2005, through and including March 13, 2007, either in the Offerings,
i
2 pursuant to a registration statement, or in the market, and who, upon disclosure of
3 certain facts alleged in the Complaint, were injured thereby (the "Class"). (The
4 New Century Common Stock, Series A Preferred Stock, Series B Preferred Stock,
5 and/or New Century Call Options and New Century Put Options (as described

6 above) are referred to collectively as "New Century Securities.")


7 2. Statement of the Class's Recovery: Subject to Court approval, and
8 as described more fully below, Plaintiffs, on behalf of the Class, have agreed to
9 settle all claims related to the purchase of New Century Common Stock, Preferred
10 Stock and/or New Century Call Options and/or sales of New Century Put Options
11 during the Class Period that were or could have been asserted against Defendants

12 and other Released Parties in the Consolidated Action in exchange for total
13 settlement payments of $124,827,088.00 (the "Total Settlement Amount") in cash

14 to be deposited into an interest-bearing escrow account (the "Settlement Fund").


15 The Net Settlement Fund (the Settlement Fund less Taxes, notice and

16 administration costs, and attorneys' fees and Litigation Expenses awarded to Lead
17 Counsel) will be distributed in accordance with a plan of allocation (the "Plan of
18 Allocation") that will be approved by the Court and will determine how the Net
1 9 Settlement Fund shall be allocated to the members of the Class. The proposed Plan
20 of Allocation is included in this Notice. Assuming that all Class Members
21 participate in the Settlements, Lead Plaintiff's damages consultant estimates that

22 the average distribution per damaged share will be approximately $0.69 per share
23 of New Century Common Stock, approximately $2.08 per share of New Century

24 Preferred Stock, approximately $0.11 per Call Option, and approximately $0.25

25 per Put Option, before deduction of Court-approved fees, expenses and costs

26 described herein.

27 3. Statement of AveraLye Amount of Damages Per Share: The parties


9
28 do not agree on the average amount of damages per share that would be

-3- NOTICE OF PENDENCY OF CLASS ACTION


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#:10920

1 recoverable If Plaintiffs were to prevail. Defendants deny all liability and that any
2 shares or Options of New Century Securities were damaged as Plaintiffs have

3 alleged. The parties disagree on, among other things: (i) whether the statements

4 challenged in this Consolidated Action were materially false and misleading; (ii)
5 whether the price of New Century shares was inflated as the result of any allegedly

6 false or misleading public statements or omissions by Defendants; and (iii) whether


7 the decline in the price of New Century shares alleged in the Consolidated Action

8 resulted from the disclosure of any information that Plaintiffs allege was k

9 wrongfully withheld.
10 4. Statement of Attorneys' Fees and Expenses Sought: Lead Counsel
11 will apply to the Court for an award of attorneys' fees from the Settlement Fund in
12 an amount not to exceed 12% of the Total Settlement Amount with interest from

13 the date of funding at the same rate as earned by the Settlement Fund. In addition,

14 Lead Counsel also will apply for the reimbursement of Litigation Expenses paid or
15 incurred in connection with the prosecution and resolution of the Consolidated {
16 Action, in an amount not to exceed $4.5 million, plus interest from the date of

17 funding at the same rate as earned by the Settlement Fund. If the Court approves
18 Lead Counsel's fee and Litigation Expense application, Lead Plaintiff's damages

19 consultant estimates that the average cost per damaged share will not exceed
20 approximately $0.11 per share of Common Stock, approximately $0.32 per share

21 of Preferred Stock, approximately $0.02 per Call Option, and approximately $0.04

22 per Put Option.

23 5. Identification of Attorneys' Representatives: Lead Plaintiff and the


24 Class are being represented by Salvatore J. Graziano, Esq., of Bernstein Litowitz

25 Berger & Grossmann LLP, the Court-appointed Lead Counsel. Any questions

26 regarding the Settlements should be directed to Mr. Graziano at Bernstein Litowitz

27 Berger & Grossmann LLP, 1285 Avenue of the Americas, New York, NY 10019,

28 (866) 648-2524, blbg@blbglaw.com .

-4- NOTICE OF PENDENCY OF CLASS ACTION


Case No. 07-00931
Case 2:07-cv-00931-DDP-FMO Document 484-4 Filed 07/30/10 Page 21 of 117 Page ID
#:10921

2 YOUR LEGAL RIGHTS AND OPTIONS IN THE SETTLEMENTS:


3
SUBMIT A CLAIM FORM NO This is the only way to get a payment. If
4
LATER THAN [INSERT] you wish to obtain a payment as a Class
5 Member, you will need to file a Claim
6
Form (which is included with this Notice)
7
postmarlced no later than [INSERT].
8
EXCLUDE YOURSELF FROM Get no payment. This is the only option
9
THE CLASS BY SUBMITTING A that allows you to ever be part of any
10
WRITTEN REQUEST FOR other lawsuit against any of the defendants
11
EXCLUSION SO THAT IT IS or other released parties concerning the
12
RECEIVED NO LATER THAN claims that were, or could have been,
13
[INSERT]. asserted in this case. k

14
15 OBJECT TO THE Write to the Court and explain why you
SETTLEMENTS BY do not like the Settlements, the proposed
16
17 SUBMITTING WRITTEN Plan of Allocation, or the request for
OBJECTIONS SO THAT THEY attorneys' fees and reimbursement of
18
19 ARE RECEIVED NO LATER expenses. You cannot object to the
THAN [INSERT]. Settlements unless you are a Class
20
Member and do not exclude yourself.
21

22 GO TO THE HEARING ON Ask to speak in Court about the fairness of


23 [INSERT] AT [INSERT], AND the Settlements, the proposed Plan of
24 FILE A NOTICE OF INTENTION Allocation, or the request for attorneys'
25 TO APPEAR SO THAT IT IS fees and reimbursement of expenses.
26 RECEIVED NO LATER THAN
c

27 [INSERT].
I

28

-5- NOTICE OF PENDENCY OF CLASS ACTION


Case No. 07-00931

Case 2:07-cv-00931-DDP-FMO Document 484-4 Filed 07/30/10 Page 22 of 117 Page ID


#:10922

1 DO NOTHING Get no payment. Remain a Class


2 Member. Give up your rights.
3

4 WHAT THIS NOTICE CONTAINS


5

6 Why Did I Get This Notice? Page


7 What Is This Case About? What Has Happened So Far? Page
8
How Do I Know If I Am Affected By The Settlements? Page
9 What Are The Lead Plaintiff's Reasons For The Settlements? Page
10
What Might Happen If There Were No Settlements? Page
11
How Much Will My Payment Be? Page
12
What Rights Am I Giving Up By Agreeing To The Settlements? Page
13 ^
What Payment Are The Attorneys For The Class Seeking?
14
How Will The Lawyers Be Paid? Page
1.5
16 How Do I Participate In The Settlements? What Do I Need To Do? Page i

17 What If I Do Not Want To Be A Part Of The Settlements?


1 8 How Do I Exclude Myself? Page
19 When And Where Will The Court Decide Whether To Approve
20 The Settlements? Do I Have To Come To The Hearing? a

21 May I Speak At The Hearing If I Don't Like The Settlements? Page


g Shares On Someone Else's Behalf?
22 What If I Bought P a ge
g

23 Can I See The Court File? Whom Should I Contact If I Have Questions? Page
24 1
8

WHY DID I GET THIS NOTICE? i


25

26
6. This Notice is being sent to you pursuant to an Order of the United
27
States District Court for the Central District of California (the "Court") because
28
you or someone in your family may have purchased or otherwise acquired or sold i
-6- NOTICE OF PENDENCY OF CLASS ACTION
Case No. 07-00931

Case 2:07-cv-00931-DDP-FMO Document 484-4 Filed 07/30/10 Page 23 of 117 Page ID
#:10923
r
1 New Century Securities during the Class Period. The Court has directed us to send
2 you this Notice because, as a potential Class Member, you have a right to know

3 about your options before the Court rules on the proposed Settlements in this case.

4 Additionally, you have the right to understand how a class action lawsuit may
5 generally affect your legal rights. If the Court approves the Settlements, a claims

6 administrator selected by Lead Plaintiff and approved by the Court, will make
7 payments pursuant to the Settlements after any objections and appeals are resolved.
8 7. In a class action lawsuit, the Court selects one or more people, known
9 as class representatives, to sue on behalf of all people with similar claims,
10 commonly known as the class or the class members. In this Consolidated Action,

11 the Court has appointed New York State Teachers' Retirement System to serve as

12 "Lead Plaintiff' under a federal law governing lawsuits such as this one, and

13 approved Lead Plaintiff's selection of the law firm of Bernstein Litowitz Berger &

14 Grossmann LLP ("Lead Counsel") to serve as Lead Counsel in the Consolidated

15 Action. Lead Plaintiff New York State Teachers' Retirement System and named

16 plaintiffs Carl Larson and Charles Hooten are the Class Representatives. A class
17 action is a type of lawsuit in which the claims of a number of individuals are
18 resolved together, thus providing the class members with both consistency and

19 efficiency. Once the class is certified, the Court must resolve all issues on behalf
20 of the class members, except for any persons who choose to exclude themselves

21 from the class. (For more information on excluding yourself from the Class, please
22 read "What If I Do Not Want To Be A Part Of The Settlements? How Do 1

23 Exclude Myself?" located below.)


24 8. The Court in charge of this case is the United States District Court for
25 the Central District of California, and the case is known as In re New Century. The
26 Judge presiding over this case is the Honorable Dean D. Pregerson, United States

27 District Judge. The people who are suing are called plaintiffs, and those who are

28 being sued are called defendants. In this case, the plaintiff is referred to as the

-7- NOTICE OF PENDENCY OF CLASS ACTION


Case No. 07-00931

Case 2:07-cv-00931-DDP-FMO Document 484-4 Filed 07/30/10 Page 24 of 117 Page ID
#:10924

1 Lead Plaintiff, on behalf of itself and the Class, and Defendants are the Individual
2 Defendants, the Underwriter Defendants and KPMG New Century was not named

3 as a defendant because New Century has filed a petition for voluntary bankruptcy
4 and the Bankruptcy Code does not permit an action to proceed against a debtor

5 who has filed such a petition.


6 9. This Notice explains the lawsuit, the Settlements, your legal rights,
7 what benefits are available, who is eligible for them, and how to get them. The

8 purpose of this Notice is to inform you of this case, that it is a class action, how

9 you might be affected, and how to exclude yourself from the Class if you wish to
10 do so. It also is being sent to inform you of the terms of the proposed Settlements,
11 and of a hearing to be held by the Court to consider the fairness, reasonableness,
12 and adequacy of the proposed Settlements, the fairness and reasonableness of the

13 proposed Plan of Allocation, and the application by Lead Counsel for attorneys'

14 fees and reimbursement of Litigation Expenses (the "Settlement Hearing").

15 10. The Settlement Hearing will be held on [INSERT] at [INSERT],


16 before the Honorable Dean D. Pregerson, at the United States District Court for the

17 Central District of California, 312 North Spring Street, Courtroom 3, Los Angeles,
18 California 90012 to determine:

19 1. whether this Consolidated Action should be finally certified, for


20 settlement purposes only, as a class action under Rules 23(a)
21 and (b) of the Federal Rules of Civil Procedure on behalf of the
22 Class;
I
23 2. whether the proposed Settlements are fair, reasonable, and
24 adequate and should be approved by the Court;
25 3. whether the claims against defendants and the other released
26 parties should be dismissed with prejudice as set forth in the
27 Stipulations; i
i
28
I

-8- NOTICE OF PENDENCY OF CLASS ACTION


Case No. 07-00931
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#:10925

1 4. whether the proposed Plan of Allocation is fair and reasonable


2 and should be approved by the Court; and
3 5. whether Lead Counsel's request for an award of attorneys' fees
4 and reimbursement of Litigation Expenses should be approved
5 by the Court.
6 11. This Notice does not express any opinion by the Court concerning the
7 merits of any claim in the Consolidated Action, and the Court still has to decide
8 whether to approve the Settlements. If the Court approves the Settlements,

9 payments to Authorized Claimants will be made after any appeals are resolved, and
10 after the completion of all claims processing. Please be patient.
4
11
WHAT IS THIS CASE ABOUT? WHAT HAS HAPPENED SO FAR?
12

13 12. Beginning on or about February 8, 2007, securities class action


z
14 complaints were filed in the United States District Court for the Central District of
15 California and the actions were consolidated by Order dated June 26, 2007.

16 13. On April 2, 2007, New Century and other Debtors filed for
17 bankruptcy in the United States Bankruptcy Court for the District of Delaware
18 (`Bankruptcy Court") under Chapter 11 of Title 11 of the United States Code.

19 14. By Order dated June 26, 2007, the Court appointed the New York
20 State Teachers' Retirement System as Lead Plaintiff for the Consolidated Action I
21 and approved its selection of Bernstein Litowitz Berger & Grossmann LLP as Lead

22 Counsel for the Class.

23 15. On September 14, 2007, Plaintiffs filed their Consolidated Class


24 Action Complaint ("Consolidated Complaint") asserting claims against Defendants
25 under the Securities Exchange Act of 1934 ("Exchange Act") and the Securities
26 Act of 1933 ("Securities Act") on behalf of the Class.

27 16. Beginning on November 2, 2007, Defendants filed motions to dismiss


28 the Consolidated Complaint, which Plaintiffs opposed on December 14, 2007.

-9- NOTICE OF PENDENCY OF CLASS ACTION


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#:10926 ir

1 17. By Order dated January 31, 2008, the Court granted the motions to
2 dismiss with leave to amend the complaint.
3 18. On March 24, 2008, Plaintiffs filed their Amended Consolidated Class
4 Action Complaint ("Amended Complaint"), alleging claims against Defendants
5 pursuant to the Securities Act and the Exchange Act.
6 19. Pursuant to stipulation, on April 30, 2008, Plaintiffs filed their Second
7 Amended Consolidated Class Action Complaint (the "Complaint"), alleging claims
i
8 against Defendants pursuant to the Securities Act and the Exchange Act.

9 20. Beginning on June 2, 2008, Defendants filed motions to dismiss the


10 Complaint, which Plaintiffs opposed on July 7, 2008.

11 21. Following a hearing, by Order dated December 3, 2008, the Court


12 substantially denied Defendants' motions to dismiss.

13 22. Beginning on January 26, 2009, Defendants answered the Complaint.


14 23. The Parties began discovery in or about April 2009, including filing
15 multiple motions to compel and motions for protective order, and serving

16 discovery requests and responses, and producing voluminous documents.


17 24. On January 13, 2010, Defendant KPMG filed a motion for summary
18 judgment, which Plaintiffs opposed on March 15, 2010.

19 25. The Parties have participated in mediation sessions and additional


20 discussions before the Honorable Daniel Weinstein, following which the Parties

21 were able to reach agreements in principle to settle this Consolidated Action on the

22 terms set forth herein. In connection with the settlement of the Consolidated

23 Action, Defendants and other persons also reached agreements to settle the action

24 entitled Kodiak Warehouse LLC, et al. a Brad A. Morrice, et al. (Case No. 08-
25 1265-DDP-FMO) commenced on November 7, 2008, in the United States District

26 Court for the Central District of California (the "Kodiak Litigation") and the

27 adversary proceeding entitled The New Century Liquidating Trust and Reorganized
28 New Century Warehouse Corp. by and through Alan M. Jacobs, Liquidating
-10- NOTICE OF PENDENCY OF CLASS ACTION
Case No. 07-00931

Case 2:07-cv-00931-DDP-FMO Document 484-4 Filed 07/30/10 Page 27 of 117 Page ID


#:10927 N'

1 Trustee and Plan Administrator.vRobert ^ re Neww Century TRS


be K. Co le et al. In
2 Holdings, Inc.) (Adv. Proc. No. 09-50882 (KJC)) commenced on April 1, 2009 in
3 the Bankruptcy Court (the "Trustee Litigation"), and the SEC Action.
4 26. On [INSERT], the Court preliminarily approved the Settlements,
5 authorized this Notice to be sent to potential Class Members, and scheduled the
6 Settlement Hearing to consider whether to grant final approval to the Settlements.
7
8
HOW DO I KNOW IF I AM AFFECTED BY THE SETTLEMENTS?
9
10 27. If you are a member of the Class, you are subject to the Settlements
11 unless you timely request to be excluded. The Class consists of all persons and
12 entities who purchased or otherwise acquired New Century Common Stock, New
13 Century Series A Preferred Stock, New Century Series B Preferred Stock, and/or
14i
New Century Call Options and/or who sold New Century Put Options, during the
15 time period from May 5, 2005, through and including March 13, 2007, either in the

16 Offerings, pursuant to a registration statement, or in the market, and who, upon I

17 disclosure of certain facts alleged in the Complaint, were injured thereby.


18 Excluded from the Class are (a) Defendants; (b) members of the immediate
19 families of the Individual Defendants; (c) the subsidiaries and affiliates of
20 Defendants; (d) any person or entity who was a partner, executive officer, director
21 or controlling person of New Century (including any of its subsidiaries or
22 affiliates) or of any Defendant; (e) any entity in which any Defendant has a
23 controlling interest; and (f) the legal representatives, heirs, successors and assigns
24 of any such excluded party. The Class also does not include those persons and
25 entities who timely request exclusion from the Class pursuant to this Notice (see
26 "What If I Do Not Want To Participate In The Class And The Settlements? How
27 Do I Exclude Myself?," below).
28

-11- NOTICE OF PENDENCY OF CLASS ACTION


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#:10928

1 RECEIPT OF THIS NOTICE DOES NOT NECESSARILY MEAN THAT C

2 YOU ARE A CLASS MEMBER OR THAT YOU ARE ENTITLED TO


3 RECEIVE PROCEEDS FROM THE SETTLEMENTS. IF YOU WISH TO
4 BE ELIGIBLE TO PARTICIPATE IN THE SETTLEMENTS, YOU MUST
5 SUBMIT THE ENCLOSED CLAIM FORM POSTMARKED NO LATER
6 THAN [INSERT].
7 I

WHAT ARE THE LEAD PLAINTIFF'S REASONS FOR THE SETTLEMENTS?


8
9 28. Lead Plaintiff and Lead Counsel believe that the claims asserted
10 against Defendants have merit. Lead Plaintiff and Lead Counsel recognize,

11 however, the expense and length of continued proceedings necessary to pursue

12 their claims against Defendants through trial and appeals, as well as the difficulties

13 in establishing liability for allegations of fraud. Lead Plaintiff and Lead Counsel

14 have taken into account the possibility that the claims asserted in the Complaint

15 might have been dismissed at a later stage, such as in response to motions for
16 summary judgment, and have considered issues that would have been decided by a

17 jury in the event of a trial of the Consolidated Action, including whether

18 Defendants acted with an intent to mislead investors, whether the alleged


19 misrepresentations or omissions were material to investors, whether all of the Class
20 Members' losses were caused by the alleged misrepresentations or omissions, and

21 the amount of damages. Lead Plaintiff and Lead Counsel have considered the

22 uncertain outcome and trial and appellate risk in complex lawsuits like this one.

23 Lead Plaintiff also considered the available funds to satisfy any verdict at trial

24 given the expense and length of continued proceedings necessary to reach a


25 successful resolution at trial and on appeal.

26 29. In light of the amount of the Settlements and the immediacy of j


1

27 recovery to the Class, Lead Plaintiff and Lead Counsel believe that the proposed

28 Settlements are fair, reasonable and adequate, and in the best interests of the Class.
-12- NOTICE OF PENDENCY OF CLASS ACTION
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#:10929

1 Lead Plaintiff and Lead Counsel believe that the Settlements provide a substantial
Ii

2 benefit now, namely $124,827,088.00 in cash (less the various deductions

3 described in this Notice), as compared to the risk that the claims in the Complaint

4 would produce a similar, smaller, or no recovery after summary judgment, trial and

5 appeals, possibly years in the future.

6 30. Defendants have denied the claims asserted against them in the
7 Complaint and deny having engaged in any wrongdoing or violation of law of any
8 kind whatsoever. Defendants have agreed to the Settlements solely to eliminate the

9 burden and expense of continued litigation. Accordingly, the Settlements may not
10 be construed as an admission of Defendants' wrongdoing.
11
WHAT MIGHT HAPPEN IF THERE WERE NO SETTLEMENTS?
12

13 31. If there were no Settlements and Lead Plaintiff failed to establish any
14 essential legal or factual element of its claims, neither Lead Plaintiff nor the other

15 members of the Class would recover anything from Defendants. Also, if

16 Defendants were successful in proving any of their defenses, the members of the
17 Class likely would recover substantially less than the amount provided in the
18 Settlements, or nothing at all.

19
HOW MUCH WILL MY PAYMENT BE?
20
21 THE PROPOSED PLAN OF ALLOCATION: GENERAL PROVISIONS
22 32. Pursuant to the respective Stipulations, the Individual Defendants
23 have agreed to pay or cause to be paid collectively $65,077,088.00; the

24 Underwriter Defendants have agreed to collectively pay $15,000,000.00; and

25 KPMG has agreed to pay $44,750,000.00. Collectively, Defendants have agreed to


26 pay a total amount of $124,827,088.00 in cash.

27 33. After approval of the Settlements by the Court, and upon satisfaction
28 of the other conditions to the Settlements, and upon issuance of a Class

-13- NOTICE OF PENDENCY OF CLASS ACTION


Case No, 07-00931
Case 2:07-cv-00931-DDP-FMO Document 484-4 Filed 07/30/10 Page 30 of 117 Page ID
#:10930

1 Distribution Order, the Net Settlement Fund will be distributed to Authorized j

2 Claimants in accordance with the Plan of Allocation.


3 34. The Settlement Fund will be distributed as follows: j
4 (i) to pay all federal, state, and local Taxes on any income earned
5 by the Settlement Fund and to pay the reasonable costs incurred
6 in connection with determining the amount of, and paying,
7 Taxes owed by the Settlement Fund (including reasonable
8 expenses of tax attorneys and accountants);
9 (ii) to pay costs and expenses in connection with providing Notice
10 to Class Members and administering the Settlements on behalf EF
11 of Class Members;
12 (iii) to pay attorneys' fees, with interest on such amount, to the
13 extent allowed by the Court pursuant to Lead Counsel'sI
14 application;
15 (iv) to pay Litigation Expenses incurred in commencing and
16 prosecuting the Consolidated Action, with interest on such
1 7 money, to the extent allowed by the Court pursuant to Lead
18 Counsel's application; and
19 (v) to compensate Authorized Claimants with the balance of the
20 Net Settlement Fund in accordance with the Plan of Allocation,
21 subject
J to an Order of the Court approving
pP g the Settlements and
22 the Plan of Allocation (or such other allocation plan as the Court
23 may approve), and subject to such Order becoming Final
24 (meaning that the time for appeal or appellate review of the Order
25 granting final approval has expired, or, if the Order is appealed,
26 that the appeal is either decided without causing a material
27 change in the Order or is upheld on appeal and is no longer
28 subject to appellate review).
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#:10931

1 35. Each person wishing to participate in the distribution must timely


2 submit a valid Claim Form establishing membership in the Class, and including all

3 required documentation, postmarked no later than to the


4 address set. forth in the Claim Form that accompanies this Notice. Unless the Court pl
5 otherwise orders, any Class Member who fails to submit a Claim Form postmarked no
t

6 later than shall be forever barred from receiving payments pursuant to


7 the Settlements set forth in the Stipulations but will in all other respects remain a
8 Class Member and be subject to the provisions of the Stipulations, including the
9 terms of any Judgment entered and releases given.
10 36. Payment pursuant to the Plan of Allocation approved by the Court
11 shall be conclusive against all Authorized Claimants. No person shall have any
12 claim against Plaintiffs, Lead Counsel, the Claims Administrator or other agent
13 designated by Lead Counsel arising from distributions made substantially in

14 accordance with the Stipulations, the Plan of Allocation, or further orders of the

15 Court. 'Plaintiffs, Defendants, their respective counsel, and all other Released

16 Parties shall have no responsibility or liability whatsoever for the investment or g


17 distribution of the Settlement Fund, the Net Settlement Fund, the Plan of

18 Allocation, the determination, administration, calculation, or payment of any claim


19 or nonperformance of the Claims Administrator, the payment or withholding of
20 Taxes owed by the Settlement Fund, or any losses incurred in connection
21 therewith, except as otherwise provided in the Stipulations.
22 37. The objective of the Plan of Allocation is to equitably distribute the
23 proceeds of the Settlements to those Class Members who suffered economic losses
24 as a result of the alleged wrongful conduct, as opposed to losses caused by market

25 and industry factors or Company-specific factors not related to the alleged wrongful

26 conduct. The Plan of Allocation reflects Lead Plaintiff's damages consultant's


27 analysis undertaken to that end, including a review of publicly available information
28 regarding New Century and analysis regarding the stock price movements.

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#:10932

1 38. The proposed Plan of Allocation provides for distribution of the Net r
2 Settlement Fund to Authorized Claimants as follows:
3 I. SUMMARY OF PLAN OF ALLOCATION

4 39. Each Person claiming to be a Class Member entitled to share in the


5 Net Settlement Fund ("Authorized Claimant") shall be required to submit a
6 separate Claim Form signed under penalty of perjury and supported by such
7 documents as specified in the Proof of Claim as are reasonably available to the
8 Authorized Claimant. Each Proof of Claim must separately set forth: (1) each

9 claimant's opening securities position in New Century Common Stock, Series A


10 Preferred Stock, Series B Preferred Stock, or Put/Call Options as of the close of the
11 market on May 4, 2005, the day before the first day of the Class Period; (ii) each

12 transaction, i.e., purchase, acquisition, sale, disposal, exercise, or expiration, made

13 during the Class Period in any such New Century Security; and (iii) each

14 claimant's ending securities position in New Century Common Stock, Series A

15 Preferred Stock, Series B Preferred Stock, or Put/Call Options, at the close of the

16 market on March 13, 2007, the last day of the Class Period, and, for Common
17 Stock and Preferred Stock, at the close of the market on June 10, 2007, in order to
18 see if claimant's Section 10(b) Recognized Loss Claims will be limited by

19 calculations relating to the 90-day look back rules of the Private Securities
20 Litigation Reform Act of 1995 ("PSLRA"). In addition, Claimants will be asked in

21 the Proof of Claim form to list sales of New Century Common

22 Stock and Preferred Stock made during the 90-day look back period of March 13,

23 2007, to June 10, 2007.5


24

25 5 Pursuant to Section 21(D)(e)(1) of the PSLRA, "in any private action arising

26
under this title in which the plaintiff seeks to establish damages by reference to the
market price of a security, the award of damages to the plaintiff shall not exceed
27 the difference between the purchase or sale price paid or received, as appropriate,
28 by the plaintiff for the subject security and the mean trading price of that security
during the 90-day period beginning on the date on which the information
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#:10933

1 40. All Proof of Claim forms must be postmarked or received by [DATE],


2 addressed as follows:
3 In re New Century Securities Litigation Settlement
4 c/o Analytics, Inc. Claims Administrator
P.O. Box 2004
5 Chanhassen, MN 55317-2004
6
41. Unless otherwise ordered by the Court, any Class Member who fails
7
to submit a properly completed and signed Proof of Claim within such period as
8
may be ordered by the Court shall be forever barred from receiving any payments
9
pursuant to the Stipulation, but will in all other respects be subject to the provisions
10
of the Stipulation and the final judgments entered by the Court.
11
42. The Net Settlement Fund shall be distributed to members of the Class
12
who submit acceptable Proofs of Claim. For purposes of the Plan of Allocation, the
13
Net Settlement Fund is divided into two components: the "Underwriter Allotment"
14
(composed of the settlement fund from the settlement with the Underwriter
15
Defendants net of Court-approved fees and expenses), and the "Individual-Auditor
16
Allotment" (composed of the settlement funds from the settlement with the
17
Individual Defendants and KPMG, net of Court-approved fees and expenses).
18
Only Class Members who purchased Series A Preferred Stock and/or Series B
19
Preferred Stock during the Class Period and were damaged thereby may be eligible
20
to receive distributions from the Underwriter Allotment based on those purchases.
21
All Class Members (including but not limited to those who purchased Series A
22
Preferred Stock and/or Series B Preferred Stock during the Class Period and were
23
damaged thereby) may be eligible to receive distributions from the Individual-
24

25
correcting the misstatement or omission that is the basis for the action is
26 disseminated." 15 U.S.C. §78u-4(e)(1). $0.87 was the average closing price of New
27
Century Common Stock during the 90-day period beginning on March 13, 2007,
and ending on June 10, 2007.
28

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#:10934

1 Auditor Allotment. Put another way, the Underwriter Allotment will be distributed
2 to only purchasers of Series A Preferred Stock and Series B Preferred Stock;
3 whereas the Individual-Auditor Allotment will be distributed to all Class Members
4 who submit valid Claim Forms, regardless of the type of New Century Security

5 purchased or sold. This is because claims against the Underwriter Defendants

6 were alleged in this Action only on behalf of purchasers of Series A Preferred


7 Stock and Series B Preferred Stock, and not on behalf of purchasers or sellers of
8 other Securities.

9 43. The Claims Administrator shall determine each Authorized Claimant's'


10 pro rata share of the Underwriter Allotment and the Individual-Auditor Allotment
11 separately established for each class of securities shown in Table 1 annexed hereto,
12 based upon each Authorized Claimant's "Recognized Loss Claim." The
13 Recognized Loss Claim formula is not intended to be an estimate of the amount
14 that a Class Member might have been able to recover after a trial; nor is it an

15 estimate of the amount that will be paid to Authorized Claimants pursuant to the
F_

16 Settlement. The Recognized Loss Claim formula is the basis upon which the

17 Underwriter Allotment and the Individual-Auditor Allotment will be

18 proportionately allocated to the Authorized Claimants.


19 44. The Recognized Loss for an Authorized Claimant's transactions will
20 be calculated by the Claims Administrator in consultation with Lead Counsel in
21 accordance with the provisions of this Plan of Allocation. Factors generally

22 considered in developing the Plan of Allocation, include, among others: (i) the time

23 period in which a New Century Security was purchased; (ii) whether a Security

24 was purchased or acquired on the open market, or as a result of some other type of

25 transaction, such as pursuant to a registration statement or prospectus, or by gift;


26 (iii) whether the Security was held until the end of the Class Period (March 13,

27 2007), or 90 days thereafter, or whether it was sold during the Class Period, and if
28 so, when it was sold; and (iv) the artificial inflation in the price of New Century

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#:10935
C

1 Securities at different times during the Class Period attributable to Defendants' i!

2 false and misleading statements as alleged in this case, and as calculated by Lead
3 Plaintiff's damages consultant. (Based on the opinions of this consultant, Lead
4 Counsel assumed, for purposes of determining the Recognized Loss, that there
5 were varied amounts of artificial inflation in prices of New Century Securities

6 during the Class Period, and based on the assumption that Plaintiffs could

7 adequately allege and prove liability for that entire period);


8 45. The Plan of Allocation generally measures the amount of loss that a
9 Class Member who submits an acceptable Proof of Claim can claim under the j
E
10 Settlements for the purpose of making pro rata allocations of the cash from the

11 Underwriter Allotment and the Individual-Auditor Allotment to Class Members for

12 their respective class of Securities. The Plan of Allocation is not a formal damage
a
13 analysis. The following proposed Plan of Allocation reflects Plaintiffs' allegations

14 that the prices of New Century Securities were artificially inflated during the Class

15 Period (May 5, 2005 — March 13, 2007) due to Defendants allegedly material

16 misrepresentations and/or omissions during the Class Period. Plaintiffs allege that

17 corrective disclosures affecting trading on February 8, 2007; March 5, 2007, and


18 March 13, 2007, removed artificial inflation from the prices of New Century

19 Securities.
20 46. The Plan of Allocation covers the following New Century Securities:
21 (1) Common Stock; (ii) Series A Preferred Stock; (iii) Series B Preferred Stock; and
22 (iv) Call and Put Options on Common Stock.

23 47. A New Century Security must be held through a corrective disclosure


24 in order to be eligible for a recovery in the Settlement; that is, a New Century

25 Security purchased or otherwise acquired during the first part of the Class Period,
26 from May 5, 2005 through February 7, 2007, must be held until or beyond

27 February 8, 2007, the first trading day after the first corrective disclosure.
28 Similarly, a New Century Security purchased or otherwise acquired on or after

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#:10936

1 February 8, 2007, and before or on March 2, 2007, must be held until March 5, I,

2 2007, the next trading day after the second corrective disclosure. Finally, a New
3 Century Security purchased or otherwise acquired on or after March 5, 2007, must
4 be held until March 13, 2007, the last day of the Class Period. If you did not hold
5 a New Century Security referred to above which was purchased during the three

6 different parts of the Class Period described above and below (see the artificial
7 inflation Tables annexed hereto) for both the New Century Common Stock and the
8 New Century Preferred Stock through at least one of the three corrective disclosure

9 dates indicated, the Recognized Loss per share is $0. The Recognized Loss for
10 these transactions will be calculated as zero because it has been determined that the
11 artificial inflation between each disclosure and arising from the circumstances
12 underlying the allegations of Plaintiffs' Complaint was constant.
r
13 II. ADDITIONAL CONSIDERATIONS IN
CALCULATION OF RECOGNIZED LOSS
14 CLAIMS FOR NEW CENTURY SECURITIES
15 48. A Recognized Loss will be calculated for each purchase or sale of
16 New Century Securities that is within the Class Period, listed in the Proof of Claim f

1 7 form, and for which adequate documentation is provided.


18 A. Guidelines Applicable to the
Calculations orAll Claims
19
49. In the event a Class Member has more than one purchase or sale of the
20 I
New Century Securities, all purchases and sales of each type of security shall be
21
matched on a First-In-First-Out ("FIFO") basis by type. Class Period sales will be
22
matched first against any New Century Securities held at the beginning of the
23
Class Period, and then against purchases in chronological order, beginning with the
24
earliest purchase made during the Class Period. Purchases and sales of New
25
Century Securities shall be deemed to have occurred on the "contract" or "trade"
26
date as opposed to the "settlement" or "payment" date. The receipt or grant by gift,
27
devise or operation of law of New Century Securities during the Class Period shall
28
not be deemed a purchase or sale of these New Century Securities for the
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#:10937

1 calculation of an Authorized Claimant's Recognized Loss Claim, nor shall it be


2 deemed an assignment of any claim relating to the purchase of such New Century

3 Securities unless specifically provided in the instrument of gift or assignment.


4 Similarly, the covering purchase of a short sale shall not be deemed a purchase or

5 sale of New Century Securities for the calculation of an Authorized Claimant's

6 Recognized Loss Claim,

7 50. Each Authorized Claimant shall be allocated a pro rata portion or


8 share of the Underwriter Allotment and/or Individual-Auditor Allotment based on s

9 his, her or its Recognized Loss Claim, as compared to the total Recognized Loss
10 Claims of all Authorized Claimants for their respective class of Securities. Each
11 Authorized Claimant shall be paid an amount determined by multiplying the total
12 in the Underwriter Allotment and/or Individual-Auditor Allotment for their class of

13 Securities by a fraction, the numerator of which shall be the Claimant's


14 Recognized Loss Claim and the denominator of which shall be the Total

15 Recognized Loss Claims of all Authorized Claimants for the included class of
16 securities. Each Authorized Claimant will receive a pro rata share of the

17 Underwriter Allotment and/or Individual-Auditor Allotment based on his, her or its


k
18 Recognized Loss Claim.

19 51. The amount of a Class Member's Recognized Loss as computed


20 above is not intended to be an estimate of a Class Member's damages, nor of what
21 a Class Member might have been able to recover at trial, and it is not an estimate

22 of the amount that will be paid pursuant to this Settlement. Instead, this

23 computation is only a method to weigh Class Members' claims against one another.

24 52. To the extent a Claimant had a gain from his, her or its transactions
25 during the Class Period with respect to New Century Securities specified above,
26 the value of their Recognized Loss Claim will be zero. Such claimants will, in any

27 event, be bound by the Settlements. You may wish to consider this when deciding

28 whether to opt-out of the Settlements.

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#:10938

1 53. For purposes of determining whether a Claimant had an overall


2 market gain with respect to his, her, or its Class Period purchases of an individual
3 New Century Security or suffered an overall market loss, the Claims Administrator
4 shall determine the difference between (i) the Total Purchase Amount paid for all
5 purchases of that individual New Century Security purchased or acquired during

6 the Class Period, (ii) any premiums received from the sale of Put Options, and (iii)
7 the sum of the Sales Proceeds received for all of that individual New Century

8 Security during the Class Period and the Holding Value ascribed to that security for

9 all Securities still held on June 10, 2010. The Holding Value shall be $0.87 per
10 share for Common Stock; $8.02 per share for Series A Preferred Stock; and $7.95
11 per share for Series B Preferred Stock. This difference will be deemed a

12 Claimant's market gain or loss on his, her, or its overall transactions in that
13 individual New Century Security during the Class Period. E
i
14 54. An Authorized Claimant's gains and losses on a particular New
15 Century Security purchased during the Class Period will be netted against each

16 other to determine the Authorized Claimant's net Recognized Loss Claim on that

17 particular security. In the case of New Century Common Stock and Put and Call

Is Options on that stock, gains and losses on both the stock and the Options will be
19 combined and thereafter netted against each other. However, in all other cases,
20 gains and losses will not be netted or aggregated across different eligible New
21 Century Securities. For example, an Authorized Claimant's Recognized Loss

22 Claim (as calculated under this Plan) on New Century Common Stock/Options will

23 not offset his, her or its Recognized Loss Claim (as calculated under this Plan) on

24 any issue of New Century Preferred Stock.

25 55. Class Members who do not submit acceptable Proofs of Claim will
26 not share in the settlement proceeds. Class Members who do not submit a request

27 for exclusion and do not submit an acceptable Proof of Claim will nevertheless be
28 bound by the Settlements and the judgments of the Court.

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#:10939

1 56. Distributions will be made to Authorized Claimants only after the


2 Court has finally approved the Settlements, the Effective Date has occurred and
3 after all claims have been processed. At that time, Lead Plaintiff will file a motion

4 for entry of a proposed Class Distribution Order which will, among other things,
f
5 approve of the distribution to Authorized Claimants of the Net Settlement Fund.
a
6 57. The Individual Defendants, the Underwriter Defendants, and KPMG j
'I
7 and their respective counsel, and all other Released Parties shall have no
8 responsibility for, or liability whatsoever, relating to distributions from the

9 Settlement Fund or the Underwriter Allotment or the Individual-Auditor Allotment,


10 or with respect to the Plan of Allocation, or the determination, administration,
11 calculation, or payment of any Proof of Claim, or non-performance of the Claims
12 Administrator, the payment or withholding of Taxes owed by a Settlement Fund, or

13 any losses incurred in connection therewith.


14 B. Computation Methodology Relating to
Recognized Losses for Common Stock
15 Purchases
16 58. For purposes of developing the Plan of Allocation, the damages
17 consultant calculated the amount of artificial inflation in the daily closing market

18 prices for New Century Common Stock during three different portions of the Class

19 Period. See the annexed Table 2. In computing artificial inflation, the damages
20 consultant considered price changes of New Century Common Stock in regard to
21 certain public announcements regarding New Century and adjusted those price
22 changes that were attributable to market forces unrelated to the alleged fraud.
23 59. As explained above, Common Stock purchases are not eligible for
24 distributions from the Underwriter Allotment, but may be eligible for distributions
25 from the Individual-Auditor Allotment.
26 C. Recognized Loss Calculations
27 60. Recognized Loss Claims will be calculated for the purposes of the
28 Settlement as follows:
i
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#:10940

1 1. Calculation of Recognized Loss for New


Century Common Stock Purchases
2
61. Calculation of Recognized Loss Claims for New Century Common
3
Stock shares shall be as follows:
4
62. For shares purchased on or between May 5, 2005, through February 7,
5
2007, the following claims for damages shall be allowed:
6
(a) For each share sold on or before February 7, 2007, no Recognized
Claims for damages shall be allowed;
g (b) For each share sold on or between February 8, 2007, and through March
13, 2007, the allowed damages shall be the inflation per share at the time of
9 purchase for the applicable date of purchase as set forth in Table 2, annexed
10 hereto, less the inflation per share at the time of sale as set forth in Table 2;
and
11

12 63. For shares purchased on or between February 8, 2007, through March


13 2 2007 the followingg claims for damages
g es shall be allowed:
14 (a) For each share sold on or before March 2, 2007, no Recognized Claims
for damages shall be allowed;
15 (b) For each share sold on or between March 5, 2007, and March 13, 2007,
16 the allowed damages shall be the inflation per share at the time of purchase
for the applicable date of purchase as set forth in Table 2, annexed hereto,
17
less the inflation per share at the time of sale as set forth in Table 2; and
18
64. For shares purchased on or between March 5, 2007, through March
19
12, 2007, the following claims for damages shall be allowed:
20
(a) For each share sold on or before March 12, 2007, no Recognized Claims
21
for damages shall be allowed;
22 (b) For each share sold on or after March 13, 2007, the allowed damages
shall be the inflation per share at the time of purchase for the applicable
23
date of purchase as set forth in Table 2, annexed hereto.
24
65. In addition to the annexed Table 2 relating to Section 10(b) New
25
Century Common Stock claims, the Recognized Loss Claims for damages for such
26
27 shares purchased during the Class Period shall be further limited (as provided for
under the PSLRA) to the smallest of the following:
28

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1 (a) the difference between the price paid and the price received (out-of-
2 pocket investment loss) if sold on or before June 10, 2007;
(b) the difference between the price paid (excluding all fees and
3 commissions) and the average closing price as set forth in Table 3
4 annexed hereto if sold between March 13, 2007, and June 10, 2007; and K
(c) the difference between the price per share paid and $0.87 per share if the 1
5 shares were sold after June 10, 2007, or were held until the current date.
6 2. Calculation of Recognized Loss
for New Century Series A Preferred Stock
7 Purchases
8 66. Calculation of Recognized Loss Claims for New Century Series A
F

9 Preferred Stock shares shall be as follows:

10 67. For shares purchased on or between May 5, 2005, through February 7,


i
11 2007, the following claims for damages shall be allowed:

12 (a) For each share sold on or before February 7, 2007, no Recognized Claims
for damages shall be allowed;
13
(b) For each share sold on or between February 8, 2007, and through March
14 13, 2007, the allowed damages shall be the inflation per share at the time
of purchase for the applicable date of purchase as set forth in Table 4,
15
annexed hereto, less the inflation per share at the time of sale as set forth
16 in Table 4; and
17
68. For shares purchased on or between February 8, 2007, through March
18 2, 2007, the following claims for damages shall be allowed:
19
(a) For each share sold on or before March 2, 2007, no Recognized Claims
20 for damages shall be allowed;
21
(b) For each share sold on or between March 5, 2007, and March 13, 2007,
the allowed damages shall be the inflation per share at the time of
22 purchase for the applicable date of purchase as set forth in Table 4,
23
annexed hereto, less the inflation per share at the time of sale as set forth
in Table 4; and
24

25 69. For shares purchased on or between March 5, 2007, through March

26 12, 2007, the following claims for damages shall be allowed:

27 (a) For each share sold on or before March 12, 2007, no Recognized Claims
for damages shall be allowed;
28

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#:10942

1 (b) For each share sold on or after March 13, 2007, the allowed damages
2 shall be the inflation per share at the time of purchase for the applicable
date of purchase as set forth in Table 4, annexed hereto.
3

4
70. The Recognized Loss Claims for damages for such Series A Preferred
5 Shares purchased during the Class Period shall be further limited (as provided for
6 under the PSLRA) to the smallest of the following:'
k,
(a) the difference between the price paid and the price received (out-of-pocket G

investment loss) if sold on or before June 10, 2007;


8 (b) the difference between the price paid (excluding all fees and commissions)
9 and the average closing price as set forth in Table 6 annexed hereto if sold
between March 13, 2007 and June 10, 2007; and
10 (c) the difference between the price per share paid and $8.02 per share if the
11 shares were sold after June 10, 2007, or were held until the current date.
3. Calculation of Recognized Loss
12 for New Century Series B Preferred Stock
Purchases
13

13
71. Calculation of Recognized Loss Claims for New Century Series B

15
Preferred Stock shares shall be as follows:

16
72. For shares purchased on or between May 5, 2005, through February 7,
17 2007, the following claims for damages shall be allowed:
18 (a) For each share sold on or before February 7, 2007, no Recognized
Claims for damages shall be allowed;
19 (b) For each share sold on or between February 8, 2007, and through
March 13, 2007, the allowed damages shall be the inflation per share at
20
the time of purchase for the applicable date of purchase as set forth in i
21 Table 5, annexed hereto, less the inflation per share at the time of sale
22
as set forth in Table 5; and

23 73. For shares purchased between February 8, 2007, through March 2,


24 2007, the following claims for damages shall be allowed:
25 (a) For each share sold on or before March 2, 2007, no Recognized Claims
26
for damages shall be allowed;
(b) For each share sold on or between March 5, 2007, and March 13, 2007,
27 the allowed damages shall be the inflation per share at the time of
28
purchase for the applicable date of purchase as set forth in Table 5,

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#:10943

1 annexed hereto, less the inflation per share at the time of sale as set
2 forth in Table 5; and

3 74. For shares purchased between March 5, 2007, through March 12,
4 2007, the following claims for damages shall be allowed:
5 (a) For each share sold on or before March 12, 2007, no Recognized
6 Claims for damages shall be allowed;
(b) For each share sold on or after March 13, 2007, the allowed damages
7 shall be the inflation per share at the time of purchase for the applicable
8 date of purchase as set forth in Table 5, annexed hereto.

