According to Blue Coat System’s (formerly CacheFlow Inc.) FORM 10-Q For The Quarterly Period Ended January 31, 2006, cases have been consolidated under the case captioned In re CacheFlow, Inc. Initial Public Offering Securities Litigation, Civil Action No. 1-01-CV-5143. This is one of a number of actions coordinated for pretrial purposes as In re Initial Public Offering Securities Litigation, 21 MC 92 with the first action filed on January 12, 2001. Plaintiffs in the coordinated proceeding are bringing claims under the federal securities laws against numerous underwriters, companies, and individuals, alleging generally that defendant underwriters engaged in improper and undisclosed activities concerning the allocation of shares in the IPO’Ss of more than 300 companies during late 1998 through 2000. The consolidated amended complaint in the Company’s case seeks unspecified damages on behalf of a purported class of purchasers of its common stock between December 9, 1999 and December 6, 2000. Pursuant to a tolling agreement, the individual defendants were dismissed without prejudice. On February 19, 2003, the court denied the Company’s motion to dismiss the claims against it. The litigation is now in discovery. In June 2004, a stipulation of settlement and release of claims against the issuer defendants, including the Company, was submitted to the court for approval. The terms of the settlement if approved, would dismiss and release all claims against the participating defendants (including the Company). In exchange for this dismissal, D&O insurance carriers would agree to guarantee a recovery by the plaintiffs from the underwriter defendants of at least $1 billion, and the issuer defendants would agree to an assignment or surrender to the plaintiffs of certain claims the issuer defendants may have against the underwriters. On August 31, 2005, the court confirmed preliminary approval of the settlement. The proposed settlement remains subject to a number of conditions, including final approval of the court.
The complaint alleges violations of Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. On or about November 18, 1999 CacheFlow commenced an initial public offering of 5,000,000 of its shares of common stock at an offering price of $24.00 per share (the "CacheFlow IPO"). In connection therewith, CacheFlow filed a registration statement, which incorporated a prospectus (the "Prospectus"), with the SEC. The complaint further alleges that the Prospectus was materially false and misleading because it failed to disclose, among other things, that: (i) the Underwriter Defendants (Morgan Stanley, Credit Suisse, Robertson Stephens and Salomon) had solicited and received excessive and undisclosed commissions from certain investors in exchange for which the Underwriter Defendants allocated to those investors material portions of the restricted number of CacheFlow shares issued in connection with the CacheFlow IPO; and (ii) the Underwriter Defendants had
entered into agreements with customers whereby the Underwriter Defendants
agreed to allocate CacheFlow shares to those customers in the CacheFlow Search IPO in exchange for which the customers agreed to purchase additional CacheFlow shares in the aftermarket at pre-determined prices.