Case 1:06-cv-02039-CC Document 1-1 Filed 08/29/2006 Page 1 of 29 OFt1I1G11111J4I.. Ak
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UNITED STATES D ISTRICT COURT
Ni-JR'T'H ERN DISTRICT OF GEORC-31AL
ATLANTA DIVESION
P,. EDWARD MILLER, Derivati.vely-on : Civi l Action No 0 6 S5YSTEPV['S5, 1N-, VERIFIED SHAL]ZF;HOLI):EF: Plaintiff, T):EF.][VATIvF- CC)]Vi]PLAiNfT FOR VIOLATION OF 'Tfi:E ]FF;DERPLL vs . IST-{CiJR:l7,];E;S 1:.AL'O~~5 AND S~T.A,"F'E', LA ' C'l~.A,lr~].~~ FOR BREACH OF DAVID B . GO ULCf, NICHOLAS . FIDUCIARY D-LFFV,A.B'US51E OF ISC BE., WILLIAM F . EVAlls'l
Defenclarlts,
I7el.aware ct3rpration, Nominal Defendarit. DEMAND FOR JURLY TRIAL x Case 1:06-cv-02039-CC Document 1-1 Filed 08/29/2006 Page 2 of 29 1 1.
ivxrvmE cw ~ruE, .A,i7viorJ
:l . This is a shareholder derivative action brought by a shareholder of
Witness Systems, Inc . ("Witiaes;> 'Sys~tE,mis," oor the •`1Ccrm~pamy") on behalf of' t11,-,
+: compamw against its Board of Directors and certain of its senior ex :e;ctitives
1r,collectively, "D efeja~dant,s' ';I. This action_ seeks t o remedy Defendants' violations of
fE161-1ral rind state lava, including breaches of fidiuciai~7 diiaty,, abuse- of control,
coi]St]"liG1:1Ve fl'a11d, corporate, waste, unjust f,r1I'1C hI71e:C1C arid gross misman.ageincut
arising out of a cherne s and Wron.g;ful course o:f bu.siraess wheireby Defendants allowed
senior Wilmess :Syste-ms insiders to divert hundreds of rniflioms of'(fiA1ars of'coiporate
assets 'to tlhemsel.ves via the manipulation of grant dates a s,j()c:iated. with humireds of'
thousands of stock options granted 'to Witrne,ss Systems irisi&rs. ]Each of the
L)eliFeridamts also parl;icipai:e,d in the conee;il[ment of the back:clatiilg iaptiion sic-h(-rn.e,
cornpl a-irif,d. cof'herE,in and/or refiise-d bo take advantage of the Cia:mpamy',; le,gal rights
to require, these senior insiders to disgorge the hundreds of millions ill Alicitb'
obtained inc;E;ritive c,c»ripfMisat.ion wi,d proceeds diverted to them Since 2000 .
2. Between fiscal 2000 and ;5,22O0 :De,1e,mdatll:s also caused Witness Systetxvs
bo file false and rni;~le,a~cling; ,~1:a~tem~~~1t~, ~witll the Sec,ariiti{,sand Exchange Cojuirnissiort
inc~ki(iiing Proxy Statements filed with they SEC "which stated tYiai the options
-1 1 - Case 1:06-cv-02039-CC Document 1-1 Filed 08/29/2006 Page 3 of 29
I,~~iril;e-cl by Witness Systems ca.rriie,d -with them an exercisese ~n-ice that was run, Am thwil the fair jriuk:e!t val~ue of' '0l iitness S);ysire;rns stock on the date of grant arid issumice"
=S . In fact, De"Ff,ndamt.>; werexxare that hepractire ;; employed ,~ the oani allowed he stock option grants to be, barcicihx;tecl to elates when, the C~~imp,Ar~y' ;s shares were trading, at or near the lowest rice for that relevant fWTi1od . E3,y August :Z10016,
De, fen_darits' barlc,dati ng scheme had ;yif,lde,cl stock option grants o, tire ompany's executive officers worth mill-ions of clolla :r;>, which coillLrilbuted to Defendwits' ability to sell ,over $45 in i6 lio n worth of Witness Systems stock,
gj, Witness 13ystemis' financial results, as reported nd filed xxt li the SECI
'"T'r e false. Defend.arits' nni>representa1tiairs and wrongful course of conduct v iol.ated the "Securities, Exchange Act of, 19134 (the `"E :~~c:han g;e; ALc,t"'), as WC-11 ass ~Cre .or~~ia ~a,nd
Delaware lave, B)i authori:zirij; ',i11+Vor a.cqjuieseiJl;g iirl the stock option baLc,k:db1:ing sc'hem~~., De;fen.clarits : (i) caused Witness 3yste,m.s t o issue false stiteraents-, (ii' 11 hundreds of rnillions of dollars of corporate sset; to senior Witness Systemss execuitives~mid (iii} subjected Witness SY;>1;e.rns to potfnztial liability iFrorn regulators,, including he SEC md the IRS .