9 75. The Recognized Loss Claims for damages for such Series B Preferred i
10 Shares purchased during the Class Period shall be further limited (as provided for

11 under the PSLRA) to the smallest of the following:

12 (a) the difference between the price paid and the price received (out-of-pocket
13 investment loss) if sold on or before June 10, 2007;
(b) the difference between the price paid (excluding all fees and commissions)
14 and the average closing price as set forth in Table 7 annexed hereto if sold
15 between March 13, 2007, and June 10, 2007; and
(c) the difference between the price per share paid and $7.95 per share if the
16 shares were sold after June 10, 2007, or were held until the current date.
17 4. Calculation of Recognized Loss for
New Century Call and Put Options
18
76. The Plan of Allocation covers the following New Century Call and
19
Put Options: New Century Call Options on Common Stock initially purchased or
20
otherwise acquired during the Class Period, on May 5, 2005, up to and including
21
March 13, 2007 ("New Century Call Options"), and New Century Put Options on
22
Common Stock written or purchased (covered) during the Class Period May 5,
23
2005, through and including March 13, 2007 ("New Century Put Options").
24
77. Artificial inflation and Recognized Losses as to New Century Call
25
Options and artificial deflation and Recognized Losses as to New Century Put
26
Options were computed in a manner similar to that used with respect to New
27
Century Common Stock as described above. To determine artificial inflation for
28
Call Options, Lead Plaintiff's damages consultant considered securities' price
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#:10944
I
1 changes that occurred in reaction to certain public announcements regarding New
2 Century and then made adjustments
J for changes
g that were attributable to market
3 forces unrelated to the alleged fraud in prices of such Call Options and Put
4 Options. Lead Plaintiff's damages consultant then developed formulae (see below)
5 from which the Recognized Losses for New Century Call Options and Put Options
6 may be calculated. In addition, the total dollar amount payable to Class Members
7 in connection with the acquisition of Call Options and the sale of Put Options
8 during the Class Period is limited to 10% of the Individual-Auditor Allotment. This

9 limitation reflects the speculative and derivative nature of these securities as

10 compared to New Century Common Stock and New Century Preferred Shares.
11 78. With respect to purchases and sales (covers) of New Century Call
12 Options during the period May 5, 2005, through and including March 13, 2007, the

13 Artificial Inflation per Call Option on a given day shall be the dollar change in the

14 value of Call Options on that day as a result of the inflation in New Century's
I
15 Common Stock share price. The dollar change in the value of Call Options will be
16 calculated using the Black-Scholes option pricing formula (using Black's
17 adjustment for dividends and the annualized standard deviation estimated from 46-
18 day, historical daily volatility estimates) using the closing share price of New

19 Century Common Stock on the transaction date, compared with the Black-Scholes

20 call pricing formula value for the Call Option using the uninflated closing share
21 price of New Century Common Stock on that same date as determined by: (1) the

22 reported closing share price minus the Common Stock price inflation per share set

23 forth in the annexed Table 2 for Call Options initially purchased between May 5,
24 2005, and March 13, 2007, and (2) the reported closing share price minus the

25 Common Stock price inflation per share set forth in the annexed Table 2 for Call

26 Options initially sold between May 5, 2005, and March 13, 2007. Once again,

27 Black's adjustment for dividends is implemented. Annualized volatility estimates


i
28 are obtained using the daily standard deviations using the returns for that day plus

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#:10945

1 the previous 45-day stock returns, which are then annualized using a 252-trading
2 day approach.
3
4 (a) For Call Options which (1) expired on or prior to February 7, 2007; (2)
were exercised prior to February 7, 2007; or (3) were sold (position
5 closed out) prior to February 7, 2007, the Recognized Loss Claim shall
6 be zero.

7 (b) For Call Options which were purchased or acquired between May 5,
8
2005, and February 7, 2007, and (1) expired on or after February 8,
2007; (2) were exercised on or between February 8, 2007, and March
9 13, 2007; or (3) were sold (position closed out) on or between February
10 8, 2007, and March 13, 2007, the Recognized Loss Claim shall be that
number of Options multiplied by the lesser of:
11

12 (1) the difference between Artificial Inflation per Call Option on the
date of purchase and Artificial Inflation per Call Option on the date
13 of expiration, exercise, or sale, as appropriate; or {
14 (2) the difference between the purchase price per Option and the sale
price per Option ($0.00 if the Call Option expired worthless).
15

16 An example at this point might be useful. Suppose on February 6, 2007, an


investor purchases 100 Call Options (long one contract) with a March 17,
17 2007 maturity and exercise price of $20. The Call Option inflation on this
18 date is $10.40 from Table 8 annexed hereto. Hence, this investor paid
$10.40 too much for the Call Option on February 6, 2007. This investor
19 then sells these Call Options on February 9, 2007, when the Call Option
20 inflation was $1.60 (see Table 8). Thus, this investor received $1.60 too
much for the Call Option on February 9, 2007. For this investor, the
21 Recognized Loss Claim is the difference in call price inflation on these two
22 dates ($10.40 - $1.60, or $8.80) times number of Options (100), for a total of
$880.00; assuming that the difference between the purchase price and the
23 sale price was greater than $8.80.
24
(c) For Call Options which were purchased or acquired between February
25
8, 2007, and March 2, 2007, and (1) expired on or after March 5, 2007,
26 (2) were exercised on or between March 5, 2007, and March 13, 2007;
or 3) were sold (position closed out) on or between March 5, 2007, and
27 March 13, 2007, the Recognized Loss Claim shall be that number of
28 Options multiplied by the lesser of:

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1 (1) the difference between Artificial Inflation per Call Option on the
2 date of purchase and Artificial Inflation per Call Option on the date
of expiration, exercise, or sale, as appropriate; or
3 (2) the difference between the purchase price per Option and the sale
4 price per Option ($0.00 if the Call Option expired worthless).

5 (d) For Call Options which were purchased or acquired between March 5,
6 2007, and March 12, 2007, and (1) expired on or after March 13, 2007;
(2) were exercised on or after March 13, 2007; or 3) were sold (position
7 closed out) on or after March 13, 2007, the Recognized Loss Claim
8 shall be that number of Options multiplied by the lesser of.

9 (1) the Artificial Inflation per Call Option on the date of purchase, or
10 (2) the difference between the purchase price per Option and the sale
price per Option ($0.00 if the Call Option expired worthless).
11

12 79. With respect to purchases (covers) and sales of Put Options during the

13 period May 5, 2005, through and including March 13, 2007, the Artificial Inflation
r
14 per Option on a given day shall be the dollar change in the value of Put Options on

15 that day as a result of the inflation in New Century's Common Stock share price.
16 The dollar change in the value of Put Options will be calculated using the Black-

17 Scholes put option pricing formula (using Black's adjustment for dividends and the

18 annualized standard deviation estimated from 46-day historical daily volatility


19 estimates) using the closing share price of New Century Common Stock on the

20 transaction date, compared with the Black-Scholes put pricing formula value for

21 the Put Option using the uninflated share closing share price of New Century

22 Common Stock on that same date as determined by: (1) the reported closing share

23 price minus the Common Stock price inflation per share set forth in the annexed

24 Table 2 for Put Options subsequently purchased between May 5, 2005, and March I
25 13, 2007, and (2) the reported closing share price minus the Common Stock price
26 inflation per share set forth in the annexed Table 2 for Put Options initially sold 9
27 between May 5, 2005, and March 13, 2007. Once again, Black's adjustment for
28 dividends is implemented. Annualized volatility estimates are obtained using the

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i
i
1 daily standard deviations using the returns for that day plus the previous 45-day r
2 stock returns, which are then annualized using 252 trading day approach.
3 (a) For Put Options which (1) expired on or prior to February 7, 2007; (2)
4 were exercised prior to February 7, 2007; or 3) were purchased (position
closed out) prior to February 7, 2007, the Recognized Loss Claim shall
5 be zero.
6
(b) For Put Options which were sold between May 5, 2005, and February 7,
7 2007, and (1) expired on or after February 8, 2007; (2) were exercised on
8 or between February 8, 2007, and March 13, 2007; or 3) were purchased
(position closed out) on or between February 8, 2007, and March 13,
9 2007, the Recognized Loss Claim shall be that number of Options
10
multiplied by the lesser of:

11
(1) the difference, multiplied by minus one, between Artificial
Inflation per Put Option on the date of sale and Artificial Inflation
12 per Put Option on the date of expiration, exercise, or purchase
13
($0.00 if the Put Option expired worthless), as appropriate; or
(2) the difference, multiplied by minus one, between the sale price per
14 Put Option and the purchase price of the Put Option ($0.00 if the
15
Put Option expired worthless).

16 An example at this point might be useful. Suppose on February 6, 2007, an


17 investor sells 100 Put Options (short one contract) with a March 17, 2007
maturity and exercise price of $20. The Put inflation on this date is -$14.22
18 from Table 8. Hence, this investor received $14.22 too little for the Put
19 Option on February 6, 2007. This investor purchases (closes) these Put
Options on February 9, 2007, when the Put inflation was -$9.07 (see Table
20 8). Thus, this investor paid $9.07 too little for the Call Option on February
21 9, 2007. For this investor, the Recognized Loss Claim is the difference in
purchase inflation and sale inflation on these two dates (-$9.07 - (-$14.22) =
22 $5.15) times number of Put Options, 100 for a total of $515.00; assuming
23 that the difference between the Put purchase price and the Put sale price was
greater than $5.15.
24

25 (c) For Put Options which were initially sold between February 8, 2007, and
March 2, 2007, and (1) expired on or after March 5, 2007; (2) were
26 exercised on or between March 5, 2007 and March 13, 2007; or 3) were
27 purchased (position closed out) on or between March 5, 2007, and March
13, 2007, the Recognized Loss Claim shall be that number of Options
28 multiplied by the lesser of-
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E
1 F
2 (1) the difference, multiplied by minus one, between Artificial
Inflation per Put Option on the date of sale and Artificial Inflation
3 per Put Option on the date of expiration, exercise, or purchase
4 ($0.00 if the Put Option expired worthless), as appropriate; or
(2) the difference, multiplied by minus one, between the sale price per
5 Put Option and the purchase price of the Put Option ($0.00 if the
6 Put Option expired worthless).

7 (d) For Put Options which were sold between March 5, 2007, and March 12,
8 2007, and (1) expired on or after March 13, 2007; (2) were exercised on
or after March 13, 2007; or 3) were purchased (position closed out) on or
9 after March 13, 2007, the Recognized Loss Claim shall be that number of
10 Options multiplied by the lesser of:

11 (1) the Artificial Inflation per Put Option on the date of sale,
12 multiplied by minus one; or
(2) the difference, multiplied by minus one, between the sale price per
13 Put Option and the purchase price of the Put Option ($0.00 if the
14 Put Option expired worthless).
s
15
Another example might be helpful here. Suppose on March 6, 2007, an
investor sold 100 Put options (short one contract) with an exercise price of E

16 $10. The put inflation for this option on March 6, 2007, was
17 - $ 0.68. Hence, this investor received $68 too little for selling these 100
options. Further suppose that this investor purchased (covered) 100 Put
18 options after March 13, 2007, when Put inflation was zero. The Recognized
19 Loss Claim for this investor will be $68 (negative of the Put inflation on the
sale date), assuming that the difference in purchase price of the Put option
20 and sale price of the Put option was greater than $0.68 per Put option.
21 III. OTHER PROVISIONS OF THE PLAN
22 80. A payment to any Class Member that would amount to less than
23 $10.00 in total will not be included in the calculation of the distribution of the

24 Underwriter Allotment and Individual-Auditor Allotment, and no such payment

25 will be made.
26 81. The determination of the price paid and the price received for a
27 particular security shall be exclusive of all commissions, taxes, fees and charges.

28

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f

1 82. The Court has reserved jurisdiction to modify, amend, or alter the Plan
2 of Allocation without further notice, or to allow, disallow or adjust the claim of any
3 Class Member on equitable grounds, to ensure a fair and equitable distribution of
4 funds. No person shall have any claim against the Plaintiffs or their counsel or any n
5 claims administrator or other agent designated by Plaintiffs or their counsel, or
6 against Defendants or their counsel, based on distributions made substantially in
7 accordance with the Stipulations and the Settlements contained therein, the Plan of
8 Allocation, or further orders of the Court.

9 83. The Defendants and their counsel shall have no involvement in, or
10 responsibility for, or liability whatsoever for the distribution of the Settlement
11 Fund or the Underwriter Allotment or Individual-Auditor Allotment, for the Plan of
12 Allocation, for the determination, administration and calculation of, or payment
P
13 pursuant to, Proofs of Claim, for the payment or withholding of Taxes owed by the
14 Settlement Fund, the Underwriter Allotment or Individual-Auditor Allotment, or
15 for acts or omissions of the Escrow Agent or any losses incurred in connection
16 therewith.
i
17 84. The Court has reserved jurisdiction to allow, disallow, or adjust on
1 8 equitable grounds the Claim of any Class Member.
19 85. The Plan of Allocation set forth herein is the plan that is being proposed
20 by Lead Plaintiff and Lead Counsel to the Court for approval. The Court may
i
21 approve this plan as proposed or it may modify the Plan of Allocation without
22 further notice to the Class.
23 '
WHAT RIGHTS AM I GIVING UP BY AGREEING TO THE SETTLEMENTS?
24

25 86. If the Settlements are approved, the Court will enter judgments (the
26 "Judgments"). The Judgments will dismiss with prejudice the claims against the
27 Defendants and other related persons and entities and will provide that Lead
28 Plaintiff and all other Class Members will provide releases as described below.
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1 87. Pursuant to the Global Officer And Director Stipulation, Plaintiffs and
2 members of the Class will be deemed by operation of law to have released, waived,

3 discharged and dismissed each and every Settled Class Claim as against each and p
4 every Released Officer And Director and the Insurance Carriers (as defined in the
5 Global Officer And Director Stipulation), and shall be deemed to forever be

6 enjoined from prosecuting any or all of the Settled Class Claims against each and

7 every Released Officer And Director and the Insurance Carriers. "Settled Class
I
8 Claim" in this paragraph means any and all claims and causes of action of every
9 nature and description, whether known or Unknown Claims, whether arising under
k
10 federal, state, common or foreign law, that Plaintiffs or any other member of the
11 Class (a) asserted in the Consolidated Action, or (b) could have asserted in any
12 forum that arise out of or are based upon the allegations, transactions, facts,

13 matters or occurrences, representations or omissions involved, set forth, or referred


14 to in the Consolidated Action, and that arise out of or relate to the purchase of New

15 Century Common Stock, New Century Series A Preferred Stock, New Century
16 Series B Preferred Stock, and/or New Century Call Options and/or the sale of New

17 Century Put Options during the Class Period. Settled Class Claims does not

18 include claims relating to the enforcement of the Settlement. "Released Officers


19 And Directors" in this paragraph means (i) the Individual Defendants, David
20 Kenneally, Kevin Cloyd, Patrick Flanagan, Stergios Theologides, Joseph F.

21 Eckroth, Jr., and Jeffrey D. Goldberg, and any of their respective heirs, executors,
22 administrators, predecessors, successors, assigns, employees, agents and retained

23 professionals; and (ii) all directors, officers, employees, and other natural persons

24 affiliated with New Century (including any of its subsidiaries and affiliates)
25 included in the definition of "Assured" or "Insured" as defined in the Policies
26 (defined in the Global Officer And Director Stipulation) and any and all of their

27 respective heirs, executors, administrators, predecessors, successors and assigns,

28
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#:10951

1 employees, agents and retained professionals (other than KPMG or the


2 Underwriter Defendants).
3 88. Pursuant to the KPMG Stipulation, Plaintiffs and members of the
4 Class will be deemed by operation of law to have released, waived, discharged and

5 dismissed each and every Settled Claim, and shall forever be enjoined from

6 prosecuting any or all Settled Claims, against any Released Auditor Party. "Settled
7 Claim" in this paragraph means any and all claims and causes of action of every
8 nature and description, whether known or Unknown, whether arising under federal,
9 state, common or foreign law, that Plaintiffs or any other member of the Class (a)
10 asserted in the Complaint, or (b) could have asserted in any forum that arise out of

11 or are based upon the allegations, transactions, facts, matters or occurrences,


12 representations
p or omissions involved set forth or referred to in the Complaint,
13 and that arise out of or relate to the purchase of New Century Common Stock, New

14 Century Series A Preferred Stock, New Century Series B Preferred Stock, and/or
15 New Century Call Options and/or the sale of New Century Put Options during the

16 Class Period. "Settled Claims" does not include claims relating to the enforcement
17 of the Settlements. "Released Auditor Party" means KPMG and any and all of its

18 partners, principals, officers, directors, employees, agents, attorneys and affiliates.

1 9 "Released Auditor Parties" does not include any Defendants other than KPMG
20 89. Pursuant to the Underwriter Stipulation, Plaintiffs and members of the
21 Class, on behalf of themselves, their parent companies, subsidiaries, affiliates,

22 heirs, executors, administrators, predecessors, successors and assigns, and any and

23 all of their current and former officers, directors, employees, agents and attorneys

24 shall be deemed by operation of law to have released, waived, discharged and


25 dismissed each and every Settled Claim, and shall forever be enjoined from
26 prosecuting any or all Settled Claims, against any Released Underwriter Party.

27 "Settled Claim" in this paragraph means any and all claims and causes of action of

28 every nature and description, whether lu-iown or Unknown, whether arising under
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1 federal, state, common or foreign law, that Plaintiffs or any other member of the
2 Class (a) asserted in the Complaint, or (b) could have asserted in any forum that

3 arise out of or are based upon the allegations, transactions, facts, matters or
4 occurrences, representations or omissions involved, set forth, or referred to in the
5 Complaint, and that arise out of or relate to the purchase of New Century Common
6 Stock, New Century Series A Preferred Stock, New Century Series B Preferred
7 Stock and/or New Century
Y all Options
p and/or the sale of New Century
rY Put
8 Options during the Class Period. "Settled Claims" does not include claims relating

9 to the enforcement of the Settlements. "Released Underwriter Party" means the


10 Underwriter Defendants and any and all of their respective parent companies,

11 subsidiaries, affiliates, heirs, executors, administrators, predecessors, successors

12 and assigns, and any and all of their current and former officers, directors,

13 employees, agents and attorneys. "Released Underwriter Parties" does not include
14 any Defendants other than the Underwriter Defendants.
15 90. "Released Parties" means the Released Officers And Directors, the
16 Released Auditor Parties, and the Released Underwriter Parties.

17 91. "Unknown Claims" means any and all claims that Lead Plaintiff or
18 any Class Member does not know or suspect to exist in his, her or its favor at the

19 time of the release of the Released Parties, which if known by him, her or it might
i
20 have affected his, her or its decision(s) with respect to the Settlements. With

21 respect to any and all settled claims, the Lead Plaintiff shall expressly waive, and

22 each Class Member shall be deemed to have waived, and by operation of the

23 Judgment shall have expressly waived, any and all provisions, rights and benefits
24 conferred by any law of any state or territory of the United States, or principle of

25 common law, that is similar, comparable, or equivalent to Cal. Civ. Code § 1542,

26 which provides:

27 A general release does not extend to claims which the creditor


28 does not know or suspect to exist in his or her favor at the time of

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1 executing the release, which if known by him or her must have


2 materially affected his or her settlement with the debtor.
3 92. Lead Plaintiff and Class Members by operation of law shall be
4 deemed to have acknowledged that the inclusion of "Unknown Claims" in the
5 definition of Settled Claims and Settled Class Claims was separately bargained for
6 and was a key element of the Settlements.
93. As specified in the Stipulations, the Judgments will also provide that

8 the Released Auditor Parties, the Released Underwriter Parties, and the Released

9
Officers And Directors will release certain claims against Lead Plaintiff and the
10 Class. In addition, certain Defendants and other persons and entities will also
f
11
release claims against each other and other persons and entities as set forth in the
12 Stipulations.
s
13 WHAT PAYMENT ARE THE ATTORNEYS FOR THE CLASS SEEKING?
14 HOW WILL THE LAWYERS BE PAID?
15

16 94. Lead Counsel has not received any payment for its services in
17 pursuing claims against Defendants on behalf of the Class, nor has Lead Counsel
18 been reimbursed for its out-of-pocket expenses. Before final approval of the
19 Settlements, Lead Counsel intends to apply to the Court for an award of attorneys'
20 fees from the Settlement Fund in an amount not to exceed 12% of the Settlement
21 Amount, plus interest from the date of funding at the same rate as earned by the
22 Settlement Fund. Lead Counsel will not calculate attorneys' fees based upon, or

23 seek attorneys' fees or expenses with respect to, any disgorgements or penalties
24 obtained by the Securities and Exchange Commission in the SEC Action. At the

25 same time, Lead Counsel also intends to apply for the reimbursement of Litigation
26 Expenses not to exceed $4.5 million, plus interest from the date of funding at the
27 same rate as earned by the Settlement Fund. Included in Lead Counsel's overall
28 request for reimbursement of Litigation Expenses will be a request for an award to

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#:10954

1 Lead Plaintiff and/or


t a d/o named plaintiffs Carl Larson and Charles Hooten for
2 reimbursement of their reasonable costs and expenses (including lost wages)
3 directly related to their representation of the Class. The Court will determine the
4 amount of the awards.

5 HOW DO I PARTICIPATE IN THE SETTLEMENTS?


6 WHAT DO I NEED TO DO? j
7 j
8 95. If you purchased or otherwise acquired New Century Common Stock,I
9 New Century Series A Preferred Stock, New Century Series B Preferred Stock,
10 and/or New Century Call Options and/or sold New Century Put Options, during the

11 period from May 5, 2005, through and including March 13, 2007, either in the

12 Offerings, pursuant to a registration statement, or in the market, and were injured

13 upon disclosure of certain facts alleged in the Complaint, and you are not excluded
14 by the definition of the Class and you do not elect to exclude yourself from the

15 Class, then you are a Class Member. You will be bound by the proposed

16 Settlements if approved by the Court, and by any judgment or determination of the


17 Court affecting the Class. If you are a Class Member, you must submit a Claim

18 Form and supporting documentation to establish your entitlement to share in the

19 Settlements. A Claim Form is included with this Notice, or you may go to the
20 website maintained by the Claims Administrator for the Settlements to download a

21 copy of the Claim Form or request that a Claim Form be mailed to you. The
k
22 website is www.neweenturysettlement.com . You may also request a Claim Form I
23 by calling toll-free 1-866-308-7615. Copies of the Claim Form can also be
24 downloaded from Lead Counsel's website at www.blbglaw.com . Those who

25 exclude themselves from the Class, and those who do not submit timely and valid
26 Claim Forms with adequate supporting documentation, will not be entitled to share

27 in the Settlements. Please retain all records of your ownership of, or transactions
28 in, New Century Securities, as they may be needed to document your Claim.
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#:10955

1 96. As a Class Member, you are represented by Lead Plaintiff and Lead
2 Counsel, unless you enter an appearance through counsel of your own choice at

3 your own expense. You are not required to retain your own counsel, but if you

4 choose to do so, such counsel must file a notice of appearance on your behalf and
5 must serve copies of his or her notice of appearance on the attorneys listed in the

6 section entitled, "When and Where Will the Court Decide Whether to Approve the
7 Settlements?," below.
8 97. If you do not wish to remain a Class Member, you may exclude
9 yourself from the Class by following the instructions in the section entitled, "What
10 If 1 Do Not Want To Be A Part Of The Class And The Settlements? How Do I

11 Exclude Myself?," below.

12 98. If you wish to object to the Settlements or any of the terms of the
13 Settlements, the proposed Plan of Allocation, or Lead Counsel's application for

14 attorneys' fees and reimbursement of Litigation Expenses, and if you do not


15 exclude yourself from the Class, you may present your objections by following the

16 instructions in the section entitled, "When and Where Will the Court Decide
17 Whether to Approve the Settlements?," below.

18 WHAT IF I DO NOT WANT TO BE A PART OF THE SETTLEMENTS?


19
HOW DO I EXCLUDE MYSELF?
20

21 99. Each Class Member will be bound by all determinations and


22 judgments in this lawsuit, including those concerning the Settlements, whether

23 favorable or unfavorable, unless such person or entity mails, by first-class mail (or
24 its equivalent outside the U.S.), or otherwise delivers a written Request for

25 Exclusion from the Class, addressed to In re New Century Securities Litigation


26 Settlement, c/o Analytics, Inc., Claims Administrator, P.O. Box 2004, Chanhassen,

27 MN 55317-2004. The exclusion request must be received no later than


28 [INSERT]. You will not be able to exclude yourself from the Class after that date.

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1 Each request for exclusion must (i) state the name and address of the person or
2 entity requesting exclusion; (ii) state that such person or entity requests exclusion

3 from the Class in In re New Century, 2:07-CV-0093 I -DDP; (iii) be signed by the
4 person or entity requesting exclusion; (iv) provide a telephone number for that
5 person or entity; and (v) provide the date(s), price(s), and number(s) of shares of

6 all purchases, acquisitions, and sales of New Century Securities during the Class I
i

7 Period. Requests for exclusion will not be valid if they do not include the
r
k

8 information set forth above and are not received within the time stated above,

9 unless the Court otherwise determines.


10 100. If you do not want to be part of the Class, you must follow these
11 instructions for exclusion even if you have pending, or later file, another lawsuit,
12 arbitration, or other proceeding relating to any Settled Claims.

13 101. If a person or entity requests to be excluded from the Class, that


14 person or entity will not receive any benefit provided for in the Settlements.

15 102. The Individual Defendants, Insurance Carriers, Underwriter


16 Defendants or KPMG may terminate the Settlements if requests for exclusion are

17 received from potential Class Members representing over a certain amount of


18 shares as stated in Supplemental Agreements. The three settlement agreements are

19 closely related and, if one of the three Settlements should not become final for any
20 reason, it could affect the finality and enforceability of the other Settlements.

21
WHEN AND WHERE WILL THE COURT DECIDE WHETHER TO APPROVE
22
THE SETTLEMENTS?
23
DO I HAVE TO COME TO THE HEARING?
24
MAY I SPEAK AT THE HEARING IF I DON'T LIKE THE SETTLEMENTS?
25
26 103. If you do not wish to object in person to the proposed Settlements,
27 proposed Plan of Allocation, and/or the application for attorneys' fees and i
28 reimbursement of Litigation Expenses, you do not need to attend the Settlement
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1 Hearing. You can object to or participate in the Settlements without attending the
2 Settlement Hearing.
3 104. The Settlement Hearing will be held on [INSERT] before the 14'

4 Honorable Dean D. Pregerson, at the United States District Court for the Central
i
5 District of California, 312 North Spring Street, Courtroom 3, Los Angeles,

6 California 90012. The Court reserves the right to approve the Settlements, the Plan
7 of Allocation or the request for attorneys' fees and reimbursement of Litigation
8 Expenses at or after the Settlement Hearing without further notice to the members

9 of the Class. The Settlements will become effective only if all three Settlements
10 are approved by the Court.
6

11 105. Any Class Member who does not submit a valid exclusion that is
12 received no later than [INSERT] may object to the Settlements, the Plan of
13 Allocation, or Lead Counsel's request for an award of attorneys' fees and

14 reimbursement of Litigation Expenses. Objections or oppositions must be in


15 writing. You must file any written objection or opposition, together with copies of

16 all other papers (including proof of all transactions in New Century Securities

17 during the Class Period) and briefs, with the Clerk's Office at the United States
18 District Court for the Central District of California at the address set forth below

19 on or before [ INSERT]. You must also serve the papers


20 on Lead Counsel for the Class at the address set forth below so that the papers are
21 received on or before [ INSERT].
22
23 Clerk's Office Lead Counsel for the Class

24 UNITED STATES BERNSTEIN LITOWITZ BERGER


25
DISTRICT COURT & GROSSMANN LLP
FOR THE CENTRAL Salvatore J. Graziano, Esq.
26 DISTRICT OF CALIFORNIA 1285 Avenue of the Americas
27
Clerk of the Court New York, NY 10019
312 N. Spring Street
28 Los Angeles, California 90012
-41- NOTICE OF PENDENCY OF CLASS ACTION
Case No. 07-00931

Case 2:07-cv-00931-DDP-FMO Document 484-4 Filed 07/30/10 Page 58 of 117 Page ID
#:10958

I Representative Counsel for Directors and


2 Officers

3 MUNGER, TOLLES & OLSON LLP


4 Kathleen M. McDowell
355 South Grand Avenue, 35th Floor
5 Los Angeles, CA 90071-1560
6
Counsel for Underwriter Defendants
7
8 PAUL, HASTINGS, JANOFSKY &
WALKER LLP
9 William F. Sullivan
10
John S. Durrant
515 South Flower Street, 25 Floor
Floor
I 1 Los Angeles, CA 90071
12
Counsel for KPMG
13
14 SIDLEY AUSTIN LLP
Michael L. Rugen
15 555 California Street, Suite 2000
16 San Francisco, CA 94104

17
106. The filing must demonstrate your membership in the Class, including
18
19 the number of shares of New Century Securities purchased or otherwise acquired
or sold during the Class Period and the price(s) paid and received. You may not
20
object to the Settlements or any aspect of them, if you are not a Class Member or if
21
you excluded yourself from the Class.
22
107. You may file a written objection without having to appear at the
23
24 Settlement Hearing. You may not appear at the Settlement Hearing to present your
objection, however, unless you first filed and served a written objection in
25
accordance with the procedures described above, unless the Court orders
26
otherwise.
27 I
108. If you wish to be heard orally at the hearing in opposition to the
28
approval of the Settlements, the Plan of Allocation, or Lead Counsel's request for
-42- NOTICE OF PENDENCY OF CLASS ACTION
Case No. 07-00931

Case 2:07-cv-00931-DDP-FMO Document 484-4 Filed 07/30/10 Page 59 of 117 Page ID
#:10959

1 an award of attorneys' fees and reimbursement of Litigation Expenses, and if you


2 have filed and served a timely written objection as described above, you also must

3 notify the above counsel on or before [INSERT ]


4 concerning your intention to appear. Persons who intend to object and desire to
5 present evidence at the Settlement Hearing must include in their written objections

6 the identity of any witnesses they may call to testify and exhibits they intend to t
7 introduce into evidence at the hearing.
8 109. You are not required to hire an attorney to represent you in making
9 written objections or in appearing at the Settlement Hearing. If you decide to hire
10 an attorney, which will be at your own expense, however, he or she must file a
11 notice of appearance with the Court and serve it on Lead Counsel so that the notice

12 is received on or before [INSERT].


13 110. The Settlement Hearing may be adjourned by the Court without
14 further written notice to the Class. If you intend to attend the Settlement Hearing,

15 you should confirm the date and time with Lead Counsel.

16 Unless the Court orders otherwise, any Class Member who does not object in
17 the manner described above will be deemed to have waived any objection and
18 shall be forever foreclosed from making any objection to the proposed
19 Settlements, the proposed Plan of Allocation, or Lead Counsel's request for an
20 award of attorneys' fees and reimbursement of Litigation Expenses. Class
21 Members do not need to appear
Pp g at the hearing or take anyother action to
22 indicate their approval.
23
WHAT IF I BOUGHT SHARES ON SOMEONE ELSE'S BEHALF?
24

25 111. If you purchased or otherwise acquired or sold New Century


26 Securities during the Class Period for the beneficial interest of a person or

27 organization other than yourself, you must either (1) send a copy of this Notice to

28 the beneficial owner of such New Century Securities, postmarked no later than
-43- NOTICE OF PENDENCY OF CLASS ACTION
Case No. 07-00931

Case 2:07-cv-00931-DDP-FMO Document 484-4 Filed 07/30/10 Page 60 of 117 Page ID
#:10960

ii)
1 fourteen (14) days after you receive this Notice, or ((^)
i pp rovide the names and k,

2 addresses of such persons no later than fourteen (14) days after you receive this k
3 Notice to In re New Century Securities Litigation Settlement, c/o Analytics, Inc.
4 Claims Administrator, P.O. Box 2004, Chanhassen, MN 55317-2004. If you
5 choose the first option, upon such mailing, you must send a statement to the
6 Claims Administrator confirming that the mailing was made as directed, and you
7 must retain the list of names and addresses for use in connection with any possible
8 future notice to the Class. If you choose the second option, the Claims

9 Administrator will send a copy of the Notice to the beneficial owner. Upon full
10 compliance with these directions, such nominees may seek reimbursement of their
11 reasonable expenses actually incurred, by providing the Claims Administrator with
12 proper documentation supporting the expenses for which reimbursement is sought.
13 Copies of this Notice may also be obtained from the settlement website

14 www.neweenturysettlement.com or Lead Counsel's website, www.blbglaw.com, or


15 by calling toll-free 1-866-308-7615.
16
CAN I SEE THE COURT FILE? WHOM SHOULD I CONTACT IF I HAVE
17
QUESTIONS?
18
i
19 112. This Notice contains only a summary of the terms of the proposed
20 Settlements. More detailed information about the matters involved in the
21 Consolidated Action is available at www.newcenturysettlement.com , including,
22 among other documents, copies of the Stipulations, Claim Form, the Complaint,
23 the Court's Order on the Defendants' motions to dismiss the Consolidated Action
24 and the Answers of Defendants. Copies of the Court-filed documents are also
25 available for review during regular business hours at the address listed above. All
26 inquiries concerning this Notice or the Claim Form should be directed to:
27

28

-44- NOTICE OF PENDENCY OF CLASS ACTION


Case No. 07-00931

I
Case 2:07-cv-00931-DDP-FMO Document 484-4 Filed 07/30/10 Page 61 of 117 Page ID
#:10961

1 In re New Century Securities Litigation Salvatore J. Graziano, Esq.


2 Settlement BERNSTEIN LITOWITZ BERGER
c/o Analytics, Inc. & GROSSMANN LLP
3 Claims Administrator 1285 Avenue of the Americas
4 P.O. Box 2004 New York, NY 10019
Chanhassen, MN 55317-2004 (866) 648-2524
5 Claims Administrator blbg@blbglaw.com
6 Lead Counsel
DO NOT CALL OR WRITE THE COURT OR THE OFFICE OF THE
7
CLERK OF COURT
8
REGARDING THIS NOTICE.
9
10

11
Dated: By Order of the Clerk of Court
United States District Court
12 for the Central District of California
13

14

15

16

17

18
p
19 G,

20

21

22

23
i
24

25

26

27

28

-45- NOTICE OF PENDENCY OF CLASS ACTION


Case No. 07-00931

Case 2:07-cv-00931-DDP-FMO Document 484-4 Filed 07/30/10 Page 62 of 117 Page ID


#:10962

2 Table 1 t

6 Issuer / Liquidation Share in Share in


7 Underlying Preference Underwriter Individual
CUSIP Type Issue Date Rate
-Auditor
Allotment
Allotment
8
Preferred Stock
9 New Century 64352D200 6/15/2005 $ 25.00 9.125% X X
Series A
10

11 Preferred Stock
New Century 6435EV207 8/15/2006 $ 25.00 9.750% X X
12 Series B I

13
New Century 6435EV108 Common Stock - - - X
14
New Century Various Call Option - - - X
15

16 New Century Various Put Option - - X

17

18

19

20

21

22

23

24

25

26

27

28

-46- NOTICE OF PENDENCY OF CLASS ACTION


Case No. 07-00931
Case 2:07-cv-00931-DDP-FMO Document 484-4 Filed 07/30/10 Page 63 of 117 Page ID
#:10963

1
2 Table 2
3
4 Inflation per Share for Common Stock Shares Purchased between
May 5, 2005, and March 13, 2007
5
6 Period Begin Date End date Inflation
1 5-May-05 7-Feb-07 $ 25.21
7 2 8-Feb-07 4-Mar-07 $ 11.09
3 5-Mar-07 12-Mar-07 $ 0.69
8 4 13-Mar-07 to the present $ 0.00

9
10

11

12

13

14

15

16

17
18

19 E

20
21
I
22

23

24

25
26
i
27

28

-47- NOTICE OF PENDENCY OF CLASS ACTION


Case No. 07-00931

Case 2:07-cv-00931-DDP-FMO Document 484-4 Filed 07/30/10 Page 64 of 117 Page ID


#:10964

1
2

3 Table 3
4
Common Stock PSLRA 90-Day Look-Back Loss Limitation Calculations
5 Average Average
Closing closing Closing closing
6 Date Price ($) price ($) Date Price ($) price ($)

7
13Mar2007 0.84 0.84 27Apr2007 0.86 1.19
8 14Mar2007 0.67 0.76 30Apr2007 0.89 1.18
15Mar2007 1.35 0.95 01May2007 0.85 1.17
t
9 16Mar2007 2.34 1.30 02May2007 0.83 1.16 1
19Mar2007 2.17 1.47 03May2007 0.80 1.15
10 20Mar2007 1.69 1.51 04May2007 0.72 1.14
i
21Mar2007 1.67 1.53 07May2007 0.59 1.12
11
22Mar2007 1.56 1.54 08May2007 0.58 1.11
23Mar2007 2.00 1.59 09May2007 0.53 1.10
12
26Mar2007 1.56 1.59 10May2007 0.43 1.08
13 27Mar2007 1.41 1.57 11May2007 0.43 1.06
28Mar2007 1.11 1.53 14May2007 0.41 1.05
14 29Mar2007 1.03 1.49 15May2007 0.37 1.03
30Mar2007 1.06 1.46 16May2007 0.36 1.02
15 02Apr2007 0.91 1.43 17May2007 0.36 1.01
03Apr2007 1.01 1.40 18May2007 0.39 0.99
16
04Apr2007 1.00 1.38 21May2007 0.44 0.98
17 05Apr2007 1.26 1.37 22May2007 0.43 0.97
09Apr2007 1.14 1.36 23May2007 0.47 0.96
18 10Apr2007 1.09 1.34 24May2007 0.45 0.95
11Apr2007 0.98 1.33 25May2007 0.47 0.94
19 12Apr2007 0.89 1.31 29May2007 0.46 0.93
13Apr2007 0.86 1.29 30May2007 0.45 0.92
20
16Apr2007 0.98 1.27 31May2007 0.44 0.92
21 17Apr2007 1.00 1.26 01Jun2007 0.44 0.91
18Apr2007 0.99 1.25 04JLm2007 0.43 0.90
22 19Apr2007 0.93 1.24 05Jun2007 0.43 0.89
20Apr2007 0.96 1.23 06Jun2007 0.45 0.88
23 23Apr2007 0.96 1.22 07Jun2007 0.44 0.88
24Apr2007 0.92 1.21 Mun2007 0.44 0.87
24 25Apr2007 0.96 1.20 Mun2007 0.44 0.87
26Apr2007 0.94 1.20 10Jun2007 0.44 0.87
25

26

27

28

-48- NOTICE OF PENDENCY OF CLASS ACTION


Case No. 07-00931

Case 2:07-cv-00931-DDP-FMO Document 484-4 Filed 07/30/10 Page 65 of 117 Page ID


#:10965

1 ^ti

2 Table 4
3
4 Inflation per Share for Series A Preferred Shares Purchased between
5 May 5, 2005, and March 1.3, 2007 i

6 Period Begin Date End date Inflation


1 5-May-05 7-Feb-07 $ 15.10 jI
7 2 8-Feb-07 4-Mar-07 $ 10.48
3 5-Mar-07 12-Mar-07 $ 1.48
8
4 13-Mar-07 to the present $ 0.00
9
10

11

12

13
Table 5
14

15 Inflation per Share for Series B Preferred Shares Purchased between


16 May 5, 2005, and March 13, 2007

17 Period Begin Date End date Inflation


1 5-May-05 7-Feb-07 $ 15.41
18
2 8-Feb-07 4-Mar-07 $ 11.18
19 3 5-Mar-07 12-Mar-07 $ 2.03
4 13-Mar-07 to the present $ 0.00
20

