According to the Order and Final Judgment, entered on May 1, 2006, the $8,500,000 Settlement is approved as fair, reasonable and adequate, and all claims are dismissed with prejudice. The Plan of Allocation is also approved and certain lead plaintiffs were awarded amounts representing unreimbursed expenses and/or lost wages. Further, plaintiffs’ counsel is awarded 33% of the Gross Settlement Fund and $312,023.31 in reimbursement of expenses.
On February 13, 2006, the Court entered the Order and Final Judgment as to claims asserted against defendant Arthur Andersen LLP as a result of the pending settlement.
On January 6, 2006, a Stipulation of Dismissal of Defendant Xchange, Inc. was filed by the plaintiffs. According to the Stipulation, Plaintiffs hereby dismiss Defendant Xchange, Inc., without prejudice. The parties agree that, if the settlement becomes final, this dismissal shall become with prejudice. That same day, a motion for partial settlement was filed by the plaintiffs. According to the Stipulation of Settlement, the Stipulation is entered into among Lead Plaintiffs on behalf of themselves and the Settlement Class, the Individual Defendants and together with Defendant Xchange, Inc., a/k/a Exchange Applications, Inc. The proposed Settlement Fund is in the amount of $8.5 million.
As summarized by the Stipulation of Settlement, by the Order dated August 26, 2002, the Court granted, in part, and denied, in part, the motions to dismiss filed by Xchange, the Individual Defendants and Arthur Andersen. Specifically, the Court allowed Plaintiffs' Section 10(b) and 20(a) claims to proceed, and it dismissed Plaintiffs ' Section 11 and 15 claims, as against the Company and the Individual Defendants. The Court also dismissed all of Plaintiffs' claims against Arthur Andersen. On October 21, 2002, Defendants filed an answer to the CAC denying the material allegations set forth therein, and asserting that they did not commit any wrongdoing and that they have no liability whatsoever for the alleged acts or omissions alleged therein. On November 3, 2002, Lead Plaintiffs filed a Motion seeking certification of a class of all persons or entities who purchased or otherwise acquired the common stock of Xchange between December 9, 1998 and September 29, 2000, with certain defined exclusions. After discovery from the proposed class representatives Paul Isaac, Joseph Butkiewicz, Stephen Moore, and Steven Jakobsen, the Defendants filed an Opposition to Class Certification on June 14, 2005. Plaintiffs' Motion for Class Certification was pending at the time parties entered into the Memorandum of Understanding regarding this settlement (the "MOU").
As previously disclosed by the Company’s Form 10-Q for the quarterly period ended September 30, 2002, Xchange and certain of its current and former officers and its former certified public accountants, Arthur Andersen, LLP, have been named defendants in a consolidated class action lawsuit originally filed on February 21, 2001 and subsequently filed as a Consolidated Amended Class Action Complaint on August 3, 2001, filed on behalf of a purported class of purchasers of Xchange’s common stock during the period from December 9, 1998 through September 29, 2000. The Amended Class Action Complaint alleges that Xchange made false or misleading statements that inflated its common stock price during the class period. The relief sought is damages on behalf of the class; however, at this time, Xchange is unable to ascertain the monetary damages sought by the class. Through its attorneys, Xchange has filed a Motion to Dismiss the Amended Class Action Complaint on October 3, 2001.
The original complaint alleges that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b(b), by issuing a series of material misrepresentations to the market during the class period. The complaint also alleges that the defendants issued numerous statements touting the contracts it entered into even though the nature of these contracts required that revenue be recognized over an extended period of time, rather than in the third quarter. As a result, the price of the company's shares was artificially inflated throughout the class period.