5 . Defendants' gross misir.iariage1-ne,rit aril n :ialfca.sance over the past decade has exposed Witness Systems and its senior executives to rrinnimall and civil ffilb]il-Y for is,~uiin€; fa1~~e, ~~~~ad rni,~l. e,a~ding; -Fin.a.ric;ial statenaent.~. S~~e;c,ifi.c.a.ll~r, Defend.an~ts ca.u~sedl
- 2 Case 1:06-cv-02039-CC Document 1-1 Filed 08/29/2006 Page 4 of 29
or allowed Witness Systems o i ssue >tatern f,ril:s that fai:le;d to d.i scl~ose, ormisstalted tile
IV l,oviing : (i) that the Company had problems with its internal controls tln~a~t prevented it from ]lssU.1C1g, accurate financial reports, and p rOjec't1oI'1s ; (11) that belcaUse of improperly recorded stock-baseld c .c»ripE.n,;al:ionn expenses, the Clompany"s, Financial results violated Genem'Llyr .A,cre~ptedl A,CC«lInti.ng P'rvricij)l .e;S ("GJA.A,P"); and (iii) th[at the E",Dnipany's public disclosures p resented an inflated viCI+N' o f 'Oliitness Spystf,ms'
~ONa:nl:irigs and earnings per stvalrel .
15 . Defendlaxits' imalfieasan .ce and rnismianagf,mie;nt during 9lie; relevant period has wreaked huli Coir.1pu1y'.; Senior e.X ecutive,s, were in.c:entiv~.e:d to over-pay themselves, t o p ro fi t fi•a ln their misconduct by caslairi~; in on 1xnder-pricedd stock option .; and 1:o issue false financial s ta.fierliell1ts to ~ cover uri their rni sd.eedl's. D+;.fif;ridants' breaches ol"fiduciary dLuti(-"13 in the adininisl:ratriori of the Company's ,Mock, option plans so polluted the plons with. grant date manipulations so as to, void all grants made pursuant to the pkiris. The Company has now been mentioned as one oaf several oa npani,e:s likely to have manipulated options . Mean.w:hi le,, certain f the Defendants a nd fimner officers, who received under-priced stock options and/or knew material n.cin-public iiriform,atiari regarding Witness Sys+tem.> °' internal contro l pro blE,rns, abused their fiducim), rel,a'tiorisriip with the Company by selling over $4.5 million worth of their pers~~nal l~y _.3 .. Case 1:06-cv-02039-CC Document 1-1 Filed 08/29/2006 Page 5 of 29 held shares at artificially inflated prices citirir.ig the relevant period, This action s1-111-lks rF;c;cnrIIMi fir Witrie:; , Systems agaiiiist these faithless w; 'Witness Systems' ]3aaxd of Directors, as currently composed, is simply nable or im,willing ito do so . JURISDICTION AND VENUE '1 . The claims asserted herein arise under §§'l 0(b), 14(a) and 20(a) of the Ex:c;riauige Act, ]_`i U . S) . C . F~~~'113f(~~), '>>3~n(a;l arid i'8t(a),, an.d Rule lOb-- .`i, 17 C.F'.R.. §24-0 .10b-5, rimrnul;gatf,ci Georgia and Delaware law for breach of fiduciary ditty, abuse of control, constructive fraud, corporate, lxas,ti6a, umjust enrichment mid gross II71'51TI~lTlii~7i'];YIE;I11:. ]In COT]-nE'C-t U)]1 W1th the ;3clts, conduct and other wrongs complained of herein, defenda nts, directly ca r indirectly, used the me;mi.> and inistrurnenta litiie;s of interstate ciom,rrierce;, the 1Jrfited 'States mail ;Ii1,d the: 1%cil iitiE~,~ of 2G n.a.tiona l securities market. 8 . This Cowl- has subject matter jurisdiction pursuant to §27 of die Exchange PLct, 1 :i U.S .C . §78aa„ as well as, 28 U. S . C . § 1331 . This Court also Ims supplemental jluriis,dlicti.on. over the state, law claims asserted hi .