Direct General Corporation Form 8-K March 2, 2007
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
DC 20549
FORM
8-K
CURRENT
REPORT PURSUANT
TO
SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
Date
of
report (Date of earliest event reported): March
2, 2007
DIRECT
GENERAL CORPORATION
(Exact
Name of Registrant as Specified in Charter)
|
Tennessee
|
000-50360
|
62-1564496
|
|
(State
or Other Jurisdiction
|
(Commission
|
(IRS
Employer
|
|
of
Incorporation)
|
File
Number)
|
Identification
No.)
|
|
1281
Murfreesboro Road
|
|
37217
|
|
Nashville,
Tennessee
|
|
|
|
(Address
of Principal Executive
Offices)
|
|
(Zip
Code)
|
|
Registrant's
Telephone Number, Including
Area Code: (615)
399-4700
|
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
o
Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act
(17 CFR 240.14d-2(b))
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act
(17 CFR 240.13e-4(c))
Item
8.01. Other Events.
On
March
2, 2007 Direct General Corporation (the “Company”) entered into a Memorandum of
Understanding (“MOU”) with other defendants and the plaintiffs to settle a
consolidated class action pending in the United States District Court for the
Middle District of Tennessee, Nashville Division (the “District Court”),
entitled In
re
Direct General Corporation Sec. Litig.,
Civil
Action No., 3:05 - 0077 (the “Action”). The stipulated settlement amount in the
MOU is $14.94 million, which is apportioned to the defendants, and the
plaintiffs agree to dismiss with prejudice all claims against all defendants
to
the Action.
The
Action is the consolidated action of six putative class action lawsuits filed
in
the District Court in the first quarter of 2005 naming the Company and certain
of its directors and current and former officers. Lead Plaintiffs to the Action
allege that the Company and certain of its directors and current and former
officers made false and misleading statements with respect to liabilities that
the Company recorded for unpaid losses and loss adjustment expenses. Lead
Plaintiffs assert claims under the Securities Exchange Act of 1934 and the
Securities Act of 1933. Lead Plaintiffs generally contend that the Company
and
certain of its directors and current and former officers knew that certain
legislation in Florida, which became effective in October 2003, would
necessarily negatively impact the Company’s business by increasing its liability
and risk of litigation, and that the Company failed to timely strengthen its
loss reserves to account for this alleged known increased future risk. Lead
Plaintiffs further assert that certain directors and current and former officers
sold shares of the Company’s stock while they were aware of the allegedly known
future negative impact of the Florida legislation, but before the Company
strengthened its reserves. Lead Plaintiffs seek to recover damages on behalf
of
all purchasers of the Company’s stock during a class period to be determined and
attorneys’ fees. The Company’s motion to dismiss this action was denied.
The
MOU
is subject to several conditions, including approval by the District Court.
In
addition, the defendants may withdraw from the settlement if a to be agreed
upon
percent of class members opt out of the settlement. The parties to the action
intend to submit a Stipulation of Settlement to the District Court seeking
preliminary approval of the settlement.
The
Company, its directors, and current and former officers do not admit to
liability or fault under the terms of the MOU. The MOU contains customary
releases of claims by the plaintiffs against the named defendants and the named
defendants against the plaintiffs.
On
March
2, 2007 the Company issued a press release announcing entry into the MOU with
Lead Plaintiffs, which is attached as Exhibit 99.1.
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
report contains forward-looking statements based on current expectations of
the
Company’s management. Those forward-looking statements include all statements
other than those made solely with respect to historical fact. Numerous risks,
uncertainties and other factors may cause actual results to differ materially
from those expressed in any forward-looking statements. These factors include,
but are not limited to, (1) the failure to obtain approval of the District
Court
of the Stipulation of Settlement; (2) a party withdrawing or otherwise
terminating its participation in the MOU; (3) the withdrawal of any defendants
due to the requisite number of class members opting out; or (4) other factors
that are described in the Company’s filings made with the Securities and
Exchange Commission. While the Company’s management makes projections and
estimates in good faith, many of the factors that will determine the outcome
of
the subject matter are beyond the Company’s ability to control or predict. The
Company undertakes no obligation to revise or update any forward-looking
statements, or to make any other forward-looking statements, whether as a result
of new information, future events or otherwise.
Item
9.01. Financial
Statements and Exhibits.
(d) Exhibits:
|
Exhibit
Number
|
Description
|
|
99.1
|
Press
release issued by Direct General Corporation, dated March 2,
2007
|
SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
DIRECT
GENERAL CORPORATION
(Registrant)
By: /s/
Ronald F. Wilson
Date:
March 2, 2007
INDEX
TO EXHIBITS
|
Exhibit
Number
|
Description
|
|
99.1
|
Press
release issued by Direct General Corporation, dated March 2,
2007
|