Sport-Haley, Inc. entered into a settlement agreement to resolve all pending claims between Sport-Haley and its former auditors. Pursuant to the terms of the settlement agreement and a sharing agreement between Sport-Haley and its director and officer liability insurance carrier, Sport-Haley will receive a net payment of approximately $173,000.
In March 2001, as the Company previously announced, Sport-Haley retained legal counsel to possibly pursue claims against its former auditors in connection with damages the Company claimed were suffered as a result of the restatements of its financial statements for fiscal years 1999 and 1998 and the corrections of material information for the quarterly periods of fiscal years 2000, 1999 and 1998. Also, Sport-Haley was advised that the former auditors asserted claims against the Company, including allegations of unpaid fees. Neither Sport-Haley nor the former auditors have filed any legal action to assert any of these disputed claims.
During a mediation session in November 2005, Sport-Haley reached an agreement in principle with the former auditors to settle all disputed claims between the parties and their affiliates. The parties have now finalized a written settlement agreement, which provides payment to Sport-Haley of $525,000. In accordance with a sharing agreement between Sport-Haley and its carrier for officer and director liability insurance, Sport-Haley will receive 33% of these settlement proceeds, or approximately $173,000, and the insurance carrier will receive the remainder to partially recover amounts the carrier paid in connection with a previously settled class action securities lawsuit and defense costs reimbursed to the Company relating to a civil action lawsuit filed by the SEC.
Among other terms of the settlement, the parties have agreed to mutual releases of all claims asserted against each other, and each party has continued to deny the merits of those claims asserted against it by the other party.