According to the Final Order of Dismissal and Judgment entered on March 23, 2006, and signed by U.S. District Judge Milton I. Shadur, the Court approves the settlement set forth in the Stipulation. Previously, on March 22, 2006, the Court entered the Order relating to the award of attorneys’ fees and reimbursement of expenses, and the Order approving the plan of allocation of settlement proceeds.
By the Notice of Pendency and Proposed Settlement of Class Action dated December 21, 2005, a settlement fund in the amount of $3,000,000 in cash has been established. The Court will hold a fairness hearing at 9:30 a.m., on March 17, 2006, at the United States Courthouse, 219 South Dearborn Street, Courtroom Number 2303, Chicago, Illinois 60604. At the hearing the Court will consider whether the settlement is fair, reasonable and adequate.
Two purported class action complaints were filed against Salton, Inc., in the U.S. District Court for the Northern District of Illinois on May 20, 2004, case number 04-CV-3531, and May 26, 2004, case number 04-CV-3658. On June 23, 2004, the Court entered the Minute Order granting Plaintiff's motion for a finding of relatedness. On September 7, 2004, the Court entered the Minute Order signed by U.S. District Judge Milton I. Shadur dismissing without prejudice and terminating case 04-CV-3531. The case continued in 04-CV-3658.
The original complaint charges defendants with violations of the Exchange Act. More specifically, the complaint alleges that Salton's Class Period press releases and quarterly and annual reports filed with the SEC were materially false and misleading because they failed to disclose the following adverse factors (among others particularized in the complaint) that were having a materially negative impact on Salton's business: (i) at the inception of the Class Period, the Company's main revenue and growth driver, the Foreman grill, had saturated the market such that it was entirely foreseeable that sales had stalled and would continue to stall and/or could not be counted on for continued and sustainable revenues in the near term; (ii) without the Company's illegal price support scheme, ended immediately prior to the Class Period by the aggressive efforts of many State Attorneys General, Salton could not maintain its market position or profit margin; and (iii) throughout much of the Class Period, Salton was either in violation of the Company's debt agreements or was foreseeably going to be in breach of those agreements. On May 10, 2004, after the close of trading, defendants issued a release announcing that Salton was performing much worse than the Company had led investors to believe, that the Company was in violation of its senior secured revolving credit facility for the month ended March 27, 2004, and that defendants anticipated near-term non-compliance with certain financial covenants. In response to this announcement, the price of Salton common stock plummeted, from $6.69 per share on May 10, 2004, to $3.35 per share on May 11, 2004, a one day drop of 50% on unusually large trading volume.