UNITED STATES DISTRICT COURT DISTRICT OF NEW …shareholdersfoundation.com/system/files/complaints/kid_brands_inc_original_filing... · occurrence of events of default under the credit

Case 2:11-cv-01624-JLL -CCC Document 1 Filed 03/22/11 Page 1 of 38 PageID: 1

UNITED STATES DISTRICT COURTDISTRICT OF NEW JERSEY

, Individually and ) NO. on Behalf of All Others Similarly Situated, }

Plaintiff, ) CLASS ACTION )

VS. COMPLAINTFOR VIOLATIONS OFFEDERAL SECURITIES LAWS

KID BRANDS, INC., BRUCE G. CRAIN, GUY )A. PAGLINCO, RAPHAEL BENAROYA, }MARIO CIAMPI, FREDERICK J. HOROWITZ, ) DEMAND FOR JURY TRIAL LAUREN KRUEGER, SALVATORE )SALIBELLO, JOHN SCHAEFER, AND )MICHAEL ZIMMERMAN, }

Defendants. }

Plaintiff

alleges the following upon information and belief, except for those

allegations that pertain to Plaintiff, which are based on the Plaint'iff's personal knowledge:

OVERVIEW

1. This is a federal class action on behalf of purchasers of the common stock of Kid

Brands, Inc. ("KID" or "Company") between March 26, 2010 and March 15, 2011, inclusive

(the "Class Period"), seeking to pursue remedies under the Securities Exchange Act of 1934 (the

"Exchange Act"). KID designs, imports, markets, and distributes branded infant and juvenile

consumer products. KID's operations currently consist of Kids Line, LLC ("Kids Line"), Sassy,

Inc. ("Sassy"), LaJobi Industries, Inc. ("LaJobi"), and CoCaLo, Inc. ("CoCaLo"), each of which


is a direct or indirect wholly-owned subsidiary of KID. LaJobi products, which are marketed

primarily under the Babi Italia, Europa Baby, Bonavita, Graco and Serta brands, consist

primarily of cribs, mattresses and other nursery furniture.

2. As alleged herein, Defendants published a series of materially false and

misleading statements that Defendants knew and/or recklessly disregarded were materially false

and misleading at the time of publication, and that omitted to reveal material information

necessary to make Defendants' statements, in light of such omissions, not materially false and

misleading.

3. Through Class Period filings, Defendants were able to, among other things: (a)

deceive the investing public regarding the Company's compliance with customs laws, internal

controls, and financial reports; (b) deceive the investing public regarding KID's business,

operations, management, future business prospects, and the intrinsic value of KID's common

stock; and (c) cause plaintiff and other members of the Class to purchase KID common stock at

artificially inflated prices.

4. It was not until March 15, 2011 that Defendants issued a release announcing the

termination of two high-level executives and admitting to a violation of United States Customs

laws stating, in part, as follows:

East Rutherford, N.J. March 15, 2011 — Kid Brands, Inc. (NYSE: KID) todayannounced a leadership change at its LaJobi subsidiary. Rick Schaub has beenappointed as President of LaJobi, effective immediately, in addition to hisongoing role as President of Kid Brands' Sassy subsidiary. Effectiveimmediately, LaJobi's current President, Larry Bivona, and its ManagingDirector of operations, have both been terminated from employment.

The Company took these actions based on the findings to date of aninvestigation into LaJobi, initiated at the direction of the Board of Directors,and supervised by a Special Committee of three non-management members ofthe Board: The Board retained Skadden, Arps, Slate, Meagher & Flom LLP toconduct the investigation. The investigation was initiated after the Board was

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made aware of potential issues regarding customs duty paid on products importedinto the U.S., while LaJobi was in the process of discussing customs duty issueswith U.S. Customs and Border Protection ("U.S. Customs"). The Board'sinvestigation has found instances at LaJobi in which incorrect import dutieswere applied on certain wooden furniture imported from vendors in China,resulting in a violation of anti-dumping regulations. On the basis of theinvestigation, the Board concluded that there was misconduct involved on thepart of certain LaJobi employees in connection with the incorrect payment ofduties, including misidentifying the manufacturer and shipper ofproducts. The ongoing investigation is also focusing on certain of LaJobi'sbusiness and staffing practices in Asia.

Kid Brands is committed to working closely with U.S. Customs to address issuesrelating to incorrect import duties. The Company currently estimates that it willincur costs of approximately $7 million relating to customs duty owed and maybe assessed a penalty of up to lx customs duty by U.S. Customs as well aspossibly being subject to assessment for additional duties on other items. TheCompany previously disclosed a potential earnout payment of approximately $12to $15 million in the aggregate relating to its acquisitions of LaJobi and CoCaLo,substantially all of which was estimated to relate to LaJobi. The Company nolonger believes such amount is payable with respect to Kid Brands' acquisition ofLaJobi, and the Company does not intend to make any eamout payment related toLaJobi.

The Company is working closely with its lenders and other business partnersregarding the impact of these matters on its existing agreements, including theoccurrence of events of default under the credit agreement and the need forwaivers or amendments under its credit and other existing agreements.[Emphases added].

5. As a result of the foregoing disclosure, KTD's stock plummeted from a closing

price of $9.24 per share on March 14, 2011 to a close of $6.91 per share on March 15, 2011,

after experiencing an intra-day low of $6.57 per share, on heavy trading volume.

JURISDICTION AND VENUE

6. The claims asserted herein arise under and pursuant to Sections 10(b) and 20(a) of

the Exchange Act, 15 U.S.C. §§ 78j(b) and 78t(a), and Rule lOb-5 promulgated thereunder by

the SEC, 17 C.F.R. § 240.1Ob-5.

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7. This Court has jurisdiction over the subject matter of this action pursuant to 28

U.S.C. §§ 1331 and 1337, and Section 27 of the Exchange Act, 15 U.S.C. § 78aa.

8. Venue is proper in this District pursuant to Section 27 of the Exchange Act, and

28 U.S.C. § 1391(b). Specifically, KID maintains its principal place of business in New Jersey

and was also incorporated under the laws of the state of New Jersey.

9. In connection with the acts alleged in this complaint, Defendants, directly or

indirectly, used the means and instrumentalities of interstate commerce, including, but not

limited to, the mails, interstate telephone communications, and the facilities of the national

securities markets.

PARTIES

10. Plaintiff as set forth in the accompanying certification,

incorporated by reference herein, purchased the common stock of KID at artificially inflated

prices during the Class Period and was damaged thereby.