-7rCinl pull-sua,nLt to 28 51 . This action :iss not a collusive one to r,oinfi-Ir .jizr-isdii,-i~io~r.i on a court of the United Statels vvhirll it would not oth~erxise have. ..4, .- Case 1:06-cv-02039-CC Document 1-1 Filed 08/29/2006 Page 6 of 29 l. (}. Venue its proper ~,i this district Pursuant tia §27 ot' lle E;a;c•.hin;ge Act, 15 1J.S.I^. §'18aa, as we'll as 28 lU. S.C . § 1 ;391 (b), Many cff' the acts charged here :iii, iriclud.i:ng the prepasatiari and dissemination of rnateiriallly false, and. rni;leadLing ir.i#ormaldQin, GCCIITTea 117, substantial part in 1:rIlS 1) Lst6C;t. Witness S y'Ste]CYIa is kI(:ated in. W1ld conducts its business in this Diistlriet, Fulrther,, Derfen.&[rit s conduct business in ffis Dis,tfict, and. certain afthel l]efie:ndan.ts are c,itiz,enis, of Georgia an.el reside in. t1qis ]Ciis'tlic't. 11 . Plaintiff .A.. Edward W[iEe;r is, and t a ll tfir.te.s relevant hereto vas, a ;hairE,hold{;l' of nominal party Witness Systems . 12 . Nominal party Witness Syste;rns is a I)el;rware Mparatiicari wf'ai its ;priinc,ip~a~~l executive offices ,~~;,~al[e~d at 300 {',olioni.a~lal Center F'au•kway, :R.c~~,~veil, Georgia . 13 . Defendant David B . Gou ld ('"Gould") has sevvetl as, Chief' Ex,e;c;utive C)i:firer (",C;EC)„) of Witness 'Systems since February 1999 and as Chairman o:F tlhe Board si:nce November if 994. Pre:vi.crwsly Ci,ou1d served as l'irclside:rit of Witness the adverse non-public information about the business of Witness Systems, as well as its markets and[ present an d i sure bu siinf,ss prospects, via access to internal - 'i - Case 1:06-cv-02039-CC Document 1-1 Filed 08/29/2006 Page 7 of 29 corjporate doemimf,nl:s, conversations and ecomnectiion,>,wit11 ether c-ory~orate officers aric i ernriloyees, ati:e-nciance at management arncUor Board meetings and c,orrimiittees thereof anti via rerlorts an'd other infbrm,ation f>rovidle!cl to him in cc>nn,eletiein th.erewi.th. Duriiig the :rf,l.e.varit fier•iod, Gou1d. l.i,a:rl:icipal:e;cl in the! issu ance cot' false airtd/coir rnislea.eling; statements, including the ;preTaration of the false andllor rni;;l.e,akc[in.g; pry:,;;,; releases and SEC filings. l3ase~d on. his knowledge olFimaterial jiian-public; itii:orrnati.ciri regarding the Coimpmi-t~y, defe~nidauil: Goiald scold 979,500 share's of' Witness Syste"llis sback for proceeds OF $13 .4 iriihion during the relevant p~ :,~riad. 1 4 . Defendant Nicholas S ), :Ciiscombe ("I)i,;c,ombf,") has bee-ii President an[cl Chief Operating Offi cer CC C)O") cof"Ol:itness 'Systerns since April 2003 . Previously, T):is,c,crm be sae:rreii as, Chief Executive,, President an al ~C'00 of'"V"Jitrte;'ss :5yst4,].xi;,, from January 2000 uuntil March 2003 . Because of Di,,coiribf,'s p us,itians, ]he ]knew the adverse mmn-publ:ic iniFoyrnatioii about l:Y[e busine ss of"ATitness 'Sysi:e:rns, as well &s its fnailre,,, markets nd present nd future business .pros]pects, via access 'CO lI]telma1't corporate documents„ ro:nvers,AtionS <11111 COMICC-tiOns wil:ri other corporate officers and emplo~~a~,~;;, attle:ndan.eet a1: imanagemf,ri1: i7if,f,tvqgs amd via reports and o1fte;r irif'armationi provided to hiirn in wirinect:iori therewith . l]urin;g the relevant l3e ri oci, Di:secFrnbe partici]patf,d in the is.;ljan,;,e o f false and./or rnislE.ad:in~; ;~tat~e:mE,li~rs,, irzcluidin.g the pre,parairion of the false a i,ilor nilisleadiqg press, releases aml SEC filings. ]Based on -Ei- Case 1:06-cv-02039-CC Document 1-1 Filed 08/29/2006 Page 8 of 29 his, lmovrl.e;clge, of'rnate:ria.i non-public information~; regal-dill' the Colr_ipany, liefellijant ]aisronilie sold 400,f35:5 shares i"W itne;ss Systems tock: for proceeds of $6.6 million Rari.ng t4e relevant period.. 