Case3:05-cv-00179-IEG-JMA Document250 BLUMENTHAL ......2008/10/16 · Case3:05-cv-00179-IEG-JMA Document250 Filed 10/16/2008 Page3 of 3 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Case 3:05-cv-00179-IEG-JMA Document 250

BLUMENTHAL & NORDREHAUGNorman B . Blumenthal (Cal. State Bar #068687)Kyle R. Nordrehaug (Cal. State Bar #205975)Aparajit Bhowmik (Cal. State Bar # 248066)2255 Calle ClaraLa Jolla, CA 92037(858) 551-1223Fax: (858 ) 551-1232

GRECO TRAFICANTE SCHULZ & BRICKClyde C. Greco, Jr. (State Bar #085970)Paul A. Traficante (State Bar #096224)Peter J. Schulz (State Bar #167646)185 West "F Street, Suite 400San Diego, CA 92101(619) 234-3660Fax: (619) 234-0626

Filed 10/16/2008 Page 1 of 3

(Additional Attorneys for Plaintiffs listed on Signature Page)Attorneys for Plaintiffs and the Certified Class

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

MICHAEL MCPHAIL; ROBERT BARRKIMNACH III; SCOTT and KRYSTINWAGNER; CANDACE and NEILHURLEY; On Behalf of Themselves andAll Others Similarly Situated

CASE NO. 05 CV 0179 (IEG)

NOTICE OF MOTION AND MOTIONFOR PRELIMINARY APPROVAL OFCLASS SETTLEMENT

Plaintiffs

v.

FIRST COMMAND FINANCIALPLANNING, INC., a Texas Corporation,FIRST COMMAND FINANCIALSERVICES, INC., a Texas Corporation,LAMAR C. SMITH and HOWARD M.CRUMP

Defendants.

Hearing Date: November 17, 2008Hearing Time: 10:30 a.m.

District Judge: Hon. Irma E. GonzalezCourtroom: 1, 4th Flr

Action Filed: January 31, 2005

TO ALL PARTIES AND THEIR ATTORNEYS OF RECORD:

PLEASE TAKE NOTICE that on November 17, 2008 at 10:30 a.m., before the Honorable

NOTICE OF MOTION AND MOTION FOR PRELIMINARY APPROVAL OF CLASS SETTLEMENT

05 CV 0179 IEG (JMA)

Case 3:05-cv-00179-IEG-JMA Document 250 Filed 10/16/2008 Page 2 of 3

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Irma E. Gonzalez in Courtroom 1 of the United States District Court for the Southern District of

California, Plaintiffs Michael Mcphail, Robert Barr Kimnach III, Scott and Krystin Wagner,

Candace and Neil Hurley, as the representatives for the certified class, will move and hereby does

move for Preliminary Approval of the proposed Class Settlement in this case. This motion is

unopposed as based on the Stipulation of Settlement.

The motion will be based on this Notice of Motion, the Memorandum of Points and

Authorities filed herewith, the Declaration of Norman B. Blumenthal and attached exhibits, the

argument of counsel and upon such other material contained in the file and pleadings ofthis action.

Dated : October 16, 2008 BLUMENTHAL & NORDREHAUG

By: Is/Norman B. BlumenthalNorman B . Blumenthal, Esq.BLUMENTHAL & NORDREHAUG2255 Calle ClaraLa Jolla, CA 92037(858) 551-1223Fax: (858 ) 551-1232

Clyde C. Greco, Jr., Esq. (SB #085970)Paul A. Traficante, Esq. (SB #096224)Peter J. Schulz, Esq. (SB #167646)GRECO TRAFICANTE SCHULZ & BRICK185 West "F Street, Suite 400San Diego, CA 92101(619) 234-3660Fax: (619) 234-0626

Joe R. Whatley, Esq.Richard Rouco, Esq.WHATLEY DRAKE LLC2323 Second Avenue NorthBirmingham, Alabama 35203(205) 328-9576Fax: (205 ) 328-9669

G. Mark Brewer, Esq.Dan Carlson, Esq.BREWER & CARLSON, LLP4275 Executive Square, Suite 1020La Jolla, CA 92037(858) 558-7766Fax: (858) 558-1553

Matthew White, Esq.Mark Gray, Esq.

1

NOTICE OF MOTION AND MOTION FOR PRELIMINARY APPROVAL OF CLASS SETTLEMENT05 CV 0179 IEG (JMA)

Case 3:05-cv-00179-IEG-JMA Document 250 Filed 10/16/2008 Page 3 of 3

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

GRAY & WHITE1200 PNC Plaza, 500 W. Jefferson St.Louisville, Kentucky 40202(502) 585-2060Fax: (502) 581-1933

Larry Franklin, Esq.FRANKLIN & HANCE, PSC505 W. Ormsby AvenueLouisville, Kentucky 40203(502) 637-6000Fax: (502) 637-1413

Attorneys for Plaintiffs and the Certified Class

K:\D\NBB\McPhail - first command\Preliminary Approval\p-notice of motion.wpd

2

NOTICE OF MOTION AND MOTION FOR PRELIMINARY APPROVAL OF CLASS SETTLEMENT05 CV 0179 IEG (JMA)

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Case 3:05-cv-00179-IEG-JMA Document 250-2

BLUMENTHAL & NORDREHAUGNorman B . Blumenthal (Cal. State Bar #068687)Kyle R. Nordrehaug (Cal. State Bar #205975)Aparajit Bhowmik (Cal. State Bar # 248066)2255 Calle ClaraLa Jolla, CA 92037(858) 551-1223Fax: (858 ) 551-1232


Filed 10/16/2008 Page 1 of 24






MEMORANDUM OF POINTS ANDAUTHORITIES IN SUPPORT OFMOTION FOR PRELIMINARYAPPROVAL OF CLASS SETTLEMENT

Plaintiffs

v.





Defendants.

MEMORANDUM IN SUPPORT OF MOTION FOR PRELIMINARY APPROVAL OF SETTLEMENT


Case 3:05-cv-00179-IEG-JMA Document 250-2 Filed 10/16/2008 Page 2 of 24

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

TABLE OF CONTENTS

1. INTRODUCTION ...................................................... 1

II. DESCRIPTION OF THE PROPOSED SETTLEMENT ......................... 1

III. NATURE OF THE CASE ................................................ 3

IV. PLAN OF ALLOCATION ................................................ 6

V. THE SETTLEMENT MEETS THE CRITERIA NECESSARY FOR PRELIMINARYAPPROVAL ........................................................... 8

A. The Role Of The Court In Preliminary ApprovalOfA Class Action Settlement ........................................ 9

B. Factors To Be Considered In Granting Preliminarily Approval ............. 10

1. The Settlements are the Product of Serious, Informed andNoncollusive Negotiations .................................... 10

2. The Settlement Has No "Obvious Deficiencies and Falls Withinthe Range for Approval ...................................... 12

3. The Settlement Does Not Improperly Grant Preferential Treatment ToClass Representatives or Segments Of The Class .................. 14

4. The Stage Of The Proceedings Are Sufficiently Advanced ToPermit Preliminary Approval Of These Settlements ................ 16

VI. THE PROPOSED METHOD OF CLASS NOTICE IS APPROPRIATE ........... 17

VII. CONCLUSION ........................................................ 19

iMEMORANDUM IN SUPPORT OF MOTION FOR PRELIMINARY APPROVAL OF SETTLEMENT



1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

TABLE OF AUTHORITIES

Cases:

Armstrong v. Board of School Directors ,616 F.2d 305 (7th Cir. 1980) .............................................. 9

Binder v. Gillespie,184 F.3d 1059 , 1063-4 (9'h Cir. 1999) ...................................... 14

Detroit v. Grinnell Corp. ,495 F.2d 448 (2d Cir. 1974) ............................................... 9

Fisher Bros. v. Cambridge-Lee Indus., Inc. ,630 F. Supp. 482 (E.D. Pa. 1985) ........................................... 9

Gariety v. Grant Thornton. LLP,368 F.3d 356, 367 (4 Cir. 2004) .......................................... 14

Gautreaux v. Pierce ,690 F.2d 616 (7th Cir. 1982) .............................................. 8

Glass v. UBS Financial Services ,2007 U.S. Dist. LEXIS 8476 (N.D. Cal. 2007) ............................... 14

Hanlon v. Chrysler Corp. ,150 F.3d 1011 (9- Cir. 1998) ............................................. 13

In re Credit Suisse First Boston Corp. Analyst Sec. Litig. ,250 F.R.D. 137 (S.D. NY 2008) ........................................... 14

In re General Motors Corp. Pick-Up Truck Fuel Tank Prods. Liab. Litig .,55 F.3d 768 (3d Cir. 1995 ) ................................................ 9

In re Initial Public Offering Securities Litigation,471 F.3d 24 (2d Cir. 2006) ............................................... 14

In re Jiffy Lube Sec. Litig. ,927 F.2d 155 (4th Cir. 1991) .............................................. 9

In re Mego Financial Corporation Securities Litigation,213 F.3d 454 (2000) .................................................... 13

In re Omnivision Techs. ,559 F. Supp. 2d 1036 (N.D. Cal. 2007) ..................................... 15

In re Portal Software, Inc. Securities Litigation,2007 U.S. Dist. Lexis 88886 (N.D. Cal. 2007) ................................ 13

In re Wash. Public Power Supply System Sec. Litig. ,720 F. Supp. 1379 (D. Ariz. 1989) ......................................... 12

Kirkorian v. Borelli,695 F. Supp. 446 (N.D. Cal. 1988) .......................................... 9

iiMEMORANDUM IN SUPPORT OF MOTION FOR PRELIMINARY APPROVAL OF SETTLEMENT



11

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Lyons v. Marrud, Inc. ,[1972-1973 Transfer Binder] Fed. Sec. L. Rep. (CCH) ¶ 93,525 (S.D.N.Y. 1972) ..... 9

Officers for Justice v. Civil Serv. Comm'n,688 F.2d 615 (9th Cir. 1982), cert. denied, 459 U.S. 1217 (1983) .................. 9

Philadelphia Housing Authority v. American Radiator & Standard Sanitary Corp. ,323 F. Supp. 364 (E.D. Pa. 1970) ........................................... 8

.S. 414 (1968) ..................................................... 9

Reed v. General Motors Corp. ,703 F.2d 170 (5th Cir. 1983) .............................................. 9

Staton v. Boeing,327 F.3d 938 (9th Cir. 2003) .............................................. 9

Weinberger v. Kendrick,698 F.2d 61 (2d Cir. 1982), cert. denied 464 U.S. 818 (1983) ..................... 9

Statutes:

Fed. R. Civ. P. 23(e) .......................................................... 8

115 U.S.C.§78u-4 .................................................... 8,15,16,17

Secondary Authorities:

2 H. Newberg & A. Conte, Newberg on Class Actions (3d ed. 1992) §§ 8.39, 11.41 ..... 8, 19

Manual for Complex Litigation, Second §§ 30.44, 41.43 (1993) .................. 8, 10, 19

Manual for Complex Litigation, Third, § § 20.212 ................................... 9

3B J. Moore, Moore's Federal Practice §§23.80 - 23.85 (2003) ......................... 9

iiiMEMORANDUM IN SUPPORT OF MOTION FOR PRELIMINARY APPROVAL OF SETTLEMENT



1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Plaintiffs Michael Mcphail, Robert Barr Kimnach III, Scott and Krystin Wagner, and

Candace and Neil Hurley, as the representatives for the certified class, ("Plaintiffs ) respectfully

submit this memorandum of points and authorities in support of Plaintiffs' motion for preliminary

approval of settlement of this class action.

1. INTRODUCTION

Plaintiffs and Defendants First Command Financial Planning, Inc., First Command Financial

Services, Inc., Lamar C. Smith and Howard M. Crump ("Defendants ) have reached a full and final

settlement of the above-captioned action for violations of the federal securities laws, which is

embodied in the Stipulation and Settlement Agreement ("Settlement Agreement ) submitted

concurrently to the Court with this motion. By this motion, Plaintiffs seeks preliminary approval

from the Court of the Settlement Agreement 1 (a copy of which is attached as Exhibit #1 to the

Declaration ofNorman Blumenthal, ("Blumenthal Decl. ) served and filed herewith), approval of

the Preliminary Order and an order scheduling the hearing date for Final Approval of the Class

Settlement.

II. DESCRIPTION OF THE SETTLEMENT

Counsel for the Parties, after contentious litigation and settlement negotiations, agreed to a

settlement that is fair, reasonable and favorable to the Class. The Class includes all individuals who

"(1) made a SIP payment during the period from January 31, 2000 through December 21, 2004 so

as to be charged a 50% sales charge on the money placed at the time into the SIP, OR who increased

the face amount of an existing SIP and were charged a 50% sales charge on the increases amount

during the period from January 31, 200 through December 31, 2004; AND (2) still owned the SIP

on December 15, 2004; AND (3) did not terminate within forty-five (45) days ofpurchasing the SIP

so as to receive a full refund of the sales charges. (Settlement Agreement at pp.5-6, Exhibit #1 to

Blumenthal Decl.)

After three and a half years of contentious litigation, the Parties have reached a settlement.

1 Capitalized terms in this Memorandum have the same meaning as contained in theStipulation and Settlement Agreement.

MEMORANDUM IN SUPPORT OF MOTION FOR PRELIMINARY APPROVAL OF SETTLEMENT05 CV 0179 IEG (JMA)


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

The Parties previously conducted four unsuccessful mediations, consisting of three before the

Honorable California Appellate Court Justice Daniel Weinstein (Ret.), and one before Magistrate

Judge Jan Adler, before the Parties again submitted to mediation before Magistrate Judge Jan Adler,

a respected jurist, with extensive experience in class actions. (Blumenthal Decl. ¶ 5). After an all

day mediation and based upon his review of the facts and applicable law in this case, and the

previous negotiations between the Parties, Magistrate Judge Adler proposed an amount to the Parties

as a mediator's proposal. The Parties accepted the mediator's proposal, in light ofMagistrate Judge

Adler's experience as a Jurist, mediator and litigator, and the uncertainties and cost of the years of

litigation the Parties faced if the Mediator's proposal was not accepted. (Blumenthal Decl., ¶5).

Under the terms ofthe accepted mediator's proposal, the Parties agreed that Defendants shall

pay $12 million without reversion. (Exhibit #1 to Blumenthal Decl.) This sum settles all SIP

commission claims of the Class Members. The Settlement shall be used to pay for: (I) the Class

Notice, Settlement Notice, Summary Notice, and claims administration costs, (ii) the attorneys' fees

and expense award to Class Counsel, (iii) the service awards to Class Representatives ofreasonable

costs and expenses (including lost wages) directly relating to the representation of the Class; and

(iv) the payment of all Authorized Claims. The amount allocated to the payment of claims is

referred to as the "Net Settlement Fund. Following the Effective Date, the Net Settlement Fund

shall be distributed to Authorized Claimants in accordance with the Plan of Allocation.

This is an excellent result for the members of the Class. Liability in this case was uncertain

because some or all of the Class Members may not have been damaged by the alleged

misrepresentations. (Decl. Blumenthal, ¶ 6). Moreover, this securities action was not a traditional

securities case in which Class reliance is established by the "fraud-on-the-market doctrine, which

could have resulted in difficulties of class-wide adjudication at trial or on appeal. (Decl.

Blumenthal, ¶ 6).

Additionally, Defendants consistently maintained that they did not violate the federal

I securities laws and adamantly denied any and all allegations of wrongdoing in this action.

Defendants denied (1) that they or their representatives made any false statements or omissions to

the Class, (2) that they acted with intent to defraud, (3) that any plaintiffor Class Member relied on2



1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

any alleged false statement or omission, and (4) that any plaintiff or Class Member was damaged

I as a result of Defendants' alleged misconduct. Defendants contended that the SIPs sold by

Defendants were legal, suitable for clients, and properly explained.

While Plaintiffs are confident they would have prevailed at trial, the collectability of any

judgment was a serious concern because Defendants lacked sufficient assets to satisfy the judgment

should the Class have fully prevailed at trial . (Decl. Blumenthal , ¶ 6). Defendants also have

asserted multiple defenses to the damage claims that might have reduced the amount awarded, and

even if Plaintiffs prevailed at trial for the full amount, the award would have been tied up in the

Court of Appeals and bankruptcy court for years . (Decl. Blumenthal, ¶ 6).

III. NATURE OF THE CASE

On January 31, 2005, Michael McPhail, Robert Barr Kimnach III, and Leonardo Giovannelli

initiated this Action by filing a class-action complaint in the United States District Court for the

Southern District ofCalifornia ("Initial Complaint ) alleging violations ofthe federal securities laws

by Defendants. [Doc. No. 1 ]. Kevin Morrison, Jennifer Morrison, Scott Wagner, Krystin Wagner,

Candace Hurley, and Neil Hurley filed a separate lawsuit against Defendants in the United States

District Court for the Western District of Kentucky on November 24, 2004, but they voluntarily

dismissed that case and joined the Action as named plaintiffs in the First Amended Complaint

("FAC ), which was filed on March 30, 2005. [Doc. No. 29]. On June 9, 2005, the Court appointed

Michael McPhail, Robert Barr Kimnach III, Leonardo Giovannelli, Kevin Morrison, Jennifer

Morrison, Scott Wagner, Krystin Wagner, Candace Hurley, and Neil Hurley to be lead plaintiff and

approved their choice of counsel for lead counsel. [Doc. No. 68]. Leonardo Giovannelli, Kevin

Morrison, and Jennifer Morrison were later removed as lead plaintiffs. (Decl. Blumenthal at ¶7).

Defendants moved to transfer the consolidated action to the Northern District ofTexas where

Defendants were located. [Doc. No. 19]. On June 9, 2005, the Court denied Defendants' motion to

transfer the Action to the Northern District of Texas. [Doc. Nos. 68, 69]. On July 22, 2005,

plaintiffs filed their Consolidated Amended Complaint ("CAC ). [Doc. No. 70].

On September 8, 2005 , Defendants moved to dismiss the CAC [Doc. No. 71], but, on

December 5, 2005, by agreement of the Parties, they withdrew this motion without prejudice to3



1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

allow the Parties to seek private mediation. [Doc. No. 83]. On January 17, 2006, the Parties

engaged in a mediation before the Hon. Daniel Weinstein (Ret.). This mediation was unsuccessful.

On February 23, 2006, the Parties engaged in a second mediation before the Hon. Daniel Weinstein

(Ret.). This mediation was again unsuccessful. (Decl. Blumenthal at ¶8).

On February 27, 2006, defendants re-filed their motion to dismiss the CAC. [Doc. No. 95].

On March 1, 2006, Plaintiffs opposed the motion to dismiss. [Doc. No. 99]. On April 10, 2006,

the Court dismissed Plaintiffs' lOb-5 and Investment Advisor Act claims without prejudice, but

denied Defendants' motion to dismiss Plaintiffs' section 12(a)(2) claim, and granted Plaintiffs leave

to amend their complaint [Doc. No. 108]. (Decl. Blumenthal at ¶9).

On May 1, 2006 , plaintiffs filed their Consolidated Second Amended Complaint ("SAC ).

[Doc. No. 110]. Defendants moved to dismiss the SAC on May 31, 2006 [Doc. No. 111 ]. On July

27, 2006, the Court dismissed plaintiffs ' section 12(a)(2) claim with prejudice, but denied

defendants' motion to dismiss Plaintiffs' 1Ob-5 claim . [Doc. No. 121]. On August 10, 2006,

defendants answered the SAC. [Doc. No. 122 ]. (Decl. Blumenthal at ¶10).

On April 30, 2007, Plaintiffs filed their motion for class certification. [Doc. No. 148].

Defendants filed their opposition to class certification on May 25, 2007. [Doc. No. 156]. On July

30, 2007, the Court granted, in part, Plaintiffs' motion for class certification. [Doc. No. 175]. The

Court's Order appointed Plaintiffs (as defined herein) as Class Representatives in the Action and

certified a Class of "all persons who, during the period from January 31, 2000 through December

31, 2004, made a SIP payment so as to be charged a 50% sales charge on the money placed at that

time into the SIP through Defendants and still owned the SIP on December 15, 2004, and who did

not terminate within forty-five (45) days ofpurchasing the SIP so as to receive a full refund of the

sales charge. [Doc. No. 175]. The Court also granted Plaintiffs leave to amend the complaint to

conform their class definition with the Order. [Doc. No. 175]. (Decl. Blumenthal at ¶11).

On August 13, 2007, Plaintiffs filed their Consolidated Third Amended Complaint ("TAC ).

[Doc. No. 176]. Defendants answered the TAC on August 22, 2007 [Doc. No. 181].

On September 19, 2007, the Court issued a formal Class Certification Order, permitting the

Action to proceed as a class action . [Doc. No. 184]. On January 3, 2008, the Court issued an order4



1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

setting the contents of the Class Notice. [Doc. No. 205]. The Defendants sought reconsideration

and a stay of proceedings, which Plaintiffs opposed. [Doc. No. 206 and 208]. The Court denied

Defendants motion for reconsideration and request for stay. [Doc. No. 209]. On January 22, 2008,

Plaintiffs filed the final Class Notice with the Court [Doc. No. 211 ], pursuant to which putative class

members had until Friday March 21, 2008 to opt out of the lawsuit by submitting a timely request

for exclusion to the Class Administrator. (Decl. Blumenthal at ¶12).

Every aspect ofthe Action was intensely litigated. After the Court granted class certification,

Defendants petitioned the Ninth Circuit Court of Appeals to appeal the ruling. [Doc. No. 178].

Plaintiffs were required to prepare a response to the petition. Ultimately, Plaintiffs prevailed, and

the Court ofAppeals denied the petition for permission to appeal on September 17, 2007. [Doc. No.

183]. However, following the denial of the petition before the Court of Appeals, the Defendants

filed a petition for a writ of certiorari with the United States Supreme Court, which Plaintiffs

opposed. Defendants petition to the United States Supreme Court was denied on January 7, 2008.

In addition, throughout the litigation, the Parties were involved in extensive discovery disputes

regarding issues such as interrogatories to absent class members, production of the class list, and

the production of electronic discovery. These disputes required the Parties to meet and confer in

person and with Magistrate Judge Adler, and several of the disputes ultimately were briefed and

resolved by formal motion. [Doc. No. 196, 197, 200, 212, 225, 230, and 235]. (Decl. Blumenthal

at ¶13).

On July 25, 2008, the Parties completed all discovery in the Action other than expert

discovery. On August 5, 2008, the Parties engaged in a third mediation before the Hon. Daniel

Weinstein (Ret.). This mediation was also unsuccessful. On August 27, 2008, the Parties engaged

in a settlement conference with the Honorable Jan M. Adler. This mediation concluded with a

mediator's proposal that was accepted by Plaintiffs and Defendants on August 29, 2008. The

accepted mediator's proposal is the settlement now presented to this Court for preliminary approval.

(Decl. Blumenthal at ¶14).

Defendants deny any and all liability or wrongdoing of any kind associated with the claims

alleged in this Action and maintain that they complied at all times with federal securities laws.5



1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Defendants contend that they and their representatives never made any false statements or omissions

to Plaintiffs or the Class, and even if a statement was false, Defendants were unaware of its falsity.

Defendants also maintain that they never acted with the intent to defraud, that no Plaintiff or Class

Member relied on any alleged false statement or omission, and that no Plaintiff or Class Member

was damaged as a result of Defendant's alleged misconduct. Further, Defendants deny that the

claims asserted by Plaintiffs are suitable for class treatment, and contend that class certification was

inappropriate in this Action because, had this case proceeded to trial, the Court would need to

conduct myriad individualized inquiries such that individualized issues would predominate over any

common questions of law or fact. (Blumenthal Decl., at ¶ 15).

Class Counsel has conducted a thorough investigation into the facts of the class action,

including depositions, document discovery, interrogatories and extensive review ofmillions ofpages

ofrelevant documents and data. Class Counsel has diligently evaluated the Class Members' claims

against Defendants. Prior to the Parties attending mediation, Plaintiffs received Class Member data,

including data reflecting the amounts invested and the commissions paid by the Class Members.

Based on the foregoing data and their own independent investigation and evaluation, Class Counsel

believe that the settlement with Defendants for the consideration and on the terms set forth in this

Stipulation of Settlement is fair, reasonable, and adequate and is in the best interest of the class in

light of all known facts and circumstances, including the risk of significant delay, defenses asserted

by Defendants, and numerous potential appellate issues. (Blumenthal Decl., at ¶ 16).

IV. PLAN OF ALLOCATION

Defendants have agreed to pay the sum of $12,000,000 (Gross Settlement Funds) by wire

transfer into an interest-bearing joint account with the Escrow Agent within 15 days after the Court

issues the Preliminary Order. (Settlement Agreement at ¶6, Exhibit #1 to Blumenthal Decl.) The

Gross Settlement Fund shall be used to pay for: (i) the Class Notices, Settlement Notice, Summary

Notice, and claims administration costs, (ii) the attorneys' fees and expense award,(iii) any service

award to Class Representatives of their reasonable costs and expenses (including lost wages)

directly relating to the representation ofthe Class, and (iv) reasonable costs and expenses associated

with determining the amount that each Authorized Claimant paid for the 50% sales charge during6



1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

the Class Period. (Settlement Agreement at ¶7).

The balance of the Gross Settlement Fund after the deductions for all applicable payments

shall be the "Net Settlement Fund. (Settlement Agreement at ¶7). Following the Effective Date,

the Net Settlement Fund shall be distributed to Authorized Claimants in accordance with the Plan

ofAllocation. (Settlement Agreement at ¶7). All funds held by the Escrow Agent shall be deemed

to be in the custody ofthe Court until such time as the funds are distributed to Authorized Claimants

or paid to the person(s) paying the Settlement Amount pursuant to this Stipulation and/or further

order of the Court and shall be invested only in United States Treasury bills and notes, or money

market funds whose portfolio is composed of United States Agency or Treasury securities which

are backed by full faith and credit ofthe United States Government using an account at Wells Fargo

Bank. (Decl. Blumenthal at ¶17).

Each Authorized Claimant shall be allocated a pro rata share of the Net Settlement Fund

based on their recognized claim compared to the total recognized claims of all Authorized

Claimants, computed on the basis of the amount each Authorized Claimant paid for their 50% SIP

sales charge during the Class Period divided by the total amount paid by all Authorized Claimants

as a group for their 50% SIP sales charge during the Class Period multiplied by the Net Settlement

Fund. (Decl. Blumenthal at ¶18). The settlement is a claims-made settlement with no reversion of

funds to Defendants. Defendants shall have no involvement in or liability for reviewing, approving,

or challenging claims filed with the Claims Administrator in connection with this Settlement.

(Settlement Agreement at ¶12, Exhibit #1 to Blumenthal Decl.) The Claims Administrator shall

process the Proofs of Claim and, after the entry of the Class Distribution Order, shall distribute the

Net Settlement Fund to Authorized Claimants as so ordered by this Court. (Settlement Agreement

at ¶16, Exhibit #1 to Blumenthal Decl.)

The Parties agree that Class Counsel will apply to the Court for an award of attorneys' fees

and reimbursement ofexpenses payable from the Gross Settlement Fund in an amount not to exceed

the attorneys' fees and expense reimbursement disclosure contained in the Settlement Notice. This

amount equals 30% ofthe first $ 10 million and 25% ofthe remaining $2 million. (Decl. Blumenthal

at ¶19). Such amounts as are approved and awarded by the Court shall be payable to Class Counsel7



1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

from the Gross Settlement Fund and shall be released from the escrow account by the Escrow Agent

within 15 days after the Court signs the Judgment. (Settlement Agreement at ¶10(a), Exhibit #1 to

Blumenthal Decl.) The Parties also agree that the Class Representatives may apply to the Court for

an award of reasonable costs and expenses (which may include lost wages) directly relating to the

representation of the Class as allowed by 15 U.S.C. § 78u-4(a)(4). (Settlement Agreement at

¶10(b), Exhibit #1 to Blumenthal Decl.)

V. THE SETTLEMENT MEETS ALL CRITERIA NECESSARY FORPRELIMINARYAPPROVAL

When a proposed class-wide settlement is reached, the settlement must be submitted to the

court for approval. Fed. R. Civ. P. 23(e)(1)(A); 2 H. Newberg & A. Conte, Newberg on Class

Actions (3d ed. 1992) at § 11.41, p.11-87. Preliminary approval is the first of three steps that

comprise the approval procedure for settlements of class actions. The second step is the

dissemination of notice of the settlement to all class members. The third step is a final settlement

approval hearing, at which evidence and argument concerning the fairness, adequacy, and

reasonableness of the settlement may be presented and class members may be heard regarding the

settlement. See Manual for Complex Litigation, Second §30.44 (1993).

The question presented on a motion for preliminary approval of a proposed class action

settlement is whether the proposed settlement is "within the range of possible approval. Manual

for Complex Litigation, Second §30.44 at 229; Gautreaux v. Pierce , 690 F.2d 616, 621 n.3 (7th Cir.

1982). Preliminary approval is merely the prerequisite to giving notice so that "the proposed

settlement ... may be submitted to members of the prospective Class for their acceptance or

rejection. Philadelphia Housing Authority v. American Radiator & Standard Sanitary Corp. , 323

F. Supp. 364, 372 (E.D. Pa. 1970). There is an initial presumption of fairness when a proposed

settlement, which was negotiated at arm's length by counsel for the Class, is presented for court

approval. Newberg , 3d Ed., § 11.41, p.11-88. However, the ultimate question of whether the

proposed settlement is fair, reasonable and adequate is made after notice of the settlement is given

to the class members and a final settlement hearing is held by the Court.

8MEMORANDUM IN SUPPORT OF MOTION FOR PRELIMINARY APPROVAL OF SETTLEMENT



1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

A. The Role Of The Court In Preliminary Approval OfA Class Action Settlement

The approval of a proposed settlement of a class action suit is a matter within the broad

discretion of the trial court. Staton v. Boeing , 327 F.3d 938, 959 (9th Cir. 2003). Preliminary

approval does not require the trial court to answer the ultimate question of whether a proposed

settlement is "fair, reasonable and adequate. In re Jiffy Lube Sec. Litig. , 927 F.2d 155, 158 (4th

Cir. 1991); Manual for Complex Litigation, Third, § § 20.212. That determination is made only after

notice ofthe settlement has been given to the members ofthe class and after the class members have

been given an opportunity to voice their views of the settlement or to be excluded from the

settlement Class. See, e.g., 3B J. Moore, Moore's Federal Practice §§23.80 - 23.85 (2003).

In considering a potential settlement for preliminary approval purposes, the trial court does

not have to reach any ultimate conclusions on the issues of fact and law which underlie the merits

of the dispute (Detroit v. Grinnell Corp. , 495 F.2d 448, 456 (2d Cir. 1974)), and need not engage

in a trial on the merits (Officers for Justice v. Civil Serv. Comm'n, 688 F.2d 615 (9th Cir. 1982),

cert. denied, 459 U.S. 1217 (1983)). The court is not required to determine that certification of a

settlement class is appropriate until the final settlement approval. In re General Motors Corp. Pick-

Up Truck Fuel Tank Prods. Liab. Litig ., 55 F.3d 768, 797 (3d Cir. 1995).

The question whether a proposed settlement is fair, reasonable and adequate necessarily

requires ajudgment and evaluation by the attorneys for the Parties based upon a comparison of"`the

terms ofthe compromise with the likely rewards of litigation.' Weinberger v. Kendrick, 698 F.2d

61, 73 (2d Cir. 1982), cert. denied 464 U.S. 818 (1983) (quoting Protective Comm. for Indep.

Stockholders of TMT Trailer Ferry, Inc. v. Anderson , 390 U.S. 414, 424-25 (1968)). Therefore,

many courts recognize that the opinion ofexperienced counsel supporting the settlement is entitled

to considerable weight. Kirkorian v. Borelli , 695 F. Supp. 446, 451 (N.D. Cal. 1988); Reed v.

General Motors Corp. , 703 F.2d 170, 175 (5th Cir. 1983); Weinberger, 698 F.2d at 74; Armstrong

v. Board of School Directors, 616 F.2d 305, 325 (7th Cir. 1980); Fisher Bros. v. Cambridge-Lee

Indus., Inc. , 630 F. Supp. 482, 489 (E.D. Pa. 1985). For example, in Lyons v. Marrud. Inc. , [1972-

1973 Transfer Binder] Fed. Sec. L. Rep. (CCH) Paragraph 93,525 (S.D.N.Y. 1972), the court noted

that "[e]xperienced and competent counsel have assessed these problems and the probability of9



1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

I success on the merits . They have concluded that compromise is well-advised and necessary. The

parties' decision regarding the respective merits of their position has an important bearing on this

case." Id. at ¶ 92,520.

B. Factors To Be Considered In Granting Preliminarily Approval

A number of factors are to be considered in evaluating a settlement for purposes of

I preliminary approval. No one factor should be determinative, but rather all factors should be

considered. These criteria have been summarized as follows:

If the proposed settlement appears to be the product of serious, informed, non-collusive negotiations , has no obvious deficiencies, does not improperly grantpreferential treatment to class representatives or segments ofthe class, and falls withinthe range ofpossible approval , then the court should direct that notice be given to theclass members of a formal fairness hearing, at which evidence may be presented insupport of and in opposition to the settlement.

Manual of Complex Litigation, Second §30.44, at 229.

Here, the settlement meets all of these criteria.

1. The Settlement is the Product of Serious. Informed and NoncollusiveNegotiations

This settlement is the result of extensive and hard fought negotiations. Indeed, the Parties

I previously mediated this Action four times without success.

Defendants deny each and every one of the claims and contentions alleged in this Action.

Defendants have asserted and continues to assert many defenses thereto, and has expressly denied

and continues to deny any wrongdoing or legal liability arising out of the conduct alleged in the

Action. Nonetheless, Defendants have concluded that this Action be settled in the manner and upon

the terms and conditions set forth in the Stipulation of Settlement in order to avoid the expense,

inconvenience, and burden of further legal proceedings, and the uncertainties of trial and appeals.

Defendants have decided to put to rest the Released Claims of the Class.

Successful settlement negotiations finally took place before Hon. Jan Adler, a respectedjurist

who is very knowledgeable and experienced with respect to this action. After an all day mediation

and after reviewing the facts and applicable law in this case, Magistrate Judge Adler recommended

a settlement amount of $12 million to the Parties as a mediator's proposal. Counsel for the Parties,

after contentious litigation and settlement negotiations, both agreed to accept the mediator's10



1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

proposal, based upon Magistrate Judge Adler's extensive expertise as a judge, a mediator and

litigator and the uncertainties ofprotracted litigation. (Blumenthal Decl., ¶5). Plaintiffs and Class

Counsel believe that this settlement is fair, reasonable and adequate. By reason of the settlement,

Defendants have agreed to pay to the Class members the sum of $12 million, as payment in full of

all of Plaintiffs' claims arising from the events described in the Complaint, including Class

Counsel's attorneys' fees, costs and expenses, the awards to the Class Representatives, and the cost

of class notice and claims administration.