21

22

23

24

25

26

27

28

-49- NOTICE OF PENDENCY OF CLASS ACTION


Case No. 07-00931

Case 2:07-cv-00931-DDP-FMO Document 484-4 Filed 07/30/10 Page 66 of 117 Page ID


#:10966
ii
1
Ifg
2 R
3 Table 6
4 Preferred Stock, Series A, PSLRA 90-Day Look-Back Loss
Limitation Calculations
5
Average Average
6 Closing closing Closing closing
Date Price ($) price ($) Date Price ($) price ($)
7
13-Mar-2007 6.45 6.45 27-Apr-2007 8.27 7.45
E'
8 14-Mar-2007 6.20 6.33 30-Apr-2007 8.45 7.48
9 15-Mar-2007 9.95 7.53 01-May-2007 9.00 7.52
16-Mar-2007 10.00 8.15 02-May-2007 8.80 7.56
10 19-Mar-2007 9.25 8.37 03-May-2007 8.80 7.59
20-Mar-2007 8.50 8.39 04-May-2007 8.75 7.62
11 21-Mar-2007 8.75 8.44 07-May-2007 9.25 7.66
12 22-Mar-2007 8.85 8.49 08-May-2007 9.00 7.70
23-Mar-2007 9.77 8.64 09-May-2007 8.70 7.72
13 26-Mar-2007 8.92 8.66 10-May-2007 8.23 7.73
27-Mar-2007 6.40 8.46 11-May-2007 7.73 7.73
14
28-Mar-2007 6.10 8.26 14-May-2007 8.50 7.75 r
15 29-Mar-2007 6.20 8.10 15-May-2007 9.00 7.78 j
30-Mar-2007 6.75 8.01 16-May-2007 9.00 7.81 !
16 02-Apr-2007 6.90 7.93 17-May-2007 8.95 7.83 i
17 03-Apr-2007 7.55 7.91 18-May-2007 8.83 7.85
04-Apr-2007 8.10 7.92 21-May-2007 9.50 7.88
18 05-Apr-2007 8.25 7.94 22-May-2007 9.50 7.92
09-Apr-2007 7.65 7.92 23-May-2007 9.10 7.94
19
10-Apr-2007 7.50 7.90 24-May-2007 9.25 7.97
20 11-Apr-2007 7.60 7.89 25-May-2007 9.10 7.99
12-Apr-2007 7.45 7.87 29-May-2007 9.25 8.01
21 13-Apr-2007 7.00 7.83 30-May-2007 9.20 8.03
22 16-Apr-2007 7.05 7.80 31-May-2007 9.14 8.05
17-Apr-2007 6.70 7.75 01-Jun-2007 8.75 8.06
23 18-Apr-2007 6.30 7.70 04-Jun-2007 8.25 8.07
19-Apr-2007 6.10 7.64 05-Jun-2007 8.10 8.07
24
20-Apr-2007 6.15 7.59 06-Jun-2007 7.45 8.06
25 23-Apr-2007 5.60 7.52 07-Jun-2007 7.00 8.04
24-Apr-2007 6.00 7.47 08-Jun-2007 6.87 8.02
26 25-Apr-2007 6.25 7.43 09-Jun-2007 6.87 8.02
27 26-Apr-2007
1
7.37 7.43 10-Jun-2007 6.87 8.02

28

-50- NOTICE OF PENDENCY OF CLASS ACTION


Case No. 07-00931

Case 2:07-cv-00931-DDP-FMO Document 484-4 Filed 07/30/10 Page 67 of 117 Page ID


#:10967

1
2 Table 7
3 Preferred Stock, Series S, PSLRA 90-Day Look-Sack Loss
Limitation Calculations
4 kl
Average Average
5 Closing closing Closing closing
Date Price ($) price ($) Date Price ($) price ($)
6
13-Mar-2007 6.32 6.32 27-Apr-2007 8.06 7.35
7 14-Mar-2007 6.35 634 30-Apr-2007 8.40 7.38
15-Mar-2007 9.89 7.52 01-May-2007 8.70 7.42
8
16-Mar-2007 10.00 8.14 02-May-2007 8.70 7.45 h,
9 19-Mar-2007 9.35 8.38 03-May-2007 8.65 7.48
20-Mar-2007 8.60 8.42 04-May-2007 8.61 7,51
10 21-Mar-2007 9.00 8.50 07-May-2007 9.45 7.56 i
11 22-Mar-2007 9.10 8.58 08-May-2007 8.88 7.60
23-Mar-2007 9.50 8.68 09-May-2007 8.70 7.62
12 26-Mar-2007 8.90 8.70 10-May-2007 8.53 7.64
27-Mar-2007 6.65 8.51 11-May-2007 8.05 7.65
13
28-Mar-2007 5.80 8.29 14-May-2007 8.45 7.67
14 29-Mar-2007 6.25 8.13 15-May-2007 8.78 7.70
30-Mar-2007 6.40 8.01 16-May-2007 9.00 7.72
15 02-Apr-2007 7.00 7.94 17-May-2007 9.20 7.76
16 03-Apr-2007 7.25 7.90 18-May-2007 8.88 7.78 I
04-Apr-2007 8.00 7.90 21-May-2007 9.50 7.81 E
17 05-Apr-2007 8.45 7.93 22-May-2007 8.75 7.83
09-Apr-2007 7.50 7.91 23-May-2007 9.25 7.86
18
10-Apr-2007 7.03 7.87 24-May-2007 9.25 7.89
19 11-Apr-2007 7.05 7.83 25-May-2007 9.10 7.91
12-Apr-2007 6.90 7.79 29-May-2007 9.30 7.94
20 13-Apr-2007 6.80 7.74 30-May-2007 9.00 7.96
21 16-Apr-2007 6.76 7.70 31-May-2007 9.65 7.99
17-Apr-2007 6.15 7.64 01-Jun-2007 8.85 8.00
22 18-Apr-2007 6.00 7.58 04-Jun-2007 8.60 8.01
19-Apr-2007 6.00 7.52 05-Jun-2007 7.60 8.00
23
20-Apr-2007 6.05 7.47 06-Jun-2007 7.50 8.00
24 23-Apr-2007 5.90 7.41 07-Jun-2007 6.90 7.98
24-Apr-2007 6.00 7.37 08-Jun-2007 6.25 7.95
25 25-Apr-2007 6.20 7.33 09-Jun-2007 6.25 7.95
26 26-Apr-2007 7.25 7.33 10-Jun-2007 6.25 7.95

27

28

-51- NOTICE OF PENDENCY OF CLASS ACTION


Case No. 07-00931

Case 2:07-cv-00931-DDP-FMO Document 484-4 Filed 07/30/10 Page 68 of 117 Page ID


#:10968

1 Table S
2 Table 8 has been abbreviated for example purposes. For a complete table, visit
Ii
3 http://www.newcenturysettlement.com/Forms/Table 8.pdf.
I
4 If you do not have access to the Internet, please contact the Claims Administrator

5 at 1-866-308-7615 to have acopyyou.


co mailed to Y
6
Max Min
7 Max Min Max Min Risk Risk Max Min Max
Maturity Exer. Close Close Vola Vola Free Free Call Call Put Min Put
8 date price price Price tility tility Rate Rate Inflat. Inflat. Inflat. Inflation
9 17-Mar-07 $2.50 $5.16 $3.21 1.98 1.88 0.05 0.05 $0.69 $0.51 $0.00 -$0.18
21-Apr-07 $2.50 $5.16 $3.21 1.98 1.88 0.05 0.05 $0.64 $0.49 -$0.05 -$0.20
10 19-May-
07 $2.50 $5.16 $3.21 1.98 1.88 0.05 0.05 $0.62 $0.51 -$0.07 -$0.19
11 18-Aug-07 $2.50 $5.16 $3.21 1.98 1.88 0.05 0.05 $0.62 $0.54 -$0.08 -$0.15
19-Jan-08 $2.50 $5.16 $3.21 1.98 1.88 0.05 0.05 $0.63 $0.59 -$0.06 -$0.11
12
17-Jan-09 $2.50 $5.16 $3.21 1.98 1.88 0.05 0.05 $0.66 $0.64 -$0.04 -$0.05
13 17-Feb-07 $5.00 $19.75 $17.21 0.93 0.88 0.05 0.05 $11.09 $11.08 $0.00 -$0.01
17-Mar-07 $5.00 $19.75 $3.21 1.98 0.88 0.05 0.05 $11.08 $0.03 -$0.01 -$1.40
14
21-Apr-07 $5.00 $15.85 $3.21 1.98 0.95 0.05 0.05 $9.41 $0.22 -$0.20 -$2.29
19-May-
15 -$0.19 -$2.30
07 $5.00 $19.75 $3.21 1.98 0.88 0.05 0.05 $10.86 $0.30
16 18-Aug-07 $5.00 $19.75 $3.21 1.98 0.88 0.05 0.05 $10.46 $0.42 -$0.16 -$3.00
19-Jan-08 $5.00 $19.75 $3.21 1.98 0.88 0.05 0.05 $9.87 $0.51 -$0.11 -$4.20
17 17-Jan-09 $5.00 $19.75 $3.21 1.98 0.88 0.05 0.05 $8.94 $0.61 -$0.06 -$3.44

18 17-Feb-07 $7.50 $19.75 $17.21 0.93 0.88 0.05 0.05 $11.09 $9.59 $0.00 -$1.50
17-Mar-07 $7.50 $19.75 $3.21 1.98 0.88 0.05 0.05 $10.75 $0.00 -$0.34 -$3.87
19 21-Apr-07 $7.50 $15.85 $3.21 1.98 0.95 0.05 0.05 $7.07 $0.10 -$0.36 -$4.69
19-May-
20 07 $7.50 $19.75 $3.21 1.98 0.88 0.05 0.05 $9.97 $0.18 -$0.31 -$4.56
18-Aug-07 $7.50 $19.75 $3.21 1.98 0.88 0.05 0.05 $9.38 $0.33 -$0.23 -$4.90
21
19-Jan-08 $7.50 $19.75 $3.21 1.98 0.88 0.05 0.05 $8.75 $0.46 -$0.16 -$5.63
22 17-Jan-09 $7.50 $19.75 $3.21 1.98 0.88 0.05 0.05 $7.95 $0.59 -$0.08 -$4.50
$10.0
23 17-Feb-07 0 $19.75 $17.21 0.93 0.88 0.05 0.05 $9.00 $7.10 -$1.14 -$3.99
$10.0
24 17-Mar-07 0 $19.75 $3.21 1.98 0.88 0.05 0.05 $9.10 $0.00 -$0.64 -$6.33
$10.0
25 21-Apr-07 0 $18.77 $3.21 1.98 0.93 0.05 0.05 $7.98 $0.05 -$0.48 -$6.82
19-May- $10.0
26
07 0 $19.75 $3.21 1.98 0.88 0.05 0.05 $8.54 $0.11 -$0.41 -$6.51
$10.0
27
18-Aug-07 0 $19.75 $3.21 1.98 0.88 0.05 0.05 $8.11 $0.27 -$0.29 -$6.40
28 $10.0
19-Jan-08 0 $19.75 $3.21 1.98 0.88 0.05 0.05 $7.68 $0.42 -$0.20 -$6.70

-52- NOTICE OF PENDENCY OF CLASS ACTION


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#:10969

1 $10.0
17-Jan-09 0 $19.75 $3.21 1.98 0.88 0.05 0.05 $7.14 $0.57 -$0.09 -$5.31
2 $12.5
17-Feb-07 0 $19.75 $17.21 0.93 0.88 0.05 0.05 $6.50 $4.60 -$3.63 -$6.49
3 $12.5
17-Mar-07 0 $19.75 $3.21 1.98 0.88 0.05 0.05 $6.80 $0.00 -$0.68 -$8.50
4 $12.5
21-Apr-07 0 $18.77 $3.21 1.98 0.93 0.05 0.05 $6.05 $0.02 -$0.55 -$8.45
5 19-May- $12.5
07 0 $19.75 $3.21 1.98 0.88 0.05 0.05 $6.95 $0.08 -$0.48 -$8.00
6 $12.5
18-Aug-07 0 $19.75 $3.21 1.98 0.88 0.05 0.05 $6.87 $0.15 -$0.34 -$7.54
7 $12.5
19-Jan-08 0 $19.75 $3.21 1.98 0.88 0.05 0.05 $6.72 $0.39 -$0.23 -$7.51
8
$12.5
17-Jan-09 0 $19.75 $3.21 1.98 0.88 0.05 0.05 $6.46 $0.55 -$0.10 -$5.95 C,
9
$15.0
17-Feb-07 0 $19.75 $17.21 0.93 0.88 0.05 0.05 $4.00 $2.16 -$6.12 -$8.93
10
$15.0 j
17-Mar-07 0 $19.75 $3.21 1.98 0.88 0.05 0.05 $4.70 $0.00 -$0.69 -$9.97
11
$15.0
12 21-Apr-07 0 $18.77 $3.21 1.98 0.93 0.05 0.05 $4.35 $0.01 -$0.60 -$9.54
19-May- $15.0
13 07 0 $19.75 $3.21 1.98 0.88 0.05 0.05 $5.40 $0.05 -$0.53 -$9.05
$15.0
14 18-Aug-07 0 $19.75 $3.21 1.98 0.88 0.05 0.05 $5.76 $0.10 -$0.38 -$8.40
$15.0
15 19-Jan-08 0 $19.75 $3.21 1.98 0.88 0.05 0.05 $5.89 $0.20 -$0.25 -$8.14
$15.0
16 17-Jan-09 0 $19.75 $3.21 1.98 0.88 0.05 0.05 $5.89 $0.45 -$0.12 -$6.47
$17.5
17 17-Feb-07 0 $19.75 $17.21 0.93 0.88 0.05 0.05 $1.70 $0.48 -$8.61 -$10.61
$17.5
18 17-Mar-07 0 $19.75 $3.21 1.98 0.88 0.05 0.05 $2.95 $0.00 -$0.69 -$10.69
$17.5
19 21-Apr-07 0 $18.77 $3.21 1.98 0.93 0.05 0.05 $3.02 $0.01 -$0.63 -$10.21
19-May- $17.5
20 07 0 $19.75 $3.21 1.98 0.88 0.05 0.05 $3.90 $0.04 -$0.56 -$9.76
$17.5
21 18-Aug-07 0 $19.75 $3.21 1.98 0.88 0.05 0.05 $4.50 $0.10 -$0.41 -$9.03
$17.5
22
19-Jan-08 0 $19.75 $3.21 1.98 0.88 0.05 0.05 $5.17 $0.20 -$0.28 -$8.63
$17.5
23
17-Jan-09 0 $19.75 $3.21 1.98 0.88 0.05 0.05 $5.40 $0.40 -$0.13 -$6.90
$20.0
24
17-Feb-07 0 $42.10 $17.21 0.93 0.21 0.05 0.05 $19.93 $0.04 -$5.28 -$17.39
25 $20.0
17-Mar-07 0 $30.84 $3.21 1.98 0.23 0.05 0.05 $10.64 $0.00 -$0.69 -$15.54
26 $20.0
21-Apr-07 0 $18.77 $3.21 1.98 0.93 0.05 0.05 $1.75 $0.00 -$0.65 -$10.60
27 19-May- $20.0
07 0 $30.60 $3.21 1.98 0.24 0.05 0.05 $9.32 $0.03 -$0.59 -$16.74
28 $20.0
18-Aug-07 0 $30.60 $3.21 1.98 0.24 0.05 0.05 $7.79 $0.05 -$0.44 -$18.25
-53- NOTICE OF PENDENCY OF CLASS ACTION
Case No. 07-00931

Case 2:07-cv-00931-DDP-FMO Document 484-4 Filed 07/30/10 Page 70 of 1 17 Page ID


#:10970 I

1 $20.0
19-Jan-08 0 $51.22 $3.21 1.98 0.21 0.05 0.04 $19.94 $0.15 -$0.30 -$18.65
2 $ 20.0
17-Jan-09 0 $42.10 $3.21 1.98 0.21 0.05 0.05 $9.25 $0.25 -$0.14 -$16.72
3 $22.5
17-Feb-07 0 $42.10 $17.21 0.93 0.21 0.05 0.05 $17.53 $0.00 -$7.68 -$19.88
4 $22.5
17-Mar-07 0 $30.84 $3.21 1.98 0.23 0.05 0.05 $8.16 $0.00 -$0.69 -$18.03
5 $22.5
21-Apr-07 0 $18.77 $3.21 1.98 0.93 0.05 0.05 $0.90 $0.00 -$0.66 -$10.82
6 19-May- $22.5
07 0 $39.69 $3.21 1.98 0.21 0.05 0.05 $14.13 $0.02 -$0.61 -$21.23 j
$22.5 CI
8 18-Aug-07 0 $34.44 $3.21 1.98 0.21 0.05 0.05 $7.53 $0.10 -$0.47 -$21.41 p
$25.0 -
9 17-Feb-07 0 $42.10 $17.21 0.93 0.21 0.05 0.05 $15.10 $0.00 $10.11 -$22.30
$25.0
17-Mar-07 0 $30.84 $3.21 1.98 0.23 0.05 0.05 $5.70 $0.00 -$0.69 -$20.49
10
$25.0
21-Apr-07 0 $18.77 $3.21 1.98 0.93 0.05 0.05 $0.40 $0.00 -$0.67 -$10.94
11
19-May- $25.0
12 07 0 $42.10 $3.21 1.98 0.21 0.05 0.05 $13.69 $0.02 -$0.63 -$23.07
$25.0
13 18-Aug-07 0 $34.44 $3.21 1.98 0.21 0.05 0.05 $5.44 $0.10 -$0.49 -$23.05
$25.0
14 19-Jan-08 0 $51.22 $3.21 1.98 0.21 0.05 0.04 $16.72 $0.15 -$0.33 -$21.93
$30.0 -
15 17-Feb-07 0 $47.82 $17.21 0.93 0.21 0.05 0.05 $14.26 $0.00 $10.95 -$25.03
$30.0
16 17-Mar-07 0 $30.84 $3.21 1.98 0.23 0.05 0.05 $1.64 $0.00 -$0.69 -$24.29
$30.0
17 21-Apr-07 0 $18.77 $3.21 1.98 0.93 0.05 0.05 $0.25 $0.00 -$0.68 -$11.05
19-May- $30.0
18 07 0 $42.10 $3.21 1.98 0.21 0.05 0.05 $9.35 $0.01 -$0.65 -$24.86
$30.0
19 18-Aug-07 0 $34.44 $3.21 1.98 0.21 0.05 0.05 $2.38 $0.09 -$0.52 -$24.73
$30.0
20 19-Jan-08 0 $53.00 $3.21 1.98 0.19 0.05 0.03 $13.64 $0.15 -$0.36 -$23.81
$30.0
21 17-Jan-09 0 $47.82 $3.21 1.98 0.21 0.05 $8.45 $0.03
0.05 -$0.17 -$21.29
$35.0 -
22
17-Feb-07 0 $47.82 $17.21 0.93 0.21 0.05 0.05 $10.36 $0.00 $11.09 -$25.21
$35.0
23
17-Mar-07 0 $30.84 $3.21 1.98 0.23 0.05 0.05 $0.12 $0.00 -$0.69 -$25.18
24
19-May- $35.0
07 0 $42.10 $3.21 1.98 0.21 0.05 0.05 $5.83 $0.01 -$0.66 -$25.19
25 $35.0
18-Aug-07 0 $34.44 $3.21 1.98 0.21 0.05 0.05 $0.88 $0.04 -$0.55 -$25.13
26 $35.0
19-Jan-08 0 $42.10 $3.21 1.98 0.21 0.05 0.05 $4.61 $0.03 -$0.38 -$24.72
27 $40.0 -
17-Feb-07 0 $47.82 $17.21 0.93 0.21 0.05 0.05 $7.36 $0.00 $11.09 -$25.21
28 $40.0
17-Mar-07 0 $30.84 $3.21 1.98 0.23 0.05 0.05 $0.05 $0.00 -$0.69 -$25.21
S
-54- NOTICE OF PENDENCY OF CLASS ACTION
Case No. 07-00931

Case 2:07-cv-00931-DDP-FMO Document 484-4 Filed 07/30/10 Page 71 of 117 Page ID


#:10971

1 19-May- $40.0
07 0 $42.10 $3.21 1.98 0.21 0.05 0.05 $3.43 $0.00 -$0.67 -$25.21
2 $40.0
18-Aug-07 0 $34.44 $3.21 1.98 0.21 0.05 0.05 $0.50 $0.00 -$0.57 -$25.20
3 $40.0
19-Jan-08 0 $53.00 $3.21 1.98 0.19 0.05 0.03 $8.65 $0.00 -$0.40 -$25.06
4 $40.0
17-Jan-09 0 $47.82 $3.21 1.98 0.21 0.05 0.05 $5.52 $0.00 -$0.19 -$23.29
5 $45.0 -
17-Feb-07 0 $47.82 $17.21 0.93 0.21 0.05 0.05 $5.11 $0.00 $11.09 -$25.21
6 $45.0
17-Mar-07 0 $30.84 $3,21 1.98 0.23 0.05 0.05 $0.02 $0.00 -$0.69 -$25.21
7 19-May- $45.0 I
E

07 0 $42.10 $3.21 1.98 0.21 0.05 0.05 $1.90 $0.00 -$0.68 -$25.21
8
$45.0
18-Aug-07 0 $34.44 $3.21 1.98 0.21 0.05 0.05 $0.30 $0.00 -$0.58 -$25.21
9 $45.0
10 19-Jan-08 0 $42.10 $3.21 1.98 0.21 0.05 0.05 $2.10 $0.00 -$0.42 -$25.17
$50.0 -
11 17-Feb-07 0 $47.82 $17.21 0.93 0.21 0.05 0.05 $3.47 $0.00 $11.09 -$25.21
19-May- $50.0
12 07 0 $42.10 $3.21 1.98 0.21 0.05 0.05 $0.98 $0.00 -$0.68 -$25.21
$50.0
13 18-Aug-07 0 $34.44 $3.21 1.98 0.21 0.05 0.05 $0.25 $0.00 -$0.60 -$25.21
$50.0
14 19-Jan-08 0 $53.00 $3.21 1.98 0.19 0.05 0.03 $5.32 $0.00 -$0.43 -$25.20 !
$50.0
15 17-Jan-09 0 $47.82 $3.21 1.98 0.21 0.05 0.05 $3.68 $0.00 -$0.21 -$24.18
$55.0 -
16 17-Feb-07 0 $47.82 $17.21 0.93 0.21 0.05 0.05 $2.31 $0.00 $11.09 -$25.21
19-May- $55.0
17 07 0 $42.10 $3.21 1.98 0.21 0.05 0.05 $0.40 $0.00 -$0.68 -$25.21
$55.0
18 19-Jan-08 0 $51.22 $3.21 1.98 0.21 0.05 0.05 $4.15 $0.00 -$0.45 -$25.21
$60.0 -
19 17-Feb-07 0 $47.82 $17.21 0.93 0.21 0.05 0.05 $1.35 $0.00 $11.09 -$25.21
$60.0
20 19-Jan-08 0 $53.00 $3.21 1.98 0.19 0.05 0.03 $3.24 $0.00 -$0.46 -$25,21
$60.0
21 17-Jan-09 0 $47.82 $3.21 1.98 0.21 0.05 0.05 $2.50 $0.00 -$0.23 -$24.71
$70.0
22
19-Jan-08 0 $53.00 $3.21 1.98 0.19 0.05 0.03 $1.90 $0.00 -$0.48 -$25.21
$70.0
23
17-Jan-09 0 $47.82 $3.21 1.98 0.21 0.05 0.05 $1.73 $0.00 -$0.24 -$24.96
24

25

26

27

28

-55- NOTICE OF PENDENCY OF CLASS ACTION


Case No. 07-00931
Case 2:07-cv-00931-DDP-FMO Document 484-4 Filed 07/30/10 Page 72 of 117 Page ID
#:10972

EXHIBIT A-2 TO EXHIBIT A


TO GLOBAL OFFICER AND DIRECTOR STIPULATION

Case 2:07-cv-00931-DDP-FMO Document 484-4 Filed 07/30/10 Page 73 of 117 Page ID
#:10973 B

BERNSTEIN LITOWITZ BERGER


1
& GROSSMANN LLP
2 BLAIR A. NICHOLAS (Bar No. 178428)
irblbglaw.com)
3 MZAWET H LIN (Bar No. 174663)
(elizabethl(a^ blb law.com)
4 NIKI L. MENDOZA (Bar No. 214646)
mkim Mplaw.coV
5 ENJA GALDON (Bar No. 211114)
bblbglaw.com
6 A. KELLA (Bar No. 234470)
takeokff blbglaw. com)
7 2481 igh Bluff Drive, Suite 300
San Diego, CA 92130
8 Tel: (858) 793-0070
Fax: (858) 793-0323
9 -and-
SALVATORE J. GRAZIANO
10sgraziano(a^blbglaw.com)
LAUREN A. MC;MILLEN
11 laurenm@blbglaw.com)
285 Avenue of the Americas
12 New York, NY 10019
Tel: (212) 554-1400
13 Fax: (212) 554-1444

14 Lead Counsel for Lead Plaintiff New


York State Teachers' Retirement System
15

16

17 UNITED STATES DISTRICT COURT


1.8 CENTRAL DISTRICT OF CALIFORNIA
19 IN RE NEW CENTURY Case No. 2:07-cv-00931-DDP (FMOx)
(Lead Case)
20

21 PROOF OF CLAIM AND


22 RELEASE

23

24 Judge: Hon. Dean D. Pregerson


25

26 PROOF OF CLAIM AND RELEASE


27
DEADLINE FOR SUBMISSION , 2010.
28
Case 2:07-cv-00931-DDP-FMO Document 484-4 Filed 07/30/10 Page 74 of 117 Page ID
#:10974

1 GENERAL INSTRUCTIONS

2 1. It is important that you completely read and understand the Notice of


3 Pendency of Class Action and Proposed Settlements, Settlement Fairness Hearing,
4 and Motion for Attorneys' Fees and Reimbursement of Litigation Expenses (the

5 "Notice") that accompanies this Proof of Claim and Release ("Proof of Claim"),
6 and the Plan of Allocation included in the Notice. The Notice and the Plan of

7 Allocation describe the proposed settlements ("Settlements") that will resolve this
8 Consolidated Action, how the Class Members are affected by the Settlements, and

9 the manner in which the proceeds of the Settlements will be distributed, if the
10 Court approves the Settlements and the Plan of Allocation. The Notice also
11 contains the definitions of many of the defined terms (which are indicated by initial
12 capital letters) used in this Proof of Claim unless otherwise stated in this Proof of

13 Claim. By signing and submitting the Proof of Claim, you will be certifying that
14 you have read and that you understand the Notice.

15 2. TO PARTICIPATE IN THE SETTLEMENTS, YOU MUST MAIL


16 YOUR COMPLETED AND SIGNED PROOF OF CLAIM AND RELEASE, BY

17 FIRST-CLASS MAIL POSTAGE PREPAID, POSTMARKED ON OR BEFORE

18 , ADDRESSED TO:
19 In re New Century Securities Litigation Settlement
20 c/o Analytics, Inc. Claims Administrator
P.O. Box 2004 t

21 Chanhassen, MN 55317-2004
22 1-866-308-7615

23 3. This Proof of Claim is directed to all persons who purchased or


24 otherwise acquired New Century common stock, New Century 9.125% Series A

25 Cumulative Redeemable Preferred Stock ("Series A Preferred Stock"), New

26 Century 9.75% Series B Cumulative Redeemable Preferred Stock ("Series B

27 Preferred Stock"), and/or New Century call options and/or who sold New Century
28 put options, during the time period from May 5, 2005, through March 13, 2007,

1
Case 2:07-cv-00931-DDP-FMO Document 484-4 Filed 07/30/10 Page 75 of 117 Page ID
#:10975

1 inclusive (the "Class Period"), and who, upon disclosure of certain facts alleged in
2 the Complaint, were injured thereby (the "Class"). (The New Century common

3 stock, Series A Preferred Stock, Series B Preferred Stock, and/or New Century call

4 options and New Century put options are referred to collectively as "New Century

5 Securities.")

6 4. "Class Member" means any person who is included in the definition


7 of the Class and who did not timely submit a proper request for exclusion in
8 accordance with the requirements set forth in the Notice. Excluded from the Class

9 are certain persons or entities excluded by definition pursuant to the Court's

10 preliminary approval of the Settlements.' Also excluded from the Class are any
11 persons or entities who exclude themselves by filing a request for exclusion in

12 accordance with the requirements set forth in the Notice.

13 5. "Authorized Claimant" means a Class Member who submits a timely


14 and valid Proof of Claim form to the Claims Administrator, in accordance with the
15 requirements established by the Court, that is approved for payment from the Net

16 Settlement Fund.

1 7 6. IF YOU ARE NOT A CLASS MEMBER, OR IF YOU, OR


18 SOMEONE ACTING ON YOUR BEHALF, FILED A REQUEST FOR
19 EXCLUSION FROM THE CLASS, DO NOT SUBMIT A PROOF OF CLAIM.
20 YOU MAY NOT, DIRECTLY OR INDIRECTLY, PARTICIPATE IN THE

21 SETTLEMENTS IF YOU ARE NOT A CLASS MEMBER. THUS, IF YOU FILE


22

23 ' The following persons are excluded from the Class: (a) the Underwriter
24 Defendants, the Individual Defendants, and KPMG ("Defendants"); (b) members
of the immediate families of the Individual Defendants; (c) the subsidiaries and
25
affiliates of Defendants; (d) any person or entity who was a partner, executive
26 officer, director or controlling person of New Century (including any of its
27 subsidiaries or affiliates) or of any Defendant; (e) any entity in which any
Defendant has a controlling interest; and (f) the legal representatives, heirs,
28 successors and assigns of any such excluded party.

2

Case 2:07-cv-00931-DDP-FMO Document 484-4 Filed 07/30/10 Page 76 of 117 Page ID
#:10976

1 A VALID REQUEST FOR EXCLUSION IN A TIMELY MANNER, ANY PROOF


2 OF CLAIM THAT YOU SUBMIT, OR THAT MAY BE SUBMITTED ON YOUR
3 BEHALF, WILL NOT BE ACCEPTED.

4 7. To recover as a Class Member, you must complete and sign this Proof
5 of Claim and mail it to the Claims Administrator postmarked on or before p
6 , 2010. If you fail to file a timely, properly addressed, and
7 completed Proof of Claim, your claim may be rejected, and you may be precluded

8 from receiving any distribution from the Settlements.

9 8. Submission of this Proof of Claim does not ensure that you will share
10 in the proceeds of the Settlements. Distributions to Class Members from the
11 Settlements are governed by the Plan of Allocation approved by the Court. The

12 proposed Plan of Allocation, which is subject to the Court's approval, is included

13 in the Notice.
14 9. If you have questions concerning the Proof of Claim, or need
15 additional copies of the Proof of Claim or the Notice, you may contact the Claims

16 Administrator, at In re New Century Securities Litigation Settlement, c/o Analytics,

17 Inc., Claims Administrator, P.O. Box 2004, Chanhassen, MN 55317-2004, or by


18 toll-free phone at (866) 308-7615, or you may download the documents from Lead

1 9 Counsel's website, www.blbglaw.com , or the website maintained by the Claims


20 Administrator for this Settlement, www.newcenturysettlement.com .

21 10. If you are a Class Member and you do not, or someone acting on your
22 behalf does not, submit a timely request for exclusion from the Class, and if the

23 Court approves the Settlements, you will be bound by the terms of any orders and
24 judgments that the Court enters. You will be bound by such orders and judgments

25 whether or not you submit a Proof of Claim.


26 11. You are required to. submit genuine and sufficient documentation for
27 all your purchases and sales of New Century Securities from May 5, 2005,

28 through and including March 13, 2007, as well as genuine and sufficient

3

Case 2:07-cv-00931-DDP-FMO Document 484-4 Filed 07/30/10 Page 77 of 117 Page ID
#:10977

1 documentation for all sales of New Century Common Stock and Preferred Stock
f

2 between March 14, 2007, through and including June 10, 2007. You are also
3 required to submit genuine and sufficient documentation reflecting your positions
4 in New Century Cominon Stock and Preferred Stock as of the close of the market
i
5 on March 13, 2007, and as of the close of the market on June 10, 2007.

6 Documentation may be photocopies of stockbrokers' confirmation slips or


7 stockbrokers' monthly statements (reflecting your opening and closing balances for
z
8 the months specified on the actual claim form, and in which transactions during the

9 Class Period occurred). IF SUCH DOCUMENTS ARE NOT IN YOUR


10 POSSESSION, PLEASE OBTAIN COPIES OR EQUIVALENT
11 CONTEMPORANEOUS DOCUMENTS FROM YOUR BROKER. FAILURE
12 TO SUPPLY THIS DOCUMENTATION MAY RESULT IN REJECTION OF

13 YOUR CLAIM. DO NOT SEND ORIGINAL STOCK CERTIFICATES.

14 12. All joint purchasers must each sign this Proof of Claim.
15 13. Agents, executors, administrators, guardians, and trustees must
16 complete and sign the Proof of Claim on behalf of persons represented by them,

17 and they must:


18 (a) expressly state the capacity in which they are acting;
19 (b) identify the name, account number, Social Security Number (or
20 taxpayer identification number), address and telephone number
21 of the beneficial owner of (or other person or entity on whose
22 behalf they are acting with respect to) the New Century
23 Securities; and
24 (c) furnish herewith evidence of their authority to bind to the Proof
25 of Claim the person or entity on whose behalf they are acting.
26 (Authority to complete and sign a Proof of Claim cannot be
27 established by stockbrokers demonstrating only that they have
28

4
Case 2:07-cv-00931-DDP-FMO Document 484-4 Filed 07/30/10 Page 78 of 117 Page ID
#:10978 u
f
1 discretionary authority to trade stock in another person's
2 accounts.) i
3 14. By submitting a signed Proof of Claim, you will be swearing that you:
4 (a) own(ed) the New Century Securities you have listed in the
5 Proof of Claim; or
6 (b) are expressly authorized to act on behalf of the owner thereof.
7 15. By submitting a signed Proof of Claim, you will be swearing to the
8 truth of the statements contained therein and the genuineness of the documents
9 attached thereto, subject to penalties of perjury under the laws of the United States
10 of America. The making of false statements, or the submission of forged or

11 fraudulent documentation, will result in the rejection of your claim and may
12 subject you to civil liability or criminal prosecution.

13 NOTICE REGARDING ELECTRONIC FILES: Certain Claimants with large


14 numbers of transactions may request, or may be requested, to submit information

15 regarding their transactions in electronic files. All Claimants MUST submit a


16 manually signed paper Proof of Claim form listing all their transactions, whether or
17 not they also submit electronic copies. If you wish to file your claim

18 electronically, you must contact the Claims Administrator at 1-866-308-7615, or

19 visit its settlement website www.newcenturysettlement.com to obtain the required


20 file layout. No electronic files will be considered to have been properly submitted
21 unless the Claims Administrator issues to the Claimant a written paper
22 aclilowledgment of receipt and acceptance of electronically submitted data.

23

24
25

26

27

28

5
i
Case 2:07-cv-00931-DDP-FMO Document 484-4 Filed 07/30/10 Page 79 of 117 Page ID
#:10979

1 In re New Century

2 PART I: CLAIMANT IDENTIFICATION


3
4 Beneficial Owner's Name (First, Middle, Last) / Joint Owner's Name

5
6 Street Address

7
8 City State Zip Code

9 (Daytime)
10 Area Code Telephone Number

11 (Evening)
12 Area Code Telephone Number

13
14 Social Security Number or Taxpayer Identification Number

15

16 Record Owner's Name (if different from beneficial owner listed above)
17
Check appropriate box (check only one box):
18
ElIndividual/Sole Proprietor 13Joint Owners 11Pension Plan
19

20 q Corporation q Partnership q Trust


21
q IRA q Other
22
23 (describe: )

24 NOTE: Separate Proofs of Claim should be submitted for each separate legal

25 entity (e.g., a claim from Joint Owners should not include separate transactions of

26 just one of the Joint Owners; an Individual should not combine his or her IRA
27 transactions with transactions made solely in the Individual's name). Conversely,

28 a single Proof of Claim submitted on behalf of one legal entity should include all

6

Case 2:07-cv-00931-DDP-FMO Document 484-4 Filed 07/30/10 Page 80 of 117 Page ID
#:10980

1 transactions made by that entity, no matter how many separate accounts that entity
2 has (e.g., a corporation with multiple brokerage accounts should include all

3 transactions made in New Century Securities during the Class Period on one Proof

4 of Claim, no matter how many accounts the transactions were made in). If you
5 require additional room to list your transactions, please be sure to include your full

6 name and the last four digits of your social security number or Tax ID number on

7 each additional sheet. Check here if additional transactions are included on

8 additional schedules.

9 PART II: NEW CENTURY COMMON STOCK


10 A. BeLyinninLy Holdings: State the number of shares of New Century
11 Common Stock the Claimant owned as of the close of the market
12 on May 4, 2005. If none, write "zero" or "0." If other than zero,
13 be sure to attach the required documentation.
14

15 B. Purchases:
16 (1) List all purchases of New Century Common Stock made during the
17 period from May 5, 2005, through and including March 13, 2007. (NOTE: If you
18 acquired your New Century Common Stock during this period other than by an

19 open-market purchase, please provide a complete description of the terms of the


20 acquisition on a separate page.) Be sure to attach the required documentation.

21 Trade Date(s) (List


22
Chronologically) Number of Purchase Total
Month/Day/Year Shares Purchased Price Per Share Purchase Price*
23 / / $ $
24 / / $ $
25 / / $ $

26 / / $ $

27
*excluding commissions, transfer taxes or other fees.
28

7
Case 2:07-cv-00931-DDP-FMO Document 484-4 Filed 07/30/10 Page 81 of 117 Page ID
#:10981

1 (ii) State the total number of shares of New Century Common Stock the
2 Claimant purchased during the period between March 14, 2007, through and

3 including June 10, 2007. If none, write "zero" or "0." (NOTE: These purchases,
4 which are not in the Class Period, are not included in the calculation of Recognized

5 Loss. This information is needed by the Claims Administrator for purposes of the

6 overall evaluation of the Claim.)


7 C. Sales: List all sales of New Century Common Stock made during
8 the period from May 5, 2005, through and including
9 June 10, 2007. Be sure to attach the required documentation.
1.0 Trade Date(s) (List
11
Chronologically) Number of Sales Total
Month/Day/Year Shares Sold Price Per Share Sales Price*
12 / / $ $
13 / / $ $

14 / / $ $

15 / / $ $

16
*excluding commissions, transfer taxes or other fees
17
18 D. Unsold Holdinl4s: State the total number of shares of New
19 Century Common Stock the Claimant owned at the close of the

20
market on March 13 2007. If none write "zero" or "0." If other
i
21
than zero, be sure to attach the required documentation.

22

23
E. EndinLy Position For 90-Day Look Back: State the total number

24
of shares of New Century Common Stock the Claimant owned at

25
the close of the market on June 10, 2007. If none, write "zero" or

26
"0." If other than zero, be sure to attach the required
documentation.
27

28

8
Case 2:07-cv-00931-DDP-FMO Document 484-4 Filed 07/30/10 Page 82 of 117 Page ID
#:10982

1 IF YOU NEED ADDITIONAL SPACE TO LIST YOUR TRANSACTIONS


2
IN THIS SECURITY PLEASE PHOTOCOPY THIS PAGE, WRITE YOUR
3
4 NAME ON THE COPY AND CHECK THIS BOX q I
G
5 IF YOU DO NOT CHECK THIS BOX THESE ADDITIONAL PAGES MAY
6
NOT BE REVIEWED
7

8 PART III: NEW CENTURY 9.125% SERIES A CUMULATIVE


REDEEMABLE PREFERRED STOCK ("SERIES A PREFERRED
9 STOCK")
10
A. Beminnins! Holdings: State the number of shares of New Century
11
Series A Preferred Stock the Claimant owned as of the close of
12
the market on May 4, 2005. If none, write "zero" or "0." If other
13
than zero, be sure to attach the required documentation.
14
15
B. Purchases:
16
(i) List all purchases of New Century Series A Preferred Stock made during
17
the period from May 5, 2005, through and including March 13, 2007. (NOTE: If
18
you acquired your New Century Series A Preferred Stock during this period in an
19
Offering or otherwise or other than by an open-market purchase, please provide a
20
complete description of the terms of the acquisition on a separate page.) Be sure to
21 I
attach the required documentation.
22 I

23

24

25

26

27

28

9

Case 2:07-cv-00931-DDP-FMO Document 484-4 Filed 07/30/10 Page 83 of 117 Page ID
#:10983

1 Trade Date(s) (List


2 Chronologically) Number of Purchase Total
Month/Day/Year Shares Purchased Price Per Share Purchase Price*
3 / / $ $
i
4 / / $ $ j
I
5 / / $ $

6 / / $ $

7 *excluding commissions, transfer taxes or other fees.