11. Defendant KID BRANDS, INC. is a New Jersey corporation, maintaining its

principal executive offices at 1800 Valley Road, Wayne, New Jersey 07470. KID designs,

manufactures through third parties, and markets products in a number of categories including,

among others: infant bedding and related nursery accessories and decor (Kids Line and

CoCaLo); nursery furniture and related products (LaJobi); and developmental toys and feeding,

bath and baby care items with features that address the various stages of an infant's early years

(Sassy). The Company's products are sold primarily to retailers in North America, the United

Kingdom, and Australia, including large, national retail accounts and independent retailers

(including toy, specialty, food, drug, apparel, and other retailers).

Individual Defendants

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12, Defendant BRUCE G. CRAIN ("Crain") is and was, during the relevant period,

President and Chief Executive Officer and a member of KID's Board of Directors. During the

Class Period, defendant Crain signed and certified the Company's SEC filings, including KID's

Forms 10-Q and Form 10-K.

11 Defendant GUY A. PAGLINCO ("Paglinco") is and was, during the relevant

period, Vice President and Chief Accounting Officer of KID. During the Class Period,

defendant Paglinco signed and certified the Company's SEC filings, including its Forms 10-Q

and Form 10-K.

14, Defendant RAPHAEL BENAROYA ("Benaroya") is and was, during the

relevant period, Chahman of the Board and a Director of KID. During the Class Period,

defendant Benaroya signed the Company's SEC filings, including its Form 10-K.

15. Defendant MARIO CIAMPI ("Ciampi") is and was, during the relevant period, a

Director of KID. During the Class Period, defendant Ciampi signed the Company's SEC filings,

including its Form 10TK.

16. Defendant FREDERICK J. HOROWITZ ("Horowitz") is and was, during the

relevant period, a Director of KID. During the Class Period, defendant Horowitz signed the

Company's SEC filings, including its Form 10-K.

17. Defendant LAUREN KRUEGER ("Krueger") is and was, during the relevant

period, Chairman of the Board and a Director. During the Class Period, defendant Krueger

signed the Company's SEC filings, including its Form 10-K.

18, Defendant SALVATORE SALIBELLO ("Salibello") is and was, during the

relevant period, Chairman of the Board and a Director. During the Class Period, defendant

Salibello signed the Company's SEC filings, including its Form 10-K.

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19. Defendant JOHN SCHAEFER. ("Schaefer") is and was, during the relevant

period, Chairman of the Board and a Director. During the Class Period, defendant Schaefer

signed the Company's SEC filings, including its Form 10-K.

20. Defendant MICHAEL ZIMMER.MAN ("Zimmerman") is and was, during the

relevant period, Chairman of the Board and a Director. During the Class Period, defendant

Zimmerman signed the Company's SEC filings, including its Fomi 10-K.

21. The defendants referenced above in T 12-20 are referred to herein as the

"Individual Defendants."

22. The Individual Defendants, because of their positions with the Company,

possessed the power and authority to control the contents of KID's quarterly reports, press

releases, and presentations to securities analysts, money and portfolio managers, and institutional

investors, i.e., the market. The Individual Defendants were provided with copies of the

Company's reports and press releases alleged to be misleading prior to or shortly after their

issuance and had the ability and opportunity to prevent their issuance or cause them to be

corrected. Because of their positions with the Company and their access to material non-public

information, the Individual Defendants knew that the adverse facts specified herein had not been

disclosed to and were being concealed from the public and that the positive representations being

made were then materially false and misleading. As a result, the Individual Defendants are liable

for the false and misleading statements pleaded herein.

23. Each of the defendants is liable as a participant in a fraudulent scheme and course

of business that operated as a fraud or deceit on purchasers of KID common stock by

disseminating materially false and misleading statements and/or concealing material adverse

facts. The scheme: (a) deceived the investing public regarding the Company's compliance with

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customs laws, internal controls, and financial reports; (b) deceived the investing public regarding

KID's business, operations, management, future business prospects, and the intrinsic value of

KID's common stock; and (c) caused plaintiff and other members of the Class to purchase KID

common stock at artificially inflated prices.

PLAINTIFF'S CLASS ACTION ALLEGATIONS

24. Plaintiff brings this action as a class action pursuant to Federal Rule of Civil

Procedure 23(a) and (b)(3) on behalf of a Class, consisting of all those who purchased or

otherwise acquired the common stock of KID between March 26, 2010 and March 15, 2011,

inclusive (the "Class") and who were damaged thereby. Excluded from the Class are defendants,

the officers and directors of the Company at all relevant times, members of their immediate

families and. their legal representatives, heirs, successors or assigns and any entity in which

Defendants have or had a controlling interest.

25. The members of the Class are so numerous that joinder is 'impracticable.

Throughout the Class Period, KID common shares were actively traded on the New York Stock

Exchange. As of March 19, 2010, there were 21,577,699 shares of KID outstanding. While the

exact number of Class Members is unknown to plaintiff at this time and can only be ascertained

through appropriate discovery, plaintiff believes that there are hundreds or thousands of

members in the proposed Class. Record owners and other members of the Class may be

identified from records maintained by KID or its transfer agent and may be notified of the

pendency of this action by mail, using a form of notice similar to that customarily used in

securities class actions.

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26. Plaintiff's claims are typical of the claims of the members of the Class as all

members of the Class are similarly affected by defendants' wrongful conduct in violation of the

federal securities laws.

27. Plaintiff will fairly and adequately protect the interests of the members of the

Class and has retained counsel competent and experienced in class and securities litigation.

28. Common questions of law and fact exist as to all members of the Class and

predominate over any questions solely affecting individual members. Among the questions of

law and fact common to the Class are:

(a) whether the federal securities laws were violated by Defendants' acts as

alleged herein;

(b) whether statements made by Defendants to the investing public du ring the

Class Period misrepresented material facts about the business, operations, and management of

KID; and,

(c) to what extent the members of the Class have sustained damages and the

proper measure of such damages.

29. A class action is superior to all other available methods for the fair and efficient

adjudication of this controversy since joinder of all members is impracticable. Furthermore, as

the damages suffered by individual Class Members may be relatively small, the expense and

burden of individual litigation make it impossible for members of the Class to individually

redress the wrongs done to them. There will be no difficulty in the management of this action as

a class action.

