According to the docket, on August 24, 2005, the Court entered the Final Judgment and Order of Dismissal with Prejudice. U.S. District Judge Gerard E. Lynch approved the settlement and dismissed the action.
By the Notice of Proposed Settlement of Class Action dated June 3, 2005, the parties have reached a cash settlement in the amount of $4,400,000. A hearing will take place on August 11, 2005, for the purpose of determining whether: (1) the proposed Settlement is fair, reasonable and adequate and appropriate of Court approval; (2) the proposed Plan of Distribution is fair, just, reasonable, and adequate; (3) the Court should approve applications of Lead Plaintiffs’ Counsel for an award of attorneys’ fees, costs and expenses; and (4) the Court should enter Final Judgment and Order of Dismissal with Prejudice dismissing the Litigation with prejudice as against Defendants.
As summarized by the same Notice, by Order of the Court, entered June 26, 2001, Waterview Partners, Adam Burstyn, Robert James Kennedy, Eli Mann and Joseph Rosenbaum were appointed Lead Plaintiffs; the law firms of Stull, Stull & Brody and Weiss & Lurie were appointed Co-Lead Counsel and the Lead Plaintiffs were directed to cause an amended complaint to be filed under Civil Action Number 01 CV 1125 (GEL). The Amended Class Action Complaint (the “Complaint”) was filed on August 15, 2001. On November 21, 2001, defendants, moved to dismiss the Complaint. Lead Plaintiffs opposed the motions to dismiss and thereafter, by Opinion and Order dated September 30, 2002, the Court dismissed Howard A. Tullman as a defendant, denied the motion to dismiss of the Defendants with respect to the Section 10(b) and Rule 10b-5 allegations in the Complaint, and granted the motion without prejudice to renew Plaintiffs’ Section 20(a) control allegations. On or about October 17, 2003, the Court issued an Order allowing Waterview Partners to withdraw as a Lead Plaintiff and from consideration as a class representative. On November 5, 2003, the Court issued an order conditionally certifying the Litigation as a class action. Following the denial of the Defendants’ motion to dismiss Plaintiffs’ 10(b) claims, discovery commenced in the case. In late 2004, Lead Counsel and counsel for the Defendants entered into earnest settlement negotiations. As a result of these negotiations, counsel for the Defendants and Lead Counsel have agreed to enter into a Stipulation of Settlement which is dated May 12, 2005.
The original complaint alleges that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5, by issuing a series of material misrepresentations to the market between 11/29/1999 and 11/15/2000, thereby artificially inflating the price of Xceed securities. Specifically, the complaint alleges that defendants filed quarterly and annual reports with the SEC that contained financial statements which were materially false and misleading as they were prepared in violation of Generally Accepted Accounting principles and the company's own accounting procedures. In its filing, the company repeatedly overstated its revenues and understated its losses by, among other things: (a) underreporting its allowance for uncollectible accounts receivable; (b) underreporting and miscomputing the amortization of intangible assets relating to workforce, customer base, technical know-how and industry contacts in connection with its acquisition of Zabit & Associates, Inc.; (c) failing to review, identify and/or take the appropriate charge for the impairment of its long-lived assets; and (d) using the percentage of completion method of accounting for reporting revenues for fixed-price contracts in violation of GAAP. As a result of this undisclosed conduct, the company's stock was trading at artificially inflated prices throughout the class period.
NOTE: On April 30, 2001, Xceed filed for Chapter 11 protection under the United States Bankruptcy Code. This filing triggered an automatic stay of the claims in the Litigation against Xceed, which has since been liquidated.