8
9 (ii) State the total number of shares of New Century Series A Preferred
10 Stock the Claimant purchased during the period between March 14, 2007, through

11
and including June 10, 2007. If none, write "zero" or "0." (NOTE: These

12
purchases, which are not in the Class Period, are not included in the calculation of

13
Recognized Loss Amount. This information is needed by the Claims

14
Administrator for purposes of the overall evaluation of the Claim.)

15

16
Co Sales: List all sales of New Century Series A Preferred Stock
17 made during the period from May 5, 2005, through and including

18 June 10, 2007. Be sure to attach the required documentation.


Trade Date(s) (List
19
Chronologically) Number of Sales Total
20 Month/Day/Year Shares Sold Price Per Share Sales Price* E
$ $
21

22

23

24

25 *excluding commissions, transfer taxes or other fees


26

27

28

10

Case 2:07-cv-00931-DDP-FMO Document 484-4 Filed 07/30/10 Page 84 of 117 Page ID
#:10984

1 D. Unsold Holdinits: State the total number of shares of New


2 Century Series A Preferred Stock the Claimant owned at the close
3 of the market on March 13, 2007. If none, write "zero" or "0." If
4 other than zero, be sure to attach the required documentation.
5 l

6 E. Ending Position For 90-Day Look Back: State the total number
7 of shares of New Century Series A Preferred Stock the Claimant
8 owned at the close of the market on June 10, 2007. If none, write
9 "zero" or "0." If other than zero, be sure to attach the required
10 documentation.
11

12 IF YOU NEED ADDITIONAL SPACE TO LIST YOUR TRANSACTIONS

13 IN THIS SECURITY PLEASE PHOTOCOPY THIS PAGE, WRITE YOUR

14 NAME ON THE COPY AND CHECK THIS BOX q


15

16 IF YOU DO NOT CHECK THIS BOX THESE ADDITIONAL PAGES MAY


17 NOT BE REVIEWED
18 PART IV: NEW CENTURY 9.75% SERIES B CUMULATIVE
19 REDEEMABLE PREFERRED STOCK ("SERIES B PREFERRED
STOCK")
20 f

21 A. Bel4innint! Holdings: State the number of shares of New Century


22 Series B Preferred Stock the Claimant owned as of the close of
23 the market on May 4, 2005. If none, write "zero" or "0." If other
24 than zero, be sure to attach the required documentation.
25
26 B. Purchases:
27 (1) List all purchases of New Century Series B Preferred Stock made during
28 the period from May 5, 2005, through and including March 13, 2007. (NOTE: If

11

Case 2:07-cv-00931-DDP-FMO Document 484-4 Filed 07/30/10 Page 85 of 117 Page ID
#:10985

1 you acquired your New Century Series B Preferred Stock during this period in an
2 Offering or otherwise or other than by an open-market purchase, please provide a
3 complete description of the terms of the acquisition on a separate page.) Be sure to
4 attach the required documentation.
5 Trade Date(s) (List
Chronologically) Number of Purchase Total k
6
Month/Day/Year Shares Purchased Price Per Share Purchase Price*
7 / / $ $ 6
8 / / $ $
9 / / $ $

10 I I $ $
11 *excluding commissions, transfer taxes or other fees.
12
13 (ii) State the total number of shares of New Century Series B Preferred

14
Stock the Claimant purchased during the period between March 14, 2007, through

15
and including June 10, 2007. If none, write "zero" or "0." (NOTE: These

16
purchases, which are not in the Class Period, are not included in the calculation of

17
Recognized Loss. This information is needed by the Claims Administrator for
18 purposes of the overall evaluation of the Claim.)
19 C. Sales: List all sales of New Century Series B Preferred Stock

20 made during the period from May 5, 2005, through and including

21 June 10, 2007. Be sure to attach the required documentation.


Trade Date(s) (List
22
Chronologically) Number of Sales Total
23 Month/Day/Year Shares Sold Price Per Share Sales Price*
24 / / $ $

25

26 / / $ $
27

28 *excluding commissions, transfer taxes or other fees

12
Case 2:07-cv-00931-DDP-FMO Document 484-4 Filed 07/30/10 Page 86 of 117 Page ID
#:10986 y
1 D. Unsold Holdinjjs: State the total number of shares of New
2 Century Series B Preferred Stock the Claimant owned at the close
3 of the market on March 13, 2007. If none, write "zero" or "0." If
4 other than zero, be sure to attach the required documentation.
5
6
6 E. EndinLy Position For 90-Day Look Back: State the total number
7 of shares of New Century Series B Preferred Stock the Claimant
8 owned at the close of the market on June 10, 2007. If none, write
9 "zero" or "0." if other than zero, be sure to attach the required 1

10 documentation. x

11

12

13 IF YOU NEED ADDITIONAL SPACE TO LIST YOUR TRANSACTIONS


14 IN THIS SECURITY PLEASE PHOTOCOPY THIS PAGE, WRITE YOUR
15 NAME ON THE COPY AND CHECK THIS BOX q

16 IF YOU DO NOT CHECK THIS BOX THESE ADDITIONAL PAGES MAY


17 NOT BE REVIEWED
18

19
20

21

22

23

24

25

26

27
28

13

Case 2:07-cv-00931-DDP-FMO Document 484-4 Filed 07/30/10 Page 87 of 117 Page ID
#:10987

1 PART V: NEW CENTURY CALL OPTIONS


i
2 A. BeLyinning Holdinus: List all Call Option contracts on New
3 Century Common Stock open as of the close of the market on
4 i
May 4, 2005:
5 Number of Call Strike Price for
6 Option Contracts Expiration Month Call Option Position: Short
Open and Year Contract or Long
7 $
8 $

9
10

11
B. Purchases: List all Call Option contracts on New Century

12
Common Stock that you purchased or acquired during the period

13
from May 5, 2005, through and including March 13, 2007. Be
sure to attach the required documentation.
14
Purchase Date(s) Number of Premium Strike Price
15
(List Option Price Per Expiration for Call
16 Chronologically) Contracts Share Month and Option
Month/Day/Year Purchased Year Contract
17
18 / /
$ $
19 / / $ $
20 / / $ $
21

22 C. Sales: List all Call Option contracts on New Century Common


23 Stock that you sold during the period from May 5, 2005, through
24 and including March 13, 2007. Be sure to attach the required
25 documentation.
26

27

28

14

i
Case 2:07-cv-00931-DDP-FMO Document 484-4 Filed 07/30/10 Page 88 of 117 Page ID
#:10988

1 Sales Date(s) Premium


2 (List Number of Price Per Expiration Strike Price for
Chronologically) Option Share Month and Call Option
3 Month/Day/Year Contracts Sold Year Contract
4 $ $
5 / I $ $

7
8
D. Exercised Calls: List all Call Option contracts on New Century
9
Common Stock that you exercised during the period from May 5, k

10
2005, through and including March 13, 2007. Be sure to attach
11
the required documentation.
12
Strike
13 Price for I
Expiration Call Number of Call Result:
14
Month and Option Option Contracts Rec'd Shares
15 Date Exercised Year Contract Exercised Or Cash?
16

17

19
20
E. Expired Calls: List all Call Option contracts on New Century
21
Common Stock that expired worthless during the period from
22
May 5, 2005, through and including March 13, 2007. Be sure to
23
attach the required documentation.
24

25
26

27
28

15

Case 2:07-cv-00931-DDP-FMO Document 484-4 Filed 07/30/10 Page 89 of 117 Page ID
#:10989
i
1 Date Contracts Strike Price
2 Expired (List Number of per Call
Chronologically) Expired Option Expiration Month Option
3 Month/Day/Year Contracts and Year Contract 9

4 / / $
$
5
6
7
8
F. Unsold/Unexpired Calls: List Call Option contracts on New
9
Century Common Stock that were open as of the close of the
10
market on March 13, 2007.
11
12
Strike Price
13 Number of Call per Call
Option Contracts Position: Short or Expiration Month Option
14
Open Long and Year Contract
15 $
16 $
17
1s
19
20
21
22
23
24
25
26
27
28

16

Case 2:07-cv-00931-DDP-FMO Document 484-4 Filed 07/30/10 Page 90 of 117 Page ID
#:10990

1 PART VI: NEW CENTURY PUT OPTIONS


2 A. Be2innin2 Holdings: List all Put Option contracts on New
3 Century Common Stock open as of the close of the market on
4 May 4, 2005:
5 Number of Put Strike Price for
6 Option Contracts Expiration Month Put Option Position: Short
Open and Year Contract or Long
7 $
I
8 $ j

9
10

11
B. Sales: List all Put Option contracts on New Century Common

12
Stock that you sold (wrote) during the period from May 5, 2005,

13
through and including March 13, 2007. Be sure to attach the
required documentation.
14
Sales Date(s) Premium
15
(Writing) (List Number of Put Price Per Expiration Strike Price for
16 Chronologically) Option Share Month and Put Option
Month/Day/Year Contracts Sold Year Contract
17
18 / / $ $
19 / / $ $

20 / / $ $
21
22
23
24

25
26

27

28

17

Case 2:07-cv-00931-DDP-FMO Document 484-4 Filed 07/30/10 Page 91 of 117 Page ID
#:10991
0

1 C. Purchases: List all Put Option contracts on New Century


2 Common Stock that you purchased or acquired during the period
3 from May 5, 2005, through and including March 13, 2007. Be
4 sure to attach the required documentation.
5 Purchase Date(s) Number of Put Premium
6 (List Option Price Per Expiration Strike Price per
Chronologically) Contracts Share Month and Put Option
7 Month/Day/Year Purchased Year Contract
8 / / $ $
9 $ $

10

11

12
D. Exercised Puts: List all Put Option contracts on New Century
13
Common Stock that you exercised during the period from May 5,
14
2005, through and including March 13, 2007. Be sure to attach
15
the required documentation. !
16
Strike Number of Put Result:
17 Expiration Price for Option Contracts Delivered
18 Month and Put Option Exercised Shares or
Date Exercised Year Contract Paid?
19
20

21

22

23
E. Expired Puts: List all Put Option contracts on New Century
24
Common Stock that expired worthless during the period from
25
May 5, 2005, through and including March 13, 2007. Be sure to
26
attach the required documentation.
27

28

18

Case 2:07-cv-00931-DDP-FMO Document 484-4 Filed 07/30/10 Page 92 of 117 Page ID
#:10992

1 Date Contracts
2 Expired (List Number of Strike Price for
Chronologically) Expired Put Expiration Month Put Option
3 Month/Day/Year Contracts and Year Contract
4 / / $

6
7
8
F. Unexpired Puts: List Put Option contracts on New Century I
9 Common Stock open as of the close of the market on March 13,
10 '
2007.
11
Number of Strike Price for
12 Unexpired Put Position: Short or Expiration Month Put Option
13
Options Contracts Long and Year Contract

14 $
15
16 YOU MUST READ THE FOLLOWING RELEASE AND SIGN ON PAGE
17 RELEASE OF CLAIMS
18 Definitions

19 Defined terms not already defined herein have the meanings given them in
20 the respective Stipulations of Settlement (described in the Notice) (the
21 "Stipulations").
22
23
24 The Releases
25 Officer and Director Release
26 1 (we) understand and acknowledge that, without further action by anyone,
27 on and after entry of the Global Officer And Director Judgment and occurrence of
28 the Effective Date of the Global Officer And Director Settlement, each Class
19
Case 2:07-cv-00931-DDP-FMO Document 484-4 Filed 07/30/10 Page 93 of 117 Page ID
#:10993

1 Member, on behalf of themselves, for good and sufficient consideration, the receipt
2 and adequacy of which are hereby acknowledged, whether or not a Proof of Claim

3 is executed and delivered by, or on behalf of, such Class Member, will be deemed

4 by operation of law to have released, waived, discharged and dismissed each and
5 every Settled Class Claim as against each and every Released Officer And Director

6 and the Insurance Carriers (as defined in the Global Officer And Director

7 Stipulation), and shall be deemed to forever be enjoined from prosecuting any or


8 all of the Settled Class Claims against each and every Released Officer And
9 Director and the Insurance Carriers. "Settled Class Claim" in this paragraph means
10 any and all claims and causes of action of every nature and description, whether
11 known or Unknown Claims, whether arising under federal, state, common or

12 foreign law, that Plaintiffs or any other member of the Class (a) asserted in the

13 Consolidated Action, or (b) could have asserted in any forum that arise out of or

14 are based upon the allegations, transactions, facts, matters or occurrences,

15 representations or omissions involved, set forth, or referred to in the Consolidated


16 Action, and that arise out of or relate to the purchase of New Century Common

17 Stock, New Century Series A Preferred Stock, New Century Series B Preferred
18 Stock, and/or New Century Call Options and/or the sale of New Century Put
19 Options during the Class Period. Settled Class Claims does not include claims
20 relating to the enforcement of the Settlement. "Released Officers And Directors"
21 in this paragraph means (i) the Individual Defendants, David Kenneally, Kevin
22 Cloyd, Patrick Flanagan, Stergios Theologides, Joseph F. Eckroth, Jr., and Jeffrey

23 D. Goldberg, and any of their respective heirs, executors, administrators,


24 predecessors, successors, assigns, employees, agents and retained professionals;

25 and (ii) all directors, officers, employees, and other natural persons affiliated with
26 New Century (including any of its subsidiaries and affiliates) included in the

27 definition of "Assured" or "Insured" as defined in the Policies (defined in the

28 Global Officer And Director Stipulation) and any and all of their respective heirs,

20
Case 2:07-cv-00931-DDP-FMO Document 484-4 Filed 07/30/10 Page 94 of 117 Page ID
#:10994
k

1 executors, administrators, predecessors, successors and assigns, employees, agents


2 and retained professionals (other than KPMG or the Underwriter Defendants).
3 KPMG Release
4 I (we) understand and acknowledge that, without further action by anyone,
5 on and after entry of the KPMG Judgment and occurrence of the Effective Date of

6 the KPMG Settlement, each Class Member, on behalf of themselves, for good and

7 sufficient consideration, the receipt and adequacy of which are hereby


8 acknowledged, whether or not a Proof of Claim is executed and delivered by, or on

9 behalf of, such Class Member, will be deemed by operation of law to have r
10 released, waived, discharged and dismissed each and every Settled Claim, and
11 shall forever be enjoined from prosecuting any or all Settled Claims, against any
12 Released Auditor Party. "Settled Claim" in this paragraph means any and all

13 claims and causes of action of every nature and description, whether known or
14 Unknown, whether arising under federal, state, common or foreign law, that

15 Plaintiffs or any other member of the Class (a) asserted in the Complaint, or (b)

16 could have asserted in any forum that arise out of or are based upon the allegations,

17 transactions, facts, matters or occurrences, representations or omissions involved,


18 set forth, or referred to in the Complaint, and that arise out of or relate to the

19 purchase of New Century Common Stock, New Century Series A Preferred Stock,
20 New Century Series B Preferred Stock, and/or New Century Call Options and/or
21 the sale of New Century Put Options during the Class Period. "Settled Claims"

22 does not include claims relating to the enforcement of the Settlements. "Released

23 Auditor Party" means KPMG and any and all of its partners, principals, officers,

24 directors, employees, agents, attorneys and affiliates. "Released Auditor Parties"

25 does not include any Defendants other than KPMG.


26

27
28

21

Case 2:07-cv-00931-DDP-FMO Document 484-4 Filed 07/30/10 Page 95 of 117 Page ID
#:10995

1 Underwriter Release
2 I (we) understand and acknowledge that, without further action by anyone,
3 on and after entry of the Underwriter Judgment and occurrence of the Effective
4 Date of the Underwriter Settlement, each Class Member, on behalf of themselves,

5 their parent companies, subsidiaries, affiliates, heirs, executors, administrators,

6 predecessors, successors and assigns, and any and all of their current and former
7 officers, directors, employees, agents and attorneys, for good and sufficient
8 consideration, the receipt and adequacy of which are hereby aclalowledged,
v
9 whether or not a Proof of Claim is executed and delivered by, or on behalf of, such
10 Class Member, will be deemed by operation of law to have released, waived,

11 discharged and dismissed each and every Settled Claim, and shall forever be

12 enjoined from prosecuting any or all Settled Claims, against any Released

13 Underwriter Party. "Settled Claim" in this paragraph means any and all claims and

14 causes of action of every nature and description, whether known or Unknown,

15 whether arising under federal, state, common or foreign law, that Plaintiffs or any

16 other member of the Class (a) asserted in the Complaint, or (b) could have asserted

17 in any forum that arise out of or are based upon the allegations, transactions, facts, i
18 matters or occurrences, representations or omissions involved, set forth, or referred !
19 to in the Complaint, and that arise out of or relate to the purchase of New Century

20 Common Stock, New Century Series A Preferred Stock, New Century Series B

21 Preferred Stock, and/or New Century Call Options and/or the sale of New Century
22 Put Options during the Class Period. "Settled Claims" does not include claims

23 relating to the enforcement of the Settlements. "Released Underwriter Party"


24 means the Underwriter Defendants and any and all of their respective parent

25 companies, subsidiaries, affiliates, heirs, executors, administrators, predecessors,

26 successors and assigns, and any and all of their current and former officers,

27 directors, employees, agents and attorneys. "Released Underwriter Parties" does


28 not include any Defendants other than the Underwriter Defendants.

22
Case 2:07-cv-00931-DDP-FMO Document 484-4 Filed 07/30/10 Page 96 of 117 Page ID
#:10996

2 SIGNATURE AND CERTIFICATIONS


3 By signing and submitting this Proof of Claim, the Claimant or the person
4 who represents the Claimant certifies, as follows:
5 1. that the Claimant is a Class Member, as defined in the Notice; V

6 2. that I (we) have read and understand the contents of the Notice and the
h
7 Proof of Claim;
8 3. that I (we) are not acting for any of the Defendants, nor am I (are we)
9 such a Defendant or otherwise excluded from the Class;
10 4. that I (we) have not filed a request for exclusion from the Class and that I
11 (we) do not know of any request for exclusion from the Class filed on my
12 (our) behalf with respect to my (our) transactions in New Century
13 Securities;
14 5. that I (we) own(ed) the New Century Securities identified in the Proof of
15 Claim, or that, in signing and submitting this Proof of Claim, 1 (we) have
16 the authority to act on behalf of the owner(s) thereof,
17 6. that Claimant may be entitled to receive a distribution from the Net
18 Settlement Fund;
19 7. that Claimant desires to participate in the Settlements described in the
20 Notice and agrees to the terms and conditions thereof;
1
21 8. that I (we) submit to the jurisdiction of the United States District Court
22 for the Central District of California for purposes of investigation and
23 discovery under the Federal Rules of Civil Procedure with respect to this
24 Proof of Claim;
25 9. that 1 (we) agree to furnish such additional information with respect to
i
26 this Proof of Claim as the parties, the Claims Administrator or the Court
27 may require;
28

23
Case 2:07-cv-00931-DDP-FMO Document 484-4 Filed 07/30/10 Page 97 of 117 Page ID
#:10997
i
E

1 10.that I (we) waive trial by jury, to the extent it exists, and agree to the
2 Court's summary disposition of the determination of the validity or
I
3 amount of the claim made by this Proof of Claim; and
4 11. that I (we) certify that I am (we are) not subject to backup withholding
5 under the provisions of Section 3406(a)(1)(c) of the Internal Revenue
6 Code.
7 NOTE: If you have been notified by the Internal Revenue Service that you are
8 subject to backup withholding, please strike the language that you are not
9 subject to backup withholding in the certification above. The Internal Revenue
10 Service does not require your consent to any provision other than the
11 certification required to avoid backup withholding.
12

13

14

15

16

17
18

19
20

21

22

23

24

25
26

27
28

24
Case 2:07-cv-00931-DDP-FMO Document 484-4 Filed 07/30/10 Page 98 of 117 Page ID j

#:10998
i
1 I declare, under penalty of perjury under the laws of the United States of
2 America, that the statements made and answers given in this Proof of Claim are

3 true and correct and that the documents submitted herewith are true and genuine.
4

5
6 Signature of Claimant
F

7
8 Print Name of Claimant Date Signed

9
10 Signature of Joint Claimant, if any

11

12 Print Name of Joint Claimant, if any Date Signed j


13
14 If Claimant is other than an individual, or is not the person completing this
form, the following also must he provided:
15

16

17 Signature of Person Completing Form

18
19 Print Name of Person Completing Form Date Signed
20

21 Capacity of Person Signing (Executor, President, Trustee, etc.)

22

23

24

25
26

27

28

25

Case 2:07-cv-00931-DDP-FMO Document 484-4 Filed 07/30/10 Page 99 of 117 Page ID
#:10999

1 REMINDER CHECKLIST
2 Please sign the Proof of Claim on page _.
3 If this Claim is being made on behalf of Joint Claimants, then both must sign.
4 Please remember to attach supporting documents.
I
5 If you move, please send your new address to: I
6 In re New Century Securities Litigation Settlement
7 c/o Analytics, Inc., Claims Administrator
P.O. Box 2004
8 Chanhassen, MN 55317-2004
9 1-866-308-7615

10
DO NOT SEND ORIGINALS OF ANY SUPPORTING DOCUMENTS.
11
12 Keep a copy of your Proof of Claim and all documentation submitted for your
13 records.
14 The Claims Administrator will acknowledge receipt of your Proof of
15 Claim by mail within 60 days. Your Proof of Claim is not deemed
fully filed until you receive an acknowledgement postcard. If you do
16 not receive an acknowledgment postcard within 60 days, please call
17 the Claims Administrator toll free at (866) 308-7615.

18

19
ACCURATE CLAIMS PROCESSING TAKES A SIGNIFICANT AMOUNT
20 OF TIME.
21 THANK YOU FOR YOUR PATIENCE
22
23

24

25
26

27
28

26
Case 2:07-cv-00931-DDP-FMO Document 484-4 Filed 07/30/10 Page 100 of 117 Page ID
#:11000 r,

i
I

EXHIBIT A-3 TO EXHIBIT A


TO GLOBAL OFFICER AND DIRECTOR STIPULATION

i

Case 2:07-cv-00931-DDP-FMO Document 484-4 Filed 07/30/10 Page 101 of 117 Page ID
#:11001
P,
1 UNITED STATES DISTRICT COURT
2 CENTRAL DISTRICT OF CALIFORNIA

3 IN RE NEW CENTURY Case No. 2:07-cv-00931-DDPFMOx


(Lead Case) ( )
4
5
6
SUMMARY NOTICE
7
8 TO: ALL PERSONS AND ENTITIES WHO PURCHASED OR
9 ACQUIRED NEW CENTURY COMMON STOCK; NEW CENTURY
9.125% SERIES A CUMULATIVE REDEEMABLE PREFERRED STOCK F
10
11 ("SERIES A PREFERRED STOCK"); NEW CENTURY 9.75% SERIES B
12 CUMULATIVE REDEEMABLE PREFERRED STOCK ("SERIES B
13 PREFERRED STOCK"); AND/OR NEW CENTURY CALL OPTIONS
AND/OR WHO SOLD NEW CENTURY PUT OPTIONS DURING THE
14
15 TIME PERIOD FROM MAY 5 9 2005, THROUGH MARCH 13, 20079
16 INCLUSIVE:

17 YOU ARE HEREBY NOTIFIED pursuant to Rule 23 of the Federal Rules of Civil
18 Procedure and an Order of the United States District Court for the Central District
of California (1) of the pendency of this action (the "Consolidated Action") as a
19 class action on behalf of the persons and entities described above (the "Class")
20 except for certain persons and entities who are excluded from the Class by
definition; and (ii) that three settlements ("Settlements") reached in this
21 Consolidated Action have been proposed that will fully and finally settle all claims
22 against and release all Defendants (i.e., a settlement with the Individual Defendants
in the amount of $65,077,088.00; a settlement with the Underwriter Defendants in
23 the amount of $15,000,000.00; and a settlement with KPMG LLP in the amount of
24 $44,750,000.00). The total cash amount of the Settlements equals
$124,827,088.00. A hearing will be held before the Honorable Dean D. Pregerson
25 at the United States District Court for the Central District of California, 312 North
26 Spring Street, Courtroom 3, Los Angeles, California 90012 at on
, 2010, to determine: (1) whether this Consolidated Action
27 should be finally certified, for settlement purposes only, as a class action under
28 Rules 23(a) and (b) of the Federal Rules of Civil Procedure on behalf of the Class;

i

Case 2:07-cv-00931-DDP-FMO Document 484-4 Filed 07/30/10 Page 102 of 117 Page ID
#:11002

1 (2) whether the proposed Settlements should be approved by the Court as fair,
2 reasonable, and adequate; (3) whether the Plan of Allocation is fair, reasonable and
adequate and therefore should be approved in connection with the Settlements; and
3 (3) whether the application of Lead Counsel for attorneys' fees and Litigation
4 Expenses should be approved.
y
5 IF YOU ARE A MEMBER OF THE CLASS, YOUR RIGHTS WILL BE
6 AFFECTED BY THE SETTLEMENTS, AND YOU MAY BE ENTITLED TO ^I
7 SHARE IN THE SETTLEMENT FUND. If you have not yet received the (1)
i
g Notice Of Pendency Of Class Action And Proposed Settlements, Settlement
9 Fairness Hearing, And Motion For Attorneys' Fees And Reimbursement Of m
10 Litigation Expenses ("Notice"); and (2) Proof Of Claim And Release ("Claim
11 Form"), you may obtain copies of these documents by contacting: In re New
12 Century Securities Litigation Settlement c/o Analytics, Inc. Claims Administrator,
13 P.O. Box 2004, Chanhassen, MN 55317-2004, (866) 308-7615. Copies of the y
14 Notice and Claim Form may also be downloaded from: www.blbglaw.com or at
15 www.newcenturysettlement.com . If you are a Class Member, in order to be
16 eligible to share in the distribution of the Net Settlement Fund, you must submit a
17 Claim Form no later than , establishing that you are entitled
18 to a recovery. You will be bound by any judgment entered in the Consolidated
19 Action whether or not you make a Claim.
20 If you desire to be excluded from the Class, you must submit a request for
21 exclusion to be received by , in the manner and form explained
22 in the Notice. All Class Members who do not request exclusion from the Class
23 will be bound by any judgment entered in the Consolidated Action.
24 Any objection to the proposed Settlements, Plan of Allocation or application for i
25 attorneys' fees and payment of Litigation Expenses must be filed with the Court
26 and delivered to be received by counsel for the parties no later than
27 , in the manner and form set forth in the Notice.
28

2

Case 2:07-cv-00931-DDP-FMO Document 484-4 Filed 07/30/10 Page 103 of 117 Page ID
#:11003

1 PLEASE DO NOT CONTACT THE COURT OR THE CLERK'S OFFICE


2 REGARDING THIS NOTICE. Inquiries, other than requests for the Notice and
3 Claim Form, may be made to Lead Counsel:
4
BERNSTEIN LITOWITZ BERGER
5 & GROSSMANN LLP
6 Salvatore J. Graziano I
1285 Avenue of the Americas 1
7 New York, New York 10019
8 Telephone: (866) 648-2524
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10 Dated: , 2010 By Order of the Clerk of the Court
United States District Court i
11 for the Central District of California
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Case 2:07-cv-00931-DDP-FMO Document 484-4 Filed 07/30/10 Page 104 of 117 Page ID
#:11004

EXHIBIT B
TO GLOBAL OFFICER AND DIRECTOR STIPULATION

r
Case 2:07-cv-00931-DDP-FMO Document 484-4 Filed 07/30/10 Page 105 of 1 17 Page ID
#:11005

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9 UNITED STATES DISTRICT COURT
10 CENTRAL DISTRICT OF CALIFORNIA

11 IN RE NEW CENTURY Case No. 2:07-cv-00931-DDP (FMOx)


12 (Lead Case)

13
14
15 [PROPOSED] OFFICER AND DIRECTOR FINAL JUDGMENT AND
ORDER OF DISMISSAL WITH PREJUDICE
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Case 2:07-cv-00931-DDP-FMO Document 484-4 Filed 07/30/10 Page 106 of 117 Page ID
#:11006
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1 This matter came before the Court for hearing pursuant to the Order
i
2 Preliminarily Approving Settlements and Providing for Notice ("Preliminary
3 Approval Order" or "Notice Order"), on the application of Lead Plaintiff New
4 York State Teachers' Retirement System ("Lead Class Plaintiff') and Plaintiffs
5 Carl Larson and Charles Hooten (collectively "Class Plaintiffs") for approval of
6 the settlement between the Class Plaintiffs, on behalf of the Class, and the Class
7 Individual Defendants set forth in the Stipulation Of Global Settlement With New
g Century Officers And Directors (the "Global Officer And Director Stipulation" or
9 "Global Officer And Director Settlement"). Full and adequate notice having been
10 given to the Class as required in the Court's Order, and the Court having
11 considered all papers filed and proceedings held herein and otherwise being fully
12 informed in the premises and good cause appearing therefor,

13 NOW, THEREFORE, IT IS HEREBY ORDERED THAT:

14 1. This Judgment incorporates by reference the definitions in the Global


I
15 Officer And Director Stipulation, and all capitalized terms used, but not defined
16 herein, shall have the same meanings as in the Global Officer And Director
17 Stipulation.

18 2. This Court has jurisdiction over the subject matter of the Consolidated
19 Class Action and over all parties to the Consolidated Class Action, including all
20 members of the Class.

21 3. The Court hereby affirms its certification in the Preliminary Approval


22 Order pursuant to Rules 23(a) and 23(b)(3) of the Federal Rules of Civil
23 Procedure, of a Class defined as follows:

24 all persons and entities who purchased or otherwise acquired New


Century common stock, New Century Series A Preferred Stock, New
25 Century Series B Preferred Stock, and/or New Century call options i
and/or who sold New Century put options, durinD the time period
26 from May 5, 2005, through and including March :3, 2007, either in
the Offerings, pursuant to a registration statement, or in the market,
27 and who, upon disclosure of certain facts alleged in the Complaint,
were injured thereby. Excluded from the Class are (a) Class
28 Defendants; members of the immediate families of thhe Class
Individual De(vcndants; (c) the subsidiaries and affiliates of Class
i

Case 2:07-cv-00931-DDP-FMO Document 484-4 Filed 07/30/10 Page 107 of 117 Page ID
#:11007

1 Defendants; (d) any person or entity who was a partner, executive


officer, director or controllingerson of New Century (includin any
2 of its subsidiaries or affiliates or of any Class Defendant; (e an
entity in which any Class Defendant has a controlling interest; and (I
3 the legal representatives, heirs successors and assigns of any such
excluded party. Also excluded from the Class are any persons who
4 exclude themselves by filing a request for exclusion in accordance
with the requirements set forth in the Notice, as listed on Exhibit 1
5 annexed hereto.
6
7 4. The Court also affirms its findings in the Preliminary Approval Order
8 that the prerequisites for a class action under Rules 23(a) and (b)(3) of the Federal
9 Rules of Civil Procedure have been satisfied in that: (a) the number of Class
10 Members is so numerous that joinder of all members thereof is impracticable; (b)
11 there are questions of law and fact common to the Class; (c) the claims of Lead
12 Class Plaintiff and Class Plaintiffs Carl Larson and Charles Hooten are typical of
13 the claims of the Class they seek to represent; (d) Class Plaintiffs have fairly and
14 adequately represented the interests of the Class; (e) the questions of law and fact
15 common to the members of the Class predominate over any questions affecting
16 only individual members of the Class; and (f) a class action is superior to other
17 available methods for the fair and efficient adjudication of the controversy.
18 5. Pursuant to Rule 23 of the Federal Rules of Civil Procedure, the
19 Court affirms its certification of Class Plaintiffs as the Class representatives and
20 Lead Counsel Bernstein Litowitz Berger & Grossmann LLP as the Class counsel.
21 6. Pursuant to Federal Rule of Civil Procedure 23, this Court hereby
22 approves the Global Officer And Director Settlement set forth in the Global
23 Officer And Director Stipulation and finds that the Global Officer And Director
24 Settlement is, in all respects, fair, reasonable, adequate and entered into in good
25 faith within the meaning of California Code of Civil Procedure § 877. The Court
26 further finds that the Global Officer And Director Settlement set forth in the
27 Global Officer And Director Stipulation is the result of arm's-length negotiations
28 between experienced counsel representing the interests of the Parties.

2

Case 2:07-cv-00931-DDP-FMO Document 484-4 Filed 07/30/10 Page 108 of 117 Page ID
#:11008

1 Accordingly, the Global Officer And Director Settlement embodied in the Global
2 Officer And Director Stipulation is hereby finally approved in all respects. The
3 Parties are hereby directed to perform its terms.
4 7. Pursuant to and in compliance with Rule 23 of the Federal Rules of
5 Civil Procedure, the Court hereby finds that due and adequate notice of these
6 proceedings was directed to all persons and entities who are Class Members, f

7 advising them of the Global Officer And Director Settlement, the Plan of
8 Allocation, and Lead Counsel's intent to apply for attorneys' fees and
9 reimbursement of Litigation Expenses associated with the Consolidated Class
10 Action, and of their right to object thereto, and a full and fair opportunity was
11 accorded to all persons and entities who are Class Members to be heard with
12 respect to the foregoing matters. Thus, it is hereby determined that all Class
13 Members who did not timely and properly elect to exclude themselves by written
14 communication postmarked or otherwise delivered on or before the date set forth
15 in the Notice and the Preliminary Approval Order, are bound by this Judgment.
16 S. The Consolidated Class Action and all claims contained therein are [
17 dismissed with prejudice as to the Class Individual Defendants.
18 9. The Parties are to bear their own costs, except as otherwise provided
19 in the Global Officer And Director Stipulation.
20 10. Upon the Effective Date, the Settled Claims shall be discharged as
21 against each and every Released Officer And Director and the Insurance Carriers,
22 and Plaintiffs shall be deemed to forever be enjoined from prosecuting any or all
23 of the Settled Claims against each and every Released Officer And Director and
24 the Insurance Carriers.
25 11. Upon the Effective Date, the Settling Individuals' Claims as against
26 Class Plaintiffs and all other Class Members, the Trust, the Trustee, Alan M.
27 Jacobs individually, the Debtors, the Debtors' Estates, the Plan Advisory
28 Committee, and Kodiak, and their respective heirs, predecessors, successors,
3

Case 2:07-cv-00931-DDP-FMO Document 484-4 Filed 07/30/10 Page 109 of 117 Page ID
#:11009

1 assigns, employees, agents and retained professionals (other than KPMG or the
2 Underwriter Defendants) shall be released, waived, discharged and dismissed, and
4

3 the Settling Individuals shall be deemed to forever be enjoined from prosecuting


4 each and every of the Settling Individuals' Claims against Class Plaintiffs and all
5 other Class Members, the Trust, the Trustee, Alan M. Jacobs individually, the
6 Debtors, the Debtors' Estates, the Plan Advisory Committee, and Kodiak, and
7 their respective heirs, predecessors, successors, assigns, employees, agents and
8 retained professionals.
9 12. Upon the Effective Date, the Settling Individuals shall be deemed to
10 have released, waived, discharged and dismissed each and every Settling
11 Individuals' Claims against KPMG and the other Released Auditor Parties, and
12 shall forever be enjoined from prosecuting each and every Settling Individuals'
13 Claim against KPMG and the other Released Auditor Parties.
14 13. Upon the Effective Date, the Settling Individuals shall be deemed to
15 have released, waived, discharged and dismissed each and every claim, and shall
16 forever be enjoined from prosecuting any claim, against any and all of the
17 Underwriter Defendants and the other Released Underwriter Parties whether
18 arising under federal, state, common or foreign law, arising out of or based upon
19 the allegations, transactions, facts, matters or occurrences, representations or
20 omissions involved, set forth, or referred to in the Consolidated Class Action,
21 14. Upon the Effective Date, Kodiak shall be deemed to have released,
22 waived, discharged and dismissed, and shall forever be enjoined from prosecuting
23 each and every of the Settled Kodiak Claims as against KPMG and the other
24 Released Auditor Parties.
25 15. Upon the Effective Date, this Final Judgment And Order Of
26 Dismissal With Prejudice constitutes the final discharge of all obligations to the
27 Plaintiffs of the Settling Individuals arising out of the Officer And Director
28 Litigations. All future claims for contribution arising out of the Officer And

4

Case 2:07-cv-00931-DDP-FMO Document 484-4 Filed 07/30/10 Page 110 of 117 Page ID
#:11010

I'
1 Director Litigations by any person or entity against the Settling Individuals or by
2 any Settling Individual against any other person or entity, other than a person
3 whose liability for the Claims asserted in the Director And Officer Litigations has
4 been extinguished by the Settlement of those Claims by that Settling Individual,
5 are barred pursuant to 15 U.S.C. § 78u-4(f)(7)(A).
6 16. The distribution of the Notice and the publication of the Summary i

7 Notice as provided for in the Preliminary Approval Order constituted the best
8 notice practicable under the circumstances, including individual notice to all
9 members of the Class who could be identified through reasonable effort. Said
10 notice provided the best notice practicable under the circumstances of those
11 proceedings and of the matters set forth therein, including the proposed Global
12 Officer And Director Settlement set forth in the Global Officer And Director
13 Stipulation, to all persons entitled to such notice, and said notice fully satisfied the
14 requirements of Federal Rule of Civil Procedure 23, the Private Securities
15 Litigation Reform Act of 1995, due process, and any other applicable law
16 17. The Court hereby finds and concludes that the formula for the
17 calculation of the claims which is set forth in the Plan of Allocation proposed by
18 Lead Class Plaintiff provides a fair and equitable basis upon which to allocate the
19 proceeds of the Settlements' among the Class Members with due consideration
i
20 having been given to administrative convenience and necessity.
21 18. The Court hereby finds and concludes that the Plan of Allocation
22 proposed by Lead Class Plaintiff is, in all respects, fair and equitable to the Class.
23
24 ' "Settlements" herein includes the settlements as set forth in the Global Officer
25 And Director Stipulation, the Stipulation of Settlement Between Plaintiffs and
KPMG LLP ("KPMG Stipulation" or "KPMG Settlement"), and the Stipulation of
26 Settlement Between Plaintiffs and the Underwriter Defendants ("Underwriter
Settlement" or "Underwriter Stipulation") (collectively "Settlements" or
27 "Stipulations"). The Plan of Allocation sets forth a plan for allocating to Class
28 Members the funds allocated to the Class from all three of the Settlements.

5

Case 2:07-cv-00931-DDP-FMO Document 484-4 Filed 07/30/10 Page 111 of 117 Page ID
#:11011

b
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1 Accordingly, the Court hereby approves the Plan of Allocation proposed by Lead !;
C
2 Class Plaintiff.
3 19. Any order entered regarding any attorneys' fees and any expense
4 application shall in no way disturb or affect this Final Judgment And Order Of
a
5 Dismissal With Prejudice and shall be considered separate from this Final j
6 Judgment And Order Of Dismissal With Prejudice.
7 20. The Global Officer And Director Stipulation and Global Officer And
8 Director Settlement set forth therein, whether or not consummated, and any
9 proceedings taken pursuant to it:
10 a. shall not be offered or received against any of the Released Officers
11 And Directors as evidence of, or construed as, or deemed to be evidence of any
12 presumption, concession, or admission by any of the Released Officers And
13 Directors with respect to the truth of any fact alleged by Plaintiffs or the validity of
14 any claim that was or could have been asserted against any of the Released
15 Officers And Directors in the Officer And Director Litigations or in any litigation,
16 or of any liability, negligence, fault, or other wrongdoing of any kind of any of the
17 Released Officers And Directors;
18 b. shall not be offered or received against any of the Released Officers
19 And Directors as evidence of a presumption, concession or admission of any fault,
20 misrepresentation or omission with respect to any statement or written document
21 approved or made by any of the Released Officers And Directors, or against the
22 Plaintiffs or any Class Members as evidence of any infirmity in the claims of
23 Plaintiffs or the other Class Members;
24 C. shall not be offered or received against any of the Released Officers
25 And Directors, or against the Plaintiffs or any other Class Members, as evidence of
26 a presumption, concession or admission with respect to any liability, negligence,
27 fault or wrongdoing of any kind, or in any way referred to for any other reason as
28 against any of the Released Officers And Directors, in any other civil, criminal or

i

I^

Case 2:07-cv-00931-DDP-FMO Document 484-4 Filed 07/30/10 Page 112 of 117 Page ID
#:11012

1 administrative action or proceeding, other than such proceedings as may be


2 necessary to effectuate the provisions of this Stipulation; provided, however, that if
3 this Stipulation is approved by the Consolidated Class Action Court, the Settling
4 Individuals, any other Released Officer And Director, or any Class Member may i
5 refer to it to effectuate the protection from liability granted them hereunder;
6 d. shall not be construed against any of the Released Officers And
h'
7 Directors, Plaintiffs or any other Class Members as an admission, concession, or
8 presumption that the consideration to be given hereunder represents the amount
9 which could be or would have been recovered after trial;
10 e. shall not be construed against Plaintiffs or any other Class Members
11 as an admission, concession, or presumption that any of their claims are without
12 merit or that damages recoverable under the Officer And Director Litigations
13 would not have exceeded the Officer And Director Settlement Amount; and
14 f. shall not be construed as or received in evidence as an admission,
15 concession or presumption that class certification is appropriate in this
16 Consolidated Class Action, except for purposes of this Settlement.
17 21. The Global Officer And Director Stipulation may be filed in an action !
18 to enforce or interpret the terms of the Global Officer And Director Stipulation, the
19 Global Officer And Director Settlement contained therein, and any other
20 documents executed in connection with the performance of the agreements
21 embodied therein. The Stipulation and/or this Final Judgment And Order Of
22 Dismissal With Prejudice may be filed in any action in order to support a defense
23 or counterclaim based on the principles of res judicata, collateral estoppel, full
24 faith and credit, release, good faith settlement, judgment bar, or reduction or any
25 other theory of claim preclusion or issue preclusion or similar defense or
26 counterclaim.
27 22. Without affecting the finality of this Final Judgment And Order Of
28 Dismissal With Prejudice in any way, this Court hereby retains continuing
Case 2:07-cv-00931-DDP-FMO Document 484-4 Filed 07/30/10 Page 113 of 117 Page ID
#:11013
i

1 jurisdiction over: (a) implementation of this Global Officer And Director


2 Settlement and any award or distribution of the settlement fund, including interest
3 earned thereon; (b) the allowance, disallowance or adjustment of any Class
4 Member's claim on equitable grounds and any award or distribution of the
5 settlement fund; (c) disposition of the settlement fund; (d) hearing and determining
6 applications for attorneys' fees and Litigation Expenses in the Consolidated Class
7 Action; (e) enforcing and administering this Judgment; (f) all parties hereto for the
8 purpose of construing, enforcing and administering the Global Officer And
9 Director Stipulation; and (g) other matters related or ancillary to the foregoing.
10 23. The Court finds that during the course of the Consolidated Class
11 Action, the Parties and their respective counsel at all times complied with the
12 requirements of Federal Rule of Civil Procedure 11.
13 24. In the event that the Global Officer And Director Settlement does not
14 become effective in accordance with the terms of the Global Officer And Director
15 Stipulation or the Effective Date does not occur, or in the event that the settlement
16 fund, or any portion thereof, is returned to any person or entity contributing to the
17 settlement fund, then this Final Judgment And Order Of Dismissal With Prejudice
18 shall be rendered null and void to the extent provided by and in accordance with
19 the Global Officer And Director Stipulation and shall be vacated and, in such
20 event, all orders entered and releases delivered in connection herewith shall be null'
e
21 and void to the extent provided by and in accordance with the Global Officer And
22 Director Stipulation.
i
23 25. Without further Order of the Court, the Parties may agree to
24 reasonable extensions of time to carry out any of the provisions of the Global
25 Officer And Director Stipulation. 1
26 1\
27 \\
28 11
i
8
I

Case 2:07-cv-00931-DDP-FMO Document 484-4 Filed 07/30/10 Page 114 of 117 Page ID
#:11014

1
2 26. There is no just reason for delay in the entry of this Judgment and
3 immediate entry by the Clerk of the Court is expressly directed.
4 IT IS SO ORDERED,
5
6 DATED:

7 THE HONORABLE DEAN D. PREGERSON


8 UNITED STATES DISTRICT COURT JUDGE
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Case 2:07-cv-00931-DDP-FMO Document 484-4 Filed 07/30/10 Page 115 of 117 Page ID
#:11015 i

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6

EXHIBIT C
TO GLOBAL OFFICER AND DIRECTOR STIPULATION

Case 2:07-cv-00931-DDP-FMO Document 484-4 Filed 07/30/10 Page 116 of 117 Page ID
#:11016

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Case 2:07-cv-00931-DDP-FMO Document 484-5 Filed 07/30/10 Page 1 of 37 Page ID
#:11018

I
1
1

EXHIBIT 3
TO UNOPPOSED MOTION FOR PRELIMINARY
APPROVAL OF SETTLEMENTS

-1-
Case No. 2:07-cv-00931-DDP (FMOx)
Case 2:07-cv-00931-DDP-FMO Document 484-5 Filed 07/30/10 Page 2 of 37 Page ID
#:11019

7
UNITED STATES DISTRICT COURT
8
CENTRAL DISTRICT OF CALIFORNIA i
9
IN RE NEW CENTURY Case No. 2:07-cv-0093 1 -DDP (FMOx)
10 (Lead Case)
11
12
13
14

15 STIPULATION OF SETTLEMENT
BETWEEN PLAINTIFFS AND KPMG LLP
16

17

18

19

20

21

22

23
24

25

26

27

28

KPMG STIPULATION OF SETTLEMENT


Case No. 2:07-cv-00931-DDP (FMOx)

Case 2:07-cv-00931-DDP-FMO Document 484-5 Filed 07/30/10 Page 3 of 37 Page ID
#:11020

1 This Stipulation of Settlement (the "Stipulation") is submitted pursuant to


2 Rule 23 of the Federal Rules of Civil Procedure. Subject to the approval of the
3 Court, this Stipulation is entered into between and among Lead Plaintiff New York

4 State Teachers' Retirement System ("Lead Plaintiff') and Plaintiffs Carl Larson
5 and Charles Hooten (collectively "Plaintiffs"), Plaintiffs in the above-captioned
6 consolidated class action (the "Consolidated Action"), on behalf of themselves and

7 the Class (as hereinafter defined), and defendant KPMG LLP ("KPMG")
8 (collectively, with Plaintiffs, the "Parties"), by and through their respective

9 counsel. The KPMG Settlement is intended to settle all Settled Claims (as defined
10 below) against KPMG and all other Released Auditor Parties (as defined below).
11 WHEREAS:
12 A. All terms with initial capitalization not otherwise defined herein shall
13 have the meanings ascribed to them in ¶1 herein.

