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Case Status:    SETTLED
On or around 02/19/2002 (Other)

Filing Date: November 05, 1997

According to the Company’s Form 10-Q, for the quarter ended September 30, 2002, in February 2002, the California Superior Court for Santa Clara County entered its preliminary approval of an agreement to settle the consolidated state court class action lawsuit. Under the terms of the class action settlement, SONICblue will contribute 2,401,501 shares of SONICblue common stock and Deloitte & Touche will contribute up to $250,000 in full settlement of all claims. In April 2002, the Superior Court granted final approval to that settlement, dismissing the case. In May 2002, the Superior Court also approved the settlement of the related California derivative litigation. The derivative settlement calls for the defendants to contribute to the settlement their respective benefits under certain directors and officers insurance policies in an amount of approximately $4.6 million which, net of attorneys' fees and litigation costs, would be paid to SONICblue, which payments have been made.

Although the federal action was previously dismissed, the class in the federal action is settling with the state action. According to the Notice of Settlement for the state action, all of these state and federal class actions are herein referred to collectively as the "Litigation."

By the docket dated June 29, 1998, on April 29, 1998, Plaintiff's filed a motion for voluntary dismissal of action without prejudice. The Court entered the Minutes on June 19, 1998, granting the motion and the federal action was terminated.

Since November 1997, a number of complaints have been filed in federal and state courts seeking an unspecified amount of damages on behalf of an alleged class of persons who purchased shares of the Company's common stock at various times between April 18, 1996 and November 3, 1997. The complaints name as defendants the Company, certain of its officers and former officers, and certain directors of the Company, asserting that they violated federal and state securities laws by misrepresenting and failing to disclose certain information about the Company's business. In addition, certain stockholders have filed derivative actions in the state courts of California and Delaware seeking recovery on behalf of the Company, alleging, among other things, breach of fiduciary duties by such individual defendants.

Plaintiff alleges that during the Class Period defendants' fraudulently or recklessly inflated S3's earnings and revenues by improperly recognizing between $40 million and $70 million in revenues from products shipped to distributors which were not final sales. Defendants' improper recognition of revenue violated the Company's established revenue recognition policy and Generally Accepted Accounting Principles, and caused the Company's financial statements to be materially overstated.

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