According to the docket, on May 31, 2000, the Court entered the final judgment and bar order with prejudice, pursuant to Rules 54(a) and (b) of the Federal Rules of Civil Procedure. The action was dismissed with prejudice and the case terminated.
As reported by the Company’s FORM 10-Q for the quarterly period ended March 31, 2000, eleven substantially similar actions were filed in the United States District Court for the Northern District of Illinois (Eastern Division). On April 20, 1999 the Court granted the plaintiff's motion to consolidate the lawsuits into a single complaint, which plaintiffs filed on May 7, 1999. On May 21, 1999, the defendants filed a motion to dismiss the consolidated amended complaint as against all defendants, which the plaintiffs opposed on June 10, 1999. On July 20, 1999 the Court denied the defendants' motion to dismiss and ordered the case to proceed to discovery. On August 4, 1999, defendants filed their answer to the consolidated amended complaint, denying all liability. Thereafter, although the Company and all of the individual defendants continued to deny any wrongdoing, an agreement to settle the matter was reached and preliminarily approved by the Court on December 23, 1999. The entire settlement amount of $1.55 million was paid into escrow by the Company's Directors and Officers Liability insurer. The settlement provides that all claims against the Company and the individual defendants will be dismissed upon entry of a final judgment. On March 24, 2000, a final fairness hearing was held before U.S. Magistrate Judge Rosemond who thereafter issued his report and recommendation to the District Court that the settlement be approved and that a final judgment be entered dismissing the action. The Magistrate Judge's report has been taken under advisement by the District Court. On May 9, 2000, the District Court issued an Order requesting that Plaintiff's counsel submit additional information in support of the request for approval of settlement on behalf of the class. Plaintiff's counsel has informed the Company that it plans to submit the requested information. Once the judgment is entered by the District Court, the settlement will become final after the expiration of the thirty day appeal period.
The original Complaint charges that Spyglass and certain of its officers and directors violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by misrepresenting or failing to disclose material information about Spyglass' operations and financial condition. Plaintiff specifically alleges that defendants' statements during the Class Period were false and misleading because contracts with several key clients were not finalized as represented in public statements. The revenue expected from these contracts, which is likely to never materialize, had formed the basis for forecasts of first quarter profitability. In that regard, on January 4, 1999 the Company announced that contrary to statements made during the Class Period, first quarter results would not meet prior estimates. As a result, the stock plummeted on heavy trading volume from $22.00 per share, the closing price on January 3, 1999, to a low of $14.50 per share on January 4, 1999. The market price of Spyglass common stock was artificially inflated during the Class Period, enabling certain defendants to take advantage of their inside knowledge by selling more than 500,000 shares of their own Spyglass stock, netting proceeds in excess of $9.1 million.