According to a press release dated December 12, 2008, a hearing will be held on February 25, 2009, at 2:00 p.m., before the Honorable Rya W. Zobel at the John Joseph Moakley United States Courthouse, One Courthouse Way, Courtroom 12, Boston, Massachusetts 02210, for the purpose of determining: (1) whether the proposed settlement of the claims in the litigation described in the detailed Notice of Pendency and Settlement of Class Action (the “Notice”) for the sum of $3,600,000 in cash (the “Settlement Fund”) should be approved by the Court as fair, reasonable and adequate; (2) whether, thereafter, this litigation should be dismissed with prejudice as set forth in the Stipulation of Settlement dated as of November 3, 2008 (the “Stipulation”); (3) whether the plan of allocation is fair, reasonable and adequate and therefore should be approved; and (4) whether the application of Plaintiffs’ Counsel for the payment of attorneys’ fees and expenses incurred in connection in this litigation should be approved.
The judge entered a preliminary approval order and set a fairness hearing for February 25, 2008.
On November 5, parties filed a Stipulation of Settlement. The deal involves a $3,600,000 cash payment, paid through Xerium's D&O insurance policy, to the class in exchange for dismissal of claims against it and its officers.
Defendants filed a motion to dismiss the consolidated complaint on December 8, 2006, which was denied in May 2007. The defendants then provided an answer to the complaint against them on June 8, 2007. Discovery continues as of August 20, 2008.
On September 22, 2006, the Court entered the Order appointing lead plaintiff and approving selection of lead and liaison counsel. On November 3, 2006, the plaintiffs filed an Amended Class Action Complaint.
The complaint charges Xerium and certain of its officers and directors with violations of the Securities Act. Xerium engages in the manufacture and supply of consumable products used in the production of paper.
Specifically, the complaint alleges that the Prospectus and Registration Statement (the "Prospectus") issued in connection with the Company's Initial Public Offering ("IPO") on or about May 16, 2005, contained untrue statements of material facts, omitted to state other facts necessary to make the statements made not misleading and was not prepared in accordance with the rules and regulations governing its preparation. Specifically, the complaint alleges that, at the time of the IPO, Xerium was undergoing "Cost Reduction Programs" which were negatively impacting its business and forcing it to have customers seek out other producers. Among other things, the Prospectus purported to warn about the potential negative impact of these programs but failed to disclose that the Company's business was then being negatively impacted by the Cost Reduction Programs and the loss of business associated therewith.
The complaint further alleges that on or around November 14, 2005, Xerium issued a press release announcing its financial results for the third quarter of 2005, the period ending September 30, 2005. The Company also reported that its cost reduction programs had severely impacted its results, causing the Company to experience declining net income. In response to this announcement the price of Xerium common stock dropped from $9.51 per share to $6.85 per share on extremely heavy trading volume.