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UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF NORTH CAROLINA EASTERN DIVISION CASE NO. 4.05-CV-00152-F(3)
RUSSELL TODD HUTTENSTINE, RONALD A. SCHINDELER, ROBERT G. COLE, JAMIE SLAUGHTERBECK, THOMAS FORTANIER, and WILLIAM SCHUTTER, on behalf to themselves and all other similarly situated, Plaintiffs,
V.
DENNIS MAST, GEORGE A. MOORE, SHANE TRAVELLER, ROSS W. SMITH, HYDROFLO,INC., and METALS AND ARSENIC REMOVAL TECHNOLOGY, INC., Defendants.
CLASS ACTION
STIPULATION AND AGREEMENT OF SETTLEMENT This Stipulation and Agreement of Settlement (the "Stipulation") dated November 17, 2007 is submitted pursuant to Rule 23 of the Federal Rules of Civil Procedure. Subject to the approval of the Court, this Stipulation is entered into by Lead Plaintiffs Ronald A. Schindler, Robert G. Cole, Jamie Slaughterbeck, and William Schutter ("Lead Plaintiffs"), on behalf of themselves and the Class, and Defendants Dennis Mast ("Mast"), George A. Moore ("Moore"), Shane Traveller ("Traveller"), Ross W. Smith ("Smith"), HydroFlo, Inc. ("HydroFlo"), and Metals and Arsenic Removal Technology, Inc. ("MARTI") (collectively, "Defendants"), all parties to this litigation (the "Parties"), by and through their respective counsel. WHEREAS, beginning on November 22, 2005, a Class Action Complaint alleging violations of federal securities laws, Russell Todd Huttenstine v. Dennis Mast, et al. , No. 4:05-ev-00152-F(3) (E.D.N.C.) (the "Action"), was filed in this Court.
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WHEREAS, Lead Plaintiffs filed the first Amended Complaint for Violation of Securities Laws on April 13, 2006 (the "Complaint") alleging: (COUNT I) violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule I Ob-5 promulgated thereunder against the Defendants and (COUNT II) violations of Section 20(a) of the Securities Exchange Act of 1934 against defendants Mast, Traveller, Smith and Moore.
WHEREAS, on May 12, 2006, defendants Mast, Moore, Smith, MARTI, and
HydroFlo filed an Answer to the Complaint. WHEREAS, on September 18, 2006, defendant Traveller filed a motion to dismiss the Complaint on the grounds that it failed to allege: (i) primary liability claims under Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule l Ob-5 thereunder; and (ii) control person claims under Section 20(a) of the Exchange Act.
WHEREAS, by Order dated December 20, 2006, the Court: (i) allowed
Traveller's motion to dismiss the primary liability claims against him; and (ii) denied Traveller's motion to dismiss the control person claims. WHEREAS , Traveller filed an answer to the Complaint on January 5, 2007. WHEREAS, by Order dated May 1, 2007, the Court (i) appointed Ronald A. Schindeler, Robert G . Cole, Jamie Slaughterbeck, and William Schutter as Lead Plaintiffs; (ii) appointed The Rosen Law Firm P.A. as Lead Plaintiffs' Counsel; and (iii) appointed Wilson & Coffey, LLP as Liaison Counsel. WHEREAS, Defendants deny any wrongdoing whatsoever and this Stipulation shall in no event be construed or deemed to be evidence of or an admission or concession on the part of any Defendant with respect to any claim of any fault or liability or wrongdoing or damage whatsoever, or any infirmity in the defenses that the Defendants have asserted. The Parties to
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this Stipulation recognize, however, that the litigation has been filed by Lead Plaintiffs and defended by the Defendants in good faith and with adequate basis in fact under Federal Rule of Civil Procedure 11, that the litigation is being voluntarily settled after advice of counsel, and that the terms of the settlement are fair, adequate and reasonable. This Stipulation shall not be construed or deemed to be a concession by any Lead Plaintiff of any infirmity in the claims asserted in the Action. WHEREAS, Lead Plaintiffs ' Counsel have conducted an investigation and discovery relating to the claims and the underlying events and transactions alleged in the Complaint. Lead Plaintiffs' Counsel have analyzed the facts and the applicable law with respect to the claims of Lead Plaintiffs and the Class against the Defendants and the potential defenses thereto, which in Lead Plaintiffs' judgment has provided an adequate and satisfactory basis for the evaluation of an agreement to settle, as described herein. WHEREAS, Lead Plaintiffs, by their counsel, have engaged in extensive arm'slength settlement negotiations with counsel for Defendants with respect to a compromise and settlement of the Action with a view to settling the issues in dispute and achieving the best relief possible consistent with the interests of the Class. WHEREAS, based upon their investigation, Lead Plaintiffs ' Counsel have concluded that the terms and conditions of this Stipulation are fair, reasonable and adequate to Lead Plaintiffs and the Class, and in their best interests, and have agreed to settle the claims raised in the Action pursuant to the terms and provisions of this Stipulation, after considering (a) the substantial benefits that Lead Plaintiffs and the members of the Class will receive from settlement of the Action, (b) the attendant risks of litigation, (c) the financial condition of the
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Defendants, and (d) the desirability of permitting the Settlement to be consummated as provided by the terms of this Stipulation. AND WHEREAS, the Parties agree for the limited purposes of this Stipulation and settlement that this Action shall be certified for class treatment under Rule 23 of the Federal Rules of Civil Procedure and that the stipulated settlement class consists of Class Members, as defined below. NOW THEREFORE, without any admission or concession on the part of Lead Plaintiffs of any lack of merit of the Action whatsoever , and without any admission or concession on the part of Defendants of any liability or wrongdoing or lack of merit in the defenses whatsoever, it is hereby STIPULATED AND AGREED, by and among the Parties, through their respective attorneys, subject to approval of the Court pursuant to Rule 23(e) of the Federal Rules of Civil Procedure, in consideration of the benefits flowing to the Parties hereto from the Settlement, that all Settled Claims (as defined below) as against the Released Parties (as defined below) shall be compromised, settled, released and dismissed with prejudice, upon and subject to the following terms and conditions: A. CERTAIN DEFINITIONS As used in this Stipulation, the following terms have the meanings specified
below:
"Attorneys' Fees and Expenses" means the portion of the Gross Settlement Fund approved by the Court for payment to Lead Plaintiffs' Counsel, including attorneys' fees, costs, litigation expenses, fees and expenses of experts (excluding Notice and Administration Expenses).
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2.
"Authorized Claimant" means any Claimant (as defined below) whose
claim for recovery has been allowed pursuant to the terms of the Stipulation or by order of the Court. 3. "Award to Lead Plaintiffs" means any award by the Court to Lead
Plaintiffs of reasonable costs and expenses (including lost wages) directly relating to the representation of the Class pursuant to 15 U.S.C. 78u-4(a)(4). 4. "Claimant" means any Class member who files a Proof of Claim (as
defined below) in such form and manner, and within such time, as set forth in this Stipulation, or as the Court shall prescribe. "Claims Administrator" means the accounting and claims administration firm of Strategic Claims Services located in Media, Pennsylvania. 6. "Class" and "Class Members" mean, for purposes of this Settlement, all
persons who acquired any common stock of HydroFlo during the period from July 18, 2005 through and including October 26, 2005, and were damaged thereby. Excluded from the Class are the Defendants and all current and former officers and directors of Defendants, and the members of their immediate families and Defendants' legal representatives, heirs, predecessors, successors and assigns and any entity in which any Defendant has or had a controlling interest or is a parent or subsidiary of or is controlled by HydroFlo, and any persons who have separately filed actions against one or more of the Defendants based in whole or in part on any claim arising out of or relating to any of the acts, omissions, misrepresentations, facts, events, matters, transactions or occurrences referred to in the Action or otherwise alleged, asserted or contended in the Action. Also excluded from the Class are those persons who file valid and timely requests
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for exclusion in accordance with the Court's Order of Preliminary Approval of Settlement concerning this Stipulation. 7. "Class Distribution Order" means the order entered by the Court, upon
application of Lead Plaintiffs' Counsel following the occurrence of the events identified in paragraph D. 13 below, which authorizes the Claims Administrator to distribute the Net Settlement Fund to the Class. "Class Period" means the period from July 18, 2005 through and including
October 26, 2005.
9. "Court" means the United States District Court for the Eastern District of
North Carolina, Eastern Division. 10. "Defendants " means Dennis Mast ("Mast"), George A. Moore ("Moore"),
Shane Traveller ("Traveller"), Ross W. Smith ("Smith"), HydroFlo, Inc. ("HydroFlo"), and Metals and Arsenic Removal Technology, Inc. ("MARTI") 11. "Defendants' Counsel" collectively means the law firm of Harris,
Winfield & Hodges LLP, counsel for defendants Mast, Moore, Smith, HydroFlo, and MARTI, and the law firm of Hunton & Williams LLP, counsel for defendant Traveller, 12. "Effective Date" means the date on which the Court's Order and Final
Judgment, substantially in the form of Exhibit B hereto, becomes "Final", which shall be deemed to be when either of the following has occurred: (a) if an appeal or review is not sought by any person from the Order and Final Judgment, the day following the expiration of the time to appeal or petition from the Order and Final Judgment; or (b) if an appeal or review is sought from the Order and Final Judgment, the day after such Order and Final Judgment is affirmed or the appeal
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or review is dismissed or denied and such Order and Final Judgment is no longer subject to further judicial review. 13. earned thereon. 14. "Escrow Account" means the interest-bearing account to be established "Gross Settlement Fund" means the Settlement Amount plus all interest
and maintained at Sovereign Bank, Philadelphia, or any successor institution selected by the Escrow Agent. The Escrow Account will be managed by the Escrow Agent (defined below). 15. "Escrow Agent' ' means Laurence Rosen, Esquire . The Escrow Agent
shall perform the duties as set forth in this Stipulation. 16. "Lead Plaintiffs" mean Ronald A. Schindeler, Robert G. Cole, Jamie
Slaughterbeck, and William Schutter, individually and as representatives of the members of the Class. 17. 18. 19. "Lead Plaintiffs' Counsel" means The Rosen Law Firm PA. "Liaison Counsel" means Wilson and Coffey, LLP. "Net Settlement Fund" means the Gross Settlement Fund, less:
(i) Attorneys' Fees and Expenses; (ii) Notice and Administration Expenses; (iii) taxes; (iv) awards to Lead Plaintiffs; and (v) other fees and expenses authorized by the Court. 20. "Notice and Administration Account" means the account to be established
from the Gross Settlement Fund and maintained by Lead Plaintiffs' Counsel. The Notice and Administration Account may be drawn upon by Lead Plaintiffs' Counsel for Notice and Administration expenses without further order of the Court. 21. "Notice and Administration Expense" means all expenses incurred
(whether or not paid) in connection with the preparation, printing, mailing, and publication of the
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Notice to the Class of the proposed settlement, and all expenses of Settlement administration; provided, however, that none of these expenses shall be deemed to include Attorneys' Fees and Expenses through the Effective Date. All such Notice and Administration Expenses shall be paid from the Gross Settlement Fund. 22. "Order and Final Judgment" means the order and judgment entered by the
Court, including a Bar Order, approving the Settlement and dismissing the Litigation as against all Defendants with prejudice and without costs to any party. 23. 24. "Parties" means Lead Plaintiffs and Defendants. "Person" means any individual, corporation, partnership, limited liability
partnership, limited partnership, professional corporation, association, affiliate, joint stock company, trust, estate, unincorporated association, government or any political subdivision or agency thereof, any other type of legal or political entity, any legal representative, and as applicable their respective spouses, heirs, predecessors, successors, representatives, or assignees. 25. "Released Parties" means the Defendants, and any of their current, former
or future parents, subsidiaries, affiliates, partners, joint venturers, officers, directors, principals, shareholders, members, agents (acting in their capacity as agents), employees, attorneys, advisors, accountants, associates and any other individual or entity in which any Defendant has a controlling interest or which is related to or affiliated with any of the Defendants or their current, former and future legal representatives, heirs, successors in interest or assigns of the Defendants. 26. "Settled Claims" means any and all claims, debts, demands, liabilities,
rights and causes of action of every nature and description whatsoever (including but not limited to, any claims for damages, interest, attorneys' fees, expert or consulting fees, and any other costs, expenses or liability whatsoever), whether based on federal, state, local, statutory or
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common law or any other law, rule or regulation , whether fixed or contingent, accrued or unacerued, liquidated or unliquidated, at law or in equity, matured or unmatured, whether class or individual in nature, including both known claims and Unknown Claims (as defined below), (i) that have been asserted in this Action by the Class Members or any of them against any of the Released Parties, including without limitation any claim arising out of or relating to any of the acts, omissions, misrepresentations, facts, events, matters, transactions or occurrences referred to in the Action or otherwise alleged, asserted or contended in the Action; or (ii) that could have been alleged, asserted or contended in this or any other forum by the Class Members or any of them against any of the Released Parties which arise out of or are based upon the allegations, transactions, facts, matters or occurrences, representations or omissions involved, set forth, or referred to in the Complaint or which relate to the purchase of HydroFlo common stock during the Class Period, including, without limitation, claims for fraud, negligent misrepresentation, negligence, gross negligence , breach of duty of care, breach of duty of loyalty, breach of fiduciary duty, or violations of any state or federal statutes or regulations. Settled Claims also include any and all claims arising out of, relating to, or in connection with the Settlement or resolution of the Action against the Released Parties (including Unknown Claims), except claims to enforce any of the terms of this Stipulation. 27. "Settled Defendants ' Claims" means all claims , demands , rights, duties,
remedies, liabilities and causes of action of every nature and description whatsoever, whether based on federal, state, local, statutory or common law or any other law, rule or regulation, including both known and Unknown Claims, that have been or could have been asserted in the Action by the Defendants or any of them or the successors and assigns of any of them against any of Lead Plaintiffs, Class Members or their attorneys, which arise out of or relate in any way
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to the institution, prosecution, or Settlement of this Action or the Settled Claims, including but
not limited to all claims for malicious prosecution or sanctions, except claims to enforce any of
the terms of this Stipulation. 28. 29. "Settlement" means the settlement contemplated by this Stipulation. "Settlement Amount" means a fund in the amount of four hundred twenty
five thousand dollars ($425,000). 30. "Settlement Hearing" means the final hearing to be held by the Court to
determine (1) whether the proposed Settlement should be approved as fair, reasonable and adequate; (2) whether all Settled Claims should be dismissed with prejudice; (3) whether an order approving the Settlement should be entered thereon; (4) whether the allocation of the Settlement Fund should be approved; and (5) an award of Attorneys' Fees and Expenses to Lead Plaintiffs' Counsel and an Award to Lead Plaintiffs. 31. "Unknown Claims" means any Settled Claim which any Lead Plaintiff or
