According to the docket, on December 28, 2000, the Court entered the Final Judgment and Order of Dismissal. The settlement was approved, and the case closed.
By the Notice Of Pendency And Proposed Settlement, a hearing will held before the Honorable Freda L. Wolfson at the United States District Courthouse for the District of New Jersey, Clarkson S. Fisher Building, 402 E. State Street, Trenton, New Jersey 08609 on December 19, 2000, to consider the fairness, reasonableness and adequacy of the proposed Settlement, to determine whether the Stock Portion of the Settlement should be issued pursuant to Section 3(a)(10) of the Securities Act of 1933, and to consider the application of Plaintiffs' Counsel for attorneys' fees and reimbursement of expenses. Pursuant to the Settlement, Defendants have caused to be paid the sum of one million dollars ($1,000,000) in cash plus interest (the “Cash Portion) from the “D&O Policy” that was the subject of the “Insurance Action” (as described in the “History of Litigation” section below) into an interest bearing account. In addition, as part of the Settlement, New World Coffee-Manhattan Bagel Company, Inc. (“New World”) on behalf of Defendants, will issue 100,000 shares of freely tradeable New World common stock with a guaranteed minimum value as of the Distribution Date of $2.00 per share or $200,000 in total (the "Stock Portion"). The Cash Portion and the Stock Portion are collectively referred to as the “Settlement Fund”.
The Manhattan Bagel Defendants filed various motions to dismiss the Complaint, the Amended Complaint and the Overend Complaint. Although the Court dismissed the allegations as to certain individual defendants, it denied the Defendants’ motions, sustaining all claims against them. The Court also denied the Defendants’ motion to dismiss the Overend Complaint.
The Consolidated Amended Complaint (the “Complaint”), which was subsequently amended by the filing of the Second Consolidated Amended Complaint (the “Amended Complaint”), alleged that Manhattan Bagel Defendants violated Sections 11 and 15 of the Securities Act of 1933 (the “Securities Act”) and Sections 10(b) and 20(a) of the Exchange Act and SEC Rule 10b-5. Specifically, Plaintiffs alleged that during the Class Period, the Manhattan Bagel Defendants issued false and misleading statements concerning Manhattan Bagel, including the Company’s revenues and earnings. The Complaint also alleged that the Manhattan Bagel Defendants failed to disclose material accounting improprieties and other problems at I&J Bagel (“I&J”) (a significant subsidiary of Manhattan Bagel which the Company acquired in June 1995) that were discovered as a result of an investigation conducted by the Manhattan Bagel Defendants of I&J immediately prior to the Class Period. As a result of the investigation, Plaintiffs alleged the Manhattan Bagel Defendants learned of serious adverse information concerning I&J, including: that I&J’s and therefore Manhattan Bagel’s reported revenues and earnings were materially false; I&J financial statements violated Generally Accepted Accounting Principles (“GAAP”); and top-level I&J and Manhattan Bagel employees were responsible for accounting the improprieties. The Complaint and the Amended Complaint alleged that the Manhattan Bagel Defendants failed to disclose material problems at Manhattan Bagel and I&J, including the overstatement, in violation of GAAP, of the Company’s reported revenues and earnings for the year-end December 31, 1995 and for the fiscal quarter-ended March 31, 1996. Additionally, Plaintiffs alleged that the Manhattan Bagel Defendants conspired with the past president of I&J, to sell approximately $20 million worth of stock at artificially inflated prices.
On November 19, 1997, as a result of significant losses and being placed in default by its primary lender, Manhattan Bagel filed a bankruptcy petition in the U.S. Bankruptcy Court for the District of New Jersey (the “Bankruptcy Court”). Thereafter, on July 29, 1998, New World Coffee & Bagels, Inc., (“New World”) agreed to acquire Manhattan Bagel. On November 20, 1998, the Bankruptcy Court approved New World’s acquisition of Manhattan Bagel and on November 25, 1998, New World announced that it had closed on its acquisition of Manhattan Bagel.
By order entered October 22, 1996 (the “Consolidation Order”), the Court: (i) consolidated the actions under Master File No. 96- CV-3351 (the "Consolidated Action" or the “Action”); (ii) appointed Roger Copland, Henry A. Billeter, Sue May Lee and David Y. Lee as Lead Plaintiffs pursuant to § 21D(a)(3)(B)(v) of the Securities Exchange Act of 1934 (the “Exchange Act”) (H. Robert McKillop was added as a member of the Lead Plaintiff’s group by a subsequent order amending the Consolidation Order); and (iii) approved Lead Plaintiffs' selection of Abbey & Ellis - presently known as Abbey, Gardy & Squitieri, LLP - and Kaplan, Kilsheimer & Fox, LLP as Lead Plaintiffs’ Counsel for the Action, and the selection of Plaintiffs’ Liaison Counsel. By order dated February 14, 1997, this Court consolidated a related California state court action, entitled Overend v. Manhattan Bagel Co., Inc., et al., CA 96-5900 (the “Overend Action”), with the Action.
The original complaint, the stock price of the Company's Common Stock declined from a closing price of $21.25 on June 20, 1996 to a closing price of $13.75 on June 21, 1996. As a result, plaintiffs claimed the company was in violation of Rule 10b-5 under the Securities Exchange Act of 1934. The lawsuits filed in New Jersey and California were consolidated into one class action lawsuit in the Federal District Court in New Jersey.