The Settlement Agreement provides for a claims process requiring the establishment of an

Escrow Fund of $12,000,000.00 to pay approved claims, attorneys' fees, costs, and expenses

approved by the Court. The Class Period begins on January 31, 2000 and continues through

December 31, 2004. Class Counsel has conducted a thorough investigation into the facts ofthe class

action, including an extensive review ofthousands ofpages relevant documents, data and discovery,

and has diligently pursued an investigation of the Class claims against Defendants. Based on the

foregoing documents and data and their own independent investigation and evaluation, Class

Counsel is ofthe opinion that the settlement with Defendants for the consideration and on the terms

set forth in this Stipulation of Settlement is fair, reasonable, and adequate and is in the best interest

of the class in light of all known facts and circumstances, including the risk of significant delay,

defenses asserted by Defendants, the available assets of Defendants, and numerous potential

appellate issues.

Plaintiffs and Class Counsel recognize the expense and length of continuing to litigate and

trying this Action against Defendants through possible appeals and bankruptcy proceedings which

could take many years to resolve. Class Counsel also have taken into account the uncertain outcome

and risk oflitigation, especially in complex actions such as this Action where assets were potentially

insufficient to pay a judgment in favor of the Class. Class Counsel are also mindful of and

recognize the inherent problems ofproof under, and alleged defenses to, the claims asserted in the

Action. Based upon their evaluation, Plaintiffs and Class Counsel have determined that the

settlement set forth in the Stipulation is in the best interest ofthe Class Members. (Decl. Blumenthal

at ¶20).11



1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Here the litigation has been hard-fought with aggressive and capable advocacy on both sides.

Accordingly, "[t]here is likewise every reason to conclude that settlement negotiations were

vigorously conducted at arms' length and without any suggestion ofundue influence . In re Wash.

Public Power Supply System Sec. Litig. , 720 F. Supp. 1379, 1392 (D. Ariz. 1989).

2. The Settlement Has No "Obvious Deficiencies " and Falls Within theRange for Approval

The proposed settlement herein has no "obvious deficiencies and is well within the range

of possible approval. All Settlement Class Members will receive an opportunity to participate in

and receive payment. The Settlement Amount, while less than what would be sought at trial,

compares favorable to the SEC settlement for closed accounts which was $12 million as well.2 In

addition, the Settlement Amount of $12 million is nearly equal to the $14.8 million which

Defendants contend was the net gain received by them from the Class Members. Further, given the

available assets of Defendants being only between $30 million and$60 million, the Settlement

Amount of $12 million payable immediately, versus the potential $30-$60 million recovery in 3 to

5 years, given the delays that would result from the appellate and bankruptcy processes, is also

compelling when the possibility ofajudgment in favor ofthe Plaintiffs must be risk rated by no less

than 50% in terms of finally prevailing for the full amount.

Finally, by allowing for a payout on a claims-made basis so as to both allow for claims and

to allow for Class Members satisfied with Defendants not to make claims , and given that the claims

rate from the SEC/NASD settlement ofapproximately 30%, one can extrapolate that even assuming

the maximum of $175 million in damages as alleges and a risk rating of 50% and a claims rate of

30% the authorized claimants can expect to receive before deduction of costs and fees a gross

payout for each claimant of almost 50 cents on the dollar without taking into account the fact that

2 The SEC settlement applied only to investors who, as of December 15, 2004, had alreadyterminated their First Command SIP. The SEC settlement provided no relief to the members ofthe Class in this case who still owned their SIP as of December 15, 2004. This SEC claim withrespect to closed SIP accounts was stronger because there could be no argument by Defendantsthat the front-end load worked to the advantage of the Class over time as Defendants argued inthis Action.

12



1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

the maximum recovery would be no more than $60 million given the available assets. Clearly the

goal of this litigation to obtain a substantial recovery of the commission charges imposed on the

Class has been met by this Settlement . (Decl. Blumenthal, ¶ 6).

This Settlement Amount, based upon the mediator's proposal, clearly falls within the range

of a reasonable settlement under Ninth Circuit precedent. In In re Mego Financial Corporation

Securities Litigtom, 213 F.3d 454,459 (2000), the Ninth Circuit affirmed the settlement approval

where "the settlement amount ofalmost $2 million was roughly one-sixth ofthe potential recovery,

which, given the difficulties in proving the case, is fair and adequate. Recently, Hon. Vaughn

Walker in the District Court for the Northern District of California, applied In re Mego and noted

that the "median percentages for all securities class actions in 2005 and 2006 which were

approximately 3.1% and 2.4% respectively and "for securities class action settlements below $50

million, a percentage of the estimated damages were 10.5% through year end 2005 and 8.8% in

2006. In re Portal Software, Inc. Securities Litigation, 2007 U.S. Dist. Lexis 88886 (N.D. Cal.

2007). Thus, the Settlement Amount here of $12 million, is well within this range of recent

securities settlements considering here that the estimated damages in this case were million $14.8

million (Defendants), $30-$60 million (Plaintiffs' estimate of collectable judgment) and $175

million (total commissions paid).

Further, where both sides face significant uncertainty, the attendant risks favor settlement.

Hanlon v. Chrysler Corp ., 150 F.3d 1011, 1026 (9'h Cir. 1998). Here, a number ofdefenses asserted

by Defendants present serious threats to the claims ofPlaintiff and the other Class Members. (Decl.

Blumenthal at ¶22). For example, Defendants contended that there were no misrepresentations and

that the fully disclosed commission charges actually worked to the advantage ofthe Class over time,

and therefore the Class Members were not damaged. Defendants also argued that reliance could not

be proved and that the presumption ofreliance found by the Court would be inapplicable or rebutted

at trial. Defendants also argued that differences between the sales presentation and investment

advice given to members ofthe Class precluded class-wide litigation ofthe alleged claims. Finally,

if a judgment were obtained for the full amount of commissions paid, Defendants would likely

declare bankruptcy as Defendants' total assets are estimated to be between $30 and $60 million, and13



ifthe parent company, First Command Financial Services, were held to be not liable as a controlling

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

person, the amount available would be substantially less.

There is federal authority which supports the arguments asserted by Defendants with respect

to liability and class certification. (Decl. Blumenthal at ¶25). In Binder v. Gillespie, 184 F.3d 1059,

1063-4 (9'h Cir. 1999), the Court of Appeals affirmed the decertification of a securities l Ob-5 class

action after determining that the presumption of reliance could not be applied. Similarly, in In re

Initial Public Offering Securities Litigation, 471 F. 3d 24,42-43 (2d Cir. 2006), the Court ofAppeals

decertified a class where the Court determined that the presumption did not apply to the securities

claims. See also Gariety v. Grant Thornton, LLP, 368 F.3d 356, 367 (4th Cir. 2004); In re Credit

Suisse First Boston Corp. Analyst Sec. Litig. , 250 F.R.D. 137, 140 (S.D. NY 2008) (class is

decertified where presumption held to be inapplicable). Therefore, Plaintiffs were presented with

a very real possibility that the Class could be decertified on appeal for various reasons, including,

as in the above cases, if the presumption of reliance in this case was held to be inapplicable.

After vigorous negotiations , Magistrate Judge Adler presented the Parties with a mediator's

proposal of $12 million to resolve the Action. As the federal court recently held in Glass v. UBS

Financial Services, where the parties faced uncertainties similar to those here:

In light ofthe above-referenced uncertainty in the law, the risk, expense, complexity,and likely duration of further litigation likewise favors the settlement. Regardless ofhow this Court might have ruled on the merits of the legal issues, the losing partylikely would have appealed, and the parties would have faced the expense anduncertainty of litigating an appeal . "The expense and possible duration of thelitigation should be considered in evaluating the reasonableness of [a] settlement." SeeIn re Mego Financial Corp.. Securities Litigation , 213 F.3d 454, 458 (9th Cir. 2000).Here, the risk of further litigation is substantial.

Glass v. UBS Financial Services , 2007 U.S. Dist. LEXIS 8476 at *12 (N.D. Cal. 2007).

3. T

The reliefprovided in the settlement will benefit all Class Members equally. The settlement

does not improperly grant preferential treatment to the Class Representative or any individual

segments of the Class.

Each Class member, including the Class Representatives, will be entitled to payment based

on the Plan of Allocation. Each Authorized Claimant's lump sum payment will be determined as14



1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

follows: Eligible Class members who submit timely claims shall receive an allocated a pro rata

share of the Net Settlement Fund based on their recognized claim compared to the total recognized

claims ofall Authorized Claimants, computed on the basis ofthe amount each Authorized Claimant

paid for their 50% SIP sales charge during the Class Period divided by the total amount paid by all

Authorized Claimants as a group for their 50% SIP sales charge during the Class Period multiplied

by the Net Settlement Fund. The settlement is a claims-made settlement with no reversion of funds

to Defendants. Defendants shall have no involvement in or liability for reviewing, approving, or

challenging claims filed with the Claims Administrator in connection with this Settlement.

(Settlement Agreement at ¶12, Exhibit #1 to Blumenthal Decl.) The Claims Administrator shall

process the Proofs ofClaim and, after the entry of the Class Distribution Order, shall distribute the

Net Settlement Fund to Authorized Claimants. (Settlement Agreement at ¶16, Exhibit #1 to

Blumenthal Decl.)

In addition to this recovery, the Class Representatives will apply to the trial court for a

reimbursement of expenses and time directly related to their representation of the Class in

accordance with 15 U. S.C. § 78u-4(a)(4), which expressly authorizes the Court to award "reasonable

costs and expenses (including lost wages) directly relating to the representation of the class to any

representative party serving on behalfofa class. This application for reimbursement is both proper

and authorized by law. See In re Omnivision Techs. , 559 F. Supp. 2d 1036, 1049 (N.D. Cal. 2007)

(Plaintiffs were awarded "$ 29,913.80 from the Settlement Fund for reimbursement of their costs

and expenses (including lost wages) relating to their representation of the Class. ) In enacting the

PSLRA, Congress acknowledges the that class representatives should be reimbursed. H.R. Conf.

Rep. No. 369, 104th Cong., 1st Sess. 35 (1995) ("The Conference Committee recognized that lead

plaintiffs should be reimbursed for reasonable costs and expenses associated with service as lead

plaintiff, including lost wages, and grants the courts discretion to award fees accordingly. )

Here, the Plaintiffs helped form the strategy for the suit, reviewed pleadings and motions,

I assisted with preparation for depositions and the mediation, and participated with counsel

throughout the negotiation of the Settlement. As a result, the Plaintiffs are entitled to seek

reimbursement of any reasonable costs and expenses incurred in this representation ofthe Class in15



1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

accordance with 15 U.S.C. § 78u-4(a)(4).

4.

The late stage ofthe proceedings at which this settlement was reached also militates in favor

of preliminary approval and ultimately, final approval of the settlement. Litigation in this action

exceeded three and a halfyears. Class Counsel has conducted a thorough investigation into the facts

ofthe class action. Class Counsel began investigating the Class Members' claims before this action

was filed and conducted discovery including depositions, interrogatories and requests for production

of documents. In this action, there were dozens of depositions taken and thousands of pages of

documents produced. Class Counsel had engaged in an extensive review and analysis of the

relevant documents and data with the assistance of experts.

At the time the settlement was reached, the Class had been certified, percipient discovery and

the Plaintiffs' expert reports were completed, the Parties were finishing expert discovery and Class

Counsel was preparing for trial. The Final Pretrial Conference was scheduled for March 16, 2009,

with trial expected to commence shortly thereafter. Accordingly, the agreement to settle certainly

did not occur until Class Counsel possessed sufficient information to make an informed judgment

regarding the likelihood of success on the merits and the results that could be obtained through

further litigation. (Decl. Blumenthal at ¶ 27).

Based on the foregoing data and their own independent investigation and evaluation, Class

Counsel is ofthe opinion that the settlement with Defendants for the consideration and on the terms

set forth in this Stipulation of Settlement is fair, reasonable, and adequate and is in the best interest

of the class in light of all known facts and circumstances, including the risk of significant delay,

defenses asserted by Defendants, the available assets of Defendants, and numerous potential

appellate issues. There can be no doubt that counsel for both Parties possessed sufficient

information to make an informedjudgment regarding the likelihood ofsuccess on the merits and the

results that could be obtained through further litigation. (Decl. Blumenthal ¶ 28).




VI. THE PROPOSED METHOD OF CLASS NOTICE IS APPROPRIATE

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

The Parties have agreed upon procedures by which the Class will be provided with written

notice ofthe Settlement similar to that approved and utilized in hundreds ofclass action settlements.

The Parties have jointly drafted a Settlement Notice and submit it to the District Court for Approval

which is part ofthe Settlement Agreement. The Claims Administrator will mail Settlement Notice

and a Proof of Claim form to the members of the Settlement Class via first-class regular U. S. mail

using the most current mailing address information available from Defendants' records, which shall

be updated by the Claims Administrator to correct for any known or identifiable address changes.

The Settlement Notice and Proof of Claim form will also appear on the Claims Administrator's

website. In addition, the Parties jointly drafted a Summary Notice which shall be published in the

Military Times.

The Settlement Notice, draftedj ointly and agreed upon by the Parties through their respective

counsel includes information regarding the nature ofthe Litigation; a summary ofthe substance of

the Settlement, including Defendants' denial of liability; the definition of the Class; the procedure

and time period for objecting to the Settlement and participating in the Final Approval hearing; a

statement that the District Court has preliminarily approved the Settlement; and information

regarding the claims filing procedure and the opt-out procedure. See Exhibit "A to Stipulation of

Settlement. The Notice also provides that any Class Member may choose to opt out of the Class,

and that any such person who chooses to opt out of the Class will not be entitled to any recovery

obtained by way of the settlement and will not be bound by the settlement or have any right to

object, appeal or comment thereon. The Settlement Notice will provide that all objections to the

Settlement by anyone, including members ofthe Class, must be made in writing, filed in the District

Court, and served upon all counsel ofrecord by deadline listed in the Settlement Notice. The Notice

informs the Class that any Class Member who fails to file and serve a timely written objections shall

be foreclosed from objecting to the terms of the Settlement unless otherwise ordered by the Court.

Moreover, the Settlement Notice complies fully with the requirements of 15 U.S.C. §78u-

4(a)(7), which imposes certain specific requirements for the Settlement Notice to the Class under

the PSLRA. As evidenced by the Settlement Notice, the notice includes the following: a statement17



1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

ofPlaintiffs' recovery, a statement ofpotential outcome of case, a statement concerning how much

will be paid per individual claimant and/or a statement from each settling party concerning the issue

or issues on which the Parties disagree, a statement of attorneys' fees or costs sought, a statement

indicating which counsel intend to make such application and a briefexplanation supporting the fees

and costs sought, an identification of one or more representatives of counsel for the plaintiff class

who will be reasonably available to answer questions from class members concerning any matter

contained in any notice of settlement published or otherwise disseminated to the class, and a brief

statement explaining the reasons why the Parties are proposing the settlement. Thus, all of the

notice requirements of the PSLRA are satisfied.

The costs associated with the mailing will be paid out ofthe Settlement Amount. The Claims

Administrator shall disseminate the Settlement Notice and ProofofClaim form to the Class, by U. S.

mail and publication in accordance with the order granting preliminary approval of the Settlement.

This notice program was designed to meaningfully reach the largest possible number of

potential Class Members. In any case in which a Notice to a Class Member is returned by the

United States Post Office as undeliverable, the Claims Administrator will use the Internal Revenue

Service Letter Forwarding Program or the Social Security Administration Reporting Service to

locate and notify Class Members. The mailing and distribution of the Notice satisfies the

requirements of due process, and is the best notice practicable under the circumstances and

constitutes due and sufficient notice to all persons entitled thereto.

The proposed Notice is accurate and informative. The Notice provides information on the

terms and provisions ofthe settlement; the benefits that settlement provides for Class Members; the

date, time and place of the final settlement approval hearing; and the procedure and deadlines for

submitting comments, objections and requests for exclusion and complies with applicable law.

Class notice is sufficient where, as here, the notice informs potential Class Members about what they

can expect to receive under the settlement, how their settlement awards would be calculated, the

procedure for objecting more generally or excluding oneself altogether from the settlement, the

amount of fees and costs that would be paid out ofthe settlement, and the date ofthe final approval

hearing. This notice satisfies the content requirements for notice following the exemplar class notice18



1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

in the Manual for Complex Litigation, Second §41.43. This notice also fulfills the requirement that

Class notices be neutral. Newberg, §8.39.

VII. CONCLUSION

In the judgment of Plaintiffs and Class Counsel, the proposed Settlement is a fair and

reasonable compromise of the issues in dispute in light of the strengths and weaknesses of each

party's case. Accordingly, Plaintiffs respectfully request that the Court preliminarily approve the

proposed settlements, certify the Class for settlement purposes, schedule a date for a hearing on

Final Approval, and sign the proposed Preliminary Approval Order submitted herewith.

Dated : October 16 , 2008 BLUMENTHAL & NORDREHAUG

By: Is/Norman B. BlumenthalNorman B . Blumenthal, Esq.BLUMENTHAL & NORDREHAUG2255 Calle ClaraLa Jolla, CA 92037(858) 551-1223Fax: (858 ) 551-1232

Clyde C. Greco, Jr., Esq. (SB #085970)Paul A. Traficante , Esq. (SB #096224)Peter J. Schulz, Esq. (SB #167646)GRECO TRAFICANTE SCHULZ & BRICK185 West "F Street, Suite 400San Diego, CA 92101(619) 234-3660Fax: (619) 234-0626

Joe R. Whatley, Esq.Richard Rouco, Esq.WHATLEY DRAKE LLC2323 Second Avenue NorthBirmingham, Alabama 35203(205) 328-9576Fax: (205 ) 328-9669

G. Mark Brewer, Esq.Dan Carlson, Esq.BREWER & CARLSON, LLP4275 Executive Square, Suite 1020La Jolla, CA 92037(858) 558-7766Fax: (858 ) 558-1553

Matthew White, Esq.Mark Gray, Esq.




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

GRAY & WHITE1200 PNC Plaza, 500 W. Jefferson St.Louisville, Kentucky 40202(502) 585-2060Fax: (502) 581-1933

Larry Franklin, Esq.FRANKLIN & HANCE, PSC505 W. Ormsby AvenueLouisville, Kentucky 40203(502) 637-6000Fax: (502) 637-1413

Attorneys for Plaintiffs and the Certified Class



2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Case 3:05-cv-00179-IEG-JMA Document 250-3

BLUMENTHAL & NORDREHAUGNorman B . Blumenthal (Cal. State Bar #068687)Kyle R. Nordrehaug (Cal. State Bar #205975)Aparajit Bhowmik (Cal. State Bar # 248066)2255 Calle ClaraLa Jolla, CA 92037(858) 551-1223Fax: (858) 551-1232


Filed 10/16/2008 Page 1 of 106






DECLARATION OF NORMAN B.BLUMENTHAL IN SUPPORT OFMOTION FOR PRELIMINARYAPPROVAL OF CLASS SETTLEMENT

Plaintiffs

v.





Defendants.

DECLARATION OF NORMAN B. BLUMENTHAL IN SUPPORT OF MOTION FOR PRELIMINARY APPROVAL OFCLASS SETTLEMENT



1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

I, NORMAN B. BLUMENTHAL, declare as follows:

1. My professional corporation is a partner in the law firm ofBlumenthal & Nordrehaug

counsel ofrecord for the Class in this matter. As such, I am fully familiar with the facts, pleadings

and history ofthis matter. The following facts are within my own personal knowledge, and if called

as a witness, I could testify competently to the matters stated herein.

2. This declaration is being submitted in support of plaintiff's Motion For an Order

(1) Preliminarily Approving Settlement of Plaintiffs' Claims; (2) Scheduling Final Settlement

Hearing; and (3) Directing that Notice be sent to Class Members. Lodged herewith as Exhibit #1

is a copy of the Stipulation and Settlement Agreement along with exhibits thereto.

Fairness of Settlement

3. Plaintiffs and Class Counsel believe that this settlement is fair, reasonable and

adequate. Under the terms of the accepted mediator's proposal, the parties agreed that First

Command would pay Twelve Million Dollars ($ 12 million) in full discharge of all claims asserted

in this action on a claims-made basis. This sum is inclusive of all claims of the Settlement Class

Members related to this action, as well as Class Counsel's attorneys' fees and costs, an enhancement

payment for the Class Representatives, and the cost of class notice and claims administration.

4. The Settlement Agreement provides for a claims process requiring payments from the

fund for each timely and valid claim submitted. All Settlement Class members will receive an

opportunity to participate in and receive payment.

5. After three and a half years of contentious litigation, the Parties have reached a

settlement. The Parties previously conducted four unsuccessful mediations, consisting of three

before the Honorable California Appellate Court Justice Daniel Weinstein (Ret.), and one before

Magistrate Judge Jan Adler, before the Parties again submitted to mediation before Magistrate Judge

Jan Adler, a respected jurist, with extensive experience in class actions. After an all day mediation

and based upon his review ofthe facts and applicable law in this case, and the previous negotiations

between the Parties, Magistrate Judge Adler proposed an amount to the Parties as a mediator's

proposal. The Parties accepted the mediator's proposal, in light of Magistrate Judge Adler's




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

experience as a Jurist, mediator and litigator, and the uncertainties and cost ofthe years oflitigation

the Parties faced if the Mediator's proposal was not accepted.

6. This is an excellent result for the members of the Class. Liability in this case was

uncertain because some or all of the Class Members may not have been damaged by the alleged

misrepresentations. Moreover, this securities action was not a traditional securities case in which

Class reliance is established by the "fraud-on-the-market doctrine, which could have resulted in

difficulties of class-wide adjudication at trial or on appeal. Additionally, Defendants consistently

maintained that they did not violate the federal securities laws and adamantly denied any and all

allegations of wrongdoing in this action. Defendants denied (1) that they or their representatives

made any false statements or omissions to the Class, (2) that they acted with intent to defraud, (3)

that any plaintiff or Class Member relied on any alleged false statement or omission, and (4) that

any plaintiff or Class Member was damaged as a result of Defendants' alleged misconduct.

Defendants contended that the SIPs sold by Defendants were legal, suitable for clients, and properly

explained. While Plaintiffs are confident they would have prevailed at trial, the collectability ofany

judgment was a serious concern because Defendants lacked sufficient assets to satisfy thejudgment

should the Class have fully prevailed at trial. Defendants also have asserted multiple defenses to

the damage claims that might have reduced the amount awarded, and even if Plaintiffs prevailed at

trial for the full amount, the award would have been tied up in the Court ofAppeals and bankruptcy

court for years. The settlement of $12 million provides substantial monetary recovery to the Class.

Clearly the goal of this litigation has been met.

Procedural History of the Litigation

7. On January 31, 2005, Michael McPhail, Robert Barr Kimnach III, and Leonardo

Giovannelli initiated this Action by filing a class-action complaint in the United States District Court

for the Southern District of California ("Initial Complaint ) alleging violations of the federal

securities laws by Defendants. [Doc. No. 1 ]. Kevin Morrison, Jennifer Morrison, Scott Wagner,

Krystin Wagner, Candace Hurley, and Neil Hurley filed a separate lawsuit against Defendants in

the United States District Court for the Western District of Kentucky on November 24, 2004, but

2




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

they voluntarily dismissed that case andjoined the Action as named plaintiffs in the First Amended

Complaint ("FAC ), which was filed on March 30, 2005. [Doc. No. 29]. On June 9, 2005, the

Court appointed Michael McPhail, Robert Barr Kimnach III, Leonardo Giovannelli, Kevin

Morrison, Jennifer Morrison, Scott Wagner, Krystin Wagner, Candace Hurley, and Neil Hurley to

be lead plaintiff and approved their choice of counsel for lead counsel. [Doc. No. 68]. Leonardo

Giovannelli, Kevin Morrison, and Jennifer Morrison were later removed as lead plaintiffs.

8. Defendants moved to transfer the consolidated action to the Northern District ofTexas

where Defendants were located. [Doc. No. 19] . On June 9, 2005, the Court denied Defendants'

motion to transfer the Action to the Northern District of Texas. [Doc. Nos. 68, 69]. On July 22,

2005 , plaintiffs filed their Consolidated Amended Complaint ("CAC ). [Doc. No. 70]. On

September 8, 2005 , Defendants moved to dismiss the CAC [Doc. No. 71 ], but, on December 5,

2005 , by agreement ofthe Parties, they withdrew this motion without prejudice to allow the Parties

to seek private mediation . [Doc. No. 83]. On January 17, 2006 , the Parties engaged in a mediation

before the Hon. Daniel Weinstein (Ret.). This mediation was unsuccessful . On February 23, 2006,

the Parties engaged in a second mediation before the Hon. Daniel Weinstein (Ret.). This mediation

was again unsuccessful.

9. On February 27, 2006, defendants re-filed their motion to dismiss the CAC. [Doc. No.

95]. On March 1, 2006, Plaintiffs opposed the motion to dismiss. [Doc. No. 99]. On April 10,

2006, the Court dismissed Plaintiffs' l Ob-5 and Investment Advisor Act claims without prejudice,

but denied Defendants' motion to dismiss Plaintiffs' section 12(a)(2) claim, and granted Plaintiffs

leave to amend their complaint [Doc. No. 108].

10. On May 1, 2006, plaintiffs filed their Consolidated Second Amended Complaint

("SAC ). [Doc. No. 110]. Defendants moved to dismiss the SAC on May 31, 2006 [Doc. No. 111 ].

On July 27, 2006, the Court dismissed plaintiffs ' section 12(a)(2) claim with prejudice, but denied

defendants' motion to dismiss Plaintiffs' l Ob-5 claim . [Doc. No. 121 ]. On August 10, 2006,

defendants answered the SAC. [Doc. No. 122].

11. On April 30, 2007, Plaintiffs filed their motion for class certification. [Doc. No. 148].

3DECLARATION OF NORMAN B. BLUMENTHAL IN SUPPORT OF MOTION FOR PRELIMINARY APPROVAL OF

CLASS SETTLEMENT05 CV 0179 IEG (JMA)


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Defendants filed their opposition to class certification on May 25, 2007. [Doc. No. 156]. On July

30, 2007, the Court granted, in part, Plaintiffs' motion for class certification. [Doc. No. 175]. The

Court's Order appointed Plaintiffs (as defined herein) as Class Representatives in the Action and

certified a Class of "all persons who, during the period from January 31, 2000 through December

31, 2004, made a SIP payment so as to be charged a 50% sales charge on the money placed at that

time into the SIP through Defendants and still owned the SIP on December 15, 2004, and who did

not terminate within forty-five (45) days ofpurchasing the SIP so as to receive a full refund of the

sales charge. [Doc. No. 175]. The Court also granted Plaintiffs leave to amend the complaint to

conform their class definition with the Order. [Doc. No. 175].

12. On August 13, 2007, Plaintiffs filed their Consolidated Third Amended Complaint

("TAC ). [Doc. No. 176]. Defendants answered the TAC on August 22, 2007 [Doc. No. 181 ]. On

September 19, 2007, the Court issued a formal Class Certification Order, permitting the Action to

proceed as a class action. [Doc. No. 184]. On January 3, 2008, the Court issued an order setting

the contents ofthe Class Notice. [Doc. No. 205]. The Defendants sought reconsideration and a stay

of proceedings, which Plaintiffs opposed. [Doc. No. 206 and 208]. The Court denied Defendants

motion for reconsideration and request for stay. [Doc. No. 209]. On January 22, 2008, Plaintiffs

filed the final Class Notice with the Court [Doc. No. 211 ], pursuant to which putative class members

had until Friday March 21, 2008 to opt out of the lawsuit by submitting a timely request for

exclusion to the Class Administrator.

13. Every aspect of the Action was intensely litigated. After the Court granted class

certification, Defendants petitioned the Ninth Circuit Court of Appeals to appeal the ruling. [Doc.

No. 178]. Plaintiffs were required to prepare a response to the petition. Ultimately, Plaintiffs

prevailed, and the Court of Appeals denied the petition for permission to appeal on September 17,

2007. [Doc. No. 183]. However, following the denial of the petition before the Court of Appeals,

the Defendants filed a petition for a writ of certiorari with the United States Supreme Court, which

Plaintiffs opposed. Defendants petition to the United States Supreme Court was denied on January

7, 2008. In addition, throughout the litigation, the Parties were involved in extensive discovery

4




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

disputes regarding issues such as interrogatories to absent class members, production of the class

list, and the production of electronic discovery. These disputes required the Parties to meet and

confer in person and with Magistrate Judge Adler, and several of the disputes ultimately were

briefed and resolved by formal motion. [Doc. No. 196, 197, 200, 212, 225, 230, and 235].

14. On July 25, 2008, the Parties completed all discovery in the Action other than expert

discovery. On August 5, 2008, the Parties engaged in a third mediation before the Hon. Daniel

Weinstein (Ret.). This mediation was also unsuccessful. On August 27, 2008, the Parties engaged

in a settlement conference with the Honorable Jan M. Adler. This mediation concluded with a

mediator's proposal that was accepted by Plaintiffs and Defendants on August 29, 2008. The

accepted mediator's proposal is the settlement now presented to this Court for preliminary approval.

15. Defendants deny any and all liability or wrongdoing of any kind associated with the

claims alleged in this Action and maintain that they complied at all times with federal securities

laws. Defendants contend that they and their representatives never made any false statements or

omissions to Plaintiffs or the Class, and even if a statement was false, Defendants were unaware of

its falsity. Defendants also maintain that they never acted with the intent to defraud, that no Plaintiff

or Class Member relied on any alleged false statement or omission, and that no Plaintiff or Class

Member was damaged as a result ofDefendant's alleged misconduct. Further, Defendants deny that

the claims asserted by Plaintiffs are suitable for class treatment, and contend that class certification

was inappropriate in this Action because, had this case proceeded to trial, the Court would need to

conduct myriad individualized inquiries such that individualized issues would predominate over any

common questions of law or fact.

16. Class Counsel has conducted a thorough investigation into the facts ofthe class action,

including depositions, document discovery, interrogatories and extensive review ofmillions ofpages

ofrelevant documents and data. Class Counsel has diligently evaluated the Class Members' claims

against Defendants. Prior to the Parties attending mediation, Plaintiffs received Class Member data,

including data reflecting the amounts invested and the commissions paid by the Class Members.

Based on the foregoing data and their own independent investigation and evaluation, Class Counsel




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

believe that the settlement with Defendants for the consideration and on the terms set forth in this

Stipulation of Settlement is fair, reasonable, and adequate and is in the best interest of the class in

light of all known facts and circumstances, including the risk of significant delay, defenses asserted

by Defendants, and numerous potential appellate issues.

Plan of Allocation

17. Defendants have agreed to pay the sum of $12,000,000 (Gross Settlement Funds) by

wire transfer into an interest-bearing joint account with the Escrow Agent within 15 days after the

Court issues the Preliminary Order. (Settlement Agreement at ¶6, Exhibit #1 hereto) The Gross

Settlement Fund shall be used to pay for: (i) the Class Notices, Settlement Notice, Summary Notice,

and claims administration costs, (ii) the attorneys' fees and expense award,(iii) any service award

to Class Representatives of their reasonable costs and expenses (including lost wages) directly

relating to the representation of the Class, and (iv) reasonable costs and expenses associated with

determining the amount that each Authorized Claimant paid for the 50% sales charge during the

Class Period. (Settlement Agreement at ¶7). The balance of the Gross Settlement Fund after the

deductions for all applicable payments shall be the "Net Settlement Fund. (Settlement Agreement

at ¶7). Following the Effective Date, the Net Settlement Fund shall be distributed to Authorized

Claimants in accordance with the Plan ofAllocation. (Settlement Agreement at ¶7). All funds held

by the Escrow Agent shall be deemed to be in the custody of the Court until such time as the funds

are distributed to Authorized Claimants or paid to the person(s) paying the Settlement Amount

pursuant to this Stipulation and/or further order of the Court and shall be invested only in United

States Treasury bills and notes, or money market funds whose portfolio is composed of United

States Agency or Treasury securities which are backed by full faith and credit of the United States

Government using an account at Wells Fargo Bank.

18. Each Authorized Claimant shall be allocated a pro rata share of the Net Settlement

Fund based on their recognized claim compared to the total recognized claims of all Authorized




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Claimants, computed on the basis of the amount each Authorized Claimant paid for their 50% SIP

sales charge during the Class Period divided by the total amount paid by all Authorized Claimants

as a group for their 50% SIP sales charge during the Class Period multiplied by the Net Settlement

Fund. The settlement is a claims-made settlement with no reversion of funds to Defendants.

Defendants shall have no involvement in or liability for reviewing, approving, or challenging claims

filed with the Claims Administrator in connection with this Settlement. (Settlement Agreement at

¶12, Exhibit #1 hereto). The Claims Administrator shall process the Proofs ofClaim and, after the

entry of the Class Distribution Order, shall distribute the Net Settlement Fund to Authorized

Claimants as so ordered by this Court. (Settlement Agreement at ¶16, Exhibit #1 ).

19. The Parties agree that Class Counsel will apply to the Court for an award ofattorneys'

fees and reimbursement of expenses payable from the Gross Settlement Fund in an amount not to

exceed the attorneys' fees and expense reimbursement disclosure contained in the Settlement Notice.

This amount equals 30% of the first $10 million and 25% of the remaining $2 million. Such

amounts as are approved and awarded by the Court shall be payable to Class Counsel from the Gross

Settlement Fund and shall be released from the escrow account by the Escrow Agent within 15 days

after the Court signs the Judgment. (Settlement Agreement at ¶10(a), Exhibit #1 ). The Parties also

agree that the Class Representatives may apply to the Court for an award of reasonable costs and

expenses (which may include lost wages) directly relating to the representation of the Class as

allowed by 15 U.S.C. § 78u-4(a)(4). (Settlement Agreement at ¶10(b), Exhibit #1 ).

Risks of Continued Litiagt

20. Plaintiffs and Class Counsel recognize the expense and length ofcontinuing to litigate

and trying this Action against Defendants through possible appeals and bankruptcy proceedings

which could take many years to resolve. Class Counsel also have taken into account the uncertain

outcome and risk of litigation, especially in complex actions such as this Action where assets were

potentially insufficient to pay a judgment in favor of the Class. Class Counsel are also mindful of

and recognize the inherent problems ofproof under, and alleged defenses to, the claims asserted in

the Action. Based upon their evaluation, Plaintiffs and Class Counsel have determined that the

7




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

settlement set forth in the Stipulation is in the best interest of the Class Members.

21. Here the litigation has been hard-fought with aggressive and capable advocacy on

both sides. Clearly the goal of this litigation, to seek redress for the Class, has been met.