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SCIENTER ALLEGATIONS

30. As alleged herein, Defendants acted with scienter in that each Defendant knew or

recklessly disregarded that the public documents and statements issued or disseminated in the

name of the Company were materially false and misleading; knew recklessly disregarded that

such statements or documents would be issued or disseminated to the investing public; and,

knowingly, recklessly disregarded, and/or substantially participated or acquiesced in the issuance

or dissemination of such statements or documents as primary violations of the federal securities

laws. As set forth elsewhere herein in detail, Defendants participated in the fraudulent scheme

alleged by virtue of their receipt of information reflecting the true facts regarding KID, their

control over the Company's alleged materially misleading misstatements, and/or their

associations with the Company, which made them privy to confidential proprietary information

concerning KID and.

31. Defendants were motivated to materially misrepresent to the SEC and investors

the true condition of KID and the true facts about because, in touting positive aspects of KID,

Defendants were able to, and did: (a) deceive the investing public regarding the Company's

compliance with customs laws, internal controls, and financial reports; (b) deceive the investing

public regarding KID's business, operations, management, future business prospects, and the

intrinsic value of KID's common stock; and (c) cause plaintiff and other members of the Class to

purchase KID common stock at artificially inflated prices.

DEFENDANTS' MATERIALLY FALSE AND MISLEADINGSTATEMENTS MADE DURING THE CLASS .PERIOD

32. On March 26, 2010, the inception of the Class Period, Defendants filed the

Company's annual report on Form 10-K for quarter and year ending December 31, 2009, stating

only as follows with respect to customs matters:

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In the ordinary course of its business, we are party to various copyright, patentand trademark infringement, unfair competition, breach of contract, customs,employment and other legal actions incidental to our business, as plaintiff ordefendant. In the opinion of management, the amount of ultimate liability withrespect to these actions will not materially adversely affect our consolidatedresults of operations, financial condition or cash flows. [Emphasis added].

33. In addition, the 2009 Form 10--K identified Lawrence Bivona as an "executive

officer" and included his biography, stating, in part, as follows:

Lawrence Bivona joined the Company as President of LaJobi, Inc. upon itsacquisition in April 2008. Prior to such acquisition, he served as President ofLaJobi Industries, Inc. (the predecessor of LaJobi) since he co-founded the

company in 1994.

34. Furthermore, the 2009 Form 10-K described the LaJobi business, stating, in part,

as follows:

Lawrence Bivona, the President of LaJobi, along with various family members,established L&J Industries, in Asia. The purpose of the entity is to providequality control services to LaJobi for goods being shipped from Asian ports.The Company has used this service since April 2008. For the years endedDecember 31, 2009 and 2008, the Company incurred costs, recorded in cost ofgoods sold, aggregating approximately $1.0 million and $0.7 million,respectively, related to the services provided. Such costs were based on theactual, direct costs incurred by L&J Industries for such individuals. [Emphasisadded].

35. The 2009 Form I O-K also contained representations which attested to the

purported effectiveness and sufficiency of the Company's controls and procedures, as follows:

We maintain disclosure controls and procedures (as defined in Exchange ActRules 13a-15(e) or 15d-15(e)) that are designed to ensure that informationrequired to be disclosed in our reports filed or submitted pursuant to theSecurities Exchange Act of 1934 is recorded, processed, summarized andreported within the time periods specified in the Securities and ExchangeCommission's rules and forms, and that information required to be disclosed inour Exchange Act reports is accumulated and communicated to our management,including our principal executive officer and principal financial officer, to allowtimely decisions regarding required disclosure.

Under the supervision and with the participation of management, including ourprincipal executive officer and principal financial officer, we carried out an

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evaluation of the effectiveness of the design and operation of our disclosurecontrols and procedures pursuant to paragraph (b) of Exchange Act Rules 13a-15or 15d-15 as of December 31, 2009. Based upon our evaluation, our principalexecutive officer and principal financial officer have concluded that ourdisclosure controls and procedures are effective as of December 31, 2009.[Emphases added].

36. In addition to the foregoing, the Company's 2009 Forma 10-K also contained

certifications by Defendants Crain and Paglinco that attested to the purported accuracy and

completeness of the Company's financial and operational reports, in substantial part, as follows-

1. 1 have reviewed this Annual Report on Form 10-K of Kid Brands, .Inc.;

2. Based on my knowledge, this report does not contain any untrue statement ofa material fact or omit to state a material fact necessary to .Make the statementsmade, in light of the circumstances under which such statements were made,not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financialinformation included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of,and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishingand maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (asdefined in Exchange Act Rules 13a — 15(f) and 15d - 15 (f)) for the registrantand have:

a) Designed such disclosure controls and procedures, or caused suchdisclosure controls and procedures to be designed under oursupervision, to ensure that material information relating to the registrant,including its consolidated subsidiaries, is made known to us by otherswithin those entities, particularly during the period in which this report isbeing prepared;

b) Designed such internal control over financial reporting, or causedsuch internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability offinancial reporting and the preparation of financial statements for externalpurposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls andprocedures and presented in this report our conclusions about the

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effectiveness of the disclosure controls and procedures, as of the end ofthe period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal controlover financial reporting that occurred during the registrant's most recentfiscal quarter (the registrant's fourth fiscal quarter in the case of an annualreport) that has materially affected, or is reasonably likely to materiallyaffect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on ourmost recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors(or persons perfoaaing equivalent functions):

a) All significant deficiencies and material weaknesses in the design oroperation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant's ability to record, process,summarize and report financial information; and

b) Any fraud, whether or not material, that involves management orother employees who have a significant role in the registrant's internalcontrol overfinancial reporting. [Emphases added].

37. In addition, Defendants Crain and Paglinco attested to the purported compliance

of the 2009 Form 10-K with the Sarbanes-Oxley Act of 2002, noting, in part, as follows:

In connection with the annual report of Kid Brands, Inc. (the "Company") onForm 10-K for the year ended December 31, 2009, as filed with the Securitiesand Exchange Commission on the date hereof {the "Report"), 1, [Defendant Crainand Defendant Paglinco], certify, pursuant to 18 U.S.C. Section 1350, as adoptedpursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirementsof Section 13(a) or 15(d) of the SecuritiesExchange Act of 1934; and

(2) The information contained in the Report fairlypresents, in all material respects, the financialcondition and results of operations of theCompany. [Emphasis added].

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38. On March 29, 2010, Defendants issued a release announcing "higher fourth

quarter and full year net sales" and providing a "2010 Growth Outlook," quoting Defendant

Crain, in part, as follows:

Bruce G. Crain, Chief Executive Officer and President, commented, "We arevery pleased with our fourth quarter and full year 2009 results, which exceededour prior full year 2009 guidance of non-GAAP Adjusted EB.ITDA above$30 million and Adjusted net income from continuing operations per dilutedshare above $0.50 per share. Despite a challenging economy in 2009, wecontinued to invest in product development and in supporting our retail customersas we completed a significant number of new product transitions. Theseinvestments enabled us to maintain or grow our shelf space with compellingofferings of design-led, innovative and branded products. Accordingly, we werepositioned to benefit when consumers modestly increased spending in the fourthquarter of 2009 and retailers responded by increasing inventories. We alsocontinued to manage our operating expenses aggressively and generated strongcashflows that enabled us to further pay down debt."

