By the Order and Final Judgment entered on December 1, 2005, the Court approves the settlement and dismisses the action with prejudice. Further, the Plan of Allocation is approved, and Co-Lead Counsel are awarded attorneys’ fees of 30% of the Settlement Fund and reimbursement of expenses in the amount of $63,719.10.
According to the Company’s Form 10-Q for the quarterly period ended June 30, 2005, the Court has scheduled a hearing for Thursday, December 1, 2005, at 10:00 a.m. in the United States District Court. At the Settlement Fairness Hearing, the Court will consider various matters, including whether to grant final approval of the settlement, whether judgment should be entered dismissing the Securities Class Action with prejudice, and class counsel’s applications for attorneys’ fees and the reimbursement of expenses. By the Notice of Pendency and Proposed Settlement of Class Action and of Application For Attorneys’ Fees and Settlement Hearing, the proposed settlement fund is in the amount of $3,125,000 in cash.
Earlier, according to the SEC filing, on September 10, 2004, the plaintiffs filed a consolidated amended class action complaint, asserting claims against Virbac and the individual defendants based on securities fraud under Section 10(b) of the Exchange Act and Rule 10b-5, and asserting claims against VBSA and the individual defendants for violation of Section 20(a) of the Exchange Act as alleged “control persons” of Virbac. In May 2005, the parties agreed to submit to mediation in an effort to resolve the action. On May 23, 2005, the Court stayed the action to allow the parties to mediate. On June 27, 2005, the parties engaged in a mediation session and reached a settlement in principle. On September 15, 2005, the parties entered into a Stipulation and Agreement of Compromise, Settlement and Release, formalizing the terms of the settlement. On September 16, 2005, the parties filed an agreed motion requesting the Court to, among other things, certify the Securities Class Action for settlement purposes and to preliminarily approve the settlement. On October 4, 2005, the Court issued an Order certifying the Class for settlement purposes and granting preliminary approval of the settlement as set forth in the Settlement Agreement and the proposed plan of allocation.
The original complaint charges Virbac, the Company's President and CEO, and the Company's CFO, with violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder. Between May 3, 2001 and November 12, 2003, the defendants issued a series of material misrepresentations to the market concerning the Company's financial results. More specifically, the defendants' statements were materially false and misleading because they failed to disclose and/or misrepresented the following adverse facts, among others: (1) that Virbac had materially overstated its net income and earnings per share; (2) that Virbac had materially overstated its inventory; (3) that
Virbac's financial results were in violation of Generally Accepted Accounting
Principles ("GAAP"); (4) that Virbac lacked adequate internal controls and was
therefore unable to ascertain the true financial condition of the Company; and
(5) that as a result, the value of Virbac's financial results were materially
overstated at all relevant times.
Specifically, the complaint alleges that on November 12, 2003, after the markets closed, the Company announced that it would delay the release of its results for the quarter and nine months ended September 30, 2003, as well as the filing of its corresponding quarterly report on Form 10-Q with the Securities and Exchange Commission pending completion of an internal inquiry being conducted by the Audit Committee of the Company's Board of Directors. The Company further stated that during the course of their quarterly review, the Company's outside auditors, PricewaterhouseCoopers, raised questions relating to certain of the Company's revenue recognition practices and inventory accounting practices.
In addition, the complaint claims that the market reacted swiftly to this news, with the Company's stock falling 22% or $1.85 per share before being halted by Nasdaq at 10:46 A.M., eastern time. The Company's stock price was $6.50 per share when trading was halted. The final blow occurred on November 24, 2003 when Virbac announced it would restate its results for 2001, 2002, and the first two quarters of 2003 due to the questions raised by PricewaterhouseCoopers relating to certain of the Company's revenue recognition practices and inventory accounting practices. As
of today, the Company's stock was still halted.