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Settlement of the InkStop Lawsuits

InkStop, Inc. ("InkStop") went out of business on October 2, 2009, leaving employees unpaid for work performed after September 13. On October 4, we filed a Lawsuit against InkStop and two of its Executive Officers.

On November 5, InkStop filed a Chapter 7 petition in Bankruptcy Court. Thereafter, InkStop was dropped as a defendant in the first Lawsuit, leaving only the two Executive Officers as defendants. Simultaneously, we filed a second Lawsuit against other Executive Officers and Directors.

We then reached a Settlement of the Lawsuits with the former members of the Board of Directors of InkStop. The Settlement is explained below.

The Settlement made substantial Settlement Payments available to all eligible employees of InkStop in the following two groups: (a) all salaried and hourly employees of InkStop, Inc. who were not paid for work performed after September 13, 2009 ("the Non-Payment Group"); and (b) all salaried Store Managers of InkStop, Inc. after January 7, 2008 ("the Store Manager Group").

The Settlement was reached between the Representative Plaintiffs and all the former members of InkStop's Board of Directors, and on March 31, 2010, was approved by the U.S. District Court as fair, reasonable, and adequate.

A. Settlement Payments to InkStop Employees and Released Claims
The Total Settlement Amount is $660,000. That amount, after deductions approved by the Court, was divided into Individual Payments to eligible employees as follows. Ninety percent (90%) was allocated to employees in the Non-Payment Group, who were eligible for Individual Payments proportionate to their respective unpaid wages for work performed after September 13, 2009 as calculated by the Department of Labor, up to a maximum payment of $4,920.50. Ten percent (10%) was allocated to employees in the Store Manager Group, who were eligible for a per person payment in the amount of $169.34. Store Managers who fell within both Groups were eligible for two Individual Payments, one from each category.

The deductions approved by the Court included attorneys' fees in the amount of 16.66% of the Total Settlement Amount. (To maximize the Individual Payments to employees, Plaintiffs' Counsel chose to reduce their customary attorneys' fee of 33.33% by one-half). Also approved by the Court were reimbursements of litigation expenses of approximately $6,500, and service awards of $2,500 each to the Representative Plaintiffs for their service in the lawsuits.

In exchange, the InkStop Lawsuits were dismissed, and participating employees released all claims for unpaid wages under the Fair Labor Standards Act as well as state statutes and common law against InkStop, Inc. and any related persons and entities including its directors, officers, and employees. The released claims included any claims that were or could have been made in the InkStop Lawsuits, as well as any claims in the InkStop bankruptcy.

B. Advantages of the Settlement and Plaintiffs' Counsel's Recommendation
We strongly recommended the Settlement. It offered substantial settlement payments to employees, without the delay, uncertainty, and risk of continuing with the InkStop Lawsuits or awaiting the outcome of the InkStop bankruptcy (which may provide no recovery at all). Before deduction of attorneys' fees, expenses, and service awards, participating employees in the Non-Payment Group recovered approximately 97.37% of their recoverable wages under the Fair Labor Standards Act. The individual payments to the Store Manager Group, although lower in amount, are fair and equitable considering the less certain nature of their claim for unpaid overtime compensation.

To participate in the settlement, employees must have completed and returned a Settlement Form entitled "Consent to Opt-Into Lawsuit, Release and Dismiss Claims."

Employees received a formal notice in the mail from the Court, and that Notice included a copy of their Settlement Form.

The amount of each employee's Settlement Payment was printed on their Settlement Form.

There are two payment dates. Eligible employees who returned signed Settlement Forms by April 28, 2010 received settlement checks in approximately May, 2010.

The final deadline for returning signed Settlement Forms was several months later. Checks were mailed at the conclusion of the case which was August or September 2010.

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