14 B. Beginning on or about February 8, 2007, securities class action


15 complaints were filed in the United States District Court for the Central District of
16 California against certain of the Defendants; and the actions were consolidated by

17 Order dated June 26, 2007;


18 C. By Order dated June 26, 2007, the Court appointed the New York
19 State Teachers' Retirement System as Lead Plaintiff for the Consolidated Action
20 and approved its selection of Bernstein Litowitz Berger & Grossmann LLP as Lead
21 Counsel for the Class;

22 D. On September 14, 2007, Plaintiffs filed their Consolidated Class


23 Action Complaint ("Consolidated Complaint") asserting claims against Defendants

24 under the Securities Exchange Act of 1934 ("Exchange Act") and the Securities

25 Act of 1933 ("Securities Act") on behalf of all persons and entities who purchased

26 or otherwise acquired New Century Financial Corporation ("New Century" or the

27 "Company") common stock; New Century 9.125% Series A Cumulative


28 Redeemable Preferred Stock ("Series A Preferred Stock"); New Century 9.75%

-1- KPMG STIPULATION OF SETTLEMENT


Case No. 2:07-cv-00931-DDP (FMOx)

Case 2:07-cv-00931-DDP-FMO Document 484-5 Filed 07/30/10 Page 4 of 37 Page ID
#:11021

1 Series B Cumulative Redeemable Preferred Stock ("Series B Preferred Stock");


2 and/or New Century call options and/or who sold New Century put options during

3 the time period from May 5, 2005, through and including, March 13, 2007, either
4 in the Offerings, pursuant to a registration statement, or in the market, and who,

5 upon disclosure of certain facts, were injured thereby;


6 E. Beginning on November 2, 2007, Defendants filed motions to dismiss
7 the Consolidated Complaint, which Plaintiffs opposed on December 14, 2007;

8 F. By Order dated January 31, 2008, the Court granted the motions to
9 dismiss with leave to amend the complaint;
10 G. On March 24, 2008, Plaintiffs filed their Amended Consolidated Class
11 Action Complaint ("Amended Complaint"), alleging claims against Defendants

12 pursuant to the Securities Act and the Exchange Act;

13 H. On April 30, 2008, Plaintiffs filed their Second Amended


14 Consolidated Class Action Complaint (the "Complaint"), alleging claims against

15 Defendants pursuant to the Securities Act and the Exchange Act;


16 I. Beginning on June 2, 2008, Defendants filed motions to dismiss the
17 Complaint, which Plaintiffs opposed on July 7, 2008;
is J. Following a hearing, by Order dated December 3, 2008, the Court
19 substantially denied Defendants' motions to dismiss;

20 K. Beginning on January 26, 2009, Defendants answered the Complaint;


21 L. The Parties began discovery in or about April 2009, including filing
22 multiple motions to compel and motions for protective order, and serving

23 discovery requests, responses and voluminous documents;

24 M. On January 13, 2010, KPMG filed a motion for summary judgment,


25 which Plaintiffs opposed on March 15, 2010;

26 N. The Parties have participated in mediation sessions and additional


27 discussions before the Honorable Daniel Weinstein, and subsequently were able to

28

-2- KPMG STIPULATION OF SETTLEMENT


Case No. 2:07-ev-00931-DDP (FMOx)
Case 2:07-cv-00931-DDP-FMO Document 484-5 Filed 07/30/10 Page 5 of 37 Page ID
#:11022

1 reach agreements in principle to settle this Consolidated Action on the terms set
2 forth herein;
3 O. KPMG denies any wrongdoing whatsoever and this Stipulation shall
4 in no event be construed or deemed to be evidence of or an admission or
5 concession on the part of KPMG with respect to any claim or of any fault or

6 liability or wrongdoing or damage whatsoever, or any infirmity in the defenses that


7 KPMG has asserted. The Parties recognize, however, that the litigation has been
8 filed by Plaintiffs and defended by KPMG in good faith and in compliance with

9 Federal Rule of Civil Procedure 11, that the litigation is being voluntarily settled
10 after receiving advice of counsel, and that the terms of the settlement are fair,

11 adequate and reasonable. This Stipulation shall not be construed or deemed to be a


12 concession by any plaintiff of any infirmity in the claims asserted in the action;

13 P. Lead Counsel represents that it has conducted an extensive


r
14 investigation and thorough discovery relating to the claims and the underlying

15 events and transactions alleged in the Complaint. Lead Counsel represents that it

16 has analyzed the evidence adduced through discovery and has researched the

17 applicable law with respect to the claims of Plaintiffs and the other members of the

18 Class (as defined herein) and the potential defenses thereto;

19 Q. Based upon their investigation and discovery as set forth above,


20 Plaintiffs and Lead Counsel have concluded that the terms and conditions of this
21 Stipulation are fair, reasonable and adequate to Plaintiffs and the other members of

22 the Class, and in their best interests, and have agreed to settle the claims raised in

23 the action pursuant to the terms and provisions of this Stipulation, after considering
24 (1) the benefits that the Class will receive from the KPMG Settlement, (2) the

25 attendant risks of litigation, and (3) the desirability of permitting the KPMG

26 Settlement to be consummated as provided by the terms of this Stipulation;

27 NOW THEREFORE, without any admission or concession on the part of


28 Plaintiffs of any lack of merit of the action whatsoever, and without any admission

-3- KPMG STIPULATION OF SETTLEMENT


Case No. 2:07-cv-00931-DDP (FMOx)
Case 2:07-cv-00931-DDP-FMO Document 484-5 Filed 07/30/10 Page 6 of 37 Page ID
#:11023

1 or concession of any liability or wrongdoing or lack of merit in the defenses


2 whatsoever by the Released Auditor Parties (as defined herein), it is hereby
3 STIPULATED AND AGREED, by and among the Parties, through their respective
4 attorneys, subject to approval of the Court pursuant to Rule 23(e) of the Federal
5 Rules of Civil Procedure, in consideration of the benefits flowing to the Parties
6 hereto from the KPMG Settlement, that all Settled Claims (as defined below) as
7 against the Released Auditor Parties (as defined below) and all Released Parties'
8 Claims (as defined below) shall be compromised, settled, released and dismissed
9 with prejudice, upon and subject to the following terms and conditions:
10 DEFINITIONS
11 1. As used in this Stipulation, the following terms have the following
12 meanings:
13 a) "Authorized Claimant" means a Class Member who submits a
1.4 timely and valid Proof of Claim Form and all required documentation to the
15 Claims Administrator, in accordance with the requirements established by the Plan
16 of Allocation approved by the Court, that is approved for payment from the Net
17 Settlement Fund.
18 b) "CAFA Notices" means proper notices of settlement, sent by
19 KPMG to the appropriate Federal official and the appropriate State official of each
20 state in which a class member resides, pursuant to the Class Action Fairness Act of
21 2005 ("CAFA"), 28 U.S.C. § 1715(b).
22 c) "Claim" means a completed and signed Proof of Claim Form
23 submitted to the Claims Administrator in accordance with the instructions on the
24 Proof of Claim Form.
25 d) "Claim Form" or "Claim Form and Release" or "Proof of Claim
26 Form" means the form, substantially in the form attached hereto as Exhibit 2 to
27 Exhibit A, that a Claimant or Class Member must complete should that Claimant or
28 Class Member seek to share in a distribution of the Net Settlement Fund.

-4- KPMG STIPULATION OF SETTLEMENT


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Case 2:07-cv-00931-DDP-FMO Document 484-5 Filed 07/30/10 Page 7 of 37 Page ID
#:11024

1 e) "Claimant" means a person or entity that submits a Claim Form


2 to the Claims Administrator seeking to share in the proceeds of the Net Settlement

3 Fund.
4 f) "Claims Administrator" means the firm of Analytics
5 Incorporated.

6 g) "Claims Against Directors And Officers" means those claims as


7 defined in paragraph 6.
8 h) "Class" means all persons and entities who purchased or
9 otherwise acquired New Century common stock, New Century Series A Preferred
10 Stock, New Century Series B Preferred Stock, and/or New Century call options
11 and/or who sold New Century put options, during the time period from May 5,

12 2005, through and including March 13, 2007, either in the Offerings (as defined

13 herein), pursuant to a registration statement, or in the market, and who, upon


14 disclosure of certain facts alleged in the Complaint, were injured thereby.

15 Excluded from the Class are (a) Defendants; (b) members of the immediate
16 families of Individual Defendants; (c) the subsidiaries and affiliates of Defendants;

17 (d) any person or entity who was a partner, executive officer, director or controlling
18 person of New Century (including any of its subsidiaries or affiliates) or of any

19 other Defendant; (e) any entity in which any Defendant has a controlling interest;
20 and (f) the legal representatives, heirs, successors and assigns of any such excluded

21 party. Also excluded from the Class are any persons who exclude themselves by

22 filing a request for exclusion in accordance with the requirements set forth in the

23 Notice.
24 i) "Class Distribution Order" means an order entered by the Court
25 authorizing and directing that the Net Settlement Fund be distributed, in whole or

26 in part, to Authorized Claimants.

27

28

-5- KPMG STIPULATION OF SETTLEMENT


Case No. 2:07-ev-0093 1 -DDP (FMOx)

Case 2:07-cv-00931-DDP-FMO Document 484-5 Filed 07/30/10 Page 8 of 37 Page ID
#:11025

1 j) "Class Member" means a person or entity that is a member of


2 the Class and does not exclude himself, herself or itself by filing a request for

3 exclusion in accordance with the requirements set forth in the Notice.

4 k) "Class Period" means the period from May 5, 2005, through


5 and including March 13, 2007.

6 1) "Complaint" means the Second Amended Consolidated Class


7 Action Complaint filed by Plaintiffs in the Consolidated Action, on or about April
8 30, 2008.

9 m) "Court" means the United States District Court for the Central
1.0 District of California.
11 n) "Defendants" means the Underwriter Defendants, KPMG, and
12 the Individual Defendants. y
13 o) "Debtors" means New Century Financial Corporation (f/k/a
14 New Century REIT, Inc.), a Maryland corporation; New Century TRS Holdings,

15 Inc. (f/k/a New Century Financial Corporation), a Delaware corporation; New

16 Century Mortgage Corporation (f/k/a JBE Mortgage) (d/b/a NCMC Mortgage

17 Corporate, New Century Corporation, and New Century Mortgage Ventures, LLC),

18 a California corporation; NC Capital Corporation, a California corporation;

19 Home1.23 Corporation (f/k/a The Anyloan Corporation, 1800anyloan.com , and


20 Anyloan.com), a California corporation; New Century Credit Corporation (f/k/a

21 Worth Funding Incorporated), a California corporation; NC Asset Holding, L.P.

22 (f/k/a NC Residual II Corporation), a Delaware limited partnership; NC Residual

23 III Corporation, a Delaware corporation; NC Residual IV Corporation, a Delaware


24 corporation; New Century R.E.O. Corp., a California corporation; New Century

25 R.E.O. II Corp., a California corporation; New Century R.E.O. III Corp., a


26 California corporation; New Century Mortgage Ventures, LLC (d/b/a Summit

27 Resort Lending, Total Mortgage Resource, Select Mortgage Group, Monticello

28 Mortgage Services, Ad Astra Mortgage, Midwest Home Mortgage, TRATS

-6- KPMG STIPULATION OF SETTLEMENT


Case No. 2:07-ev-00931-DDP (FMOx)
Case 2:07-cv-00931-DDP-FMO Document 484-5 Filed 07/30/10 Page 9 of 37 Page ID
#:11026

1 Financial Services, Elite Financial Services, and Buyers Advantage Mortgage), a

2 Delaware limited liability company; NC Deltex, LLC, a Delaware limited liability


3 company; NCoral, L.P., a Delaware limited partnership; and New Century 1
4 Warehouse Corporation, a California corporation.
5 p) "Debtors' Estates" means the bankruptcy estates of the Debtors
6 created as a result of the Debtors' petitions under Chapter 11 of Title 11 of the
7 United States Bankruptcy Code.

8 q) "Effective Date" means the date on which all the following


9 shall have occurred: (a) the Court has entered the Preliminary Approval Order; (b)
10 payment of the KPMG Settlement Amount has been made pursuant to ¶9 below;
11 (c) ninety (90) days have elapsed since the deadline for KPMG to serve the CAFA

12 Notices; (d) KPMG and the other Released Auditor Parties have been released

13 from any and all claims and causes of action of every nature and description,

14 whether known or Unlmown Claims, by the Settling Individuals whether arising

15 under federal, state, common or foreign law, that arise out of or relate in any way

16 to the institution, prosecution, or settlement of the claims which were asserted in


17 the Consolidated Action, the Trustee Litigation or the Kodiak Litigation, or that

18 arise out of or relate in any way to New Century (including any of its subsidiaries

19 and affiliates), the Trust, the Trustee, the Debtors, or the Debtors' Estates, except
20 for (1) an allowed priority claim in the amount of $5,000 pursuant to proof of claim
21 no. 2385 filed by Fredric J. Forster in the Bankruptcy Court against Debtors'

22 Estates and (ii) any and all claims arising out of or in connection with the defense

23 and subsequent settlement of the Schroeder a New Century Holdings, Inc.


24 (Adversary Proceeding No. 07-51598(KJC)) and the Philadelphia Indemnity

25 Arbitration, including, but not limited to (I) claims for benefits under any insurance

26 programs or policies to which the Settling Individuals are entitled, (II) claims for

27 advancement, indemnification, contribution, reimbursement or other payments


28 whether based on law, the Debtors' certificate or articles of incorporation, bylaws,

-7- KPMG STIPULATION OF SETTLEMENT


Case No. 2:07-ev-0093 I -DDP (FMOx)

Case 2:07-cv-00931-DDP-FMO Document 484-5 Filed 07/30/10 Page 10 of 37 Page ID


#:11027

1 or other contract or agreement; (e) KPMG and the other Released Auditor Parties
2 have been released from each and every claim by the Underwriter Defendants
3 arising under federal, state, common or foreign law, arising out of or based upon

4 the allegations, transactions, facts, matters or occurrences, representations or


5 omissions involved, set forth, or referred to in the Consolidated Action; (f) the
6 Court has approved the KPMG Settlement, following notice to the Class and a
7 hearing, as prescribed by Rule 23 of the Federal Rules of Civil Procedure; and

8 (g) the Court has entered the KPMG Judgment, substantially in the form annexed
9 hereto as Exhibit B, which has become Final. KPMG shall have the right to waive
10 some or all of the conditions in subsections (d) and (e) of this subparagraph, but in

11 such event, KPMG shall be required to promptly offer to the Settling Individuals

12 and to the Underwriter Defendants substantively reciprocal releases substantively


13 similar to the reciprocal releases identified below in paragraphs 6 and 7. In the

14 event that KPMG receives the releases from the Settling Individuals stated in
15 subsection (d), KPMG shall be required to promptly offer to other former New

16 Century officers or directors with whom KPMG has entered into a tolling
17 agreement related to New Century substantially similar substantively reciprocal
18 releases.
19 r) "Escrow Account" means an account maintained to hold the
20 Settlement Fund, which shall be controlled exclusively by Lead Counsel and
21 deemed to be in the custody of the Court and shall remain subject to the

22 jurisdiction of the Court until such time as the funds are distributed or returned

23 pursuant to the terms of this Stipulation and/or further order of the Court.
24 s) "Escrow Agent" means The Huntington National Bank to serve
25 as escrow agent.
26 t) "Escrow Agreement" means the agreement among Lead
27 Counsel and the Escrow Agent setting forth the terms under which the Escrow

28 Agent shall maintain the Escrow Account.

-8- KPMG STIPULATION OF SETTLEMENT


Case No. 2:07-ev-00931-DDP (FMOx)

Case 2:07-cv-00931-DDP-FMO Document 484-5 Filed 07/30/10 Page 11 of 37 Page ID
#:11028

1 u) "Final" when referring to an order or judgment means: (i) that


2 the time for appeal or appellate review of the order or judgment has expired; or
3 (ii) if there has been an appeal, (a) that the appeal has been decided without

4 causing a material change in the order or judgment; or (b) that the order or
5 judgment has been upheld on appeal and is no longer subject to appellate review

6 by further appeal or writ of certiorari.


7 v) "Individual Defendants" means Robert K. Cole, Brad A.
8 Morrice, the Estate of Edward F. Gotschall, Patti M. Dodge, Fredric J. Forster,

9 Michael M. Sachs, Harold A. Black, Donald E. Lange, Terrence P. Sandvik,


10 Richard A. Zona, Marilyn A. Alexander, David Einhorn, and William J. Popejoy.

11 w) "Kodiak" means Kodiak Warehouse LLC, Kodiak Warehouse


12 JPM Capital LLC, Kodiak CDO1 Ltd., Kodiak CDO Management LLC, and

13 Kodiak Funding LP.

14 x) "KPMG" means KPMG LLP.


15 y) "KPMG Judgment" means the final judgment, substantially in
16 the form attached hereto as Exhibit B, to be entered pursuant to Rule 54(b) of the

17 Federal Rules of Civil Procedure approving the KPMG Settlement.


18 z) "KPMG Settlement" means the proposed settlement as set forth
19 in this Stipulation.
20 aa) "KPMG Settlement Amount" means the sum of $44,750,000.00 i
21 in cash which KPMG shall pay or cause to be paid into the Escrow Account as set

22 forth in ¶9 below.

23 bb) "Kodiak Litigation" means the action Kodiak Warehouse LLC,


24 et al. a Brad A. Morrice, et al. (Case No. 08-1265-DDP-FMO) commenced on

25 November 7, 2008, against Robert K. Cole, Brad A. Morrice, the Estate of Edward

26 F, Gotschall, Patti M. Dodge, and Jeffrey D. Goldberg by Kodiak in the United


27 States District Court for the Central District of California.

28

-9- KPMG STIPULATION OF SETTLEMENT


Case No. 2:07-cv-00931-DDP (FMOx)
Case 2:07-cv-00931-DDP-FMO Document 484-5 Filed 07/30/10 Page 12 of 37 Page ID
#:11029

1 cc) "Lead Counsel" means the law firm of Bernstein Litowitz


2 Berger & Grossmann LLP.
3 dd) "Lead Plaintiff' means the New York State Teachers'
4 Retirement System.
5 ee) "Litigation Expenses" means the costs and expenses incurred
6 by Plaintiffs' Counsel in connection with commencing and prosecuting the
7 Consolidated Action, for which Lead Counsel intends to apply to the Court for
8 reimbursement from the Settlement Fund.

9 ff) "Net Settlement Fund" means the Settlement Fund (as defined
10 below) less: (i) any Taxes; (ii) any Notice and Administration Costs; (iii) any

11 attorneys' fees awarded by the Court; and (iv) any Litigation Expenses awarded by

12 the Court.

13 gg) "Notice" means the Notice of Pendency of Class Action and


14 Proposed Settlement, Settlement Fairness Hearing and Motion for Attorneys' Fees
15 and Reimbursement of Litigation Expenses, substantially in the form attached

16 hereto as Exhibit 1 to Exhibit A, which is to be sent to members of the Class.

1 7 hh) "Notice and Administration Costs" means the costs, fees and
18 expenses that are incurred by the Claims Administrator and Lead Counsel in

19 connection with (i) providing notice to the Class; and (ii) administering the Claims

20 process.
21 ii) "Offerings" means the public offerings pursuant to which New
22 Century Series A and B Preferred Stock were offered to the public in June 2005

23 and August 2006.

24 jj) "Other Former Officers" means David Kenneally, Kevin Cloyd,


25 Patrick Flanagan, Stergios Theologides, and Joseph F. Eckroth, Jr.

26 kk) "Parties" means KPMG and Plaintiffs, on behalf of themselves


27 and the Class Members.
28

-10- KPMG STIPULATION OF SETTLEMENT


Case No. 2:07-ev-00931-DDP (FMOx)
Case 2:07-cv-00931-DDP-FMO Document 484-5 Filed 07/30/10 Page 13 of 37 Page ID
#:11030

1 11) "Philadelphia Indemnity Arbitration" means the claims filed


2 with the American Arbitration Association by the Trustee against Philadelphia
3 Indemnity Insurance Company to pay and indemnify, in accordance with the terms
4 of the applicable insurance policy, New Century, its successor-in-interest, the New
5 Century Liquidating Trust, and Harold A. Black, Fredric J. Forster, Donald E.

6 Lange, and Michael M. Sachs, the full amount of defense costs that each have
7 incurred in the defense and subsequent settlement of Schroeder v. New Century
8 Holdings, Inc. (Adversary Proceeding No. 07-51598 (KJC)), and to pay and
9 reimburse their other insurable losses as agreed to in said insurance policy.
10 mm) "Plaintiffs" means Lead Plaintiff, Carl Larson and Charles
11 Hooten.
12 nn) "Plaintiffs' Counsel" means Lead Counsel and all other counsel
13 who, at the direction and under the supervision of Lead Counsel, represent Class
14 Members in the Consolidated Action.

15 oo) "Plan of Allocation" means the proposed plan of allocation of


16 the Net Settlement Fund set forth in the Notice.

17 pp) "Preliminary Approval Order" or "Notice Order" means the


18 proposed order, substantially in the form attached hereto as Exhibit A, to be entered

19 by the Court preliminarily approving the KPMG Settlement and directing notice be
20 provided to the Class.

21 qq) "Released Auditor Parties" means KPMG and any and all of its
22 partners, principals, officers, directors, employees, agents, attorneys and affiliates.
23 "Released Auditor Parties" does not include any Defendants other than KPMG

24 rr) "Released Parties' Claims" means any and all claims and causes
25 of action of every nature and description, whether known or unknown, whether

26 arising under federal, state, common or foreign law, that arise out of or relate in

27 any way to the institution, prosecution, or settlement of the claims against KPMG

28

-11- KPMG STIPULATION OF SETTLEMENT


Case No. 2:07-cv-0093 1 -DDP (FMOx)

Case 2:07-cv-00931-DDP-FMO Document 484-5 Filed 07/30/10 Page 14 of 37 Page ID
#:11031

1 "Released Parties' Claims" does not include claims relating to the enforcement of
2 the KPMG Settlement.

3 ss) "Released Underwriter Parties" means the Underwriter


4 Defendants and any and all of their respective parent companies, subsidiaries,
5 affiliates, heirs, executors, administrators, predecessors, successors and assigns,

6 and any and all of their current and former officers, directors, employees, agents
7 and attorneys. "Released Underwriter Parties" does not include any Defendants

8 other than the Underwriter Defendants.

9 tt) "Settled Claims" means any and all claims and causes of action
10 of every nature and description, whether known or Unknown, whether arising

11 under federal, state, common or foreign law, that Plaintiffs or any other member of

12 the Class (a) asserted against the Released Auditor Parties in the Complaint, or (b)

13 could have asserted against the Released Auditor Parties in any forum that arise out
14 of or are based upon the allegations, transactions, facts, matters or occurrences,

15 representations or omissions involved, set forth, or referred to in the Complaint,

16 and that arise out of or relate to the purchase of New Century common stock, New
17 Century Series A Preferred Stock, New Century Series B Preferred Stock, and/or
18 New Century call options and/or the sale of New Century put options during the

19 Class Period. "Settled Claims" does not include claims relating to the enforcement
20 of the KPMG Settlement.

21 uu) "Settlement Fund" means the KPMG Settlement Amount, and


22 any and all interest earned thereon.

23 vv) "Settlement Hearing" means the hearing set by the Court under
24 Rule 23(e)(1)(c) of the Federal Rules of Civil Procedure to consider approval of
25 the KPMG Settlement.

26 ww) "Settling Individuals" means the Individual Defendants and the


27 Other Former Officers and their respective heirs, executors, administrators,
28

-12- KPMG STIPULATION OF SETTLEMENT


Case No. 2:07-cv-00931-DDP (FMOx)

Case 2:07-cv-00931-DDP-FMO Document 484-5 Filed 07/30/10 Page 15 of 37 Page ID
#:11032

1 predecessors, successors and assigns, employees, agents and retained professionals


2 (other than the Underwriter Defendants).
3 xx) "Summary Notice" means the publication notice, substantially
4 in the form attached hereto as Exhibit 3 to Exhibit A, to be published as set forth in

5 the Preliminary Approval Order.

6 yy) "Taxes" means: (i) all federal, state and/or local taxes of any
7 kind on any income earned by the Settlement Fund; and (ii) the reasonable
8 expenses and costs incurred by Lead Counsel in connection with determining the

9 amount of, and paying, any taxes owed by the Settlement Fund (including, without a
10 limitation, reasonable expenses of tax attorneys and accountants).

11 zz) "Trust" means the New Century Liquidating Trust and


12 Reorganized New Century Warehouse Corporation.

13 aaa) "Trustee" means Alan M. Jacobs, as Liquidating Trustee of the


14 New Century Liquidating Trust and Plan Administrator of the Reorganized New

15 Century Warehouse Corporation.


16 bbb) "Trustee Litigation" means the adversary proceeding The New
17 Century Liquidating Trust and Reorganized New Century Warehouse Corp. by and
18 through Alan M. Jacobs, Liquidating Trustee and Plan Administrator (In re New

19 Century TRS Holdings, Inc.) (Adv. Proc. No. 09-5882 (KJC)) commenced on April

20 1 1 2009, against Robert C. Cole, Brad A. Morrice, Susan K. Gotschall, as Executor

21 of the Estate of Edward F. Gotschall, Marilyn A. Alexander, Harold A. Black,

22 Frederic J. Forster, Donald E. Lange, William J. Popejoy, Michael M. Sachs,

23 Richard A. Zona, David Einhorn, Patrick Flanagan, Kevin M. Cloyd, Patti M.

24 Dodge, Joseph F. Eckroth, Jr., Stergios Theologides, and EG Enterprises, in the

25 United States District Court for the District of Delaware.

26 ccc) "Underwriter Defendants" means Bear, Stearns & Co. Inc., now
27 known as J.P. Morgan Securities Inc., Deutsche Bank Securities Inc., Piper Jaffray

28

-13- KPMG STIPULATION OF SETTLEMENT


Case No. 2:07-ev-00931-DDP (FMOx)
Case 2:07-cv-00931-DDP-FMO Document 484-5 Filed 07/30/10 Page 16 of 37 Page ID
#:11033

1 & Co., Stifel, Nicolaus & Co., Inc., JMP Securities LLC, Roth Capital Partners,
2 Morgan Stanley & Co., Inc., and Jefferies & Company, Inc.

3 ddd) "Unknown Claims" means any and all Settled Claims that
4 Plaintiffs or any Class Member does not know or suspect to exist in his, her or its
5 favor at the time of the release of the Released Auditor Parties, and any Released

6 Parties' Claims that any Released Auditor Party does not know or suspect to exist
7 in his, her or its favor, which if known by him, her or it might have affected his,
8 her or its decision(s) with respect to the KPMG Settlement. With respect to any
9 and all Settled Claims and Released Parties' Claims, the Parties stipulate and agree
10 that upon the Effective Date, the Plaintiffs and the Released Auditor Parties shall
11 expressly waive, and each Class Member shall be deemed to have waived, and by
12 operation of the KPMG Judgment shall have expressly waived, any and all
13 provisions, rights and benefits conferred by any law of any state or territory of the
14 United States, or principle of common law, that is similar, comparable, or
15 equivalent to Cal. Civ. Code § 1542, which provides:

16 A general release does not extend to claims which the


17 creditor does not know or suspect to exist in his or her
18 favor at the time of executing the release, which if known
19 by him or her must have materially affected his or her
20 settlement with the debtor.
21 Plaintiffs and the Released Auditor Parties acknowledge, and Class Members by
22 operation of law shall be deemed to have acknowledged, that the inclusion of

23 "Unknown Claims" in the definition of Settled Claims and Released Parties'


24 Claims was separately bargained for and was a key element of the KPMG

25 Settlement.

26 CLASS CERTIFICATION
27 2. The Parties stipulate and agree to: (a) certification of the Consolidated
28 Action as a class action pursuant to Rules 23(a) and 23(b)(3) of the Federal Rules

-14- KPMG STIPULATION OF SETTLEMENT


Case No. 2:07-cv-00931-DDP (FMOx)
Case 2:07-cv-00931-DDP-FMO Document 484-5 Filed 07/30/10 Page 17 of 37 Page ID
#:11034

1 of Civil Procedure on behalf of the Class; (b) appointment of Plaintiffs as the Class
I
2 Representatives; and (c) appointment of Lead Counsel as Class Counsel pursuant

3 to Rule 23(g) of the Federal Rules of Civil Procedure. Following execution of this
4 Stipulation, Plaintiffs, with the consent of KPMG, shall apply to the Court for entry
I
5 of the Preliminary Approval Order, which will certify the Consolidated Action to

6 proceed as a class action. The Parties shall have the right to withdraw from the
7 agreement to stipulate and agree to class certification and the appointment of Class

8 Representatives and Class Counsel in the event that the KPMG Settlement does not

9 become Final.
10 RELEASE OF CLAIMS
11 3. The obligations incurred pursuant to this Stipulation shall be in full
12 and final disposition of the Consolidated Action against KPMG; and shall frilly and

13 finally release any and all Settled Claims as against all Released Auditor Parties

14 and shall also release as against the Plaintiffs and all other Class Members any and

15 all Released Parties' Claims, and shall also fully and finally release other claims as

16 set forth below.

17 4. Pursuant to the KPMG Judgment, upon the Effective Date, Plaintiffs


18 and members of the Class shall be deemed by operation of law to have released,

19 waived, discharged and dismissed each and every Settled Claim, and shall forever
20 be enjoined from prosecuting any or all Settled Claims, against any Released
21 Auditor Party.
22 5. Pursuant to the KPMG Judgment, upon the Effective Date, KPMG
23 and each of the other Released Auditor Parties, on behalf of themselves, their heirs,
24 executors, administrators, predecessors, successors and assigns, shall be deemed by

25 operation of law to have released, waived, discharged and dismissed each and

26 every one of the Released Parties' Claims, and shall forever be enjoined from

27 prosecuting any or all of the Released Parties' Claims, against Plaintiffs and their

28 employees, agents and attorneys, and all other Class Members.

-15- KPMG STIPULATION OF SETTLEMENT


Case No. 2:07-ev-0093 1 -DDP (FMOx)
Case 2:07-cv-00931-DDP-FMO Document 484-5 Filed 07/30/10 Page 18 of 37 Page ID
#:11035

1 6. Pursuant to the KPMG Judgment, upon the Effective Date, KPMG


2 and the other Released Auditor Parties hereby release, waive, discharge and
3 dismiss, and shall be deemed by this agreement and/or operation of law to forever

4 be enjoined from prosecuting any and all claims and causes of action of every
5 nature and description, whether known or Unknown Claims against any of the

6 Settling Individuals, whether arising under federal, state, common or foreign law,
7 that arise out of or relate in any way to the institution, prosecution, or settlement of
8 the claims which were asserted in the Consolidated Action, the Trustee Litigation
9 or the Kodiak Litigation, or that arise out of or relate in any way to New Century
10 (including any of its subsidiaries and affiliates), the Trust, the Trustee, the Debtors,
11 or the Debtors' Estates, except for (i) an allowed priority claim in the amount of

12 $5,000 pursuant to proof of claim no. 2385 filed by Fredric J. Forster in the

13 Bankruptcy Court against Debtors' Estates and (ii) any and all claims arising out of
14 or in connection with the defense and subsequent settlement of the Schroeder v.
15 New Century Holdings, Inc. (Adversary Proceeding No. 07-51598(KJC)) and the
16 Philadelphia Indemnity Arbitration, including, but not limited to (a) claims for
17 benefits under any insurance programs or policies to which the Settling Individuals
18 are entitled, (b) claims for advancement, indemnification, contribution,
19 reimbursement or other payments whether based on law, the Debtors' certificate or
20 articles of incorporation, bylaws, or other contract or agreement ("Claims Against

21 Directors And Officers"), provided and conditioned upon KPMG and the other
22 Released Auditor Parties receiving substantively reciprocal releases from the

23 Settling Individuals. This release does not include claims relating to the
24 enforcement of the Settlement.

25 7. Pursuant to the KPMG Judgment, upon the Effective Date, KPMG


26 and the Released Auditor Parties shall be deemed by operation of law to have
27 released, waived, discharged and dismissed, and shall be forever enjoined from
28 prosecuting, each and every claim against the Underwriter Defendants and the

-16- KPMG STIPULATION OF SETTLEMENT


Case No. 2:07-cv-00931-DDP (FMOx)

Case 2:07-cv-00931-DDP-FMO Document 484-5 Filed 07/30/10 Page 19 of 37 Page ID
#:11036

1 Released Underwriter Parties, arising under federal, state, common or foreign law,
2 arising out of or based upon the allegations, transactions, facts, matters or

3 occurrences, representations or omissions involved, set forth, or referred to in the

4 Consolidated Action, provided and conditioned upon KPMG receiving

5 substantively reciprocal releases from the Underwriter Defendants.


6 8. Pursuant to the KPMG Judgment, upon the Effective Date, KPMG
7 and the Released Auditor Parties shall be deemed by operation of law to have
8 released, waived, discharged and dismissed, and shall be forever enjoined from

9 prosecuting, each and every claim and cause of action of every nature and

10 description, whether known or Unknown Claims, whether arising under federal,


11 state, common or foreign law, that KPMG (a) asserted in the Kodiak Litigation, or

12 (b) could have asserted in any forum that arise out of or are based upon the

13 allegations, transactions, facts, matters or occurrences, representations or


14 omissions involved, set forth, or referred to in the Kodiak Litigation, or that arise

15 out of or relate in any way to New Century (including any of its subsidiaries and

16 affiliates), the Debtors or the Debtors' Estates, against Kodiak, provided and

17 conditioned upon KPMG receiving a substantially reciprocal release from Kodiak


18 THE SETTLEMENT CONSIDERATION
19 9. Within twenty-one (21) business days after entry of the Preliminary
20 Approval Order, KPMG shall pay or cause to be paid into the Escrow Account a

21 total of $44,750,000.00 in cash (the "KPMG Settlement Amount"). No later than

22 ten (10) business days after entry of the Preliminary Approval Order, Lead Counsel

23 shall provide to KPMG the following information:

24 a) the street address of the Escrow Agent;


25 b) the ABA routing number of the Escrow
Agent; and
26
c) the Federal tax identification number for the
27 Escrow Account.
28

-17- KPMG STIPULATION OF SETTLEMENT


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1 10. If any portion of the KPMG Settlement Amount is not paid into the
2 Escrow Account in the timeframe as designated above in ¶9, Plaintiffs have the
3 option to: (1) terminate the KPMG Settlement; or (ii) require that KPMG pay or
4 cause to be paid interest at the rate of 5% per annum from the time the payments
5 are due until deposited, which interest shall be paid at the time the funds are
6 subsequently paid into the Escrow Account.
7 1 l . Within ten (10) calendar days after filing of the Motion for
8 Preliminary Approval, KPMG shall properly serve the CAFA Notices. The Parties

9 will request that, pursuant to 28 U.S.C. § 1715(d), the Final Approval Hearing be
10 scheduled for no earlier than ninety (90) days following the deadline for KPMG to
11 serve the CAFA Notices as stated in this paragraph. Any failure by KPMG to

12 comply with the CAFA Notices requirements will not provide grounds for delay of

13 the Final Approval Hearing or entry of the KPMG Judgment.


14 USE OF SETTLEMENT FUNDS
15 12. The Settlement Fund shall be used to pay: (1) any Taxes; (ii) any
16 Notice and Administration Costs; (iii) any attorneys' fees awarded by the Court;

17 and (iv) any Litigation Expenses awarded by the Court. The balance remaining in

18 the Settlement Fund, after payment of items (i)-(iv), shall be distributed to


19 Authorized Claimants as provided below.
20 13. The Net Settlement Fund shall be distributed to Authorized Claimants
I
21 as provided herein. Except as provided herein or pursuant to orders of the Court,

22 the Net Settlement Fund shall remain in the Escrow Account prior to the Effective

23 Date. All funds held by the Escrow Agent shall be deemed to be in the custody of
24 the Court and shall remain subject to the jurisdiction of the Court until such time as

25 the funds shall be distributed or returned pursuant to the terms of this Stipulation

26 and/or further order of the Court. The Escrow Agent shall invest any funds in the

27 Escrow Account in United States Treasury Bills (or a mutual fund invested solely

28 in such instruments) and shall collect and reinvest all interest accrued thereon,

-18- KPMG STIPULATION OF SETTLEMENT


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#:11038

1 except that any residual cash balances of less than $100,000 may be invested in
E

2 money market mutual funds comprised exclusively of investments secured by the


3 full faith and credit of the United States.

4 14. The Parties hereto agree that the Settlement Fund is intended to be a
5 Qualified Settlement Fund within the meaning of Treasury Regulation § 1.46813-1

6 and that Lead Counsel, as administrator of the Settlement Fund within the meaning
7 of Treasury Regulation § 1.468B-2(k)(3), shall be solely responsible for filing or

8 causing to be filed all informational and other tax returns as may be necessary or
9 appropriate (including, without limitation, the returns described in Treasury
10 Regulation § 1.468B-2(k)) for the Settlement Fund. Such returns shall be
11 consistent with this paragraph and in all events shall reflect that all Taxes on the

12 income earned on the Settlement Fund shall be paid out of the Settlement Fund as

13 provided by Paragraph 37 below. Lead Counsel shall also be solely responsible for
14 causing payment to be made from the Settlement Fund of any Taxes owed with

15 respect to the Settlement Fund. Upon written request, KPMG will provide
E
16 promptly to Lead Counsel any statements or information required for tax purposes,
17 including the statement described in Treasury Regulation § 1.468B-3(e). Lead

18 Counsel, as administrator of the Settlement Fund within the meaning of Treasury

19 Regulation § 1.468B-2(k)(3), shall timely make such elections as are necessary or


20 advisable to carry out this paragraph, including, as necessary, making a "relation

21 back election," as described in Treasury Regulation § 1.468B-10), to cause the


22 Qualified Settlement Fund to come into existence at the earliest allowable date, and

23 shall take or cause to be taken all actions as may be necessary or appropriate in

24 connection therewith.

25 15. All Taxes shall be paid out of the Settlement Fund, and shall be timely
26 paid by the Escrow Agent pursuant to the disbursement instructions to be set forth

27 in the Escrow Agreement, and without prior Order of the Court. Any tax returns

28 prepared for the Settlement Fund (as well as the election set forth therein) shall be

-19- KPMG STIPULATION OF SETTLEMENT


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#:11039
l
1 consistent with the previous paragraph and in all events shall reflect that all Taxes
2 (including any interest or penalties) on the income earned by the Settlement Fund

3 shall be paid out of the Settlement Fund as provided herein. None of the Released

4 Auditor Parties shall have any liability or responsibility for any Taxes or related

5 expenses of any kind whatsoever. The Settlement Fund shall indemnify and hold

6 all Released Auditor Parties harmless for any Taxes and related expenses of any
7 kind whatsoever (including without limitation, taxes payable by reason of any such
8 indemnification), if any, payable by KPMG by reason of any income earned on the

9 Settlement Fund. KPMG shall notify the Escrow Agent promptly if it receives any E
a
10 notice of any claim for Taxes relating to the Settlement Fund.

11 16. This is not a claims-made settlement. Once the Effective Date occurs,
12 neither KPMG, its insurance carriers, nor any other Released Auditor Parties nor

13 any other person or entity that contributed to the Settlement Fund on their behalf,

14 will have the right or ability to get back any of the KPMG Settlement Amount or

15 any interest accrued thereon, irrespective of the number of Claims filed, the

16 collective amount of losses of Authorized Claimants, the percentage of recovery of


17 losses, or the amounts to be paid to Authorized Claimants from the Net Settlement
I
18 Fund.
19 17. The Claims Administrator shall discharge its duties under Lead
20 Counsel's supervision and subject to the jurisdiction of the Court. Except as V
I
21 otherwise provided herein, the Released Auditor Parties shall have no I

22 responsibility whatsoever for the administration of the KPMG Settlement, and

23 shall have no liability whatsoever to any person, including, but not limited to, the
24 Class Members, in connection with any such administration. Lead Counsel shall

25 cause the Claims Administrator to mail the Notice and Proof of Claim Form to

26 those members of the Class at the address of each such person as set forth in the

27 records of New Century or its transfer agent(s), or who otherwise may be identified

28 through further reasonable effort. Lead Counsel will cause to be published the

-20- KPMG STIPULATION OF SETTLEMENT


Case No. 2:07-ev-00931-DDP (FMOx)

i
Case 2:07-cv-00931-DDP-FMO Document 484-5 Filed 07/30/10 Page 23 of 37 Page ID
#:11040

1 Summary Notice pursuant to the terms of the Preliminary Approval Order or


2 whatever other form or manner might be ordered by the Court.

3 18. Lead Counsel may pay from the Escrow Account, without further
4 approval from KPMG or other Defendants or further order of the Court, the Notice

5 and Administration Costs actually incurred. Such costs and expenses shall include,

6 without limitation, the actual costs of publication, printing and mailing the Notice,
7 reimbursements to nominee owners for forwarding the Notice to their beneficial
8 owners of New Century securities, the administrative expenses incurred and fees

9 charged by the Claims Administrator in connection with providing Notice and


10 processing the submitted claims, and the fees, if any, of the Escrow Agent. In the
i
11 event that the KPMG Settlement is terminated pursuant to the terms of this

12 Stipulation, all Notice and Administration Costs paid or incurred, including any

13 related fees, shall not be returned or repaid to KPMG or any other person or entity

14 who or which contributed to the Settlement Fund on their behalf.

15 ATTORNEYS' FEES AND LITIGATION EXPENSES


16 19. Lead Counsel will apply to the Court for a collective award of
17 attorneys' fees to Plaintiffs' Counsel. Lead Counsel also will apply to the Court for
1s reimbursement of Litigation Expenses, which may include reimbursement of the

19 expenses of Plaintiffs in accordance with 15 U.S.C. § 78u-4(a)(4). Neither KPMG,

20 nor any other Released Auditor Party, shall take any position with respect to Lead

21 Counsel's applications or awards discussed in this paragraph. Such matters are not

22 the subject of any agreement between KPMG and Plaintiffs other than what is set

23 forth in this Stipulation.

24 20. Any attorneys' fees and Litigation Expenses that are awarded by the
25 Court shall be paid to Lead Counsel, with the Court's approval, immediately upon

26 award, notwithstanding the existence of any timely filed objections thereto, or

27 potential for appeal therefrom, or collateral attack on the KPMG Settlement or any

28 part thereof, subject to Lead Counsel's obligation to pay back any such amount if,

-21- KPMG STIPULATION OF SETTLEMENT


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#:11041

1 as a result of any appeal, further proceeding or successful collateral attack, the

2 attorneys' fee or Litigation Expense award is amended, modified or does not


3 become Final. Lead Counsel shall make the appropriate refund or repayment in

4 full, with interest at the same rate as earned by the Settlement Fund, no later than
5 ten (10) business days after receiving from KPMG's counsel or from a court of

6 appropriate jurisdiction notice of the termination of the KPMG Settlement or

7 notice of any reduction of the award of attorneys' fees and/or Litigation Expenses.
8 An award of attorneys' fees and/or Litigation Expenses is not a necessary term of
9 this Stipulation and is not a condition of this Stipulation. Lead Counsel, as a
10 condition of receiving such fees and expenses, on behalf of itself and each partner
s
11 and/or shareholder of it, agrees that the law firm and its partners and/or

12 shareholders are subject to the jurisdiction of the Court for the purpose of

13 enforcing the provisions of this paragraph. Without limitation, each such law firm

14 and its partners and/or shareholders agree that the Court may, upon application of

15 KPMG on notice to Lead Counsel, summarily issue orders, including but not

16 limited to judgment and attachment orders, and may make appropriate findings of,

17 or sanctions for, contempt against them or any of them should such law firm fail to
18 timely repay fees and expenses pursuant to this paragraph.

