According to the Company’s FORM 10-Q For the Quarterly Period Ended June 30, 2003, in August, 2001, a purported class action lawsuit was filed in the United States District Court for the Southern District of New York against the Company and several of its officers as well as against the underwriters of the Company’s initial public offering of common stock in June, 2000. In April, 2002, the complaint was amended to add allegations, substantially similar to those described above, concerning the Company’s secondary public offering of stock. In October, 2002, the individual defendants were dismissed without prejudice from this lawsuit pursuant to tolling agreements entered into with the plaintiffs. The Company believes that these claims are without merit. The Company has agreed to join a proposed settlement regarding this claim, which settlement is subject to final negotiation and court approval.
The complaint alleges violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. On or about June 30, 2000 StorageNetworks commenced an initial public offering of 9,000,000 of its shares of common stock at an offering price of $15 per share (the "StorageNetworks IPO"). In connection therewith, StorageNetworks 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) Defendants had solicited and received excessive and undisclosed commissions from certain investors in exchange for which Defendants allocated to those investors material portions of the restricted number of StorageNetworks shares issued in connection with the StorageNetworks IPO; and (ii) Defendants had entered into agreements with customers whereby Defendants agreed to allocate StorageNetworks shares to those customers in the StorageNetworks IPO in exchange for which the customers agreed
to purchase additional StorageNetworks shares in the aftermarket at
pre-determined prices. As alleged in the complaint, the SEC is investigating
underwriting practices in connection with several other initial public