15, Def-"ndant William F . Evaris ("l73vans") has beei'i Executive Vice ]Pri-I;,i.clerit wad Chi ef Financial Officer ("C' TO") of `h'itiaess 'Systems since ]vl'v~ :'002 wad Chief Aclrniin i.;tr,akive; officer s ince April 2003, PPreviously Evans served as a consultant for the Company rom January 201CI]. to ]Viir~ 2002 . BBecause ol"Evans's positions, hoe; knew the adverse non-public infi>>rmati«m about the business of ."Witriess Sy'Ste-1C7lCi, as 'V4'E;1l as its, f.i'lan(:E:s, markets and present and future bU,511;1e'S5 prospects, via access to internal Or'p01'atE, ClbcU1TlE.T11.Ss GOl1'Ve CsiltLbl75 aU CD17rIe Ctll)1C15 with 01}]IF;1" corporate Offi C e'I'S and e mplOye-c;3, ilttl;,7C11dallCe ' a1. lTlZlClil~)Y,] TIE;Ii1 lT]«;E:tlrig 5 and via reports ndL other hilFoy-rnat;iori provided to him Iiri conr.te ctioln therewith. Defie:nda nt Evans, by his speriali zedL financial expertise, was i ja a 1xrii(vze position to u.ndez•stainld the: bizsIiriE,ss, af''OT:itne ss ~~.ysiferns, a.s well as its finances, markets and present and i lttu.re business prolsple;cts. During Vie, relevant period., E',vam; participlated :iri the issuance 01' false ancllor in isle;adinig; s1.2[temeixt~;, including- the preparation, oftlie ; False ari(Vor m4sleadin~~; press releases and "SEC fili:ngs. Raseii on his lmovile;clgf, of material non-public, information rE;gat•cling; the Ct»unpary, defendant Evans > ;olcl 72,000 shares of Witness >:ysre;ms stock for rimce;e;cLs; of 1; 1 . 1 :rriil[iari during the ~re-1_e .varit periocl. -7- Case 1:06-cv-02039-CC Document 1-1 Filed 08/29/2006 Page 9 of 29 1 6, I){eff,nilant lCatlilE ;E,ri Miller ("Miller") has been Senior Vice Pre-sidlerit, Global Finance, and, Accounting of''W itne:ss System since April 2005 . Defemlairit ?vl,[illie:r joined Ilie Comparty in October 9915~ 'to build th e analysis and planning group . Because of, lV[il:ler's position, ,shoe labl-IX thC- a.clVerSe! JIon-pUIllit, information . ,about the business f"Wi#ne;ss ,3ystE, ir s, aswf,ll as its finmce;s, markets nd. present and. future business prospects, viia arre;,:, to internal oxpaz•ale clorimletit.s, conver:;at.ions and corim1-rl:ion.s with other corporate ci ffic,f,r•s w1id employees, atte][1ldaI]Ce ii1. 17:1afiiiprel]TlE:rlt ]TwE;tll1jor5 and via reports and other infbrrritl-,i,Dn provided. to her in conEriection th.e;rewith. Defendant N[illLe:r, by her specialized. i:inanc;ial expertise, w as in ai unique position to undLe.rstand the busiiriF,:,qs o~rNVil[rie,,, 'Syste-111's, as "Arell as its finances, m arkets ariii present and. future business prospects. During Jie- relevant period, Miller parlicirlated in 1:rife issuance of false andJlor MislE,Mdiing staterrienl :s, includ.ing tlrile prep,aral:ion of thel false nd /or mislE,mdiin~; press releases zu~id .3:E.