22. Here, a number of defenses asserted by Defendants present serious threats to the

claims of Plaintiff and the other Class Members. (Decl. Blumenthal at ¶24). For example,

Defendants contended that there were no misrepresentations and that the fully disclosed commission

charges actually worked to the advantage of the Class over time, and therefore the Class Members

were not damaged. Defendants also argued that reliance could not be proved and that the

presumption of reliance found by the Court would be inapplicable or rebutted at trial. Defendants

also argued that differences between the sales presentation and investment advice given to members

of the Class precluded class-wide litigation of the alleged claims. Finally, if a judgment were

obtained for the full amount of commissions paid, Defendants would likely declare bankruptcy as

Defendants' total assets are estimated to be between $30 and $60 million, and ifthe parent company,

First Command Financial Services, were held to be not liable as a controlling person, the amount

available would be substantially less.

25. There is federal authority which supports the arguments asserted by Defendants with

respect to liability and class certification. In Binder v. Gillespie, 184 F.3d 1059, 1063-4 (9'h Cir.

1999), the Court of Appeals affirmed the decertification of a securities lOb-5 class action after

determining that the presumption ofreliance could not be applied. Similarly, in In re Initial Public

Offering Securities Litigation, 471 F. 3d 24, 42-43 (2d Cir. 2006), the Court of Appeals decertified

a class where the Court determined that the presumption did not apply to the securities claims. See

also Gariety v. Grant Thornton, LLP, 368 F.3d 356, 367 (4th Cir. 2004); In re Credit Suisse First

Boston Corp. Analyst Sec. Litig. , 250 F.R.D. 137, 140 (S.D. NY 2008) (class is decertified where

presumption held to be inapplicable). Therefore, Plaintiffs were presented with a very real

possibility that the Class could be decertified on appeal for various reasons, including, as in the

above cases, if the presumption of reliance in this case was held to be inapplicable.

26. Similarly here, Nexcycle would have certainly argued in opposing class certification




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

that individual issues predominated because there was no explicit policy requiring off the clock

work and there were variations as to why employees may have worked off the clock. While other

cases have approved class certification in offthe clock wage claims, class certification in this action

would have been hotly disputed and was by no means a foregone conclusion.

27. The late stage of the proceedings at which this settlement was reached also militates

in favor ofpreliminary approval and ultimately, final approval of the settlement. Litigation in this

action exceeded three and a half years. Class Counsel has conducted a thorough investigation into

the facts of the class action. Class Counsel began investigating the Class Members' claims before

this action was filed and conducted discovery including depositions, interrogatories and requests for

production of documents. In this action, there were dozens of depositions taken and thousands of

pages of documents produced. Class Counsel had engaged in an extensive review and analysis of

the relevant documents and data with the assistance of experts. At the time the settlement was

reached, the Class had been certified, percipient discovery and the Plaintiffs' expert reports were

completed, the Parties were finishing expert discovery and Class Counsel was preparing for trial.

The Final Pretrial Conference was scheduled for March 16, 2009, with trial expected to commence

shortly thereafter. Accordingly, the agreement to settle certainly did not occur until Class Counsel

possessed sufficient information to make an informedjudgment regarding the likelihood of success

on the merits and the results that could be obtained through further litigation.

28. Based on the foregoing data and their own independent investigation and evaluation,

Class Counsel is ofthe opinion that the settlement with Defendants for the consideration and on the

terms set forth in this Stipulation of Settlement is fair, reasonable, and adequate and is in the best

interest of the class in light of all known facts and circumstances, including the risk of significant

delay, defenses asserted by Defendants, the available assets ofDefendants, and numerous potential

appellate issues. There can be no doubt that counsel for both Parties possessed sufficient

information to make an informedjudgment regarding the likelihood ofsuccess on the merits and the

results that could be obtained through further litigation.

29. There is no need for continued litigation simply to reaffirm what is already known




1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

by the negotiating parties. Given the complexities of this case, potential offsets, the claims of

primary jurisdiction along with the uncertainties of proof and appeal, the proposed settlement in

Plaintiffs' view is well within the range of possible approval and has no obvious deficiencies.

30. Class Counsel are experienced in prosecuting class action lawsuits and have

competently represent the Class. Other lawyers at my firm and I have extensive class litigation

experience. We have handled a number of class actions and complex commercial cases and have

I acted both as counsel and as lead and co-lead counsel in a variety of these matters. We have

successfully prosecuted and obtained significant recoveries in numerous class action lawsuits and

other lawsuits involving complex issues oflaw and fact. Class Counsel have been involved as class

counsel in over two hundred (200) class action matters. A true and correct copy of the resume of

my firm is attached hereto as Exhibit #2 .

I declare under penalty ofperjury under the laws ofthe State ofCalifornia that the foregoing

is true and correct. Executed this 16th day of October, 2008, at La Jolla, California.

By: s/Norman B. Blumenthal

NORMAN B. BLUMENTHAL

I K:\D\NBB\McPhail - first command\Preliminary Approval\p-Decl NBB.wpd




DECLARATION OF NORMAN BLUMENTHAL

EXHIBIT #1

3:05-cv-00179-IEG-JMA Document 250-3 Filed 10/16/2008 Page 13 of 106

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28



MICHAEL MCPHAIL; ROBERT BARRKIMNACH III; SCOTT and KRYSTINWAGNER; CANDACE and NEIL HURLEY;On Behalf of Themselves and All OthersSimilarly Situated,

Case No. 05 CV 0179 IEG (JMA)

STIPULATION AND AGREEMENT OFSETTLEMENT

Plaintiffs,

V.

FIRST COMMAND FINANCIALPLANNING. INC., a Texas Corporation,FIRST COMMAND FINANCIALSERVICES, INC., a Texas Corporation,LAMAR C. SMITH and HOWARD M.CRUMP,

Defendants.

SI'II't i..viio :t\'i)AGREEMENTOFSETui.FNIENT05 CV 0179 1 EG (JMA)


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

STIPULATION AND AGREEMENT OF SETTLEMENT

Pursuant to Rule 23 of the Federal Rules of Civil Procedure , this Stipulation and

Agreement of Settlement ("Stipulation ") is submitted in the above-captioned case, McPhail v.

First Command Financial Planning, Inc., Case No . 3:05-CV-0I 79-IEG (JMA) (hereinafter the

"Action"). Subject to the approval of the United States District Court for the Southern District of

California ("Court"), this Stipulation is entered into by plaintiffs Michael McPhail, Robert Barr

Kimnach III, Scott Wagner, Krystin Wagner, Neil Hurley, and Candace Hurley (collectively

"Plaintiffs" or "Class Representatives"), on behalf of themselves and the Class (as hereinafter

defined), and defendants First Command Financial Planning, Inc., First Command Financial

Services, Inc., Lamar C. Smith, and Howard M. Crump (collectively "Defendants"). Class

Representatives and Defendants shall be referred to herein as the "Parties."

WHEREAS:

A. Beginning on January 31, 2005, Michael McPhail, Robert Barr Kimnach III, and

Leonardo Giovannelli initiated this Action by filing a class-action complaint in the United States

District Court for the Southern District of California ("Initial Complaint") alleging violations of

the federal securities laws by, among others, First Command Financial Planning, Inc. and First

Command Financial Services, Inc. (collectively "First Command") [Doc. No. I].

B. Kevin Morrison, Jennifer Morrison, Scott Wagner, Krystin Wagner, Candace

Hurley, and Neil Hurley filed a separate lawsuit against First Command in the United States

District Court for the Western District of Kentucky on November 24, 2004 , but they voluntarily

dismissed that case and joined the Action as named plaintiffs in the First Amended Complaint

("FAC"), which was filed on March 30, 2005 [ Doc. No. 29].

C. On June 9, 2005, the Court denied defendants' motion to transfer the Action to the

Northern District of Texas and appointed Michael McPhail, Robert Barr Kimnach III, Leonardo

Giovannelli, Kevin Morrison_ Jennifer Morrison, Scott Wagner, Krvstin Wagner, Candace

Hurley, and Neil Hurley as lead plaintiffs [Doc. Nos. 68, 69]. Leonardo Giovannelli, Kevin

Morrison. and Jennifer Morrison were later removed as lead plaintiffs.

S'I'IPI'L.l'uO\' AEI) A(:KEF\iI:T oN SETTI.H:\II:\T

05 CV 0179 1 EG (J MA)


1 D. On July 22, 2005. plaintiffs filed their Consolidated Amended Complaint ("CAC")

2 [Doc. No. 70].

3 E. On September 8, 2005, Defendants moved to dismiss the CAC [Doc. No. 711, but,

4 on December 5, 2005, by agreement of the parties, they withdrew this motion without prejudice

5 to allow the parties to seek private mediation [Doc. No. 83].

6 F. On January 17, 2006, the parties engaged in a mediation before the I Ion. Daniel

7 Weinstein (Ret.). This mediation was unsuccessful.

8 G. On February 23, 2006, the parties engaged in a second mediation before the Hon.

9 Daniel Weinstein (Ret.). This mediation was unsuccessful.

10 H. On February 27, 2006, defendants re-filed their motion to dismiss the CAC [Doc.

11 No. 95]. On March 1, 2006, plaintiffs re-filed their opposition [Doc. No. 99]. And, on March 20,

12 2006, defendants re-filed their reply [Doc. No. 103].

13 I. On April 10, 2006, the Court dismissed plaintiffs' lOb-5 and Investment Advisor

14 Act claims, but denied defendants' motion to dismiss plaintiffs' section 12(a)(2) claim and

15 granted plaintiffs leave to amend their complaint [Doc. No. 108].

16 J. On May 1, 2006, plaintiffs filed their Consolidated Second Amended Complaint

17 ("SAC") [Doc. No. 110]. Defendants moved to dismiss the SAC on May 31, 2006 [Doe. No.

18 111].

19 K. On July 27, 2006, the Court dismissed plaintiffs' section 12(a)(2) claim with

20 prejudice, but denied def'endants' motion to dismiss plaintiffs' l Ob-5 claim [Doc. No. 121 ].

21 L. On August 10, 2006, defendants answered the SAC [Doc. No. 122].

22 M. On April 30, 2007, plaintiffs filed their motion for class certification [Doc. No.

23 148]. Defendants filed their opposition on May 25, 2007 [Doc. No. 156] and plaintiffs filed their

24 reply on June 18, 2007 [Doc. No. 168].

25 N. On July 30, 2007, the Court granted, in part, plaintiffs' motion for class

26 certification [Doc. No. 175], appointing Plaintiffs (as defined herein) as Class Representatives in

27 the Action and certifying a class of "all persons who. during the period from January 31. 2000

28 through December 31, 2004, made a Sill payment so as to be charged a 50% sales charge on the

2. S'[ ur['1.:\ 1'IO.\ ,t\[ ) AGREE:\I1:\l OF SF:'i ri i:MFNT

05 (:V 0179 FE.G (Jk1A)


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

money placed at that time into the SIP through First Command and still owned the SIP on

December 15, 2004, and who did not terminate within forty-five (45) days of purchasing the SIP

so as to receive a full refund of the sales charge." The Court also granted Plaintiffs leave to

amend their complaint to conform their class definition with the Order.

0. On August 13, 2007, Plaintiffs filed their Consolidated Third Amended Complaint

("TAC'') [Doc. No. 176], which Defendants answered on August 22, 2007 [Doc. No. 181].

P. On September 19, 2007, the Court issued its Class Certification Order, permitting

the Action to proceed as a class action [Doc. No. 184]. On January 3, 2008, the Court issued an

order setting the contents of the Class Notice [Doc. No. 205].

Q. On January 22, 2008, Plaintiffs filed the final Class Notice with the Court [Doc.

No. 211 ], pursuant to which putative class members had until Friday, March 21, 2008, to opt out

of the lawsuit by submitting a timely request for exclusion to the Class Administrator.

R. On July 25, 2008, the Parties completed all discovery in the Action other than

expert discovery.

S. On August 5, 2008, the Parties engaged in a third mediation before the Hon.

Daniel Weinstein (Ret.). This mediation was unsuccessful.

T. On August 27, 2008, the Parties engaged in a settlement conference with the Hon.

Jan M. Adler. This mediation concluded with a mediator's proposal that was accepted by Class

Representatives and Defendants on August 29, 2008.

U. Class Representatives, through Class Counsel, have conducted an investigation

related to the claims and the underlying events and transactions alleged in the TAC. Class

Representatives, through Class Counsel, have analyzed the evidence adduced during pretrial

discovery and have researched the applicable law with respect to the claims of Class

Representatives and the Class against Defendants and the potential defenses thereto.

V. With the assistance of the Hon. Jan M. Adler acting as a mediator, Class

Representatives, through Class Counsel, have engaged in independent discussions and ann's-

length negotiations with Defendants regarding a compromise and settlement of the Action, all of

S'I IN I.. rlo ,\\1) ACREEME.r OF SETTLEMENT

05 CV 0179 1 EC (JMA)

Ca 3:05-cv-00179-IEG-JMA Document 250-3 Filed 10/16/2008 Page 17 of 106

I which was conducted with a view toward settling the issues in dispute and achieving the best

2 relief possible in the Action that is consistent with the interests of the Class.

3 W. Based upon their investigation and pretrial discovery as set forth above, Class

4 Counsel has recommended and Class Representatives have concluded that the terms and

5 conditions of this Stipulation are fair, reasonable, and adequate to, and in the best interests of, the

6 Class Representatives and the Class. After considering (a) the substantial benefits that Class

7 Members will receive from the Settlement; (b) the attendant risks of litigation; and (c) the

8 desirability of permitting the Settlement (as hereinafter defined) to be consummated as provided

9 by the terms of this Stipulation, Class Counsel and Class Representatives have agreed to settle the

10 claims that were raised or could have been raised in the Action, subject to the terms and

11 provisions of this Stipulation.

12 X. Defendants deny any wrongdoing whatsoever, and this Stipulation shall in no way

13 or event be construed or deemed to be evidence of, or be considered an admission or concession

14 by any Defendant of, any fault, liability, wrongdoing, damage, or any infirmity in the defenses

15 that any Defendant has asserted or could assert in the Action or any other action. Defendants

16 contend that the Systematic Investment Plans sold were legal, suitable for clients, and were

17 properly explained. Indeed, had this matter proceeded to trial, Defendants would have vigorously

18 contested the matter at each stage, including appeal, if applicable, to demonstrate that neither First

19 Command nor the Individual Defendants or any person working for First Command, including its

20 registered representatives, engaged in any wrongdoing of any kind.

21 Y. Notwithstanding the Parties respective positions about the merits of the Action, the

22 Parties recognize that the Action has been litigated by Class Representatives and defended by

23 Defendants in good faith, that the Action is being voluntarily settled following arm's-length

24 bargaining with the aid of experienced and able mediators and upon advice of competent counsel,

25 and that the terms of the Settlement and this Stipulation are fair, reasonable. and adequate to the

26 Class. This Stipulation shall not be construed or deemed to be evidence of. or considered an

27 admission or concession by any Class Representative or Class Member. of any infirmity in the

28 claims asserted in the Action.

4 S rtrri..A rlo. ,^^n AcREENI :v r of S}: rr[.E; IF:\ r05 CV 0179 1 E•G (JI'dA)

Cas 3:05-cv-00179-IEG-JMA Document 250-3 Filed 10/16/2008 Page 18 of 106

l Z. NOW THEREFORE, in consideration of the foregoing recitals and the benefits

2 flowing to the Parties from the Settlement, it is hereby STIPULATED AND AGREED by and

3 among the Parties, through their respective counsel, subject to approval of the Court pursuant to

4 Rule 23(e) of the Federal Rules of Civil Procedure, that all Settled Claims (defined below in

5 ¶ I(ii)) and all Settled Defendants' Claims (defined below in ¶ 1(jj)) shall be compromised,

6 settled, released, and dismissed with prejudice, upon and subject to the following terms and

7 conditions:

8 DEFINITIONS

9 1. As used in this Stipulation, and any exhibits attached hereto and made a part

0 hereof, the following terms shall have the following meanings:

II (a) "Action" means the above-styled case, McPhail v. First Command

12 Financial Planning, .Inc., Case No. 3:05-CV-0179 IEG (JMA). pending in the United States

13 District Court for the Southern District of California.

14 (b) "Alternative Judgment" has the meaning set forth in ¶ 26(d) hereof.

15 (c) "Authorized Claimant" means a Class Member who submits a timely and

16 valid Proof of Claim form to the Claims Administrator.

17 (d) "Claims Administrator" means Gilardi & Co. ("Gilardi"), which shall

18 administer the Settlement subject to approval and appointment by the Court.

19 (e) "Claims Rate" equals the total number of Authorized Claimants divided by

20 the total number of Class Members. For example, if there are 75 authorized claimants and 100

21 class members, then the claims rate would be .75 or 75% (expressed as a percentage).

22 (t) "Class" shall be defined as all persons who did not previously opt out of

23 this Action by submitting a timely request for exclusion to the Class Administrator and who meet

24 the following definition, which is set forth in the Class Notice [Doc. No. 211 ]:

25 (1) Made a SIP payment during the period from January 31, 2000through December 31. 2004 so as to be charged a 50% sales

26 charge on the money placed at that time into the SIP, OR whoincreased the face amount of an existing SIP and were charged a

27 50% sales charge on the increased amount during the period

28from January 31. 2000 through December 31. 2004,

ST 111k IxI lo\ .01) AGRI•:E:SIE\T or SE"I"I1.rti:\T

05 CV 0179lEG (JN1A)


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

AND

(2) still owned the SIP on December 15, 2004;

AND

(3) did not terminate within forty-five (45) days of purchasing theSIP so as to receive a full refund of the sales charges.

Excluded from this class definition is any person who, fromJanuary 31, 2000 to the present, is/was an officer, director,employee, registered representative or agent of First CommandFinancial Services, Inc., or First Command Financial Planning,Inc., or any employee or family member of the foregoingexcluded persons.

Also excluded from this class definition is any person who paidless than a 50% sales charge due to an initial investment or anincrease in the face amount of an investment that qualified as abreak-point, as defined in the SIP's prospectus.

Excluded from the Class are: (i) Defendants; (ii) all officers, directors, employees, registered

representatives, agents and partners of any Defendant and of any Defendant's partnerships,

subsidiaries, or affiliates at all relevant times; (iii) members of the immediate family of any of the

foregoing excluded parties; (iv) the legal representatives, heirs, successors, and assigns of any of

the foregoing excluded parties; and (v) any entity in which any of the foregoing excluded parties

has or had a controlling interest at all relevant times. Also excluded from the Class are all

persons who exclude themselves from the Settlement by timely requesting exclusion in

accordance with the requirements set forth in the Settlement Notice.

(g) "Class Administrator" means Gilardi & Co. ("Gilardi"), which previously

administered the Class Notice.

(h) "Class Counsel" means the following law firms: (1) Greco Traficante

Schulz & Brick; (2) Blumenthal & Nordrehaug; (3) Whatley Drake & Kailas LLC; (4) Brewer &

Carlson, LLP; and (5) Franklin Gray & White.

(i) "Class Distribution Order" has the meaning set forth in ^ 1 i hereof.

(0) "Class Member'" means a member of the Class.

(, S I III'L:%"[lo\ .\\I) AGKFE'%IEYI OF SF:T'I'LF:\IF.\'r

o-1 cV 01791EG (J%IA)


1 (k) "Class Notice" means the class-action notice that was filed with the Court

2 in this Action on January 22, 2008 [Doc. No. 211 ] and subsequently distributed to putative class

3 members by the Class Administrator.

4 (1) "Class Period" means the period of time between January 31, 2000 and

5 December 31, 2004, inclusive.

6 (m) "Class Representatives" means Michael McPhail, Robert Barr Kimnach 111,

7 Scott Wagner, Krystin Wagner, Neil Hurley, and Candace Hurley.

8 (n) "Complaint" means and includes the Initial Complaint [Doc No. 1], First

9 Amended Complaint [Doc. No. 29], Consolidated Amended Complaint [Doc. No. 70],

10 Consolidated Second Amended Complaint [Doe. No. 110], and Consolidated Third Amended

11 Complaint [Doe. No. 176]; and Amendment to the Consolidated Third Amended Complaint [Doe.

12 No. 203].

13 (o) "Court" means the United States District Court for the Southern District of

14 California.

15 (p) "Defendants" means First Command Financial Planning, Inc., First

16 Command Financial Services, Inc., Lamar C. Smith, and Howard M. Crump.

17 (q) "Effective Date" means the date upon which the Settlement contemplated

18 by this Stipulation shall become effective, as set forth in ¶ 26 hereof.

19 (r) "Escrow Agent" means Gilardi & Co., pursuant to the Escrow Agreement,

20 to be executed in connection with this Settlement.

21 (s) "Fairness Hearing" means the hearing to be held by the Court on the date

22 specified in the Settlement Notice at which time the Court will consider whether to approve the

23 Settlement, the Plan of Allocation, Class Counsel's application for fees and expenses, Class

24 Representatives' application for reimbursement of costs and expenses, and other matters related

25 to the Settlement.

26 (t) `'Final" or "Finality," with respect to any Judgment or Alternative

27 Judgment (both defined herein). means: (i) if no appeal is filed with respect to the Judgment or

28 Alternative Judgment, the expiration date of the time provided for under the corresponding rules

7.Sr11'1 AGREE. trv r or SF:rrt.EiF:\T

05 CV 0179 ICG (JMA)


1 of the applicable court or statute for filing or noticing any appeal; or (ii) if an appeal is filed from

2 the Judgment or Alternative Judgment, the date of (A) final dismissal of such appeal, or the final

3 dismissal of any proceeding on certiorari or otherwise to review the Judgment or Alternative

4 Judgment; or (B) final affirmance of such appeal, the expiration of the time to file a petition for a

5 writ of certiorari or other form of review, or the denial of a writ of certiorari or other form of

6 review of the Judgment or Alternative Judgment, and, if certiorari or other form of review is

7 granted, the date of final affirmance following review pursuant to that grant. Any proceeding or

8 order, or any appeal or petition for a writ of certiorari or other form of review pertaining solely to

9 (i) any application for attorneys' fees, costs or expenses, and/or (ii) the Plan of Allocation

10 (defined herein), shall not in any way delay or preclude the Judgment or Alternative Judgment

I I from becoming Final.

12 (u) "First Command" means, for the limited purposes of this Agreement, both

13 First Command Financial Pla1ining, Inc. and First Command Financial Services, Inc.

14 (v) "First Command's Counsel" means the law firm of Cooley Godward

15 Kronish LLP, which represents both First Command Financial Planning, Inc. and First Command

16 Financial Services, Inc.

17 (w) "Gross Settlement Fund" means the Settlement Amount (defined herein),

18 plus any interest on, or other income or gains related to, that amount which is earned while such

19 funds are held by the Escrow Agent.

20 (x) "Individual Defendants" means Lamar C. Smith and Iloward M. Crump.

21 (y) "Judgment" means the judgment approving the Settlement, to be entered by

22 the Court substantially in the form attached hereto as Exhibit B.

23 (z) "Net Settlement Fund" has the meaning set forth in ¶ 7 hereof.

24 (aa) "Opt-Out Threshold" has the meaning set forth in ¶ 25 hereof and in the

25 Supplemental Agreement.

26 (bb) "Parties" means Plaintiffs and Defendants.

27 (cc) "Plaintiffs" means Class Representatives, on behalf of themselves and the

28 Class.

STn[^r[.:^[[o^:^s[ÂCREE\IENf OFSr[LE-%[t:vr^' 05 CV 0179 IEG (JNI:\)


1 (dd) "Plan of Allocation" has the meaning set forth in 1 13 hereof.

2 (ce) "Preliminary Order" means the order preliminarily approving the

3 Settlement and directing notice thereof to the Class, to be entered by the Court substantially in the

4 form attached hereto as Exhibit A.

5 (ff) "Proof of Claim" means the proof of claim form substantially in the form

6 attached hereto as Tab 2 to Exhibit A.

7 (gg) "Related Parties" means each Defendant's past or present directors,

8 officers, employees, registered representatives, agents, partners, principals, members, insurers,

9 co-insurers, re-insurers, controlling shareholders, attorneys, advisors, accountants, auditors,

10 personal or legal representatives, predecessors, successors, parents, subsidiaries, divisions, joint

I 1 ventures, assigns, spouses, heirs, related or affiliated entities, any entity in which a Defendant has

12 a controlling interest, any member of any Individual Defendant's immediate family, or any trust

13 of which any Individual Defendant is the settlor or which is for the benefit of any member of an

14 Individual Defendant's immediate family.

15 (hh) "Released Parties" means Defendants and the Related Parties.

16 (ii) "Settled Claims" means and includes any and all claims, debts, demands,

17 controversies, obligations, losses, rights or causes of action or liabilities of any kind or nature

18 whatsoever (including, but not limited to, any claims for damages (whether compensatory,

19 special, incidental, consequential, punitive, exemplary or otherwise), injunctive relief, declaratory

20 relief, rescission or rescissionary damages, interest, attorneys' fees, expert or consulting fees,

21 costs, expenses, or any other form of legal or equitable relief whatsoever), whether based on

22 federal, state, local, statutory or common law or any other law, rule or regulation, whether fixed

23 or contingent, accrued or un-accrued, liquidated or unliquidated, at law or in equity, matured or

24 unmatured, whether class or individual in nature, including both known claims and Unknown

25 Claims (defined herein in 1(ss)) that: (i) have been asserted in this Action by Class

26 Representatives on behalf of the Class and its Class Members against any of the Released Parties,

27 or (ii) have been or could have been asserted in any forum by Class Representatives. Class

28 Members. or any of them against any of the Released Parties, which arise out of, relate to, or are

9 S nNri.Ariox A,%[) ACREF\!F:\ r OF SV1°n.r:\IF.\ I

05(:V01791EG(JMA)


1 based upon the allegations, transactions, facts, matters, occurrences, representations, or omissions

2 involved, set forth, or referred to in the Complaint as limited and/or clarified by the Court's July

3 30, 2007 Order granting class certification, including any claim, cause of action and/or demand

4 that was or could have been asserted therein. The Parties stipulate and agree that Class

5 Representatives did not allege, in the Action, any claim, cause of action, or demand against

6 Defendants related to or arising out of the sale of insurance products, or any other securities other

7 than a SIP, sold by or on behalf of Defendants. The Parties further stipulate and agree that, as a

8 result of the foregoing, no tolling of the statute of limitations concerning any claim, cause of

9 action, or demand related to or arising out of the sale of insurance products by or on behalf of

10 Defendants shall be deemed to have occurred as a result of the filing of the Action. Settled

11 Claims shall also include any claims, debts, demands, controversies, obligations, losses, rights, or

12 causes of action that Class Representatives, Class Members. or any of them may have against the

13 Released Parties or any of them which involve or relate in any way to the defense of the Action or

14 the Settlement of the Action. Notwithstanding the foregoing, or any other provision contained in

15 this Stipulation, Settled Claims shall not include any claims to enforce the Settlement, including

16 without limitation, any claims to enforce the terms of this Stipulation, of orders, or of judgments

17 issued by the Court in connection with the Settlement.

18 {jj) "Settled Defendants' Claims" means and includes any and all claims.

19 debts, demands, controversies, obligations, losses, costs, rights or causes of action or liabilities of

20 any kind or nature whatsoever (including, but not limited to, any claims for damages (whether

21 compensatory, special, incidental, consequential, punitive, exemplary or otherwise), injunctive

22 relief, declaratory relief, rescission or rescissionary damages, interest, attorneys' fees, expert or

23 consulting fees. costs, expenses, or any other form of legal or equitable relief whatsoever),

24 whether based on federal, state, local, statutory or common law or any other law, rule or

25 regulation, whether fixed or contingent, accrued or unaccrued, liquidated or unliquidated, at law

26 or in equity, matured or unmatured, including both known claims and Unknown Claims, that have

27 been or could have been asserted in the Action or any forum by the Released Parties against any

28 of the Class Representatives, Class Counsel, Class Members or their attorneys, which arise out of

10.S'riPi LATIO\ A\f) AGI2EK11E\'r ON SF:T'r1.E\TE.NT

I05


1 or relate in any way to the institution, prosecution, or settlement of the Action. Notwithstanding

2 the foregoing, or any other provision contained in this Stipulation, Settled Defendants' Claims

3 shall not include any claims to enforce the Settlement, including, without limitation, any of the

4 terms of this Stipulation or orders or judgments issued by the Court in connection with the

5 Settlement.

6 (kk) "Settlement" means the settlement contemplated by this Stipulation.

7 (11) "Settlement Amount" means U.S.$ 12,000,000.00.

8 (mm) "Settlement Notice" means the Notice of Proposed Settlement and Motion

9 for Attorneys' Fees & Fairness Hearing, which is to be sent to Class Members substantially in the

10 form attached hereto as Tab I to Exhibit A.

11 (nn) "Stipulation" means this Stipulation and Agreement of Settlement.

12 (oo) "Supplemental Agreement" shall have the meaning set forth in ¶ 25.

13 (pp) "Summary Notice" means the Summary Notice of Proposed Settlement and

14 Hearing to be published substantially in the form attached hereto as Tab 3 to Exhibit A.

15 (qq) "Tailored Professional Services Program" means First Command's

16 financial planning service that, for a variable fee that is based on the extent of service, time, and

17 effort that an advisor spends working with a client, allows the client to select and pay for the most

18 appropriate planning tools and levels of advisory service to match the complexities of the client's

19 own financial needs and goals.

20 (rr) "Taxes" means (i) any and all applicable taxes, duties and similar charges

21 imposed by a government authority (including any estimated taxes, interest or penalties) arising

22 in any jurisdiction, if any, (A) with respect to the income or gains earned by or in respect of the

23 Gross Settlement Fund, including, without limitation, any taxes that may be imposed upon

24 Defendants or its counsel with respect to any income or gains earned by or in respect of the Gross

25 Settlement Fund for any period while it is held by the Escrow Agent during which the Gross

26 Settlement Fund does not qualify as a Qualified Settlement Fund for federal or state income tax

27 purposes; or (B) by way of withholding as required by applicable law on any distribution by the

28 Escrow Agent or the Claims Administrator of any portion of the Gross Settlement Fund to

1H. STIP( 1,.1'E'!O\ ;1\E) AGREkaILY r or Si: ri.E\1E\ r

105 C\- 0179 AEG (J1iA)


1

2

3

4

5

6

7

8

9

10

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Authorized Claimants and other persons entitled thereto pursuant to this Stipulation: and (ii) any

and all expenses, liabilities and costs incurred in connection with the taxation of the Gross

Settlement Fund (including without limitation , expenses of tax attorneys and accountants).

(ss) "Unknown Claims" means any and all Settled Claims that any Class

Representative or Class Member does not know of or suspect to exist, and any and all Settled

Defendants' Claims that First Command or any Individual Defendant does not know of or suspect

to exist, in his, her, or its favor at the time of the release of the Released Parties which, if known

by him, her, or it, might have affected his, her, or its settlement with and release of, as applicable,

the Released Parties, Class Representatives, and Class Members, or might have affected his, her,

or its decision to object or not to object to this Settlement. The Class Representatives, Class

Members, First Command, the Individual Defendants, and each of them may hereafter discover

facts in addition to or different from those which he, she, or it now knows or believes to be true

with respect to the subject matter of the Settled Claims and/or the Settled Defendants' Claims.

Nevertheless, with respect to any and all Settled Claims and Settled Defendants' Claims, the

Parties stipulate and agree that, upon the Effective Date, the Parties shall expressly waive and

each of the Class Members shall be deemed to have, and by operation of the Judgment shall have,

waived all provisions, rights, and benefits of California Civil Code § 1542 and all provisions,

rights, and benefits conferred by any law of any state or territory of the United States, or principle

of common law, which is similar, comparable, or equivalent to California Civil Code § 1542.

California Civil Code § 1542 provides:

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THECREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HERFAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IFKNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HISOR HER SETTLEMENT WITH THE DEBTOR.

The Parties expressly acknowledge, and the Class Members shall be deemed to have, and by

operation of the Judgment shall have, acknowledged that the waiver and release of Unknown

Claims constituting Settled Claims and/or Settled Defendants' Claims was separately bargained

for and a material element of the Settlement.

12.Srn'l LA HON AND AGRF: ENI EN r OF SETTLEMENT

05 C:V 0179 1 E:G (JN1A)


1 SCOPE AND EFFECT OF SETTLEMENT

2 2. The obligations incurred pursuant to this Stipulation shall be in full and final

3 disposition of the Action as to Defendants and shall be in full and final disposition of any and all

4 Settled Claims and Settled Defendants' Claims.

5 3. Upon the Effective Date, Class Representatives, and all Class Members on behalf

6 of themselves, their personal representatives, heirs, executors, administrators, trustees, successors,

7 and assigns, shall be deemed to have, and by operation of the Judgment shall have, fully, finally,

8 and forever released, relinquished, and discharged each and every one of the Settled Claims

9 against the Released Parties, whether or not any such Class Member or Class Representative

10 executes and delivers a Proof of Claim. Further, the Judgment will provide that, upon the

11 Effective Date, Class Representatives and all Class Members on behalf of themselves, their

12 personal representatives, heirs, executors, administrators, trustees, successors and assigns, shall

13 be deemed to have covenanted not to sue on, and shall forever be barred from suing on,

14 instituting, prosecuting, continuing, maintaining or asserting in any forum, either directly or

15 indirectly, on their own behalf or on behalf of any class or other person, any Settled Claim against

16 any of the Released Parties.

17 4. Upon the Effective Date, Defendants, on behalf of themselves and their Related

18 Parties, shall be deemed to have, and by operation of the Judgment shall have, fully, finally, and

19 forever released, relinquished, and discharged each and every one of the Settled Defendants'

20 Claims. Further, the Judgment will provide that, upon the Effective Date, Defendants, on behalf

21 of themselves and their Related Parties, shall be deemed to have covenanted not to sue on, and

22 shall forever be barred from suing on, instituting, prosecuting, continuing, maintaining, or

23 asserting in any forum, either directly or indirectly, on their own behalf or on behalf ofany class

24 or other person, any Settled Defendants' Claim against Class Representatives, Class Members,

25 and their respective counsel, or any of them.

26 SETTLEMENT CONSIDERATION

27 6. In consideration for the release and discharge provided for in ¶ 3 hereof. First

28 Command shall pay or cause to be paid the sum of $12,000.000 by wire transfer into an interest-

13 S'FINI LA -1 JON VA) AGREF:%IE\7 OF SE7°rLE\IE\T05 ('V 0179 1 EG ONL%) r


1 bearing joint account with the Escrow Agent within 15 days after the Court issues the Preliminary

2 Order.

3 7. The Gross Settlement Fund shall be used to pay (i) the Class Notice, Settlement

4 Notice, Summary Notice, and administration costs referred to in ¶ 9(b) hereof, (ii) the attorneys'

5 fees and expense award referred to in ¶ 10(a) hereof, (iii) the award to Class Representatives of

6 reasonable costs and expenses (including lost wages) directly relating to the representation of the

7 Class referred to in ¶ 10(b) hereof; and (iv) the remaining administration expenses referred to in

8 ¶ 11 hereof. The balance of the Gross Settlement Fund after the above payments and the payment

9 of any Taxes shall be the "Net Settlement Fund." Following the Effective Date, the Net

10 Settlement Fund shall be distributed to Authorized Claimants as provided in ¶¶¶ 12-14 hereof in

I I accordance with the Plan of Allocation. Any sums required to be held in escrow hereunder shall

12 be held by the Escrow Agent. All funds held by the Escrow Agent shall be deemed to be in the.