member of the Class does not know or suspect to exist in his, her or its favor at the time of the release of the Released Parties , whether or nor concealed or hidden, which if known by him, her or it, might have affected his, her or its decision with respect to the Settlement, including, but not limited to, the decision not to object to the Settlement, and any Settled Defendants ' Claims which any Defendant does not know or expect to exist in his, her or its favor, whether or not concealed or hidden, which if known by him, her, or it might have affected his, her, or its decision(s) with respect to the Settlement. With respect to any and all Settled Claims and Settled Defendants' Claims, the Parties stipulate and agree that upon the Effective Date, Lead Plaintiffs and Defendants shall expressly, and each of the members of the Class shall be deemed to have, and by operation of the Order and Final Judgment shall have, expressly waived any and all
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provisions, rights and benefits conferred by any law of any state or territory of the United States, or principle of common law, which is similar, comparable, or equivalent to Cal. Civ. Code 1542 which provides: "A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor." Lead Plaintiffs and Defendants acknowledge, and the members of the Class by operation of the Order and Final Judgment shall be deemed to have acknowledged, that the inclusion of "Unknown Claims" in the definitions of "Settled Claims" and "Settled Defendants' Claims" was separately bargained for and was a key element of the Settlement of which this release is a part. B. SCOPE AND EFFECT OF SETTLEMENT 1. The obligations incurred pursuant to this Stipulation shall be in full and
final disposition of the Action and any and all Settled Claims as against all Released Parties and any and all Settled Defendants' Claims as against Lead Plaintiffs, the Class Members, or their attorneys. 2. Pursuant to the Order and Final Judgment, upon the Effective Date of this
Settlement, Lead Plaintiffs and each of the Class Members on behalf of themselves, their current and former heirs, executors, administrators , successors , attorneys, and any person they represent, shall, with respect to each and every Settled Claim, release and forever relinquish and discharge, and shall forever be enjoined from prosecuting, all Settled Claims and any and all claims arising out of, relating to, or in connection with the Settlement or resolution of the Action against the Released Parties (including Unknown Claims) whether or not such Class Member executes and delivers the Proof of Claim and Release, except claims to enforce any of the terms of this Stipulation. Further, Lead Plaintiffs and all Class Members on behalf of themselves, their current and former heirs, executors, administrators, successors, attorneys, and assigns, expressly
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covenant not to assert any claim or action against any of the Defendants derivatively on behalf of HydroFlo that (i) arises out of or relates to any of the acts, omissions, misrepresentations , facts, events, matters, transactions or occurrences referred to in the Action or otherwise alleged, asserted or contended in the Action or (ii) that could have been alleged, asserted or contended in this or any other any forum by the Class Members or any of them against any of the Released Parties which arise out of, relate to, or are based upon the allegations, transactions, facts, matters or occurrences, representations or omissions involved, set forth, or referred to in the Complaint, and shall forever be enjoined from commencing, instituting or prosecuting any such claim. 3. The Proof of Claim and Release to be executed by the Class Members
shall release all Settled Claims against the Released Parties and shall be substantially in the form and content contained in Exhibit A-2 to the [Proposed] Order of Preliminary Approval of Settlement (Exhibit A hereto) (the "Order of Preliminary Approval"). 4. Pursuant to the Order and Final Judgment, upon the Effective Date of this
Settlement, each of the Defendants, on behalf of themselves and the Released Parties, shall release and forever discharge each and every of the Settled Defendants' Claims, and shall forever be enjoined from prosecuting the Settled Defendants' Claims as against any of the Lead Plaintiffs, Class Members, or their attorneys, including but not limited to claims for malicious prosecution or sanctions. C. THE SETTLEMENT CONSIDERATION 1. Subject to the terms of this Stipulation, Defendants shall pay the
Settlement Amount into the Escrow Account within ten (10) business days of the Court's entry an Order preliminarily approving the Settlement. 2. The Gross Settlement Fund, net of any Taxes (as defined below) on the
income thereof and any Tax Expenses (as defined below), shall be used to pay the Notice and -12-
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Administration Expenses as authorized by this Stipulation, and (i) the Attorneys' Fees and Expenses, (ii) Awards to Lead Plaintiffs, and (iii) other fees and expenses authorized by the Court. The balance of the Gross Settlement Fund after the above payments shall be the Net Settlement Fund which shall be distributed to the Authorized Claimants. 3. Any sums required to be held in escrow hereunder shall be held by Lead
Plaintiffs' Counsel as Escrow Agent for the benefit of Lead Plaintiffs and the Class until the Effective Date of the Settlement. All funds held by the Escrow Agent shall be deemed to be in custodia legis and shall remain subject to the jurisdiction of the Court until such time as the funds shall be distributed or returned to Defendants pursuant to this Stipulation and/or further order of the Court. The Escrow Agent shall not disburse the Gross Settlement Fund, or any portion thereof, except as provided in this Stipulation, or upon Order of the Court. 4. The Escrow Agent shall invest any funds in excess of $150,000 in short
term United States Agency or Treasury Securities (or a mutual fund invested solely in such instruments), and shall collect and reinvest all interest accrued thereon. Any funds held in escrow in an amount of less than $150,000 may be held in a bank account insured to the extent possible by the FDIC. Interest earned on the money deposited into the Escrow Account will be part of the Gross Settlement Fund. 5. The Notice and Administration Expenses shall be paid from the Gross
Settlement Fund. In order to pay Notice and Administration Expenses, $75,000 shall be withdrawn from the Gross Settlement Fund and deposited into a Notice and Administration Account within five (5) business days after the Settlement Amount has been placed into the Escrow Account as described in Cl. The Notice and Administration Account shall be administered solely by Lead Plaintiffs' Counsel for Notice and Administration Expenses without
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further Court approval. The Notice and Administration Account shall be administrated solely by Lead Plaintiffs' Counsel as Escrow Agent. Any taxes or other expenses incurred in connection with the Notice and Administration Account shall be paid from the Notice and Administration Account or from the remainder of the Gross Settlement Fund. Defendants will have no obligation for payment of taxes or other expenses associated with the Notice and Administration Account. Notice and Administration Expenses in excess of $75,000 shall not be paid out of the Gross Settlement Fund until after the Effective Date. In no event shall Defendants be responsible to pay more than the Settlement Amount. 6. Defendants' Counsel shall have access to all records of the Notice and
Administration Account and the Escrow Account, and upon request to the Escrow Agent, shall receive copies of all records of disbursements, deposits and statements of accounts. 7. Defendants shall not be liable for the loss of any portion of the Settlement
Fund nor have any obligation for the payment of claims, taxes, legal fees or any other expenses payable from the Settlement Fund. D. ADMINISTRATION AND CALCULATION OF CLAIMS, FINAL AWARDS AND DISTRIBUTION OF NET SETTLEMENT FUND The Claims Administrator shall administer and calculate the claims that shall be allowed and oversee distribution of the Net Settlement Fund, under the supervision of Lead Plaintiffs' Counsel, and subject to appeal to, and jurisdiction of, the Court. 2. Except as otherwise provided below, on and after the Effective Date, the
Gross Settlement Fund shall be applied as follows: a. To the extent not paid from the Notice and Administration
Account, to pay without prior order of the Court, the expenses incurred in connection with providing notice to Class Members, administering and distributing the Net Settlement Fund to
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Class Members, processing Proofs of Claim, processing requests for exclusion, escrow fees and costs, and any applicable taxes; b. In addition to the attorneys' fees and expenses paid pursuant to
Section H.2 herein, to pay any additional Attorneys' Fees and Expenses as may be awarded to Lead Plaintiffs' Counsel by the Court pursuant to Section H.l herein; and Subject to the approval and further order(s) of the Court, the Net Settlement Fund shall be allocated to Authorized Claimants as set forth in Section F below. 3. Each Class Member wishing to participate in the Settlement shall be
required to submit a Proof of Claim and Release (in substantially the form set forth in Exhibit A2 to Order of Preliminary Approval of Settlement, which inter alia releases all Settled Claims against all Released Parties), signed under penalty of perjury by the beneficial owner(s) of the securities that are the subject of the Proof of Claim and Release or by someone with documented authority to sign for the beneficial owners and supported by such documents as specified in the instructions accompanying the Proof of Claim and Release. 4. All Proofs of Claim must be postmarked or received within the time
prescribed in the Order of Preliminary Approval of Settlement unless otherwise ordered by the Court. Any Class Member who fails to submit a properly completed Proof of Claim within such period as shall be authorized by the Court shall be forever barred from receiving any payments pursuant to this Stipulation or from the Net Settlement Fund (unless, by Order of the Court, a later submitted Proof of Claim by such Class Member is approved), but will in all other respects be subject to the provisions of this Stipulation and Order and Final Judgment, including, without limitation, the release of the Settled Claims and dismissal of the Action. Provided that it is received before the motion for the Class Distribution Order is filed, a Proof of Claim shall be
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deemed to have been submitted when posted, if received with a postmark indicated on the envelope and if mailed by first-class mail and addressed in accordance with the instructions thereon. In all other cases, the Proof of Claim shall be deemed to have been submitted when actually received by the Claims Administrator. 5. Each Proof of Claim shall be submitted to the Claims Administrator who
shall determine, under the supervision of Lead Plaintiffs' Counsel, in accordance with this Stipulation and any applicable orders of the Court, the extent, if any, to which each claim shall be allowed, subject to appeal to the Court. Prior to disbursement of the Net Settlement Fund, Defendants will receive a list of Proofs of Claim received by the Claims Administrator indicating which Proofs of Claim have been allowed by the Claims Administrator. 6. Lead Plaintiffs' Counsel shall have the right, but not the obligation, to
waive what they deem to be formal or technical defects in any Proofs of Claim filed in the interest of achieving substantial justice. 7. Proofs of Claim that do not meet the filing requirements may be rejected.
Prior to rejection of a Proof of Claim, the Claims Administrator shall communicate with the Claimant in order to remedy curable deficiencies in the Proof of Claim submitted. The Claims Administrator, under the supervision of Lead Plaintiffs' Counsel, shall notify in a timely fashion and in writing, all Claimants whose Proofs of Claim they propose to reject in whole or in part, setting forth the reasons thereof, and shall indicate in such notice that the Claimant whose claims are to be rejected has the right to review by the Court if the Claimant so desires and complies with the requirement of subparagraph (8) below. If any Claimant whose claim has been rejected in whole or in part desires to contest such rejection, the Claimant must, within twenty (20) days after the date of mailing of
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the notice required by subparagraph (7) above, serve upon the Claims Administrator a notice and statement of reasons indicating the Claimant's ground for contesting the rejection along with any supporting documentation, and requesting a review thereof by the Court. If a dispute concerning a claim cannot be otherwise resolved, Lead Plaintiffs' Counsel shall thereafter present the request for review to the Court. 9. The administrative determination of the Claims Administrator accepting
and rejecting claims shall be presented to the Court, on notice to Defendants' Counsel, for approval by the Court in the Class Distribution Order. 10. Each Claimant shall be deemed to have submitted to the jurisdiction of the
Court with respect to the Claimant's claim, and the claim will be subject to investigation and discovery under the Federal Rules of Civil Procedure, provided that such investigation and discovery shall be limited to that Claimant's status as a Class Member and the validity and amount of the Claimant's claim. No discovery shall be allowed on the merits of the Action or Settlement in connection with processing of the Proofs of Claim. 11. Payment pursuant to this Stipulation shall be deemed final and conclusive
against all Class Members. All Class Members whose claims are not approved by the Court shall be barred from participating in distributions from the Net Settlement Fund, but are otherwise bound by all of the terms of the Order and Final Judgment to be entered in the Action and the releases provided for herein, and will be barred from bringing any action against the Released Parties concerning the Settled Claims. 12. All proceedings with respect to the administration, processing and
determination of claims described by this paragraph of this Stipulation and the determination of
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all controversies relating thereto, including disputed questions of law and fact with respect to the validity of claims, shall be subject to the jurisdiction of the Court. 13. The Net Settlement Fund shall be distributed to Authorized Claimants by
the Claims Administrator upon application to the Court by Lead Plaintiffs' Counsel for a Class Distribution Order only after the Effective Date and after: (i) all claims have been processed, and all Claimants whose claims have been rejected or disallowed, in whole or in part, have been notified and provided the opportunity to be heard concerning such rejection or disallowance; (ii) all objections with respect to all rejected or disallowed claims have been resolved by the Court, and all appeals therefrom have been resolved or the time therefor has expired; and (iii) all matters with respect to Attorneys' Fees and Expenses, costs and disbursements have been resolved by the Court, and all appeals therefrom have been resolved or the time therefor has expired; and (iv) all costs of administration have been paid. 14. If any funds remain in the Net Settlement Fund by reason of uncashed
checks or otherwise, then, after the Claims Administrator has made reasonable and diligent efforts to have Class Members who are entitled to participate in the distribution of the Net Settlement Fund cash their distribution checks, any balance remaining in the Net Settlement Fund one (1) year after the initial distribution of such funds shall be re-distributed, after payment of any unpaid costs or fees incurred in administering the Net Settlement Fund for such redistribution, to Class Members who have cashed their checks and who would receive at least $10.00 from such re-distribution. If after six months after such re-distribution any funds shall remain in the Net Settlement Fund, then such balance shall be contributed to non-sectarian, notfor-profit, 501(c)(3) organization(s) approved by the Court upon motion by Lead Plaintiffs' Counsel.
