By the Final Judgment and Order of Dismissal entered on September 6, 2005, the settlement as set forth in the Stipulation of Settlement dated April 25, 2005, is approved, and the action is dismissed with prejudice. Further, the Plan of Allocation is approved as fair and reasonable, and Plaintiffs’ Counsel are awarded twenty-five (25%) of the Gross Settlement Fund, specifically $562,500 in cash and stock and 375,000 in Settlement Shares, plus interest, and $77,715.73, plus interest, in reimbursement of expenses.
According to a press release dated April 28, 2005, Zomax Incorporated announced that it has signed an agreement to settle, without admission of liability, the class action lawsuit pending against the Company relating to alleged securities law violations in 2000.The agreement, which is dependent upon the completion of certain discovery by the plaintiffs' counsel and final approval by the United States District Court in Minneapolis, resolves all shareholder class members' claims against the Company and certain of its former officers. The agreement calls for$2.25 million to be paid in cash by the Company's directors' and officers' insurer and the issuance by the Company of 1.5 million shares of its common stock.
The lawsuit charges Zomax and certain of its officers with violations of securities laws regarding false and misleading statements made to the public and the failure to disclose material events during the class period. Specifically, the complaint alleges that Defendants issued a series of positive statements regarding both demand for Zomax’s products and the expected margins on its sales of CDs and DVDs. In fact, by the beginning of the class period, there was a decline in demand, particularly from its largest customer, Microsoft, as well as price pressure from nearly all of Zomax's key customers. Throughout August 2000, while Defendants continued to issue false and misleading statements, Individual Defendants began unloading massive sums of Zomax common stock.
The complaint further alleges on or around September 21, 2000, Zomax surprised the market by announcing that its third quarter 2000 financial results would be lower than what the Company had been falsely touting. As a result of this news, shares of Zomax common stock fell by 52.16%, or $9.06 per share, to close at $8.31 per share on extremely heavy volume on September 22, 2000.