According to the docket, on October 20, 2002, the Court entered the Order signed by U.S. District Judge Gerard L. Goettel granting preliminary approval of the settlement. On December 30, 2002, the Court entered the Final Judgment and Order of Final Approval, and the case was closed. On December 18, 2003, the Court entered the Order granting the distribution of the class settlement funds.
In a press release dated October 29, 2002, Mercator Software, Inc. announced it reached an agreement to settle the consolidated stockholder litigation initially filed against the Company in August, 2000, in federal district court. A Stipulation of Settlement has been executed and filed with the Court. The terms of the Stipulation of Settlement, which are subject to final court approval and notice to class members, include no admission of liability by the Company. Under the terms of the settlement, Mercator's directors and officers liability insurance carriers will pay $8.2 million to resolve all claims related to the stockholder litigation. The Company also announced that a shareholder derivative action was filed in Connecticut Superior Court on October 25, 2002, on behalf of two individual persons who are currently members of the class alleging facts substantially similar to the allegations in the consolidated stockholder litigation. The Company believes the shareholder derivative action is without merit and intends to seek dismissal of it in connection with the settlement of the consolidated stockholder litigation.
Between August 23, 2000 and September 21, 2000 a series of fourteen purported securities class action lawsuits was filed in the United States District Court for the District of Connecticut (the “Court”), naming as defendants Mercator and former officers of the Company. On or about November 24, 2000, these lawsuits were consolidated into one lawsuit captioned: In re Mercator Software, Inc. Securities Litigation, Master File No. 3:00-CV-1610 (GLG). The lead plaintiffs purported to represent a class of all persons who purchased Mercator’s Common Stock from April 20, 2000 through and including August 21, 2000. Each complaint in the consolidated action alleged violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, through alleged material misrepresentations and omissions and seeks an unspecified award of damages. On January 26, 2001, the lead plaintiffs filed an amended complaint in the consolidated matter with substantially the same allegations. On March 12, 2001, the defendants responded by filing a motion to dismiss the Amended Consolidated Class Action Complaint. On September 14, 2001, U.S. District Judge Gerard L. Goettel issued a ruling denying the motion to dismiss.
The original complaint alleges that Mercator and certain of its officers issued false and misleading financial statements and press releases to the investing public concerning the Company's publicly reported revenues, earnings, and expenses. Moreover, the Company omitted to state material information necessary to be issued in order to make prior statements not misleading. Specifically, on August 21, 2000, after the market had closed, Mercator shocked the investing community by announcing that the Company restated and lowered first- and second-quarter 2000 earnings to account for approximately $2.4 million of under-reported expenses for the period. In addition, the Company stated that it made key management changes to strengthen financial controls and oversight, including the termination of several members of upper management. The Company said that discrepancies in the reporting of expenses surfaced in a review by outside auditors. Following the review, the Company appointed a new chairman and stated that defendant Kevin McKay, its chief financial officer, only appointed four weeks ago, resigned.