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E.
TAX TREATMENT The Parties agree to treat the Gross Settlement Fund as being at all times a
qualified settlement fund within the meaning of Treasury Regulation 1.468B-1 and Section 468B of the Internal Revenue Code, as amended, for the taxable years of the Gross Settlement Fund, beginning with the date it is created. In addition, the Escrow Agent shall timely make such elections as necessary or advisable to carry out the provisions of this paragraph, including the "relations-back election" (as defined in Treas. Reg. 1.468B-1(j)(2)) back to the earliest permitted date. Such elections shall be made in compliance with the procedures and requirements contained in such regulations. It shall be the responsibility of the Escrow Agent to timely and properly prepare, and deliver the necessary documentation for signature by all necessary parties, and thereafter to cause the appropriate filing to occur. 2. For purposes of Section 468B of the Internal Revenue Code, as amended,
and the regulations promulgated thereunder, the "administrator" shall be the Escrow Agent. The Escrow Agent shall timely and properly file all tax returns necessary or advisable with respect to the Gross Settlement Fund, and make all required tax payments, including deposits of estimated tax payments in accordance with Treas. Reg. 1.468B-2(k). Such returns (as well as the election described in paragraph E. 1. hereof) shall be consistent with this paragraph and reflect that all taxes (including any interest or penalties) on the income earned by the Gross Settlement Fund shall be paid out of the Gross Settlement Fund as provided in paragraph E.3. hereof. 3. All (i) taxes (including any interest or penalties) arising with respect to the
income earned by the Gross Settlement Fund, including any taxes or tax detriments that may be imposed upon Defendants with respect to any income earned by the Gross Settlement Fund for any period during which the Gross Settlement Fund does not qualify as a qualified settlement fund for Federal or state income tax purposes ("Taxes"); and (ii) expenses and costs incurred in
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connection with the operation and implementation of this paragraph (including without limitation, expenses of tax attorneys and/or accountants and mailing and distribution costs and expenses relating to filing (or failing to file) the returns described in this paragraph) ("Tax Expenses"), shall be paid out of the Gross Settlement Fund; in all events the Released Parties shall have no liability for Taxes or the Tax Expenses. Further, Taxes and Tax Expenses shall be treated as, and considered to be, a cost of administration of the Settlement and shall be timely paid by the Escrow Agent out of the Gross Settlement Fund without prior order from the Court. The Escrow Agent shall be obligated (notwithstanding anything herein to the contrary) to withhold from distribution to members of the Class any funds necessary to pay such amounts including the establishment of adequate reserves for any Taxes and Tax Expenses (as well as any amounts that may be required to be withheld under Treas. Reg. 1468B-2(l)(2)); the Released Parties are not responsible and shall have no liability therefor. The Parties hereto agree to cooperate with the Escrow Agent, each other, and their tax attorneys and accountants to the extent reasonably necessary to carry out the provisions of this paragraph. F. ALLOCATION OF NET SETTLEMENT FUND 1. The Net Settlement Fund shall be allocated among the Authorized
Claimants in accordance with the "Plan of Allocation" set forth in Notice of Pendency and Settlement of Class Action (attached hereto as Exhibit A-1). The amount so allocated to each Authorized Claimant constitutes and is referred to herein as the Authorized Claimant's "Recognized Claim." The Plan of Allocation is based upon Lead Plaintiffs' Counsel's assessment of the merits and the relative strengths and weaknesses, including recoverable damages, of the claims of the members of the Class.
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2.
Nothing in this Plan of Allocation shall constitute or be deemed an
admission by any of the Defendants that there is liability or damage of any kind or that the dollar amounts set forth in this Plan of Allocation reflect actual or potential damages to the Class. 3. Payment in the manner set forth above shall be deemed conclusive
compliance with this Stipulation against all Authorized Claimants. All Class Members who fail to submit valid and timely Proofs of Claim shall be barred from participating in the distribution of the Net Settlement Fund but otherwise shall be bound by all of the terms of this Stipulation, including the terms of any Order and Final Judgment entered and the releases given. 4. The Released Parties shall have no responsibility for and no obligations or
liabilities of any kind whatsoever in connection with the determination, administration, calculation or payment of claims to members of the Class. 5. The Defendants shall have no involvement in the solicitation of, or review
of Proofs of Claim, or involvement in the administration process itself, which will be conducted by the Claims Administrator in accordance with this Stipulation and the Order and Final Judgment to be entered by the Court. 6. No Authorized Claimant shall have any claim against Lead Plaintiffs'
Counsel, Defendants, Defendants' Counsel, or the Claims Administrator based on, or in any way relating to the distributions from the Net Settlement Fund that have been made substantially in accordance with this Stipulation and any applicable orders of the Court. 7. Any change in the allocation of the Net Settlement Fund ordered by the
Court shall not affect the validity or finality of this Settlement.
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G.
OBLIGATIONS OF AND LIMITATIONS OF LIABILITY OF ESCROW AGENT The Escrow Agent shall not be responsible for the payment of any sums due to
Authorized Claimants or other Persons except to the extent of maintaining account of and appropriately paying sums as required by this Stipulation , but only to the limited extent that such sums have been delivered into the Escrow Account or Notice and Administration Account as required by this Stipulation. The Escrow Agent shall be liable only for acts of gross negligence or willful misconduct. The assumption of duties as Escrow Agent shall not preclude Lead Plaintiffs' Counsel from continuing to represent, as the case may be, Lead Plaintiffs or Class Members. H. LEAD PLAINTIFFS' COUNSELS' REQUEST FOR AN AWARD OF ATTORNEYS' FEES AND EXPENSES 1. Lead Plaintiffs' Counsel intend to submit an application to the Court, on
notice to Defendants' Counsel, for the payment of Attorneys' Fees and Expenses, including (i) an award of attorneys' fees up to 33.3% of the Settlement Amount; and (ii) reimbursement of litigation costs and expenses, plus interest, including fees and expenses of experts, incurred in connection with the prosecution of the Action and Awards to Lead Plaintiffs. All such amounts shall be paid from the Gross Settlement Fund. Lead Plaintiffs' Counsel reserve the right to make an additional application or applications for payment from the Gross Settlement Fund for fees and expenses incurred after the Settlement Hearing. Defendants take no position, and will not oppose any application concerning Lead Plaintiffs' Counsel's request or award of attorneys' fees and reimbursement of expenses, or Awards to Lead Plaintiffs (reimbursement of time and expenses to the Lead Plaintiffs) to the extent those requests do not exceed 42% of the Settlement Amount. In no event shall Defendants be responsible to pay more than the Settlement Amount.
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2.
Such Attorneys' Fees and Expenses and Awards to Lead Plaintiffs as are
awarded by the Court shall be paid from the Gross Settlement Fund to Lead Plaintiffs' Counsel within ten (10) business days after the Effective Date. 3. Lead Plaintiffs' Counsel shall allocate the Attorneys' Fees and Expenses
award among all Plaintiffs' Counsel in a fashion which, in the opinion and sole discretion of Lead Plaintiffs' Counsel fairly compensates Plaintiffs' Counsel for their respective contributions to the prosecution of the Action. 4. It is agreed that the procedure for and the allowance or disallowance by
the Court of any applications by Lead Plaintiffs' Counsel for Attorneys' Fees and Expenses, including fees for experts and consultants to be paid out of the Gross Settlement Fund, and any order or proceeding relating thereto are not part of the Settlement set forth in the Stipulation, and are to be considered by the Court separately from the Court's consideration of the fairness, reasonableness, and adequacy of the Settlement set forth in the Stipulation, and any order or proceeding relating to the fee and expense application, or any appeal from any order relating thereto or reversal or modification thereof shall not operate to terminate or cancel this Stipulation or affect its finality. I. THE PRELIMINARY APPROVAL ORDER As soon as practicable, Lead Plaintiffs and Defendants shall move the Court for entry of the Order of Preliminary Approval of Settlement, substantially in the form of Exhibit A hereto, providing for, among other things, preliminary approval of the Settlement and notice to the Class of the Settlement Hearing. The Order of Preliminary Approval of Settlement (Exhibit A hereto) to be submitted to the Court shall contain exhibits substantially in the form set forth in (i) the Notice of Pendency and Settlement of Class Action (the "Notice") (Exhibit A-I hereto); (ii) the Summary Notice of Pendency and Settlement of Class Action ("Summary Notice")
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(Exhibit A-3 hereto); and (iii) the Proof of Claim and Release (Exhibit A-2 hereto). Defendants are not liable or responsible for the method of, or representations made in, the Notice or Summary Notice. J. ORDER AND FINAL JUDGMENT TO BE ENTERED BY THE COURT APPROVING THE SETTLEMENT The Parties shall seek to have the Court enter an Order and Final Judgment substantially in the form of Exhibit B hereto. K. CONDITIONS OF SETTLEMENT The Effective Date of the Settlement shall be conditioned upon the occurrence of all of the following events: a. The Court shall enter the Order of Preliminary Approval of
Settlement in all material respects, as required by paragraph I., above; b. The Defendants have not exercised their right to terminate the
Settlement pursuant to paragraph K.3 below; The Court shall enter the Order and Final Judgment in all material respects, as required by paragraph J., above; d. occurred; and Defendants shall have paid the Settlement Amount, as set forth in paragraph C., above. 2. Upon occurrence of all of the events referenced in paragraph K. 1. above, An Effective Date as defined in paragraph A. 12 hereof shall have
each of the Lead Plaintiffs shall have and each and all of the members of the Class shall hereby be deemed to have, and by operation of the Order and Final Judgment shall have, fully, finally, and forever, released, settled and discharged, in accordance with the terms of paragraph B.,
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above, the Released Parties from and with respect to the Settled Claims, whether or not such members of the Class execute and deliver a Proof of Claim. If prior to the Settlement Hearing, Persons who otherwise would be Members of the Class have filed with the Court valid and timely requests for exclusion ("Requests for Exclusion") from the Class in accordance with the provisions of the Order of Preliminary Approval of Settlement and the notice given pursuant thereto, and such Persons in the aggregate purchased common stock during the Class Period in an amount greater than the amounts specified in a separate Supplemental Agreement between the parties (the "Supplemental Agreement"), Defendants, in their sole and absolute discretion, shall have the option to terminate this Stipulation in accordance with the procedures set forth in the Supplemental Agreement. The Supplemental Agreement will not be filed with the Court unless and until a dispute among the parties concerning its interpretation or application arises. Copies of all Requests for Exclusion received, together with copies of all written revocations of Requests for Exclusion, shall be delivered to Counsel for Defendants no later than fourteen (14) days prior to the Settlement Hearing. The required procedure for and consequences of making such an election are as follows: a. Such option to withdraw shall be exercised by serving written
notice, signed by Defendants' Counsel upon Lead Plaintiffs' Counsel, but not less than five (5) business days before the Settlement Hearing; b. If Defendants exercise their option to withdraw from the
Settlement as provided herein, this Stipulation will be null and void, and the provisions of
paragraph L. hereof will apply.
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4.
Upon the occurrence of all of the events referenced in paragraph K. 1.
above, the obligation of the Escrow Agent to return funds from the Gross Settlement Fund to Defendants pursuant to paragraph L.2. hereof shall be absolutely and forever extinguished. 5. If all of the conditions specified in paragraph K.1 are not met, then the
Stipulation shall be canceled and terminated subject to paragraph L. below. L. EFFECT OF DISAPPROVAL, CANCELLATION OR TERMINATION Defendants' Counsel or Lead Plaintiffs' Counsel shall have the right to terminate the Settlement and this Stipulation by providing written notice of their election to do so ("Termination Notice") to all other parties hereto within thirty (30) days of: a. the Court's declining to enter the Order of Preliminary Approval of
Settlement in any material respect; b. the Court's refusal to approve this Stipulation or any material part
of it; provided however that the allowance or disallowance by the Court of any applications by Lead Plaintiffs' Counsel for Attorneys' Fees and Expenses, including fees for experts and consultants to be paid out of the Gross Settlement Fund, shall not be material; the Court' s declining to enter the Order and Final Judgment in all material respects as required by paragraph J. above; d. the date upon which the Order and Final Judgment is modified or
reversed in any material respect by the Court of Appeals or the Supreme Court; or e. in the event that the Court enters an order and final judgment in a
form other than that provided above (an "Alternative Judgment") and none of the Parties hereto elect to terminate this Settlement, the date that such Alternative Judgment is modified or reversed in any material respect by the Court of Appeals or the Supreme Court.
