3Ware 2004 Annual Report Download - page 24

In May 2001, a series of similar state derivative actions were filed against our directors and certain
executive officers. The state complaints have been coordinated and assigned to the Superior Court of California
in the County of San Diego. Applied Micro Circuits Shareholders Cases, Case No. JCCP No. 4193. In December
2001, the court appointed plaintiffs filed a consolidated state complaint that alleges overstatement of our
financial prospects, mismanagement, inflation of stock value and sale of stock at inflated prices for personal gain
during the period from November 2000 through February 2001. The plaintiffs seek treble damages from the
defendants alleged to have illegally sold stock and damages from all defendants for the other alleged violations
of corporate law set forth in the complaint. In February 2002, our board of directors formed a special litigation
committee to evaluate the claims in the consolidated state complaint. The special litigation committee retained
independent legal counsel and submitted a report to the court in July 2002. Defendants filed a motion seeking
dismissal of the consolidated action. In June 2003, the court denied defendants’ motion to dismiss. In November
2003, counsel for the special litigation committee filed a motion to bifurcate trial of this matter, seeking an order
that trial regarding whether the matter should be dismissed due to the special litigation committee’s
recommendations take place prior to trial regarding the underlying claims. The motion was granted in January
2004. Discovery in this lawsuit is continuing.
We believe that the allegations in these lawsuits are without merit and intend to defend against the lawsuits
vigorously. We cannot predict the likely outcome of these lawsuits, and an adverse result in either lawsuit could
have a material adverse effect on us. We have notified our insurance carriers of these lawsuits and submitted
expenses incurred in defending the lawsuits as claims under the relevant insurance policies.
Since 1993, we have been named as a potentially responsible party, or PRP, along with a large number of
other companies that used Omega Chemical Corporation in Whittier, California to handle and dispose of certain
hazardous waste material. We are a member of a large group of PRPs that has agreed to fund certain remediation
efforts at the Omega Chemical site, for which we have accrued approximately $100,000. In September 2000, we
entered into a consent decree with the Environmental Protection Agency, pursuant to which we agreed to fund
our proportionate share of the initial remediation efforts at the Omega Chemical site.
In September 2003, Silvaco Data Systems (“Silvaco”) filed a complaint against us in the Superior Court of
the State of California in the County of Santa Clara. Silvaco Data Systems v. Applied Micro Circuits Corporation
Case No. 103cv005696. In its complaint, Silvaco claims that we misappropriated trade secrets and have engaged
in unfair business practices by using software licensed to us by Circuit Symantics, Inc. We have filed an answer
denying Silvaco’s allegations and have filed a motion seeking a stay of the lawsuit against us pending arbitration
of the terms of a settlement agreement between Circuit Symantics and Silvaco. The motion has been granted and
the arbitration is expected to take place in the second quarter of fiscal 2005.
Several litigation matters are discussed below involving JNI Corporation (“JNI”), which became a wholly-
owned subsidiary of the Company in October 2003.
In April 2001, a series of similar federal complaints were filed against JNI and certain of its officers and
directors. These complaints were consolidated into a single proceeding in U.S District Court for the Southern
District of California. Osher v. JNI, lead Case No. 01 cv 0557 J (NLS). The first consolidated and amended
complaint alleged that between July 13, 2000 and March 28, 2001 JNI and the individual defendants made false
statements about JNI’s business and operating results in violation of the Securities Exchange Act, and also included
allegations that defendants made false statements in JNI’s secondary public offering of common stock in October
2000. In March, 2003, the Court dismissed the action, with prejudice. In April, 2004, Plaintiffs filed a notice of
appeal.
In October 2001, a stockholder derivative suit was filed against JNI and certain of its former officers and
directors in the San Diego County Superior Court, Case No. GIC 775153. The complaint alleged that between
October 16, 2000 and January 24, 2001, the defendants breached their fiduciary duty by failing to adequately
oversee the activities of management and that JNI allegedly made false statements about its business and results
causing its stock to trade at artificially inflated levels. The Court has sustained JNI’s demurrers to each of the
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