Telestone Technologies Securities Litigation

Case No. 2:15-cv-00703-JMV-MF
United States District Court District Of New Jersey

8. HOW MUCH WILL MY PAYMENT BE?

At this time, it is not possible to make any determination as to how much any individual Settlement Class Member may receive from the Settlement.

Pursuant to the Settlement, Mazars CPA has agreed to pay or caused to be paid $1.25 million dollars ($1,250,000.00) in cash. The Settlement Amount will be deposited into an escrow account. The Settlement Amount plus any interest earned thereon is referred to as the “Settlement Fund.” If the Settlement is approved by the Court and the Effective Date occurs, the “Net Settlement Fund” (that is, the Settlement Fund less (a) all federal, state and/or local taxes on any income earned by the Settlement Fund and the reasonable costs incurred in connection with determining the amount of and paying taxes owed by the Settlement Fund (including reasonable expenses of tax attorneys and accountants); (b) the costs and expenses incurred in connection with providing notice to Settlement Class Members and administering the Settlement on behalf of Settlement Class Members; and (c) any attorneys’ fees and Litigation Expenses awarded by the Court) will be distributed to Settlement Class Members who submit valid Claim Forms, in accordance with the proposed Plan of Allocation or such other plan of allocation as the Court may approve.

The Net Settlement Fund will not be distributed unless and until the Court has approved the Settlement and a plan of allocation, and the time for any petition for rehearing, appeal or review, whether by certiorari or otherwise, has expired.

Neither Mazars CPA nor any other person or entity that paid any portion of the Settlement Amount on their behalf are entitled to get back any portion of the Settlement Fund once the Court’s order or judgment approving the Settlement becomes Final. Mazars CPA shall not have any liability, obligation or responsibility for the administration of the Settlement, the disbursement of the Net Settlement Fund or the plan of allocation.

Approval of the Settlement is independent from approval of a plan of allocation. Any determination with respect to a plan of allocation will not affect the Settlement, if approved.

Unless the Court otherwise orders, any Settlement Class Member who fails to submit a Claim Form postmarked on or before February 21, 2018 shall be fully and forever barred from receiving payments pursuant to the Settlement but will in all other respects remain a Settlement Class Member and be subject to the provisions of the Stipulation, including the terms of any Judgment entered and the releases given. This means that each Settlement Class Member releases the Released Plaintiff’s Claims (as defined in FAQ 6) against the Mazars CPA Releasees (as defined in FAQ 6) and will be enjoined and prohibited from filing, prosecuting, or pursuing any of the Released Plaintiff’s Claims against any of the Mazars CPA Releasees whether or not such Settlement Class Member submits a Claim Form.

Participants in and beneficiaries of a plan covered by ERISA (“ERISA Plan”) should NOT include any information relating to their transactions in Telestone common stock held through the ERISA Plan in any Claim Form that they may submit in this Action. They should include ONLY those shares that they purchased or acquired outside of the ERISA Plan. Claims based on any ERISA Plan’s purchases or acquisitions of Telestone common stock during the Class period may be made by the plan’s trustees. To the extent any of the Defendants or any of the other persons or entities excluded from the Settlement Class are participants in the ERISA Plan, such persons or entities shall not receive, either directly or indirectly, any portion of the recovery that may be obtained from the Settlement by the ERISA Plan.

The Court has reserved jurisdiction to allow, disallow, or adjust on equitable grounds the Claim of any Settlement Class Member.

Each Claimant shall be deemed to have submitted to the jurisdiction of the Court with respect to his, her or its Claim Form.

Only Settlement Class Members, i.e., persons and entities who purchased or otherwise acquired Telestone common stock during the Class period and were damaged as a result of such purchases or acquisitions will be eligible to share in the distribution of the Net Settlement Fund. Persons and entities that are excluded from the Settlement Class by definition or that exclude themselves from the Settlement Class pursuant to request will not be eligible to receive a distribution from the Net Settlement Fund and should not submit Claim Forms.

PROPOSED PLAN OF ALLOCATION

The objective of the Plan of Allocation is to equitably distribute the Settlement proceeds to those Settlement Class Members who suffered economic losses as a proximate result of the alleged wrongdoing. The calculations made pursuant to the Plan of Allocation are not intended to be estimates of, nor indicative of, the amounts that Settlement Class Members might have been able to recover after a trial. Nor are the calculations pursuant to the Plan of Allocation intended to be estimates of the amounts that will be paid to Authorized Claimants pursuant to the Settlement. The computations under the Plan of Allocation are only a method to weigh the claims of Authorized Claimants against one another for the purposes of making pro rata allocations of the Net Settlement Fund.