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Neither a modification nor a reversal on appeal of any award of fees, costs and expenses by the Court to any of Lead Plaintiffs' counsel shall be deemed a material modification of the Order and Final Judgment or this Stipulation. 2. If either: (a) the Effective Date does not occur, or (b) this Stipulation is
canceled or terminated pursuant to its terms, or (c) the Settlement does not become Final for any reason, then the Gross Settlement Fund, less amounts reasonably expended for notice to the Class, shall be refunded to Defendants by the Escrow Agent within ten (10) business days of such cancellation or termination. Such refund shall be returned as directed by Defendants. 3. If the Effective Date does not occur, or if this Stipulation is disapproved,
canceled or terminated pursuant to its terms, and at the request of counsel for Defendants, the Escrow Agent or his, her, or its designee shall apply for any tax refund owed to the Gross Settlement Fund and pay the proceeds, after deduction of any fees and expenses incurred in connection with such application(s) for refund payable to Defendants in the order as stated above. 4. If the Effective Date does not occur, or if this Stipulation is disapproved,
canceled or terminated pursuant to its terms, all of the Parties to this Stipulation shall be deemed to have reverted to their respective status prior to the execution of this Stipulation, and they shall proceed in all respects as if this Stipulation had not been executed and the related orders had not been entered, preserving in that event all of their respective claims and defenses in the Action, and shall revert to their respective positions in the Action. 5. No order of the Court or modification or reversal of any order of the Court
concerning the Plan of Allocation or the amount of any attorneys' fees, costs, and expenses awarded by the Court shall constitute grounds for cancellation or termination of the Stipulation.
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M.
MISCELLANEOUS PROVISIONS The Parties hereto: (a) acknowledge that it is their intent to consummate
the Settlement contemplated by this Stipulation; and (b) agree to cooperate to the extent necessary to effectuate and implement all terms and conditions of this Stipulation, and (c) agree to exercise their best efforts and to act in good faith to accomplish the foregoing terms and conditions of the Stipulation. 2. All of the exhibits attached hereto are hereby incorporated by reference as
though fully set forth herein. 3. This Stipulation may be amended or modified only by a written instrument
signed by counsel for all Parties to this Stipulation or their successors-in-interest. 4. This Stipulation and the exhibits attached hereto constitute the entire
agreement among the Parties hereto and no representations, warranties or inducements have been made to any party concerning this Stipulation or its exhibits other than the representations, warranties and covenants contained and memorialized in such documents. Except as otherwise provided herein, each party shall bear its own costs. Lead Plaintiffs' Counsel's Attorneys' Fees and Expenses, subject to Court approval, shall be paid only out of the Gross Settlement Fund and the Defendants shall not have any obligation with respect to the payment of said Fees and Expenses. 6. Lead Plaintiffs' Counsel, on behalf of the Class, are expressly authorized
to take all appropriate action required or permitted to be taken by the Class pursuant to this Stipulation to effectuate its terms and are also expressly authorized to enter into any modifications or amendments to this Stipulation on behalf of the Class. 7. Counsel for the Parties represent that they are authorized to sign this
Stipulation on behalf of their respective clients.
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This Stipulation may be executed in one or more original, photocopied or facsimile counterparts. All executed counterparts and each of them shall be deemed to be one and the same instrument. Counsel for the Parties to this Stipulation shall exchange among themselves original signed counterparts and a complete set of original executed counterparts shall be filed with the Court. 9. This Stipulation shall be binding upon, and inure to the benefit of, the
successors, assigns, executors, administrators, heirs and legal representatives of the Parties hereto. No assignment shall relieve any party hereto of obligations hereunder. 10. All terms of this Stipulation and all exhibits hereto shall be governed and
interpreted according to the laws of the State of North Carolina without regard to its rules of conflicts of law, except to the extent that federal law requires that federal law governs, and in accordance with the laws of the United States. 11. Defendants and Lead Plaintiffs on behalf of themselves and each member
of the Class hereby irrevocably submit to the jurisdiction of the Court for any suit, action, proceeding or dispute arising out of or relating to this Stipulation or the applicability of this Stipulation. The administration and consummation of the Settlement as embodied in this Stipulation shall be under the authority of the Court and the Court shall retain jurisdiction for the purpose of entering orders providing for awards of attorneys' fees and expenses to Lead Plaintiffs' Counsel, Awards to Lead Plaintiffs and enforcing the terms of this Stipulation. 12. None of the Parties hereto shall be considered to be the drafter of this
Stipulation or any provision hereof for purposes of any statute, case law or rule of interpretation or construction that would or might cause any provision to be construed against the drafter hereof. Because of the arm's-length negotiations that preceded the execution of this Stipulation,
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all Parties hereto have contributed substantially and materially to the preparation of this Stipulation. 13. Neither this Stipulation, nor the fact of the Settlement are an admission or
concession by any Defendant of any liability or wrongdoing whatsoever. This Stipulation is not a finding of the validity or invalidity of any claims in the Action or of any wrongdoing by any of the Defendants named therein. Neither this Stipulation, nor the fact of settlement, nor the settlement proceedings, nor the settlement negotiations, nor any related documents, shall be used or construed as an admission of any fault, liability or wrongdoing by any person. Neither this Stipulation, nor the fact of settlement, nor the settlement proceedings, nor the settlement negotiations, nor any related documents shall be offered or received in evidence as an admission, concession, presumption or inference against any party in any proceeding other than such proceedings as may be necessary to consummate or enforce this Stipulation. 14. The Parties to this Stipulation intend the Settlement to be a final and
complete resolution of all disputes asserted or which could be asserted by the Class Members against the Released Parties with respect to the Settled Claims. Accordingly, Lead Plaintiffs and the Defendants agree not to assert in any forum that the litigation was brought by Lead Plaintiffs or defended by Defendants in bad faith or without a reasonable basis. The Parties hereto shall assert no claims of any violation of Rule 1 i of the Federal Rules of Civil Procedure relating to the prosecution, defense, or settlement of the Action. The Parties agree that the amount paid and the other terms of the Settlement were negotiated at arm's-length in good faith by the Parties, and reflect a settlement that was reached voluntarily after consultation with experienced legal counsel.
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15.
The headings in this Stipulation are used for purposes of convenience and
ease of reference only and are not meant to have any legal effect, nor are they intended to influence the construction of this Stipulation in any way. 16. The waiver of one party of any breach of this Stipulation by any other
party shall not be deemed a waiver of any other breach of this Stipulation. The provisions of this Stipulation may not be waived except by a writing signed by the affected party, or counsel for that party. * * * REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
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IN WITNESS WHEREOF, the Parties hereto, intending to be legally bound
hereby, We caused this Stipulation to be executed, by their duly authorized attorneys, as of the day and year f above written.
Dated: jZ / rn007
TBE ROSEN LAW FIRM PA
HARMS, WRqMLD & HODGES, LU
Laurence Rosen, Esq. Phii3ip Kin4 Esq. 350 Fifth Avenue, Suite 5505 New York, NY 101 19
and
al S. Harris Esq
255 t rough SU=t ate 260 Ralezg, North Carolina 27603
On behalf of Defendants Dennis Mast, George A. Moore, I ydrroFlo, inc., and Melds and Arsenic Removal Technology, Inc.
WILSON & COFFEY, LLP I
ETON & WILLIAMS, LLP
Kevin : dge, Esq. 110 Oakwood Drive, Suite 400 Winstou-Salem, North Carona 27103
On behalf of Lead Piabdi fs and the. Class
L. Neal Ellis, Jr. One Bank ofAmerica Plaza, Suite 1400 421 Fayetteville Street 1a.Ieigh, North Carolina. 27601
On behajfofi efcndant Shane Traveller
, ...
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IN WITNESS WHEREOF, the Parties hereto, intending to be legally bound
hereby, have caused this Stipulation to be executed, by their duly authorized attorneys, as of the day and year first above written.
Dated:
'2007 HARRIS, WINFIELD & HODGES, LLP
THE ROSEN LAW FIRM PA
Laurence Rosen, Esq. Phillip Kim, Esq.
350 Fifth Avenue, Suite 5508 New York, NY 10118
and
Donald J. Harris, Esq. 255 Hillsborough Street Suite 260
Raleigh, North Carolina 27603
On behalf of Defendants Dennis Mast, George A. Moore, HydroFlo, Inc., and Metals and Arsenic Removal Technology, Inc.
WILSON & COFFEY, LLP
HUNTON & WILLIAMS, LLP
-A 71"^ U44.1
Kevin B. Cartledge, Esq.
110 Oakwood Drive, Suite 400 Winston-Salem, North Carolina 27103
L. Neal Ellis, Jr.
One Bank of America Plaza, Suite 1400 421 Fayetteville Street Raleigh, North Carolina 27601
On behalf of Lead Plaintiffs and the Class
On behalf of Defendant Shane Traveller
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CERTIFICATE OF SERVICE I, Kevin B. Cartledge, hereby certify that on this date I electronically filed the foregoing STIPULATION AND AGREEMENT OF SETTLEMENT with the Clerk of Court using the CM/ECF system which will send notification of such filing to the following: nellis @hunton.com dharri s@harri swinfield. com cynthia.oneal@,tprr.com
This the 27th day of November, 2007. Is! Kevin B. Cartledge Kevin B . Cartledge Attorney for Plaintiffs OF COUNSEL: WILSON & COFFEY, L.L.P. 110 Oakwood Drive , Suite 400 Winston-Salem, NC 27103 Tele: [phone] Fax: [phone] THE ROSEN LAW FIRM, P.A. Laurence Rosen, Esq. 350 Fifth Avenue, Suite 5508 New York, NY 10118 Tele: [phone] Fax: [phone]
I
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UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF NORTH CAROLINA EASTERN DIVISION CASE NO. 4:05-CV-00152-F(3)
RUSSELL TODD HUTTENSTINE, RONALD A. SCHINDELER, ROBERT G. COLE, JAMIE SLAUGHTERBECK, THOMAS FORTANIER, and WILLIAM SCHUTTER, on behalf to themselves and all other similarly situated, EXHIBIT A Plaintiffs, v. DENNIS MAST, GEORGE A. MOORE, SHANE TRAVELLER, ROSS W. SMITH, HYDROFLO, INC., and METALS AND ARSENIC REMOVAL TECHNOLOGY, INC., Defendants. : CLASS ACTION
[PROPOSED] ORDER OF PRELIMINARY APPROVAL OF SETTLEMENT WHEREAS, a consolidated action is pending before the Court entitled Huttenstine v. Mast, No. 4:05-CV-00152-F(3) (the "Action ); and WHEREAS, the Parties having made application, pursuant to Rule 23(e) of the Federal Rules of Civil Procedure, for an order preliminarily approving the Settlement of this Action in accordance with the Stipulation and Agreement of Settlement, dated November 17, 2007 (the "Stipulation ) which together with the exhibits annexed thereto, set forth the terms and conditions for a proposed Settlement of the Action and for dismissal of the Action with prejudice upon the terms and conditions set forth therein ; and the Court having read and considered the Stipulation and the exhibits annexed thereto; IT IS HEREBY ORDERED:
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1. 2.