19 21. Lead Counsel shall have the sole authority to allocate the Court-
20 awarded attorneys' fees amongst Plaintiffs' Counsel in a manner which it, in good
21 faith, believes reflects the contributions of such counsel to the prosecution and

22 settlement of the Consolidated Action.

23 22. Neither KPMG nor any of the Released Auditor Parties shall have any
24 responsibility for, or interest in, or liability whatsoever with respect to any person

25 who may assert some claim to any fee and expense award that the Court may

26 make.

27

28

-22- KPMG STIPULATION OF SETTLEMENT


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#:11042

1 CLAIMS ADMINISTRATOR
2 23. The Claims Administrator shall administer the process of receiving,
3 reviewing and approving or denying Claims under Lead Counsel's supervision and
4 subject to the jurisdiction of the Court. KPMG shall not have any responsibility
5 for, involvement in or liability for providing notice to the Class, the administration d

6 of the KPMG Settlement, the allocation of the Settlement proceeds, or the


7 reviewing or challenging of Claims of members of the Class. The allocation of
8 the Net Settlement Fund among Authorized Claimants shall be subject to a Plan of
9 Allocation to be proposed by Lead Counsel and approved by the Court. KPMG
a
10 shall take no position with respect to such proposed Plan of Allocation; such Plan
11 of Allocation is a matter separate and apart from the proposed Settlement between
12 KPMG and Plaintiffs, and any decision by the Court concerning the Plan of
13 Allocation shall not affect the validity or finality of the proposed Settlement.
i
14 24. The Claims Administrator shall receive Claims and determine first,
15 whether the Claim is a valid Claim, in whole or part, and second, each Authorized
16 Claimant's pro rata share of the Net Settlement Fund as set forth in the Plan of
17 Allocation set forth in the Notice attached hereto as Exhibit 1 to Exhibit A, or in

18 such other plan of allocation as the Court approves.


19 25. The Plan of Allocation proposed in the Notice is not a necessary tern
20 of this Stipulation and it is not a condition of this Stipulation that any particular
i
21 plan of allocation be approved by the Court.

22 26. Any Class Member who does not submit a valid Claim Form will not
23 be entitled to receive any distribution from the Net Settlement Fund but will
24 otherwise be bound by all of the terns of this Stipulation and KPMG Settlement,

25 including the terms of the Judgment to be entered in the Consolidated Action and
26 the releases provided for herein, and will be permanently barred and enjoined from

27 bringing any action, claim, or other proceeding of any kind against any Released

28 Auditor Party concerning any Settled Claim.

-23- KPMG STIPULATION OF SETTLEMENT


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#:11043

1 27. Lead Counsel shall be responsible for supervising the administration


2 of the Settlement and disbursement of the Net Settlement Fund. Neither KPMG,
3 nor any other Released Auditor Party, shall have any liability, obligation or
4 responsibility whatsoever for the administration of the KPMG Settlement or
5 disbursement of the Net Settlement Fund. Neither KPMC^ nor any other Released
6 Auditor Party, shall be permitted to review, contest or object to any Claim Form or

7 any decision of the Claims Administrator or Lead Counsel with respect to

8 accepting or rejecting any Claim Form or Claim for payment by a Class Member.

9 Lead Counsel shall have the right, but not the obligation, to waive what they deem
10 to be formal or technical defects in any Claim Forms submitted in the interests of
11 achieving substantial justice.

12 28. For purposes of determining the extent, if any, to which a Class


13 Member shall be entitled to be treated as an Authorized Claimant, the following

14 conditions shall apply:


1 5 a. Each Class Member shall be required to submit a Claim Form
16 and Release, substantially in the form attached hereto as Exhibit 2 to Exhibit A,
17 releasing all Released Claims against the Released Auditor Parties and supported
18 by such documents as are designated therein, including proof of the Claimant's
19 loss, or such other documents or proof as the Claims Administrator or Lead
20 Counsel, in their discretion, may deem acceptable, by the date set by the Court;
21 b. Each Claim Form shall be submitted to and reviewed by the
22 Claims Administrator, under the supervision of Lead Counsel, who shall determine
23 in accordance with this Stipulation the extent, if any, to which each Claim shall be
24 allowed, subject to review by the Court pursuant to subparagraph (d) below;
25 C. Claim Forms that do not meet the submission requirements may
26 be rejected. Prior to rejecting a Claim in whole or in part, the Claims

27 Administrator shall communicate with the Claimant in writing, to give the


28 Claimant the chance to remedy any curable deficiencies in the Claim Form

-24- KPMG STIPULATION OF SETTLEMENT


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#:11044

1 submitted. The Claims Administrator, under supervision of Lead Counsel, shall


2 notify, in a timely fashion and in writing, all Claimants whose Claim the Claims j
3 Administrator proposes to reject in whole or in part, setting forth the reasons
4 therefor, and shall indicate in such notice that the Claimant whose Claim is to be

5 rejected has the right to a review by the Court if the Claimant so desires and

6 complies with the requirements of subparagraph (e) below;


7 d. If any Claimant whose Claim has been rejected in whole or in
8 part desires to contest such rejection, the Claimant must, within twenty (20) days

9 after the date of mailing of the notice required in subparagraph (c) above, serve
10 upon the Claims Administrator a notice and statement of reasons indicating the

11 Claimant's grounds for contesting the rejection along with any supporting

12 documentation, and requesting a review thereof by the Court. If a dispute

13 concerning a Claim cannot be otherwise resolved, Lead Counsel shall thereafter


14 present the request for review to the Court; and

15 e. The administrative detenninations of the Claims Administrator


16 accepting and rejecting Claims shall be presented to the Court, on notice to

17 KPMG's counsel, for approval by the Court in the Class Distribution Order,

18 29. Each Claimant shall be deemed to have submitted to the jurisdiction


19 of the Court with respect to the Claimant's Claim, and the Claim will be subject to
20 investigation and discovery under the Federal Rules of Civil Procedure, provided

21 that such investigation and discovery shall be limited to that Claimant's status as a

22 Class Member and the validity and amount of the Claimant's Claim. No discovery

23 shall be allowed on the merits of this Consolidated Action or this KPMG


24 Settlement in connection with the processing of Claim Forms.

25 30. Lead Counsel will apply to the Court, on notice to all Parties, for a
26 Class Distribution Order: (i) approving the Claims Administrator's administrative

27 determinations concerning the acceptance and rejection of the Claims submitted;


28 (ii) approving payment of any additional unpaid or anticipated administration fees

-25- KPMG STIPULATION OF SETTLEMENT


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Case 2:07-cv-00931-DDP-FMO Document 484-5 Filed 07/30/10 Page 28 of 37 Page ID
#:11045

1 and expenses associated with the administration of the KPMG Settlement from the
2 Escrow Account; (iii) if the Effective Date has occurred, directing payment of the p
3 Net Settlement Fund to Authorized Claimants from the Escrow Account; and (iv)
4 other relief as appropriate.
5 31. Payment
Y pursuant to the Class Distribution Order shall be final and
6 conclusive against all Class Members. All Class Members whose Claims are not
7 approved by the Court shall be barred from participating in distributions from the
8 Net Settlement Fund, but otherwise shall be bound by all of the terms of this

9 Stipulation and the KPMG Settlement, including the terms of the Judgment to be
10 entered in this Consolidated Action and the releases provided for therein, and will
11 be permanently barred and enjoined from bringing any action against any and all
12 Released Auditor Parties concerning any and all of the Settled Claims.

13 32. All proceedings with respect to the administration, processing and


14 determination of Claims and the determination of all controversies relating thereto, j
1
15 including disputed questions of law and fact with respect to the validity of Claims, s
16 shall be subject to the jurisdiction of the Court.
17 TERMS OF THE JUDGMENT
18 33. If the KPMG Settlement contemplated by this Stipulation is approved
19 by the Court, Lead Counsel and KPMG's counsel shall request that the Court enter
20 a KPMG Judgment, substantially in the form annexed hereto as Exhibit B,

21 pursuant to Rule 54(b) of the Federal Rules of Civil Procedure.

22 WAIVER OR TERMINATION
23 34. Within thirty (30) days of. (a) the Court's declining to enter, without
24 leave to resubmit, an order granting preliminary approval of the KPMG Settlement
25 in any material respect; (b) the Court's refusal to approve this Stipulation or any

26 material part of it; (c) the Court's declining to enter the KPMG Judgment in any

27 material respect; or (d) the date upon which the KPMG Judgment is modified or

28 reversed in any material respect by the Court of Appeals or the Supreme Court,

-26- KPMG STIPULATION OF SETTLEMENT


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#:11046

1 each of the Parties shall have the right to terminate the KPMG Settlement and this
2 Stipulation by providing written notice to the other Party of an election to do so.
3 However, any decision with respect to an application for attorneys' fees or

4 Litigation Expenses, or with respect to any plan of allocation, shall not be

5 considered material to the KPMG Settlement and shall not be grounds for

6 termination.
7 35. In addition, if Class Members who purchased or acquired more than a
8 certain number of shares of New Century common stock during the Class Period

9 properly elect to exclude themselves from the Class in accordance with the
10 requirements for requesting exclusion provided in the Notice, as specified in a
f

11 separate supplemental agreement among the Parties (the "Supplemental


12 Agreement"), KPMG shall have the option to terminate this KPMG Settlement and

13 Stipulation.

14 36, Lead Counsel and KPMG's counsel shall request jointly that the
i
15 deadline for submitting exclusions from the Class be at least twenty-one (21) days

16 prior to the Final Approval Hearing. Copies of all timely requests for exclusion

17 from the Class received by the Claims Administrator (or other person designated to
18 receive exclusion requests) shall be provided to Lead Counsel and KPMG's

19 counsel no later than fifteen (15) days prior to the Final Approval Hearing. If the
20 threshold stated in the Supplemental Agreement is reached, KPMG shall have until

21 5:00 p.m. PDT of the seventh day before the Final Approval Hearing to inform
22 Lead Counsel, in writing, that it elects to exercise its option to terminate the

23 KPMG Settlement and this Stipulation. Lead Counsel shall have the right to

24 communicate with the holders of such shares and, if a sufficient number of them

25 withdraw in writing their requests for exclusion such that the total number of
26 shares purchased during the Class Period represented by the remaining "opt outs"

27 represents less than the threshold, the notice of termination shall be deemed

28 withdrawn.

-27- KPMG STIPULATION OF SETTLEMENT


Case No. 2:07-cv-0093 1 -DDP (FMOx)
I

Case 2:07-cv-00931-DDP-FMO Document 484-5 Filed 07/30/10 Page 30 of 37 Page ID
#:11047

1 37. Except as otherwise provided herein, in the event that the KPMG
E

2 Settlement is terminated, the Parties shall be deemed to have reverted to their


3 respective status in this Consolidated Action immediately prior to May 5, 2010,

4 and, except as otherwise expressly provided, the Parties shall proceed in all
5 respects as if this Stipulation and any related orders had not been entered. Within
6 five (5) business days of receipt from KPMG of a notice of termination, Lead

7 Counsel shall direct the Escrow Agent, in writing, to return to KPMG the KPMG
8 Settlement Amount, including accrued interest and earnings, less any amounts paid

9 or incurred for Notice and Administration Costs actually incurred and paid or
10 payable and/or Taxes paid or owing. Within ten (10) business days of receipt of

11 such notice, the Escrow Agent shall refund that full amount to KPMG At the

12 request of KPMG, the Escrow Agent or its designee shall apply for any tax refund

13 owed on account of the KPMG Settlement Amount and shall pay the proceeds,
14 after deducting any fees or expenses incurred in connection with such i
i
15 application(s) for refund, to KPMG
16 NO ADMISSION OF WRONGDOING
17 38. This Stipulation, whether or not consummated, and any proceedings
18 taken pursuant to it:

19 a. shall not be offered or received against any of the Released


20 Auditor Parties as evidence of, or construed as, or deemed to be evidence of any

21 presumption, concession, or admission by any of the Released Auditor Parties with

22 respect to the truth of any fact alleged by Plaintiffs or the validity of any claim that

23 was or could have been asserted against any of the Released Auditor Parties in this

24 Consolidated Action or in any litigation, or of any liability, negligence, fault, or

25 other wrongdoing of any kind of any of the Released Auditor Parties;

26 b. shall not be offered or received against any of the Released


27 Auditor Parties as evidence of a presumption, concession or admission of any fault,
28 misrepresentation or omission with respect to any statement or written document

-28- KPMG STIPULATION OF SETTLEMENT


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Case 2:07-cv-00931-DDP-FMO Document 484-5 Filed 07/30/10 Page 31 of 37 Page ID
#:11048

1 approved or made by any of the Released Auditor Parties, or against the Plaintiffs
2 or any Class Members as evidence of any infirmity in the claims of Plaintiffs or the
3 other Class Members;
4 C. shall not be offered or received against any of the Released
5 Auditor Parties, or against the Plaintiffs or any other Class Members, as evidence
6 of a presumption, concession or admission with respect to any liability, negligence,
7 fault or wrongdoing of any kind, or in any way referred to for any other reason as
8 against any of the Released Auditor Parties, in any other civil, criminal or

9 administrative action or proceeding, other than such proceedings as may be


10 necessary to effectuate the provisions of this Stipulation; provided, however, that if
r
11 this Stipulation is approved by the Court, KPMG, any other Released Auditor

12 Party, or any Class Member may refer to it to effectuate the protection from

13 liability granted them hereunder;

14 d. shall not be construed against any of the Released Auditor


15 Parties, Plaintiffs or any other Class Members as an admission, concession, or

16 presumption that the consideration to be given hereunder represents the amount


17 which could be or would have been recovered after trial;

18 e. shall not be construed against Plaintiffs or any other Class


19 Members as an admission, concession, or presumption that any of their claims are
20 without merit or that damages recoverable under the Complaint would not have

21 exceeded the KPMG Settlement Amount; and

22 f. shall not be construed as or received in evidence as an


23 admission, concession or presumption that class certification is appropriate in this

24 Consolidated Action, except for purposes of this KPMG Settlement.

25 39. KPMG and/or any of the other Released Auditor Parties may file this
26 Stipulation of Settlement and/or the Judgment in this action, in order to support a

27 defense or counterclaim based on principles of res judicata, collateral estoppel, full


28 faith and credit, release, good faith settlement, judgment bar, or reduction or any

-29- KPMG STIPULATION OF SETTLEMENT


Case No. 2:07-ev-00931-DDP (FMOx)
Case 2:07-cv-00931-DDP-FMO Document 484-5 Filed 07/30/10 Page 32 of 37 Page ID
#:11049

1 other theory of claim preclusion or issue preclusion or similar defense or


2 counterclaim.
3 MISCELLANEOUS PROVISIONS
4 40. All of the exhibits attached hereto are hereby incorporated by
5 reference as though fully set forth herein.
6 41. KPMG warrants that, as to the payments made by or on behalf of it, at
7 the time of such payment, it was not insolvent, nor did nor will the payment
8 required to be made by or on behalf of it render it insolvent, within the meaning of
9 and/or for the purposes of the United States Bankruptcy Code, including §§ 101
10 and 547 thereof. This representation is made by KPMG and not by its counsel.
11 42. If a case is commenced in respect of KPMG (or any insurance carrier
12 contributing to the KPMG Settlement Amount) under Title 11 of the United States

13 Code (Bankruptcy), or a trustee, receiver, conservator, or other fiduciary is


14 appointed under any similar law, and in the event of the entry of a final order of a

15 court of competent jurisdiction determining the transfer of money to the Settlement

16 Fund or any portion thereof by or on behalf of KPMG to be a preference, voidable


17 transfer, fraudulent transfer or similar transaction and any portion thereof is

18 required to be returned, and such amount is not promptly deposited to the

19 Settlement Fund by others, then, at the election of Lead Counsel, the Parties shall
20 jointly move the Court to vacate and set aside the releases given and the Judgment

21 entered in favor of KPMG and the other Released Auditor Parties pursuant to this
22 Stipulation, which releases and Judgment shall be null and void; the Parties shall

23 be restored to their respective positions in the litigation immediately prior to May


24 5, 2010; and any cash amounts in the Settlement Fund shall be returned as

25 provided in Paragraph 37 above.

26 43. The Parties intend this KPMG Settlement to be a final and complete
27 resolution of all disputes asserted or which could be asserted by the Plaintiffs, any

28 other Class Members and their attorneys against all Released Auditor Parties with

-30- KPMG STIPULATION OF SETTLEMENT


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Case 2:07-cv-00931-DDP-FMO Document 484-5 Filed 07/30/10 Page 33 of 37 Page ID
#:11050

1 respect to all Settled Claims. Accordingly, the Parties agree not to assert in any
2 forum that this Consolidated Action was brought or defended in bad faith or i
3 without a reasonable basis. The Parties hereto shall assert no claims of any
4 violation of Rule 11 of the Federal Rules of Civil Procedure relating to the

5 prosecution, defense, or settlement of this Consolidated Action. The Parties agree


6 that the amount paid and the other terms of this Settlement were negotiated at
7 arm's-length in good faith by the Parties, including a mediation conducted by a
8 professional mediator, the Hon. Daniel Weinstein of JAMS (the "Mediator"), and
9 reflect a settlement that was reached voluntarily after consultation with
10 experienced legal counsel. g

11 44. While retaining their rights to deny that the claims asserted .in the
12 Consolidated Action were meritorious, KPMG in any statement made to any media

13 representative (whether or not for attribution) will not deny that the Consolidated

14 Action was commenced and prosecuted in good faith and is being settled
15 voluntarily after consultation with competent legal counsel. In all events, the

16 Parties shall refrain from any accusations of wrongful or actionable conduct by any
17 Party concerning the prosecution and resolution of the Consolidated Action, and
18 shall not otherwise suggest that the Settlement constitutes an admission of any
19 claim or defense alleged.
20 45. Except as specifically provided above, this Stipulation may not be
21 modified or amended, nor may any of its provisions be waived except by a writing

22 signed by all signatories hereto or their successors-in-interest.

23 46. In the event of any dispute between the Parties regarding the
24 implementation of this Stipulation of Settlement or any related document, except as

25 otherwise provided herein, the Parties agree to submit such disputes first to the

26 Mediator for prompt mediation and, if no agreement can be promptly reached, the

27 Parties may pursue all legal remedies under this Stipulation of Settlement in a court

28 with appropriate jurisdiction.

-31- KPMG STIPULATION OF SETTLEMENT


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1 47. The headings herein are used for the purpose of convenience only and
2 are not meant to have legal effect.

3 48. The administration and consummation of this KPMG Settlement as


4 embodied in this Stipulation shall be under the authority of the Court, and the

5 Court shall retain jurisdiction for the purpose of entering orders providing for
6 awards of attorneys' fees and Litigation Expenses to Lead Counsel and enforcing

7 the terms of this Stipulation.


8 49. The waiver by one Party of any breach of this Stipulation by any other
9 Party shall not be deemed a waiver of any other prior or subsequent breach of this
10 Stipulation.

11 50. This Stipulation and its exhibits constitute the entire agreement among
12 the Parties hereto concerning this KPMG Settlement, and no representations,

13 warranties, or inducements have been made by any Party hereto concerning this

14 Stipulation and its exhibits other than those contained and memorialized in such
15 documents.
16 51. This Stipulation may be executed in one or more original and/or faxed
17 counterparts. All executed counterparts and each of them shall be deemed to be
18 one and the same instrument provided that counsel for the signatories of this

19 Stipulation shall exchange among themselves copies of original signed


20 counterparts.

21 52. This Stipulation shall be binding upon, and inure to the benefit of, the
22 successors and assigns of the Parties hereto.

23 53. The construction, interpretation, operation, effect and validity of this


24 Stipulation, and all documents necessary to effectuate it, shall be governed by the

25 internal laws of the State of California without regard to conflicts of laws, except
26 to the extent that federal law requires that federal law govern.

27 54. This Stipulation shall not be construed more strictly against one Party
28 than another merely by virtue of the fact that it, or any part of it, may have been

-32- KPMG STIPULATION OF SETTLEMENT


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#:11052

1 prepared by counsel for one of the Parties, it being recognized that it is the result of
i
2 arm's-length negotiations between the Parties and all Parties have contributed
3 substantially and materially to the preparation of this Stipulation.
4 55. All counsel and any other person executing this Stipulation and any of
5 the exhibits hereto, or any related KPMG Settlement documents, warrant and
6 represent that they have the full authority to do so and that they have the authority
7 to take appropriate action required or permitted to be taken pursuant to the

8 Stipulation to effectuate its terms.


9 56. Counsel for the Parties agree to cooperate fully with one another in
10 seeking Court approval of the Preliminary Approval Order, the Stipulation and this
11 KPMG Settlement, and to use best efforts to promptly agree upon and execute all
12 such other documentation as may be reasonably required to obtain final approval

13 by the Court of the Settlement.

14 57. All of the exhibits to this Stipulation of Settlement are material and
15 integral parts hereof and are fully incorporated herein by this reference.
16 58. This Stipulation of Settlement shall be binding upon and inure to the
17 benefit of the successors and assigns of the Parties.
18 59, The Parties and their respective counsel also agree to keep the
19 information disclosed to them in connection with mediation and settlement

20 negotiations confidential unless required to publicly disclose such information by


21 applicable law, in which case written notice as to the content of any public

22 communication shall be provided to the other Party at least three (3) business days

23 prior to disclosure. In the event either of the Parties or their counsel wishes to
24 make a voluntary public disclosure regarding the Settlement, its terms, conditions,

25 or obligations (other than the fact that this case was resolved by Settlement), such
26 Party or counsel shall provide at least three (3) business days' advance notice to the

27 other Party as to the content of any such public communication. Notwithstanding

28 the foregoing, nothing herein shall preclude Plaintiffs' Counsel or Plaintiffs from

-33- KPMG STIPULATION OF SETTLEMENT


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#:11053

1 publicly filing papers, and making statements, in Court in connection with


2 preliminary and final approval of the KPMG Settlement,
3 60. If any Party is required to give notice to any other Party under this
4 Stipulation,
p such notice shall be in writingg and shall be deemed to havee been duly
5 given upon receipt of hand delivery or facsimile transmission with confirmation of
6 receipt. Notice required to be provided to any Party shall be provided to that
7 Party's counsel at the address listed below.
8 DATED AS OF: July 23, 2010 BERNSTEIN LITOWITZ BERGER
9 & GROSSMANN LLP

10 q
11
V • ORE J. GRAZIANO
12

13
BLAIR A. NICHOLAS
ELIZABETH LIN
14
NIKI L. MENDOZA
BENJAMIN GALDSTON
15
TAKEO A. KELLAR
12481 High Bluff Drive, Suite 300
16
San Dieggo CA 92130
Tel: 85 793-0070
17 Fax: (8583 793-0323
-and-
18 SALVATORE J. GRAZIANO
LAUREN A. MCMILLEN
19 1285 Avenue of the Americas
New York, NY 10019
20 Tel:(212,) 554 -1400
Fax: (212) 554-1444
21
MURRAY, FRANK & SAILER LLP
22
MARVIN L. FRANK
275 Madison Avenue, Suite 801
23
New York, NY 10016
Tel:212 682-1818
24
Fax: (212
) 682-1892

25

26
I
27

28

-34- ICPMG STIPULATION OF SETTLEMENT-


Case No. 2,07-cv-00931-DDP (FMOx)
Case 2:07-cv-00931-DDP-FMO Document 484-5 Filed 07/30/10 Page 37 of 37 Page ID
^. f..l #:11054

1 Lead Counsel for Lead Plaintiff The New


York State Teachers' Retirement System and
2 the Class, and Plaintiffs Carl Larson and
Charles Hooten
3
4
SIDLEY U LLP
5

6
"Amid
7 MIC , ELF . RUGEN
555 alifornia St. Suite 2000
8 San Francisco, CX 94104-1715
Tel; 415-772-1292
9
Attorneys for Defendant KPMG LLP
10
11

12

13

14

15
h
16

17

18

19

20

21

22

23

24

25

26

27

28

-35- KPMG STIPULATION OF SETTLEMENT


Case No. 2:07-cv-00931-DDP (FMOx)
i
Case 2:07-cv-00931-DDP-FMO Document 484-6 Filed 07/30/10 Page 1 of 114 Page ID s
#:11055
I

EXHIBIT A

TO KPMG STIPULATION

I

Case 2:07-cv-00931-DDP-FMO Document 484-6 Filed 07/30/10 Page 2 of 114 Page ID
#:11056

1 BERNSTEIN LITOWITZ BERGER


& GROSSMANN LLP r
2 BLAIR A. NICHOLAS (Bar No. 178428)
lairblbglaw.com)
3 2LIZAETH LIN (Bar No. 174663)
(elizabethl^ a blbglaw.com)
4 NIKI L. MEENDOZA (Bar No. 214646)
nikima blbglaw.com)
5 ENJAl^IIN GALDSTON (Bar No. 211114)
benkblbglaw.com)
6 A O A. KELLAR (Bar No. 234470)
(takeokffigh
blb law.com)
7 2481 Bluff Drive, Suite 300
San Diego, CA 92130
8 Tel: (858) 793-0070
Fax: (858) 793-0323
9 -and-
SALVATO ^RE J. GRAZI ANO )
10 (c
L sAUREN . MC1MILLEN
11 ^laurenm@blbglaw.com )
285 Avenue of the Americas
12 New York, NY 10019
Tel: 212 554-1400
13 Fax: 212 554-1444
14 Lead Counsel for Lead Plaintiff New
York State Teachers' Retirement System
15

16

17 UNITED STATES DISTRICT COURT


18 CENTRAL DISTRICT OF CALIFORNIA
19
IN RE NEW CENTURY Case No. 2:07-cv-00931-DDP (FMOx)
20 (Lead Case)
21
[PROPOSED] ORDER
22 PRELIMINARILY APPROVING
SETTLEMENTS AND
23 PROVIDING FOR NOTICE
24 EXHIBIT A
25
Judge: Hon. Dean D. Pregerson
26

27

28
[PROPOSED] ORDER PRELIM. APPROVING
SETTLEMENTS AND PROVIDING FOR NOTICE
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#:11057

1 WHEREAS, Lead Plaintiff New York State Teachers' Retirement System n'
2 ("Lead Plaintiff'), and Plaintiffs Carl Larson and Charles Hooten, on behalf of
3 themselves and all others similarly situated (collectively with Lead Plaintiff,
4 "Plaintiffs") and the Individual Defendants,] the Underwriter Defendants, 2 and
5 KPMG LLP ("KPMG") (collectively "Defendants") (collectively, with
6 Defendants, the "Parties"), have reached agreements to settle the above-captioned
7 litigation (the "Consolidated Action"), and Plaintiffs have applied to the Court
8 pursuant to Rule 23(e) of the Federal Rules of Civil Procedure for an order
9 preliminarily approving the Settlements in accordance with the Stipulations of
10 Settlement, 3 which, together with the exhibits annexed thereto, set forth the terms
11 and conditions for the proposed Settlements regarding the Consolidated Action,
12
13 1
"Individual Defendants" or "Class Individual Defendants" means Robert K.
14 Cole, Brad A. Morrice, Estate of Edward Gotschall, Patti M. Dodge, Fredric J.
15 Forster, Michael M. Sachs, Harold A. Black, Donald E. Lange, Terrence P.
Sandvik, Richard A. Zona, Marilyn A. Alexander, David Einhorn, and William J.
16 Popejoy.
17 2 "Underwriter Defendants" means Bear, Stearns & Co. Inc., Deutsche Bank
18 Securities Inc., Piper Jaffray & Co., Stifel, Nicolaus & Co., Inc., JMP Securities
LLC, Roth Capital Partners, Morgan Stanley & Co., Inc., and Jeffries & Co., Inc.
19 3 The terms of the proposed settlement with the Underwriter Defendants is set
20 forth in the Stipulation Of Settlement Between Plaintiffs And The Underwriter
Defendants (the "Underwriter Stipulation" or the "Underwriter Settlement"); the
21 terms of the proposed settlement with KPMG is set forth in the Stipulation Of
22 Settlement Between Plaintiffs And KPMG LLP (the "KPMG Stipulation" or
23 "KPMG Settlement"); and the proposed settlement with the Individual Defendants
is set forth in the Stipulation Of Global Settlement With New Century Officers
24 And Directors (the "Global Officer And Director Settlement" or "Global Officer
25 And Director Stipulation"). The Global Officer And Director Stipulation contains
proposed settlements in this Consolidated Action, and related Trustee Litigation
26 and Kodiak Litigation (as defined in the Global Officer And Director Stipulation).
The Global Officer And Director Stipulation, the Underwriter Stipulation and the
27 KPMG Stipulation are referred to collectively as the "Stipulations," "Stipulations
28 of Settlement," or the "Settlements."
[PROPOSED] ORDER PRELIM. APPROVING
-1- SETTLEMENTS AND PROVIDING FOR NOTICE
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#:11058

1 and for dismissal of the Consolidated Action with prejudice as against all of the
2 Defendants and their related parties, upon the terms and conditions set forth
3 therein; and the Court having read and considered the Stipulations and the exhibits
4 annexed thereto; r
5 NOW, THEREFORE, IT IS HEREBY ORDERED:
6 1. This order (the "Notice Order" or "Preliminary Approval Order")
7 hereby incorporates by reference the definitions in the Stipulations unless
8 otherwise indicated, and all terms with initial capitalization not otherwise defined
9 herein shall have the same meanings as set forth in the Stipulations. Any
10 inconsistencies between the Stipulations and the Notice of Pendency of Class
11 Action and Proposed Settlements, Settlement Fairness Hearing, and Motion for
12 Attorneys' Fees and Reimbursement of Litigation Expenses ("Notice") will be
13 controlled by the language of the Stipulations.
14 2. The Court hereby preliminarily approves the Settlements as being fair,
15 reasonable and adequate to the Class, pending a final hearing on the Settlements.
f
16 CLASS CERTIFICATION
17 3. The Court hereby certifies, pursuant to Rules 23(a) and 23(b)(3) of the
18 Federal Rules of Civil Procedure, a Class defined as follows:
19 all persons and entities who purchased or otherwise acquired New
Century common stock, New Century Series A Preferred Stock, New
20 Century Series B Preferred Stock, and/or New Century call options
and/or who sold New Century put options, during the time period
21 from May 5, 2005, through and including March 13, 2007, either in
the Offerings, pursuant to a registration statement, or in the market,
22 and who, upon disclosure of certain facts alleged in the Complaint,
were injured thereby. Excluded from the Class are (a) Defendants;b
23 members of the immediate families of the Individual Defendants; ^c)
the subsidiaries and affiliates of Defendants; (d) any person or entity
24 who was a partner, executive officer, director or controllingperson of
New Centu (including any of its subsidiaries or affiliate or of any
25 Defendant; 7 (e) any entity in which any Defendant has a controlling
interest; and (f) the legal representatives heirs, successors and assigns
26 of any such excluded party. Also excluded from the Class are any
persons who exclude themselves by filing a request for exclusion in
27 accordance with the requirements set forth in the Notice.
28
[PROPOSED] ORDER PRELIM. APPROVING
-2- SETTLEMENTS AND PROVIDING FOR NOTICE
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1 4. The Court finds that the prerequisites for a class action under Rules
2 23(a) and (b)(3) of the Federal Rules of Civil Procedure have been satisfied in that: b

3 (a) the number of Class Members is so numerous that joinder of all members
4 thereof is impracticable; (b) there are questions of law and fact common to the
5 Class; (c) the claims of Lead Plaintiff New York State Teachers' Retirement
6 System ("NYSTRS") and Plaintiffs Carl Larson and Charles Hooten are typical of
7 the claims of the Class they seek to represent; (d) Plaintiffs have fairly and
8 adequately represented the interests of the Class; (e) the questions of law and fact
9 common to the members of the Class predominate over any questions affecting
10 only individual members of the Class; and (f) a class action is superior to other
11 available methods for the fair and efficient adjudication of the controversy.
12 5. Pursuant to Rule 23 of the Federal Rules of Civil Procedure, Plaintiffs
13 are certified as Class Representatives and Lead Counsel Bernstein Litowitz Berger
14 & Grossmann LLP is certified as Class Counsel.
15 6. The Court appoints the firm of Analytics Incorporated ("Claims
16 Administrator") to supervise and administer the notice procedure as well as the
17 processing of claims as more fully set forth below:
18 a. Within five (5) business days after entry of this Order, the
19 Claims Administrator shall cause a copy of the Notice and the Proof of Claim and
20 Release (the "Claim Form"), annexed hereto respectively as Exhibits 1 and 2, to be
21 mailed by first-class mail, postage prepaid, to all members of the Class at the
22 address of each such Class Member as set forth in the records of New Century or
23 its transfer agent, or who are identified by further reasonable efforts (the "Notice
24 Date"). Lead Counsel shall, at or before the Settlement Hearing, file with the
25 Court proof of mailing of the Notice and Claim Form; and
26 b. A summary notice ("Summary Notice"), annexed hereto as
27 Exhibit 3, shall be published once each in the national edition of The Wall Street
28 Journal and over the PR Newswire within five (5) business days of the mailing of
[PROPOSED] ORDER PRELIM. APPROVING
-3- SETTLEMENTS AND PROVIDING FOR NOTICE
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#:11060

1 the Notice. Lead Counsel shall, at or before the Settlement Hearing, file with the
2 Court proof of publication of the Summary Notice.
3 7. The Court approves the form of Notice and Summary Notice
4 (together, the "Notices") and Claim Form, and finds that the procedures established
5 for publication, mailing and distribution of such Notices substantially in the
6 manner and form set forth in paragraph 6 of this Order meet the requirements of
7 Rule 23 of the Federal Rules of Civil Procedure, the Private Securities Litigation
8 Reform Act of 1995, and due process, and constitute the best notice practicable
9 Linder the circumstances.
10 8. For the purpose of identifying and providing notice to the Class, the
11 Trustee and the Underwriter Defendants shall provide to the Claims Administrator
12 the information as agreed to in the Global Officer And Director Stipulation and the
13 Underwriter Stipulation, respectively.
14 9. Nominees who purchased or otherwise acquired New Century stock
15 for beneficial owners who are Class Members are directed to: (a) request within
16 fourteen (14) days of receipt of the Notice additional copies of the Notice and the
17 Claim Form from the Claims Administrator for such beneficial owners; or (b) send
18 a list of the names and addresses of such beneficial owners to the Claims
19 Administrator within fourteen (14) days after receipt of the Notice. If a nominee
20 elects to send the Notice to beneficial owners, such nominee is directed to mail the
21 Notice within fourteen (14) days of receipt of the copies of the Notice from the
22 Claims Administrator, and upon such mailing, the nominee shall send a statement
23 to the Claims Administrator confirming that the mailing was made as directed, and
24 the nominee shall retain the list of names and addresses for use in connection with
25 any possible future notice to the Class. Upon full compliance with this Preliminary
26 Approval Order, including the timely mailing of Notice to beneficial owners, such
27 nominees may seek reimbursement of their reasonable expenses actually incurred
28 in complying with this Preliminary Approval Order by providing the Claims
[PROPOSED] ORDER PRELIM. APPROVING
-4- SETTLEMENTS AND PROVIDING FOR NOTICE
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#:11061

1 Administrator with proper documentation supporting the expenses for which


2 reimbursement is sought and reflecting compliance with these instructions,
3 including timely mailing of the Notice, if the nominee elected or elects to do so.
4 Such properly documented expenses incurred by nominees in compliance with the
5 terms of this Preliminary Approval Order shall be paid from the Settlement Fund.
6 HEARING: RIGHT TO BE HEARD
7 10. There shall be a hearing on [November 8, 2010, or November 15,
8 2010] [100 days from filing of stipulations], 2010, at 10:00 a.m. (the "Settlement
9 Hearing") at which time the Court shall address the fairness, reasonableness and
10 adequacy of the Settlements, the fairness and reasonableness of the Plan of
11 Allocation, and Lead Counsel's application for attorneys' fees and payment of
12 Litigation Expenses. The Settlement Hearing shall be held before this Court at the
13 United States District Court for the Central District of California, 312 North Spring
I

14 Street, Courtroom 3, 2nd Floor, Los Angeles, California 90012.


15 11. Papers in support of the Settlements, the Plan of Allocation, and Lead
16 Counsel's application for attorneys' fees and payment of Litigation Expenses shall
17 be filed on or before twenty-eight (28) days prior to the Settlement Hearing.
18 12. Any member of the Class may appear at the Settlement Hearing and
19 show cause why the proposed Settlements embodied in the Stipulations should or
20 should not be approved as fair, reasonable and adequate, and/or to present
21 opposition to the Plan of Allocation or to the application of Lead Counsel for
22 attorneys' fees and payment of Litigation Expenses. However, no Class Member
23 shall be heard or entitled to contest the approval of the terms and conditions of the
24 Settlements, or the terms of the Plan of Allocation or the application by Lead
25 Counsel for an award of attorneys' fees and payment of Litigation Expenses unless
26 that Class Member (i) has served written objections, including the basis therefor, as
27 well as copies of any papers (including proof of all purchases or acquisitions of
28 New Century stock or options during the Class Period) and/or briefs in support of
[PROPOSED] ORDER PRELIM. APPROVING
-5- SETTLEMENTS AND PROVIDING FOR NOTICE
Case No. 2:07-cv-00931-DDP (FMOx)
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#:11062

1 his, her or its position upon the following counsel such that it is received on or
2 before twenty-one (21) days prior to the Settlement Hearing: Salvatore J.
3 Graziano, Esq., Bernstein Litowitz Berger & Grossmann LLP, 1285 Avenue of the
4 Americas, New York, NY 10019; Kathleen M. McDowell, Esq., Munger, Tolles &
5 Olson, 355 South Grand Avenue, 35th Floor, Los Angeles, CA 90071-1560; John
6 S. Durrant, Paul, Hastings, Janofsky & Walker LLP, 515 South Flower Street, 25th
7 Floor, Los Angeles, CA 90071; and Michael L. Rugen, Sidley Austin LLP, 555
8 California St., Suite 2000, San Francisco, CA 94104-1715; and (ii) filed said
9 objections, papers and briefs with the Clerk of the United States District Court for
10 the Central District of California on or before twenty-one (21) days before the
11 Settlement Hearing. Any Class Member who does not make his, her or its
12 objection in the manner provided for herein shall be deemed to have waived such
13 objection and shall forever be foreclosed from making any objection to the fairness
14 or adequacy of the Settlements as incorporated in the Stipulations, to the Plan of
15 Allocation or to the application by Lead Counsel for an award of attorneys' fees
16 and payment of Litigation Expenses unless otherwise ordered by the Court. The
17 manner in which a notice of objection should be prepared, filed and delivered shall
18 be stated in the Notice.
19 13. If approved, all Class Members will be bound by the proposed
20 Settlements provided for in the Stipulations, and by any judgment or determination
21 of the Court affecting Class Members, regardless of whether or not a Class
22 Member submits a Claim Form.
23 14. Any member of the Class may enter an appearance in the
24 Consolidated Action, at their own expense, individually or through counsel of their
25 own choice. If they do not enter an appearance, they will be represented by Lead
26 Counsel.
27 15. The Court reserves the right to adjourn or continue the Settlement
28 Hearing, or any adjournment or continuance thereof, without any further notice to
[PROPOSED] ORDER PRELIM. APPROVING
-6- SETTLEMENTS AND PROVIDING FOR NOTICE
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1 Class Members and to approve the Stipulations and/or Plan of Allocation with
2 modification and without further notice to Class Members.
3 CLAIMS PROCESS
4 16. In order to be entitled to participate in the Settlements, a Class
5 Member must complete and submit a Claim Form in accordance with the
6 instructions contained therein and/or in the Notice. To be valid and accepted,
7 Claim Forms submitted in connection with the Settlements must be postmarked no
8 later than 120 days after the Notice date (unless by Order of the Court, late-filed
9 Claim Forms are accepted).
10 17. Any Class Member who does not timely submit a valid Claim Form
11 shall not be entitled to share in the Settlement Fund, unless otherwise ordered by
12 the Court, but nonetheless shall be barred and enjoined from asserting any of the
13 settled claims and shall be bound by any judgment or determination of the Court
14 affecting the Class Members.
15 18. As set forth in the Stipulations, Defendants and their related parties
16 shall have no responsibility whatsoever for the administration of the Settlements or
17 the disbursement of the Net Settlement Fund and shall not be permitted to review,
18 contest or object to any Claim Form or any decision of the Claims Administrator or
19 Lead Counsel with respect to accepting or rejecting any Claim Form or Claim for
20 payment by a Class Member.
21 REQUEST FOR EXCLUSION FROM THE CLASS
22 19. Any requests for exclusion must be submitted such that they are
23 received no later than twenty-one (21) days before the date of the Settlement
24 Hearing. To be valid, each request for exclusion must (1) state the name and
25 address of the person or entity requesting exclusion; (ii) state that such person or
26 entity requests exclusion from the Class in In re New Century, 07-CV-0093 I -DDP
27 (FMOx); (iii) be signed by the person or entity requesting exclusion; (iv) provide a
28 telephone number for that person or entity; and (v) provide the date(s), price(s),
[PROPOSED] ORDER PRELIM. APPROVING
-7- SETTLEMENTS AND PROVIDING FOR NOTICE
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#:11064

1 and number(s) of shares of all purchases, acquisitions, and sales of New Century
2 Securities during the Class Period. Requests for exclusion will not be valid if they
3 do not include the information set forth above and are not received within the time
4 stated above, unless the Court otherwise determines. Copies of all timely requests
5 for exclusion from the Class received by the Claims Administrator (or other person
6 designated to receive exclusion requests) shall be provided to Lead Counsel and
7 Individual Defendants' Counsel, counsel for the Insurance Carriers (as defined in
8 the Global Officer And Director Stipulation), counsel for KPMG, and counsel for
i
9 the Underwriter Defendants, no later than fifteen (15) days prior to the Settlement
10 Hearing. All persons who submit valid and timely requests for exclusion in the
11 manner set forth in this paragraph shall have no rights under the Stipulations, shall
12 not share in the distribution of the Net Settlement Fund, and shall not be bound by
13 the Stipulations or any final judgment.
14 20. As set forth in the Stipulations, Defendants and their related parties
15 shall have no responsibility or liability whatsoever with respect to the Plan of
16 Allocation or Lead Counsel' app cation for an award of attorneys' fees and
Counsel's application
17 payment of Litigation Expenses. The Plan of Allocation and Lead Counsel's
18 application for an award of attorneys' fees and payment of Litigation Expenses will
19 be considered separately from the fairness, reasonableness and adequacy of the
tl
20 Settlements. At or after the Settlement Hearing, the Court will determine whether
21 Lead Counsel's proposed Plan of Allocation should be approved, and the amount
22 of attorneys' fees and Litigation Expenses to be awarded to Lead Counsel. Any
23 appeal from any orders relating to the Plan of Allocation or Lead Counsel's
24 application for an award of attorneys' fees and Litigation Expenses, or reversal or
25 modification thereof, shall not operate to terminate or cancel the Settlements, or
26 affect or delay the finality of the judgment to be entered pursuant to Rule 54(b) of
27 the Federal Rules of Civil Procedure approving the Settlements and the settlement
28 of the Consolidated Action set forth therein.
[PROPOSED] ORDER PRELIM. APPROVING
-8- SETTLEMENTS AND PROVIDING FOR NOTICE
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1 21. Only Class Members and Lead Counsel shall have any right to any
2 portion of, or any rights in the distribution of, the settlement funds except as
3 provided in the Stipulations or otherwise ordered by the Court.
4 22. All funds held by the escrow agent selected by Lead Counsel to
5 maintain the escrow account(s) for the Settlements ("Escrow Agent") shall be
6 deemed and considered to be in custodia legis and shall remain subject to the
7 jurisdiction of the Court until such time as such funds shall be distributed pursuant
8 to the Stipulations and/or further Order of the Court.
9 23. Lead Counsel or its agents are authorized and directed to prepare any
10 tax returns required to be filed for the escrow account maintained to hold the
11 settlement funds pursuant to the terms of the Stipulations and to cause any Taxes
12 due and owing to be paid from the escrow account(s) without further Order of the
13 Court, and to otherwise perform all obligations with respect to Taxes and any
14 reportings or filings in respect thereof as contemplated by the Stipulations without
15 further Order of the Court.
16 24. As set forth in the Stipulations, Lead Counsel may pay from the
17 escrow account(s), without further approval from Defendants or further Order of
18 the Court, the costs, fees and expenses that are incurred by the Claims
19 Administrator and Lead Counsel in connection with (i) providing notice to the
4
20 Class; and (ii) administering the claims process in connection with the
21 Consolidated Action ("Notice and Administration Costs") actually incurred. Such
22 costs and expenses shall include, without limitation, the actual costs of publication,
23 printing and mailing the Notice, reimbursements to nominee owners for forwarding
24 the Notice to their beneficial owners, the administrative expenses incurred and fees
25 charged by the Claims Administrator in connection with providing Notice and
26 processing the submitted claims, and the fees, if any, of the Escrow Agent. In the
27 event that any of the Settlements are terminated pursuant to the terms of the
28
[PROPOSED] ORDER PRELIM. APPROVING
-9- SETTLEMENTS AND PROVIDING FOR NOTICE
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Case 2:07-cv-00931-DDP-FMO Document 484-6 Filed 07/30/10 Page 12 of 114 Page ID
#:11066