13 custody of the Court until such time as the funds are distributed to Authorized Claimants or paid

14 to the person(s) paying the Settlement Amount pursuant to this Stipulation and/or further order of

15 the Court. The Escrow Agent may invest any funds in excess of U.S.$600.000 in 90-day United

16 States Treasury Securities or in money market funds whose portfolio is composed of United

17 States Agency or Treasury securities which are backed by full faith and credit of the United States

18 Government through an account with Wells Fargo Bank, and shall collect and reinvest all interest

19 accrued thereon. Any funds held in escrow in an amount of less than U.S.$600,000 may be held

20 in a bank account insured by the Federal Deposit Insurance Corporation ("FDIC"). The Parties

21 agree that the Gross Settlement Fund is intended to be a Qualified Settlement Fund within the

22 meaning of Treasury Regulation § 1.468B-1. and that the Escrow Agent. as administrator of the

23 Gross Settlement Fund vkithin the meaning of Treasury Regulation § 1.468B-2(k)(3), shall be

24 responsible for filing tax returns and any other tax reporting for or in respect of the Gross

25 Settlement Fund and paying from the Gross Settlement Fund any Taxes owed with respect to the

26 Gross Settlement Fund. The Parties agree that the Gross Settlement Fund shall be treated as a

27 Qualified Settlement Fund from the earliest date possible. and agree to any relation-back election

28 required to treat the Gross Settlement Fund as a Qualified Settlement Fund from the earliest date

14. S'rii 1..1TIO\ M) Ac12E:E%IEN -1-01 : SE:TTLE..1E.\T0-5 CV 01791EG(J:1IA)


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26 11

27

28

possible. First Command agrees to provide promptly to the Claims Administrator the statement

described in Treasury Regulation § I.468B-3(e).

(a) All Taxes shall be paid out of the Gross Settlement Fund, shall be

considered to be a cost of administration of the Settlement and shall be timely paid by the Escrow

Agent without prior Order of the Court. The Gross Settlement Fund or the Escrow Agent shall, to

the extent required by law, be obligated to withhold from any distributions to Authorized

Claimants and other persons entitled thereto pursuant to this Stipulation any funds necessary to

pay Taxes, including the establishment of adequate reserves for Taxes as well as any amount that

may be required to be withheld under Treasury Reg. § 1.468B-(1)(2) or otherwise under

applicable law in respect of such distributions. Further, the Gross Settlement Fund shall

indemnify and hold harmless the Released Parties for Taxes.

(b) The Released Parties shall not have any responsibility for or liability

whatsoever with respect to: (i) any act, omission or determination of Class Counsel, the Escrow

Agent or the Claims Administrator, or any of their respective designees or agents, in connection

with the administration of the Settlement or otherwise; (ii) the management, investment or

distribution of the Gross Settlement Fund and/or the Net Settlement Fund; (iii) the Plan of

Allocation; (iv) the determination, administration, calculation, or payment of any claims asserted

against the Gross Settlement Fund and/or the Net Settlement Fund; (v) any losses suffered by, or

fluctuations in the value of, the Gross Settlement Fund and/or the Net Settlement Fund; or (vi) the

payment or withholding of any Taxes, expenses, and/or costs incurred in connection with the

taxation of the Gross Settlement Fund and/or the Net Settlement Fund, or the filing of any returns.

(c) Before any distributions are made to Authorized Claimants as I

contemplated hereby, each Authorized Claimant shall provide any and all information that the

Claims Administrator may reasonably require and/or that is required by applicable law regarding

Taxes, and the filing and reporting of Taxes. The Claims Administrator may also, without

liability to the Authorized Claimants, delay such distributions unless and until such information is

provided in the form required by the Claims Administrator.

1 5.STIPi[.,4'1'1{)\:\.M) Aciu•: 1:%ti:\"P O F SETT LEMENT

05 CV 01791LG (JnIA)


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23a

24

25

26

27

28

ADMINISTRATION

8. The Claims Administrator shall administer the Settlement subject to the

jurisdiction of the Court for all Class Members. Defendants shall cooperate in the administration

of the Settlement to the extent reasonably necessary to effectuate its terms, including providing

without charge all necessary information from First Command's transfer records concerning the

identity of Class Members and their transactions.

9. The Escrow Agent, acting solely in its capacity as escrow agent:

(a) shall be subject to the jurisdiction of the Court;

(b) may pay from the Gross Settlement Fund, without further approval from

First Command, all reasonable costs and expenses up to the amount of U.S.$600,000 associated

with (1) determining the amount that each Authorized Claimant paid for their 50% SIP sales

charge during the Class Period, (2) identifying and notifying the Class Members, (3) effecting

mailing of the Class Notice. Settlement Notice, and Proof of Claim, (4) publication of the

Summary Notice to the Class, and (5) the administration of the Settlement, including without

limitation, the actual costs of retrieving the data necessary to determining the amount that each

Authorized Claimant paid for their 50% SIP sales charge during the Class Period, printing and

mailing the Settlement Notice and Proof of Claim, publication of the Summary Notice, any Taxes

due, and the reasonable administrative expenses incurred and fees charged by the Claims

Administrator in connection with providing notice and processing the submitted claims. In the

event that such costs exceed U.S.$600,000 prior to the Effective Date, Class Counsel shall submit

a written request to First Command's Counsel seeking to utilize additional monies from the Gross

Settlement Fund for purpose of providing notice and administering the Settlement, with the

understanding that consent shall not be unreasonably withheld by Defendants. In the event that

the Settlement is terminated, as provided for herein, notice and administration costs paid or

incurred in connection with this paragraph shall not be returned to the person(s) who paid the

Settlement Amount: and

(c) may rely upon any notice, certificate . instrument . request . paper, or other

document reasonably believed by it to be genuine and to have been made. sent. or signed by an

16.S-ni,t i.,% no\ . %NJ) AcREE'.IEYF or Sr: rn.f:'si:N r

05f:V0179tEG(JMA)


1 authorized signatory in accordance with this Stipulation, and shall not be liable for (and will be

2 indemnified from the Gross Settlement Fund and held harmless from and against) any and all

3 claims, actions, damages, costs (including reasonable attorneys' fees), and expenses claimed

4 against or incurred by the Escrow Agent for any action taken or omitted by it, consistent with the

5 terms hereof and those of any separate escrow agreements concerning the Gross Settlement Fund,

6 in connection with the perfonnance by it of its duties pursuant to the provisions of this Stipulation

7 or order of the Court, except for its gross negligence or willful misconduct. If the Escrow Agent

8 is uncertain as to its duties hereunder, the Escrow Agent may request that Class Representatives

9 (and, prior to the Effective Date, First Command) sign a document which states the action or non-

10 action to be taken by the Escrow Agent. In the event the Settlement is terminated, as provided for

11 herein, indemnified amounts and expenses incurred by the Escrow Agent in connection with this

12 paragraph shall not be returned to the person(s) who paid the Settlement Amount.

13 ATTORNEYS' FEES AND EXPENSES AND AWARD TO CLASS REPRESENTATIVES

14 10. The Parties agree that:

15 (a) Class Counsel will apply to the Court for an award of attorneys' fees and

16 reimbursement of expenses payable from the Gross Settlement Fund (plus interest on both sums

17 at the same rate earned by the Gross Settlement Fund) in an amount not to exceed the attorneys'

18 fees and expense reimbursement disclosure contained in the Settlement Notice. Class Counsel

19 shall provide to the Court, as part of the motion for approval of the Settlement, all necessary

20 information required by the Court concerning the total award of attorneys' fees and

21 reimbursement of expenses to be paid from the Gross Settlement Fund. Such amounts as are

22 approved and awarded by the Court shall be payable to Class Counsel from the Gross Settlement

23 Fund and shall be released from the escrow account by the Escrow Agent within 15 days after the

24 Court signs the Judgment, notwithstanding the existence of any timely filed objections thereto, or

25 potential for appeal therefrom, or collateral attack on the Settlement or any part thereof. Class

26 Counsel agrees to promptly make refunds or repayments to the Gross Settlement Fund, if and

27 when, as a result of any appeal and/or further proceedings on remand. or successful collateral

28 attack, the fee or cost award is reduced or reversed or for whatever reason the Settlement is

17.STIPI !..v rIo\ :^.\I};1GE2F:I:ÎF:\'r OF SF"I'7 N'!'

05 CV 0179 lEG (.InIA)


1 terminated pursuant to this Stipulation, of all (or, if the attorneys' fees and expense award is

2 reduced, any excess) attorneys' fees and expenses awarded by the Court, plus interest thereon at

3 the same rate as is earned by the Gross Settlement Fund. The apportionment and distribution

4 among Class Counsel of any award of attorneys' fees and expenses shall be within their sole

5 discretion. The Released Parties shall not have any obligations or liability whatsoever with

6 respect to any attorneys' fees or expenses incurred by Class Counsel beyond those awarded by the

7 Court to Class Counsel, which shall be payable solely from the Gross Settlement Fund.

8 (b) Class Representatives will apply to the Court for an award of reasonable

9 costs and expenses (which may include lost wages) directly relating to the representation of the

10 Class as allowed by 15 U.S.C. § 78u-4(a)(4), plus interest on such sum at the same rate earned by

11 the Gross Settlement Fund. Class Representatives shall provide to the Court, as part of the

12 motion for approval of the Settlement, all necessary information required by the Court concerning

13 the total award of reasonable costs and expenses to be paid from the Gross Settlement Fund.

14 Such amounts as are awarded by the Court to Class Representatives from the Gross Settlement

15 Fund shall be payable immediately upon award by the Court, notwithstanding the existence of

16 any timely filed objections thereto, or potential for appeal therefrom, or collateral attack on the

17 Settlement or any part thereof, subject to Class Representatives' obligations to make appropriate

18 refunds or repayments (including interest thereon at the same rate as is earned by the Gross

19 Settlement Fund) to the Gross Settlement Fund, if and when, as a result of any appeal and/or

20 further proceedings on remand, or successful collateral attack, the fee or cost award is reduced or

21 reversed or for whatever reason the Settlement is terminated pursuant to this Stipulation. The

22 Released Parties shall not have any obligations or liability whatsoever with respect to any costs

23 and expenses to Class Representatives beyond those awarded by the Court to Class

24 Representatives, which shall be payable solely from the Gross Settlement Fund.

25 CLASS DISTRIBUTION ORDER & ADMINISTRATION EXPENSES

26 11. Class Counsel will apply to the Court for an order approving the Claims

27 Administrator's administrative determinations concerning the acceptance and rejection of the

28 claims submitted herein. and approving any fees and expenses relating to the administration of the

18,S'YIN I.:vrlo.\ ,%NI} AGREEMENT O SG7°rLF:1irvr

05 CV' 0179 lEG (J 11A)


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Settlement not previously paid by the Escrow Agent pursuant to } 9 or applied for, including the

fees and expenses of the Claims Administrator, and, only if the Effective Date (as defined in ¶ 26)

has occurred, directing payment of the Net Settlement Fund to Authorized Claimants (the "Class

Distribution Order")

DISTRIBUTION TO AUTHORIZED CLAIMANTS

12. Each Authorized Claimant shall be allocated a pro rata share of the Net Settlement

Fund based on his, her or its Recognized Claim compared to the Total Recognized Claims of all

Authorized Claimants, computed on the basis of the amount each Authorized Claimant paid for

their 50% SIP sales charge during the Class Period ("Recognized Claim") divided by the total

amount paid by all Authorized Claimants as a group for their 50% SIP sales charge during the

Class Period ("Total Recognized Claims") multiplied by the Net Settlement Fund (collectively

the "Plan of Allocation"). This is a claims-made settlement with no reversion of funds. First

Command shall not be entitled to receive any portion of the Gross Settlement Fund following the

Effective Date. Defendants shall have no involvement in or liability for reviewing, approving, or

challenging claims filed with the Claims Administrator in connection with this Settlement.

13. The Claims Administrator shall determine each Authorized Claimant's pro rata

share of the Net Settlement Fund based on the Plan of Allocation described in Ij 12, above). If.

after 180 calendar days following entry of the Class Distribution Order and after all efforts

authorized by the Court have been made to locate Authorized Claimants, there are any funds

remaining in the Net Settlement Fund because of uncashed settlement checks or for any other

reason ("Remainder), then the Claim Administrator must dispose of this Remainder as instructed

in the Escrow Agreement.

14. It is understood and agreed by the Parties that the Plan of Allocation, including. I

but not limited to, any adjustments to any Authorized Claimants claim set forth herein, is not part

of the Stipulation and is to be considered by the Court separately from the Court's consideration

of the fairness, reasonableness, and adequacy of the Settlement. Any order or proceeding relating

to the Plan of Allocation shall not operate to terminate or cancel the Stipulation or affect the

19. S rirI i..t rroN :^^n Acr2r:r:^rF.^ r OF St:rrr.M.«N:.N'r05 CV 01791fr;(; (JM A)


1 Finality of the Court's Judgment approving the Stipulation and the Settlement or any other orders

2 entered pursuant to the Stipulation.

3 ADMINISTRATION OF THE SETTLEMENT

4 15. Any Class Member who does not submit a timely and valid Proof of Claim will

5 not be entitled to receive any of the proceeds from the Net Settlement Fund but will otherwise be

6 bound by all of the terms of this Stipulation and the Settlement, including the terms of the

7 Judgment to be entered in the Action and the releases provided for herein, and will be barred from

8 bringing any action against the Released Parties concerning the Settled Claims, unless said Class

9 Member elects to exclude himself, herself, or itself from the Settlement in accordance with the

10 procedures and timing set forth in the Settlement Notice.

11 16. The Claims Administrator shall process the Proofs of Claim and, after the entry of

12 the Class Distribution Order, shall distribute the Net Settlement Fund to Authorized Claimants.

13 Except for the obligation of First Command to pay the Settlement Amount to the Escrow Agent in

14 accordance with ¶ 6 hereof, the Released Parties shall have no liability, obligation or

15 responsibility for the administration of the Settlement or disbursement of the Net Settlement

16 Fund.

17 17. For purposes of determining the extent, if any, to which a Class Member shall be

18 entitled to be treated as an Authorized Claimant, the following conditions shall apply:

19 (a) Each Class Member shall be required to submit a Proof of Claim or such

20 other documents or proof as the Claims Administrator, in its discretion. may deem acceptable;

21 (b) All Proofs of Claim must be submitted by the date specified in the

22 Settlement Notice unless such period is extended by order of the Court. Any Class Member who

23 fails to submit a Proof of Claim by such date shall be forever barred from receiving any payment

24 pursuant to the Settlement (unless, by Court Order, a later submitted Proof of Claim by such

25 Class Member is approved), but shall in all other respects be bound by all of the terms of this

26 Stipulation and the Settlement, including the terms of the Judgment to be entered in the Action.

27 and the releases provided for herein, and will be barred from bringing any action against the

28 Released Parties concerning the Settled Claims, unless said Class Member elects to exclude

20.Srir[ I.; IIOst\i) ACRFF3TEVI OFSET.II.EMIE\F

05 CV 0179 I E G (J VI A)


1 himself, herself, or itself from the Settlement in accordance with the procedures and timing set

2 forth in the Settlement Notice. A Proof of Claim shall be deemed to have been submitted when

3 posted, if it is received with a postmark on the envelope, if mailed by first-class mail, and if

4 addressed in accordance with the instructions thereon. In all other cases, the Proof of Claim shall

5 be deemed to have been submitted when actually received by the Claims Administrator, including

6 Proofs of Claim that have been filed online via the website www.fcsettlement.com;

7 (e) Each Proof of Claim shall be submitted to and reviewed by the Claims

8 Administrator, which shall determine in accordance with this Stipulation and the approved Plan

9 of Allocation the extent, if any, to which each claim shall be allowed, subject to review by the

10 Court pursuant to ¶ 17(e) below;

11 (d) Proofs of Claim that do not meet the submission requirements may be

12 rejected. Prior to rejection of a Proof of Claim, the Claims Administrator shall communicate with

13 the claimant in order to attempt to remedy the curable deficiencies in the Proof of Claim

14 submitted. The Claims Administrator shall notify, in a timely fashion and in writing, each

15 claimant whose Proof of Claim it proposes to reject in whole or in part, setting forth the reasons

16 therefor, and shall indicate in such notice that the claimant whose claim is to be rejected has the

17 right to a review by the Court if the claimant so desires and complies with the requirements of

18 ¶ 17(e) below; and

19 (e) If any claimant whose claim has been rejected in whole or in part desires to

20 contest such rejection, the claimant must, within twenty (20) calendar days after the date of

21 mailing of the notice required in ¶ 17(d) above, serve upon the Claims Administrator a notice and

22 statement of reasons indicating the claimant's grounds for contesting the rejection along with any

23 supporting documentation. and requesting a final review thereof by the Court. If a dispute

24 concerning a claim cannot be otherwise resolved, Class Counsel shall thereafter present the

25 request for review to the Court, which will have final decision-making power over any such

26 dispute(s).

27 18. The administrative determinations of the Claims Administrator accepting and

28 rejecting claims shall be presented to the Court for approval in the Class Distribution Order.

21. Srri'l I v l ION ,A\D AGRI E\EEYF OF SETTLEMENT05 CV 01791EG (JIM A)


1 19. Each claimant shall be deemed to have submitted to the jurisdiction of the Court,

2 and the claim will be subject to investigation and discovery under the Federal Rules of Civil

3 Procedure, provided that such investigation and discovery shall be limited to that claimant's

4 status as a Class Member and the validity and amount of such claimant's claim. No discovery

5 shall be allowed on the merits of the Action, the Settled Claims, the Settled Def'endants' Claims,

6 or the Settlement in connection with processing the Proofs of Claim.

7 20. Distribution of the Net Settlement Fund to Authorized Claimants pursuant to the

8 Settlement shall be deemed final and conclusive against all Class Members. All Class Members

9 whose claims are not approved shall be barred from participating in distributions from the Net

10 Settlement Fund, but otherwise shall be bound by all of the terms of this Stipulation and the

11 Settlement, including the terms of the Judgment to be entered in the Action, and the releases

12 provided for herein, and will be barred from bringing any action against the Released Parties

13 concerning the Settled Claims.

14 21. All proceedings with respect to the administration, processing, and determination

15 of claims described by ¶ 17 hereof, and the determination of all controversies relating thereto,

16 including disputed questions of law and fact with respect to the validity of claims, shall be subject

17 to the jurisdiction of the Court.

18 22. The Net Settlement Fund shall be distributed to Authorized Claimants by the

19 Claims Administrator, only after the Effective Date and after: (i) all claims have been processed,

20 and all claimants whose claims have been rejected or disallowed, in whole or in part, have been

21 notified and provided the opportunity to contest with the Claims Administrator such rejection or

22 disallowance; (ii) all objections with respect to all rejected or disallowed claims have been

23 resolved by the Court and all appeals therefrom have been resolved or the time therefor has

24 expired; (iii) all costs of administration have been paid; and (iv) the Court has entered the Class

25 Distribution Order directing such distribution.

26 (a) Accompanying each disbursement (or settlement check) issued to each

27 Authorized Claimant. the Claims Administrator shall include a notice in the form attached as

28 Exhibit C hereto informing the recipient of the terms of First Command's "Free Choice Plan."

27 SrIIIl I..-1'110\. \DAGR}:E.\IENI o! SE`rTLE\IE.vr

05 Cr' 0179 1 EG (JN-iA)


I Under First Command's "Free Choice Plan," each family comprised of one or more Authorized

2 Claimants is granted the option, in its sole discretion, to either (i) cash the settlement check(s)

3 issued by the Claims Administrator to the family's Authorized Claimant(s), or instead (ii)

4 endorse one or more of the settlement checks over to First Command in exchange for a credit of

5 up to three times (the "Multiple") the combined face amount of the endorsed check(s), up to a

6 maximum total credit ("Maximum") of $300. This credit can then be applied against the cost of

7 financial planning services under First Command's new Tailored Professional Services Program.

8 Each family comprised of one or more Authorized Claimants may exercise this credit option once

9 and must exercise the credit option within 180 days of the issuance of the settlement check(s).

10 Further, if the Claims Rate is below 50%, then the Multiple and Maximum may be adjusted

1 I accordingly, in an amount to be negotiated in good faith between the Parties (with Judge Adler

12 resolving any disputes).

13 TERMS OF PRELIMINARY ORDER

14 23. Promptly after this Stipulation has been fully executed, Class Counsel shall apply

15 to the Court for entry of a Preliminary Order, substantially in the form attached hereto as Exhibit

16 A. which shall, among other provisions, preliminarily approve the Settlement and direct notice

17thereof to the Class. The mailing of the Settlement Notice shall occur within sixty (60) calendar

18 days after the Preliminary Order has been entered. The publication of the Summary Notice shall

19 occur within fifteen (15) calendar days after the mailing of the Settlement Notice.

20 TERMS OF ORDER AND FINAL JUDGMENT

2124. If the Settlement contemplated by this Stipulation is preliminarily approved by the

22 Court pursuant to the Preliminary Order, then the Parties shall request that a Judgment be entered

23 in all material respects in the form annexed hereto as Exhibit B.

24SUPPLEMENTAL AGREEMENT

2525. Simultaneously herewith, Class Counsel and First Command's Counsel are

26executing a "Supplemental Agreement." Unless otherwise directed by the Court, the

27Su lcmcntal Agreement will not be tiled with the Court. As set forth in ¶' "^pP ' ^^ ^8, First Command

28

211.SiIPITA Io\ 1\D AGRE}:\IF,\'1' OF Sii i f.4:]I£\ f

05 CV0179 1 EG (JN1A)


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

may, in accordance with the terms set forth in the Supplemental Agreement, elect in writing to

terminate the Settlement and this Stipulation if a certain condition (the "Opt-Out Threshold") is

met and Class Counsel are unable to cure this condition in accordance with the terms of the

Supplemental Agreement. If required by the Court, the Supplemental Agreement and/or any of

its terms may be disclosed to the Court for purposes of approval of the Settlement, but such

disclosure shall be carried out to the fullest extent possible in accordance with the practices of the

Court so as to preserve the confidentiality of the Supplemental Agreement, particularly the Opt-

Out Threshold . In the event of a termination of this Settlement pursuant to the Supplemental

Agreement, this Stipulation and Settlement shall become null and void and of no further force and

effect, with the exception of the provisions of ^ 29 which shall continue to apply.

EFFECTIVE DATE OF SETTLEMENT, WAIVER, OR TERMINATION

26. The "Effective Date" of the Settlement shall be the date when all of the following

conditions shall have occurred:

(a) payment of the Settlement Amount pursuant to ¶ 6 herein;

(b) approval by the Court of the Settlement, following notice to the Class and a

hearing, as prescribed by Rule 23 of the Federal Rules of Civil Procedure;

(c) entry by the Court of a Judgment, in all material respects in the form set

forth in Exhibit B annexed hereto;

(d) the Judgment becomes Final, or, in the event that the Court enters a

judgment that differs from the Judgment in any material respect (-'Alternative Judgment") and

none of the Parties hereto elects to terminate this Settlement, such Alternative Judgment becomes

Final;

(e) expiration of the time for Defendants to exercise their termination rights

provided in the Supplemental Agreement and ¶ 25 herein; and

(f) the later of (i) expiration of the time to exercise the termination rights

provided in ¶ 27 hereof, or (ii) if a dispute arises regarding the right to terminate this Settlement

and thereby this Stipulation . the resolution of any such dispute as provided in IT 27(a ) hereof.

24.S'nrrt.. ^'rIo\ .\\) ACRE E'.l E\T OF SETTU: n v r

05 CV 0179IEG ( Jill A)


1 27. Class Representatives and First Command shall each have the right to terminate

2 the Settlement and thereby this Stipulation by providing written notice of their election to do so

3 ('`Termination Notice") to all other Parties within thirty (30) days of any of the following: (i) the

4 Court declining to enter the Preliminary Order in any material respect; (ii) the Court declining to

5 approve the Settlement as set forth in this Stipulation in any material respect; (iii) the Court

6 declining to enter the Judgment in any material respect; (iv) the date upon which the Judgment is

7 modified or reversed in any material respect by any level of appellate court; (v) entry by the Court

8 of an Alternative Judgment that differs from the Judgment in any material respect; or (vi) the date

9 upon which any Alternative Judgment is modified or reversed in any material respect by any level

10 of appellate court. Class Representatives shall also have the right to terminate the Settlement and

II thereby this Stipulation if the Settlement Amount is not paid pursuant to this Stipulation.

12 Notwithstanding any other provision or paragraph in this Stipulation, no action or inaction by the

13 Court or any appellate court relating solely to (i) any award of attorneys' fees and expenses

14 and/or any award to Class Representatives for reimbursement of costs or expenses pursuant to

15 ¶ 10 hereto, and/or (ii) the Plan of Allocation shall entitle Class Representatives to terminate the

16 Settlement or any part of this Stipulation.

17 (a) In the event that either Class Representatives or First Command terminates

18 this Settlement and thereby this Stipulation pursuant to ¶ 27 hereof and the other Party disputes

19 the basis for such termination, the Parties agree to, and shall, submit such dispute to Magistrate

20 Judge Jan M. Adler for a binding determination of the terminating party's right to terminate

21 pursuant to the provisions of this Stipulation. The Parties agree that Magistrate Judge Jan M.

22 Adler shall be the sole and exclusive arbiter of any such dispute and that his decision shall be

23 mandatory, binding. and not subject to any appeal or review.

24 28. Notwithstanding any other provision or paragraph in this Stipulation, First

25 Command may, in accordance with the terms set forth in the Supplemental Agreement, and in its

26 sole discretion, elect in writing to terminate the Settlement and this Stipulation If the Opt-Out

27 Threshold is exceeded and not cured in accordance with the terms of the Supplemental

28 Agreement.

25, ST IPULATION ANi) AGREESIEN F OF SETTLEMENT05 (:V 0t79IEG (JN1A)


29. Except as otherwise provided herein, in the event the Settlement is terminated

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

pursuant to this Stipulation, the Parties shall be deemed to have reverted to their respective status

in the Action as of August 27, 2008 and, except as otherwise expressly provided, shall proceed in

all respects as if this Stipulation and any related orders had not been entered. Furthermore, within

ten (10) business days following any termination of this Settlement, Class Counsel will repay into

the Gross Settlement Fund any amount that has already been paid to Class Counsel for attorneys'

fees and expenses (together with interest thereon at the same rate as is earned on the Gross

Settlement Fund), and Class Representatives will repay into the Gross Settlement Fund any

amount that has already been paid to Class Representatives as reasonable costs and expenses

(together with interest thereon at the same rate as is earned on the Gross Settlement Fund). The

Escrow Agent shall then promptly pay to First Command an amount equal to the Settlement

Amount together with any interest or other income earned thereon or in respect thereof while held

in escrow, less any Taxes paid, less any amounts required to be paid to the Escrow Agent

pursuant to the relevant escrow agreement, and less any reasonable costs of administration and

notice actually incurred and paid or payable from the Settlement Amount (as described in ¶ 6

hereof), less any applicable withholding taxes.

30. Except as otherwise provided herein, if the Settlement is terminated pursuant to

this Stipulation, or the Settlement is not approved by the Court, or the Settlement does not

otherwise become effective, the Parties agree that the law firms of WHATLEY DRAKE & KALLAS

LLC, 2001 Park Place North, Suite 1000, Birmingham, Alabama 35203 and BLUMENTHAL &

NORPREHAUG, 2255 Calle Clara, La Jolla, California 92037 shall be jointly and severally

responsible for returning to First Command the Gross Settlement Amount, plus all interest

accrued thereon and less any administration costs and expenses incurred by the Claims

Administrator as described in TT 9 and 11 hereof.

NO ADMISSION OF WRONGDOING

31. This Stipulation, whether or not consummated, and any proceedings taken

pursuant to it:

26. STfrl LA 'llo\ .t n AGRF: FSIVN 1 OF SETTLEM ENT

05 CV 0179 IEC (JN!A)


1 (a) shall not be offered or received against any Released Party as evidence of,

2 or construed as or deemed to be evidence of, any presumption, concession, or admission by any

3 Released Party regarding the truth of any fact alleged by any Class Member or the Class

4 Representatives or the validity of any claim that has been or could have been asserted in the

5 Action or in any other action, or the deficiency of any defense that has been or could have been

6 asserted in the Action or in any other action, or of any liability, negligence, fault, or wrongdoing

7 of any Released Party;

8 (b) shall not be offered or received against any Released Party as evidence of a

9 presumption, concession, or admission of any fault, misrepresentation, or omission with respect

10 to any statement or written document approved or made by any Released Party;

11 . (c) shall not be offered or received against any Released Party as evidence of a

12 presumption, concession, or admission with respect to any liability, negligence, fault, or

13 wrongdoing in any other civil, criminal, or administrative action or proceeding, other than such

14 proceedings as may be necessary to effectuate the provisions of this Stipulation; provided,

15 however, that if this Stipulation is approved by the Court, the Released Parties may refer to it to

16 effectuate the releases granted them hereunder;

17 (d) shall not be construed against any Released Party as an admission or

18 concession that the consideration to be given hereunder represents the amount that could be or

19 would have been recovered after trial; and

20 (e) shall not be construed as or received in evidence as an admission,

21 concession, or presumption against the Class Representatives or any of the Class Members that

22 any of their claims are without merit, or that any defenses asserted by Defendants have any merit,

23 or that damages recoverable under the Action would not have exceeded the Settlement Amount.

24 MISCELLANEOUS PROVISIONS

25 32. All of the exhibits attached hereto are hereby incorporated by reference as though

26 fully set forth herein.

27 33. The Parties intend the Settlement to be a final and complete resolution of all

28 disputes asserted or which could be asserted by the Class Members against the Released Parties or

27. SrIYI I.A'I'IO\

05(:V 0179 IEG (JMA)


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

any of them with respect to the Settled Claims. Accordingly, Class Representatives, on behalf of

themselves and the Class, and Defendants agree not to assert in any forum that the Action was

brought by Class Representatives or any Class Member, or defended by Defendants, in bad faith

or without a reasonable basis. The Parties shall assert no claims of any violation of Rules 11 or

37 of the Federal Rules of Civil Procedure relating to the prosecution, defense, or settlement of

the Action. The Parties affirm that they are aware of no facts or circumstances that would give

rise to any violations of Rules 11 or 37 of the Federal Rules of Civil Procedure relating to this

Action. The Parties shall request that the Court, in connection with its entry of the Judgment,

make specific findings of fact that Class Representatives and Class Counsel initiated, maintained,

and prosecuted the Action in good faith and in accordance with Class Counsel's obligations under

Rules 11 and 37 of the Federal Rules of Civil Procedure.

34. The Released Parties may file the Stipulation and/or the Judgment in any action

that may be brought against them in order to support a defense or counterclaim based on

principles of res judicata, collateral estoppel, full faith and credit, release, good faith settlement,

judgment bar or reduction, or any other theory of claim preclusion or issue preclusion or similar

defense or counterclaim.

35. The Parties agree that the Settlement 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.

36. In the event that one or more of the Parties institutes any legal action against any

other Party to enforce the provisions of the Settlement or this Stipulation, or to declare rights or

obligations under the Settlement or this Stipulation prior to the Effective Date, the successful

Party or Parties shall be entitled to recover from the unsuccessful Party or Parties reasonable

attorneys' fees and costs incurred in connection with any such enforcement action.

37. Nothing in this Stipulation or the negotiations or proceedings relating to this

Stipulation and the Settlement is intended to or shall be deemed to constitute a waiver of any

applicable privilege or immunity.

28 S711'I I .vI IO\ A ND AGRF:F:MIF:\T OF SETTLEMENT

05CV01791LG(JNIA)


1 38. This Stipulation may not be modified or amended, nor may any of its paragraphs

2 or provisions be waived, except by a writing signed by First Command and each Class

3 Representative, on behalf of themselves and the Class, or their successors-in-interest. The clients

4 authorize their respective counsel to sign and bind them to any amendment hereto or ancillary

5 agreement referred to herein.

6 39. The headings herein are used for the purpose of convenience only and are not

7 meant to have legal effect.

8 40. The administration and consummation of the Settlement as embodied in this

9 Stipulation shall be under the authority of the Court, and the Court shall retain jurisdiction for the

10 purpose of entering orders providing for awards of attorneys' fees and expenses to Class Counsel,

11 enforcing the terms of this Stipulation, and resolving any disputes that may arise in connection

12 with this Stipulation or the Settlement.

13 41. The waiver by one Party of any breach of this Stipulation by any other Party shall

14 not be deemed a waiver of any other prior or subsequent breach of this Stipulation.

15 42. This Stipulation, its exhibits, the Supplemental Agreement, and the Escrow

16 Agreement supersede all prior agreements and constitute the entire agreement concerning the

17 Settlement of the Action as to the Parties and any and all Settled Claims and Settled Defendants'

18 Claims. No representations, warranties, or inducements have been made by or on behalf of any

19 Party hereto concerning this Stipulation, its exhibits, the Supplemental Agreement. and the

20 Escrow Agreement other than those contained and memorialized in such documents.

21 43. This Stipulation may be executed in one or more counterparts including by

22 signature transmitted by facsimile or scanned image. All executed counterparts and each of them

23 shall be deemed to be one and the same instrument.

24 44. This Stipulation shall be binding upon, and inure to the benefit of, the Parties and

25 their respective agents, executors, heirs, successors and assigns.

26 45. All agreements made and orders entered during the course of the Action relating to

27 confidentiality of information shall survive the execution. performance. and/or termination of this

28 Stipulation.

29 S"III'L L.-1"1IO A\"1)AGIiF.E^1E:\T O1 $1;'1"f1,F:ÎF.^"r

05CV0179IEG(JNIA)

Case ;:05-cv-00179-IEG-JMA Document 250-3 Filed 10/16/2008 Page 43 of 106

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

46. The construction and interpretation of this Stipulation and the Supplemental

Agreement shall be governed by the internal laws. of the State of California without regard to

conflicts of laws, except to the extent that federal law of the United States requires that federal

law governs.

47. This Stipulation shall not be construed more strictly against one Party than another

merely by virtue of the fact that it, or any part of it, may have been prepared by counsel for one of

the Parties, it being recognized that it is. the result of arm's-length negotiations between the

Parties and that all Parties have contributed substantially and materially to the preparation of this

Stipulation.

48. All counsel and any other person executing this Stipulation, any of the exhibits

hereto, or any related Settlement documents, warrant and represent that they have the full

authority to do so and that they have the authority to take appropriate action required or permitted

to be taken pursuant to the Stipulation to effectuate its terns.