Mr. Crain concluded, "We believe that the attractive characteristics of the infantand juvenile industry - which include stable to modestly growing birth rates andother consumer demographics, limited seasonality, and retailers driving furthersupplier consolidation — position us well for 2010 and beyond. Although ourview regarding consumers and retailers is cautious during early 2010, we intendto continue extending our leadership position and building market share byleveraging our combination of design-led brands, category leadership positionsand operational strengths. While we remain committed to controlling andleveraging expenses, we will also continue to invest in the business and seekopportunities to deliver synergies and benefits globally across the organizationthat should benefit all our stakeholders over time." [Emphases added].

39. The statements made by Defendants and contained in the Company's 2009 Form

10-K were each materially false and misleading when made, and were known by Defendants to

be false or were recklessly disregarded as such thereby, for the following reasons, among others:

(a) The Company was investigating the failure to comply with United States

Customs laws and the impact of paying the correct duties, as well as penalties thereof assessed to

the Company;

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(b) Potential defaults to existing agreements and covenants as a result of the

failure to comply with United States Customs laws;

(c) Additional costs of compliance with United States Customs laws;

(d) The involvement of LaJobi's President, Larry Bivona, and its Managing

Director of Operations in the failure to comply with United States Customs laws;

(e) L&r Industries and LaJobi did not provide "quality control services";

(f) Throughout the Class Period, it was also not true that KID contained

adequate systems of internal operational or financial controls, such that the Company's reported

disclosures and financial staternents were true, complete, accurate, or reliable; and,

(g) As a result of the aforementioned adverse conditions which Defendants

failed to disclose, throughout the Class Period, Defendants lacked any reasonable basis to claim

that KID was operating according to plan, strategy, or that KID could achieve guidance

sponsored and/or endorsed by Defendants.

40. On May 5, 2010, Defendants filed a quarterly report on Form 10-Q for the quarter

ending March 31, 2010 stating only as follows with respect to customs matters:

In the ordinary course of its business, the Company is party to various copyright,patent and trademark infringement, unfair competition, breach of contract,customs, employment, product liability, product recall and other legal actionsincidental to its business, as plaintiff or defendant. In the opinion ofmanagement, the amount of ultimate liability with respect to such actions thatare currently pending will not materially adversely affect the consolidatedresults of operations, financial condition or cash flows of the Company.[Emphasis added].

41. The 1Q:10 Form 10-Q also contained representations which attested to the


We maintain disclosure controls and procedures as defined in Rules 13a-15(e) or15d-15(e) of the Securities Exchange Act of 1934, as amended (the "ExchangeAct") that are designed to ensure that information required to be disclosed in our

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Exchange Act reports is recorded, processed, summarized and reported within thetime periods specified in the Securities and Exchange Commission's rules andforms and that such infoiniation is accumulated and cozrununicated to ourmanagement, including our principal executive officer and principal financialofficer (together, the "Certifying Officers"), to allow for timely decisionsregarding required disclosure.

In designing and evaluating disclosure controls and procedures, managementrecognizes that any controls and procedures, no matter how well designed andoperated, can provide only reasonable, not absolute assurance of achieving thedesired objectives.

Under the supervision and with the participation of management, including theCertifying Officers, we carried out an evaluation of the effectiveness of thedesign and operation of our disclosure controls and procedures pursuant toparagraph (b) of Exchange Act Rules 13a-15 or 15d-15 as of March 31, 2010.Based upon that evaluation, the Certifying Officers have concluded that ourdisclosure controls and procedures are effective as of March 31, 2010.[Emphases added].

42. In addition to the foregoing, the Company's I Q:10 Form 10-Q also contained


completeness of the Company's financial and operational reports, in substantial part, as follows:

1.I have reviewed this Quarterly Report on Form I0-Q of Kid Brands, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement ofa material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made,not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financialinformation included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of,

and for, the periods presented in this report;


a) Designed such disclosure controls and procedures, or caused suchdisclosure controls and procedures to be designed under our

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supervision, to ensure that material information relating to the registrant,including its consolidated subsidiaries, is made known to us by otherswithin those entities, particularly during the period in which this report isbeing prepared;


c) Evaluated the effectiveness of the registrant's disclosure controls andprocedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end ofthe period covered by this report based on such evaluation; and


5. The registrant's other certifying officer and I have disclosed, based on ourmost recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors(or persons perfoifning equivalent functions):


b) Any fraud, whether or not material, that involves management orother employees who have a significant role in the registrant's internalcontrol over financial reporting. [Emphases added].


of the 2Q:10 Form 10-Q with the Sarbanes-Oxley Act of 2002, noting, in part, as follows:

In connection with the quarterly report of Kid Brands, Inc. (the "Company") onForm 10-Q for the quartet' ended .Tune 30, 2010 as filed with the Securities andExchange Commission on the date hereof {the "Report"), I, [Defendant Crain andDefendant Paglinco], certify, pursuant to 18 U.S.C. Section 1350, as adoptedpursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

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44. The day after the filing of the 1Q:10 Form 10-Q, on May 6, 2010, Defendants

issued a release reporting growth in net sales and net income, quoting Defendant Crain, who

stated, in part, as follows:

Bruce G. Crain, Chief Executive Officer and President, commented, "We arepleased with our solid first quarter 2010 results, and we remain encouraged bythe underlying fundamentals and strategic growth initiatives of our businesses.We also achieved further cost leverage as we maintained discipline over variablecosts and working capital while selectively investing in market share expansionand efficiency initiatives. We believe that our business buildingaccomplishments, market position, strong cash flows and solid capital structurecontinue to benefit our business and position us well to achieve long-termgrowth."

Mr. Crain concluded, "Based on our current macroeconomic outlook and 2010operational plans, we believe that we remain on track to achieve our full year2010 earnings performance outlook of at least $256 million of net sales, at least$0.67 per diluted share of net income and at least $20 million of debt repayment."[Emphasis added].

45. The statements made by Defendants and contained in the Company's IQ: 10 Foull

10-Q and May 6, 2010 release were each materially false and misleading when made, and were

known by Defendants to be false at that time or were recklessly disregarded as such thereby for

the reasons stated herein in x(39, supra.