1 Stipulations, all Notice and Administration Costs paid or incurred, including any
2 related fees, shall not be returned or repaid as set forth in the Stipulations.
3 25. The Stipulations and Settlements set forth therein, whether or not
4 consummated, and any proceedings taken pursuant to the Stipulations and
5 Settlements:
6 a. shall not be offered or received against any of the Released
7 Parties4 as evidence of, or construed as, or deemed to be evidence of any
8 presumption, concession, or admission by any of the Released Parties with respect
9 to the truth of any fact alleged by Plaintiffs 5 or the validity of any claim that was or
10 could have been asserted against any of the Released Parties in the Consolidated
11 Action, the Trustee Litigation, or the Kodiak Litigation (as defined in the Global
12 Officer And Director Stipulation) or in any litigation, or of any liability,
13 negligence, fault, or other wrongdoing of any kind of any of the Released Parties;
14 b. shall not be offered or received against any of the Released
15 Parties as evidence of a presumption, concession or admission of any fault,
16 misrepresentation or omission with respect to any statement or written document
17 approved or made by any of the Released Parties, or against the Plaintiffs or any
18 Class Members as evidence of any infirmity in the claims of Plaintiffs or the other
19 Class Members;
20 C. shall not be offered or received against any of the Released
21 Parties, or against the Plaintiffs or any other Class Members, as evidence of a
22 presumption, concession or admission with respect to any liability, negligence,
23
24 4
Herein "Released Parties" includes: (i) the Released Officers And Directors (as
25 defined in the Global Officer And Director Stipulation); (ii) the Released Auditor
26 Parties (as defined in the KPMG Stipulation); and (iii) the Released Underwriter
Parties (as defined in the Underwriter Stipulation).
27 5
"Plaintiffs" in this paragraph 25 includes Class Plaintiffs, the Trustee, and Kodiak
28 (as defined in the Global Officer And Director Stipulation).
[PROPOSED] ORDER PRELIM. APPROVING
-10- SETTLEMENTS AND PROVIDING FOR NOTICE
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#:11067

1 fault or wrongdoing of any kind, or in any way referred to for any other reason as
2 against any of the Released Parties, in any other civil, criminal or administrative
3 action or proceeding, other than such proceedings as may be necessary to
4 effectuate the provisions of the Stipulations; provided, however, that if the
N
5 Stipulations are approved by the Court, Defendants, any other Released Party, or
6 any Class Member may refer to the Settlements and Stipulations to effectuate the
7 protection from liability granted them hereunder;
8 d. shall not be construed against any of the Released Parties,
9 Plaintiffs or any other Class Members as an admission, concession, or presumption
10 that the consideration to be given hereunder represents the amount which could be
I I or would have been recovered after trial;
12 e. shall not be construed against Plaintiffs or any other Class
13 Members as an admission, concession, or presumption that any of their claims are
14 without merit or that damages recoverable under the Consolidated Action, the
15 Trustee Litigation and the Kodiak Litigation would not have exceeded the amount
16 of the Settlements; and
17 f. shall not be construed as or received in evidence as an
18 admission, concession or presumption that class certification is appropriate in this
19 Consolidated Action, except for purposes of the Settlements.
20 26. Except as otherwise provided in the Stipulations, there shall be no
21 distribution of any of the net settlement fund for any of the Settlements to any
22 Class Member until a plan of allocation is finally approved and the Court issues a
23 Class Distribution Order.
24 1\
25 \\
26 \\
27
28
[PROPOSED] ORDER PRELIM. APPROVING
-11- SETTLEMENTS AND PROVIDING FOR NOTICE
Case No. 2:07-cv-0093 1 -DDP (FMOx)
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#:11068

1 The Court retains jurisdiction of this Consolidated Action to consider all


2 further applications arising out of or connected with the proposed Settlements, and
3 as otherwise warranted.
4 IT IS SO ORDERED.
5 DATED:

6 THE HONORABLE DEAN D. PREGERSON


7 UNITED STATES DISTRICT COURT JUDGE
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
[PROPOSED] ORDER PRELIM. APPROVING
-12- SETTLEMENTS AND PROVIDING FOR NOTICE
Case No. 2:07-cv-0093 1 -DDP (FMOx)
Case 2:07-cv-00931-DDP-FMO Document 484-6 Filed 07/30/10 Page 15 of 114 Page ID
#:11069

it

EXHIBIT A-1 TO EXHIBIT A

TO KPMG STIPULATION

Case 2:07-cv-00931-DDP-FMO Document 484-6 Filed 07/30/10 Page 16 of 114 Page ID
#:11070

1 BERNSTEIN LITOWITZ BERGER


& GROSSMANN LLP
2 BLAIR A. NICHOLAS (Bar No. 178428)
airblbglaw.com)
3 N1ZAWET H LIN (Bar No. 174663)
elizabethlblbglaw.com
4 NIKI L. M NDOZA (Bar No. 214646)
kimlbglaw.com)
5 UNJAM1 N GALDS TON (Bar No. 211114)
benblbglaw.com F
6 AI A. <- (Bar No. 234470)
(takeokfflgblb law.com)
7 2481 .,h Bluff Drive, Suite 300
San Diego, CA 92130
8 Tel:(858) 793-0070
Fax: (858) 793-0323
9 -and-
SALVATORE J. GRAZIANO
10 (sgraziano(a^blbglaw.com )
LAUREN A. MCMILLEN
11 ^laurenm@blbglaw.com)
285 Avenue of the Americas
12 New York, NY 10019
Tel: 212 554-1400
13 Fax: 212 554-1444

14 Lead Counsel for Lead Plaintiff New


York State Teachers' Retirement System
15

16

17 UNITED STATES DISTRICT COURT


18 CENTRAL DISTRICT OF CALIFORNIA
19 IN RE NEW CENTURY Case No. 2:07-cv-00931-DDP (FMOx)
(Lead Case)
20
1
21 NOTICE OF PENDENCY OF
CLASS ACTION AND PROPOSED
22 SETTLEMENTS, SETTLEMENT
FAIRNESS HEARING, AND t
23 MOTION FOR ATTORNEYS'
FEES AND REIMBURSEMENT
24 OF LITIGATION EXPENSES
25

26 Judge: Hon. Dean D. Pregerson

27

28

NOTICE OF PENDENCY OF CLASS ACTION


Case No. 07-00931
Case 2:07-cv-00931-DDP-FMO Document 484-6 Filed 07/30/10 Page 17 of 114 Page ID
#:11071
i
1 A Federal Court authorized this Notice. This is not a solicitation from a lawyer.
2 NOTICE OF PENDENCY OF CLASS ACTION: Please be advised that your rights
3 may be affected by a class action lawsuit pending in this Court (the
4 "Consolidated Action") if, during the period from May 5, 2005, through and

5 including March 13, 2007, you purchased or acquired Common Stock,


6 9.125% Series A Cumulative Redeemable Preferred Stock ("Series A

7 Preferred Stock"), 9.75% Series B Cumulative Redeemable Preferred Stock


8 ("Series B Preferred Stock"), and/or Call Options and/or sold Put Options of
9 New Century Financial Corporation ("New Century" or the "Company").
10
Cr.
11 NOTICE OF SETTLEMENTS: Please also be advised that the Court-appointed
12 Lead Plaintiff, New York State Teachers' Retirement System ("Lead

13 Plaintiff') and Plaintiffs Carl Larson and Charles Hooten (collectively

14 "Plaintiffs"), on behalf of the Class (as defined below), have reached three

15 proposed settlements ("Settlements") of the Consolidated Action as follows: a


16 settlement with the Underwriter Defendants' in the amount of $15,000,000.00;

17 a settlement with KPMG LLP ("KPMG") in the amount of $44,750,000.00;

18 and a settlement with the Individual DefendantS 2 in which the Class will

19 receive $65,077,088.00. 3 The total cash amount of the Class's recovery equals
20
21 ' " Underwriter Defendants" means Bear, Stearns & Co. Inc., Deutsche Bank
22
Securities Inc., Piper Jaffray & Co., Stifel, Nicolaus & Co., Inc., JMP Securities
LLC, Roth Capital Partners, Morgan Stanley & Co., Inc., and Jeffries & Co., Inc.
23 ( " Underwriter Defendants").
24 2 "Individual Defendants" means Robert K. Cole, Brad A. Morrice, Estate of
Edward Gotschall, Patti M. Dodge, Fredric J. Forster, Michael M. Sachs, Harold
25
A. Black, Donald E. Lange, Terrence P. Sandvik, Richard A. Zona, Marilyn A.
26 Alexander, David Einhorn, and William J. Popejoy. "Defendants" means the
Underwriter Defendants, the Individual Defendants, and KPMG.
27
3
The $65,077,088.00 includes funds recovered by the Securities and Exchange
28
Commission in a civil enforcement action entitled SEC v. Morrice et al., Case No.
-1- NOTICE OF PENDENCY OF CLASS ACTION
Case No. 07-00931

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#:11072
r
1 $12498279088.00. The terms of the Settlements are set forth in the E
P,

2 Stipulations.4
3 This Notice explains important rights you may have, including your possible
4 receipt of cash from the Settlements. Your legal rights will be affected
5 whether or not you act. Please read this Notice carefully!
6

7 1. Description of the Consolidated Action and the Class: Lead


8 Plaintiff alleges that Defendants made false and misleading statements and/or
9 omitted material information to investors during the Class Period. Defendants
10 deny all allegations, and deny that investors were damaged as a result of any such
11 alleged statements or omissions. This Notice relates to three proposed Settlements

12 regarding claims against the Individual Defendants, the Underwriter Defendants,

13 and KPMG (collectively "Defendants") in the Consolidated Action. The proposed V

14 Settlements, if approved by the Court, will resolve all claims and potential claims

15 of Class Members against the Defendants and the other applicable Released Parties

16 (as identified below), and will provide relief to all persons and entities who
17 purchased or otherwise acquired New Century Common Stock, Series A Preferred

18 Stock, Series B Preferred Stock (Series A Preferred Stock and Series B Preferred
19 Stock are collectively referred to as "Preferred Stock"), and/or New Century Call
20 Options and/or who sold New Century Put Options, during the time period from
21

22 09-1426-DDP, commenced on December 7, 2009, in the United States District

23
Court for the Central District of California (the "SEC Action").
4
All capitalized terms that are not defined herein shall have the meaning
24
ascribed to them in the Stipulations. "Stipulations" means the Stipulation Of
25 Global Settlement With New Century Officers And Directors (the "Global Officer
And Director Stipulation" or "Global Officer And Director Settlement");
26
Stipulation Of Settlement Between Plaintiffs And The Underwriter Defendants (the
27 "Underwriter Stipulation" or "Underwriter Settlement"); and Stipulation Of
Settlement Between Plaintiffs And KPMG LLP (the "KPMG Stipulation" or
28
"KPMG Settlement").
-2- NOTICE OF PENDENCY OF CLASS ACTION
Case No. 07-00931

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#:11073
r

1 May 5, 2005, through and including March 13, 2007, either in the Offerings,

2 pursuant to a registration statement, or in the market, and who, upon disclosure of


3 certain facts alleged in the Complaint, were injured thereby (the "Class"). (The I^
4 New Century Common Stock, Series A Preferred Stock, Series B Preferred Stock,
5 and/or New Century Call Options and New Century Put Options (as described
6 above) are referred to collectively as "New Century Securities.")
7 2. Statement of the Class's Recovery: Subject to Court approval, and
8 as described more fully below, Plaintiffs, on behalf of the Class, have agreed to

9 settle all claims related to the purchase of New Century Common Stock, Preferred
10 Stock and/or New Century Call Options and/or sales of New Century Put Options
11 during the Class Period that were or could have been asserted against Defendants
12 and other Released Parties in the Consolidated Action in exchange for total
13 settlement payments of $124,827,088.00 (the "Total Settlement Amount") in cash
14 to be deposited into an interest-bearing escrow account (the "Settlement Fund"). I
15 The Net Settlement Fund (the Settlement Fund less Taxes, notice and

16 administration costs, and attorneys' fees and Litigation Expenses awarded to Lead

17 Counsel) will be distributed in accordance with a plan of allocation (the "Plan of


1 8 Allocation") that will be approved by the Court and will determine how the Net
19 Settlement Fund shall be allocated to the members of the Class. The proposed Plan
20 of Allocation is included in this Notice. Assuming that all Class Members
21 participate in the Settlements, Lead Plaintiff's damages consultant estimates that
22 the average distribution per damaged share will be approximately $0.69 per share
23 of New Century Common Stock, approximately $2.08 per share of New Century
24 Preferred Stock, approximately $0.11 per Call Option, and approximately $0.25
25 per Put Option, before deduction of Court-approved fees, expenses and costs
26 described herein.
27 3. Statement of AveraLye Amount of Damages Per Share: The parties
28 do not agree on the average amount of damages per share that would be
-3- NOTICE OF PENDENCY OF CLASS ACTION
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#:11074

1 recoverable if Plaintiffs were to prevail. Defendants deny all liability and that any
2 shares or Options of New Century Securities were damaged as Plaintiffs have

3 alleged. The parties disagree on, among other things: (i) whether the statements
4 challenged in this Consolidated Action were materially false and misleading; (ii)
5 whether the price of New Century shares was inflated as the result of any allegedly
6 false or misleading public statements or omissions by Defendants; and (iii) whether
7 the decline in the price of New Century shares alleged in the Consolidated Action

8 resulted from the disclosure of any information that Plaintiffs allege was
9 wrongfully withheld.
10 4. Statement of Attorneys' Fees and Expenses Sought: Lead Counsel
11 will apply to the Court for an award of attorneys' fees from the Settlement Fund in

12 an amount not to exceed 12% of the Total Settlement Amount with interest from
13 the date of funding at the same rate as earned by the Settlement Fund. In addition,

14 Lead Counsel also will apply for the reimbursement of Litigation Expenses paid or
i
15 incurred in connection with the prosecution and resolution of the Consolidated
16 Action, in an amount not to exceed $4.5 million, plus interest from the date of

17 funding at the same rate as earned by the Settlement Fund. If the Court approves
18 Lead Counsel's fee and Litigation Expense application, Lead Plaintiff's damages

19 consultant estimates that the average cost per damaged share will not exceed
20 approximately $0.11 per share of Common Stock, approximately $0.32 per share

21 of Preferred Stock, approximately $0.02 per Call Option, and approximately $0.04
22 per Put Option.

23 5. Identification of Attorneys' Representatives: Lead Plaintiff and the


24 Class are being represented by Salvatore J. Graziano, Esq., of Bernstein Litowitz

25 Berger & Grossmann LLP, the Court-appointed Lead Counsel. Any questions
26 regarding the Settlements should be directed to Mr. Graziano at Bernstein Litowitz

27 Berger & Grossmann LLP, 1285 Avenue of the Americas, New York, NY 10019,

28 (866) 648-2524, blbg@blbglaw.com .

-4- NOTICE OF PENDENCY OF CLASS ACTION


Case No. 07-00931
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#:11075
P
1

2 YOUR LEGAL RIGHTS AND OPTIONS IN THE SETTLEMENTS:


3
SUBMIT A CLAIM FORM NO This is the only way to get a payment. If
4
LATER THAN [INSERT] you wish to obtain a payment as a Class
5
Member, you will need to file a Claim
6 Form (which is included with this Notice)
7
postmarked no later than [INSERT].
8
EXCLUDE YOURSELF FROM Get no payment. This is the only option
9
THE CLASS BY SUBMITTING A that allows you to ever be part of any
10
WRITTEN REQUEST FOR other lawsuit against any of the defendants
11
EXCLUSION SO THAT IT IS or other released parties concerning the
12
RECEIVED NO LATER THAN claims that were, or could have been,
13
[INSERT]. asserted in this case.
14
OBJECT TO THE Write to the Court and explain why you
15
16 SETTLEMENTS BY do not like the Settlements, the proposed
SUBMITTING WRITTEN Plan of Allocation, or the request for
17
OBJECTIONS SO THAT THEY attorneys' fees and reimbursement of
18
ARE RECEIVED NO LATER expenses. You cannot object to the
19
THAN [INSERT]. Settlements unless you are a Class
20
Member and do not exclude yourself.
21

22 GO TO THE HEARING ON Ask to speak in Court about the fairness of


a
23 [INSERT] AT [INSERT], AND the Settlements, the proposed Plan of
24 FILE A NOTICE OF INTENTION Allocation, or the request for attorneys'

25 TO APPEAR SO THAT IT IS fees and reimbursement of expenses.


26 RECEIVED NO LATER THAN

27 [INSERT].
28

-5- NOTICE OF PENDENCY OF CLASS ACTION


Case No. 07-00931

Case 2:07-cv-00931-DDP-FMO Document 484-6 Filed 07/30/10 Page 22 of 114 Page ID


#:11076

1 DO NOTHING Get no payment. Remain a Class


2 Member. Give up your rights.
3 1

4 WHAT THIS NOTICE CONTAINS q


5

6 Why Did I Get This Notice? Page


7 What Is This Case About? What Has Happened So Far? Page
8 How Do I Know If I Am Affected By The Settlements?
Page
9 What Are The Lead Plaintiff's Reasons For The Settlements? Page
10
What Might Happen If There Were No Settlements? Page
11
How Much Will My Payment Be? Page
12
What Rights Am I Giving Up By Agreeing To The Settlements? Page
13 ^
What Payment Are The Attorneys For The Class Seeking?
14
15 How Will The Lawyers Be Paid? Page

16
How Do I Participate In The Settlements? What Do I Need To Do? Page
17 What If I Do Not Want To Be A Part Of The Settlements?
1 8 How Do I Exclude Myself? Page
19 When And Where Will The Court Decide Whether To Approve
20 The Settlements? Do I Have To Come To The Hearing?
21 May I Speak At The Hearing If I Don't Like The Settlements? Page
22 What If I Bought Shares On Someone Else's Behalf? Page
23 Can I See The Court File? Whom Should I Contact If I Have Questions? Page
24
WHY DID I GET THIS NOTICE?
25

26
6. This Notice is being sent to you pursuant to an Order of the United
27
States District Court for the Central District of California (the "Court") because
28
you or someone in your family may have purchased or otherwise acquired or sold
-6- NOTICE OF PENDENCY OF CLASS ACTION
Case No. 07-00931

Case 2:07-cv-00931-DDP-FMO Document 484-6 Filed 07/30/10 Page 23 of 114 Page ID
#:11077

1 New Century Securities during the Class Period. The Court has directed us to send
2 you this Notice because, as a potential Class Member, you have a right to know
3 about your options before the Court rules on the proposed Settlements in this case.

4 Additionally, you have the right to understand how a class action lawsuit may
5 generally affect your legal rights. If the Court approves the Settlements, a claims

6 administrator selected by Lead Plaintiff and approved by the Court, will make

7 payments pursuant to the Settlements after any objections and appeals are resolved.
8 7. In a class action lawsuit, the Court selects one or more people, known
9 as class representatives, to sue on behalf of all people with similar claims,
10 commonly known as the class or the class members. In this Consolidated Action,
11 the Court has appointed New York State Teachers' Retirement System to serve as

12 "Lead Plaintiff' under a federal law governing lawsuits such as this one, and

13 approved Lead Plaintiff's selection of the law firm of Bernstein Litowitz Berger &
14 Grossmann LLP ("Lead Counsel") to serve as Lead Counsel in the Consolidated

15 Action. Lead Plaintiff New York State Teachers' Retirement System and named
16 plaintiffs Carl Larson and Charles Hooten are the Class Representatives. A class

17 action is a type of lawsuit in which the claims of a number of individuals are

18 resolved together, thus providing the class members with both consistency and
19 efficiency. Once the class is certified, the Court must resolve all issues on behalf
20 of the class members, except for any persons who choose to exclude themselves

21 from the class. (For more information on excluding yourself from the Class, please

22 read "What If I Do Not Want To Be A Part Of The Settlements? How Do I j


23 Exclude Myself?" located below.)

24 8. The Court in charge of this case is the United States District Court for
25 the Central District of California, and the case is known as In re New Century. The
26 Judge presiding over this case is the Honorable Dean D. Pregerson, United States

27 District Judge. The people who are suing are called plaintiffs, and those who are

28 being sued are called defendants. In this case, the plaintiff is referred to as the

-7- NOTICE OF PENDENCY OF CLASS ACTION


Case No. 07-00931

Case 2:07-cv-00931-DDP-FMO Document 484-6 Filed 07/30/10 Page 24 of 114 Page ID
#:11078

1 Lead Plaintiff, on behalf of itself and the Class, and Defendants are the Individual
2 Defendants, the Underwriter Defendants and KPMG New Century was not named
3 as a defendant because New Century has filed a petition for voluntary bankruptcy
4 and the Bankruptcy Code does not permit an action to proceed against a debtor
i
5 who has filed such a petition.
6 9. This Notice explains the lawsuit, the Settlements, your legal rights,
7 what benefits are available, who is eligible for them, and how to get them. The
8 purpose of this Notice is to inform you of this case, that it is a class action, how

9 you might be affected, and how to exclude yourself from the Class if you wish to
10 do so. It also is being sent to inform you of the terms of the proposed Settlements,
11 and of a hearing to be held by the Court to consider the fairness, reasonableness,

12 and adequacy of the proposed Settlements, the fairness and reasonableness of the

13 proposed Plan of Allocation, and the application by Lead Counsel for attorneys'

14 fees and reimbursement of Litigation Expenses (the "Settlement Hearing").

15 10. The Settlement Hearing will be held on [INSERT] at [INSERT],


16 before the Honorable Dean D. Pregerson, at the United States District Court for the

17 Central District of California, 312 North Spring Street, Courtroom 3, Los Angeles,
18 California 90012 to determine:

19 1. whether this Consolidated Action should be finally certified, for


20 settlement purposes only, as a class action under Rules 23(a)
21 and (b) of the Federal Rules of Civil Procedure on behalf of the
22 Class;
23 2. whether the proposed Settlements are fair, reasonable, and
24 adequate and should be approved by the Court;
25 3. whether the claims against defendants and the other released
26 parties should be dismissed with prejudice as set forth in the
27 Stipulations;
28

-8- NOTICE OF PENDENCY OF CLASS ACTION


Case No. 07-00931

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#:11079
I

1 4. whether the proposed Plan of Allocation is fair and reasonable


2 and should be approved by the Court; and
3 5. whether Lead Counsel's request for an award of attorneys' fees
4 and reimbursement of Litigation Expenses should be approved
5 by the Court.
I
6 11. This Notice does not express any opinion by the Court concerning the
7 merits of any claim in the Consolidated Action, and the Court still has to decide
8 whether to approve the Settlements. If the Court approves the Settlements,
9 payments to Authorized Claimants will be made after any appeals are resolved, and
10 after the completion of all claims processing. Please be patient.

11
WHAT IS THIS CASE ABOUT? WHAT HAS HAPPENED SO FAR?
12
P
13 12. Begiluling on or about February 8, 2007, securities class action
14 complaints were filed in the United States District Court for the Central District of
15 California and the actions were consolidated by Order dated June 26, 2007.
16 13. On April 2, 2007, New Century and other Debtors filed for
17 bankruptcy in the United States Bankruptcy Court for the District of Delaware
1 8 ( " Bankruptcy Court") under Chapter 11 of Title 11 of the United States Code.
19 14. By Order dated June 26, 2007, the Court appointed the New York
20 State Teachers' Retirement System as Lead Plaintiff for the Consolidated Action
21 and approved its selection of Bernstein Litowitz Berger & Grossmann LLP as Lead

22 Counsel for the Class.

23 15. On September 14, 2007, Plaintiffs filed their Consolidated Class


24 Action Complaint ("Consolidated Complaint") asserting claims against Defendants

25 under the Securities Exchange Act of 1934 ("Exchange Act") and the Securities
26 Act of 1933 ("Securities Act") on behalf of the Class.
27 16. Beginning on November 2, 2007, Defendants filed motions to dismiss
28 the Consolidated Complaint, which Plaintiffs opposed on December 14, 2007.

-9- NOTICE OF PENDENCY OF CLASS ACTION


Case No. 07-00931

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#:11080

1 17. By Order dated January 31, 2008, the Court granted the motions to
k
2 dismiss with leave to amend the complaint.

3 18. On March 24, 2008, Plaintiffs filed their Amended Consolidated Class
4 Action Complaint ("Amended Complaint"), alleging claims against Defendants
5 pursuant to the Securities Act and the Exchange Act,
6 19. Pursuant to stipulation, on April 30, 2008, Plaintiffs filed their Second
7 Amended Consolidated Class Action Complaint (the "Complaint"), alleging claims

8 against Defendants pursuant to the Securities Act and the Exchange Act.

9 20. Beginning on June 2, 2008, Defendants filed motions to dismiss the


10 Complaint, which Plaintiffs opposed on July 7, 2008.

11 21. Following a hearing, by Order dated December 3, 2008, the Court


12 substantially denied Defendants' motions to dismiss.

13 22. Beginning on January 26, 2009, Defendants answered the Complaint.


14 23. The Parties began discovery in or about April 2009, including filing
15 multiple motions to compel and motions for protective order, and serving
16 discovery requests and responses, and producing voluminous documents.
17 24. On January 13, 2010, Defendant KPMG filed a motion for summary
18 judgment, which Plaintiffs opposed on March 15, 2010.

19 25. The Parties have participated in mediation sessions and additional


20 discussions before the Honorable Daniel Weinstein, following which the Parties

21 were able to reach agreements in principle to settle this Consolidated Action on the

22 terms set forth herein. In connection with the settlement of the Consolidated

23 Action, Defendants and other persons also reached agreements to settle the action

24 entitled Kodiak Warehouse LLC, et al. a Brad A. Morrice, et al. (Case No. 08-
25 1265-DDP-FMO) commenced on November 7, 2008, in the United States District
26 Court for the Central District of California (the "Kodiak Litigation") and the

27 adversary proceeding entitled The New Century Liquidating Trust and Reorganized

28 New Century Warehouse Corp. by and through Alan M. Jacobs, Liquidating


-10- NOTICE OF PENDENCY OF CLASS ACTION
Case No. 07-00931
Case 2:07-cv-00931-DDP-FMO Document 484-6 Filed 07/30/10 Page 27 of 114 Page ID
#:11081

1 Trustee and Plan Administrator v Robert K. Cole et al. (In re New Century TRS
2 Holdings, Inc.) (Adv. Proc. No. 09-50882 (KJC)) commenced on April 1, 2009 in
3 the Bankruptcy Court (the "Trustee Litigation"), and the SEC Action.
4 26. On [INSERT], the Court preliminarily approved the Settlements,
5 authorized this Notice to be sent to potential Class Members, and scheduled the
6 Settlement Hearing to consider whether to grant final approval to the Settlements.
7

8 HOW DO I KNOW IF I AM AFFECTED BY THE SETTLEMENTS?


9
10 27. If you are a member of the Class, you are subject to the Settlements k'
11 unless you timely request to be excluded. The Class consists of all persons and

12 entities who purchased or otherwise acquired New Century Common Stock, New
i
13 Century Series A Preferred Stock, New Century Series B Preferred Stock, and/or
14 New Century Call Options and/or who sold New Century Put Options, during the

15 time period from May 5, 2005, through and including March 13, 2007, either in the

16 Offerings, pursuant to a registration statement, or in the market, and who, upon

17 disclosure of certain facts alleged in the Complaint, were injured thereby.


18 Excluded from the Class are (a) Defendants; (b) members of the immediate

19 families of the Individual Defendants; (c) the subsidiaries and affiliates of


20 Defendants; (d) any person or entity who was a partner, executive officer, director
21 or controlling person of New Century (including any of its subsidiaries or

22 affiliates) or of any Defendant; (e) any entity in which any Defendant has a

23 controlling interest; and (f) the legal representatives, heirs, successors and assigns

24 of any such excluded parry. The Class also does not include those persons and

25 entities who timely request exclusion from the Class pursuant to this Notice (see
26 "What If I Do Not Want To Participate In The Class And The Settlements? How

27 Do I Exclude Myself?," below).


28

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I

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#:11082

1 RECEIPT OF THIS NOTICE DOES NOT NECESSARILY MEAN THAT


2 YOU ARE A CLASS MEMBER OR THAT YOU ARE ENTITLED TO
3 RECEIVE PROCEEDS FROM THE SETTLEMENTS. IF YOU WISH TO
4 BE ELIGIBLE TO PARTICIPATE IN THE SETTLEMENTS, YOU MUST
i
5 SUBMIT THE ENCLOSED CLAIM FORM POSTMARKED NO LATER
6 THAN [INSERT].
7
WHAT ARE THE LEAD PLAINTIFF'S REASONS FOR THE SETTLEMENTS?
8
9

9 28. Lead Plaintiff and Lead Counsel believe that the claims asserted
10 against Defendants have merit. Lead Plaintiff and Lead Counsel recognize,
11 however, the expense and length of continued proceedings necessary to pursue

12 their claims against Defendants through trial and appeals, as well as the difficulties
13 in establishing liability for allegations of fraud. Lead Plaintiff and Lead Counsel
14 have taken into account the possibility that the claims asserted in the Complaint

15 might have been dismissed at a later stage, such as in response to motions for
16 summary judgment, and have considered issues that would have been decided by a
17 jury in the event of a trial of the Consolidated Action, including whether
18 Defendants acted with an intent to mislead investors, whether the alleged
19 misrepresentations or omissions were material to investors, whether all of the Class
20 Members' losses were caused by the alleged misrepresentations or omissions, and

21 the amount of damages. Lead Plaintiff and Lead Counsel have considered the
22 uncertain outcome and trial and appellate risk in complex lawsuits like this one.

23 Lead Plaintiff also considered the available funds to satisfy any verdict at trial
24 given the expense and length of continued proceedings necessary to reach a

25 successful resolution at trial and on appeal.


26 29. In light of the amount of the Settlements and the immediacy of
27 recovery to the Class, Lead Plaintiff and Lead Counsel believe that the proposed

28 Settlements are fair, reasonable and adequate, and in the best interests of the Class.
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i
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1 Lead Plaintiff and Lead Counsel believe that the Settlements provide a substantial
2 benefit now, namely $124,827,088.00 in cash (less the various deductions
3 described in this Notice), as compared to the risk that the claims in the Complaint
4 would produce a similar, smaller, or no recovery after summary judgment, trial and
5 appeals, possibly years in the future.

6 30. Defendants have denied the claims asserted against them in the
7 Complaint and deny having engaged in any wrongdoing or violation of law of any
8 kind whatsoever. Defendants have agreed to the Settlements solely to eliminate the

9 burden and expense of continued litigation. Accordingly, the Settlements may not
10 be construed as an admission of Defendants' wrongdoing.
11
WHAT MIGHT HAPPEN IF THERE WERE NO SETTLEMENTS?
12

13 31. If there were no Settlements and Lead Plaintiff failed to establish any
14 essential legal or factual element of its claims, neither Lead Plaintiff nor the other

15 members of the Class would recover anything from Defendants. Also, if

16 Defendants were successful in proving any of their defenses, the members of the

17 Class likely would recover substantially less than the amount provided in the
18 Settlements, or nothing at all.
19
HOW MUCH WILL MY PAYMENT BE?
20
21 THE PROPOSED PLAN OF ALLOCATION: GENERAL PROVISIONS
22 32. Pursuant to the respective Stipulations, the Individual Defendants
23 have agreed to pay or cause to be paid collectively $65,077,088.00; the
24 Underwriter Defendants have agreed to collectively pay $15,000,000.00; and

25 KPMG has agreed to pay $44,750,000.00. Collectively, Defendants have agreed to

26 pay a total amount of $124,827,088.00 in cash.


27 33. After approval of the Settlements by the Court, and upon satisfaction
i
28 of the other conditions to the Settlements, and upon issuance of a Class
s
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I Distribution Order, the Net Settlement Fund will be distributed to Authorized


u
2 Claimants in accordance with the Plan of Allocation. j
t
3 34. The Settlement Fund will be distributed as follows:
4 (i) to pay all federal, state, and local Taxes on any income earned
5 by the Settlement Fund and to pay the reasonable costs incurred
6 in connection with determining the amount of, and paying,
7 Taxes owed by the Settlement Fund (including reasonable
8 expenses of tax attorneys and accountants);
9 (ii) to pay costs and expenses in connection with providing Notice
10 to Class Members and administering the Settlements on behalf
I I of Class Members; ^I
12 (iii) to pay attorneys' fees, with interest on such amount, to the
13 extent allowed by the Court pursuant to Lead Counsel's i
14 application;
15 (iv) to pay Litigation Expenses incurred in commencing and
16 prosecuting the Consolidated Action, with interest on such
17 money, to the extent allowed by the Court pursuant to Lead
18 Counsel's application; and
19(v) to compensate Authorized Claimants with the balance of the
20 Net Settlement Fund in accordance with the Plan of Allocation, q
21 subject to an Order of the Court approving the Settlements and
22 the Plan of Allocation (or such other allocation plan as the Court
23 may approve), and subject to such Order becoming Final
24 (meaning that the time for appeal or appellate review of the Order
25 granting final approval has expired, or, if the Order is appealed,
26 that the appeal is either decided without causing a material
27 change in the Order or is upheld on appeal and is no longer
28 subject to appellate review).
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1 35. Each person wishing to participate in the distribution must timely


2 submit a valid Claim Form establishing membership in the Class, and including all
3 required documentation, postmarked no later than , to the
4 address set forth in the Claim Form that accompanies this Notice. Unless the Court
5 otherwise orders, any Class Member who fails to submit a Claim Form postmarked no
I
6 later than shall be forever barred from receiving payments pursuant to
7 the Settlements set forth in the Stipulations but will in all other respects remain a E
8 Class Member and be subject to the provisions of the Stipulations, including the

9 terms of any Judgment entered and releases given.


10 36. Payment pursuant to the Plan of Allocation approved by the Court
m
11 shall be conclusive against all Authorized Claimants. No person shall have any

12 claim against Plaintiffs, Lead Counsel, the Claims Administrator or other agent
13 designated by Lead Counsel arising from distributions made substantially in
14 accordance with the Stipulations, the Plan of Allocation, or further orders of the
15 Court. Plaintiffs, Defendants, their respective counsel, and all other Released

16 Parties shall have no responsibility or liability whatsoever for the investment or

17 distribution of the Settlement Fund, the Net Settlement Fund, the Plan of
18 Allocation, the determination, administration, calculation, or payment of any claim

19 or nonperformance of the Claims Administrator, the payment or withholding of


20 Taxes owed by the Settlement Fund, or any losses incurred in connection
21 therewith, except as otherwise provided in the Stipulations.

22 37. The objective of the Plan of Allocation is to equitably distribute the


23 proceeds of the Settlements to those Class Members who suffered economic losses

24 as a result of the alleged wrongful conduct, as opposed to losses caused by market

25 and industry factors or Company-specific factors not related to the alleged wrongful

26 conduct. The Plan of Allocation reflects Lead Plaintiff's damages consultant's


27 analysis undertaken to that end, including a review of publicly available information

28 regarding New Century and analysis regarding the stock price movements.
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1 38. The proposed Plan of Allocation provides for distribution of the Net
2 Settlement Fund to Authorized Claimants as follows:
w
3 I. SUMMARY OF PLAN OF ALLOCATION

4 39. Each Person claiming to be a Class Member entitled to share in the


5 Net Settlement Fund ("Authorized Claimant") shall be required to submit a

6 separate Claim Form signed under penalty of perjury and supported by such

7 documents as specified in the Proof of Claim as are reasonably available to the


9
8 Authorized Claimant. Each Proof of Claim must separately set forth: (i) each

9 claimant's opening securities position in New Century Common Stock, Series A


10 Preferred Stock, Series B Preferred Stock, or Put/Call Options as of the close of the

11 market on May 4, 2005, the day before the first day of the Class Period; (ii) each

12 transaction, i.e., purchase, acquisition, sale, disposal, exercise, or expiration, made


13 during the Class Period in any such New Century Security; and (iii) each
14 claimant's ending securities position in New Century Common Stock, Series A °.
15 Preferred Stock, Series B Preferred Stock, or Put/Call Options, at the close of the

16 market on March 13, 2007, the last day of the Class Period, and, for Common

17 Stock and Preferred Stock, at the close of the market on June 10, 2007, in order to
18 see if claimant's Section 10(b) Recognized Loss Claims will be limited by

19 calculations relating to the 90-day look back rules of the Private Securities
20 Litigation Reform Act of 1995 ("PSLRA"). In addition, Claimants will be asked in

21 the Proof of Claim form to list sales of New Century Common

22 Stock and Preferred Stock made during the 90-day look back period of March 13,

23 2007, to June 10, 2007.5


24
25 5 Pursuant to Section 21(D)(e)(1) of the PSLRA, "in any private action arising
26
under this title in which the plaintiff seeks to establish damages by reference to the
market price of a security, the award of damages to the plaintiff shall not exceed
27 the difference between the purchase or sale price paid or received, as appropriate,
28 by the plaintiff for the subject security and the mean trading price of that security
during the 90-day period beginning on the date on which the information
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1 40. All Proof of Claim forms must be postmarked or received by [DATE],


2 addressed as follows: p

3 In re New Century Securities Litigation Settlement


4 c/o Analytics, Inc. Claims Administrator
P.O. Box 2004
5 Chanhassen, MN 55317-2004
6
41. Unless otherwise ordered by the Court, any Class Member who fails
7
to submit a properly completed and signed Proof of Claim within such period as
8
may be ordered by the Court shall be forever barred from receiving any payments
9
pursuant to the Stipulation, but will in all other respects be subject to the provisions
10
of the Stipulation and the final judgments entered by the Court.
11
42. The Net Settlement Fund shall be distributed to members of the Class
12
who submit acceptable Proofs of Claim. For purposes of the Plan of Allocation, the
13
Net Settlement Fund is divided into two components: the "Underwriter Allotment"
14
(composed of the settlement fund from the settlement with the Underwriter
15
Defendants net of Court-approved fees and expenses), and the "Individual-Auditor
16
Allotment" (composed of the settlement funds from the settlement with the
17
Individual Defendants and KPMG, net of Court-approved fees and expenses).
18
Only Class Members who purchased Series A Preferred Stock and/or Series B
19
Preferred Stock during the Class Period and were damaged thereby may be eligible
20 I
to receive distributions from the Underwriter Allotment based on those purchases.
21
All Class Members (including but not limited to those who purchased Series A
22
Preferred Stock and/or Series B Preferred Stock during the Class Period and were
23
damaged thereby) may be eligible to receive distributions from the Individual-
24

25
correcting the misstatement or omission that is the basis for the action is
26 disseminated." 15 U.S.C. §78u-4(e)(1). $0.87 was the average closing price of New
27
Century Common Stock during the 90-day period beginning on March 13, 2007,
and ending on June 10, 2007.
28

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1 Auditor Allotment. Put another way, the Underwriter Allotment will be distributed
i
2 to only purchasers of Series A Preferred Stock and Series B Preferred Stock;
3 whereas the Individual-Auditor Allotment will be distributed to all Class Members
4 who submit valid Claim Forms, regardless of the type of New Century Security

5 purchased or sold. This is because claims against the Underwriter Defendants

6 were alleged in this Action only on behalf of purchasers of Series A Preferred


fl
7 Stock and Series B Preferred Stock, and not on behalf of purchasers or sellers of
8 other Securities.

9 43. The Claims Administrator shall determine each Authorized Claimant's


10 pro rata share of the Underwriter Allotment and the Individual-Auditor Allotment

11 separately established for each class of securities shown in Table 1 annexed hereto,
12 based upon each Authorized Claimant's "Recognized Loss Claim." The

13 Recognized Loss Claim formula is not intended to be an estimate of the amount


14 that a Class Member might have been able to recover after a trial; nor is it an

15 estimate of the amount that will be paid to Authorized Claimants pursuant to the

16 Settlement. The Recognized Loss Claim formula is the basis upon which the
17 Underwriter Allotment and the Individual-Auditor Allotment will be
18 proportionately allocated to the Authorized Claimants.

19 44. The Recognized Loss for an Authorized Claimant's transactions will


20 be calculated by the Claims Administrator in consultation with Lead Counsel in

21 accordance with the provisions of this Plan of Allocation. Factors generally


22 considered in developing the Plan of Allocation, include, among others: (1) the time

23 period in which a New Century Security was purchased; (ii) whether a Security
24 was purchased or acquired on the open market, or as a result of some other type of

25 transaction, such as pursuant to a registration statement or prospectus, or by gift;

26 (iii) whether the Security was held until the end of the Class Period (March 13,
27 2007), or 90 days thereafter, or whether it was sold during the Class Period, and if

28 so, when it was sold; and (iv) the artificial inflation in the price of New Century

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i
1 Securities at different times during the Class Period attributable to Defendants'
2 false and misleading statements as alleged in this case, and as calculated by Lead
3 Plaintiff's damages consultant. (Based on the opinions of this consultant, Lead j
4 Counsel assumed, for purposes of determining the Recognized Loss, that there
5 were varied amounts of artificial inflation in prices of New Century Securities

6 during the Class Period, and based on the assumption that Plaintiffs could
7 adequately allege and prove liability for that entire period);
8 45. The Plan of Allocation generally measures the amount of loss that a
9 Class Member who submits an acceptable Proof of Claim can claim under the
10 Settlements for the purpose of making pro rata allocations of the cash from the
6

11 Underwriter Allotment and the Individual-Auditor Allotment to Class Members for


12 their respective class of Securities. The Plan of Allocation is not a formal damage

13 analysis. The following proposed Plan of Allocation reflects Plaintiffs' allegations

14 that the prices of New Century Securities were artificially inflated during the Class

15 Period (May 5, 2005 — March 13, 2007) due to Defendants' allegedly material

16 misrepresentations and/or omissions during the Class Period. Plaintiffs allege that

17 corrective disclosures affecting trading on February 8, 2007; March 5, 2007, and


18 March 13, 2007, removed artificial inflation from the prices of New Century

1 9 Securities.
20 46. The Plan of Allocation covers the following New Century Securities:
21 (1) Common Stock; (ii) Series A Preferred Stock; (iii) Series B Preferred Stock; and
22 (iv) Call and Put Options on Common Stock.