The Plan of Allocation generally measures the amount of loss that a Settlement Class Member can claim for purposes of making pro rata allocations of the cash in the Net Settlement Fund to Authorized Claimants. The Plan of Allocation is not a formal damage analysis. Recognized Loss Amounts are based primarily on the price declines observed over the period which Lead Plaintiff allege corrective information was entering the market place. In this case, Lead Plaintiff alleges that Defendants made false statements and omitted material facts between March 31, 2010 and April 16, 2013, inclusive, which had the effect of artificially inflating the prices of Telestone common stock.

In order to have recoverable damages, disclosure of the alleged misrepresentations and omissions must be the cause of the decline in the price of Telestone common stock. Alleged corrective disclosures that removed the artificial inflation from the prices of Telestone common stock occurred on May 15, 2012, August 14, 2012, November 19, 2012, and April 16, 2013.

To the extent a Claimant did not purchase Telestone common stock during the Class period and hold it over one of the corrective disclosure dates set forth in the preceding paragraph, his, her or its Recognized Loss Amount for those transactions will be zero.

CALCULATION OF RECOGNIZED LOSS AMOUNTS

Based on the formula set forth below, a “Recognized Loss Amount” shall be calculated for each purchase of Telestone common stock during the Class period that is listed in the Proof of Claim Form and for which adequate documentation is provided. In the calculations below, if a Recognized Loss Amount calculates to a negative number, that Recognized Loss Amount shall be zero.

For shares of Telestone common stock purchased between March 31, 2010 and April 16, 2013:

A. For shares held at the end of trading on August 29, 2013, the Recognized Loss shall be that number of shares multiplied by the lesser of:

(1) the applicable purchase date artificial inflation per share figure, as found in Table A; or

(2) the difference between the purchase price per share and $0.60. 5

B. For shares sold between March 31, 2010 and April 16, 2013, the Recognized Loss shall be that number of shares multiplied by the lesser of:

(1) the applicable purchase date artificial inflation per share figure less the applicable sales date artificial inflation per share figure, as found in Table A; or

(2) the difference between the purchase price per share and the sales price per share.

C. For shares sold between June 3, 2013 and August 29, 2013, the Recognized Loss shall be the lesser of:

(1) the applicable purchase date artificial inflation per share figure, as found in Table A; or

(2) the difference between the purchase price per share and the sales price per share; or

(3) the difference between the purchase price per share and the average closing price between June 3, 2013 and the date of sale, as found in Table B 6.

Table A

Purchase or Sale Date Range Artificial Inflation Per Share
03/31/2010 – 05/14/2012 $ 1.58
05/15/2012 – 08/13/2014 $ 1.12
08/14/2012 – 11/16/2012
11/19/2012 – 04/15/2013 $ 0.74
04/16/2013 $ 0.56

Table B

Date of Sale Average Closing Price Between 06/03/2013 and Date of Sale Date of Sale Average Closing Price Between 06/03/2013 and Date of Sale
6/3/2013 $0.30 7/17/2013 $0.48
6/4/2013 $0.28 7/18/2013 $0.49
6/5/2013 $0.28 7/19/2013 $0.49
6/6/2013 $0.29 7/22/2013 $0.5
6/7/2013 $0.29 7/23/2013 $0.51
6/10/2013 $0.29 7/24/2013 $0.51
6/11/2013 $0.29 7/25/2013 $0.52
6/12/2013 $0.30 7/26/2013 $0.52
6/13/2013 $0.31 7/29/2013 $0.53
6/14/2013 $0.31 7/30/2013 $0.53
6/17/2013 $0.31 7/31/2013 $0.54
6/18/2013 $0.31 8/1/2013 $0.54
6/19/2013 $0.32 8/5/2013 $0.55
6/20/2013 $0.32 8/6/2013 $0.55
6/21/2013 $0.33 8/7/2013 $0.55
6/24/2013 $0.34 8/8/2013 $0.55
6/25/2013 $0.35 8/9/2013 $0.56
6/26/2013 $0.36 8/12/2013 $0.56
6/27/2013 $0.36 8/13/2013 $0.57
6/28/2013 $0.37 8/14/2013 $0.57
7/1/2013 $0.37 8/15/2013 $0.57
7/2/2013 $0.38 8/16/2013 $0.58
7/3/2013 $0.39 8/19/2013 $0.58
7/5/2013 $0.41 8/20/2013 $0.58
7/8/2013 $0.42 8/21/2013 $0.59
7/9/2013 $0.43 8/22/2013 $0.59
7/10/2013 $0.44 8/23/2013 $0.59
7/11/2013 $0.45 8/26/2013 $0.60
7/12/2013 $0.46 8/27/2013 $0.60
7/15/2013 $0.46 8/28/2013 $0.60
7/16/2013 $0.47 8/29/2013 $0.60

ADDITIONAL PROVISIONS

If a Settlement Class Member has more than one purchase or sale of Telestone common stock, all purchases and sales shall be matched on a First In, First Out (“FIFO”) basis. Class period sales will be matched first against any holdings at the beginning of the Class period, and then against purchases in chronological order, beginning with the earliest purchase made during the Class period.