46. On August 4, 2010, Defendants filed a quarterly report on Form 10-Q for the

quarter ending June 30, 2010 stating only as follows with respect to customs matters:

In the ordinary course of its business, the Company is party to various copyright,patent and trademark infringement, unfair competition, breach of contract,customs, employment, product liability, product recall and other legal actions

17


incidental to its business, as plaintiff or defendant. In the opinion ofmanagement, the amount of ultimate liability with respect to such actions thatare currently pending will not materially adversely affect the consolidatedresults of operations, financial condition or cash flows of the Company.[Emphasis added].

47. The 2Q:10 Form 10-Q also contained representations which attested to the


We maintain disclosure controls and procedures as defined in Rules 13a-15(e) or15d-15(e) of the Securities Exchange Act of 1934, as amended (the "ExchangeAct") that are designed to ensure that information required to be disclosed in ourExchange Act reports is recorded, processed, summarized and reported within thetime periods specified in the Securities and Exchange Commission's rules andforms and that such information is accumulated and communicated to ourmanagement, including our principal executive officer and principal-financialofficer (together, the "Certifying Officers"), to allow for timely decisionsregarding required disclosure.


Under the supervision and with the participation of management, including theCertifying Officers, we carried out an evaluation of the effectiveness of thedesign and operation of our disclosure controls and procedures pursuant toparagraph (b) of Exchange Act Rules 13a-15 or 15d-15 as of June 30, 2010.Based upon that evaluation, the Certifying Officers have concluded that ourdisclosure controls and procedures are effective as of June 30, 2010.[Emphases added].

48. In addition to the foregoing, the Company's 2Q:10 Form 10-Q also contained



1.I have reviewed this Quarterly Report on Form 10-Q of .Kid Brands, Inc.;


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3. Based on my knowledge, the financial statements, and other financialinformation included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of,

and for, the periods presenter) in this report;






5. The registrant's other certifying officer and I have disclosed, based on ourmost recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors(or persons performing equivalent functions):


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b) Any fraud, whether or not material, that involves management orother employees who have a significant role in the registrant's internalcontrol over financial reporting. [Emphases added].


of the 2Q:10 Form IO-Q with the Sarbanes-Oxley Act of 2002, noting, in part, as follows:

In connection with the quarterly report of Kid Brands, Inc. (the "Company") onForm 10-Q for the quarter ended June 30, 2010 as filed with the Securities andExchange Commission on the date hereof (the "Report"), I, [Defendant Crain andDefendant Paglinco], certify, pursuant to 18 U.S.C. Section 1350, as adoptedpursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:



50. The day after the filing of the 2Q:10 Form 10-Q, Defendants issued a release

announcing the filing of the quarterly report and strong growth in the LaJobi line stating, in part,

as follows:

Net Sales Increase 13.3%; Comparable Net Income Increases 16.6%

Company Raises 2010 Outlook

Wayne, N.J. —August 5, 2010- Kid Brands, Inc. (NYSE: KID) today reportedfinancial results for the three months ended June 30, 2010 ("Q2 2010").

Net sales for Q2 2010 increased 13.3% to $67.9 million, compared to$60.0 million for the three months ended June 30, 2009 ("Q2 2009"). Thisincrease was primarily the result of strong growth at LaJobi, particularly in itslicensed Graco° collection, as well as growth in Sassy programs, which includedthe successful launch of a licensed Garanimalso product line at Walmart.

Gross profit was $20.7 million, or 30.5% of net sales, for Q2 2010, as comparedto $19.0 million, or 31.6% of net sales, for Q2 2009. In absolute terms, gross

20


profit increased as a result of the increase in net sales. Gross profit marginsdecreased somewhat as a result of: (i) continued strong sales growth of LaJobi'snursery furniture programs, which typically generate lower gross margins thanour other subsidiaries; (ii) increased sales of licensed products, which tend tohave lower margins as a result of royalties recorded in cost of goods sold; (iii) ashift in product mix; and (iv) increased freight costs. The decline in gross profitmargins was partially offset by strong margin gains at CoCaLo and some marginimprovement at Kids Line.

51. The August 5, 2010 release quoted Defendant Crain, who issued positive

statements about managing discretionary expenses, thus conditioning investors to believe that the

Company maintained strict controls and procedures, stating, in part, as follows:

"Our second quarter performance reflects the excellent progress we are achievingagainst our strategic growth plans," commented Bruce G. Crain, Chief ExecutiveOfficer and President. "With double-digit top- and bottom-line growth, wegenerated the highest quarterly sales level on a comparable basis for our infantand juvenile business. Our focus on creating innovative and design-led productsallowed us to further strengthen our position in our core markets and captureadditional market share by expanding our presence in several new or developingchannels, including certain mass merchandisers. Whether working individually orcollaboratively, we believe that each of our businesses has continued to providenew product programs at a range of price points that appeal to both retailers andconsumers, especially in a retail environment that remains challenging. We alsomaintained our focus on carefully managing discretionary expenses andworking capital, and used our substantial cash flow to pay down debt, whichfurther reduced the applicable interest rates under our credit facility."[Emphasis added].

52. The statements made by Defendants and contained in the Company's 2Q:10 Form

10-Q and August 5, 2010 release were each materially false and misleading when made, and

were known by Defendants to be false at that time or were recklessly disregarded as such thereby

for the reasons stated herein in t39, supra.

53. On November 3, 2010, Defendants filed a quarterly report on Form 10-Q for the

quarter ending September 30, 2010. With respects to customs issues, Defendants stated only as

follows with respect to customs matters:

In the ordinary course of its business, the Company is party to various copyright,patent and trademark infringement, unfair competition, breach of contract,

21


customs, employment, product liability, product recall and other legal actionsincidental to its business, as plaintiff or defendant. In the opinion ofmanagement, the amount of ultimate liability with respect to such actions thatare currently pending will not materially adversely affect the consolidatedresults of operations, financial condition or cash flows of the Company.[Emphasis added].

54. As shares of KID continued to trade at levels artificially inflated by Defendants'

publication of materially false statements about the Company, in addition to making statements

concerning Company operations and financial results, the 3Q.10 Iiomi 10-Q contained

representations which attested to the purported effectiveness and sufficiency of the Company's

controls and procedures, as follows:

We maintain disclosure controls and procedures as defined in Rules 13a-15(e) or15d-15(e) of the Securities Exchange Act of 1934, as amended (the "ExchangeAct") that are designed to ensure that information required to be disclosed in ourExchange Act reports is recorded, processed, summarized and reported within thetime periods specified in the Securities and Exchange Commission's rules andforms and that such information is accumulated and communicated to ourmanagement, including our principal executive officer and principal financialofficer (together, the "Certifying Officers"), to allow for timely decisionsregarding required disclosure.


