According to a press release dated August 10, 2004, InterCept, Inc. announced that it has received final court approval on the previously announced settlement of the consolidated securities class action litigation filed against the company and several of its current and former officers. Under the terms of the settlement, the claims against InterCept and the individual defendants were dismissed without any admission of liability or wrongdoing. The shareholder class will receive a payment of $5.3 million, from which plaintiff's counsel will be awarded attorney's fees. As previously announced, InterCept recorded a charge in the fourth quarter of 2003 to reflect its portion of the settlement and attorney's fees.
The original complaint alleges that, during the Class Period, defendants made material misrepresentations and/or omitted to make material disclosures due to their false assurances that the adult pornography internet portion of their merchant processing business was insignificant and due to their failure to disclose that VISA regulations implemented on November 1, 2002, which were targeted specifically to address risks of internet pornography card processing, had caused a material loss of business. Specifically, Plaintiff alleges that defendants knew by the time their fourth quarter earnings estimate was issued on November 4, 2002 that they would suffer a material loss of business because defendants were aware by November 1, 2002 which of their customers had met the deadline to become sponsored merchants under the new VISA regulations. In a January 9, 2003 press release, Intercept announced that it was revising its fourth quarter 2002 earnings per share estimate downward to $0.92 to $0.98 from its earlier, November 4, 2002, estimate of $1.11 to $1.15. The Company cited "reduced revenues in our merchant area result(ing) primarily from the iBill operations, which experienced a large loss of merchant customers following the implementation of a new credit card association rule in mid-November." Following these disclosures, shares of Intercept declined from the Class Period high of $19.11 per share to close near $7.00 per share on January 10, 2003 on unusually high volume. By the close of trading on January 10, 2003, the stock had lost more than half of its value just prior to the disclosure.