According to Trinsic, Inc.’s (formerly Z-Tel Communications) FORM 10-Q For The Quarterly Period Ended June 30, 2006, a settlement has been reached by the plaintiffs, the issuers and insurers of the issuers. The principal terms of the proposed settlement are (i) a release of all claims against the issuers and their officers and directors, (ii) the assignment by the issuers to the plaintiffs of certain claims the issuers may have against the Underwriters and (iii) an undertaking by the insurers to ensure the plaintiffs receive not less than $1 billion in connection with claims against the Underwriters. Hence, under the terms of the proposed settlement our financial obligations will likely be covered by insurance. To be binding the settlement must be approved by the court. The court has given preliminary, but not final approval of the settlement. A fairness hearing was held April 24, 2006. The court has not yet made its ruling as to fairness. There is no assurance that the settlement will be finally approved by the court.
As disclosed by the same SEC filing, during June and July 2001, three separate class action lawsuits were filed against the Company, certain of its current and former directors and officers (the “D&Os”) and firms engaged in the underwriting (the “Underwriters”) of our initial public offering of stock (the “IPO”). The lawsuits, along with approximately 310 other similar lawsuits filed against other issuers arising out of initial public offering allocations, have been assigned to a Judge in the United States District Court for the Southern District of New York for pretrial coordination. The lawsuits against the Company have been consolidated into a single action. A consolidated amended complaint was filed on April 20, 2002. A Second Corrected Amended Complaint (the “Amended Complaint”), which is the operative complaint, was filed on July 12, 2002. Initial discovery has begun. The Company believes it isentitled to indemnification from its Underwriters.
The complaint charges defendants with violations of the Securities Act of 1933 and the Securities Exchange Act of 1934 for issuing a Registration Statement and Prospectus (theProspectus) that contained materially false and misleading information and failed to disclose material information. The Prospectus was issued in connection with Z-TEL' IPO. The complaint alleges that the Prospectus was false and misleading because it failed to disclose (i) Credit Suisse's agreement with certain investors to provide them with significant amounts of restricted Z-TEL shares in the IPO in exchange for exorbitant and undisclosed commissions; and (ii) the agreement between Credit Suisse and certain of its customers whereby Credit Suisse would allocate shares in the IPO to those customers in exchange for the customers' agreement to purchase Z-TEL shares in the after-market at pre-determined prices.