According to the Company’s FORM 10-Q for quarterly period ended October 27, 2001, on July 26, 2001, the Company and certain other defendants reached an agreement in principle to settle the complaint. Under the terms of the settlement, the
Company will provide the plaintiffs: (i) a $2,000,000 subordinated note due five years from the date of issuance with interest in arrears accrued at 6% per annum; (ii) 2.5 million shares of the Company's common stock; and, (iii) 1 million warrants to purchase the Company's Common Stock at $2 per share. The Warrants are callable by the Company at $0.25 per share if the Company stock trades at a price in excess of $4 for 10 days or more. This settlement was approved by the United States District Court for the Southern District of New York on January 29, 2002.
Earlier, according to the same SEC filing, a consolidated class action complaint against the Company, certain of its former officers and directors and its auditors was filed in the United States District Court for the Southern District of New York. The complaint alleged violations of the federal securities laws and sought to recover damages on behalf of all purchasers of the Company's common stock during the class period November 6, 1997 to November 6, 2000. The complaint sought rescission of the purchase of shares of the Company's Common Stock or alternatively, unspecified compensatory damages, along with costs and expenses including attorney's fees.
The original complaint alleges that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, by issuing a series of material misrepresentations to the market between December 7, 1999 and November 6, 2000, thereby artificially inflating the price of Del Global securities. Specifically, on November 6, 2000, Del Global announced that its net income for the fiscal year ending July 29, 2000 would be "substantially lower than its net income for Fiscal 1999" and that it would delay the filing with the SEC of its Form 10-K for its Fiscal Year 2000. The Company further announced that it will most likely revise its fiscal 2000 quarterly results and "is currently conducting a review to determine if it will also be required to restate Fiscal 1999 results." Following this announcement, on November 6, 2000, the NASDAQ Stock Exchange announced a halt in the trading of the common stock of Del Global.