49. The Parties agree to cooperate fully with one another in seeking Court approval of

the Preliminary Order, the Stipulation and the Settlement, and to promptly agree upon and

execute all such other documentation as may be reasonably required to obtain final approval by

the Court of the Settlement.

COOLEY GODWARD KRONISH LLP4401 Eastgate MallSan D'ego, Cali rnia 92121

Octoberfj, 2008

W lia E. Grauer

October, 2008

Koji F. Fukumura1, 1Attorneysfo e nts First Command Financial Plan n ng,Inc. and Firs Command Financial Services, Inc.

30,STiPULA'r1ON ANA AGREEMENT OF SETL'LEMENT

05 CV 0179 lEG (JMA)


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

4

October r.!, 2008J. ScgSpiker

Chief Executive Officer forFirst Command Financial Planning, Inc.

Defendant

r

October L, 2008J. ott Spiker

v Chief ecutive Officer forFirst Command Financial Services, Inc.

Defendant

SHEPPARD MULLIN RICHTER & HAMPTON LLP501 West Broadway , Suite 1900San Diego , California 92101

October _, 2008

I October _, 2008

I October-, 2008

October 2008^3_ .

Robert D. Rose

Attorneys for Defendants Lamar C. Smith and Howard M.Crump

Defendant

Lamar C. Smith

Howard M. Crump

Defendant

BLUMENTHAL & NORDREHAUG2255 Calle Clara

31.STIPULATION AND AGltmwwr OF SE7 ri.rmLNF

05 CV 0179IEG (JMA)

Attorneys for Plaintiffs


3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

October , 2008

October , 2008

October/,'/, 2008

1 October _, 2008

J. Scott SpikerChief Executive Officer for

First Command Financial Planning, Inc.

Defendant


First Command Financial Services, Inc.

Defendant

SHEPPARD MULLIN RICHTER & HAMPTON LLP501 West Broadway, Suite 1900San Diego , California 92101

Robert D. Rose

Attorneysfor Defendants Lamar C. Smith and Howard M.Crump

Lamar C. Smith

October , 2008

Defendan t

Howard M. Crump

October , 2008

Defendant

BLUMENTHAL & NORDREHAUG2255 Calle ClaraLa Jolla , California 92037

Norman B. Blumenthal

Attorneysfor Plaintiffs

STIPUf..Ai io AND AGRF:E%II'T cw SETTLEMENT05 CV O 179 IEG (JMA)


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

October, 2008

October , 2008


First Command Financial Planning, Inc.

Defendant



Defendant

SHEPPARD MULLIN RICHTER & HAMPTON LLP501 West Broadway, Suite 1900San Diego , California 92101

October_, 2008Robert D. Rose

Attorneysfor Defendants Lamar C. Smith and Howard M.Crump

October 13, 2008Lamar C. Smith

Defendant

October/5 200877 ward M. Cmfx6

BLUMENTHAI. & NORDREHAUG2255 Calle ClaraLa Jolla, California 92037

October , 2008Norman B . Blumenthal


a 1.S] I MI A lioN AN]) %ciiI;IM N'r OF SE: r-ru; WNr

05 CV 0 179 IE( (JMA)


1

2 October 2008J. Scott Spiker

3 Chief Executive Officer forFirst Command Financial Planning, Inc.

4 Defendant

5

6 October 2008J. Scott Spiker

7 Chief Executive Officer forFirst Command Financial Services, Inc.

8 Defendant

9 SHEPPARD MULLIN RICHTER & HAMPTON LLP501 West Broadway, Suite 1900

10 San Diego, California 92101

11October 2008

12 Robert D. Rose

13 Attorneysfor Defendants Lamar C. Smith and Howard M.Crump

14

15 October_, 2008Lamar C. Smith

16Defendant

17

18 October _, 2008Howard M. Crump

19Defendant

20BLUMENTHAL & NORDREHAUG

21 2255 Calle ClaraLa Jolla, California 92037

22October , 2008

23 Norman B. Blumenthal

24 Attorneys for Plaintiffs

25

26

27

28

i 1 .S'i IPt I.A I I0\ AÌ) ,1GREE:SII \7 OP SE'I1'I.FAEE1"r

05 CV 0179 1 EG (JMA)


1

2

3

4

5

6

7

8

9'

10

• 11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Octoberiii,

2008

WHATLEY DRAKE & KALLAS LLC2001 Park Place North, Suite 1000Rip uingham, Alabaria 35203

October _, 2008

October _, 2008

October -, 2008

October , 2008

October _, 2008

October _, 2008

I/ Joe R . Whatley .lr.


GRECO TRAFICANTE SCHULZ & BRICK185 West F Street, Suite 400San Diego, California 92101

Peter J. Schulz

Attorneysfor Plaint/fs

BREWER & CARLSON LLP4275 Executive Square, Suite 1020La Jolla , California 92037

G. Mark Brewer

Atlorrreycfor Plnlrrtfs

FRANKLIN GRAY & WHITE505 West Ornsby AvenueLouisville , Kentucky 40203

Mark K. Gray

Attorneysfor PfirintjJs

Michael McPhailClass Representative

Robert Barr Kinmach Ill

Class Representative

-- Scott Wage-er

Class Represen tative

5'l'ivri ,.1 nYU\ VNI) ,t(;REENI :\'Y OF Si rrLE\11\1.34. OS CV 0179 IEG (JM. )

Case 3

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

179-IEG-JMA Document 250-3 Filed 10/16/2008 Page 49 of 106

October_, 2008

I October I , 2008

I October_, 2008

October , 2008

October 2008

October _, 2008

October -, 2008

WHATLEY DRAKE & KALLAS LLC2001 Park Place North, Suite 1000Birmingham, Alabama 35203

Joe R . Whatley, Jr.

Atlortreysfor Plaintiffs

GRECO TRAFICANTE SCHULZ & BRICK185 West F SWet , Suite 400San Diego,^*nia 92101

Peter J. Schulz


BREWER & CARLSON 11.P4275 Executive Square , Suite 1020La Jolla, California 92037

G. Mark Brewer

Attoriteycfor Plaintiffs

FRANKLIN GRAY & WHITE505 West Ornsby AvenueLouisville, Kentucky 40203

Mark K. Gray

Attortte tJsfor Plaintiffs

Michael McPhailClass Representative

Robert Barr Kininach III


Scott Wagner


5IIPI'E.%FION .A\I) 1GftrI'.u}_V'rOFSETrE .v.,uV\r

05 CV 0179lEG (JMA)

Case L:05-cv-00179-IEG-JMA Document 250-3 Filed 10/16/2008 Page 50 of 106

3

4

5

6

7

8

9

10

12

13

14

15

16

17

18

19

20

21

22

23

24

25

2 6

27

28

October , 2008

October _, 2008

Octobeke, 2008

October , 2008

October -, 2008

October _, 2008

October . 2008

WHATLEY DRAKE & KALLAS LLC2001 Park Place North, Suite 1000Birmingham, Alabama 35203

Joe R. Whatley, Jr.

Attorrret=s for Plaintiffs

GRECO TRAFICANTE SCHULZ & BRICK185 West F Street, Suite 400San Diego, California 92101

Peter]. Schulz

Attorneys for Plaintiffs

BREWER & CARLSON LLP4275 Executive Square, Suite 1020La Jolla, California 92037

CJ. mark brewer

Attortrel'sfor Plaintiffs

FRANKLIN GRAY & WHITE505 West Ornsby AvenueLouisville, Kentucky 40203



Mark K. Gray

Michael Mcl'hai

Robert Barr Kininach III

Class Pepreseurlnlive


Scott Wagner

Sn f u..t!'Io\ :tmflAG Ina:\ t.m-oF

05 cv 0179 WE(; (JM:t)


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

October , 2008Krystin Wagner

October , 2008


Neil Hurley

October , 2008


Candace Hurley


33 STn'uI.,AT10\ A ND AGREEMENT OF SE '1"rl.E%1ENT

05 CV 0179 lEG (JMA)


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28




Plaintiffs,

Case No. 05 CV 179 IEG (JMA)

ORDER FOR NOTICE AND HEARING

Judge: Hon. Irma E. Gonzalez

V.

FIRST COMMAND FINANCIALPLANNING, INC., a Texas Corporation;FIRST COMMAND FINANCIALSERVICES, INC., a Texas Corporation;LAMAR C. SMITH; and HOWARD M.CRUMP,

Defendants.

ORDER FOR NOTICE An HEARING

0 CV 0179 IEG (JNIA)


1 WHEREAS, a class action is pending before this Court entitled: !McPhail v. First

2 Command Financial Planning, Inc., Case No.: 3: 05-CV-0179 lEG (JMA) (the "Action");

3 WHEREAS, on January 31, 2005, Michael McPhail, Robert Barr Kimnach III, and

4 Leonardo Giovannelli initiated this Action by filing a complaint against Defendants;

5 WHEREAS, on March 30, 2005, McPhail, Kimnach, and Giovannelli filed the First

6 Amended Complaint ("FAC"), in which they were joined as named plaintiffs by Kevin Morrison,

7 Jennifer Morrison, Scott Wagner, Krystin Wagner, Candace Hurley, and Neil Hurley;

8 WHEREAS, on June 9, 2005, the Court appointed Michael McPhail, Robert Barr

9 Kimnach III, Leonardo Giovannelli, Kevin Morrison, Jennifer Morrison, Scott Wagner, Krystin

10 Wagner, Candace Hurley, and Neil Hurley as lead plaintiffs.'

11 WHEREAS, on July 22, 2005, plaintiffs filed their Consolidated Amended Complaint ("CAC").

12 WHEREAS, on February 27, 2006, defendants moved to dismiss the CAC.

13 WHEREAS, on April 10, 2006, the Court granted, in part, and denied, in part, defendants'

14 motion to dismiss the CAC, and granted plaintiffs leave to amend their complaint.

15 WHEREAS, on May 1, 2006, plaintiffs filed their Consolidated Second Amended

16 Complaint ("SAC"), which Defendants moved to dismiss on May 3 1, 2006.

17 WHEREAS, on July 27, 2006, the Court granted, in part, and denied, in part, defendants'

18 motion to dismiss;

19 WHEREAS, on April 30, 2007, plaintiffs filed their motion for class certification;

20 WHEREAS, on July 30, 2007, the Court granted, in part, plaintiffs' motion for class

21 certification, appointing Plaintiffs (as defined above) as Class Representatives in the Action and

22 certifying a class of "all persons who, during the period from January 31, 2000 through December

23 31, 2004, made a SIP payment so as to be charged a 50% sales charge on the money placed at that

24 time into the SIP through First Command and still owned the SIP on December 15, 2004, and

25 who did not terminate within forty-five (45) days of purchasing the SIP so as to receive a full

26 refund of the sales charge." Excluded from the Class are (i) Defendants; (ii) all officers,

27' Leonardo (iiovannelli. Kevin Morrison_ and Ienniter Morrison were later removed as lead

28 plaintiffs.

1 Oiuwit FOR No"rl(i-; Aim) HFARING05 CV O 179 I EG (J MA)


1 directors, and partners of any Defendant and of any Defendant's partnerships, subsidiaries, or

2 affiliates, at all relevant times; (iii) members of the immediate family of any of the foregoing

3 excluded parties; (iv) the legal representatives, heirs, successors, and assigns of any of the

4 foregoing excluded parties; and (v) any entity in which any of the foregoing excluded parties has

5 or had a controlling interest at all relevant times.

6 WHEREAS, on August 13, 2007, Plaintiffs filed their Consolidated Third Amended

7 Complaint ("TAC"), which is the operative complaint in this Action, to conform the class

8 definition with the Court's class certification order.

9 WHEREAS, on August 27, 2008, the Parties engaged in a settlement conference with the

10 Honorable Jan M. Adler and, on August 29, 2008, reached an agreement in principle to settle the

11 Action;

12 WHEREAS, the Parties entered into a Stipulation and Agreement of Settlement dated

13 October ji, 2008 ("Stipulation");

14 WHEREAS, pursuant to Rule 23 of the Federal Rules of Civil Procedure, the Parties

15 having presented the settlement of the Action to the Court for preliminary approval in accordance

16 with the Stipulation; and

17 WHEREAS, the Stipulation, together with the exhibits thereto, sets forth the terms and

18 conditions for the proposed settlement of the claims alleged in the TAC.

19 NOW, upon consent of Class Representatives, on behalf of themselves and the Class, and

20 Defendants (collectively, the "Parties"), and after review and consideration of the Stipulation

21 filed with the Court and the exhibits annexed thereto, and after due deliberation,

22 IT IS HEREBY ORDERED that:

23 1. The Court, for purposes of this Order for Notice and Hearing (the '`Preliminary

24 Order"), adopts all defined terms as set forth in the Stipulation.

25 2. Class Counsel are authorized to act on behalf of the Class with respect to all acts

26 required by, or which may be given pursuant to, the Stipulation, or such other acts that are

27 reasonably necessary to consummate the proposed Settlement set forth in the Stipulation.

28

ORDER Fol' No-rici: AN1n HEARINGOS CV 0179 1EG (JNIA)


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

3. The Court appoints Gilardi & Co. ("Gilardi") as Claims Administrator to supervise

and administer the notice and claims procedures in connection with the Settlement. The Parties

and their counsel shall not be liable for any act or omission of the Claims Administrator.

4. The Escrow Agent is authorized and directed: (i) to prepare any tax returns and

any other tax reporting regarding the Gross Settlement Fund created in the Settlement; (ii) to pay

from the Gross Settlement Fund any Taxes owed with respect to the Gross Settlement Fund; and

(iii) to otherwise perform all obligations with respect to Taxes and any reporting or filings in

respect thereof as contemplated by the Stipulation, without further order of the Court.

5. The Court preliminarily approves: (i) the Settlement of the Action as set forth in

the Stipulation, and (ii) the proposed Plan of Allocation described in the Settlement Notice,

subject to the right of any member of the Class to challenge the fairness, reasonableness, and

adequacy of the Settlement, Stipulation, or the proposed Plan of Allocation, and to show cause, if

any exists, why a final judgment dismissing the Action based on the Stipulation should not be

ordered herein after due and adequate notice to the Class has been given in accord with this

Preliminary Order.

6. Pursuant to FED. R. Civ. P. Rule 23(e), a hearing ("Fairness 1-fearing") shall be

held on , 2009, at .m., in the United States District Court for the Southern

District of California, the Hon. Irma E. Gonzalez presiding, to:

a. determine whether the Settlement should be approved by the Court as fair,

reasonable, adequate, and in the best interests of the Class;

b. determine whether the Judgment should be entered pursuant to the

Stipulation, inner (ilia, dismissing the Action against Defendants with prejudice and extinguishing

and releasing all Settled Claims as set forth in ¶ 3 of the Stipulation and barring all Settled

Defendants Claims as set forth in T 4 of the Stipulation;

c. determine whether to approve the Plan of Allocation:

d. rule on Class Counsel's application for an award of attorneys' fees and

reimbursement of expenses, and any request of Class Representatives for reimbursement of

reasonable costs and expenses; and

ORDER FOR No'IICE Am) HEA RING

US (Ni 0179 1 LG (.J %I A)


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

e. rule on such other matters as the Court may deem appropriate.

7. The Court reserves the right to adjourn the Fairness Hearing or any aspect thereof,

including the consideration of the application for attorneys ' fees and reimbursement of expenses,

without further notice of any kind to the Class.

8. The Court reserves the right to approve the Settlement at or after the Fairness

Hearing, with modification by consent of the Parties and without further notice to the Class.

9. The Claims Administrator shall make reasonable efforts to identify all persons

who are members of the Class. Within fifteen (15) calendar days following the Court's entry of

this Preliminary Order, First Command shall provide to the Claims Administrator, if necessary, a

list(s), as it or its transfer agent may possess , which is appropriate for providing notice to the

Class and in a format , designated by the Claims Administrator , which is appropriate for mailings.

First Command shall bear any costs associated with providing this information to the Claims

Administrator.

10. Within sixty (60) calendar days after the entry of this Preliminary Order, the

Claims Administrator shall cause a copy of the Settlement Notice and the Proof of Claim form

("Proof of Claim"), substantially in the forms of Tabs 1 and 2 attached hereto, to be mailed by

United States mail, postage pre-paid , to all reasonably ascertainable members of the Class, at their

last known address appearing in the transfer records maintained by or on behalf of First

Command (the "Notice Date").

11. Class Counsel shall file with the Court and serve upon counsel for Defendants, no

later than seven (7) calendar days prior to the Fairness Hearing, an affidavit or declaration

describing the efforts taken to comply with this Preliminary Order and stating that the mailings

have been completed in accordance with the terms of this Preliminary Order.

12. Within fifteen (15) calendar days of the Notice Date, Class Counsel shall publish a

Summary Notice, substantially in the form of Tab 3 attached hereto, once in the Military Times.

Class Counsel shall tile with the Court and serve upon counsel for Defendants, no later than seven

(7) calendar days prior to the Fairness Hearing, an affidavit or declaration stating that the

Summary Notice has been published in accordance with the terns of this Order.

4. ORDI.H FOR NOTICE As-n WANG05 CV 0179 lEG (Jr t)


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

13. The form and method of notice specified herein is the best notice practicable, shall

constitute due and sufficient notice to all persons and entities entitled to receive such notice, and

shall fully satisfy the requirements of due process, Rule 23 of the Federal Rules of Civil

Procedure, and 15 U.S.C. §78u-4(a)(7).

14. Any member of the Class who timely and properly objects to the Settlement, the

Plan of Allocation, Class Counsel's application for attorneys' fees and reimbursement of

expenses, and/or Class Representatives' application for reimbursement of reasonable costs and

expenses directly relating to their representation of the Class, or who otherwise wishes to be

heard, may appear in person or by his or her attorney at the Fairness Hearing and present

evidence or argument that may be proper or relevant; provided, however, that no person or entity

other than the Parties and their counsel shall be heard, and no papers, briefs, pleadings, or other

documents submitted by any person or entity shall be considered by the Court unless, no later

than -, 2009 [45 days from the date of mailing of the Settlement Notice], such person or

entity files with the Court and serves upon counsel listed below: (i) a written notice of intention to

appear containing the person or entity's name, address, telephone number, and signature; (ii) a

statement of such person or entity's objections to any matters before the Court; and (iii) the

grounds therefore or the reasons that such person or entity desires to appear and be heard, as well

as all documents or writings such person or entity desires the Court to consider. Such filings shall

be served upon the Court and the following counsel:

Attorneysfor Defendants First Command Financial Planning,Inc. and First Command Financial Services, Inc.

William E. GrauerKoji F. FukumuraCOOLEY GODWARD KRONISH L,LP4401 Eastgate MallSan Diego, California 92121

ou i :i Fou No rice: ANi) HEARING05 CV 0179 IEG (JMA)


1 Attorneys for Defendants Lamar C. Smith and Howard M.Crump

2Robert D. Rose

3 SHEPPARD MULLIN RICHTER & HAMPTON LLP501 West Broadway, Suite 1900

4 San Diego , California 92101

5 Attorneysfor Plaintiffs

6 Norman B. BlumenthalBLUMENTHAL & NORDREHAUG

7 2255 Calle ClaraLa Jolla, California 92037

8Attorneys for Plaintiffs

9Joe R. Whatley, Jr.

10 WHATLEY DRAKE & KALLAS LLC2001 Park Place North, Suite 1000

11 Birmingham , Alabama 35203

12 Attorneysfor Plaintiffs

13 Clyde C. Greco, Jr.GRECO TRAFICANTE SCHULZ & BRICK

14 185 West F Street, Suite 400San Diego , California 92101

15Attorneys for Plaintiffs

16G. Mark Brewer

17 BREWER & CARLSON LLP4275 Executive Square, Suite 1020

18 La Jolla, California 92037

19 Attorneys for Plaintiffs

20 Mark K. GrayFRANKLIN GRAY & WHITE

21 505 West Ornsby AvenueLouisville, Kentucky 40203

22

23 15. Any person falling within the definition of the Class may, upon request, be

24 excluded from the Settlement. Any such person must submit to the Claims Administrator a

25 request for exclusion ("Request for Exclusion") no later than _ __. 2009 [45 days from the

26 date of mailing of the Settlement Notice]. A Request for Exclusion must be signed by the person

27 requesting exclusion and state: (i) the name. address, and telephone number of the person

28 requesting exclusion ; and (ii) that the person wishes to be excluded from the Class. Copies of all

6. ORDER FOR NOTICE AN[) HEARING05 CV' 0179 lEG (JMA)


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Requests for Exclusion, including supporting documentation submitted therewith, that are

received by the Claims Administrator shall be delivered to Class Counsel and Defendants'

counsel within two (2) business days of receipt thereof. All persons who submit valid and timely

Requests for Exclusion in the manner set forth in this paragraph shall have no rights under the

Stipulation and shall not share in any distribution of the Settlement Amount.

16. Any Class Member who wishes to participate in the Settlement and receive a

distribution from the Net Settlement Fund created by the Settlement must submit a valid and

properly executed Proof of Claim to the Claims Administrator, at the address indicated in the

Settlement Notice, postmarked not later than , 2009 [60 days from the date of

mailing of the Settlement Notice]. Such deadline may be further extended by Court order. If

mailed by first class, registered, or certified mail, postage prepaid, and addressed in accordance

with the instructions given in the Proof of Claim, then such Proofs of Claim shall be deemed to

have been submitted when postmarked. All other Proofs of Claim shall be deemed to have been

submitted at the time they are actually received by the Claims Administrator, including those

submitted online via the website www.fcsettlement.com. To be valid, a Proof of Claim must: (i)

be completed in a manner that permits the Claims Administrator to determine the eligibility of the

claim as set forth in the Proof of Claim; (ii) include the release by the claimant of all Settled

Claims as set forth in the Stipulation; and (iii) be signed with an affirmation that the information

is true and correct. As part of the Proof of Claim, each Class Member shall submit to the

jurisdiction of the Court with respect to the claim submitted, and shall (subject to the effectuation

of the Settlement reflected in the Stipulation) agree and enter into the releases as provided in the

Stipulation. All Class Members who do not submit valid and timely Proofs of Claim shall be

forever barred from receiving any payments pursuant to the Settlement, but will in all other

respects be bound by all of the terms of the Stipulation and the Settlement, including the releases

provided for therein, and all of the terms of the Judgment, if entered, whether favorable or

unfavorable, and will be barred from bringing any action against any Released Party (as defined

in the Stipulation) concerning or relating to the Settled Claims. unless such persons or entities

request exclusion from the Class in a timely and proper manner. as provided herein.

7. ORDER FOR NOTICE A\1) t1E. RING

05 (A 0179 1 EG (J M,%)


1

2

3

4

5

6

7

8

9

10

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

17. If this Settlement, including any amendment made in accordance with ¶ 38 of the

Stipulation, is not approved by the Court or is terminated or otherwise does not become Final for

any reason whatsoever, then the Settlement (including any modification thereof) made with the

consent of the Parties as provided for in the Stipulation, and any actions taken or to be taken in

connection therewith (including this Preliminary Order and any judgment entered herein), shall be

terminated, shall become void, and shall be of no further force and effect, except that any

obligations or provisions relating to payment of costs and expenses incurred in connection with

notice and claims administration and any other obligation or provision that is expressly

designated in the Stipulation to survive termination of the Settlement shall survive termination of

the Stipulation.

18. All proceedings in the Action, other than such proceedings as may be necessary to

carry out the terms and conditions of the Settlement, are hereby stayed and suspended until

further order of this Court. Pending final approval of the Settlement, Class Representatives and

all Class Members are barred and enjoined from commencing, prosecuting, or asserting in any

forum, either directly or indirectly, on their own behalf or on behalf of any class or other person,

any Settled Claim against any of the Released Parties.

19. The Stipulation, including any provisions contained in the Stipulation, any

negotiations, statements, or proceedings in connection therewith, or any action undertaken

pursuant thereto:

(a) shall not be offered or received against any Released Party as evidence of

or construed as or deemed to be evidence of any presumption, concession, or admission by any

Released Party with respect to the truth of any fact alleged by any Class Member or the Class

Representatives or the validity of any claim that has been or could have been asserted in the

Action or in any other action, or the deficiency of any defense that has been or could have been

asserted in the Action or in any other action. or of any liability, negligence. fault, or wrongdoing

of any Released Party;

8. ounek Forz No"ru:e Amu IIe.mm:05 CV 01791EG (J111.t)


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

(b) shall not be offered or received against any Released Party as evidence of a

presumption, concession or admission of any fault, misrepresentation or omission with respect to

any statement or written document approved or made by any Released Party;

(c) shall not be offered or received against any Released Party as evidence of a

presumption, concession, or admission with respect to any liability, negligence, fault, or

wrongdoing in any civil, criminal, or administrative action or proceeding, other than such

proceedings as may be necessary to effectuate the provisions of the Stipulation; provided,

however, that if the Stipulation is approved by the Court, then the Released Parties may refer to it

to effectuate the releases and other liability protection granted to them hereunder;

(d) shall not be construed against any Released Party as an admission or

concession that the consideration to be given pursuant to the Stipulation represents the amount

that could be or would have been recovered after trial; and

(e) shall not be construed as or received in evidence as an admission,

concession, or presumption against Class Representatives or any of the Class Members that any

of their claims are without merit, or that any defenses asserted by Defendants has any merit, or

that damages recoverable under the Action would not have exceeded the Settlement Amount.

20. Any Party making submissions to the Court in support of approval of the

Settlement or the Plan of Allocation, or in support of any application for an award of attorneys'

fees and reimbursement of expenses or for reimbursement of costs and expenses of Class

Representatives, shall do so by seven (7) calendar days before the date scheduled for the Fairness

Hearing.

21. The Court authorizes payment out of the Gross Settlement Fund of the notice and

administrative expenses that are described in ^ 9(b) of the Stipulation.

22. The passage of title and ownership of the Gross Settlement Fund to the Escrow

Agent in accordance with the terms of the Stipulation is approved. With the exception of Class

Counsel and Class Members, no person or entity shall have any right to any portion of, or in the

distribution of, the Gross Settlement Fund or Net Settlement Fund, unless otherwise ordered by

the Court or otherwise provided in the Stipulation.

9 ORDER FOR NOTICE A\1 I] EARiNC

05 CV 0179 IE( (JVIA)


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

23. The Court further retains jurisdiction over this Action to consider all further

matters arising out of or connected with the Settlement reflected in the Stipulation, including

enforcement of the releases provided for in the Stipulation.

24. The Court may, for good cause, extend any of the deadlines set forth in this Order

without further notice to Class Members.

IT IS SO ORDERED.

Dated: , 2008

Hon. Irma E. Gonzalez

United States District Court Judge

10 .ORDER FOR No'I ICE: A\i7 HEARING

05 CV 0179 I EG (J M A)

Case 3:05-cv-00179-IEG-JMAJM1BOc ttSO&B^T c lad 10/16/2008 Page 63 of 106


MICHAEL MCPI IAII,: ROBERT BARR KIMNACH III: SCOTT

and KRYSTIN WAGNER: CANDACE and NEIL HURLEY: On

Behalf of Themselves and All Others Similarly Situated,

Case No. 05 CV 0179 lEG (.1MA)

Judge: The Honorable Irma I-. Gonzalez

Plaintiffs.

FIRST COMMAND FINANCIAL PLANNING. INC.. a Texas

Corporation, FIRST COMMAND FINANCIAL SERVICES. INC..

a Texas Corporation, LAMAR C. SMITH and HOWARD M.

CRUMP,

Defendants.

NOTICE OF PROPOSED SETTLEMENT AND MOTION FOR ATTORNEYS' FEES & FAIRNESS HEARING

TO: ALL PERSONS WHO. DURING THE PERIOD FROM JANUARY 31. 2000 THROUGH DECEMBER 31. 2004. MADE ASYSTEMATIC INVESTMENT PLAN ("SIP") PAYMENTSO AS TO BE CHARGED A 50% SALES CIIARGE ON THE

MONEY PLACED AT THAT TIME INTO Tl lE SIP THROUGH FIRST COMMAND AND STILL OWNED THE SIP ON

DECEMB ER 15. 2004 , AND WI 10 DID NOT TERMINATE WITI IIN FORTY-FIVE (45) DAYS OF PURCHASING TI IF Sill

SO AS TO RECEIVE A FULL REFUND OF THE SAL.-'.S CHARGE.

YOU MAY BE A MEMBER OF THE CLASS IN THIS ACTION AND ENTITLED TO SHARE IN A $12,000,000

SETTLEMENT. THIS SETTLEMENT NOTICE CONTAINS IMPORTANT INFORMATION WHICH MAY AFFECT

YOU. PLEASE READ IT CAREFULLY.

A ,lecleral court atulltori=ed tlris Selilernennt Notice. This is scot a solicitatiornJi-om a laavtêr.

Ifyou belong to the Class and Iltis Settlenrerrt is approved, your legal rights will be affected whether}you act or not. Read this Settlement

Notice carefully to see what your rights and options are in connection with this Settlement. r

A. On . 2008. the Court preliminarily approved a settlement ( the "Set(lement' ) in the above -captioned action (the "Action")between plaintiffs Michael McPhail, Robert Barr Kimnach H L Scott Wagner. Kryslin Wagner . Neil Hurley- and Candace Hurley

(collectively " Plaintiffs" or "Class Representatives"), on behalf of themselves and the Class ( as defined in I Cr below ). and dclcndants First

Command Financial Planning. Inc ., First Command Financial Services . I nc. (collectively "First Command"). Lamar C . Smith, and Howard

M. Crump (collectively " Individual Defendants"). If finally approved , the Settlement will resolve all claims of the Class in this litigation.

13. In exchange for the payment by First Command ofS12 million in cash ("Settlement Amount"). the Class shall release any and all claims it

has against the Released Parties (as defined below in the Answer to Question 2). The total cash amount of $12.000.000.00. plus interest. isreferred to herein as the "Settlement Fund." The Settlement Fund. less attorneys' lees. expense reimbursements. and other costs approvedby the Court ("Net Settlement Fund"), n ill be distributed to Class Members who submit timely and valid Proof's of Claim.

C. The Class consists oi'all persons who did not previously opt out of this Action by submitting a timely request for exclusion to the ClassAdministrator and who, with regard to a Systematic investment Plan ("SIP") sold through First Command, meet the following definition:

(1) Made a SIP payment during the period from January 31. 2000 through December 31. 2004 so as to becharged a 50% sales charge on the money placed at that time into the SIP. OR who increased the face amount

of an existing Sill and were charged it 50% sales charge on the increased amount during the period from

This Settlement Notice summarizes and is qualified in its entirely by the Stipulation and Agreement of Settlernenl dated October . 2008. entered into Isv and amongthe Class Representatives. on behall'ol'thentselves and the Class, and Detcndants (the "Stipulation"). The Stipulation sets forth the loins of the Settlement. Pleaserefer to the Stipulation, fit a complete description of the terms and pros isionts thereol. A cops ot'tlre Stipulation is available at the N%chsilc m" N% icsettfement cons.

Case 3^^ ^3^^ Oq 9 l r 3 1D gument 250-3 Filed 10/16/2008 Page 64 of 106

AND

(2) still owned the SIP on December 15, 2004;

AND

(3) did not terminate within forty-five (45) days of purchasing the Sil l so as to receive a full refund of the sales

charges.

Excluded from this class definition is any person who, from January 31. 2000 to the present, is/was anofficer, director, employee. registered representative or agent of First Command Financial Services, Inc., or

First Command Financial Planning. Inc., or any employee or family member of the foregoing excluded

persons.

Also excluded from this class definition is any person who paid less than a 50% sales charge due to an initial

investment or an increase in the face amount of an investment that qualified as a break-point, as defined inthe Sill's prospectus.

D. Also excluded from the Class are: (i) Defendants; (ii) all officers, directors, employees, registered representatives. agents and partners ofany Defendant and of any Defendant's partnerships, subsidiaries. or affiliates at all relevant times: (iii) members of the immediate family ofany of the foregoing excluded parties; (iv) the legal representatives. heirs. successors, and assigns of any of the foregoing excluded parties:

and (v) any entity in which any of the foregoing excluded parties has or had a controlling interest at all relevant times. Also excluded fromthe Class is any Class Member who opts out of the Settlement by timely requesting exclusion in accordance with the requirements set forthin this Settlement Notice.

E. Class Representatives and Defendants disagree on the amount of damages. if any. that could have been recovered if the Class prevailed onits claims at trial. Defendants do not believe that they violated the federal securities laves, deny all allegations of wrongdoing asserted

against them. and deny that First Command or its representatives made any statements that were materially false or misleading. They havealso asserted affirmative defenses to the claims alleged in this case. Accordingly. Defendants assert that they are not liable to the Class forany amount of damages.

F. Counsel for Class Representatives ("Class Counsel") intend to seek an award of attorneys' fees and costs of up to 30% of the first $10million and 25% of the next $2 million of the Settlement Fund. plus interest earned at the same rate earned by the Class on the SettlementFund. Class Counsel have been litigating this case for almost four years without any payment whatsoever, advancing millions of dollars in

time and expense. Class Counsel will also request reimbursement of the expenses they have incurred in connection with the prosecution of

this Action as part of this amount. In addition. Class Representatives intend to seek reimbursement of the reasonable costs and expensesthey incurred relating to their representation of the Class.

G. In reaching the Settlement. Class Representatives and Defendants have avoided the cost and time of a trial and Class Representatives have

agreed to the Settlement to avoid the risk of'the dismissal of sonic or all of the claims against Defendants.

II. hurther ' information regarding the Settlement and this Settlement Notice may be obtained by contacting the following Class Counsel:

Norman B . Blumenthal. Esq., BLUMENTI IAI. & NORDREIIAUG. 2255 Callc Clara, La Jolla, California 92037. Telephone: ( 858) 551-1223, or on their website at www.hamlawca.com.

YOUR LEGAL RICH I'S AND OPTIONS

Submit a Proof of Claim Form 11' the Settlement is approved and you are a member of the Class. you may be entitled to receive a

payment only if you submit a Proof ofClaim fornl. A copy of the Proof ofClaim form is enclosed. or

( by 2009 ) you may file your Proof olClaim online at w^+^N.lcsettlcment.com.

160 days from the date of mailing of If you remain in the Class, you a ill he hound by the Settlement and will give up any "Settled Claims"this Settlement Notice) you may have against the "Released tartics" (as more fully described below in the Answer to Question

No. 2). so it is in your interest to submit a ProofofClaim form.

ExetudeG08013 :05-CV-00179- I of v t3l n#»25N3he C]Eil@d1Oit1&i 2OO ursePage-6&ofhh1d6 in theAnswer to Question No. 14) and you will not receive any payment from the Settlement Fund. You

(by 2009) cannot bring or be part of another lawsuit or arbitration against any of the Released Parties based on any

Settled Claims unless you exclude yourself from the Class.

145 days from the date of mailing of

this Settlement Notice)

Object If you do not exclude yourself, but you wish to object to any part of the Settlement, you may (as

discussed below in the Answer to Question No. 19) write to the Court about your objections.

