According to the Notice of Pendency and Settlement, the parties reached an agreement-in-principle to settle the action. The settlement creates a fund in the principal amount of $50,000,000.00 in cash (the "Settlement Fund") which is earning interest. Based on an estimate of the number of shares entitled to participate in the settlement and the anticipated number of claims to be submitted by Class Member(s), the average distribution from the Settlement Fund would be approximately $0.13 per share before deduction of Court-approved fees and expenses.
If the settlement is approved by the Court, Plaintiffs' Co-Lead Counsel will apply to the Court (1) for attorneys' fees not to exceed 17.5% of the settlement proceeds, and reimbursement of expenses incurred not to exceed $375,000, and (2) compensation of up to $10,000 for each of the Lead Plaintiffs to reimburse them for their time and expenses incurred in prosecuting the Action, all to be paid from the Settlement Fund. If the amounts requested by Plaintiffs' Co-Lead Counsel are approved by the Court, the average cost would be approximately $0.02 per share. The average cost per share could vary depending on the number of shares for which valid claims are submitted.
The original complaint charges Sprint and certain of its officers and directors with violations of the Securities Exchange Act of 1934. This action was against Sprint and its present and former executives, including William T. Esrey, Sprint's Chairman and CEO, as well as WorldCom, Inc. (``WorldCom'') and Bernard J. Ebbers, WorldCom's Chairman and CEO. Sprint is in the telecommunications business, offering hardline and wireless long-distance service, is the third largest long-distance carrier in the U.S. and has revenues of $17+ billion per year. The complaint alleged that during the Class Period, defendants made false and misleading statements concerning Sprint and WorldCom, their business and finances and Sprint's merger with WorldCom to secure approval of the merger to extract hundreds of millions of dollars of benefits in connection with the aborted merger of Sprint and WorldCom. Defendants were able to extract these monies via: (1) secretly modifying the ``change of control'' definition in Sprint's executive compensation plan, allowing hundreds of millions of dollars of unvested stock options to accelerate and vest simply on a shareholder vote to approve the merger with WorldCom, rather than the actual completion of the aborted merger with WorldCom; and (2) the systematic failure to disclose to Sprint's public shareholders information possessed by the Sprint Defendants that the proposed merger was almost certain to never occur due to concerted opposition from government officials.