According to the docket dated January 21, 2005, on February 10, 2005, the Court entered the Order granting the Motion for Disbursement of Funds. Earlier, on January 12, 2001, the Court entered the Final Judgment of Dismissal with Prejudice by U.S. District Judge Denny Chin approving the settlement and dismissing the action with prejudice. The Class Counsel was awarded $750,000 in attorneys' fees and $72,151.32 as reimbursement of expenses and the case was closed.
The Complaint charges that Foamex and certain of its officers and directors violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by issuing materially false and misleading statements concerning its financial condition and results of operations. Specifically, the Complaint alleges that defendants materially overstated Foamex' financial condition for the first three quarters of fiscal 1998, which artificially inflated the price of Foamex stock. At the same time, defendants reassured the investing public that the Company was in compliance with all covenants contained in its credit facilities. After the close of trading on April 16, 1999, Foamex shocked the market by announcing: (1) that it was seriously out of compliance with certain bank covenants and might have to re-classify all of its long-term indebtedness into current liabilities, affecting Foamex' status as a "going concern", (2) that it would report a $23 million loss in earnings before taxes and other deductions (EBITDA) for its fourth quarter of fiscal 1998 ($19.5 million less than previously estimated) and that its full fiscal year 1998 EBITDA would be $20 million less than previously estimated, (3) that the results of its first three quarters of fiscal 1998 might have to be restated, and (4) that it might incur a $65 million tax-related charge against earnings. The market reaction to the news was swift and severe. The price of Foamex stock plummeted to close at $6.50 on April 16, 1999 and $5.875 on April 19, 1999.