(by 2009)

145 days from the date of mailing of

this Settlement Noticel

Attend the Fairness Hearing If you have submitted a written objection to any aspect of the Settlement to the Court, you may (but do

not have to) attend the Fairness I Tearing and present your objections to the Court at that hearing,

(to be held on , 2009)

Do Nothing If you arc a Class Member and you do not either submit a Proof of Claim form or request exclusion,

you will be bound by the Settlement (including the release of the Released Parties), you will receive no

payment, and you will not he able to bring or pursue any Settled Claims in any other lawsuit or

arbitration.

1. These rights and options - and the deadlines to exercise them - are explained in this Settlement Notice. Please note the date of the

Fairness Hearing - currently scheduled for . 2009 - is subject to change without further notice. If you plan to attend the

hearing, you should check With the Court and the s4ebsite ,vww,lcsettlement.com to be sure no change to the date and time of the hearing

has been made.

The Court in charge of this case still has to decide whether to approve the Settlement . Payments will he made to Class Members only if the

Court approves the Settlement and if that approval is upheld in any appeals that may be tiled,

I WHAT THIS SETTLEMENT NOTICE CONTAINS

Summary of Settlement ....................................................................................................................................................................................................

Basic Information .............................................................................................................................................................................................................

I . Why did I get this Settlement Notice package? .................... ..............................................................................................................

2. What is this lawsuit about? .................................................................................................................................................................

3. Why is this case a class action? ..........................................................................................................................................................

4. Why is there a Settlement? .............

5. 1 lost do I know whether I am part of the Class? ................................................................................................................................

6. Are there exceptions to being included? .............................................................................................................................................

7. 1 am still not sure whether I am included ...........................................................................................................................................

The Settlement Benefits - What You Receive ................................................................................................................................................................

8. What does the Settlement provide? ............. ...........................................................

9. 1 lox% much will my payment he? ........................................................................................................................................................

10. I lo%% can I get a payment? ..................................................................................................................................................................

1 1. When would I get my payment? .........................................................................................................................................................

12. What is First Command's - l7ree Choice plan" and how do I participate'? ..........................................................................................

13. What is the elect of my remaining in the Class? ...............................................................................................................................

.I. 1 low do I get out of the Settlement? ..........

15. 1t'l don't exclude myself from the Class in connection with the Action. can I sue

the Released Parties for the same thing later? ....................................................................................................................................

16. If I exclude myself. can I get money from this Settlement in connection with the Action? ................................................................

The Lawyers Representing You .......................................................................................................................................................................................

17. Do I ha c a lass v er in the case ? ..........................................................................................................................................................

18. 1lovv will the lavers he paid? ...........................................................................................................................................................

Objecting to the Settlement , Plan of Allocation or the Attorneys' Fees Award ...........................................................................................................

3.

Case 31t5XW10Ol II€&.JMA1 likO *jme t 5Ougment:P.led.40/1.6/2008 ....... Page..6:6..Of.. 1.0.6.............20. What's the difference between objecting and excluding? ..................................................................................................................21. When and where will the Court decide whether to approve the Settlement? ......................................................................................22. Do I have to come to the hearing? ......................................................................... .............................................................................23. May I speak at the hearing? ................................................................................................................................................................

If You Do Nothing .............................................................................................................................................................................................................

24. What happens it' l do nothing at all? ............................................................................................................................................:......

Getting More Information ...............................................................................................................................................................................................

25. Are there more details about the Settlement? .....................................................................................................................................

26. f low do I get more information ? ..............

I BASIC INFORMATION

1. Why did I get this Settlement Notice package?

You or someone in your family may have, during the period from January 31, 2000 through December 31, 2004, made a systematicinvestment plan ("SIR") payment so as to be charged a 50% sales charge on the money placed at that time into the SIP through First Command andstill owned the SIP on December 15, 2004, and did not terminate within forty-five (45) days of purchasing the SIP so as to receive a full refund of thesales charge.

The Court caused this Settlement Notice to be sent to you because, if you fall within this group and are not otherwise excluded from theClass, your rights will be affected and you have a right to know about the proposed Settlement , and about all of your options, before the Courtdecides whether to approve the Settlement . If the Court approves it, and after any objections and appeals are resolved , the Court -appointed ClaimsAdministrator (Gilardi & Co.) %% if] cause payments to be made to Class Members who submit valid and timely Proofs of Claim.

This Settlement Notice package describes the lawsuit , the Settlement , your legal rights , what benefits are available , who is eligible forthem, and how to get them.

The Court in charge of this Action is the United States District Court for the Southern District of California. The people who areprosecuting this action on behalf of the Class are called "Class Representatives" and the people or companies they are suing are called - Defendants.'-This case, also called the "Action." is known as.tkPhail v. First Command Financial Planning, Inc.. Case No. 3:05-CV-0179 IEG (JMA).

2. What is this lawsuit about?

First Command Financial Planning. Inc.. a subsidiary of First Command Financial Services. Inc.. is a registered broker-dealer and a leadingprovider of personal financial plans to senior enlisted personnel and commissioned military officers. First Command's clients include approximately40% of the military's general officers and approximately 30% of its commissioned officers. First Command is a Texas corporation with its principalplace of business in Fort Worth. Texas.

Beginning on J anuary 31 . 2(105. Michael McPhail. Robert Barr Kimnach Ill. and Leonardo Giovannelli initiated this Action by filing aclass-action complaint in the United States District Court for the Southern District of California ("Initial Complaint") alleging violations of thefederal securities laws by First Command and certain officers and directors of the Company.

In the Initial Complaint , and in subsequent . amended versions of the complaint . Plaintiffs alleged that Defendants violated the federalsecurities laws by making false and misleading statements or omitting material information in connection with First Command ' s marketing ofSystematic Investment Plans ("SIPs"). A SIP is a mutual fund investment program specifically designed for disciplined . long-term investors. Undera SIP. an investor contributes a monthly - allotment from his or her payroll ( such as S50 or $100 per month ) to the plan . The monthly contributions arcthen used to buy shares in a particular mutual fund. which is managed by a major mutual fund company. such as Fidelity , Franklin Templeton.Pioneer, or AIM. A SIP investor continues to make monthly payments until the plan is completed , which is generally alter 180 - 30(1 payments. Aunique feature ol'the SIP is that the investor pays an initial 50% sales load on the first twelve payments. but thereafter . the investor is contractual)entitled to make up to 288 additional contributions fee of any further sales charges . Ilan investor completes the program . as intended . by making300 payments . then his or her effective sales load declines to 2%. far below the industry average for load mutual funds.

In this Action, Plaintiffs have specifically alleged that Defendants made false and misleading statements or omissions regarding the SIP's50% sales charge, regarding alternative in+cstrnents (e.g.. no-load and load funds). and regarding the military's Thrift Savings Plan (' 7'SP").Plaintiffs contend that the they. and members of the ('lass. .kould not have purchased a Sill but for the alleged false and misleading statements oromissions made by Defendants. Defendants have denied violating any laws and have raised. or could raise. numerous defenses. including that thestatements or omissions were not false and misleading. and even if they were, Defendants were una%%are of their falsity. In addition. Defendants have

4.

consistently t ci3}â^'1^jpti0®ary^n [1^s^1t^Jdk Cla0(jt&250$leged I;IWeh1 @^s1^ (s^$teme ; i^ , W66vere notdamaged as a result of the alleged misconduct by Defendants. In short, Defendants expressly deny any wrongdoing alleged in the pleadings and thelawsuit , and neither admit nor concede any actual or potential fault, wrongdoing . or liability in connection with any facts or claims that have been orcould have been alleged in the Action, and contend that the Systematic Investment Plans sold were legal, suitable for clients, and were properlyexplained.

THE CLASS CLAI\1s HAW. BEEN AGGRESSIVEL), Lrt7GA'fi:n

Before filing the Complaint, Class Representatives undertook an extensive investigation of the events surrounding the alleged fraud, whichincluded the review and analysis of SEC and NASD filings, press releases. public statements. news articles, and other publications. The investigation

also included in-person and telephonic interviews of former First Command employees, as well as current and former f=irst Command clients.

On January 31, 2005, Michael McPhail. Robert Barr Kimnach III. and Leonardo Giovannelli filed the Initial Complaint.

On March 30. 20055 McPhail, Kimnach. and Giovannelli filed the First Amended Complaint ("FAC"). They were joined as namedplaintiffs by Kevin Morrison . J ennifer Morrison. Scott Wagner. Krystin Wagner, Candace I lurley, and Neil I Turley, who had filed a separate class-action lawsuit on November 24, 2004 against f=irst Command in the United States District Court for the Western District of Kentucky, but voluntarilydismissed that case.

On June 9, 2005, the Court denied defendants' motion to transfer the Action to the Northern District of Texas and appointed MichaelMcPhail, Robert Barr Kimnach 111, Leonardo Giovannelli. Kevin Morrison. Jennifer Morrison, Scott Wagner. Krystin Wagner, Candace Hurley, andNeil }lurley as lead plaintiffs. Leonardo Giovannelli, Kevin Morrison, and Jennifer Morrison were later removed as lead plaintiffs.

On July 22, 2005 . plaintiffs filed their Consolidated Amended Complaint ("CAC").

On September 8. 2005 , Defendants moved to dismiss the CAC, but. on December 5 . 2005 , by agreement of the parties, they withdrew thismotion without prejudice to allow the parties to seek private mediation.

On January 17, 2006. the parties engaged in a mediation before the Hon. Daniel Weinstein (Ret.). This mediation was unsuccessful

On February 23, 2006, the parties engaged in a second mediation before the lion. Daniel Weinstein (Ret.). This mediation wasunsuccessful.

On February 27, 2006, deti:ndants re-filed their motion to dismiss the CAC On March 1.2006_ plaintiffs re-filed their opposition. And. onMarch 20, 2006. defendants re-filed their reply.

On April 10, 2006. the Court dismissed plaintiffs' Section 10(b) and Investment Advisor Act claims. but denied defendants ' motion todismiss plaintiffs ' Section I2(a)(2) claim and granted plaintiff's leave to amend their complaint.

On May t. 2006. plaintiffs filed their Consolidated Second Amended Complaint ("SAC"). Defendants moved to dismiss the SAC on May31, 2006.

On Jul), 27. 2006. the Court dismissed plaintiffs' section 12(a)(2) claim with prejudice . but denied defendants ' motion to dismiss plaintiffs'Section 10( b) claim . Shortly thereafter. on August 10. 2006, defendants answered the SAC.

On April 30. 2007, plaintiffs filed their motion for class certification. Defendants filed their opposition on May 25, 2007 and plaintiffsfiled their reply on June 18, 2007.

On July 30. 2007. the Court granted. in part. plaintiffs' motion for class certification ("Order"). appointing Plaintiffs (as defined in' A.above) as Class Representatives in the Action and ccrtifjing a class of"all persons who_ during the period from January 31. 2000 through December31, 2004. made a SI P payment so as to he charged a 50% sales charge on the money placed at that time into the SIP through First Command and stillowned the SIP on December 15. 2004, and who did not terminate within flirty-five (45) days of purchasing the SIP so as to receive a full refund ofthe sales charge." The Court also granted Plaintiffs leave to amend the complaint to conform their class definition to the Order.

2007

On August 13, 2007. Plaintiffs filed their Consolidated Third Amended Complaint ("I AC"). which Defendants answered on August 22.

On September 19. 2007. the Court issued its Class Certification Order, permitting the Action to proceed as a class action. On January 3.2008. the Court issued an order setting the contents of the Class Notice.

5.

CMeu r^T LWWWUWJMAnal 0orbr*anV2%O-3ourt. Fiftdt1@jj6W0 $ve clPager6&sQC4 N I FridayMarch 21, 2008 to opt out of the lawsuit by submitting a timely request for exclusion to the Class Administrator.

Class Representatives undertook extensive discovery with respect to the merits of the Action, This discovery included the analysis of over500,000 pages of documents produced by Defendants and third parties which related to, among other things, the marketing and sale of SIPS, thetraining of First Command representatives, mutual fund performance. internal studies and statistics on SIPS, compensation of Defendants. regulatorycompliance, customer complaints, etc. Class Counsel and their consultants have literally spent thousands of hours reviewing, analyzing. andsummarizing these documents ifor use in prosecuting the Action. Class Counsel also retained multiple experts to assist in the prosecution of theAction.

On Jul), 25, 2008 . The Parties completed all discovery in the Action other than expert discovery.

On August 5, 2008. the Parties engaged in a third mediation before the } Ion. Daniel Weinstein (Ret.). This mediation was unsuccessful.

On August 27, 2008, the Parties engaged in a settlement conference with the Honorable Jan M. Adler. This mediation concluded with amediator's proposal that was accepted by Class Representatives and Defendants on August 29, 2008.

The Settlement is the product of extensive negotiations between Class Representatives and Defendants and their experienced counsel. andit was achieved through numerous rounds of mediation conducted before Judge Weinstein and Judge Adler.

RELE.tSF

If the Court approves the Settlement, all Class Members, on behalf of themselves their personal representatives, heirs, executors,administrators, trustees, successors, and assigns. will release any "Settled Claims" they have as against the "Released Parties." This means that if

you remain a member of the Class, any and all "Settled Claims" you have against the `'Released Parties" will be released and discharged regardless ofwhether you file a Proof of Claim. and regardless of whether you are found eligible to share in the Settlement Fund.

"Settled Claims" means and includes any and all claims. debts, demands, controversies, obligations, losses, rights or causes of action orliabilities of any kind or nature whatsoever (including. but not limited to, any claims for damages (whether compensatory. special, incidental.consequential, punitive. exemplary or otherwise), injunctive relief declaratory relief. rescission or rescissionary damages, interest, attorneys' tics,

expert or consulting lees. costs, expenses- or any other form of legal or equitable relief whatsoever), whether based on federal, state. local. statutoryor common ]au or any other laxs, rule or regulation. whether fixed or contingent. accrued or un-accrued, liquidated or unliquidated. at law or inequity. matured or unmatured. %%hethcr class or individual in nature, including both known claims and Unknown Claims that: (i) have been assertedin this Action by Class Representatives on behalf of the Class and its Class Members against any of the Released Parties, or (ii) have been or couldhave been asserted in any Forum by Class Representatives. 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. occurrences, representations. or omissions involved. set forth. or referred to inthe Complaint as limited and/or clarified by the C'ourt's Jul), 30. 2007 Order granting class certification, including any claim, cause of action and/ordemand that was or could have been asserted therein. The Parties stipulate and agree that Class Representatives did not allege. in the Action, any

claim. cause of action. or demand against Defendants related to or arising out of the sale of insurance products, or any other securities other than aSIP, sold by or on behalf of' Defendants. The Parties further stipulate and agree that, as a result, of' the foregoing, no lolling of the statute oflimitations concerning any claim. cause of action. or demand related to or arising out of the sale of insurance products by or on behalf of Defendantsshall be deemed to has c occurred as a result of the filing of the Action. Settled Claims shall also include any claims. debts, demands. controversies.

obligations, losses, rights. or causes of action that Class Representatives, Class Members, or any of them may have against the Released Parties orany of them which involve or relate in any way to the defense of the Action or the Settlement of the Action. Notwithstanding the foregoing, or anyother provision contained in this Stipulation. Settled Claims shall not include any claims to enforce the Settlement, including without limitation, anyclaims to enforce the terms of this Stipulation. of orders. or ofjudgments issued by the Court in connection with the Settlement.

"Settled Defendants' Claims" means and includes any and all claims. debts, demands. controversies, obligations. losses, costs. rights orcauses oI'action or liabilities of any kind or nature whatsoever (including. but not limited to. any claims for damages (whether compensator). special.incidental. consequential. punitive. exemplary or otherwise). injunctive relief. declaratory relief. rescission or rescissionary damages. interest.attorneys' fees. expert or consulting fees. costs. expenses- or any other form of legal or equitable relief whatsoever). whether based on federal- state.local. statutory or common la or arty other law. rule or regulation. whether fixed or contingent, accrued or unacerued, liquidated or unliquidated. atlaw or in equity, matured or umnatured, including both known claims and Unknown Claims, that have been or could have been asserted in the Actionor any forum h) the Released Parties against any of the Class Representatives. Class Counsel. Class Members, or their attorneys. nhich arise out ofor relate in any way to the institution. prosecution, or settlement of the Action. Notwithstanding the foregoing. or any other provision contained inthis Stipulation. Settled lhfendanl ' Claims shall not include am claims to enforce the Settlement. including. without lirrnilation. any 01'111C terns of[his Stipulatim or orders or judgments issued by the Court in connection with the Settlement.

"tlnknotwn Claims" means any and all claims that any Class Rcpreserttatiw or Class Mentber does not know or suspect to exist and anyand all claims that first Command or any, Individual Defendant does not know or suspect to exist in his. her . or its fas or at the time of the release of

6.

the Relea c r^:Î ^L^t^'r^r^c^[N f^ j6^, mid cQl Qk^r or itF1 cJn1OM&2008case Pagep594CA eleasedParties, Class Representatives, and Class Members, or might have affected his, her or its decision to object or not to object to this Settlement. TheClass Representatives. Class Members, First Command. and the Individual Defendants. and each of them. may hereafter discover facts in addition toor di flerent from those which he. she. or it now knows or believes to he true with respect to the subject matter of the Settled Claims and/or the SettledDefendants' Claims. Nevertheless, with respect to any and all Settled Claims and Settled Defendants' Claims, the Parties stipulate and agree that,upon the Effective Date, the Parties shall expressly waive and each of the Class Members shall be deemed to have waived, and by operation of theJudgment shall have waived, all provisions, rights, and benefits of Calilbrnia Civil Code § 1542 and all provisions. rights and benefits conferred byany law of any state or territory of the United States. or principle of common law, which is similar, comparable, or equivalent to California CivilCode § 1542. California Civil Code § 1542 provides:

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WEIICII TLIF CREDITOR DOES NOT KNOW OR SUSPECTf0 EXIST IN HIS OR HER FAVOR AT THE TIME OF F.XECU1'ING THE RELEASE, WHICH IF KNOWN BY HIM ORHER MUST I1AVE MATERIALLY AFFECTED I [IS OR I IER SETTLEMENT WITI I THE DEBTOR.

The Parties expressly acknowledge. and the Class Members shall be deemed to have. and by operation of the Judgment shall have, acknowledgedthat the waiver and release of Unknown Claims constituting Settled Claims and/or Settled Defendants' Claims was separately bargained far and amaterial element of the Settlement.

"Released Parties" means Defendants and each Defendants past or present directors, officers, employees, registered representatives,agents, partners, principals, members, insurers, co-insurers. re-insurers. controlling shareholders, attorneys, advisors, accountants, auditors. personalor legal representatives, predecessors, successors, parents, subsidiaries, divisions, joint ventures, assigns, spouses. heirs, related or affiliated entities,any entity in which a Defendant has a controlling interest, any member of any Individual Defendant's immediate family, or any trust of which anyIndividual Defendant is the settlor or which is for the benefit of any member of an Individual Defendant's immediate family.

A copy of the Stipulation is available for free on the Internet at wrvw.lcsettlcment.com.

3. Why is this case a class action?

In a class action. one or more plaintiffs. called class representatives, sue on behalf of people who have similar claims. All of theindividuals and entities on whose behalf the plaintiffs are suing are class members. One court resolves the issues for all class members, except forthose ssho choose to exclude themselves from the class.

Here, United States District Court Judge lima E. Gonzalez is presiding over the Action. In this Action, the Court appointed MichaelMcPhail, Robert Barr Kimnach I!L Scott Wagner. Krystin Wagner. Neil Hurley. and Candace Ilurley as "Class Representatives."

4. Why is there a Settlement?

The Court has not reached a final judgment as to whether the Class has proved its claims under the federal securities laws againstDefendants. It would likely take several more years before a trial on the merits is held. final judgment is entered, and all appeals are exhausted.Instead. Class Representatives and Defendants have agreed to resolve the lawsuit. In reaching the Settlement. they have avoided the risk. cost. andtime of a trial. and Class Representatives have avoided any further delay in bringing this Action to a resolution. In addition, as with any litigatedcase. Class Representatives would face an uncertain outcome if this Action %vent to trial. On the one hand. a trial could result in a verdict greater thanthe Settlement Amount. On the other hand. Defendants have many defenses that they can be expected to assert, and a trial could result in a verdictlower than the Settlement Amount, or even no recovery at all for Class Representatives and the Class. Based on these factors and others, ClassRepresentatives and their attorneys in this case believe the Settlement is best for all Class Members.

5. How do I know whether I am part of the Class?

To see if you will receive money from the Settlement Fund. Nou first must determine whether you are a Class Member. The Class includesany individual, subject to certain exceptions (described in the Anssêr to Question 6). %%ho. with regard to a Systematic Investment Plan ("SIP") soldthrough First Command:

(1) Made a SIP payment during the period from .lanuary 3 I. 2000 through December 31. 2004 so as to he charged a 50%sales charge on the money placed at that time into the SIP. OR ssho increased the lace amount of an existing SIP andwere charged a 50% sales charge on the increased amount during the period from.lanuary 31. 2000 through December3 1. 2004-

AND

(2) still owned the SIP on Decemher 15. 2004:

I.

Case 3cv-00179-IEG-JMA Document 250-3 Filed 10/16/2008 Page 70 of 106

(3) did not terminate within forty-five (45) days of purchasing the SIP so as to receive a full refund of the sales charges.

6. Are there exceptions to being included?

You are not a Class Member if, pursuant to the Class Notice that was filed in this Action on January 22, 2008, you previously opted out ofthis Action by submitting a timely request for exclusion from the Class.

Also. )ou are not a Class Member if, from January 31. 2000 to the present. you arc/were an officer. director. employee, registeredrepresentative. or agent of First Command Financial Services. Inc.. or First Command Financial Planning. Inc., or you are/were an employee orfamily member of the foregoing excluded persons.

Also. you are not a Class Member if you paid less than a 50% sales charge due to an initial investment or an increase in the face amount ofan investment that qualified as a break-point. as defined in the SIP's prospectus.

Also, you are not a Class Member if you are (i) a Defendant-, (ii) an officer, director, or partner of any Defendant or of any Defendants'partnerships. subsidiaries, or affiliates at all relevant times; (iii) a member of the immediate family of any of the foregoing excluded parties; (iv) alegal representative. heir. successor, or assign of any of the foregoing excluded parties; or (v) an entity in which any of the foregoing excluded partieshas or had a controlling interest.

Also. you are not a Class Member if you submit a valid and timely request for exclusion from the Settlement in accordance with therequirements set forth in this Settlement Notice. The procedure for requesting exclusion from the Settlement is described below in the Answer toQuestion No. 14. "I-low do I get out of the Settlement?"

In addition. you are not a Class Member if you previously settled an actual or threatened lawsuit or arbitration with Defendants andreleased all of Defendants from further claims concerning the marketing and sale of a SIP.

7. 1 am still not sure whether I am included.

If you are still not sure whether you are member of the Class, you can ask for help, which will be provided to you at no cost. You can callthe Claims Administrator at 1-866-511-8879. or visit the website www.fcsettlement.com for more information, or write to the following address:

First Command Litigation

Claims Administration c/o Gilardi & Co.

P.O. Box 8060San Rafael. California 94912-8060

Or you can fill out and return the enclosed Proof of Claire form, or file a Proof of Claim online at w w.fcsettlement.com, to see whether you qualify.

THE SETTLEMENT BENEFITS - WHAT YOU RECEIVE

8. What does the Settlement provide?

Pursuant to the Settlement. First Command deposited SI2,000.000.00 into an interest-bearing escrow account on .2009.

The Settlement. it'approved. will result in the dismissal of the Complaint as against Defendants and the release by all Class Members of allthe Settled Claims against the Released Parties. as defined above in the Answer to Question No. 2. The Net Settlement Fund will be distributed inaccordance with the provisions of the Plan of Allocation. which is explained below in the Anse er to Question No. 9, to the Class Members %%ho filetimely and valid Proof oi'Claim forms following the procedures set forth in this Settlement Notice and on the Proof of Claim form.

9. How much will my payment be!

Your share ofthe Net Settlement bind will depend on the total number of valid claim forms that {'lass Members submit and how much youpaid as a 50% sales charge on SIP account(s) during the Class Period.

8.

F JeIflOO5'c 00179-IEG-JMA Document 250-3 Filed 10/16/2008 Page 71 of 106

• Class Representatives and their expert consultants have prepared a Plan of Allocation that provides instructions for the ClaimsAdministrator to determine each Class Member ' s proportionate share of the Net Settlement Fund.

• The Plan of Allocation provides a mathematical formula for determining the amount of money or "Recognized Claim" that will be paid toeach "Authorized Claimant."

• Class Representatives will share in the Net Settlement Fund on the same basis and to the same extent as all other Authorized Claimants,although they will also separately seek reimbursement for the reasonable time and expenses incurred in representing the Class.

• Each valid claim will be allocated a proportionate share of the Net Settlement Fund based on the Authorized Claimant's Recognized Claim

compared to the Total Recognized Claims of all Class Members who submit valid Proof of Claim forms.

• Class Members who do not file valid and timely Proof of Claim forms will not share in the Net Settlement Fund.

• Class Members who exclude themselves from the Settlement ww ill not share in the Net Settlement Fund.

• Distributions will not be sent to Authorized Claimants until after the Fairness I fearing, after all claims have been processed. and after theSettlement has become effective in accordance with its terms. It takes a significant amount of time for these events to occur and thus.payments will not he sent until (his process is fully completed and approved by the Court.

• Each Authorized Claimant may. in lieu of cashing his or her settlement check. choose to participate in First Command 's "Free ChoicePlan." subject to the terms and conditions described below in the Answer to Question 12.

• If there are un-cashed distribution checks remaining after all efforts. authorized by the Court, have been made to locate Authorized

Claimants. then the remaining funds will be donated to five "military• relief charities," pursuant to the terms of the Escrow Agreement.

• The Plan of Allocation may be modified in connection with, among other things. a ruling by the Court.

If you have questions about the tax consequences of participating in the Settlement, you should consult with your own tax advisor.

10. How can I get a payment?

To qualify for a settlement payment. you must submit a Proof of Claim form . A Proof of Claim form is attached to this Settlement Notice.You may also request that a Proof of Claim form he mailed to you by calling the Claims Administrator at 1-866 -511-8879 . You may also file a Proofof Claim form on the Internet at %vww . fcsettlcment.com. Read the instructions carefully. fill out the Proof of Claim form . submit all the documents

requested ( if any), sign the form , and mail it postmarked no later than . 2009 [60 days from the date of mailing of this SettlementNotice ]. Please note that all Proof of Claim forms must he signed and postmarked , or filed online , by the above date in order to he timely andthereby eligible to receive any payment from the Net Settlement Fund.

11. When would I get my payment?

Payment to Class Members is contingent on the Court's approval of the Settlement Agreement and on such approval becoming final and nolonger subject to any appeals to any court. If Judge Gonzalez approves the Settlement there still might be appeals. Appeals, if any. will take time.

perhaps several years.

The Net Settlement Fund will he distributed by the Claims Administrator as soon as possible after final approval has been obtained for theSettlement (which includes exhaustion of any appeals). As noted above. the resolution of any appeal may take several years. In addition. processing

of'the Proofs of Claim requires significant time to complete.

Anyone who sends in a Proof of Claim firm can receive information about the progress of the Settlement by visiting the w4ebsite at

w% w.fcsettlement.com. or by calling 1-866-5 I 1-8879. or by writing to: First Command Litigation_ Claims Administration c/o Gilardi & Co.. 1'.O.

Box 8060. San Rafael. California 94912.8060.

12. What is First Command's "Free Choice Plan" and how do I participate?

Accompany im, each disbursement (or settlement check) issued to each Authoriicd Claimant ' ill he a notice entitled: Fttts1 Comm..%'t'sFREE CrtoicE PLAN (the''FC'I' Notice"). Under First Command's "like Choice Plan." each lernily comprised ofone or more Authorized Claimantsis granted the option- in its sole discretion . to either (i) cash the settlement check(s) issued hv the Claims Administrator to the family's Authorized

`J.

Claimantt.rS6tiTWOgibV1100179JtEISuJMAe setilp(yeori4 t 2.5"-first cpi nlOIt12@@$)r a ftgeft7i2t®fhf®6mes thecombined lace amount of the endorsed check(s). tip to a maximum total credit of $300. This credit can then he applied against the cost of financialplanning services under First Command's new Tailored Professional Services Program. Each family comprised of one or more AuthorizedClaimants may exercise this credit option once and must exercise the credit option within 180 days of the issuance of the settlement check(s). A copyof the FCP Notice. including a description of First Command's Tailored Professional Services Program. will accompany each settlement check. Youmay also get a copy of the FCP Notice on the Internet at www.lcsettlcment.com or by calling the Claims Administrator at 1-866-511-8879.

13. What is the effect ofmy remaining in the Class?

Unless you exclude yourself from the Class, you will be a Class Member and will he bound by all orders and judgments entered by theCourt regarding the Settlement. If the Settlement is approved, you will not be able to sue, continue to sue. or he part of any other lawsuit orarbitration against any of the Released Parties concerning any of the Settled Claims. You will be hound by the Settlement (including the release ofthe Settled Claims) whether or not you submit a Proof of Claim form and/or receive a payment under the Settlement.

14. How do I get out of the Settlement?

To get out of the Settlement. you must exclude yourself from the Class. To exclude yourself from the Class. you must send a letter by mailto the Claims Administrator saving that you want to he excluded from the Class in McPhail v. First Command Financial Planning, Inc., Case No.3:05-CV-01 79-1136 (JMA). If you wish to exclude yourself. be sure to include in your letter your name, address. telephone number, and signature,and mail your exclusion request postmarked no later than 2009 [45 days from the date of mailing of this Settlement Notice] to:

First Command Litigation

Claims Administration c/o Gilardi & Co.

P.O. Box 8060

San Rafael. California 94912-8060

You cannot exclude yourself on the website. by telephone, or by e-mail. If you do not follow these procedures - including meeting thedate for exclusion set out above -you will not be excluded from the Class, and you will be bound by all of the orders and judgments enteredby the Court regarding the Settlement.

If you ask to be excluded , you will not receive a Settlement payment , and you cannot object to the Settlement . You will not helegally hound by anything that happens in this lawsuit. You will also not participate in any distribution of the Net Settlement Fund.

15. If I don ' t exclude m yself from the Class in connection with the Action , can I sue the Released Parties for the same thing later?

No. Unless you exclude yourself from the Class in connection with the Action. you give up any right to sue any or all of the ReleasedParties for any Settled Claims. If you have a pending lawsuit or arbitration against First Command or any of its officers and directors or any otherReleased Parties, speak to the lawyer representing you in that case immediately. You must exclude yourself from this Class to continue your ownlawsuit or arbitration against any of the Released Parties. Remember, your request for exclusion must he postmarked no later than2009 145 days from the date of mailing of-this Settlement Notice].

16. If I exclude myself, can I get money from this Settlement in connection with the Action?

No. If you exclude yourself; do not send in a Proof ol'Claim form to ask for money in connection with the Action. lfyou exclude yourselffrom the Class. you may be able to sue. continue to sue. or he part of'a diftcrent lawsuit or arbitration against the Released Parties.

THE LAWYERS REPRESENTING YOU

17. Do I have a lawyer in the case?

The la%% firms of 13LtIMENT11AL & NORDRlI IAUG. 2255 Calle Clara. La Jolla. California 92037: WI IA'I LEY DRAKE & KAI.LASLLC, 2001 Park Place North. Suite 1000. Birmingham. Alabama 35203: GRECO "lRAFICAN'l'E SCI Ilil.% & 13RICK, 185 West F Street. Suite 400.San Diego. California 92101: I3RIAVER & CAR[ SON LLP. 4275 Executive Square. Suite 1020, l,a Jolla. California 92037: and FRANKLINGRAY & WI-Il l E. 505 West Ornshy Avenue. Louisville. Kentucky 40203. represent Class Representatives and all other Class Members in theAction. These lawyers are called Class Counsel. You will not be charged directly by these lawyers. If you want to he represented by your ownlawyerr you may hire one at > our o1% 11 expense.

is. Howe9Ah .WEtV-0 4(79-IEG-JMA Document 250-3 Filed 10/16/2008 Page 73 of 106

Class Counsel intends to seek an award of attorneys' fees, costs, and expenses of up to 30% of the first $10 million and 25% of the next $2million of the Settlement Fund. Class Counsel has been litigating this case for nearly four years without any payment whatsoever. At the FairnessHearing, Class Counsel will seek reimbursement of costs and expenses incurred in connection with the prosecution of this Action as pan of thisamount. Class Representatives intend to seek an award of the reasonable costs and expenses (including lost wages) that theyy incurred in representingthe Class.

OBJECTING TO THE SETTLEMENT, PLAN OF ALLOCATION, OR THE ATTORNEYS' FEES

You can tell the Court that you do not agree with the Settlement or some part of it.

19. How do I tell the Court that I do not like any aspect of the Settlement?

If you are a Class Member and you do not exclude yourself, then you can object to the Settlement if you do not like any part of it. You cangive reasons why you think the Court should not approve the Settlement, the Plan of Allocation, Class Counsel's request for attorneys' fees andreimbursement of expenses, or Class Representatives' request for reimbursement of reasonable costs and expenses relating to their representation ofthe Class.

To object, you must send a letter or other filing saying that you object to the proposed Settlement in .AlcPhail v. First Command FinancialPlanning, Inc., Case No. 3:05-CV-0179-IEG (JMA). You must include your name, address, telephone number, signature, and the reasons you object.

You must also (1) verify that you are a member of the Class (as defined in 1"; C, above, and discussed in response to Questions 5 and 6. above), and(2) indicate the total amount of money that you paid in sales charges as a result of the 50% sales charge that was applied to at least one of your SIPpayments between January 31. 2000 and December 31, 2004. Your written objection must be served on one of the Class Counsel and each

Defendants' Counsel listed below, and it must be received by them no later than 2009 [45 days from the date of mailing of thisSettlement Notice]:

Class Counsel

Counselfor Plaintiffs

Norman B . Blumenthal

BLUMENI I IAL & NORDREI IAUG

2255 Calle ClaraLa Jolla. California 92037


Joe R. Whatley. Jr.

WI IA"1 LEY DRAKE & KALLAS LLC

2001 Park Place North. Suite 1000

Birmingham , Alabama 35203


Peter J. Schulz

GRECO (RAFICANTE SCI [I.JL/.. & 13RICK

185 West F Street_ Suite 400

San Diego. California 92101


G. Mark Brewer

BREWER & CARLSON LIP

4275 Executive Square. Suite 1020

La Jolla . California 92037


Mark K. Gray

FRANKLIN GRAY & W1111 E

505 West O rnshv A%enuc

Louisville- Kentucky 40203

Defendants ' Counsel

Counselfor First Command Financial Planning, Inc. and


William E. Grauer

Koji F. Fukumura

COOLEY GO[) WARD KRONISI I I.LP

4401 Eastgatc Mall

San Diego, California 92121

Counselfor Lamar C. Smith and Howard .49. Crump

Robert D. Rose

Sl IEPPAR1) MULLIN R1CI11 FR & I TAMP ON LLP

501 West Broadway. Suite 1900

San Diego. California 92101


You must also file your objection with the Clerk of the United States District Court for the Southern District of California. The address is:Clerk, United States District Court, Southern District of California, United States Courthouse. 880 Front Street, Suite 4290. San Diego, California92 101-8900. The Clerk must receive your objection no later than 2009 [45 days from the date of mailing of this SettlementNotice].