A Claimant’s “Recognized Claim” under the Plan of Allocation shall be the sum of his, her or its Recognized Loss Amounts for Telestone common stock.

The Net Settlement Fund will be distributed to Authorized Claimants on a pro rata basis based on the relative size of their Recognized Claims. Specifically, a “Distribution Amount” will be calculated for each Authorized Claimant, which shall be the Authorized Claimant’s Recognized Claim divided by the total Recognized Claims of all Authorized Claimants, multiplied by the total amount in the Net Settlement Fund. If any Authorized Claimant’s Distribution Amount calculates to less than $10.00, it will not be included in the calculation and no distribution will be made to such Authorized Claimant.

Purchases and sales of Telestone common stock shall be deemed to have occurred on the “contract” or “trade” date as opposed to the “settlement” or “payment” date. The receipt or grant by gift, inheritance or operation of law of Telestone common stock during the Class period shall not be deemed a purchase or sale of Telestone common stock for the calculation of an Authorized Claimant’s Recognized Loss Amount, nor shall the receipt or grant be deemed an assignment of any claim relating to the purchase of Telestone common stock unless (i) the donor or decedent purchased or otherwise acquired such Telestone common stock during the Class period; (ii) no Claim Form was submitted by or on behalf of the donor, on behalf of the decedent, or by anyone else with respect to such Telestone common stock; and (iii) it is specifically so provided in the instrument of gift or assignment.

To the extent a Claimant had a market gain with respect to his, her, or its overall transactions in Telestone common stock during the Class period, the value of the Claimant’s Recognized Claim shall be zero. Such Claimants shall in any event be bound by the Settlement. To the extent that a Claimant suffered an overall market loss with respect to his, her, or its overall transactions in Telestone common stock during the Class period, but that market loss was less than the total Recognized Claim calculated above, then the Claimant’s Recognized Claim shall be limited to the amount of the actual market loss.

For purposes of determining whether a Claimant had a market gain with respect to his, her, or its overall transactions in Telestone common stock during the Class period or suffered a market loss, the Claims Administrator shall determine the difference between (i) the Total Purchase Amount 7 and (ii) the sum of the Total Sales Proceeds 8 and Total Holding Value. 9 This difference shall be deemed a Claimant’s market gain or loss with respect to his, her, or its overall transactions in Telestone common stock during the Class period.

After the initial distribution of the Net Settlement Fund, the Claims Administrator shall make reasonable and diligent efforts to have Authorized Claimants cash their distribution checks. To the extent any monies remain in the fund nine (9) months after the initial distribution, if Lead Counsel, in consultation with the Claims Administrator, determines that it is cost-effective to do so, the Claims Administrator shall conduct a re-distribution of the funds remaining after payment of any unpaid fees and expenses incurred in administering the Settlement, including for such re-distribution, to Authorized Claimants who have cashed their initial distributions and who would receive at least $10.00 from such re-distribution. Additional re-distributions to Authorized Claimants who have cashed their prior checks and who would receive at least $10.00 on such additional re-distributions may occur thereafter if Lead Counsel, in consultation with the Claims Administrator, determines that additional re-distributions, after the deduction of any additional fees and expenses incurred in administering the Settlement, including for such re-distributions, would be cost-effective. At such time as it is determined that the re-distribution of funds remaining in the Net Settlement Fund is not cost-effective, the remaining balance shall be contributed to non-sectarian, not-for-profit organization(s), to be recommended by Lead Counsel and approved by the Court.

Payment pursuant to the Plan of Allocation, or such other plan of allocation as may be approved by the Court, shall be conclusive against all Authorized Claimants. No person shall have any claim against Lead Plaintiff, Lead Counsel, Lead Plaintiff’s damages expert, Mazars CPA, Mazars CPA’s Counsel, or any of the other Releasees, or the Claims Administrator or other agent designated by Lead Counsel arising from distributions made substantially in accordance with the Stipulation, the plan of allocation approved by the Court, or further Orders of the Court. Lead Plaintiff, Mazars CPA and their respective counsel, and all other Mazars CPA Releasees, shall have no responsibility or liability whatsoever for the investment or distribution of the Settlement Fund, the Net Settlement Fund, the plan of allocation, or the determination, administration, calculation, or payment of any Claim Form or nonperformance of the Claims Administrator, the payment or withholding of taxes owed by the Settlement Fund, or any losses incurred in connection therewith.

The Plan of Allocation set forth herein is the plan that is being proposed to the Court for its approval by Lead Plaintiff after consultation with his damages expert. The Court may approve this plan as proposed or it may modify the Plan of Allocation without further notice to the Settlement Class. Any Orders regarding any modification of the Plan of Allocation will be posted on the Important Documents page.

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