ProNet and its insurance carriers have entered into an agreement to pay $5 million to settle securities class action lawsuits pending against the paging company in state and federal courts.
ProNet and some of its officers and directors are defendants in class actions that were filed after the price of the company’s stock fell in June. ProNet stockholders filed lawsuits on June 27 in Dallas in state and federal court alleging that ProNet and certain officers and directors violated state and federal securities and common law through misrepresentations and omissions in the prospectus related to the company’s financial condition.
In the federal suits, stockholders said the officers, directors and its investment banker/underwriter “participated in a scheme to inflate the price of ProNet stock in order to effect numerous acquisitions and to consummate concurrent debt and equity offerings in violation of the federal securities laws,” stated the stockholders. Those investors who filed the complaint had purchased ProNet common stock between Jan. 31, 1996, and June 21, 1996. “The defendants’ scheme was successful as it pushed the price of ProNet stock up as high as $33.63 per share before the truth regarding ProNet’s operations and prospectus was revealed, and ProNet’s stock price collapsed to as low as $7.38 per share,” said the stockholders.
In addition to the $5 million settlement, ProNet will assign to the plaintiffs certain rights against one of its insurers and will issue 1 million shares of ProNet stock to the class upon final court approval of the settlement. The company also will pay $2 million to the class if, within two years from the final approval of the settlement, the company merges or control of the company changes. The proposed settlement, which the company said is in the best interest of ProNet and its stockholders, is subject to a definitive agreement and court approval.
ProNet said the settlement does not resolve any claims against the underwriter defendants by the class plaintiffs or any potential claims by the underwriters against ProNet. The settlement includes a provision by which ProNet’s maximum exposure to claims of contribution or indemnity to the underwriters is $6.5 million, plus any attorney fees associated with litigation. ProNet said it intends to defend any claims for contribution or indemnity that might be asserted against it by the underwriters.