The terms defined in the Stipulation are incorporated herein. The Settlement of the Action, as set forth in the Stipulation, is
preliminarily approved as fair, reasonable and adequate. 3. Pursuant to the Stipulation, the Court preliminarily finds that this Action
meets the class certification requirements of Rule 23 of the Federal Rules of Civil Procedure and that the Class consists of: "all persons who acquired any common stock of HydroFlo, Inc. ("HydroFlo ) during the period from July 18, 2005, through and including October 26, 2005, and were damaged thereby. Excluded from the Class are the Defendants and all current and former officers and directors of Defendants, and the members of their immediate families and Defendants' legal representatives, heirs, predecessors, successors and assigns and any entity in which any Defendant has or had a controlling interest or is a parent or subsidiary of or is controlled by HydroFlo, and any persons who have separately filed actions against one or more of the Defendants based in whole or in part on any claim arising out of or relating to any of the acts, omissions, misrepresentations, facts, events, matters, transactions or occurrences referred to in the Action or otherwise alleged, asserted or contended in the Action. Also excluded from the Class are those persons who file valid and timely requests for exclusion in accordance with this Order. 4. In preliminarily certifying this Class for the purposes of settlement, the
Court preliminarily appoints each of the Lead Plaintiffs as class representatives , and the Court preliminarily concludes that : (a) the requirements of Fed. R. Civ. P. Rules 23(a) and 23(b)(3) are satisfied; (b) the Class is so numerous that joinder of all members is impractical; (c) there are questions of law and fact common to all members of the Class; (d) the claims of the Lead Plaintiffs are typical of the claims of the members of the Class; (e) Lead Plaintiffs will fairly and
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adequately protect the interests of the members of the Class; (f) Plaintiffs' Lead Counsel are qualified to represent the Class; (g) common questions of law and/or fact predominate over any such questions that may affect Class members individually; and (h) a class action is superior to all other available methods for the fair and efficient adjudication of this Action. 5. A Hearing shall be held before this Court on , 2008, at
in Courtroom
, of the United States Courthouse, Eastern District of North
Carolina, Eastern Division, 201 South Evans Street, Greenville, NC 27858, to determine: (i) whether the Court should finally certify this action as class action for the purposes of settlement; (ii) whether the proposed Settlement of the Action on the terms and conditions provided for in the Stipulation is fair, reasonable , and adequate and should be approved by the Court; (iii) whether a Judgment as provided in the Stipulation should be entered herein; (iv) whether the Plan of Allocation of the Net Settlement Fund as set forth in the Stipulation should be approved; and (v) whether the motion of Lead Plaintiffs' Counsel for the payment of Attorneys' Fees and Expenses and an Award to Lead Plaintiffs is reasonable and should be approved. The Court may adjourn the Hearing and later reconvene it without further notice to the members of the Class. 6. The Court approves , as to form and content, the Notice of Pendency and
Settlement of Class Action (the "Notice ), the Summary Notice of Pendency and Settlement of Class Action ("Summary Notice ), and the Proof of Claim and Release form (the "Proof of Claim ), annexed as Exhibits A-1, A-3, and A-2, hereto, and finds that the publication, mailing and distribution of the Notice and Summary Notice substantially in the manner and form set forth in this Order meets the requirements of Rule 23 of the Federal Rules of Civil Procedure, Section 21(D)(a)(7) of the Exchange Act, 15 U.S.C. 78u-4(1)(7) as amended by the Private Securities Litigation Reform Act of 1995, and due process , and is the best notice practicable
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under the circumstances and shall constitute due and sufficient notice to all persons entitled thereto. Lead Plaintiffs' Counsel are authorized to issue such Notices and Proof of Claim, in substantially their present form, to those members of the Class who can be identified through reasonable effort. 7. Lead Plaintiffs' Counsel are hereby authorized to retain the firm of
Strategic Claims Services (the "Claims Administrator ) to supervise and administer the notice procedure as well as processing claims as more fully set forth below: (a) Not later than fourteen (14) days from the date hereof, Lead
Plaintiffs' Counsel shall cause a copy of the Notice and Proof of Claim, substantially in the form of Exhibits A-1 and A-2 annexed hereto , to be mailed by first-class mail to all Class members reasonably identified by the transfer records for HydroFlo common stock ("HydroFlo Stock ) at the Class members' addresses listed on such transfer records (obtained in accordance with paragraph 8 below) . The date of such initial mailing shall be referred to as the "Notice Date ; (b) Not later than fourteen ( 14) business days after the Notice Date,
Lead Plaintiffs' Counsel shall cause a Summary Notice, substantially in the form annexed as Exhibit A-3 hereto, to be published once in Investor 's Business Daily, and shall cause a copy of the Summary Notice to be published electronically on either the PR Newswire or Business Wire; (c) Lead Plaintiffs' Counsel shall also cause copies of the Notice and
Proof of Claim to be mailed as soon as practicable to persons who indicate, in response to the Summary Notice or otherwise, that they acquired HydroFlo Stock during the Class Period; (d) The Claims Administrator, under direction of Lead Plaintiffs'
Counsel, shall use its best reasonable efforts to obtain from all banks, brokerage firms or other nominees (the "Nominees ) shown by the transfer records of HydroFlo to have held HydroFlo
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Stock during the Class Period, the names and addresses of their customers for whom they held such HydroFlo Stock as nominee and who acquired during the Class Period, and to cause a copy of the Notice, together with a copy of the Proof of Claim, to be promptly mailed by first-class mail to each such customer whose name and address is provided by any Nominee. Alternatively, such Nominees may at their own election make such mailing themselves; (e) At or prior to the Hearing provided for in numbered paragraph 5 of
this Order, Lead Plaintiffs' Counsel shall serve on Defendants' Counsel and file with the Court proof, by affidavit or declaration under penalty of perjury, of such publication and mailing. 8. All reasonable costs incurred in identifying and notifying members of the
Class as well as administering the Settlement, shall be paid from the Gross Settlement Fund as set forth in the Stipulation. 9. All members of the Class shall be bound by all determinations and
judgments in the Action concerning the Settlement, whether favorable or unfavorable. 10. Members of the Class who wish to participate in the Net Settlement Fund
shall complete and submit Proofs of Claim in accordance with the instructions contained therein. All Proofs of Claim must be postmarked or received no later than ninety (90) days from the Notice Date. 11. For purposes of facilitating the processing of claims, Lead Plaintiffs'
Counsel and/or the Claims Administrator shall lease and maintain a numbered post office box. All Notices to Class members and other communications regarding the proposed Settlement of these actions shall designate the post office box as the return address. Lead Plaintiffs' Counsel and/or the Claims Administrator shall be responsible for preserving, for a period of two years from the date of distribution of the proceeds of the Net Settlement Fund, all Proofs of Claim and
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any and all other written communications from Class members or any other person in response to the Notice. Lead Plaintiffs' Counsel and/or the Claims Administrator shall be responsible for responding to inquiries mailed to said post office box, but copies of all written answers to such inquiries shall be maintained and made available for inspection by all counsel in this Action. 12. All members of the Class shall have the option to be excluded from the
Class and thereby elect not to participate in the Net Settlement Fund. Such exclusions shall be exercisable by mailing a timely and valid request for exclusion, postmarked no later than fortyfive (45) days following the Notice Date, and mailed by first- class mail to the Claims Administrator pursuant to the instructions set forth in the Notice. All persons who timely file valid requests for exclusion from the Class shall not be Class members and shall have no rights with respect to the Settlement and have no interest in the Gross or Net Settlement Fund. Any member of the Class not submitting a valid and timely request for exclusion shall remain a member of the Class. 13. Lead Plaintiffs' Counsel shall promptly provide Defendants' Counsel with
a copy of all communications and documentation relating to members of the Class who request exclusion therefrom. 14. Any member of the Class may enter an appearance in the Action, at his or
her or its own expense, individually or through counsel of his, her or its choice. If any member of the Class does not enter an appearance, he, she or it will be represented by Lead Plaintiffs' Counsel. 15. Pending final determination of whether the Settlement should be
approved, neither the Class Representatives nor any member of the Class, either directly, representatively, or in any other capacity, shall commence, maintain, or prosecute against any of
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the Released Parties any action or proceeding in any court or tribunal asserting any of the Settled Claims. 16. Pending final determination of whether the Settlement should be
approved, all discovery and all proceedings in the Action are stayed, except for the proceedings relating to the Settlement. 17. Any member of the Class who has not requested exclusion may appear
with or without counsel, and show cause, if he, she or it has any, why the proposed Settlement of the Action should not be approved as fair, reasonable and adequate, or why a Judgment should not be entered thereon, or why Attorneys' Fees and Expenses should not be awarded to Lead Plaintiffs' Counsel in the amount requested, why an award to Lead Plaintiffs should not be made or why the Plan of Allocation of the Net Settlement Fund should not be approved; provided, however, that no Class member or any other Person shall be heard or entitled to contest the approval of the terms and condition of the proposed Settlement, or, if approved, the Judgment and order thereon unless: (i) that Person has filed (delivered by hand or sent by first class mail) written objections of any papers and briefs, with the Clerk of the United States District Court for the Eastern District of North Carolina, Eastern Division, United States Courthouse, 201 South Evans Street, Greenville , NC 27858, no later than forty-five (45) days following the Notice Date; and (ii) has served copies of such papers, no later than forty-five (45) days, by hand or first-class mail upon: Laurence Rosen, Esq. Phillip Kim, Esq. THE ROSEN LAW FIRM PA 350 Fifth Avenue, Suite 5508 New York, NY 10118 Lead Counsel for Plaintiffs
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Kevin Cartledge, Esq. WILSON & COFFEY, LLP 110 Oakwood Drive , Suite 400 Winston-Salem, NC 27103 Liaison Counsel for Plaintiffs Donald J. Harris, Esq. HARRIS, WINFIELD & HODGES, LLP 255 Hillsborough Street Suite 260 Raleigh, NC 27603 L. Neal Ellis, Jr. HUNTON & WILLIAMS LLP One Bank of America Plaza 421 Fayetteville Street Suite 1400 Raleigh, NC 27601
Attorneys for Defendants Any objection must contain a written notice of the grounds for opposing the Settlement, Plan or Allocation, Attorneys' Fees and Expenses, Awards to Lead Plaintiffs', and any other element of the Settlement. Such objections must demonstrate the objecting Person's membership in the Class by including: (a) the objecting Person's name, address and telephone number; (b) proof of the number of shares of HydroFlo Stock acquired and sold during the Class Period by the objecting Person; and (c) a statement of the reasons for objection. Any member of the Class who does not make his, her or its objection in the manner provided shall be deemed to have waived such objection and shall forever be foreclosed from making any objection to the fairness or adequacy of the proposed Settlement as incorporated in the Stipulation or any Judgment that may be entered, to the award of Attorneys' Fees and Expenses to Lead Plaintiffs' Counsel, the award to Lead Plaintiffs, and to the Plan of Allocation.
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18.
Any response to any objection(s) to the proposed Settlement or the motion
for Attorneys' Fees and Expenses shall be filed no later twenty-one (21) days before the Hearing. 19. Upon the Effective Date, Lead Plaintiffs and each of the Class Members,
on behalf themselves and each of their predecessors, successors, parents, subsidiaries, affiliates, custodians, agents, assigns, representatives, heirs, executors, trustees, administrators and any other person or entity having any legal or beneficial interest in HydroFlo Stock acquired by any member of the Class during the Class Period, whether or not they file a Proof of Claim within the time provided for, and whether or not they participate in the Net Settlement Fund, shall be deemed conclusively to have fully, finally, unconditionally and forever released, settled and discharged the Released Parties, from and with respect to the Settled Claims and any and all claims arising out of, relating to, or in connection with the Settlement or resolution of the Action against the Released Parties (including Unknown Claims), and shall be forever barred and enjoined from commencing, instituting, or prosecuting the Settled Claims or any action or other proceeding, including any derivative action that (i) arises out of or relates to any of the acts, omissions, misrepresentations, facts, events, matters, transactions or occurrences referred to in the Action or otherwise alleged, asserted or contended in the Action or (ii) could have been alleged, asserted or contended in any forum by the Class Members or any of them against any of the Released Parties which arise out of, relate to, or are based upon the allegations, transactions, facts, matters or occurrences, representations or omissions involved, set forth, or referred to in the Complaint, against any of the Released Parties with respect to, based on, or arising from the Settled Claims, except claims to enforce any of the terms of this Stipulation. 20. All funds held by the Escrow Agent shall be deemed and considered to be
in custodia legis of the Court in accordance with the Stipulation, and shall remain subject to the
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jurisdiction of the Court until such time as such funds shall be distributed pursuant to the Stipulation, Plan of Allocation and/or further order(s) of the Court. 21. The payment of the Gross Settlement Fund to the Escrow Agent in
accordance with the terms and obligations of the Stipulation is approved. 22. Neither the Defendants nor any of the Released Parties nor their respective
counsel shall have any responsibility for, interest in, or liability with respect to, the investment or distribution of the Settlement Fund, the Plan of Allocation, the determination, administration, or calculation of claims, any motion for reimbursement of attorneys' fees or reimbursement of expenses submitted by Lead Plaintiffs' Counsel, or the payment, or withholding of taxes, or any losses incurred in connection therewith, and such matters will be considered separately from the fairness , reasonableness and adequacy of the Settlement. 23. Neither the Stipulation, nor any of its terms or provisions, nor any
negotiations or proceedings connected with it, shall be construed as an admission or concession by any of the Defendants of the truth of any of the allegations in the Action, or of any liability, fault or wrongdoing of any kind. If the Settlement is disapproved, cancelled or terminated in accordance with the terms of the Stipulation, the Stipulation shall have no force or effect except as provided in Paragraph K therein and all negotiations, proceedings and statements made in connection therewith shall be without prejudice to the right of any persons, and the Parties to the Action shall be restored to their prior respective positions. 24. All papers in support of the Settlement, and any motion for Attorneys'
Fees and Expenses and an award to Lead Plaintiffs shall be filed with the Court and served twenty-one (21) days prior to the Hearing.
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25.
At or after the Hearing, the Court will determine whether the motion of
Lead Plaintiffs' Counsel for an award of Attorneys' Fees and Expenses should be approved. 26. The Court reserves the right to adjourn the date of the Hearing and any
adjournment thereof without further notice to members of the Class, and retains jurisdiction to consider all further applications arising out of or connected with the proposed Settlement. 27. Only Class members shall have any rights with respect to approval of or
objection to the Settlement, the Plan of Allocation or the motion of Lead Plaintiffs' Counsel for the payment of Attorneys' Fees and Expenses and an award to Lead Plaintiffs. IT IS SO ORDERED, this day of 1200.
_HON. JAMES C. FOX UNITED STATES DISTRICT JUDGE
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UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF NORTH CAROLINA EASTERN DIVISION CASE NO. 4:05-CV-00152-F(3)
RUSSELL TODD HUTTENSTINE, RONALD A. SCHINDELER, ROBERT G. COLE, JAMIE SLAUGHTERBECK, THOMAS FORTANIER, and WILLIAM SCHUTTER, on behalf to themselves and all other similarly situated, EXHIBIT A-1 Plaintiffs, v. DENNIS MAST, GEORGE A. MOORE, SHANE TRAVELLER, ROSS W. SMITH, HYDROFLO, INC., and METALS AND ARSENIC REMOVAL TECHNOLOGY, INC., Defendants. : CLASS ACTION
NOTICE OF PENDENCY AND SETTLEMENT OF CLASS ACTION
If you acquired common stock of HydroFlo, Inc. during the period from July 18, 2005 through and including October 26, 2005, you could get a payment from a class action settlement.