23 47. A New Century Security must be held through a corrective disclosure


24 in order to be eligible for a recovery in the Settlement; that is, a New Century

25 Security purchased or otherwise acquired during the first part of the Class Period,

26 from May 5, 2005 through February 7, 2007, must be held until or beyond
27 February 8, 2007, the first trading day after the first corrective disclosure.

28 Similarly, a New Century Security purchased or otherwise acquired on or after

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1 February 8, 2007, and before or on March 2, 2007, must be held until March 5,
2 2007, the next trading day after the second corrective disclosure. Finally, a New

3 Century Security purchased or otherwise acquired on or after March 5, 2007, must


4 be held until March 13, 2007 5 the last day of the Class Period. If you did not hold
5 a New Century Security referred to above which was purchased during the three
6 different parts of the Class Period described above and below (see the artificial i
7 inflation Tables annexed hereto) for both the New Century Common Stock and the

8 New Century Preferred Stock through at least one of the three corrective disclosure
9 dates indicated, the Recognized Loss per share is $0. The Recognized Loss for
10 these transactions will be calculated as zero because it has been determined that the

11 artificial inflation between each disclosure and arising from the circumstances

12 underlying the allegations of Plaintiffs' Complaint was constant.

13 II. ADDITIONAL CONSIDERATIONS IN


CALCULATION OF RECOGNIZED LOSS
14 CLAIMS FOR NEW CENTURY SECURITIES
i
15 48. A Recognized Loss will be calculated for each purchase or sale of
16 New Century Securities that is within the Class Period, listed in the Proof of Claim

17 form, and for which adequate documentation is provided.


18 A. Guidelines Applicable to the
Calculations o} All Claims
19
49. In the event a Class Member has more than one purchase or sale of the
20
New Century Securities, all purchases and sales of each type of security shall be
21
matched on a First-In-First-Out ("FIFO") basis by type. Class Period sales will be
22
matched first against any New Century Securities held at the beginning of the
23
Class Period, and then against purchases in chronological order, beginning with the
24
earliest purchase made during the Class Period. Purchases and sales of New
25
Century Securities shall be deemed to have occurred on the "contract" or "trade"
26
date as opposed to the "settlement" or "payment" date. The receipt or grant by gift,
27
devise or operation of law of New Century Securities during the Class Period shall
28
not be deemed a purchase or sale of these New Century Securities for the
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1 calculation of an Authorized Claimant's Recognized Loss Claim, nor shall it be


2 deemed an assignment of any claim relating to the purchase of such New Century
3 Securities unless specifically provided in the instalment of gift or assignment.
4 Similarly, the covering purchase of a short sale shall not be deemed a purchase or
5 sale of New Century Securities for the calculation of an Authorized Claimant's
f
6 Recognized Loss Claim. u
7 50. Each Authorized Claimant shall be allocated a pro rata portion or
8 share of the Underwriter Allotment and/or Individual-Auditor Allotment based on

9 his, her or its Recognized Loss Claim, as compared to the total Recognized Loss
10 Claims of all Authorized Claimants for their respective class of Securities. Each

11 Authorized Claimant shall be paid an amount determined by multiplying the total


12 in the Underwriter Allotment and/or Individual-Auditor Allotment for their class of

13 Securities by a fraction, the numerator of which shall be the Claimant's

14 Recognized Loss Claim and the denominator of which shall be the Total

15 Recognized Loss Claims of all Authorized Claimants for the included class of

16 securities. Each Authorized Claimant will receive a pro rata share of the
17 Underwriter Allotment and/or Individual-Auditor Allotment based on his, her or its
1

18 Recognized Loss Claim.

1 9 51. The amount of a Class Member's Recognized Loss as computed


20 above is not intended to be an estimate of a Class Member's damages, nor of what

21 a Class Member might have been able to recover at trial, and it is not an estimate

22 of the amount that will be paid pursuant to this Settlement. Instead, this
23 computation is only a method to weigh Class Members' claims against one another.

24 52. To the extent a Claimant had a gain from his, her or its transactions
25 during the Class Period with respect to New Century Securities specified above,
26 the value of their Recognized Loss Claim will be zero. Such claimants will, in any

27 event, be bound by the Settlements. You may wish to consider this when deciding
28 whether to opt-out of the Settlements.

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1 53. For purposes of determining whether a Claimant had an overall


2 market gain with respect to his, her, or its Class Period purchases of an individual

3 New Century Security or suffered an overall market loss, the Claims Administrator
4 shall determine the difference between (i) the Total Purchase Amount paid for all
5 purchases of that individual New Century Security purchased or acquired during

6 the Class Period, (ii) any premiums received from the sale of Put Options, and (iii)
7 the sum of the Sales Proceeds received for all of that individual New Century
8 Security during the Class Period and the Holding Value ascribed to that security for

9 all Securities still held on June 10, 2010. The Holding Value shall be $0.87 per
10 share for Common Stock; $8.02 per share for Series A Preferred Stock; and $7.95

11 per share for Series B Preferred Stock. This difference will be deemed a

12 Claimant's market gain or loss on his, her, or its overall transactions in that

13 individual New Century Security during the Class Period.


14 54. An Authorized Claimant's gains and losses on a particular New
15 Century Security purchased during the Class Period will be netted against each
16 other to determine the Authorized Claimant's net Recognized Loss Claim on that

17 particular security. In the case of New Century Common Stock and Put and Call

18 Options on that stock, gains and losses on both the stock and the Options will be
19 combined and thereafter netted against each other. However, in all other cases,

20 gains and losses will not be netted or aggregated across different eligible New
21 Century Securities. For example, an Authorized Claimant's Recognized Loss

22 Claim (as calculated under this Plan) on New Century Common Stock/Options will

23 not offset his, her or its Recognized Loss Claim (as calculated under this Plan) on
24 any issue of New Century Preferred Stock.

25 55. Class Members who do not submit acceptable Proofs of Claim will
26 not share in the settlement proceeds. Class Members who do not submit a request
27 for exclusion and do not submit an acceptable Proof of Claim will nevertheless be
28 bound by the Settlements and the judgments of the Court.

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1 56. Distributions will be made to Authorized Claimants only after the


2 Court has finally approved the Settlements, the Effective Date has occurred and
3 after all claims have been processed. At that time, Lead Plaintiff will file a motion

4 for entry of a proposed Class Distribution Order which will, among other things,
i
5 approve of the distribution to Authorized Claimants of the Net Settlement Fund.
'I
6 57. The Individual Defendants, the Underwriter Defendants, and KPMG
7 and their respective counsel, and all other Released Parties shall have no
8 responsibility for, or liability whatsoever, relating to distributions from the

9 Settlement Fund or the Underwriter Allotment or the Individual-Auditor Allotment,


10 or with respect to the Plan of Allocation, or the determination, administration,

11 calculation, or payment of any Proof of Claim, or non-performance of the Claims


12 Administrator, the payment or withholding of Taxes owed by a Settlement Fund, or

13 any losses incurred in connection therewith.

14 B. Computation Methodology Relating to


Recognized Losses for Common Stock
15 Purchases
s
16 58. For purposes of developing the Plan of Allocation, the damages l
17 consultant calculated the amount of artificial inflation in the daily closing market
18 prices for New Century Cominon Stock during three different portions of the Class
19 Period. See the annexed Table 2. In computing artificial inflation, the damages
20 consultant considered price changes of New Century Common Stock in regard to
21 certain public announcements regarding New Century and adjusted those price

22 changes that were attributable to market forces unrelated to the alleged fraud.

23 59. As explained above, Common Stock purchases are not eligible for
24 distributions from the Underwriter Allotment, but may be eligible for distributions

25 from the Individual-Auditor Allotment.


26 C. Recognized Loss Calculations
27 60. Recognized Loss Claims will be calculated for the purposes of the
28 Settlement as follows:
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1 1. Calculation of Recognized Loss for New


Century Common Stock Purchases
2
61. Calculation of Recognized Loss Claims for New Century Common
3
Stock shares shall be as follows:
4
62. For shares purchased on or between May 5, 2005, through February 7,
5
2007, the following claims for damages shall be allowed:
6
(a) For each share sold on or before February 7, 2007, no Recognized
7 Claims for damages shall be allowed;
g (b) For each share sold on or between February 8, 2007, and through March
13 1 2007, the allowed damages shall be the inflation per share at the time of
9 purchase for the applicable date of purchase as set forth in Table 2, annexed
10 hereto, less the inflation per share at the time of sale as set forth in Table 2;
and
11
12 63. For shares purchased on or between February 8, 2007, through March
13 2, 2007, the following claims for damages shall be allowed:

14 (a) For each share sold on or before March 2, 2007, no Recognized Claims
for damages shall be allowed;
15
(b) For each share sold on or between March 5, 2007, and March 13, 2007,
16 the allowed damages shall be the inflation per share at the time of purchase
for the applicable date of purchase as set forth in Table 2, annexed hereto,
17
less the inflation per share at the time of sale as set forth in Table 2; and
18
64. For shares purchased on or between March 5, 2007, through March
19
20 12, 2007, the following claims for damages shall be allowed:
(a) For each share sold on or before March 12, 2007, no Recognized Claims
21
for damages shall be allowed;
22 (b) For each share sold on or after March 13, 2007, the allowed damages
shall be the inflation per share at the time of purchase for the applicable
23
date of purchase as set forth in Table 2, annexed hereto.
24
65. In addition to the annexed Table 2 relating to Section 10(b) New
25
Century Common Stock claims, the Recognized Loss Claims for damages for such
26
shares purchased during the Class Period shall be further limited (as provided for
27
28 under the PSLRA) to the smallest of the following:

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1 (a) the difference between the price paid and the price received (out-of-
2 pocket investment loss) if sold on or before June 10, 2007;
(b) the difference between the price paid (excluding all fees and
3 commissions) and the average closing price as set forth in Table 3
4 annexed hereto if sold between March 13, 2007, and June 10, 2007; and
(c) the difference between the price per share paid and $0.87 per share if the
5 shares were sold after June 10, 2007, or were held until the current date.
6 2. Calculation of Recognized Loss
for New Century Series A Preferred Stock
7 Purchases
8 66. Calculation of Recognized Loss Claims for New Century Series A
9 Preferred Stock shares shall be as follows:
10 67. For shares purchased on or between May 5, 2005, through February 7,
11 2007, the following claims for damages shall be allowed:

12 (a) For each share sold on or before February 7, 2007, no Recognized Claims
for damages shall be allowed;
13
(b) For each share sold on or between February 8, 2007, and through March
14 13, 2007, the allowed damages shall be the inflation per share at the time
of purchase for the applicable date of purchase as set forth in Table 4,
15
annexed hereto, less the inflation per share at the time of sale as set forth
16 in Table 4; and
17
68. For shares purchased on or between February 8, 2007, through March
18
2, 2007, the following claims for damages shall be allowed:
19
(a) For each share sold on or before March 2, 2007, no Recognized Claims
20 for damages shall be allowed;
21
(b) For each share sold on or between March 5, 2007, and March 13, 2007,
the allowed damages shall be the inflation per share at the time of
22 purchase for the applicable date of purchase as set forth in Table 4,
23
annexed hereto, less the inflation per share at the time of sale as set forth
in Table 4; and
24
25 69. For shares purchased on or between March 5, 2007, through March

26 12, 2007, the following claims for damages shall be allowed:

27
(a) For each share sold on or before March 12, 2007, no Recognized Claims
for damages shall be allowed;
28

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E
r
1 (b) For each share sold on or after March 13, 2007, the allowed damages
2 shall be the inflation per share at the time of purchase for the applicable
date of purchase as set forth in Table 4, annexed hereto.
3

4 70. The Recognized Loss Claims for damages for such Series A Preferred
5 Shares purchased during the Class Period shall be further limited (as provided for
6 under the PSLRA) to the smallest of the following:
(a) the difference
7
between the price paid and the price received (out-of-pocket N

investment loss) if sold on or before June 10, 2007;


8 (b) the difference between the price paid (excluding all fees and commissions)
9 and the average closing price as set forth in Table 6 annexed hereto if sold
between March 13, 2007 and June 10, 2007; and
10 (c) the difference between the price per share paid and $8.02 per share if the
11 shares were sold after June 10, 2007, or were held until the current date.
3. Calculation of Recognized Loss
12 for New Century Series B Preferred Stock
13 Purchases
71. Calculation of Recognized Loss Claims for New Century Series B
14

15
Preferred Stock shares shall be as follows:

16
72. For shares purchased on or between May 5, 2005, through February 7, e
17 2007, the following claims for damages shall be allowed:
(a) For each share sold on or before February 7, 2007, no Recognized
18
Claims for damages shall be allowed;
19 (b) For each share sold on or between February 8, 2007, and through
20 March 13, 2007, the allowed damages shall be the inflation per share at
the time of purchase for the applicable date of purchase as set forth in
21 Table 5, annexed hereto, less the inflation per share at the time of sale
22
as set forth in Table 5; and

23 73. For shares purchased between February 8, 2007, through March 2,


24 2007, the following claims for damages shall be allowed:

25 (a) For each share sold on or before March 2, 2007, no Recognized Claims
26
for damages shall be allowed;
(b) For each share sold on or between March 5, 2007, and March 13, 2007,
27 the allowed damages shall be the inflation per share at the time of
28 purchase for the applicable date of purchase as set forth in Table 5,

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1 annexed hereto, less the inflation per share at the time of sale as set
2 forth in Table 5; and

3 74. For shares purchased between March 5, 2007, through March 12,
4 2007, the following claims for damages shall be allowed:
5 (a) For each share sold on or before March 12, 2007, no Recognized
6 Claims for damages shall be allowed;
(b) For each share sold on or after March 13, 2007, the allowed damages
7 shall be the inflation per share at the time of purchase for the applicable
8 date of purchase as set forth in Table 5, annexed hereto.

9 75. The Recognized Loss Claims for damages for such Series B Preferred
10 Shares purchased during the Class Period shall be further limited (as provided for

11 under the PSLRA) to the smallest of the following:

12 (a) the difference between the price paid and the price received (out-of-pocket
13 investment loss) if sold on or before June 10, 2007;
(b) the difference between the price paid (excluding all fees and commissions)
14 and the average closing price as set forth in Table 7 annexed hereto if sold
15 between March 13, 2007, and June 10, 2007; and
(c) the difference between the price per share paid and $7.95 per share if the
16 shares were sold after June 10, 2007, or were held until the current date.
17 4. Calculation of Recognized Loss for
New Century Call and Put Options
18
76. The Plan of Allocation covers the following New Century Call and
19
Put Options: New Century Call Options on Common Stock initially purchased or
20
otherwise acquired during the Class Period, on May 5, 2005, up to and including
21
March 13, 2007 ("New Century Call Options"), and New Century Put Options on
22
Common Stock written or purchased (covered) during the Class Period May 5,
23
2005, through and including March 13, 2007 ("New Century Put Options").
24
77. Artificial inflation and Recognized Losses as to New Century Call
25
Options and artificial deflation and Recognized Losses as to New Century Put
26
Options were computed in a manner similar to that used with respect to New
27
Century Common Stockas described above. To determine artificial inflation for
28 i
Call Options, Lead Plaintiff's damages consultant considered securities' price
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1 changes that occurred in reaction to certain public announcements regarding New

2 Century and then made adjustments for changes that were attributable to market
3 forces unrelated to the alleged fraud in prices of such Call Options and Put i
E.
4 Options. Lead Plaintiff's damages consultant then developed formulae (see below)
5 from which the Recognized Losses for New Century Call Options and Put Options
6 may be calculated. In addition, the total dollar amount payable to Class Members
1
7 in connection with the acquisition of Call Options and the sale of Put Options
8 during the Class Period is limited to 10% of the Individual-Auditor Allotment. This
9 limitation reflects the speculative and derivative nature of these securities as
10 compared to New Century Common Stock and New Century Preferred Shares.

11 78. With respect to purchases and sales (covers) of New Century Call
12 Options during the period May 5, 2005, through and including March 13, 2007, the

13 Artificial Inflation per Call Option on a given day shall be the dollar change in the

14 value of Call Options on that day as a result of the inflation in New Century's

15 Common Stock share price. The dollar change in the value of Call Options will be
16 calculated using the Black-Scholes option pricing formula (using Black's

17 adjustment for dividends and the annualized standard deviation estimated from 46-
18 day, historical daily volatility estimates) using the closing share price of New

19 Century Common Stock on the transaction date, compared with the Black-Scholes
20 call pricing formula value for the Call Option using the uninflated closing share
21 price of New Century Common Stock on that same date as determined by: (1) the

22 reported closing share price minus the Common Stock price inflation per share set

23 forth in the annexed Table 2 for Call Options initially purchased between May 5,

24 2005, and March 13, 2007, and (2) the reported closing share price minus the

25 Common Stock price inflation per share set forth in the annexed Table 2 for Call

26 Options initially sold between May 5, 2005, and March 13, 2007. Once again,

27 Black's adjustment for dividends is implemented. Annualized volatility estimates


2 8 are obtained using the daily standard deviations using the returns for that day plus
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1 the previous 45-day stock returns, which are then annualized using a 252-trading
2 day approach.
3 j
4 (a) For Call Options which (1) expired on or prior to February 7, 2007; (2)
were exercised prior to February 7, 2007; or (3) were sold (position
5 closed out) prior to February 7, 2007, the Recognized Loss Claim shall
6 be zero.

7 (b) For Call Options which were purchased or acquired between May 5,
8
2005, and February 7, 2007, and (1) expired on or after February 8,
2007; (2) were exercised on or between February 8, 2007, and March
9 13, 2007; or (3) were sold (position closed out) on or between February
10 8, 2007, and March 13, 2007, the Recognized Loss Claim shall be that
number of Options multiplied by the lesser of:
11
12 (1) the difference between Artificial Inflation per Call Option on the
date of purchase and Artificial Inflation per Call Option on the date
13 of expiration, exercise, or sale, as appropriate; or
14 (2) the difference between the purchase price per Option and the sale
price per Option ($0.00 if the Call Option expired worthless).
15
16 An example at this point might be useful. Suppose on February 6, 2007, an
investor purchases 100 Call Options (long one contract) with a March 17,
17 2007 maturity and exercise price of $20. The Call Option inflation on this
18 date is $10.40 from Table 8 annexed hereto. Hence, this investor paid
$10.40 too much for the Call Option on February 6, 2007. This investor
19 then sells these Call Options on February 9, 2007, when the Call Option
20 inflation was $1.60 (see Table 8). Thus, this investor received $1.60 too
much for the Call Option on February 9, 2007. For this investor, the
21 Recognized Loss Claim is the difference in call price inflation on these two
22 dates ($10.40 - $1.60, or $8.80) times number of Options (100), for a total of
$880.00; assuming that the difference between the purchase price and the
23 sale price was greater than $8.80.
24
(c) For Call Options which were purchased or acquired between February
25 8, 2007, and March 2, 2007, and (1) expired on or after March 5, 2007,
26 (2) were exercised on or between March 5, 2007, and March 13, 2007;
or 3) were sold (position closed out) on or between March 5, 2007, and
27 March 13, 2007, the Recognized Loss Claim shall be that number of
28 Options multiplied by the lesser of-

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k

1 (1) the difference between Artificial Inflation per Call Option on the 1
2 date of purchase and Artificial Inflation per Call Option on the date
of expiration, exercise, or sale, as appropriate; or
3 (2) the difference between the purchase price per Option and the sale
4 price per Option ($0.00 if the Call Option expired worthless).

5 (d) For Call Options which were purchased or acquired between March 5,
6 2007, and March 12, 2007, and (1) expired on or after March 13, 2007;
(2) were exercised on or after March 13, 2007; or 3) were sold (position
7 closed out) on or after March 13, 2007, the Recognized Loss Claim
8 shall be that number of Options multiplied by the lesser of:

9 (1) the Artificial Inflation per Call Option on the date of purchase, or
10 (2) the difference between the purchase price per Option and the sale
price per Option ($0.00 if the Call Option expired worthless).
11

12 79. With respect to purchases (covers) and sales of Put Options during the
13 period May 5, 2005, through and including March 13, 2007, the Artificial Inflation
14 per Option on a given day shall be the dollar change in the value of Put Options on

15 that day as a result of the inflation in New Century's Common Stock share price.
i
16 The dollar change in the value of Put Options will be calculated using the Black-
17 Scholes put option pricing formula (using Black's adjustment for dividends and the e
18 annualized standard deviation estimated from 46-day historical daily volatility
19 estimates) using the closing share price of New Century Common Stock on the

20 transaction date, compared with the Black-Scholes put pricing formula value for
21 the Put Option using the uninflated share closing share price of New Century
22 Common Stock on that same date as determined by: (1) the reported closing share

23 price minus the Common Stock price inflation per share set forth in the annexed
24 Table 2 for Put Options subsequently purchased between May 5, 2005, and March

25 13, 2007, and (2) the reported closing share price minus the Common Stock price

26 inflation per share set forth in the annexed Table 2 for Put Options initially sold

27 between May 5, 2005, and March 13, 2007. Once again, Black's adjustment for
28 dividends is implemented. Annualized volatility estimates are obtained using the

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i
1 daily standard deviations using the returns for that day plus the previous 45-day
2 stock returns, which are then annualized using 252 trading day approach. r
3 (a) For Put Options which (1) expired on or prior to February 7, 2007; (2)
4 were exercised prior to February 7, 2007; or 3) were purchased (position
closed out) prior to February 7, 2007, the Recognized Loss Claim shall
5 be zero.
6
(b) For Put Options which were sold between May 5, 2005, and February 7,
7 2007, and (1) expired on or after February 8, 2007; (2) were exercised on
8 or between February 8, 2007, and March 13, 2007; or 3) were purchased
(position closed out) on or between February 8, 2007, and March 13,
9 2007, the Recognized Loss Claim shall be that number of Options
10 multiplied by the lesser of:
(1) the difference, multiplied by minus one, between Artificial
11
Inflation per Put Option on the date of sale and Artificial Inflation
12 per Put Option on the date of expiration, exercise, or purchase
($0.00 if the Put Option expired worthless), as appropriate; or
13
(2) the difference, multiplied by minus one, between the sale price per
14 Put Option and the purchase price of the Put Option ($0.00 if the
15
Put Option expired worthless).
E
16 An example at this point might be useful. Suppose on February 6, 2007, an
17 investor sells 100 Put Options (short one contract) with a March 17, 2007
maturity and exercise price of S20. The Put inflation on this date is -$14.22
18 from Table 8. Hence, this investor received $14.22 too little for the Put
19 Option on February 6, 2007. This investor purchases (closes) these Put
Options on February 9, 2007, when the Put inflation was -$9.07 (see Table
20 8). Thus, this investor paid $9.07 too little for the Call Option on February
21 91 2007. For this investor, the Recognized Loss Claim is the difference in
purchase inflation and sale inflation on these two dates (-$9.07 - (-$14.22) =
22 $5.15) times number of Put Options, 100 for a total of $515.00; assuming
23 that the difference between the Put purchase price and the Put sale price was
greater than $5.15.
24

25 (c) For Put Options which were initially sold between February 8, 2007, and
March 2, 2007, and (1) expired on or after March 5, 2007; (2) were
26 exercised on or between March 5, 2007 and March 13, 2007; or 3) were
27 purchased (position closed out) on or between March 5, 2007, and March
13, 2007, the. Recognized Loss Claim shall be that number of Options
28 multiplied by the lesser of-
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1
2 (1) the difference, multiplied by minus one, between Artificial
Inflation per Put Option on the date of sale and Artificial Inflation
3 per Put Option on the date of expiration, exercise, or purchase
4 ($0.00 if the Put Option expired worthless), as appropriate; or
(2) the difference, multiplied by minus one, between the sale price per
5 Put Option and the purchase price of the Put Option ($0.00 if the
6 Put Option expired worthless).

7 (d) For Put Options which were sold between March 5, 2007, and March 12,
8 2007, and (1) expired on or after March 13, 2007; (2) were exercised on
or after March 13, 2007; or 3) were purchased (position closed out) on or
9 after March 13, 2007, the Recognized Loss Claim shall be that number of
10 Options multiplied by the lesser of:

11 (1) the Artificial Inflation per Put Option on the date of sale,
12 multiplied by minus one; or
(2) the difference, multiplied by minus one, between the sale price per
13 Put Option and the purchase price of the Put Option ($0.00 if the
14 Put Option expired worthless).

15
Another example might be helpful here. Suppose on March 6, 2007, an
investor sold 100 Put options (short one contract) with an exercise price of
16 $10. The put inflation for this option on March 6, 2007, was
17 - $ 0.68. Hence, this investor received $68 too little for selling these 100
options. Further suppose that this investor purchased (covered) 100 Put
18 options after March 13, 2007, when Put inflation was zero. The Recognized
19 Loss Claim for this investor will be $68 (negative of the Put inflation on the
sale date), assuming that the difference in purchase price of the Put option
20 and sale price of the Put option was greater than $0.68 per Put option.
21 III. OTHER PROVISIONS OF THE PLAN

22 80. A payment to any Class Member that would amount to less than
23 $10.00 in total will not be included in the calculation of the distribution of the
24 Underwriter Allotment and Individual-Auditor Allotment, and no such payment

25 will be made.

26 81. The determination of the price paid and the price received for a
27 particular security shall be exclusive of all commissions, taxes, fees and charges.
28

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1 82. The Court has reserved jurisdiction to modify, amend, or alter the Plan
2 of Allocation without further notice, or to allow, disallow or adjust the claim of any
3 Class Member on equitable grounds, to ensure a fair and equitable distribution of
4 funds. No person shall have any claim against the Plaintiffs or their counsel or any
5 claims administrator or other agent designated by Plaintiffs or their counsel, or

6 against Defendants or their counsel, based on distributions made substantially in


7 accordance with the Stipulations and the Settlements contained therein, the Plan of
8 Allocation, or further orders of the Court.
9 83. The Defendants and their counsel shall have no involvement in, or
10 responsibility for, or liability whatsoever for the distribution of the Settlement

11 Fund or the Underwriter Allotment or Individual-Auditor Allotment, for the Plan of

12 Allocation, for the determination, administration and calculation of, or payment


1

13 pursuant to, Proofs of Claim, for the payment or withholding of Taxes owed by the I

14 Settlement Fund, the Underwriter Allotment or Individual-Auditor Allotment, or

15 for acts or omissions of the Escrow Agent or any losses incurred in connection
16 therewith. f
17 84. The Court has reserved jurisdiction to allow, disallow, or adjust on
18 equitable grounds the Claim of any Class Member.
19 85. The Plan of Allocation set forth herein is the plan that is being proposed
20 by Lead Plaintiff and Lead Counsel to the Court for approval. The Court may

21 approve this plan as proposed or it may modify the Plan of Allocation without

22 further notice to the Class.

23
WHAT RIGHTS AM I GIVING UP BY AGREEING TO THE SETTLEMENTS?
24
25 86. If the Settlements are approved, the Court will enter judgments (the
26 "Judgments"). The Judgments will dismiss with prejudice the claims against the

27 Defendants and other related persons and entities and will provide that Lead
28 Plaintiff and all other Class Members will provide releases as described below.
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1 87. Pursuant to the Global Officer And Director Stipulation, Plaintiffs and
2 members of the Class will be deemed by operation of law to have released, waived,!
3 discharged and dismissed each and every Settled Class Claim as against each and

4 every Released Officer And Director and the Insurance Carriers (as defined in the
5 Global Officer And Director Stipulation), and shall be deemed to forever be

6 enjoined from prosecuting any or all of the Settled Class Claims against each and
7 every Released Officer And Director and the Insurance Carriers. "Settled Class
fl
8 Claim" in this paragraph means any and all claims and causes of action of every

9 nature and description, whether known or Unknown Claims, whether arising under
10 federal, state, common or foreign law, that Plaintiffs or any other member of the

11 Class (a) asserted in the Consolidated Action, or (b) could have asserted in any

12 forum that arise out of or are based upon the allegations, transactions, facts,

13 matters or occurrences, representations or omissions involved, set forth, or referred

14 to in the Consolidated Action, and that arise out of or relate to the purchase of New
15 Century Common Stock, New Century Series A Preferred Stock, New Century

16 Series B Preferred Stock, and/or New Century Call Options and/or the sale of New
17 Century Put Options during the Class Period. Settled Class Claims does not
18 include claims relating to the enforcement of the Settlement. "Released Officers

19 And Directors" in this paragraph means (1) the Individual Defendants, David
20 Kenneally, Kevin Cloyd, Patrick Flanagan, Stergios Theologides, Joseph F.

21 Eckroth, Jr., and Jeffrey D. Goldberg, and any of their respective heirs, executors,

22 administrators, predecessors, successors, assigns, employees, agents and retained

23 professionals; and (ii) all directors, officers, employees, and other natural persons

24 affiliated with New Century (including any of its subsidiaries and affiliates)

25 included in the definition of "Assured" or "Insured" as defined in the Policies


26 (defined in the Global Officer And Director Stipulation) and any and all of their

27 respective heirs, executors, administrators, predecessors, successors and assigns,


28

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1 employees, agents and retained professionals (other than KPMG or the

2 Underwriter Defendants).

3 88. Pursuant to the KPMG Stipulation, Plaintiffs and members of the


4 Class will be deemed by operation of law to have released, waived, discharged and
a
5 dismissed each and every Settled Claim, and shall forever be enjoined from
6 prosecuting any or all Settled Claims, against any Released Auditor Party. "Settled
7 Claim" in this paragraph means any and all claims and causes of action of every
8 nature and description, whether known or Unknown, whether arising under federal,
9 state, common or foreign law, that Plaintiffs or any other member of the Class (a)
10 asserted in the Complaint, or (b) could have asserted in any forum that arise out of

11 or are based upon the allegations, transactions, facts, matters or occurrences,

12 representations or omissions involved, set forth, or referred to in the Complaint,

13 and that arise out of or relate to the purchase of New Century Common Stock, New

14 Century Series A Preferred Stock, New Century Series B Preferred Stock, and/or

15 New Century Call Options and/or the sale of New Century Put Options during the
16 Class Period. "Settled Claims" does not include claims relating to the enforcement
17 of the Settlements. "Released Auditor Party" means KPMG and any and all of its
18 partners, principals, officers, directors, employees, agents, attorneys and affiliates.
19 "Released Auditor Parties" does not include any Defendants other than KPMG.
20 89. Pursuant to the Underwriter Stipulation, Plaintiffs and members of the
21 Class, on behalf of themselves, their parent companies, subsidiaries, affiliates,

22 heirs, executors, administrators, predecessors, successors and assigns, and any and

23 all of their current and former officers, directors, employees, agents and attorneys

24 shall be deemed by operation of law to have released, waived, discharged and


25 dismissed each and every Settled Claim, and shall forever be enjoined from

26 prosecuting any or all Settled Claims, against any Released Underwriter Party.

27 "Settled Claim" in this paragraph means any and all claims and causes of action of

28 every nature and description, whether known or Unknown, whether arising under

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1 federal, state, common or foreign law, that Plaintiffs or any other member of the
2 Class (a) asserted in the Complaint, or (b) could have asserted in any forum that

3 arise out of or are based upon the allegations, transactions, facts, matters or

4 occurrences, representations or omissions involved, set forth, or referred to in the


5 Complaint, and that arise out of or relate to the purchase of New Century Common
i
6 Stock, New Century Series A Preferred Stock, New Century Series B Preferred
7 Stock, and/or New Century Call Options and/or the sale of New Century Put
8 Options during the Class Period. "Settled Claims" does not include claims relating

9 to the enforcement of the Settlements. "Released Underwriter Party" means the r


10 Underwriter Defendants and any and all of their respective parent companies,
G

11 subsidiaries, affiliates, heirs, executors, administrators, predecessors, successors

12 and assigns, and any and all of their current and former officers, directors,

13 employees, agents and attorneys. "Released Underwriter Parties" does not include

14 any Defendants other than the Underwriter Defendants.

15 90. "Released Parties" means the Released Officers And Directors, the
16 Released Auditor Parties, and the Released Underwriter Parties.
17 91. "Unknown Claims" means any and all claims that Lead Plaintiff or
18 any Class Member does not know or suspect to exist in his, her or its favor at the

19 time of the release of the Released Parties, which if known by him, her or it might
20 have affected his, her or its decision(s) with respect to the Settlements. With
21 respect to any and all settled claims, the Lead Plaintiff shall expressly waive, and

22 each Class Member shall be deemed to have waived, and by operation of the

23 Judgment shall have expressly waived, any and all provisions, rights and benefits
24 conferred by any law of any state or territory of the United States, or principle of

25 common law, that is similar, comparable, or equivalent to Cal. Civ. Code § 1542,
26 which provides:

27 A general release does not extend to claims which the creditor


28 does not know or suspect to exist in his or her favor at the time of

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1 executing the release, which if known by him or her must have i


2 materially affected his or her settlement with the debtor.
i
3 92. Lead Plaintiff and Class Members by operation of law shall be
4 deemed to have acknowledged that the inclusion of "Unknown Claims" in the
i
5 definition of Settled Claims and Settled Class Claims was separately bargained for
6 and was a key element of the Settlements.

7 93. As specified in the Stipulations, the Judgments will also provide that

8 the Released Auditor Parties, the Released Underwriter Parties, and the Released
9 Officers And Directors will release certain claims against Lead Plaintiff and the

10 Class. In addition, certain Defendants and other persons and entities will also

11 release claims against each other and other persons and entities as set forth in the
E

12
Stipulations.

13 WHAT PAYMENT ARE THE ATTORNEYS FOR THE CLASS SEEKING?


f
14 HOW WILL THE LAWYERS BE PAID?
15

16 94. Lead Counsel has not received any payment for its services in
17 pursuing claims against Defendants on behalf of the Class, nor has Lead Counsel
18 been reimbursed for its out-of-pocket expenses. Before final approval of the
19 Settlements, Lead Counsel intends to apply to the Court for an award of attorneys'

20
fees from the Settlement Fund in an amount not to exceed 12% of the Settlement
21 Amount, plus interest from the date of funding at the same rate as earned by the f

22 Settlement Fund. Lead Counsel will not calculate attorneys' fees based upon, or

23
seek attorneys' fees or expenses with respect to, any disgorgements or penalties
24 obtained by the Securities and Exchange Commission in the SEC Action. At the
25 same time, Lead Counsel also intends to apply for the reimbursement of Litigation
26 Expenses not to exceed $4.5 million, plus interest from the date of funding at the
27 same rate as earned by the Settlement Fund. Included in Lead Counsel's overall
28 request for reimbursement of Litigation Expenses will be a request for an award to

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1 Lead Plaintiff and/or named plaintiffs Carl Larson and Charles Hooten for
2 reimbursement of their reasonable costs and expenses (including lost wages)
3 directly related to their representation of the Class. The Court will determine the
4 amount of the awards.

5 HOW DO I PARTICIPATE IN THE SETTLEMENTS?


6 WHAT DO I NEED TO DO?
7 j
8 95. If you purchased or otherwise acquired New Century Common Stock,
9 New Century Series A Preferred Stock, New Century Series B Preferred Stock,
10 and/or New Century Call Options and/or sold New Century Put Options, during the

11 period from May 5, 2005, through and including March 13, 2007, either in the

12 Offerings, pursuant to a registration statement, or in the market, and were injured

13 upon disclosure of certain facts alleged in the Complaint, and you are not excluded
14 by the definition of the Class and you do not elect to exclude yourself from the
15 Class, then you are a Class Member. You will be bound by the proposed

16 Settlements if approved by the Court, and by any judgment or determination of the

17 Court affecting the Class. If you are a Class Member, you must submit a Claim
18 Form and supporting documentation to establish your entitlement to share in the

19 Settlements. A Claim Form is included with this Notice, or you may go to the
20 website maintained by the Claims Administrator for the Settlements to download a
21 copy of the Claim Form or request that a Claim Form be mailed to you. The

22 website is www.neweentuT-ysettlement.com . You may also request a Claim Form

23 by calling toll-free 1-866-308-7615. Copies of the Claim Form can also be

24 downloaded from Lead Counsel's website at www.blbglaw.com . Those who


25 exclude themselves from the Class, and those who do not submit timely and valid
26 Claim Forms with adequate supporting documentation, will not be entitled to share

27 in the Settlements. Please retain all records of your ownership of, or transactions
28 in, New Century Securities, as they may be needed to document your Claim.

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1 96. As a Class Member, you are represented by Lead Plaintiff and Lead
2 Counsel, unless you enter an appearance through counsel of your own choice at
3 your own expense. You are not required to retain your own counsel, but if you
4 choose to do so, such counsel must file a notice of appearance on your behalf and
5 must serve copies of his or her notice of appearance on the attorneys listed in the
6 section entitled, "When and Where Will the Court Decide Whether to Approve the
7 Settlements?," below.
8 97. If you do not wish to remain a Class Member, you may exclude
9 yourself from the Class by following the instructions in the section entitled, "What
10 If I Do Not Want To Be A Part Of The Class And The Settlements? How Do I r
11 Exclude Myself?," below.

12 98. If you wish to object to the Settlements or any of the terms of the
13 Settlements, the proposed Plan of Allocation, or Lead Counsel's application for

14 attorneys' fees and reimbursement of Litigation Expenses, and if you do not

15 exclude yourself from the Class, you may present your objections by following the

16 instructions in the section entitled, "When and Where Will the Court Decide

17 Whether to Approve the Settlements?," below.


18 WHAT IF I DO NOT WANT TO BE A PART OF THE SETTLEMENTS?
1.9
HOW DO I EXCLUDE MYSELF? E
20
21 99. Each Class Member will be bound by all determinations and
22 judgments in this lawsuit, including those concerning the Settlements, whether i
23 favorable or unfavorable, unless such person or entity mails, by first-class mail (or
24 its equivalent outside the U.S.), or otherwise delivers a written Request for

25 Exclusion from the Class, addressed to In re New Century Securities Litigation


1

26 Settlement, c/o Analytics, Inc., Claims Administrator, P.O. Box 2004, Chanhassen,

27 MN 55317-2004. The exclusion request must be received no later than

28 [INSERT]. You will not be able to exclude yourself from the Class after that date.
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1 Each request for exclusion must (i) state the name and address of the person or
2 entity requesting exclusion; (ii) state that such person or entity requests exclusion
3 from the Class in In re New Century, 2:07-CV-0093 I -DDP; (iii) be signed by the

4 person or entity requesting exclusion; (iv) provide a telephone number for that

5 person or entity; and (v) provide the date(s), price(s), and numbers) of shares of
6 all purchases, acquisitions, and sales of New Century Securities during the Class i
7 Period. Requests for exclusion will not be valid if they do not include the
8 information set forth above and are not received within the time stated above,

9 unless the Court otherwise determines.


10 100. If you do not want to be part of the Class, you must follow these
11 instructions for exclusion even if you have pending, or later file, another lawsuit, G

12 arbitration, or other proceeding relating to any Settled Claims.

13 101. If a person or entity requests to be excluded from the Class, that


14 person or entity will not receive any benefit provided for in the Settlements. I
15 102. The Individual Defendants, Insurance Carriers, Underwriter
16 Defendants or KPMG may terminate the Settlements if requests for exclusion are

17 received from potential Class Members representing over a certain amount of


18 shares as stated in Supplemental Agreements. The three settlement agreements are

19 closely related and, if one of the three Settlements should not become final for any
20 reason, it could affect the finality and enforceability of the other Settlements.
21
WHEN AND WHERE WILL THE COURT DECIDE WHETHER TO APPROVE
22
THE SETTLEMENTS?
23
DO I HAVE TO COME TO THE HEARING?
24
MAY I SPEAK AT THE HEARING IF I DON'T LIKE THE SETTLEMENTS?
25
26 103. If you do not wish to object in person to the proposed Settlements,
27 proposed Plan of Allocation, and/or the application for attorneys' fees and
28 reimbursement of Litigation Expenses, you do not need to attend the Settlement
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1 Hearing. You can object to or participate in the Settlements without attending the
1

2 Settlement Hearing.
E

3 104. The Settlement Hearing will be held on [INSERT] before the


4 Honorable Dean D. Pregerson, at the United States District Court for the Central
5 District of California, 312 North Spring Street, Courtroom 3, Los Angeles,

6 California 90012. The Court reserves the right to approve the Settlements, the Plan
7 of Allocation or the request for attorneys' fees and reimbursement of Litigation
8 Expenses at or after the Settlement Hearing without further notice to the members

9 of the Class. The Settlements will become effective only if all three Settlements
10 are approved by the Court.
11 105. Any Class Member who does not submit a valid exclusion that is
12 received no later than [INSERT] may object to the Settlements, the Plan of
13 Allocation, or Lead Counsel's request for an award of attorneys' fees and

14 reimbursement of Litigation Expenses. Objections or oppositions must be in

15 writing. You must file any written objection or opposition, together with copies of

16 all other papers (including proof of all transactions in New Century Securities

17 during the Class Period) and briefs, with the Clerk's Office at the United States
18 District Court for the Central District of California at the address set forth below
19 on or before [ INSERT]. You must also serve the papers
20 on Lead Counsel for the Class at the address set forth below so that the papers are
21 received on or before [ INSERT].
22

23
Clerk's Office Lead Counsel for the Class

24 UNITED STATES BERNSTEIN LITOWITZ BERGER


25
DISTRICT COURT & GROSSMANN LLP
FOR THE CENTRAL Salvatore J. Graziano, Esq.
26 DISTRICT OF CALIFORNIA 1285 Avenue of the Americas
27 Clerk of the Court New York, NY 10019
312 N. Spring Street
28 Los Angeles, California 90012

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1 Representative Counsel for Directors and


2 Officers j

3 MUNGER, TOLLES & OLSON LLP


4 Kathleen M. McDowell
355 South Grand Avenue, 35th Floor
5 Los Angeles, CA 90071-1560

6 Counsel for Underwriter Defendants


7
8 PAUL, HASTINGS, JANOFSKY &
WALKER LLP
9 William F. Sullivan
to John S. Durrant
515 South Flower Street, 25 th Floor
11 Los Angeles, CA 90071
12
Counsel for KPMG
13

14 SIDLEY AUSTIN LLP


Michael L. Rugen
15 555 California Street, Suite 2000 h
16 San Francisco, CA 94104

17
106. The filing must demonstrate your membership in the Class, including
18
the number of shares of New Century Securities purchased or otherwise acquired
19
or sold during the Class Period and the price(s) paid and received. You may not
20
object to the Settlements or any aspect of them, if you are not a Class Member or if
21
you excluded yourself from the Class.
22
107. You may file a written objection without having to appear at the
23
Settlement Hearing. You may not appear at the Settlement Hearing to present your
24 I
objection, however, unless you first filed and served a written objection in
25
accordance with the procedures described above, unless the Court orders
26