According to a press release dated January 25, 2008, KVH Industries, Inc. announced that the United States District Court for the District of Rhode Island has granted final approval of the previously disclosed settlement of the securities class action claims filed in federal court against KVH and certain of its officers in 2004 on behalf of a class of KVH shareholders. KVH also announced that on November 19, 2007 the Rhode Island Superior Court granted final approval of the settlement of the related derivative lawsuit filed by KVH shareholders against certain of KVH's directors and officers. Pursuant to the settlement agreements, the appeal of the dismissal of another related derivative lawsuit pending in the U.S. Court of Appeals for the First Circuit has also been dismissed. As a result of these actions, all claims in these three lawsuits have been fully and finally settled and dismissed with prejudice by the courts.
On July 27, 2007, plaintiffs submitted a motion for settlement and stipulation of settlement, agreeing to pay $5,000,000 in exchange for dismissing the case with prejudice. The settlement agreement is awaiting the judge's final approval.
According to the Company’s FORM 10-Q for the quarterly period ended: June 30, 2006, the Teamsters Affiliates Pension Plan has been appointed lead plaintiff. This matter consolidates into one action eight separate complaints filed between July 24, 2004 and September 15, 2004. On January 14, 2005, the defendants filed a motion to dismiss the consolidated complaint for failure to state a claim upon which relief can be granted. The court denied this motion in part and granted it in part. On October 14, 2005, the defendants answered the consolidated complaint and denied liability and all allegations of wrongdoing. Subsequently, on December 13, 2005, plaintiffs filed a motion for class certification.
The original complaint charges KVH and certain of its officers and directors with violations of the Securities Exchange Act of 1934. KVH describes itself as a designer, manufacturer and marketer of mobile satellite communications products for the automotive/recreational vehicle/marine markets and navigation, guidance and stabilization products for defense markets.
The complaint alleges that, throughout the Class Period, defendants issued materially false and misleading statements regarding KVH's increasing financial results and the strong demand for its newly developed TracVision A5 and G8 satellite TV systems (the 'TracVision systems'). As alleged in the complaint, these statements were materially false and misleading because they failed to disclose, among other things: (a) that defendants had 'stuffed' the retail channels with overpriced TracVision systems; (b) that the Company's revenues were not growing by millions of dollars per quarter and the purported growth trends in the Company's revenues could not be sustained; and (c) that KVH had not realized any material cost reduction in the manufacture of its TracVision systems and would be forced to write-down its inventory of manufactured goods by millions of dollars. The complaint further alleges that defendants failed to disclose these adverse facts in order to complete a public offering of KVH common stock, raising more than $51.5 million in much needed capital.
On or about July 6, 2004, before the market opened for trading, KVH stunned the investing public by announcing that it was slashing the retail price of its TracVision systems by more than 34% and taking a multi-million dollar write down of vendor purchase commitments and on-hand inventories to reflect the true value of KVH's TracVision systems sales. In pre-opening market trading, KVH common stock declined more than 19%, to open at $9.51 per share on July 6, 2004, a 49% decline from the public offering price just 4 months prior.