A federal court authorized this notice. This is not a solicitation from a lawyer. The settlement will provide $425,000 in cash, plus interest, to pay claims from investors who acquired common stock of HydroFlo, Inc. ("HydroFlo Stock ) during the period from July 18, 2005 through and including October 26, 2005. The Settlement represents an average recovery of $.0425 per share of common stock (for the 10 million outstanding shares that were available for purchase by Class Members). These averages are estimates and are before deduction of any Court-approved fees and expenses. See Question 8 below for a more detailed explanation. Attorneys for the Lead Plaintiffs intend to ask the Court to award them fees up to 33.3% of the settlement amount, and reimbursement of litigation expenses not to exceed $35,000, and an award to each of the four Lead Plaintiffs not to exceed $1,000 per
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person. Collectively, the fees and expenses are estimated to average 1.80 per share of common stock. If approved by the Court, these amounts will be paid from the Gross Settlement Fund. Therefore, the approximate recovery, after deduction of attorneys and fees expenses approved by the Court, is an average of 2.50 per share of common stock. These are estimates. Your actual recovery, if any, may vary depending on your purchase price and sale price and the number of Proof of Claim forms that are filed. See Question 8 below for a more detailed explanation. The Settlement resolves a lawsuit concerning whether HydroFlo, four of its principal officers and directors, and a subsidiary misled investors about certain contracts it had entered into with customers. Defendants deny the allegations in the lawsuit, and deny any wrongdoing. The parties disagree on the liability and damage issues. See Question 4 below for a more detailed explanation. Your legal rights are affected whether you act or don't act. Read this notice carefully. YOUR LEGAL RIGHTS AND OPTIONS IN THIS SETTLEMENT SUBMIT A CLAIM FORM EXCLUDE YOURSELF The only way to get a payment.
Get no payment. This is the only option that allows you to ever be part of any other lawsuit against Defendants about the legal claims in this case. Write to the Court about why you don't like the settlement. Ask to speak in Court about the fairness of the settlement.
OBJECT GO TO A HEARING
DO NOTHING
Get no payment. Give up rights.
LEGAL RIGHTS AND OPTIONS IN THIS SETTLEMENT: These rights and options-and the deadlines to exercise them-are explained in this notice. The Court in charge of this case still has to decide whether to approve the Settlement. Payments will be made if the Court approves the Settlement and after appeals are resolved and claims are processed. Please be patient. Further information regarding this Settlement may be obtained by contacting Plaintiffs' Lead Counsel: Laurence Rosen, Esq. or Phillip Kim, Esq., The Rosen Law Firm PA, 350 5th Avenue, Suite 5508, New York, NY 10018.
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WHAT THIS NOTICE CONTAINS Page BASIC INFORMATION ................................................................................................................ 1 1. 2. 3. 4. Why did you get this Notice package? ................................................................. .. What is this lawsuit about? ................................................................................... .. Why is this a class action? .................................................................................... .. Why is there a settlement? .................................................................................... .. 1 1 2 2
WHO IS IN THE SETTLEMENT ................................................................................................ .. 3 5. 6. 7. How do I know if I am part of the settlement? ..................................................... .. 3 Are there exceptions to being included? ............................................................... .. 3 I'm still not sure if I am included .......................................................................... .. 4
THE SETTLEMENT BENEFITS - WHAT YOU GET .............................................................. .. 4 8. What does the settlement provide? ....................................................................... .. 4
HOW YOU GET A PAYMENT-SUBMITTING A CLAIM FORM........................................ .. 5 9. 10. 11. How can I get a payment? ..................................................................................... .. 5 When would I receive my payment? .................................................................... .. 5 What am I giving up to get a payment or stay in the Class? ................................. .. 5
EXCLUDING YOURSELF FROM THE SETTLEMENT .......................................................... .. 7 12. 13. 14. 15. 16. How do I get out of the settlement? ...................................................................... .. If I do not exclude myself, can I sue Defendants for the same thing later? .......... .. If I exclude myself, can I receive money from this settlement? ........................... .. Do I have a lawyer in this case ? ............................................................................ .. How will the lawyers be paid? .............................................................................. .. 7 8 8 8 8
OBJECTING TO THE SETTLEMENT ....................................................................................... .. 8 17. 18. How do I tell the Court that I do not like the settlement? ..................................... .. 9 What is the difference between objecting and requesting exclusion? .................. .. 9
THE COURT'S FAIRNESS HEARING ...................................................................................... .. 9 19. 20. 21. When and where will the Court decide whether to approve the settlement?........ .. 9 Do I have to come to the hearing? ........................................................................ 10 May I speak at the hearing? .................................................................................. 10
IF YOU DO NOTHING ............................................................................................................... 10 22. What happens if I do nothing at all? ..................................................................... 10
GETTING MORE INFORMATION ............................................................................................ 10 23. How do I obtain more information about the Settlement? .................................... 10
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UNDERSTANDING YOUR PAYMENT - THE PLAN OF ALLOCATION ........................ SPECIAL NOTICE TO SECURITIES BROKERS AND OTHER NOMINEES ....................
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BASIC INFORMATION 1. Why did you get this Notice package? You or someone in your family may have acquired the common stock of HydroFlo, Inc. ("HydroFlo Stock ) during the period from July 18, 2005 through and including October 26, 2005. The Court in charge of the case is the United States District Court for the Eastern District of North Carolina, Eastern Division and the case is known as Huttenstine v. Mast, et al. , No. 4:05-CV-00152-F(3) (E.D.N.C.) (the "Action ). U.S. District Judge James C. Fox is in charge of this class action. The people who sued are called Plaintiffs, and the companies and individuals they sued HydroFlo, Inc., Metals and Arsenic Removal Technology, Inc., Dennis Mast, George A. Moore, Shane Traveller, and Ross W. Smith are called Defendants. The Court sent you this notice because you have a right to know about a proposed Settlement of this class action lawsuit, and about all of your options, before the Court decides whether to approve the Settlement. If the Court approves the Settlement, and resolves any objections to the Settlement submitted by Class members, as explained below, or appeals, then an administrator appointed by the Court will process the claims received and distribute the payments to class members with valid claims. You can track the progress of the settlement by visiting: http://www.rosenlegal.com. This package explains the lawsuit, the Settlement, your legal rights, the benefits that are available, who is eligible for them, and how to obtain them. 2. What is this lawsuit about? The lawsuit alleges that HydroFlo, its subsidiary Metals and Arsenic Removal Technology, and four of its officers and directors misled investors about the nature of: (1) certain agreements the Company had entered into with certain customers for the sale of water pitchers; (2) a stock analyst report that was represented as being independent, when it was not; (3) the Company's involvement with the Hurricane Katrina efforts; and (4) certain wastewater treatment requests from authorities in North Carolina. The lawsuit alleges that HydroFlo materially misled investors about certain sales contracts its Metals and Arsenic Removal Technology subsidiary had entered into with certain customers in China. Specifically, Plaintiffs allege that the Company failed to disclose that the sales contracts were merely consignment agreements that did not obligate the Company's customers to purchase any fixed dollar amount of the Company's products. The lawsuit also asserts that the Company had improperly touted a stock analyst report as being independent, when in fact the Company had paid for the report to be created and issued. Moreover, the lawsuit alleges that the Company materially mischaracterized its involvement in the Hurricane Katrina relief effort to falsely imply that the Company had reached agreements with various governmental agencies for lucrative governmental initiatives announced at that time. Lastly, the lawsuit asserts that the Company falsely announced a request that it had received to start water treatment
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services for certain North Carolina communities, when in fact no such requests had been issued. The lawsuit claims that these alleged omissions and misrepresentations were violations of 10(b) and 20(a) of the Securities Exchange Act of 1934. Defendants steadfastly deny the allegations in the lawsuit and have vigorously defended the claims. 3. Why is this a class action? In a class action, one or more persons and/or entities called Class Representatives sue on behalf of all persons and/or entities who have similar claims. All of these persons and/or entities are referred to as a Class, or individually, as Class members. One court resolves all of the issues for all Class members, except for those Class members who exclude themselves from the Class. 4. Why is there a Settlement? The Court did not decide in favor of Plaintiffs or Defendants. Instead, Plaintiffs and Defendants have agreed to settle the lawsuit. Plaintiffs have agreed to settle the lawsuit based on the facts they have discovered during the litigation, the risks that will be involved in seeking to take this case to trial, and their conclusions that the proposed Settlement is fair, reasonable and adequate, and serves the best interests of the litigation and Class members. Counsel for Plaintiffs have determined that by settling, they avoid the cost and risks of a trial, while at the same time providing substantial compensation to the Class. The Class Representatives and the Counsel for the Class believe that the Settlement is best for all Class members. Lead Plaintiffs and Defendants do not agree regarding the merits of Plaintiffs' allegations with respect to liability or the average amount of damages per share that would be recoverable if Lead Plaintiffs were to prevail on each claim asserted. The issues on which the parties disagree include: (1) whether Defendants made any false and misleading statements; (2) whether the statements made were false, material or otherwise actionable under the federal securities laws; (3) whether Defendants made the statements with the requisite knowledge; (4) the appropriate economic model for determining the amount by which HydroFlo Stock was allegedly artificially inflated (if at all) during the Class Period; (5) the extent to which the various matters that Lead Plaintiffs alleged were materially false or misleading (if at all), influenced and artificially inflated (if at all) the trading price of HydroFlo Stock at various times during the Class Period; (6) the extent to which external factors, such as general market conditions, influenced the trading price of HydroFlo at various times during the Class Period; and (7) whether HydroFlo's Stock traded in an efficient market. While Plaintiffs' Counsel were prepared to go to trial, and were confident in the merits of their case, they recognize that litigation and a trial are risky propositions and that Plaintiffs and the Class may not have prevailed on any or all of their claims. In addition, Plaintiffs' Counsel believe that this Settlement provides a substantial cash recovery to the Class, and believe that they may not have obtained a greater recovery even if they had
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gone to trial. Throughout the Settlement negotiations, Defendants continued to deny liability, contended that Plaintiffs and the Class were not damaged, asserting instead that the decline in the price of HydroFlo Stock was attributable to other factors. This dispute regarding damages would be subject to expert testimony, and therefore, it would be impossible to predict with certainty which side's arguments would find favor with the jury. As a result, in a trial, Plaintiffs could have recovered nothing or substantially less than the amount of the Settlement. Even assuming that Plaintiffs could have won at trial, any verdict would inevitably be the subject of appeal, and the Class' recovery would have remained uncertain and been further delayed. In this case, even if Plaintiffs had won a verdict greater than the Settlement at trial, and that verdict had withstood Defendants' challenge on appeal, Plaintiffs may not have been able to collect the judgment as the Defendants have limited financial resources and no applicable insurance coverage. WHO IS IN THE SETTLEMENT To see if you will get money from this Settlement, you first have to determine whether you are a Class member. 5. How do I know if I am part of the Settlement? Judge Fox decided that everyone who fits the following description is a Class member: all persons who acquired any common stock of HydroFlo during the period from July 18, 2005 through and including October 26, 2005. 6. Are there exceptions to being included? You are not a Class member if you are: a Defendant, a current or former officer or director of a Defendant, a member of a Defendant's immediate family, a Defendants' legal representative, heir, predecessor, successor or assign, or any entity in which any Defendant has or had a controlling interest, or of which any Defendant is a parent or subsidiary, or is controlled by HydroFlo, or any person who has separately filed actions against one or more of the Defendants based in whole or in part on any claim arising out of or relating to any of the acts, omissions, misrepresentations, facts, events, matters, transactions or occurrences referred to in the Action or otherwise alleged, asserted or contended in the Action. Also, if you exclude yourself from the Class, as described below, you are not a part of the Class. If one of your mutual funds owns HydroFlo Stock, that alone does not make you a Class Member. You are a Class Member only if you purchased HydroFlo Stock. Contact your broker to see if you own or held HydroFlo Stock. To be a Class member, you must have acquired HydroFlo Stock during the Class Period.
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7.
I'm still not sure if I am included. If you are still not sure whether you are included in the Class, you can ask for free help by calling Strategic Claims Services at [phone] for more information. Or you can fill out and return the claim form attached to this Notice to see if you qualify. THE SETTLEMENT BENEFITS - WHAT YOU GET
8.
What does the Settlement provide? On November 17, 2007, the parties in the lawsuit arrived at a proposed Settlement of the lawsuit and signed a Stipulation and Agreement of Settlement. The parties' agreement, by itself, is not sufficient for the Settlement to be official - the proposed Settlement requires the Judge's approval. The terms of the proposed Settlement are summarized below, and the full Settlement terms are contained in a Stipulation and Agreement of Settlement ("Stipulation ) dated November 17, 2007. You can obtain a copy of the Stipulation by writing to Plaintiffs' Lead Counsel: Laurence Rosen, Esq., Phillip Kim, Esq., The Rosen Law Firm PA, 350 5th Avenue, Suite 5508, New York, NY 10018 or by email at [e-mail] or pkim@rosenle ate. a. What is the Settlement Fund?
The proposed Settlement calls for Defendants to create a Settlement Fund in the amount of $425,000 in cash. This $425,000 has been deposited into an interest-bearing account, the "Gross Settlement Fund. It is estimated approximately 10 million outstanding shares of HydroFlo common stock were issued and outstanding during the Class Period, and were available for purchase by Class Members, as some outstanding shares were owned or controlled by Defendants. Thus, Class Counsel estimate that the $425,000 recovery represents an average recovery of 4.250 per share of common stock, as some outstanding shares were owned by Defendants. This average recovery is only an estimate and can vary as explained below. Subject to the Court's approval, a portion of the Gross Settlement Fund also will be used to pay Plaintiffs' attorneys' fees and reasonable litigation expenses and awards to Lead Plaintiffs. See Question 16 below for a more detailed explanation. A portion of the Gross Settlement Fund will also be used to pay taxes due on interest earned by the Gross Settlement Fund if necessary, and any notice and claims administration expenses permitted by the Court or the Stipulation. After the foregoing deductions from the Gross Settlement Fund have been made, the amount remaining (the "Net Settlement Fund ) will be distributed to Class Members who submit valid claims. b. What can you expect to receive under the proposed Settlement?
