According to the Final Judgment and Order of Dismissal with Prejudice signed by U.S. District Judge Edward W. Nottingham and entered on January 27, 2006, the settlement is approved and the action is dismissed with prejudice. The Court further entered that day the Order awarding attorney’s fees and reimbursement of expenses to lead plaintiff’s counsel.
By the Notice of Settlement of Class Action dated November 8, 2005, a settlement hearing will be held on January 27, 2006, at 10:00 a.m., before the Honorable Edward W. Nottingham, United States District Judge, at the United States District Court for the District of Colorado, 901 19th Street, Denver, Colorado 80294-3589 (the “Settlement Hearing”). The purpose of the Settlement Hearing will be to determine: (1) whether the settlement consisting of $1,200,000 in cash plus accrued interest should be approved as fair, reasonable and adequate to each of the Settling Parties; (2) whether the proposed plan to distribute the settlement proceeds (the “Plan of Allocation”) is fair, reasonable and adequate; (3) whether the application by Lead Plaintiff’s counsel for an award of attorneys’ fees and expenses should be approved; (4) whether costs and expenses should be awarded to Lead Plaintiff pursuant to 15 U.S.C. §78u-4(a)(4) of the Securities Exchange Act of 1934 (“Exchange Act”); and (5) whether the Litigation should be dismissed with prejudice. The Court may adjourn or continue the Settlement Hearing without further notice to the Settlement Class.
Earlier, according to the same Notice, in January 2005, Ultimate Electronics, Inc. filed a voluntary petition for bankruptcy in the United States Bankruptcy Court for the District of Delaware.
As reported by the Company’s FORM 10-Q For the Quarterly Period Ended October 31, 2004, on May 30, 2003, the Company moved to dismiss all claims asserted in the complaint. The Alaska Electrical Pension Fund ("AEPF"), which had been appointed as the lead plaintiff to represent the putative plaintiff class, responded to the Company's motion to dismiss by filing an amended complaint on August 11, 2003. In the amended complaint, AEPF asserts claims against the Company and all of the Company's directors during the relevant period for alleged violations of Sections 11, 12(a)(2) and 15 of the Securities Act. AEPF asserts that the prospectus, dated April 30, 2002, for the Company's 2002 public offering of common stock failed to disclose material facts that were required to be disclosed and contained false and misleading statements. The amended complaint seeks to recover unspecified monetary damages, an award of rescission or rescissory damages and an award of attorneys' fees, costs and prejudgment and post-judgment interest. On September 11, 2003, the Company moved to dismiss all claims asserted by AEPF in the amended complaint. On September 27, 2004, the court granted the motion in part and dismissed the Section 12(a)(2) claims and certain claims brought under Section 11. The court denied the motion as to other Section 11 claims and the Section 15 claim. On October 18, 2004, the Company filed an answer generally denying the claims asserted in the complaint.
The original complaint charges that during the Class Period, the defendants issued and/or failed to correct false and misleading financial statements and press releases concerning the Company's publicly reported revenues and earnings directed to the investing public. Throughout the Class Period, the Company maintained that it could offset any reduction in margins incurred as a result of this transition through
continued sales of high margin items, including direct broadcast satellite (DBS) service and systems and audio equipment. Yet, in part to enjoy a large economic windfall as a result of its class period offering of Ultimate stock, the Company failed to disclose that high margin sales were decreasing rapidly and with it, a critical
stabilizer to the Company's bottom line. On August 8, 2002 the Company finally disclosed that because of the reduction in high margin sales, the Company would miss its second quarter earnings EPS outlook by almost 50%.