Under the supervision and with the participation of management, including theCertifying Officers, we carried out an evaluation of the effectiveness of thedesign and operation of our disclosure controls and procedures pursuant toparagraph (b) of Exchange Act Rules 13a-15 or 15d-15 as of September 30,2010. Based upon that evaluation, the Certifying Officers have concluded thatour disclosure controls and procedures are effective as of September 30, 2010.[Emphases added].

55. In addition to the foregoing, the Company's 3Q:10 Form 10-Q also contained



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1. I have reviewed this Quarterly Report on Form IO-Q of Kid Brands, Inc.;


3. Based on my knowledge, the financial statements, and other financialinformation included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of,and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishingand maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (asdefined in Exchange Act Rules 13a ---- 15(f) and 15d - 15 (f)) for the registrantand have:





5. The registrant's other certifying officer and I have disclosed, based on ourmost recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors(or persons performing equivalent functions):

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b) Any fraud, whether or not material, that involves management orother employees who have a significant role in the registrant's internalcontrol overfinancial reporting. [Emphases added].


of the 3Q:10 Fornn 10-Q with the Sarbanes-Oxley Act of 2002, noting, in part, as follows:

In connection with the quarterly report of Kid Brands, Inc. (the "Company") onForm 10-Q for the quarter ended Tune 30, 2010 as filed with the Securities andExchange Commission on the date hereof (the "Report" ),.1, [Defendant Crain andDefendant Paglinco], certify, pursuant to 18 U.S.C. Section 1350, as adoptedpursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:



57. The day after the filing of the 3Q:10 Form 10-Q, Defendants issued a release

announcing the filing of the quarterly report and strong growth in the LaJobi line. In addition,

Defendants disclosed a warning issued by the U.S. Consumer Product Safety Commission and

the U.S. Food and Drug Administration -- not mentioning any disclosures about United States

Customs issues — stating, in part, as follows:

Net Sales .Increase 18.4%; Net .Income Increases 38.1 %

Adjusted Net Income Increases 58.4%

Company Reaffirms 2010 Sales and Earnings Outlook

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Wayne, N.J. ------ November 4, 2010 — Kid Brands, Inc. (NYSE: KID) todayreported financial results for the three months ended September 30, 2010 ("Q32010").

Net sales for Q3 2010 increased 18.4% to $71.1 million, compared to$60.1 million for the three months ended September 30, 2009 ("Q3 2009"). Thisincrease was completely organic and primarily the result of strong top-linegrowth at LaJobi, Sassy and CoCaLo. LaJobi's growth was driven primarily bythe strong performance of its Graco° licensed products and recent cribplacements at Walmart stores, Sassy's increase was driven primarily by itslicensed Garanimals° product line (also for Walmart) and CoCaLo's 'increasewas due to continued strong performance of several top-selling collections.

Gross profit was $20.6 million, or 29.0% of net sales, for Q3 2010, as comparedto $18.5 million, or 30.7% of net sales, for Q3 2009. In absolute terms, grossprofit increased as a result of the increase in net sales. Gross profit marginsdecreased as a result of. (i) amounts recorded by the Company of approximately$670,000 in Q3 2010 related to the discontinuance of its sleep positioner productline (described below), which decreased gross margins by one full percentagepoint; (ii) incremental promotional allowances provided to retailers; (iii) strongsales growth at LaJobi, whose products typically carry lower gross margins;(iv) a continued shift in product mix toward more opening price point and otherlower margin product categories, including continued strength in sales oflicensed products, which tend to have a lower margin as a result of royaltiesrecorded in cost of goods sold; and (v) increased freight and product costs. TheCompany's Sassy subsidiary discontinued the sale of infant sleep positionersfollowing a warning from the U.S. Consumer Product Safety Commission andthe U.S. Food and Drug Administration regarding the use of such productsand, in connection therewith, has recorded amounts related to estimated retailerreturns, the write-down of inventory and related costs. Sales of sleep positionersrepresented approximately 0.5% of the Company's consolidated 2010 sales.

58. The November 5, 2010 release quoted Defendant Crain, who issued positive

statements about managing discretionary expenses, thus conditioning investors to believe that the

Company maintained strict controls and procedures, stating, in part, as follows:

Mr. Crain continued, "Looking out to the remainder of the year and beyond, webelieve that we are well-positioned within the marketplace. We are encouragedby the early reception to our new product launches at the recent trade shows,where we introduced several new product categories and further enhanced ourofferings in our core categories. We continue to address the needs of today'sparents by offering essential and innovative products that are branded,

25


fashionable and functional, which we believe serves us well in both the currentlychallenging economic times and during the likely eventual recovery. We are alsoworking closely with our vendor and retailer partners to mitigate rising costs ofgoods, and are maintaining tight controls on all discretionary expenses.Additionally, we are ensuring that we have adequate inventories to serve ourretailers and consumers in our core and many new product categories andchannels."

Concluding, Mr. Crain noted, "Based on our current plans and assumptions, weremain comfortable with our prior outlook to grow net sales to at least$267 million and net income to at least $0.71 per diluted share for the full year2010. Although debt repayment continues to be a high priority, we remaincommitted to ensuring that we have adequate inventory to support our growthplans for 2011 and, as a result, do not anticipate meaningful additional debtrepayment during the remainder of 2010." [Emphasis added].

59. The statements made by Defendants and contained in the Company's 3Q:10 Form

10-Q and November 5, 2010 release were each materially false and misleading when made, and

were known by Defendants to be false at that time or were recklessly disregarded as such thereby

for the reasons stated herein in '[39, supra.

THE TRUTH IS REVEALED

60. It was not until March 15, 2011 that Defendants issued a release announcing the

termination of two high-level executives and admitting to a violation of United States Customs

laws stating, in part, as follows:

East Rutherford, N.J. — March 15, 2011 — Kid Brands, Inc. (NYSE: KID) todayannounced a leadership change at its LaJobi subsidiary. Rick Schaub has beenappointed as President of LaJobi, effective immediately, in addition to hisongoing role as President of Kid Brands' Sassy subsidiary. Effectiveimmediately, LaJobi's current President, Larry Bivona, and its ManagingDirector of operations, have both been terminated from employment

The Company took these actions based on the findings to date of an investigationinto LaJobi, initiated at the direction of the Board of Directors, and supervised bya Special Committee of three non-management members of the Board. TheBoard retained Skadden, Arps, Slate, Meagher & Flom LLP to conduct theinvestigation. The investigation was initiated after the Board was made aware ofpotential issues regarding customs duty paid on products imported into the U.S.,while LaJobi was in the process of discussing customs duty issues with U.S.