Your share of the Net Settlement Fund will depend on: (1) the number of claims filed; (2) when during the Class Period you purchased your HydroFlo Stock; (3) whether you sold your HydroFlo Stock during the Class Period, or held your HydroFlo Stock past the end of the Class Period; (4) the amount of administrative costs, including the costs of
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notice; and (5) the amount awarded by the Court for attorneys' fees, costs and expenses and awards to the Lead Plaintiffs. By following the Plan of Allocation at the end of this notice, you can calculate your "Recognized Claim. The Claims Administrator will distribute the Net Settlement Fund, according to the Plan of Allocation, after the deadline for submission of Proof of Claim and Release forms has passed and all claims have been processed. HOW YOU GET A PAYMENT-SUBMITTING A CLAIM FORM 9. How can I get a payment? To qualify for payment, you must send in a Proof of Claim and Release form. This claim form is attached to this Notice. You may also obtain a claim form on the Internet at http://www.rosenle ate. Read the instructions carefully, fill out the form, sign it in the locations indicated, include all the documents the form asks for, and mail the claim form , 200_ to: and documentation postmarked no later than Claims Administrator HydroFlo, Inc. Securities Litigation c/o Strategic Claims Services PO Box 230 Media, PA 19063
The Claims Administrator will process your claim and advise you if you are an "Authorized Claimant - meaning that your claim satisfies the requirements approved by the Court. 10. When would I receive my payment? The Court will hold a hearing on -, 2008, to decide whether to approve the Settlement. Even if Judge Fox approves the Settlement, there may be appeals that would delay the implementation of the Settlement. It is always uncertain whether these appeals can be resolved, and resolving them can take time, perhaps more than a year. After the approval, and the resolution of any appeals, the Claims Administrator must process all of the claim forms. Everyone who sends in a claim form will be informed of the approval or disapproval of their claim. Please be patient. You can also track the progress of the settlement by visiting: bnp://www.rosenlegal.com . 11. What am I giving up to get a payment or stay in the Class? Unless you exclude yourself, you will remain in the Class. That means that if the Settlement is approved, you and all Class members will release (i.e. can't sue, continue to sue, or be part of any other lawsuit) all "Settled Claims against Defendants and the "Released Parties. It also means that all of the Court's orders will apply to you and legally bind you. Please see the definitions of all of the terms that are in quotations below. If you sign the claim form, you are agreeing to a "Release of Claims, attached to -5-
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the claim form, which describes exactly the legal claims that you give up if you receive Settlement benefits. "Released Parties means the Defendants, and any of their current, former or future parents, subsidiaries, affiliates, partners, joint venturers, officers, directors, principals, shareholders, members, agents (acting in their capacity as agents), employees, attorneys, advisors, accountants, associates and any other individual or entity in which any Defendant has a controlling interest or that is related to or affiliated with any of the Defendants or their current, former and future legal representatives, heirs, successors in interest or assigns of the Defendants "Settled Claims means any and all claims, debts, demands, liabilities, rights and causes of action of every nature and description whatsoever (including, but not limited to, any claims for damages, interest, attorneys' fees, expert or consulting fees, and any other costs, expenses or liability whatsoever), whether based on federal, state, local, statutory or common law or any other law, rule or regulation, whether fixed or contingent, accrued or unaccrued, liquidated or unliquidated, at law or in equity, matured or unmatured, whether class or individual in nature, including both known claims and Unknown Claims (as defined below) (i) that have been asserted in this Action by the Class Members or any of them against any of the Released Parties, including without limitation any claim arising out of or relating to any of the acts, omissions, misrepresentations, facts, events, matters, transactions or occurrences referred to in the Action or otherwise alleged, asserted or contended in the Action; or (ii) that could have been alleged, asserted or contended in this or any other forum by the Class Members or any of them against any of the Released Parties which arise out of or are based upon the allegations, transactions, facts, matters or occurrences, representations or omissions involved, set forth, or referred to in the Complaint or which relate to the purchase of HydroFlo common stock during the Class Period, including, without limitation, claims for fraud, negligent misrepresentation, negligence, gross negligence, breach of duty of care, breach of duty of loyalty, breach of fiduciary duty, or violations of any state or federal statutes or regulations. Settled Claims also include any and all claims arising out of, relating to, or in connection with the Settlement or resolution of the Action against the Released Parties (including Unknown Claims), except claims to enforce any of the terms of the Stipulation. "Unknown Claims means any Settled Claim which any Lead Plaintiff or member of the Class does not know or suspect to exist in his, her or its favor at the time of the release of the Released Parties, whether or nor concealed or hidden, which if known by him, her or it, might have affected his, her or its decision with respect to the Settlement, including, but not limited to, the decision not to object to the Settlement, and any Settled Defendants' Claims which any Defendant does not know or expect to exist in his, her or its favor, whether or not concealed or hidden, which if known by him, her, or it might have affected his, her, or its decision(s) with respect to the Settlement. With respect to any and all Settled Claims and Settled Defendants' Claims, the Parties stipulate and agree that upon the Effective Date, Lead Plaintiffs and Defendants shall expressly, and each of the members of the Class shall be deemed to have, and by operation of the Order and Final Judgment shall have, expressly waived any and all provisions, rights and benefits conferred by any law of any state or territory of the United States, or principle of -6-
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common law, which is similar, comparable, or equivalent to Cal. Civ. Code 1542 which provides: "A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor. Lead Plaintiffs and Defendants acknowledge, and the members of the Class by operation of the Order and Final Judgment shall be deemed to have acknowledged, that the inclusion of "Unknown Claims in the definitions of "Settled Claims and "Settled Defendants' Claims (defined below) was separately bargained for and was a key element of the Settlement of which this release is a part. "Settled Defendants' Claims means all claims, demands, rights, duties, remedies, liabilities and causes of action of every nature and description whatsoever, whether based on federal, state, local, statutory or common law or any other law, rule or regulation, including both known and Unknown Claims, that have been or could have been asserted in the Action by the Defendants or any of them or the successors and assigns of any of them against any of Lead Plaintiffs, Class Members or their attorneys, which arise out of or relate in any way to the institution, prosecution, or Settlement of this Action or the Settled Claims, including but not limited to all claims for malicious prosecution or sanctions, except claims to enforce any of the terms of the Stipulation.
EXCLUDING YOURSELF FROM THE SETTLEMENT If you do not want to receive a payment from this Settlement, and you want to keep the right to sue or continue to sue Defendants on your own about the legal issues in this case, then you must take steps to get out of the Settlement. This is called excluding yourselfor is sometimes referred to as opting out of the Class. 12. How do I get out of the Settlement? To exclude yourself from the settlement, you must send a letter by mail stating that you want to be excluded as a Class member from Huttenstine v. Mast et al. , No. 4:05-CV00152-F(3) (E.D.N.C.). Be sure to include your name, address, telephone number, and your signature, along with your purchases and sales in HydroFlo Stock in order to indicate your membership in the Class. You must mail your exclusion request postmarked no later than , 200_ to:
Claims Administrator HydroFlo, Inc. Securities Litigation c/o Strategic Claims Services PO Box 230 Media, PA 19063
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You can't exclude yourself on the phone or by e-mail. If you ask to be excluded, you will not receive a Settlement payment, and you cannot object to the Settlement. You will not be legally bound by anything that happens in this lawsuit. 13. If I do not exclude myself, can I sue Defendants for the same thing later? No. Unless you exclude yourself, you give up any right to sue Defendants for the claims that this Settlement resolves. If you have a pending lawsuit, speak to your lawyer in that case immediately. You may have to exclude yourself from this Class to continue your own lawsuit. 14. If I exclude myself, can I receive money from this Settlement? No. If you exclude yourself, do not send in a claim form to ask for any money. THE LAWYERS REPRESENTING YOU 15. Do I have a lawyer in this case? The Court appointed the law firms of The Rosen Law Firm PA and Wilson & Coffey, LLP, to represent you and the other Class Members. These lawyers are called Plaintiffs' Counsel or Class Counsel. You will not be charged for these lawyers. If you want to be represented by your own lawyer, you may hire one at your own expense. 16. How will the lawyers be paid? Plaintiffs' Counsel have expended considerable time litigating this Action on a contingent fee basis, and have advanced the expenses of litigation with the expectation that if they were successful in recovering money for the Class, they would receive fees and be reimbursed for their expenses from the Gross Settlement Fund, as is customary in this type of litigation. Therefore, Plaintiffs' Counsel will file a motion asking the Court at the Fairness Hearing (see Question 19 below) to make an award of attorneys' fees in an amount not to exceed 33.3% of the Gross Settlement Fund and for reimbursement of litigation expenses in an amount not to exceed $35,000. The requested fees and expenses are estimated to be an average of 1.80 per share of common stock. (These averages are estimates based on approximately 10 million shares of HydroFlo common stock that were available for purchase during the Class Period.) The Court may award less than these amounts. Any amounts awarded by the Court will come out of the Gross Settlement Fund. OBJECTING TO THE SETTLEMENT You can tell the Court that you do not agree with the Settlement, any part of the Settlement, or the motion for attorneys fees and award to Lead Plaintiffs.
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17.
How do I tell the Court that I do not like the Settlement? If you are a Class member, you can object to the settlement if you do not like any part of it. You can state why you think the Court should not approve it. The Court will consider your views. To object, you must send a letter stating that you object to the Settlement in Huttenstine v. Mast et al. , No. 4:05-CV-00152-F(3) (E.D.N.C.). Be sure to include your name, address, telephone number, your signature, your purchases and sales of HydroFlo Stock in order to indicate your membership in the Class and all of the reasons for your objection to the settlement. Be sure to mail the objection to the five different places stated below, postmarked no later than 1200. _COURT CLASS COUNSEL DEFENSE COUNSEL Donald Harris, Esq. Harris, Winfield & Hodges, LLP 255 Hillsborough Street Suite 260 Raleigh, NC 27603 and Kevin Cartledge, Esq. Wilson & Coffey, LLP 110 Oakwood Drive, Suite 400 Winston-Salem, NC 27103 L. Neal Ellis, Jr. Hunton & Williams LLP On Bank of America Plaza 421 Fayetteville Street Suite 1400 Raleigh, NC 27601
Clerk of the Court United States District Court Eastern District of North Carolina-Eastern Division 201 South Evans Street Greenville, NC 27858-1137
Laurence Rosen, Esq. Phillip Kim, Esq. The Rosen Law Firm PA 350 Fifth Avenue, Suite 5508 New York, NY 10118 and
18.
What is the difference between objecting and requesting exclusion? Objecting is simply telling the Court that you do not like something about the Settlement. You can object only if you stay in the Class. Excluding yourself is telling the Court that you do not want to be part of the Class. If you exclude yourself, you have no basis to object because the case no longer affects you. THE COURT'S FAIRNESS HEARING The Court will hold a hearing to decide whether to approve the Settlement. You may attend and you may ask to speak.
19.
When and where will the Court decide whether to approve the Settlement? The Court will hold a Fairness Hearing at _.m. on , 2008, at the United States District Court for the Eastern District of North Carolina, Eastern Division, 201 South Evans Street, Courtroom , Greenville, NC 27858. At this hearing the Court will consider whether the Settlement is fair, reasonable, and adequate. If there are
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objections, the Court will consider them. Judge Fox will listen to people who have asked to speak at the hearing. The Court may also decide how much to pay Plaintiffs' Counsel for attorneys' fees and expenses and how much to award Lead Plaintiffs. After the hearing, the Court will decide whether to approve the Settlement. We do not know how long these decisions will take. 20. Do I have to come to the hearing? No. Class Counsel will answer any questions Judge Fox may have. But, you are welcome to come at your own expense. If you send an objection, you do not have to come to Court to talk about it. As long as you mailed your written objection on time, the Court will consider it. You may also pay your own lawyer to attend, but it is not necessary. 21. May I speak at the hearing? You may ask the Court for permission to speak at the Fairness Hearing. To do so, you should send a letter saying that it is your "Notice of Intention to Appear in Huttenstine v. Mast et al. , No. 4:05-CV-00152-F(3) (E.D.N.C.). Be sure to include your name, address, telephone number, and your signature. Your Notice of Intention to Appear must be postmarked no later than , 2008, and be sent to the Clerk of the Court, Class Counsel, and Defense Counsel, at the five addresses listed in Question 17. IF YOU DO NOTHING 22. What happens if I do nothing at all? If you do nothing, you will not receive any money from this Settlement. But, unless you exclude yourself, you will not be able to start a lawsuit, continue with a lawsuit, or be part of any other lawsuit against Defendants about the legal issues in this case, ever again. GETTING MORE INFORMATION 23. How do I obtain more information about the Settlement? You can: (1) call [phone]; (2) write to the Claims Administrator, at Strategic Claims Services, PO Box 230, Media, PA 19063, or (3) visit the website at www.rosenlegal.com, where you will find answers to common questions about the settlement, a claim form, plus other information to help you determine whether you are a Class Member and whether you are eligible for a payment. UNDERSTANDING YOUR PAYMENT - THE PLAN OF ALLOCATION The Net Settlement Fund will be allocated among the Authorized Claimants in accordance with this "Plan of Allocation.
