ComVentures' Van der Meer sent Byte and Switch the following statement: "Nishan's Board of Directors acted consistent with the highest ethical, moral, and legal standards. Nishan's merger with McData was in the best interests of Nishan, its employees, and the common shareholders. The employees have been retained by an excellent parent company and the common shareholders all made money on their shares. In contrast, the preferred investors lost millions of dollars on the final outcome. The accused board members and investors intend to vigorously defend against the plaintiff's baseless claims." He also notes that the judge assigned to the case, Judge William J. Elfving, denied Latif's attempt to obtain a temporary restraining order on Sept. 15, 2003.
Neither Cogan nor Russo responded to requests for comment. McGraw could not be reached.
McData is also named in the suit as a defendant. Latif accuses the Fibre Channel switch vendor of offering Nishan's departing management team "unusually high severance payments, totaling over $3.1 million, with the only apparent goal of obtaining their proxy vote in favor of the Merger." In addition, according to the lawsuit, McData offered a 50 percent retention bonus to Nishan employees who promised to vote their common shares in support of the deal.
Asked to comment, a McData spokeswoman says: "We are aware of the allegations in the complaint and will defend against them, but beyond that can't comment further since it is ongoing litigation."
Latif claims that ComVentures, Lightspeed, and their allies worked to minimize the return to Nishan's common shareholders at every turn. For example, McData's initial term sheet of July 17 proposing the Nishan deal included a specific provision that $5 million be distributed to the common shareholders. But the revised term sheet submitted by Nishan deleted any specific consideration for common shareholders, Latif's lawsuit alleges.
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