20. What's the difference between objecting and excluding?

Objecting is simply telling the Court that you do not like something about the Settlement. You can object only ifyou are a Class Member.Excluding yourself is telling the Court that you do not want to be part of the Class. If you exclude yourself from the Class. you have no basis toobject. because the Settlement no longer affects you. If you do not exclude yourself from the Class, you will remain a member of the Class and willhe bound by the terms of the Stipulation (including the releases contained therein) and all orders and judgments entered by the Court regarding theSettlement regardless of whether the Court accepts or denies your objection.

21. When and where will the Court decide whether to approve the Settlement?

The Court will hold a Fairness Hearing at `: m. on _. 2009. before the Honorable Irma E. Gonzalez in the United StatesDistrict Court for the Southern District of California. 940 Front Street, San Diego. California 92101, At this hearing, the Court will consider whetherthe Settlement is fair, reasonable, and adequate. If there are objections. the Court will consider them. After the Fairness I-fearing, the Court willdecide whether to approve the Settlement and the Plan of Allocation. The Court will also rule on (1) Class Counsel's request for attorneys' fees andexpenses and (2) Class Representatives' request for reimbursement of reasonable costs and expenses relating to their representation of the Class. Wedo not know how long these decisions will take.

22. Do I have to come to the hearing?

No. Class Counsel will answer any questions the Court might have. But. you are welcome to come at your own expense. Ifyou send anobjection. you do not have to come to Court to talk about it. As long as it is received on time. it will be before the Court when the Court considerswhether to approve the Settlement as fair. reasonable. and adequate. You also may pay your own lawyer to attend the Fairness 1-learing. butattendance is not necessary.

23. May I speak at the hearing?

Ifyou are a Class Member who has not requested to he excluded from the Class. you may ask the Court for permission to speak at theFairness Itearing. To do so. you must send a letter or other paper called a "Notice of Intention to Appear at Fairness Hearing in McPhail v. %irs!Command Financial Planning. Inc." Be sure to include \our name. address. telephone number. and your signature. Your Notice of Intention toAppear must be served on the counsel listed above (in the Answer to Question No. 19) and must he filed with the Clerk of the Court at the address inthe Answer to Question No. 19 no later than 2009. You cannot speak at the Fairness Hearing ifyou exclude yourself from theClass.

I IF YOU DO NOTHING

24. What happens if I do nothing at all?

If you are a Class Member and you do nothing . you will not receive any payment in connection with the Settlement . However, you willstill he hound by the Settlement. Even if' you receive no payment . you will not be able to start a lawsuit or arbitration, continue a lawsuit orarbitration , or be part of any other lawsuit or arbitration against any ol' thc Released Parties based on any Settled Claims unless you exclude yourself.

I GETTING MORE INFORMATION

25. Are there more details about the Settlement"

This Settlement Notice summarizes the Settlement. The complete Settlement is set out in the Stipulation. You may obtain a free copy ofthe Stipulation, as well as other relevant documents. from the settlement websitc at ww«.lcsettlcment.com. or you may request a copy by writing (o:First Command Litigation. Claims Administration c/o Gilardi & Co.. P.O. Box 8060_ San Rafael. California 94912-8060. If you elect to obtaincopies from a source other than the free wsehsite. there ma% be a charge for cop) ing and mailing such documents. The Stipulation is also filed withthe Clerk of the U.S. District Court for the Southern District of Calitornia. 880 Front Street. Suite 4290. San Diego. California 92101-8900. and maxhe obtained from the Clerk's office directly. I'urthcr inlbrmation regarding the Action and this Settlement Notice may be obtained by contactingClass Counsel at the address provided in the Answer to Question No. 19. aho%e.

12.

26. How Wt3,165!6Qr@ p?g-IEG-JMA Document 250-3 Filed 10/16/2008 Page 75 of 106

You can visit the w-cbsite www.fcsettlement .com, where you can find answers to common questions about the Settlement, print a Proof ofClaim form, file a Proof of Claim, and obtain other information to help you determine whether you are a Class Member and whether you are eligiblefor payment . You can also call 1-866-511-8879 , or write to: First Command Litigation, Claims Administration c/o Gilardi & Co., P.O. Box 8060.San Rafael , California 94912-8060.

13.

n Case 3:05-cv-00179-IEG-JMA Document 250-3 Filed 10/16/2008 Page 76 of 106 M

UNITED STATES DISTRICT COURT Must Be PostmarkedSOUTHERN DISTRICT OF CALIFORNIA No Later Than

MCPHAA. V. FIRST COMMAND _'2008

CASE NO: 05CV0179 IEG (JMA)

PROOF OF CLAIM FORM MPFC2CLAIMANT INFORMATION

BARCODE >) MPFC2--«CLAlM7»-<CKDIG >AUTHCODEFIRSTNAME»«LASTNAME»«ADDR1 ><ADDR2»(<CITY)) ((ST)) ((ZIP))

If your name or address is different from those shown above , print the corrections below.Last Name First Name

Address:

EF__l_._^_ ^__IL

TTCity T i ^^ State Zi

Account Number Telephone Number (Evening)

^-L1!! --I^^ WIW_ J L1. ZZ ^ LJ E[If you would like to file your Proof of Claim Form on -line, please go to www. FCsettlement . com. You will be asked toreference your claim number and authorization code. This information can be found to the right of your name and ad-dress information as a highlighted seven digit and four digit code, respectively.

TO SHARE IN THE RECOVERY, YOU MUST FILE YOUR PROOF OF CLAIM FORM ON-LINE , OR YOU MUSTCOMPELTE , SIGN AND RETURN THIS CLAIM FORM TO THE CLAIMS ADMINISTRATOR AT THE BELOW ADDRESS.

First Command Litigation Class Administrationc/o Gilardi & Co. LLC

P.O. Box 8060San Rafael, CA 94912-8060

1(866) 511-8879

I, , Certify the following:

1. Made a SIP payment during the period from January 31, 2000 through December 31, 2004 so as to be charged a 50%sales charge on the money placed at that time into the SIP, OR who increased the face amount of an existing SIP and werecharged a 50% sales charge on the increased amount during the period from January 31, 2000 through December 31, 2004;

AND

2. Still owned the SIP on December 15, 2004;

AND

3. Did not terminate within forty-five (45) days of purchasing the SIP so as to receive a full refund of the sales charges.I declare under penalty of perjury that the foregoing is true and correct.

Executed this day of

(Month/Year)

Signature

n

in

(City/State/Country)

Case 3 : 05-cv-00179-IEG-JMA Document 250-3 Filed 10/16/2008



MICHAEL MCPHAIL; ROBERT BARRKIMNACH III; SCOTT and KRYSTINWAGNER; CANDACE and NEILHURLEY; On Behalf of Themselves andAll Others Similarly Situated,

Plaintiffs,V.

FIRST COMMAND FINANCIALPLANNING, INC., a Texas Corporation,FIRST COMMAND FINANCIALSERVICES, INC., a Texas Corporation,LAMAR C.- SMITH and HOWARD M.CRUMP,

Defendants.

Page 77 of 106

Case No . 05 CV 0179 IEG (JMA)

Judge: The Honorable Irma E. Gonzalez

SUMMARY NOTICE OF PROPOSED SETTLEMENT AND HEARING

TO: ALL PERSONS WHO, DURING THE PERIOD FROM JANUARY 31, 2000THROUGH DECEMBER 31, 2004, MADE A SYSTEMATIC INVESTMENTPLAN ("SIP") PAYMENT SO AS TO BE CHARGED A 50% SALES CHARGEON THE MONEY PLACED AT THAT TIME INTO THE SIP THROUGHFIRST COMMAND AND STILL OWNED THE SIP ON DECEMBER 15, 2004,AND WHO DID NOT TERMINATE WITHIN FORTY-FIVE (45) DAYS OFPURCHASING THE SIP SO AS TO RECEIVE A FULL REFUND OF THESALES CHARGE.

YOU ARE HEREBY NOTIFIED that a settlement of $12,000,000 has been proposed in

the above-captioned case (the "Settlement")

A hearing will be held on , 2009 at -.in., before the

Honorable Irma E. Gonzalez in the United States District Court for the Southern District of

California, 940 Front Street, San Diego, California 92101. to determine whether: (1) the

proposed Settlement should be approved by the Court as fair, reasonable. adequate , and in the


best interests of the Class; (2) Class Counsel's application for an award of attorneys' fees and

reimbursement of expenses and Class Representatives' application for reimbursement of costs

and expenses should be approved; (3) the Court should dismiss with prejudice and release all

claims against the Defendants relating to the conduct alleged in this case; and (4) the Court

should rule on such other matters as the Court deems appropriate. If approved, the Settlement

will resolve all claims in this litigation as further described in the full, printed Notice of Proposed

Settlement & Motion for Attorneys' Fees and Fairness Hearing (the "Settlement Notice").

First Command expressly denies any wrongdoing alleged in the pleadings and the lawsuit

and neither admits nor concedes any actual or potential fault , wrongdoing , or liability in

connection with any facts or claims that have been or could have been alleged in the Action.

First Command contends that the Systematic Investment Plans sold were legal, suitable for

clients, and were properly explained.

IF YOU ARE A MEMBER OF THE CLASS DESCRIBED ABOVE, YOU MAY BE

ENTITLED TO SHARE IN THE SETTLEMENT FUND AND YOUR RIGHTS WILL BE

AFFECTED UNLESS YOU EXCLUDE YOURSELF FROM THE SETTLEMENT. If you

have not yet received (1) the full, printed Settlement Notice and/or (2) the Proof of Claim form

("Proof of Claim") explaining , among other things , how to make a claim to participate in the

Settlement or to exclude yourself from the Settlement, you may obtain copies of these documents

by downloading them from the website www. fcsettlement . com or by contacting the Claims

Administrator:

First Command LitigationClaims Administration c/o Gilardi & Co.

P.O. Box 8060San Rafael, California 94912-8060

Inquiries, other than requests for the Settlement Notice and Proof of Clairn. may be made

to Class Counsel:


Norman B. Blumenthal, Esq.BLUMENTHAL & NORDREHAUG

2255 Calle ClaraLa Jolla, California 92037

To participate in the Settlement, you must submit a Proof of Claim to the Claims

Administrator, postmarked no later than -, 2009 [60 days after the mailing of

the Settlement Notice], or you must file a Proof of Claim online at www.fcsettlement.com no

later than 2009 [60 days after the mailing of the Settlement Notice]. The

deadline for submitting objections to the Settlement and requesting exclusion from the

Settlement is _, 2009 [45 days after the mailing of the Settlement Notice].

Further information may also be obtained by directing your inquiry in writing to the

Claims Administrator, Gilardi & Co., at the address listed above. You may also call 1-866-511-

8879 or visit the website www.fcsettlement.com for more information.

By Order of The Court

n


I

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28




Case No. 05 CV 179 lEG (JMA)

FINAL ORDER AND JUDGMENT

Judge: Hon. Irma E. Gonzalez

Plaintiffs,

V.

FIRST COMMAND FINANCIALPLANNING, INC., a Texas Corporation;FIRST COMMAND FINANCIALSERVICES, INC., a Texas Corporation;LAMAR C. SMITH; and HOWARD M.CRUMP,

Defendants.

FINAL ORDER ANn Jun(.IENT05 CV 0 179 lEG (JMA)


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

WHEREAS, a class action is pending before this Court entitled: McPhail v. First

Command Financial Planning, Inc., Case No.: 3: 05-CV-0179 IEG (JMA) (the "Action");

WHEREAS, the Court previously certified the Class (as defined herein ) in this Action by

order dated September 19, 2007, over the opposition of Defendants First Command Financial

Planning, Inc. and First Command Financial Services, Inc. (collectively, "First Command" or the

"Company") and Defendants Lamar C. Smith and Howard M. Crump (collectively, "Individual

Defendants");

WHEREAS, pursuant to Federal Rule of Civil Procedure 23(e), this matter came before

the Court for hearing pursuant to the Order for Notice and Hearing dated -, 2009 (the

"Preliminary Order"), on the application of the Parties for approval of a proposed settlement of

the Action (the "Settlement"), which is set forth in the Stipulation and Agreement of Settlement

dated October , 2008 and was entered into by Class Representatives, on behalf of themselves

and the Class, and Defendants (the "Stipulation");

WHEREAS, due and adequate notice has been given to the Class as required in the

Preliminary Order; and

WHEREAS, the Court has considered all papers fled and proceedings had herein and

otherwise is fully informed in the premises and good cause appearing;

IT IS HEREBY ORDERED, ADJUDGED AND DECREED as follows:

1. This Order and Final Judgment (the "Judgment") incorporates by reference the

definitions in the Stipulation, and all terms used herein shall have the same meanings as set forth

in the Stipulation unless otherwise defined herein.

2. This Court has jurisdiction over the subject matter of the Action, and over all

parties to the Action (the "Parties "), including all members of the Class.

3. The Notice of Proposed Settlement and Motion for Attorneys' Fees & Fairness

Hearing (the "Settlement Notice") has been given to the Class, pursuant to and in the manner

directed by the Preliminary Order. Class Counsel has filed proof of the mailing of the Settlement

Notice and proof of publication of the Summary Notice with the Court. A full opportunity to he

heard has been offered to all Parties, the Class, and persons and entities in interest . The #orni and

FI\A!. Oiun:R AtI) J(f)G01i NT0i CV 0179IEG (J!IA)


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

manner of the Settlement Notice and the Summary Notice are hereby determined to have: (a)

constituted the best practicable notice , (b) constituted notice that was reasonably calculated, under

the circumstances , to apprise Class Members of the pendency of the Action, of the effect of the

Stipulation , including releases, of their right to object to the proposed Settlement, of their right to

exclude themselves from the Class, and of their right to appear at the Fairness Hearing, (c)

constituted reasonable , due, adequate , and sufficient notice to all persons or entities entitled to

receive notice , and (d) met all applicable requirements of the Federal Rules of Civil Procedure,

the United States Constitution ( including the Due Process Clause), 15 U.S.C. § 78u-4(a)(7), the

Rules of the Court, and any other applicable law. It is further determined that all members of the

Class are bound by the Judgment herein.

4. The Settlement, and all transactions preparatory or incident thereto, is found to be

fair, reasonable, adequate, and in the best interests of the Class, and is hereby approved. The

Parties are hereby authorized and directed to comply with and to consummate the Settlement in

accordance with the Stipulation , and the Clerk of this Court is directed to enter and docket this

Judgment in the Action.

5. The Action and all claims included therein, as well as all of the Settled Claims

(defined in the Stipulation and in Paragraph 6(c) below) are dismissed with prejudice as to Class

Representatives and all other members of the Class, and as against each and all of the Released

Parties (defined in the Stipulation and in Paragraph 6(b) below). The Parties are to bear their own

costs, except as otherwise provided in the Stipulation.

6. As used in this Judgment, the terms "Released Parties," "Related Parties," "Settled

Claims," "Settled Defendants' Claims," and "Unknown Claims" shall have the meanings set forth

below:

(a) "Related Parties" means each Defendant's past or present directors,

officers, employees, registered representatives, agents, partners, principals, members, insurers,

co-insurers, re-insurers, controlling shareholders, attorneys, advisors, accountants, auditors,

personal or legal representatives, predecessors. successors. parents. subsidiaries, divisions, joint

ventures. assigns. spouses, heirs. related or affiliated entities. any entity in which a Defendant has

7 Fi\:11. ORDER ;1\I) J( D( 1E\'T05 CV 01791EG (JMA)


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

a controlling interest , any member of any Individual Defendant's immediate family, or any trust

of which any Individual Defendant is the settlor or which is for the benefit of any member of an

Individual Defendant's immediate family.

(b) "Released Parties" means Defendants and the Related Parties.

(c) "Settled Claims" means and includes any and all claims, debts, demands,

controversies , obligations , losses, rights or causes of action or liabilities of any kind or nature

whatsoever (including, but not limited to , any claims for damages ( whether compensatory,

special , incidental , consequential , punitive, exemplary or otherwise), injunctive relief, declaratory

relief, rescission or rescissionary damages, interest , attorneys ' fees, expert or consulting fees,

costs, expenses , or any other form of legal or equitable relief whatsoever), whether based on

federal , state , local, statutory or common law or any other law, rule or regulation, whether fixed

or contingent , accrued or un-accrued , liquidated or unliquidated, at law or in equity, matured or

unmatured , whether class or individual in nature , including both known claims and Unknown

Claims (defined herein ) that: (i) have been asserted in this Action by Class Representatives on

behalf of the Class and its Class Members against any of the Released Parties, or ( ii) have been or

could have been asserted in any forum by Class Representatives, 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, occurrences , representations , or omissions involved , set forth, or

referred to in the Complaint as limited and/or clarified by the Court's July 30, 2007 Order

granting class certification , including any claim , cause of action and/or demand that was or could

have been asserted therein . Class Representatives and Class Counsel did not allege, in the

Action , any claim , cause of action , or demand against Defendants related to or arising out of the

sale of insurance products by or on behalf of Defendants. As a result of the foregoing, no tolling

of the statute of limitations concerning any claim, cause of action , or demand related to or arising

out of the sale of insurance products by or on behalf of Defendants shall be deemed to have

occurred as a result of the filing of the Action. Settled Claims shall also include any claims,

debts. demands. controversies. obligations. losses . rights, or causes of action that Class

Representatives . Class Members, or any of them may have against the Released Parties or any of,

Fi\,u. ORDER AND JA DGMF V F05 CV 0179 IEG (J%1,L)


1 them which involve or relate in any way to the defense of the Action or the Settlement of the

2 Action. Notwithstanding the foregoing, or any other provision contained in this Stipulation,

3 Settled Claims shall not include any claims to enforce the Settlement, including without

4 limitation, any claims to enforce the terms of this Stipulation, of orders, or ofjudgments issued by

5 the Court in connection with the Settlement.

6 (d) "Settled Defendants' Claims" means and includes any and all claims,

7 debts, demands, controversies, obligations, losses, costs, rights or causes of action or liabilities of

8 any kind or nature whatsoever (including, but not limited to, any claims for damages (whether

9 compensatory, special, incidental, consequential, punitive, exemplary or otherwise), injunctive

10 relief, declaratory relief, rescission or rescissionary damages, interest, attorneys' fees, expert or

II consulting fees, costs, expenses, or any other form of legal or equitable relief whatsoever),

12 whether based on federal, state, local, statutory or common law or any other law, rule or

13 regulation, whether fixed or contingent, accrued or unaccrued, liquidated or unliquidated, at law

14 or in equity, matured or unmatured, including both known claims and Unknown Claims, that have

15 been or could have been asserted in the Action or any forum by the Released Parties against any

16 of the Class Representatives, Class Counsel. Class Members or their attorneys, which arise out of

17 or relate in any way to the institution, prosecution, or settlement of the Action. Notwithstanding

18 the foregoing, or any other provision contained in this Stipulation, Settled Defendants' Claims

19 shall not include any claims to enforce the Settlement, including, without limitation, any of the

20 tenns of this Stipulation or orders or judgments issued by the Court in connection with the

21 Settlement.

22 (e) "Unknown Claims" means any and all claims that any Class Representative

23 or Class Member does not know or suspect to exist and any and all claims that First Command or

24 any Individual Defendant does not know or suspect to exist in his. her, or its favor at the time of

25 the release of the Released Parties which, if known by him, her or it, might have affected his, her

26 or its settlement with and release of, as applicable, the Released Parties, Class Representatives,

27 and Class Members, or might have affected his. her or its decision to object or not to object to this

28 Settlement. The Class Representatives. Class Members. First Command. and the Individual

4. FI' ,11.ORI)t:R AND JUDGMENT

05, CV 0179 1 EG (JMA)


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Defendants and each of them may hereafter discover facts in addition to or different from those

which he, she or it now knows or believes to be true with respect to the subject matter of tht

Settled Claims and/or the Settled Defendants' Claims. Nevertheless, with respect to any and all

Settled Claims and Settled Defendants' Claims, the Parties stipulate and agree that, upon the

Effective Date, the Parties shall expressly waive and each of the Class Members shall be deemed

to have, and by operation of the Judgment shall have, waived all provisions, rights and benefits of

California Civil Code § 1542 and all provisions, rights and benefits conferred by any law of any

state or territory of the United States, or principle of common law, which is similar, comparable

or equivalent to California Civil Code § 1542. California Civil Code § 1542 provides:

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THECREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HERFAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IFKNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HISOR HER SETTLEMENT WITH THE DEBTOR.

The Parties expressly acknowledge, and the Class Members shall be deemed to have, and by

operation of the Judgment shall have, acknowledged that the waiver and release of Unknown

Claims constituting Settled Claims and/or Settled Defendants' Claims was separately bargained

for and a material element of the Settlement.

7. Upon the Effective Date, Class Representatives and all Class Members on behalf

of themselves, their personal representatives, heirs, executors, administrators, trustees, successors,

and assigns: (a) shall have fully, finally and forever released, relinquished and discharged each

and every one of the Settled Claims against the Released Parties, whether or not any such Class

Member or Class Representative executes or delivers a Proof of Claim form ('`Proof of Claim");

and (b) shall be deemed to have covenanted not to sue on, and shall forever be barred from suing

on, instituting, prosecuting, continuing, maintaining or asserting in any forum, either directly or

indirectly, on their own behalf or on behalf of any class or other person, any Settled Claim against

any of the Released Parties.

8. Upon the Effective Date, each of the Defendants , on behalf of themselves and

their Related Parties: (a) shall have fully. finally and forever released. relinquished and

discharged each and every one of the Settled Defendants' Claims; and (b) shall be deemed to

Fi.\ni. ORi)rR AND Jt i)(NIFN rO5('v0179IEG(JM4)


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

have covenanted not to sue on, and shall forever be barred from suing on, instituting, prosecuting,

continuing, maintaining or asserting in any forum, either directly or indirectly, on their own

behalf or on behalf of any class or other person, any Settled Defendants' Claim against Class

Representatives, Class Members and their respective counsel, or any of them.

9. Notwithstanding ¶¶ 7-8 herein, nothing in this Judgment shall bar any action or

claim by any of the Parties or the Released Parties to enforce or effectuate the terms of the

Stipulation or this Judgment.

10. This Judgment and the Stipulation, including any provisions contained in the

Stipulation, any negotiations, statements, or proceedings in connection therewith, or any action

undertaken pursuant thereto:

(a) shall not be offered or received against any Released Party as evidence of

or construed as or deemed to be evidence of any presumption, concession, or admission by the

Released Party with respect to the truth of any fact alleged by any of the plaintiffs or the validity

of any claim that has been or could have been asserted in the Action or in any litigation, or the

deficiency of any defense that has been or could have been asserted in the Action or in any

litigation , or of any liability, negligence, fault, or wrongdoing of any Released Party;

(b) shall not be offered or received against any Released Party as evidence of a I

presumption. concession, or admission of any fault, misrepresentation, or omission with respect

to any statement or written document approved or made by any Released Party;

(c) shall not be offered or received against any Released Party as evidence of a

presumption, concession, or admission with respect to any liability, negligence, fault, or

wrongdoing in any civil, criminal, or administrative action or proceeding, other than such

proceedings as may be necessary to effectuate the provisions of the Stipulation; provided.

however, that the Released Parties may refer to the Stipulation to effectuate the releases and other

liability protection granted them hereunder and may file the Stipulation and/or this Judgment in I

any action that may be brought against them in order to support a defense or counterclaim based

on principles of res judicata. collateral estoppel. full faith and credit, release, good faith

6.FI\:11. ORDER ;1.N1) JI:DGM ENT

05 C V 0179 1 E C (.1:11 A)


1 settlement, judgment bar, or reduction, or any other theory of claim preclusion or issue preclusion

2 or similar defense or counterclaim;

3 (d) shall not be construed against any Released Party as an admission or

4 concession that the consideration to be given hereunder represents the amount that could be or

5 would have been recovered after trial; and

6 (e) shall not be construed as or received in evidence as an admission,

7 concession, or presumption against the Class Representatives or any of the Class Members that

8 any of their claims are without merit, or that any defenses asserted by Defendants have any merit,

9 or that damages recoverable under the Action would not have exceeded the Settlement Amount.

10 H. The Plan of Allocation is approved as fair and reasonable, and Class Counsel and

11 the Claims Administrator are directed to administer the Settlement in accordance with the terms

12 and provisions of the Stipulation.

13 12. The Court finds that all Parties and their counsel have complied with each

14 requirement of the Private Securities Litigation Reform Act ("PSLRA") and Rules 11 and 37 of

15 the Federal Rules of Civil Procedure as to all proceedings herein, and that Class Representatives

16 had a good faith basis to bring, maintain, and prosecute this Action in accordance with the

17 PSLRA and Federal Rule of Civil Procedure 11.

18 13. Only those Class Members who submit valid and timely Proofs of Claim shall be

19 entitled to receive a distribution from the Net Settlement Fund. The Proof of Claim to be

20 executed by each Class Member shall further release all Settled Claims against the Released

21 Parties. All Class Members shall be bound by all of the terms of the Stipulation and this

22 Judgment, including the releases set forth herein, whether or not they submit a valid and timely

23 Proof of Claire, and shall be barred from bringing any action against any of the Released Parties

24 concerning the Settled Claims.

25 14. No Class Member shall have any claim against Class Counsel, the Claims

26 Administrator, or other agent designated by Class Counsel based on the distributions made

27 substantially in accordance with the Settlement and Plan of Allocation as approved by the Court

28 and further orders of the Court.

7. Fr.,%i.0ii1)r.H AND JL IX,\i} \ r055 CV 0179 JEG (JMIA)


1 15. No Class Member shall have any claim against the Defendants, Defendants'

2 counsel, or any of the Released Parties with respect to: (a) any act, omission, or determination of

3 Class Counsel, the Escrow Agent, or the Claims Administrator, or any of their respective

4 designees or agents, in connection with the administration of the Settlement or otherwise; (b) the

5 management, investment or distribution of the Gross Settlement Fund and/or the Net Settlement

6 Fund; (c) the Plan of Allocation; (d) the determination. administration, calculation, or payment of

7 claims asserted against the Gross Settlement Fund and/or the Net Settlement Fund; (e) the

8 administration of the Escrow Account; (f) any losses suffered by, or fluctuations in the value of,

9 the Gross Settlement Fund and/or the Net Settlement Fund; or (g) the payment or withholding of

10 any Taxes, expenses and/or costs incurred in connection with the taxation of the Gross Settlement

I I Fund and/or the Net Settlement Fund or the filing of any tax returns.

12 16. Any person who opts out of the Settlement by submitting, pursuant to the

13 Settlement Notice, a timely request for exclusion shall be entitled to timely file an individual

14 lawsuit, but shall be barred from filing a subsequent class action lawsuit concerning the Settled

15 Claims against any of the Released Parties ("Anti-Stacking Order").

16 17. Any order approving or modifying the Plan of Allocation set forth in the

17 Settlement Notice, or the application by Class Counsel for an award of attorneys' fees and

18 reimbursement of expenses, or any request of Class Representatives for reimbursement of

19 reasonable costs and expenses, shall not disturb or affect the finality of this Judgment, the

20 Stipulation, or the Settlement contained therein.

21 18. Class Counsel are hereby awarded attorneys' fees, costs, and expenses in the

22 amount of % of the Gross Settlement Fund plus accrued interest, the sum of which the Court

23 finds to be fair and reasonable. The foregoing award of fees, costs, and expenses shall be paid to

24 Class Counsel from the Gross Settlement Fund, and such payment shall be made at the time and

25 in the manner provided in the Stipulation, with interest from the date the Gross Settlement Fund

26 was funded to the date of payment, at the same net rate that interest is earned by the Gross

27 Settlement Fund. The appointment and distribution among Class Counsel of any award of

28 attorneys' fees shall be within Class Counsel's sole discretion.

8. FI\.%ORL i:Ii;%NI)Ji UC'i!E.T05 CV 0179IEG(JNIA)


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

19. In making this award of attorneys' fees and reimbursement of expenses to be paid

from the Gross Settlement Fund, the Court has considered and found that:

(a) The Settlement has created a fund of $12 million in cash that is already on

deposit, plus interest thereon, and that numerous Class Members who submit acceptable Proofs of

Claim will benefit from the Settlement;

(b) Over copies of the Settlement Notice were disseminated to Class

Members stating that Class Counsel were moving for attorneys' fees, costs, and expenses equal to

30% of the first $10 million and 25% of the next $2 million of the Settlement Fund, plus interest

thereon, and ( ) objections were filed against the terms of the proposed Settlement or

the ceiling on the fees and expenses contained in the Settlement Notice;

(c) Class Counsel have conducted the litigation and achieved the Settlement

with skill, perseverance, and diligent advocacy;

(d) The Action involves complex factual and legal issues and was actively

prosecuted for nearly four years and, in the absence of a settlement, would involve further lengthy

proceedings with uncertain resolution of the complex factual and legal issues;

(e) Had Class Counsel not achieved the Settlement there would remain a

significant risk that the Class Representatives and the Class may have recovered less than the

Settlement Amount or nothing at all from the Defendants;

(f) Class Counsel have advanced $ in costs and expenses to fund the

litigation of this Action; and

(g) The amount of attorneys' fees awarded and expenses reimbursed from the

Gross Settlement Fund are fair and reasonable and consistent with awards in similar cases.

20. Class Representatives are hereby awarded $ as reimbursement for their

reasonable costs and expenses directly related to their representation of the Class as allowed by I

15 U.S.C. §78u-4(a)(4), plus interest earned on such amount at the same rate earned by the Gross

Settlement Fund.

21. Without affecting the finality of this Judgment in any way, the Court reserves

exclusive and continuing jurisdiction over the Action. the Class Representatives, the Class_ and

9. F1.' 1i. ORDER AND JELUGMI[:N r

OS(:V0179tEG(JMA)


1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

the Released Parties for the purposes of. (a) supervising the implementation, enforcement,

construction, and interpretation of the Stipulation. the Plan of Allocation, and this Judgment; (b)

hearing and determining any application by Class Counsel for an award of attorneys' fees, costs,

and expenses and/or reimbursement to the Class Representatives, if such determinations are not

made at the final hearing; and (c) supervising the distribution of the Gross Settlement Fund and/or

the Net Settlement Fund.

22. In the event, for any reason whatsoever, that the Settlement is terminated or does

not become Final in accordance with the terms of the Stipulation, or in the event that the Gross

Settlement Fund, or any portion thereof, is returned to First Command, then this Judgment shall

be rendered null and void, shall be vacated to the extent provided by and in accordance with the

Stipulation, and, in such event, all orders entered and releases delivered in connection herewith

shall be null and void to the extent provided by and in accordance with the Stipulation.

23. In the event that, prior to the Effective Date, one or more of the Parties institutes

any legal action against any other Party to enforce any provision of the Stipulation or this

Judgment or to declare rights or obligations thereunder, the successful Party or Parties shall be

entitled to recover from the unsuccessful Party or Parties reasonable attorneys' fees and costs

incurred in connection with any such action.

24. There is no reason for delay in the entry of this Judgment and immediate entry by

the Clerk of the Court is expressly directed pursuant to Rule 54(b) of the Federal Rules of Civil

Procedure.

IT IS SO ORDERED.

_,2009Dated:

Hon. Irma E. Gonzalez

United States District Court Judge

10. FINAL ORDERAND JUDGMENT05 (:V' 0179 1 EG (J.-MA)


McPhail v. First Command Financial Planning, Inc.Case No. 3:05-CV-0 I 79-TEG (JMA)

FIRST COMMAND' S FREE CHOICE PLAN

You are receiving this notice and enclosed settlement check because you are anAuthorized Claimant (i.e., one who submitted a valid and timely Proof of Claim) in thesettlement of McPhail tv. First C'onunand Financial Planning. Ine., Case No. 3:05-CV-0179-IEG(JMA) (the "Settlement"). Because you are an Authorized Claimant, your family is entitled toparticipate in First Command's "Free Choice Plan" under the terms and conditions set forthherein.

1. "FREE CllotcE PLAN"

A. Terms & Conditions

Instead of cashing the enclosed settlement check, you may, at your sole discretion,choose to endorse the settlement check over to First Command in exchange for credit equal tothree times the face amount ofthe endorsed check. This credit can then be applied against thecost of financial planning services for your family under First Command's new TailoredProfessional Services Program (which is described below). If you receive multiple settlementchecks, then you may choose to endorse one or more of those checks over to First Command inexchange for credit equal to three times the face amount of the endorsed check(s). In addition, ifanother member of your family is also an Authorized Claimant and receives one or moresettlement checks, then he or she may choose to endorse one or more of those settlement checksover to First Command in exchange for credit equal to three times the face amount of theendorsed check(s). The maximum total credit is $300 per family . Further, your family,comprised of one or more Authorized Claimants, may only exercise the credit option once andmust exercise the credit option within 180 days ofthe issuance of the settlement check(s) .

B. Example

Suppose you receive a settlement check for $20 and your spouse receives a separatesettlement check for $30. If, instead of cashing the checks, you would like your family toparticipate in First Command's "Free Choice Plan," then you, your spouse, or both can endorsethe check(s) over to First Command in exchange for a credit to be applied against the cost ofFirst Command's Tailored Professional Services Program. For example, if you and your spousedecide to endorse both checks (i.e., $50) over to First Command, then your family would receivea total credit of $150. Alternatively, if you decide to endorse only your check (e.g., $20) over toFirst Command, then your family would receive a credit of $60.

II. FIRST COMMAND'S TAILORED PROFESSIONAL SERVICES PROGRAM

First Command's "Tailored Professional Services Program' is a financial planningservice that, for a variable fee based on the extent of service. time, and effort a First Commandadvisor spends working with the client, allows a client to select and pay for the most appropriateplanning tools and levels of advisory service to match the complexities of the client's ownfinancial needs and goals, in the creation of a written financial plan.


More information on First Command's "Tailored Professional Services Program" can befound at http://www.firsteommand.com/pdf/DOS.pdf.

III. INSTRUCTIONS

If you would like to participate in First Command's "Free Choice Plan," then pleasefollow these instructions:

(1) For each settlement check that you wish to endorse over to First Command, write"Pay to the Order of First Command Financial Planning , Inc." on the firsttwo lines on the back of the check.