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2. For Class members who conducted multiple transactions in HydroFlo Stock during the Class Period, the earliest subsequent sale shall be matched first against those shares in the Claimant's opening position on the first day of the Class Period, and then matched chronologically thereafter against each purchase made during the Class Period. Any transaction resulting in a gain shall be excluded. 4. The purchase and sales prices do not include any brokerage commissions , transfer taxes or other fees. The covering purchase of a short sale is not an eligible purchase. Gifts and 5. transfers are not eligible purchases. 6. A. The Recognized Loss of each Authorized Claimant shall be calculated as follows: Shares purchased during the period July 18, 2005 through and including October 26, 2005 and held through the close of trading on October 26, 2005, recognized per share loss is the lesser of: a. The price paid (excluding commissions ) less $.24 (the 90-day average closing price after the Class Period); and
b. $.35. To the extent there are sufficient funds in the Net Settlement Fund, each 7. Authorized Claimant will receive an amount equal to the Authorized Claimant's Aggregate Recognized Loss described above. If, however, the amount in the Net Settlement Fund is not sufficient to permit payment of the total claim of each Authorized Claimant, then each Authorized Claimant shall be paid the percentage of the Net Settlement Fund that each Authorized Claimant's claim bears to the total of the claims of all Authorized Claimants. SPECIAL NOTICE TO SECURITIES BROKERS AND OTHER NOMINEES If you purchased HydroFlo common stock ("HydroFlo Stock ) during the Class Period as nominee for a beneficial owner, then within ten (10) days after you receive this Notice, you must either: (a) send a copy of this Notice and the accompanying Proof of Claim and Release form by first-class mail to all such beneficial owners; or (b) provide a list, electronically if possible, of the names and addresses of such beneficial owners to the Claims Administrator: Claims Administrator HydroFlo , Inc. Securities Litigation c/o Strategic Claims Services PO Box 230 Media, PA 19060 If you chose option (a) above, you may request enough forms from the Claims Administrator (at no charge) to complete your mailing. You may seek reimbursement of your reasonable expenses actually incurred in complying with these directives, subject to approval of
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Plaintiffs' Counsel or the Court. All communications concerning this matter should be addressed to the Claims Administrator. INQUIRIES All inquiries concerning this Notice, the Proof of Claim form, or any other questions by Class Members should be directed to: Claims Administrator HydroFlo, Inc. Securities Litigation c/o Strategic Claims Services PO Box 230 Media, PA 19060
PLEASE DO NOT CONTACT THE COURT REGARDING THIS NOTICE DATED: 1200 BY ORDER OF THE DISTRICT COURT: HON. JAMES C. FOX
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TO:
ALL PERSONS WHO ACQUIRED THE COMMON STOCK OF HYDROFLO, INC. ("HYDROFLO) DURING THE PERIOD FROM JULY INCLUDING OCTOBER 26, 2005. 18, 2005 THROUGH AND
1.
GENERAL INSTRUCTIONS 1. To recover as a Member of the Class based on your claims in the action entitled
Huttenstine v. Mast et al. , No. 4:05-CV-00152-F(3) (E.D.N.C.), you must complete and, on page hereof, sign this Proof of Claim and Release. If you fail to file a properly completed and addressed (as set forth in 3 below) Proof of Claim and Release, your claim may be rejected, and you may be precluded from any recovery from the Net Settlement Fund created in connection with the proposed Settlement of the Litigation. 2. Submission of this Proof of Claim and Release, however, does not assure that you will
share in the proceeds of Settlement in the Litigation. 3. YOU MUST MAIL YOUR COMPLETED AND SIGNED PROOF OF CLAIM POSTMARKED ON OR BEFORE , 200_, ADDRESSED AS
AND RELEASE FOLLOWS:
Claims Administrator HydroFlo, Inc. Securities Litigation c/o Strategic Claims Services P.O. Box 230 Media, PA 19063 If you are NOT a Member of the Class (as defined below and in the Notice of Pendency and Proposed Settlement of Class Action), DO NOT submit a Proof of Claim and Release form. 4. If you are a Member of the Class and you do not timely request exclusion, you are bound
by the terms of any judgment entered in the Litigation , WHETHER OR NOT YOU SUBMIT A PROOF OF CLAIM AND RELEASE.
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II.
DEFINITIONS 1. "Class or "Settlement Class means all persons who acquired any common stock of
HydroFlo during the period from July 18, 2005 through and including October 26, 2005, and were damaged thereby. Excluded from the Class are the Defendants and all current and former officers and directors of Defendants, and the members of their immediate families and Defendants' legal representatives, heirs, predecessors, successors and assigns and any entity in which any Defendant has or had a controlling interest or is a parent or subsidiary of or is controlled by HydroFlo, and any persons who have separately filed actions against one or more of the Defendants based in whole or in part on any claim arising out of or relating to any of the acts, omissions, misrepresentations, facts, events, matters, transactions or occurrences referred to in the Action or otherwise alleged, asserted or contended in the Action. Also excluded from the Class are those Persons who timely and validly request exclusion from the Class pursuant to the Notice of Pendency and Proposed Settlement of Class Action. 2. "Class Period means the period commencing on July 18, 2005 through and including
October 26, 2005. 3. "Class Member or "Member of the Class means a Person who falls within the
definition of the Class as set forth in A.6 of the Stipulation. 4. "Defendants means Dennis Mast, George A. Moore, Shane Traveller, Ross W. Smith,
HydroFlo, Inc., and Metals and Arsenic Removal Technology, Inc.. 6. "Person means any individual, corporation, partnership, limited liability partnership,
limited partnership, professional corporation, association, affiliate, joint stock company, trust, estate, unincorporated association, government or any political subdivision or agency thereof, any other type of legal or political entity, any legal representative, and as applicable their respective spouses, heirs, predecessors, successors, representatives, or assignees. 7. "Released Parties means the Defendants, and any of their current, former or future
parents, subsidiaries, affiliates, partners, joint venturers, officers, directors, principals, shareholders, members, agents (acting in their capacity as agents), employees, attorneys, advisors, accountants,
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associates and any other individual or entity in which any Defendant has a controlling interest or which is related to or affiliated with any of the Defendants or their current, former and future legal representatives, heirs, successors in interest or assigns of the Defendants. 8. "Settling Parties means collectively the Defendants and the Released Parties, Members
of the Class, Lead Plaintiffs in the Litigation, and Lead Plaintiffs' Counsel. III. CLAIMANT IDENTIFICATION 1. If you purchased or otherwise acquired the common stock of HydroFlo ("HydroFlo
Stock ) during the Class Period and held the certificate (s) in your name, you are the beneficial purchaser as well as the record purchaser . If, however , you purchased or otherwise acquired HydroFlo Stock during the Class Period and the certificate (s) were registered in the name of a third party, such as a nominee or brokerage firm, you are the beneficial purchaser and the third party is the record purchaser. 2. Use Part I of this form entitled "Claimant Identification to identify each purchaser of
record ("nominee ), if different from the beneficial purchaser of HydroFlo Stock which forms the basis of this claim. THIS CLAIM MUST BE FILED BY THE ACTUAL BENEFICIAL PURCHASER OR
PURCHASERS, OR THE LEGAL REPRESENTATIVE OF SUCH PURCHASER OR PURCHASERS, OF THE HYDROFLO STOCK UPON WHICH THIS CLAIM IS BASED. 3. All joint purchasers must sign this claim. Executors , administrators, guardians,
conservators and trustees must complete and sign this claim on behalf of Persons represented by them and their authority must accompany this claim and their titles or capacities must be stated. The Social
Security (or taxpayer identification) number and telephone number of the beneficial owner may be used in verifying the claim. Failure to provide the foregoing information could delay verification of your claim or result in rejection of the claim. IV. CLAIM FORM 1. Use Part II of this form entitled "Schedule of Transactions in HydroFlo Stock. to supply If you need more space or additional
all required details of your transaction(s) in HydroFlo Stock.
schedules, attach separate sheets giving all of the required information in substantially the same form.
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Sign and print or type your name on each additional sheet. 2. On the schedules, provide all of the requested information with respect to all of your
purchases or acquisitions and all of your sales of HydroFlo Stock that took place at any time beginning July 18, 2005 through and including October 26, 2005, whether such transactions resulted in a profit or a loss. Failure to report all such transactions may result in the rejection of your claim. 3. List each transaction in the Class Period separately and in chronological order, by trade You must accurately provide the month, day and year of each
date, beginning with the earliest. transaction you list. 4.
The term "Purchase Price
means the amount paid for the securities (excluding
commissions and transfer taxes) and the term "Sales Price means the amount realized on the sale of the securities (excluding commissions and transfer taxes). The date of the purchase or sale is the "contract or "trade date as distinguished from the "settlement date. The covering purchase of a short sale of
HydroFlo Stock is not an eligible purchase for purposes of the Settlement. 5. Broker confirmations or other documentation of your transactions in HydroFlo Stock
should be attached to your claim. Failure to provide this documentation could delay verification of your claim or result in rejection of your claim. 6. The above requests are designed to provide the minimum amount of information The Claims Administrator may request additional
necessary to process the most simple claims.
information as required to calculate your losses efficiently and reliably. In some cases where the Claims Administrator cannot perform the calculation accurately or at a reasonable cost to the Class with the information provided, the Claims Administrator may condition acceptance of the claim upon the production of additional information and/or the hiring of an accounting expert at the Claimant's cost.
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UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NORTH CAROLINA EASTERN DIVISION Huttenstine v. Mast et al., Case No. 4:05-CV-00152-F(3) PROOF OF CLAIM Must be Postmarked No Later Than: , 200 Please Type or Print PART I: CLAIMANT IDENTIFICATION
Beneficial Owner's Name (First, Middle, Last)
Joint Owner's Name (First Middle, Last)
Record Owner's Name (if different from Beneficial Owner list above)
Street Address
City
State
Zip Code
Foreign Province
or
Foreign Country
Social Security Number
Taxpayer Identification Number
(Day) Area Code Telephone Number
(Evening) ( Area Code Telephone Number
Area Code
Facsimile Number
E-Mail Address
Check appropriate box: u u u Individual/Sole Proprietor Corporation IRA u u Partnership Other u u Trust Pension Plan
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PART II: A.
SCHEDULE OF TRANSACTIONS IN HYDROFLO STOCK Number of shares of HydroFlo Stock held at the beginning of trading on July 18, 2005: Shares of Common Stock:
B.
Purchases or A cquisitions (July 18, 2005 - October 26, 2005, inclusive ) of HydroFlo Stock: Trade Date Month Day Year Number of Shares Purchased or Acquired Total Purchase Price (excluding commissions and transfer taxes)
(List Chronologically)
1. 2. 3. 4. 5. 6. 7. 8. 9. 10.
IMPORTANT:
Identify by number listed above all purchases in which you covered a " short sale :
C.
Sales (July 18, 2005 - October 26, 2005, inclusive) of HydroFlo Stock:
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Trade Date Month Day Year (List Chronologically)
Number of Shares Sold
Total Sale Price (excluding commissions and transfer taxes)
1. 2. 3. 4. 5. 6. 7. 8. 9. 10.
D.
Number of HydroFlo shares held at close of trading on October 26, 2005: Shares of Common Stock:
If you require additional space, attach extra schedules in the same format as above. Sign and print your name on each additional page. YOU MUST READ THE RELEASE AND SIGN ON PAGE
V.
SUBMISSION TO JURISDICTION OF COURT AND ACKNOWLEDGMENTS I (We) submit this Proof of Claim and Release under the terms of the Stipulation and Agreement
of Settlement described in the Notice. I (We) also submit to the jurisdiction of the United States District Court for the Eastern District of North Carolina, Eastern Division, with respect to my (our) claim as a Class Member and for purposes of enforcing the release set forth herein. I (We) further acknowledge that
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I am (we are) bound by and subject to the terms of any judgment that may be entered in the Litigation. I (We) agree to furnish additional information to support this claim if required to do so. I (We) have not submitted any other claim covering the same purchases or acquisitions of HydroFlo Stock during the Class Period and know of no other Person having done so on my (our) behalf. VI. RELEASE 1. I (We) hereby acknowledge full and complete satisfaction of, and do hereby fully, finally
and forever settle, release and discharge from the Settled Claims each and all of the Defendants and all other Released Parties, defined as the Defendants, and any of their current, former or future parents, subsidiaries, affiliates, partners, joint venturers, officers, directors, principals, shareholders, members, agents (acting in their capacity as agents), employees, attorneys, advisors, accountants, associates and any other individual or entity in which any Defendant has a controlling interest or which is related to or affiliated with any of the Defendants or their current, former and future legal representatives, heirs, successors in interest or assigns of the Defendants. 2. "Settled Claims means any and all claims, debts, demands, liabilities, rights and causes
of action of every nature and description whatsoever (including but not limited to, any claims for damages, interest, attorneys' fees, expert or consulting fees, and any other costs, expenses or liability whatsoever), whether based on federal, state, local, statutory or common law or any other law, rule or regulation, whether fixed or contingent, accrued or unaccrued, liquidated or unliquidated, at law or in equity, matured or unmatured, whether class or individual in nature, including both known claims and Unknown Claims (as defined below), (i) that have been asserted in this Action by the Class Members or any of them against any of the Released Parties, including without limitation any claim arising out of or relating to any of the acts, omissions, misrepresentations, facts, events, matters, transactions or occurrences referred to in the Action or otherwise alleged, asserted or contended in the Acti...