26


Customs and Border Protection ("U.S. Customs"). The Board's investigationhas found instances at LaJobi in which incorrect import duties were applied oncertain wooden furniture imported from vendors in China, resulting in aviolation of anti-dumping regulations. On the basis of the investigation, theBoard concluded that there was misconduct involved an the part of certainLaJobi employees in connection with the incorrect payment of duties, includingmisidentifying the manufacturer and shipper of products The ongoinginvestigation is also focusing on certain of LaJobi's business and staffingpractices in Asia. [Emphases added].

Kid Brands is committed to working closely with U.S. Customs to address issuesrelating to incorrect import duties. The Company currently estimates that it willincur costs of approximately $7 million relating to customs duty owed and maybe assessed a penalty of up to Ix customs duty by U.S. Customs as well aspossibly being subject to assessment far additional duties on other items. TheCompany .previously disclosed a potential earnout payment of approximately $12to $15 million in the aggregate relating to its acquisitions of LaJobi and CoCaLo,substantially all of which was estimated to relate to LaJobi. The Company nolonger believes such amount is payable with respect to Kid Brands' acquisition ofLaJobi, and the Company does not intend to make any earnout payment related toLaJobi.

The Company is working closely with its lenders and ether business partnersregarding the impact of these matters on its existing agreements, including theoccurrence of events of default under the credit agreement and the need forwaivers or amendments under its credit and other existing agreements.

61. As a result of the foregoing disclosure, KID's stock plummeted from a closing

price of $9.24 per share on March 14, 2011 to a close of $6.91 per share on March 15, 2011,

after experiencing an intra-day low of $6.57 per share, on heavy trading volume.

CAUSATION AND ECONOMIC LOSS

62. During the Class Period, as detailed herein, Defendants engaged in a scheme to

deceive the market, and a course of conduct that artificially inflated KID's stock price and

operated as a fraud or deceit on Class Period purchasers of KID'S stock by misrepresenting the

status of KID'S compliance with customs laws and internal controls and disclosures. Ultimately,

however, when Defendants' prior misrepresentations and fraudulent conduct came to be revealed

27


to investors, shares of KID declined precipitously -- evidence that the prior artificial inflation in

the price of KTD's shares was eradicated. As a result of their purchases of KID stock during the

Class Period at artificially inflated prices, plaintiff and other members of the Class suffered

economic losses when the Company's true condition and the truth about was finally and fully

revealed and. the artificial inflation was removed from price of the Company's stock, i.e.,

damages under the federal securities laws.

63. By improperly characterizing KID's financial and operational condition, the

Defendants presented a misleading image of KID. During the Class Period, Defendants

repeatedly emphasized the purported accuracy and effectiveness of the Company's disclosure

controls and procedures. These claims caused and maintained the artificial inflation in KID's

stock price throughout the Class Period, until the truth about the Company and were ultimately

revealed to investors. As the truth became known to investors, these disclosures had an

immediate, adverse impact on the price of KID shares.

64. These belated revelations also evidenced Defendants' prior falsification of KID's

compliance with customs laws, disclosure controls and procedures, and business prospects due to

Defendants' false statements. As investors and the market ultimately learned, the Company's

internal controls and disclosures had vastly been overstated or falsely stated. As this adverse

information became known to investors, the prior artificial inflation began to be eliminated from

KID's share price and the members of the Class were damaged as a result of the related share

price decline.

65. The decline in IUD's stock price at the end of the Class Period was a direct result

of the nature and extent of Defendants' fraud being revealed to investors and to the market. The

timing and magnitude of KID's stock price decline negates any inference that the losses suffered

28


by plaintiff and the other members of the Class were caused by changed market conditions,

macroeconomic or industry factors, or even Company-specific facts unrelated to Defendants'

fraud.

Applicability Of Presumption Of Reliance:Fraud-On-The-Market Doctrine

66. At all relevant times, the market for KID's common stock was an efficient market

for the following reasons, among others:

(a) KID's stock met the requirements for listing, and was listed and actively

traded on the New York Stock Exchange national market exchange, a highly efficient and

automated market;

(b) As a regulated issuer, KID filed periodic public reports with the SEC and

the New York Stock Exchange;

(c) KID regularly communicated with public investors via established market

communication mechanisms, including through regular disseminations of press releases on the

national circuits of major newswire services and through other wide-ranging public disclosures;

and

(d) KID was followed by securities analysts employed by major brokerage

firm(s) who wrote research reports, which were publicly available and entered the public

marketplace.

67. As a result of the foregoing, the market for KID securities promptly digested

current information regarding the Company from all publicly available sources and reflected

such information in KID's stock price. Under these circumstances, all purchasers of KID

common stock during the Class Period suffered similar injury through their purchase of KID

common stock at artificially inflated prices and a presumption of reliance applies.

29


NO SAFE HARBOR

68. The statutory safe harbor provided for forward-looking statements under certain

circumstances does not apply to any of the allegedly false statements pleaded herein. Many of

the specific statements pleaded were not identified as "forward-looking statements" when made.

To the extent that any alleged misstatements are forward-looking, there were no meaningful

cautionary statements identifying important factors that could cause actual results to differ

materially from those in the purportedly forward-looking statements. Alternatively, to the extent

that the statutory safe harbor does apply to any forward-looking statements pleaded herein,

defendants are liable for those false forward-looking statements because at the time each was

made, the particular speaker knew that the particular forward-looking statement was false, and/or

the forward-looking statement was authorized and/or approved by an executive officer of KID

who knew that those statements were false or lacked any reasonable basis when made.

BASIS OF ALLEGATIONS

69. Plaintiff has alleged the following based upon the investigation of plaintiff's

counsel, which included a review of SEC filings by KID, as well as regulatory filings and

reports, securities analysts' reports and advisories about the Company, press releases and other

public statements issued by the Company, and media reports about the Company. Plaintiff

believes that substantial additional evidentiary support will exist for the allegations set forth

herein after a reasonable opportunity for discovery.

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FIRST CLAIM

Violation Of Section 10(b) OfThe Exchange Act And Rule 10b-5

Promulgated Thereunder Azainst All Defendants

70. Plaintiff repeats and realleges each and every allegation contained above as if

fully set forth herein.