(2) On the third line on the back of the check, have the Payee (i.e., the individual towhom the check is payable) endorse the settlement check(s) by signing his or hersignature below the statement in (1), above. If the settlement check is made out toa minor (i.e., an individual under the age of 18), then a parent or guardian mustendorse the check by signing his or her name and then writing "Parent/Guardianof insert child's name], Minor" below the signature.

(3) Mail the settlement check(s) to the following address:

First Command ' s "Free Choice Plan"c/o First Command Financial Planning, Inc.

P.O. Box 2387Fort Worth , TX, 76113-2387

(4) After your endorsed check(s) is received, you will be contacted by FirstCommand's Home Office or by your local First Command advisor to scheduletime to begin your "Free Choice Plan."

(5) If you have any questions or comments regarding First Command's "Free ChoicePlan," then please call 1-800-443-2104.


DECLARATION OF NORMAN BLUMENTHAL

EXHIBIT #2

ti Case 3 : 05-cv-00179-IEG-Jh%umP itiqng lgP&-AiaugF$10/16/2008 Page 94 of 106

2255 Calle Clara, La Jolla, California 92037Tel: (858) 551-1223Fax: (885) 551-1232

FIRM RESUME

Areas of Practice: Consumer and Securities Class Action, Civil Litigation, Transactional Law,Business Litigation, Products Liability and Construction Defects.

ATTORNEY BIOGRAPHIES

Norman B. BlumenthalPartnerPractice Areas: Consumer and Securities Class Action, Civil Litigation, Transactional LawAdmitted: 1973, Illinois; 1976, CaliforniaBiography: Law Clerk to Justice Thomas J. Moran, Illinois Supreme Court, 1973-1975. Instructor,Oil and Gas Law: California Western School of Law, 1981; University of San Diego School ofLaw,1983. President and Chairman of the Board, San Diego Petroleum Club Inc., 1985-1986. ChiefOperating Officer and General Counsel, Brumark Corporation, 1980-1987.Member: San Diego County, Illinois State and American Bar Associations; State Bar of California.Educated: University of Wisconsin (B.A., 1970); Loyola University of Chicago (J.D., 1973)Born: Washington, D.C., January 31, 1948

Kyle R. Nordrehaug

Partner

Practice Areas: Consumer and Securities Class Actions, Civil LitigationAdmitted: 1999, CaliforniaMember: State Bar of CaliforniaEducated: University of California at Berkeley (B.A., 1994); University of San Diego (J.D. 1999)Born: San Diego, California, October 21, 1972

Aparaj it BhowmikAssociatePractice Areas: Consumer and Securities Class Actions, Civil LitigationAdmitted: 2007, CaliforniaMember: State Bar of CaliforniaEducated: University of California at San Diego (B.A., 2002); University of San Diego (J.D.2006)Born: Los Angeles, California, February 20, 1980

Scott MacraeContract AttorneyPractice Areas: Consumer and Securities Class ActionAdmitted: 1982, CaliforniaEducated: Bowdoin College (B.A., 1978); University of California at Berkeley,Boalt Hall School of Law (J.D., 1982)Born: Summit, New Jersey, November 26, 1956


REPORTED CASES

Hall v. Count of Los Angeles, 148 Cal. App. 4th 318 (2007); Coshow v. City of Escondido, 132Cal. App. 4th 687 (2005); Daniels v. Philip Morris , 18 F.Supp 2d 1110 (1998 S.D. Cal.);Washington Mutual Bank v. Superior Court , 24 Cal. 4'h 906 (2001); Gibson v. World Savings &Loan Asso. , 103 Cal. App. 4" 1291 (2003); Jordan v. De artment of Motor Vehicles, 75 Cal.App. 4'" 445 (1999); Jordan v. Department of Motor Vehicles , 100 Cal.App. 4th 431 (2002);Norwest Mortgage, Inc. v. Superior Court , 72 Cal.App.4th 214 (1999); Hildago v. DiversifiedTransp. Sya , 1998 U.S. App. LEXIS 3207 (9'" Cir. 1998); Kensington Mg-al. v. Oakley,Inc., 1999 U.S. Dist LEXIS 385; Fed.Sec.L.Rep. (CCH) P90, 411 (1999 C.D. Cal.); Olszewski v.Scripps Health, 30 Cal. 4" 798 (2003); Taiheiyo Cement Corp. v. Superior Court, 105 Cal.App.4" 398 (2003); McMeans v. Scripps Health, Inc. , 100 Cal. App. 4`" 507 (2002); Ramos v.Countrywide Home Loans , 82 Cal.App. 4'" 615 (2002); Tevssier v. City,, of San Diego , 81Cal.App. 4`" 685; Rocker v. KPMG LLP , 122 Nev. Adv. Op. No. 101 (2006). Practice areas:Consumer Class Actions; Securities Class Actions; Civil Litigation; Transactional Law BusinessLitigation.

2

Case 3 : 05-cv-00179-IEG-JIMASQOA fffi^4 RZ3KGItE l911612008 Page 96 of 106

Blumenthal & Nordrehaug (AV)

LEAD COUNSEL - CLASS ACTION

Adkins v. Washington Mutual Bank - SettledOrange County Superior CourtNature of Case: Unfair Competition - Bank Interest OverchargesPlaintiffs Counsel: Blumenthal & Nordrehaug

Agah v. CompUSA - "In Litigation"U.S. District Court, Southern District of CaliforniaCase No. SA CV05-1087 DOC (Anx)Nature of Case: Unfair Competition - Unfair Rebate ProgramPlaintiff's Counsel: Blumenthal and Nordrehaug

Allec v. Cross Country Bank - SettledOrange County Superior CourtNature of Case: Unfair Business Practices-Deceptive AdvertisingPlaintiff's Counsel: Blumenthal & Nordrehaug

Arreguin v. Impact Solutions - "In Litigation'Los Angeles Superior Court, Case No. BC 340107Nature of Case: Labor Code ViolationsPlaintiff's Counsel: Blumenthal and Nordrehaug

Ayala v. Met-RX USA - "In Litigation"Los Angeles Superior Court, Case No. L.A.S.C. Case No. : BC 289455Nature of Case: Unfair Competition - Sale of Illegal ProductsPlaintiff's Counsel: Blumenthal and Nordrehaug &Trenam, Kemker, Scharf, Barkin, Frye,O'Neill & Mullis, P.A.

Bermant v. Bank of America, Investment Services , Inc. - "In Litigation"Los Angeles Superior Court, Civil Action No. BC342505Nature of Case: Labor Code ViolationsPlaintiff ' s Counsel : Blumenthal and Nordrehaug &Arias, Ozzello & Gignac, L.L.P. &United Employees Law Group

Bolger v. Dr. Martens - SettledSan Diego Superior CourtNature of Case: Unfair Business Practices-Deceptive AdvertisingPlaintiff's Counsel: Blumenthal & Nordrehaug

Briseno v. American Savings Bank - SettledOrange County Superior CourtNature of Case: Unfair Competition - Force Ordered Insurance Overcharges

^t5^^.7^fFnl NqRqet 2h50eL & eye 0/16/2008 Page 97 of 106

Buonomo v. ValueVision - SettledMinnesota District CourtNature of Case: False Advertising, Breach of WarrantyPlaintiffs Counsel: Blumenthal & Nordrehaug; Mansfield, Tanick & Cohen, P.A.

Butler v. Oberman, Tivoli, Miller and Pickert, Inc. - "In Litigation"Los Angeles Superior Court, Case No. BC 339051Nature of Case: LaborPlaintiff's Counsel: Blumenthal and Nordrehaug

Citizens for Fair Treatment v. Quest Communications - SettledSan Diego Superior CourtNature of Case: Failure to Pay for Vacation TimePlaintiff's Counsel: Blumenthal and Nordrehaug

Cohen v. Bosch Tool - "In Litigation"San Diego Superior Court, Case No. GIC 853562Nature of Case: Unfair Business Practices-Deceptive AdvertisingPlaintiff's Counsel: Blumenthal and Nordrehaug

Collins v. Galpin Motors - "In Litigation"Los Angeles Superior Court, Case No. BC 343915Nature of Case: OvertimePlaintiff's Counsel: Blumenthal and Nordrehaug

Comstock v. Washington Mutual Bank - "In Litigation"San Diego County Superior CourtNature of Case: Unfair Competition - Force Order InsurancePlaintiffs Counsel: Blumenthal & Nordrehaug

Conley v. Norwest - SettledSan Diego County Superior CourtNature of Case: Unfair Business Practices-Force Ordered Insurance OverchargesPlaintiffs Counsel: Blumenthal & Nordrehaug

Connell v. Sun Microsystems - "In Litigation"Alameda Superior Court, Case No. RGO6252310Nature of Case: Labor Code ViolationsPlaintiff's Counsel: Blumenthal and Nordrehaug &United Employees Law & Group Chavez & Gertler, LLP

Curry v. California Testing Bureau/McGraw Hill - "In Litigation"U.S. District Court, Northern District of California, San JoseCivil Action No. C-05-4003 JWNature of Case: ERISA ClaimPlaintiff's Counsel: Blumenthal and Nordrehaug & Chavez & Gertler

Danford v. Movo Media - SettledSan Diego Superior Court

4

QW-RRITAIl99AWPraRRRY f{ AA iolatFîî of^nruROIOA Righgp%9t8 of 106

Plaintiffs Counsel: Blumenthal & Nordrehaug

Daniels, et al, v. Philip Morris, et al . - On Review before the California Supreme CourtSan Diego Superior CourtNature of Case: Unfair Business Practices-Unlawful, Deceptive and Unfair Marketing ofCigarettes to ChildrenPlaintiffs Counsel: Blumenthal & Nordrehaug

Dewane v. Prudential - "In Litigation"U.S. District Court, Central District of CaliforniaCase NO. SA CV 05-1031Nature of Case: Labor Code ViolationsPlaintiff's Counsel: Blumenthal and Nordrehaug &Wynne Law Firm & Thierman Law Firm P.C.

Downtown Inns v. Pac Bell - SettledCalifornia Public Utilities CommissionNature of Case: Illegal ChargePlaintiffs Counsel: Blumenthal & Nordrehaug; Sullivan Hill.

Fallah v. Cingular Wireless - "In Litigation"Orange County Superior CourtCase NO.Nature of Case: Unfair Competition - Unfair Rebate ProgramPlaintiffs Counsel: Blumenthal and Nordrehaug

Fierro v. Chase Manhattan - SettledSan Diego Superior CourtNature of Case: Unfair Competition - Bank Interest OverchargesPlaintiffs Counsel: Blumenthal & Nordrehaug

Friend v. Wellpoint - "In Litigation"

Los Angeles Superior Court, Case NO. BC345147Nature of Case: Labor Code ViolationsPlaintiffs Counsel: Blumenthal and Nordrehaug &United Employees Law Group

Getchius v. National Private Securit - "In Litigation"Los Angeles Superior Court, Case No. BC 338907Nature of Case: OvertimePlaintiff's Counsel: Blumenthal and Nordrehaug

Gibson v. World Savings - Judgment for Class after Appeal - SettledOrange County Superior CourtNature of Case: Unfair Business Practices-Force Ordered Insurance OverchargesPlaintiffs Counsel: Blumenthal & Nordrehaug

Gill v. Parabody, Inc. - SettledSan Diego Superior CourtNature of Case: Product Defect

^ttl t^ îr ^11 i^ 1Pk it ^t NPr%MW^t 250-3 Filed 10/16/2008

Greer v. Fleet Mortgage - SettledSan Diego Superior CourtNature of Case: Unfair Business Practices-Bank OverchargesPlaintiffs Counsel: Blumenthal & Nordrehaug

Guzman v. GNC, Inc. - "In Litigation"U.S. District Court, Central District of CaliforniaCase No. CV 06-2326 MMM FMOxNature of Case: Unfair Competition - Illegal Product SalesPlaintiff's Counsel: Blumenthal and Nordrehaug &Trenam, Kemker, Scharf, Barkin, Frye,

O'Neill & Mullis, P.A.

Guzman v. Muscletech . - " In Litigation"U.S. District Court, Central District of CaliforniaCase No. Case No. CV06-2377 CAS JTLxNature of Case: Unfair Competition - Illegal Product SalesPlaintiff's Counsel: Blumenthal and Nordrehaug &Thanasides, Zalkin & Acero & Trenam, Kemker, Scharf,Barkin, Frye, O'Neill & Mullis, P.A.

Hahn v. Circuit City -- SettledSan Diego Superior Court; U.S. District Court, Southern District of CaliforniaNature of Case: Unfair Business Practices, Failure to Pay Vacation TimePlaintiff's Counsel: Blumenthal & Nordrehaug

Hall v. County of Los Angeles - "In Litigation"Los Angeles Superior Court, Case No. BC208582Nature of Case: Gender DiscriminationPlaintiff's Counsel: Blumenthal and Nordrehaug &The Lewis Law Firm

Handler v. Oppenheimer - "In Litigation"Los Angeles Superior Court, Civil Action No. BC343542Nature of Case: Labor Code ViolationsPlaintiff's Counsel: Blumenthal and Nordrehaug &Perona, Langer, Beck, Lallande and SerbinHiggins v. Maryland Casualty - SettledSan Diego Superior CourtNature of Case: Unfair Business Practices-Deceptive Insurance OverchargesPlaintiffs Counsel: Blumenthal & Nordrehaug

Hoffman v. National Warranty Insurance - "In Litigation"District Court for the State of NevadaNature of Case: Auto Warranty FraudPlaintiff' s Counsel : Blumenthal & Nordrehaug; Greco, Traficante & Edwards;Gerard, Osuch & Cisneros, LLP

Hollander v. Vitamin Shoppe Industries - "In Litigation"

Page 99 of 106

6

C eA9Pr&v 1X-9Tl 11MA Document 250-3 Filed 10/16/2008

Case No.L.A.S.C. Case No. BC311446Nature of Case: Unfair Competition - Illegal Product SalesPlaintiff's Counsel: Blumenthal and Nordrehaug &Thanasides, Zalkin & Acero & Trenam, Kemker, Scharf,Barkin, Frye, O'Neill & Mullis, P.A.

Jones v. E*Trade Mort a 7e - "In Litigation"U.S. District Court , Southern District CaliforniaCase No. 02-CV-1 123 L (JAH)Nature of Case : TILA ViolationsPlaintiff's Counsel : Blumenthal and Nordrehaug &Robert C . Fellmeth, Esq.

Kinv. Nordstrom - SettledSan Diego Superior CourtNature of Case: Unfair Business Practices-Failure to Pay for Vacation TimePlaintiffs Counsel: Blumenthal & Nordrehaug

Lopez v. K-Mart - "In Litigation"Ventura County Superior Court, Case No. BC 351983Nature of Case: Overtime - Unfair Business Practice

Page 100 of 106

Plaintiff's Counsel: Blumenthal and Nordrehaug & Arias, Ozzello, & Gignac, LLP & UnitedEmployees Law Group

Mann v. Vital Pharmaceuticals - "In Litigation"Los Angeles Superior CourtCase No. L.A.S.C. Case No. : BC 310790Nature of Case: Unfair Competition - Illegal Product SalesPlaintiff's Counsel: Blumenthal and Nordrehaug &Trenam, Kemker, Scharf, Barkin, Frye, O'Neill & Mullis, P.A.

Mandell v. Republic Bank - SettledLos Angeles County Superior CourtNature of Case: Breach of Fiduciary Duties to IRA Account HoldersPlaintiffs Counsel: Blumenthal & Nordrehaug

Manzanarezv. Home Savings of America - SettledSan Francisco Superior CourtNature of Case: Unfair Business Practices-Overcharge for Inspection FeesPlaintiff's Counsel: Blumenthal & Nordrehaug

Marchese v. Ty, Inc. - Settled San Diego Superior CourtNature of Case: Unfair Business Practices-Deceptive AdvertisingPlaintiffs Counsel: Blumenthal & Nordrehaug

Martinez v. Yahoo, Inc . - SettledNature of Case: Deceptive AdvertisingPlaintiff's Counsel: Blumenthal & Nordrehaug

Matloubian v. Home Savings of America - Settled

^tAgj Tq,gq-JMA Document 250-3 Filed 10/16/2008 Page 101 of 106

Nature of Case: Unfair Business Practices-Force Ordered Insurance OverchargesPlaintiff's Counsel: Blumenthal & Nordrehaug; Chavez & Gertler

McMeans v. Scri1212sHealth, - SettledSan Diego Superior CourtNature of Case: Unfair Competition, Lien OverchargesPlaintiffs Counsel: Blumenthal & Nordrehaug

McPhail v. First Command - "In Litigation"United States District Court for the Southern District of CaliforniaCase No.05CV0179 IEG (JMA)Nature of Case: Securities Fraud, 10(b)(5) violationsPlaintiff's Counsel: Blumenthal & Nordrehaug appointed Lead Counsel, Greco & Traficante &Whatley Drake LLC & Gray & White,& Brewer & Carlson, LLP & Franklin & Hance, PSC

Meco v. International Medical Research and related cases) - "In Litigation"Los Angeles Superior CourtNature of Case: Unfair Competition, Product Adulteration, Illegal Sale of DrugsPlaintiff's Counsel: Blumenthal & Nordrehaug

Nakagawa v. LPJ Pharmaceuticals - "In Litigation"Los Angeles Superior CourtCase No. FRESNO S.C. Case No. : 04CECG 00453Nature of Case: Unfair Competition - Illegal Product SalesPlaintiff's Counsel: Blumenthal and Nordrehaug &Trenam, Kemker, Scharf, Barkin, Frye, O'Neill & Mullis, P.A.

Navarette v. Edwards Theaters/Century - "In Litigation"Orange County Superior Court, Case No. 050000211Nature of Case: OvertimePlaintiff's Counsel: Blumenthal and Nordrehaug

Nelson v. St. Paul Fire & Marine Insurance - SettledBrazoria County District Court, TexasNature of Case: Deceptive Business Practices in sale of oil & gas reserve insurancePlaintiff's Counsel: Blumenthal & Nordrehaug

Nguyen v. Wells Fargo Home Mortgage - "In Litigation"Orange County Superior Court, Case No. 05 CC 00116Nature of Case: Unfair Business Practices - Force Ordered Insurance OverchargesPlaintiffs Counsel: Blumenthal & Nordrehaug

Olszewski v. ScrippsHealth - Judgment for PlaintiffSan Diego Superior CourtNature of Case: Unfair Competition, Lien OverchargesPlaintiff's Counsel: Blumenthal & Nordrehaug

Pacheco v. Lexicon Marketing - "In Litigation"Los Angeles Superior Court, Case No. BC 342265Nature of Case: Overtime

re iaug50-3Filed 10/16/2008 Page 102 of 106n i# -Fonsel? IErC'en ia anc or

Patelski v. The Boeing Company - SettledUnited States District Court, Southern District of New York;transferred to United States District Court, Eastern District of MissouriNature of Case: Refund ActionPlaintiffs' Counsel: Blumenthal & Nordrehaug, Sigman, Lewis & Feinberg, P.C.

Pearlman v. Bank of America - SettledSan Diego Superior CourtNature of Case: Unfair Business Practices-Force Ordered Insurance OverchargesPlaintiff's Counsel: Blumenthal & Nordrehaug; Chavez & Gertler

Prince v. ClientLogic - "In Litigation"Eighth Judicial District Court, Clark County, NevadaNo Case No. A517624Nature of Case: OvertimePlaintiff's Counsel: Blumenthal and Nordrehaug & Gerard & Osuch, LLP

Puentes v. Wells Fargo Home Mortgage - "In Litigation"San Diego Superior CourtNature of Case: Unfair Business Practices - Bank Interest OverchargesPlaintiff's Counsel: Blumenthal & Nordrehaug

Ralphs v. Blockbuster, Inc . SettledSan Diego Superior CourtNature of Case: Unlawful Late FeesPlaintiff's Counsel: Blumenthal & Nordrehaug, Morris and Associates, Pettersen and Bark

Ramos v. Countrywide - SettledSan Diego Superior CourtNature of Case: Unfair Business Practices-Force Ordered Insurance OverchargesPlaintiffs' Counsel: Blumenthal & Nordrehaug; Sullivan Hill; Chavez & Gertler

Redin v. Sterling Trust - SettledLos Angeles Superior CourtNature of Case: Breach of Fiduciary Duties of IRA AdministratorPlaintiff's Counsel: Blumenthal & Nordrehaug

Reynolds v. Marlboro/Philip Morris U.S.A. - "In Litigation"U.S. District Court, Southern District of CaliforniaCivil Action No. 05 CV 1876 JAHNature of Case: Unfair CompetitionPlaintiff' s Counsel : Blumenthal and Nordrehaug

Rezec v. Sony - SettledSan Diego Superior CourtNature of Case: Fraudulent AdvertisingPlaintiffs' Counsel: Blumenthal & Nordrehaug, Prongay & Borderud; The Cifarelli Law Firm

Rocheford v. SC&E Administrative Service - "In Litigation"

9

Case 3: -cn-0Q179-Jr oMx,A Document 250-3 Filed 10/16/2008

Nature of Case: Auto Warranty FraudPlaintiffs' Counsel: Blumenthal & Nordrehaug; Greco, Traficante & Edwards;Gerard, Osuch & Cisneros, LLP

Santone v . AT&T - SettledUnited states District Court, Southern District of AlabamaNature of Case: Unconscionable Business PracticesPlaintiff's Counsel: Blumenthal & Nordrehaug, Morris & Associates

Scott v. Blockbuster, Inc. - SettledCount of Appeals, Ninth District of Texas, Beaumont, TexasNature of Case: Unlawful Late Fees

Page 103 of 106

Plaintiff's Counsel: Blumenthal & Nordrehaug, Brothers & Thomas, LLP, Vaughan O. Stewart

Shiell v. County of Los Angeles - "In Litigation"Los Angeles Superior CourtCase Number BC208583; [Related to]: BC208582

Nature of Case: Claim for Common Law Employment

Plaintiffs Counsel: Blumenthal and Nordrehaug &

The Lewis Law Firm

Silvas v. E*Trade - "in Litigation"U.S. District Court, Southern DistrictCASE NO. 05cv02348 - W (NLS)Nature of Case: TILA ViolationsPlaintiff's Counsel: Blumenthal and Nordrehaug & Robert Fellmeth & The Law Offices ofDaniel Harris & The Nygaard Law Firm

Sims v. Philip Morris, Inc. - "In Litigation"United States District Court, For the District of ColumbiaNature of Case: Unlawful Marketing of Cigarettes to ChildrenPlaintiffs' Counsel: Blumenthal & Nordrehaug, Thorsnes, Bartolotta & McGuire;Chavez & Gertler, Thomas E. Sharkey and Fleishman & Fisher

Sirota v. Swing-N-Slide - SettledWisconsin District Court , County of Rock WisconsinCase No. 95CV726JNature of Case : Fraudulent Stock Buy Back-Derivative ClaimPlaintiff ' s Counsel : Blumenthal & Nordrehaug ; Sullivan Hill ; Milberg, Weiss, Bershad , Hynes &Lerach ; Nowlan & Mouat

Sorensen v. Binions, - "In Litigation"Nature of Case: ERISA violationPlaintiffs Counsel: Blumenthal & Nordrehaug; Gerard & Osuch

Stevens v. Robinsons-May - SettledSan Diego Superior CourtNature of Case: Unfair Business Practices-Failure to Pay for Vacation TimePlaintiff's Counsel: Blumenthal & Nordrehaug

10

Case 3 : 05-cv-00179-IEG-JMA Document 250-3 Filed 10/16/2008 Page 104 of 106Strauss v. Bayer Corporation In LitigationUnited States District Court, District of MinnesotaNature of Case: Baycol Products Liaibility LitigationPlaintiffs' Counsel: Blumenthal & Nordrehaug; Fleishman & Fisher

Tauber v. Alaska Airlines - SettledLos Angeles Superior CourtNature of Case: Unfair Business Practice - Employment PracticesPlaintiff's Counsel: Blumenthal & Nordrehaug

Van GoM v. Ameri nest Mortgage/Deutsche Bank - "In Litigation"U.S. District Court, Central District of CaliforniaCase No. SACV05-907 CJC (ANx)Nature of Case: OvertimePlaintiff's Counsel: Blumenthal and Nordrehaug

Wadhwa v. Escrow Plus - SettledLos Angeles Superior CourtNature of Case: Investment FraudPlaintiffs Counsel: Blumenthal & NordrehaugYao v. Bodyonics, Ltd. - "In Litigation"Los Angeles Superior Court, JCCP No. 4363Nature of Case: Unfair Competition - Illegal Product SalesPlaintiff's Counsel: Blumenthal and Nordrehaug

Zugich v. Wells Fargo Bank - SettledSan Francisco Superior CourtNature of Case: Unfair Business Practices-Force Ordered Insurance OverchargesPlaintiff's Counsel: Blumenthal & Nordrehaug

CO-COUNSEL - Class Actions

Baxt v. Scor U.S. - SettledDelaware Court of ChanceryNature of Case: TakeoverPlaintiffs' Counsel: Blumenthal & Nordrehaug; Sullivan Hill;Rosenthal, Monhait, Gross & Goddess, P.A.

Bronson v. Blech Securities - SettledU.S. District Court, Southern District of New YorkNature of Case: Securities FraudPlaintiffs' Counsel: Blumenthal & Nordrehaug; Milberg; Weiss, Bershad, Hynes & Lerach;Kaplan, Kilsheimer & Fox; Berstein, Liebhard & Lifshitz; Berstein & Ostraff, Law Office ofDennis J. Johnson; John T. Maher; Sullivan Hill; Well, Gotshal & Manges; Paul, Hastings,Janofsky & Walker; Andrews & Kurth; Paul, Weiss, Rifkind, Wharton & Garrison; Wolff &Samson; Heller, Horowitz & Feit, P.C.; Shereff, Friedman, Hoffman & Goodman, LLP;Debevoise & Plimpton; Smith, Campbell, Paduano; Thelen, Marrin, Johnson & Bridges; TheOffices of Robert Swetnick; Crummy Del Deo; Robinson, Silverman, Pearce, Aronsohn &Berman; Buchanan Ingersoll, P.C.; Morgan, Lewis & Bockius, Schwartz, Kelm, Warren &Ramirez; Porter & Hedges, L.L.P.; MicroProbe Corp.; NeoRX Corp.; Solomon, Zauderer,

11

g9PARM-py5(^R ^7 R^^: YA Document 250-3 Filed 10/16/2008 Page 105 of 106

Caushon v. General Motors Corp. - "In Coordinated Litigation"In re Automobile Antitrust CasesSan Diego Superior Court , coordinated in San FranciscoNature of Case: Unfair Competition ; AntitrustPlaintiffs Co-Counsel : Blumenthal & Nordrehaug

Dibella v. Olympic Financial - SettledU.S. District Court, District of MinnesotaNature of Case: Securities FraudPlaintiffs Counsel : Blumenthal & Nordrehaug

Ferrari v. Read -Rite - SettledU. S. District Court, Northern District of CaliforniaNature of Case : Securities FraudPlaintiff' s Counsel: Blumenthal & Nordrehaug ; Milberg, Weiss, Bershad , Hynes & Lerach

Hart v. United States Tobacco Co. - "In Litigation"Los Angeles Superior CourtCoordinated in Smokeless Tobacco LitigationNature of Case: Unfair Competition ; AntitrustPlaintiff' s Co-Counsel : Blumenthal & Nordrehaug ; the Cuneo Law Group P.C.; Gordon Ball

Kensington Capital v. Oakley - SettledU. S. District Court , Southern District of CaliforniaNature of Case : Securities FraudPlaintiffs ' Counsel: Blumenthal & Nordrehaug ; Milberg, Weiss, Bershad, Hynes & Lerach

Kensington Capital v. Vesta - SettledU. S. District Court, Northern District of AlabamaNature of Case : Securities FraudPlaintiffs ' Counsel : Blumenthal & Nordrehaug ; Milberg, Weiss, Bershad , Hynes & Lerach

Manaster v. SureBeam - SettledUnited States District CourtNature of Case: Violation of Securities ActPlaintiffs ' Counsel : Blumenthal & Nordrehaug ; Milberg Weiss Bershad Hynes & Lerach

Jordan/Ramos v. DMV - Judgment for PlaintiffSuperior Court, SacramentoNature of Case: Commerce Clause Violation - Tax declared unconstitutional -Affirmed on appealPlaintiffs' Counsel: Blumenthal & Nordrehaug; Milberg, Weiss, Bershad, Hynes & Lerach;Weiss & Yourman; Sullivan Hill.

Ridgewood Capital Management v. Gensia - SettledU.S. District Court, Southern District of California, #CV-92-1500HPlaintiffs' Counsel: Barrack, Rodos & Bacine; Kaplan, Kilsheimer & Fox; Wolf, Popper, Ross,Wolf & Jones; Law Offices of Joseph H. Weiss; Kaufman, Malchman, Kaufman & Kirby;Sullivan Hill; Blumenthal & Nordrehaug

12

Case 3 : 05-cv-00179-IEG-JMA Document 250-3 Filed 10/16/2008 Page 106 of 106

Shurman v. Scimed - SettledState of Minnesota District Court, Fourth District, #94-17640Plaintiffs' Counsel: Blumenthal & Nordrehaug; Milberg, Weiss, Bershad, Hynes & Lerach;Kaplan, Kilsheimer & Fox; Sullivan Hill; Law Offices of Lawrence G. Soicher.

Sirota v. Swing-N-Slide - SettledWisconsin District Court, County of Rock WisconsinNature of Case: Fraudulent Stock Buy-Back-Derivative ClaimPlaintiffs Counsel: Blumenthal & Nordrehaug; Sullivan Hill;Milberg, Weiss, Bershad, Hynes & Lerach; Nowlan & Mouat

Slatton v. G.E. Capital Mortgage Services - SettledCamden County Superior Court, New Jersey, #CAML0256198Nature of Case: Forced order insurancePlaintiffs Counsel: Blumenthal & Nordrehaug

Somkin v. Molten Metal - SettledU.S. District Court, District of Massachusetts, #9710325PBSNature of Case: Securities FraudPlaintiffs Counsel: Blumenthal & Nordrehaug

Sparks v AT&T - SettledIllinois District Court - Madison CountyDeceptive Practice claim - Leased consumer telephone equipmentPlaintiffs counsel - Carr Korein Tillery; Blumenthal & Nordrehaug; Whatley Drake

G:\D\NBB\McPhail - first cominand\Class Certitication\BAN Fiim Rcsume.wpd

13


1

2

3

4

5

61

71

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22 1

23

24

25

26

27

28

BLUMENTHAL & NORDREHAUGNorman B . Blumenthal (Cal. State Bar #068687)Kyle R. Nordrehaug (Cal. State Bar #205975)2255 Calle ClaraLa Jolla, CA 92037(858) 551-1223Fax: (858 ) 551-1232

GRECO & TRAFICANTEClyde C. Greco, Jr. (State Bar #085970)Paul A. Traficante (State Bar #096224)Peter J. Schulz (State Bar #167646)555 West Beech Street, Suite 500San Diego, CA 92101(619) 234-3660Fax: (619) 234-0626

I Additional Attorneys for Plaintiffs listed on Signature Page




Plaintiffs

v.

FIRST COMMAND FINANCIALPLANNING, INC., a Texas Corporation,FIRST COMMAND FINANCIALSERVICES, INC., a Texas Corporation,LAMAR C. SMITH and HOWARD M.CRUMP,

Defendants.

CASE NO. 05 CV 0179 (IEG) (JMA)

CERTIFICATE OF SERVICE[F.R.C.P. §5]


Judge: Hon. Irma GonzalezDept: 1, 4th floor


1

CERTIFICATE OF SERVICE

05 CV 0179 (IEG) (JMA)

Case 3 : 05-cv-00179-IEG-JMA Document 250-4 Filed 10/16/2008 Page 2 of 3

1 PROOF OF SERVICE [F.R.C.P. §51

2 I am a citizen of the United States and a resident of the State of California. I am employed

3in the County of San Diego, State ofCalifornia. I am over the age of 18 and not a party to the within

4

5 action . My business address is 2255 Calle Clara, La Jolla, California 92037. On October 16, 2008,

6 I served the document(s) described as below in the manner set forth below:

7

8 (1) NOTICE OF MOTION AND MOTION FOR PRELIMINARY APPROVAL OF

CLASS SETTLEMENT

9 (2) MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF

10 MOTION FOR PRELIMINARY APPROVAL OF CLASS SETTLEMENT(3) DECLARATION OF NORMAN B. BLUMENTHAL IN SUPPORT OF

11 MOTION FOR PRELIMINARY APPROVAL OF CLASS SETTLEMENT

12

13 _X_ (BY ELECTRONIC SERVICE): I caused the listed documents to be electronically filedthrough the CM/ECF system at the United States District Court for the Southern District

14 of California which generates a Notice of Electronic Filing to all parties and constitutes

15 service of the electronically filed documents on all parties for purposes of the FederalRules of Civil Procedure.

16

17_XX_ (Federal): I declare that I am employed in the office of a member ofthe bar of this Court at

whose direction the service was made, and that the foregoing is true and correct under

18 penalty of perjury.

19Executed on October 16, 2008, at San Diego, California.

20

21 /s/Norman Blumenthal

22 Norman B. BlumenthalBLUMENTHAL & NORDREHAUG

23 2255 Calle Clara

24La Jolla, CA 92037(858) 551-1223

25 Fax: (858) 551-1232

26 Clyde C. Greco, Jr., Esq.

27 Paul A. Traficante, Esq.

28 1CERTIFICATE OF SERVICE

05 CV 0179 (IEG) (JMA)


1 Peter J. Schulz, Esq.GRECO & TRAFICANTE

2 555 West Beech Street, Suite 5003 San Diego, CA 92101

(619) 234-36604 Fax: (619) 234-0626

5Joe R. Whatley, Esq.

6 WHATLEY DRAKE LLC2323 Second Avenue North

7 Birmingham, Alabama 352038 (205) 328-9576

Fax: (205) 328-96699

10 Matthew White, Esq.Mark Gray, Esq.

11 GRAY & WHITE

121200 PNC Plaza, 500 West Jefferson StreetLouisville, Kentucky 40202

13 (502) 585-2060

14Fax: (502) 581-1933

15 G. Mark Brewer, Esq.Dan Carlson, Esq.

16 BREWER & CARLSON, LLP

174275 Executive Square, Suite 1020La Jolla, CA 92037

18 (858) 558-7766

19Fax: (858) 558-1553

20 Larry Franklin, Esq.

FRANKLIN & HANCE, PSC21 505 W. Ormsby Avenue

22 Louisville, Kentucky 40203(502) 637-6000

23 Fax: (502) 637-1413

24Attorneys for Plaintiffs and the Certified Class

25

26

27

28 2CERTIFICATE OF SERVICE

05 CV 0179 (IEG) (JMA)

Documents

Case3:05-cv-00179-IEG-JMA Document250 BLUMENTHAL ......2008/10/16 · Case3:05-cv-00179-IEG-JMA Document250 Filed 10/16/2008 Page3 of 3 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18