According to the Company’s From 10-Q for the quarterly period ended June 30, 2003, at a July 18, 2003 hearing, U.S. District Judge Richard A. Lazzara entered an Order and Final Judgment approving the settlement of the class action lawsuit. In May 2003, in anticipation of Judge Lazzara’s approval of the settlement and pursuant to the parties’ Stipulation and Agreement of Settlement, the insurer deposited the $2.1 million into an escrow account established and maintained by the plaintiff’s attorneys.
As reported by the Company’s Form 10-K for the fiscal year ended December 31, 2002, the case had been set for trial during the trial term commencing May 5, 2003. On August 6, 2002, the plaintiff offered to accept, in full settlement of the IPO Litigation as to all defendants, payment of $2.1 million to the putative plaintiff class. On August 14, 2002, the Company’s Board of Directors voted to accept this offer, and the issuer of the Company’s applicable Directors and Officers and Company Reimbursement insurance policy has agreed to pay $2.1 million to the plaintiff class. The settlement was also approved by BIG and by the other defendants represented by Company counsel. The parties to the IPO Litigation have negotiated and signed a Memorandum of Understanding (“MOU”) of the principal material settlement terms, and the parties presently are preparing a Stipulation and Agreement of Settlement, and related documents, for submission to Judge Lazzara. The settlement is contingent upon approval by Judge Lazzara, following notice to the members of the plaintiff class of, and a hearing on, the proposed settlement terms.
The plaintiff’s Consolidated Amended Class Action Complaint was filed on February 7, 2001, names as defendants the following parties: the Company; BIG, Venture Capital Corporation, a selling shareholder in the IPO; the five inside directors of the Company at the time of the IPO; and Raymond James & Associates, Inc. and Keefe, Bruyette & Woods, Inc., the underwriters for the IPO. The complaint alleges, among other things, that the defendants violated Sections 11, 12(a)(2) and 15 of the Securities Act of 1933, as amended, by making certain false and misleading statements in the roadshow presentations, registration statement and prospectus relating to the IPO. More specifically, the complaint alleges that, in connection with the IPO, the defendants made various material misrepresentations and/or omissions relating to: (i) the Company’s ability to integrate Geotrac’s flood zone determination business with the Company’s own flood zone determination business and with its insurance outsourcing services business; (ii) actual and anticipated synergies between the Company’s flood zone determination and outsourcing services business lines; and (iii) the Company’s use of the IPO proceeds. The complaint seeks unspecified damages, including interest, and equitable relief, including a rescission remedy. On March 26, 2001, the Company, BIG and the five inside director defendants filed a motion to dismiss the plaintiff’s complaint for, among other things, failure to allege material misstatements and/or omissions in the roadshow presentations, registration statement and/or prospectus relating to the IPO. On July 11, 2001, U.S. District Judge Richard A. Lazzara denied all of the defendants’ motions to dismiss the complaint.
On September 28, 2000, October 25, 2000 and October 30, 2000, three alleged shareholders of the Company filed three nearly identical lawsuits in the United States District Court for the Middle District of Florida, each on behalf of a putative class of all persons who purchased shares of the Company’s Common Stock pursuant and/or traceable to the registration statement for the Company’s February 1999 initial public offering (the “IPO”). The lawsuits were consolidated on December 1, 2000, and the consolidated action is proceeding under Case No. 8:00-CV-2013-T-26MAP (the “IPO Litigation”).
The original complaint alleges that the prospectus was materially false and misleading because it failed to disclose: the flood mapping business was not compatible with INMG's outsourcing services and synergies could not possibly be realized causing expected future growth to be well-below INMG's estimates; as a result of the incompatible nature of the two lines of business, few if any cross-over selling opportunities existed, further impacting future growth expectations; INMG's problems integrating these two lines of business prevented INMG from consolidating Geotrac of America, Inc. into its operations and accessing Geotrac's customer base to generate additional revenue; and as a result of the foregoing, the defendants had no reasonable basis to conclude that INMG expected to experience significant growth in its business and revenues.