71. During the Class Period, Defendants carried out a plan, scheme, and course of

conduct which was intended to and, throughout the Class Period, did: (a) deceive the investing

public regarding the Company's compliance with customs laws, internal controls, and financial

reports; (b) deceive the investing public regarding KID's compliance with customs laws,

business, operations, management, future business prospects, and the intrinsic value of KID's

common stock; and (c) cause plaintiff and other members of the Class to purchase KID common

stock at artificially inflated prices. In furtherance of this unlawful scheme, plan, and course of

conduct, Defendants, jointly and individually took the actions set forth herein.

72. Defendants (a) employed devices, schemes, and artifices to defraud; (b) made

untrue statements of material fact and/or omitted to state material facts necessary to make the

statements made not misleading; and, (c) engaged in acts, practices, and a course of business

which operated as a fraud and deceit upon the purchasers of the Company's common stock in

violation of Section 10(b) of the Exchange Act and Rule 10b-S. All Defendants are sued either

as primary participants in the wrongful and illegal conduct charged herein and/or as controlling

persons as alleged below.

73. Defendants, individually and in concert, directly and indirectly, by the use, means

or instrumentalities of interstate commerce and/or of the mails, engaged and participated in a

continuous course of conduct to conceal adverse material information about the business,

operations, and future prospects of KID as specified herein.

31


74. Each of the Individual Defendants' primary liability, and controlling person

liability, arises from the following facts: (a) the Individual Defendants were high-level

executives and/or directors at the Company during the Class Period and members of the

Company's management team or had control thereof; (b) each of these Defendants, by virtue of

his responsibilities and activities as a senior officer and/or director of the Company was privy to

and participated in the creation, development and reporting of the Company's internal budgets,

plans, projections, and/or reports; (c) each of these Defendants enjoyed significant personal

contact and familiarity with the other defendants and was advised of and had access to other

members of the Company's management team, internal reports, and other data and information;

and, (d) each of these Defendants was aware of the Company's dissemination of infointation to

the investing public, which they knew or recklessly disregarded was materially false and

misleading when made.

75. The Defendants had actual knowledge of the misrepresentations and omissions of

material facts set forth herein, or acted with reckless disregard for the truth in that they failed to

ascertain and disclose such facts. Defendants' material misrepresentations and/or omissions

were done knowingly or recklessly for the purpose and effect of concealing KID's true condition

and future business prospects from the investing public and supporting the artificially inflated

price of its common stock. Defendants, if they did not have actual knowledge of the

misrepresentations and omissions alleged, were severely reckless in failing to obtain such

knowledge by refraining from taking those steps necessary to discover whether those statements

were false or misleading.

76. As a result of the dissemination of the materially false and misleading information

and failure to disclose material facts, as set forth above, the market price of KID common stock

32


was artificially inflated during the Class Period. In ignorance of the fact that market prices of

KID's publicly-traded common stock were artificially inflated, and relying directly or indirectly

on the false and misleading statements made by Defendants, or upon the integrity of the market

in which the securities trade, and/or on the absence of material adverse information that was

known to or recklessly disregarded by Defendants but not disclosed in public, plaintiff and the

other members of the Class acquired KID common stock during the Class Period at artificially

high prices and were damaged thereby.

77. At the time of said misrepresentations and omissions, plaintiff and other members

of the Class were ignorant of their falsity, and believed them to be true. Had plaintiff and the

other members of the Class known the truth regarding KID, which were not disclosed by

Defendants, plaintiff and other members of the Class would not have purchased or otherwise

acquired their KID common stock, or if they had, they would not have done so at the artificially

inflated prices paid.

78. As a direct and proximate result of Defendants' wrongful conduct, plaintiff and

the other members of the Class suffered damages in connection with their respective purchases

and sales of the Company's common stock during the Class Period.

79. By virtue of the foregoing, Defendants have violated Section 10(b) of the

Exchange Act, and Rule 1 Ob-5 promulgated thereunder.

SECOND CLAIM

Violation Of Section 20(a) OfThe Exchange Act Against Individual Defendants

80. Plaintiff repeats and realleges each and every allegation contained above as if

fully set forth herein.

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81, The Individual Defendants acted as controlling persons of KID within the

meaning of Section 20(a) of the Exchange Act as alleged herein. By virtue of their high-level

positions, and their ownership and contractual rights, participation in and/or awareness of the

Company's operations and/or intimate knowledge of the false statements regarding filed by the

Company with the SEC and disseminated to the investing public, the Individual Defendants had

the power to influence and control, and did influence and control, directly or indirectly, the

decision-making of the Company, including the content and dissemination of the various

statements, which plaintiff contends are materially false and misleading. The Individual

Defendants were provided with or had unlimited access to copies of the Company's reports,

press releases, public filings, and other statements alleged by plaintiff to be materially

misleading prior to and/or shortly after these statements were issued and had the ability to

prevent the issuance of the statements or cause the statements to be corrected.

82. In particular, each of these Defendants had direct and supervisory involvement in

the day-to-day operations of the Company and, therefore, is presumed to have had the power to

control or influence the particular transactions giving rise to the securities violations as alleged

herein, and to have exercised the same.

83. As set forth above, KID and the Individual Defendants each violated Section

I0(b) and Rule IOb-5 by their acts and omissions as alleged in this complaint. As a direct and

proximate result of defendants' wrongful conduct, plaintiff and other members of the Class

suffered damages in connection with their purchases of the Company's common stock at

artificially inflated prices during the Class Period. As such, the Individual Defendants are liable

pursuant to Section 20(a) of the Exchange Act.

WHEREFORE, plaintiff prays for relief and judgment, as follows:

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A. Determining that this action is a proper class action, certifying plaintiff as

a class representative under Rule 23 of the Federal Rules of Civil Procedure, designating plaintiff

as Lead Plaintiff, and approving plaintiffs counsel as Lead Counsel;

B. Awarding compensatory damages in favor of plaintiff and the other Class

Members against all defendants, jointly and severally, for all damages sustained as a result of

defendants' wrongdoing, in an amount to be proven at trial, including interest thereon;

C. Awarding plaintiff and the Class their reasonable costs and expenses

incurred in this action, including counsel fees and expert fees;

D. Awarding extraordinary, equitable and/or injunctive relief as permitted by

law, equity and the federal statutory provisions sued hereunder, pursuant to Rules 64 and 65, and

any appropriate state law remedies to assure that the Class has an effective remedy; and

E. Such other and further relief as the Court may deem just and proper.

JURY TRIAL DEMANDED

Plaintiff hereby demands a trial by jury.

Dated: March 22, 201 mnann

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