(: i-ilir,jg,,. Ras+~iJ on her kr.ic~~~l~e~~ge of rnat~e .ria.l n~~~n-~~iubliic; ir~fo~lrtn~a~ti()In re ;~,~u~clir~g; the C-oirnpany, defendant Miller sokl 39, 0'95 shares :F Witness Systems stock fbr proceeds of$8StE,1 i' 1. during the relle;vanl= period, ]'1 . Defendant Loren lB . Wi.rnpfheimer ("W im.pffie;imeIr") ha.s ]been Senior Vice l'rE,siden't, Coq)orate Devf,laprner.it, General ~Counsel]l and Secretary of Witness Systems since January Ci{1l~ . Defendant ~V"~irn .p#~~e;im,~~~ joined the O]7l~) ~311;y in ._ 8-- Case 1:06-cv-02039-CC Document 1-1 Filed 08/29/2006 Page 10 of 29 'aepternber 2000 as Vice ]Prels i dlent of Strategic. Development, General Counsel and SlecrR,l:ary. Because of Wimpffi6rn_e.r' :, po;;itic»ls, he knew the, adverse non-public. information about the business crf"Witnle ;ss Systems, as well a,,; its fiiin.ances, markets wid present and future; business prospects, via access to ill'teiTIEll cc>rx1orale (IOCwTIE,rlts, c,omer;;a1:ilons and corme+,-l:ions with other corporate officers and ,rnpilloyees, zltt1 ;,11+dance ii1;1T.Ic`lTlii~i,l:]71E:I11 ]T.IE'F,tlll,,Drls and vi,t r{.-]i,OCI:SI and other lllfOfllTl ,ltli:)Cl ~)I'(111] dF1CE 'tp him in corvnectiori therewith. "During the relevarit period, NVirripfficinleir participated 41 the, iss,u ,;old .152,200 shares o-f Witness ;SystE,7r,ts stock for proceeds o-f $5 .0 million during the re levant period. 1 8 . De-fiE,ri da nt Nancy Y . 'Tre,aste,r ("Treaster'"') has been S enior Vice President, Global C'oiporate Marketitig of Witness Systf"IriSS since April '2003 . Previously, 'I'reaste-Ir serle-d as Senior Vice; ]Pre;;iclmit o',F:M arketing; :Frorn Jfarllxaj~~ 2001 to Apr il 2003) and as Vice President of Nla;rlce1:ing; from April 1 997 to Janiaar~ 2.00 1 . F3 ec~xuse oi''Ireastf,r's' positions, she I:riem' thE, adverse non-pu blic, i4orl-natiorl about the lbushies.; of' Witness Systems, as reel l as its firiaru,f, ,, markets aind pre-se-lit and future business prospects, via access to 1:Cltel ilill I~Q:C~)~~Ci~~;E' +docu.rnent l5., com'e'I'SatlCiZls - 9 - Case 1:06-cv-02039-CC Document 1-1 Filed 08/29/2006 Page 11 of 29 and connections will other corporate officers and employees, a:tten.clariccl at m.ainagE,lrlerit nae'e'dng's and via reports and other in.formal:ion provided to her iii ('o1tiz1eC tiOrl illereNvithl. During the relevant peliod, Tr•easter participated -iri die issuance oi' :false and!J or misleading statements, including the prePairation of the false ,end/{ar rn i,slLe;etding press, releases ; and S5EC; filings. Based on her 1criovrl~e;clgc- of'mzteriial xiojn,- plzb:lic in.formation regarding, the Company, defeTidairit Treastf,r >olld 15Ci,12 6sha -e5; of Witness Systerris stock for proceeds of $2 .3 1-million during the! relevant period . D e:Ff.rid,3int John. R . E3')]ume ("El oume," ;f ;has been Senior V President o f Global Product Mair1cell:ing of ;'5-Ys-t(,rn.s sil1~;,1e March 200-3 . Because of Rourne's p OS iti.ciri, hl-, k:ri ('.lv the adverse, non-public informal-lion about the business +A Witiriess 'S ysirerns, as well as its fiilances, markets and p resent aiii3 jaituire busirwass pr•asPE,rts, via access toy internal corporate dcoc;turne;nts, con.versatic>ns, and ro :nnect:ions with othe-3r corporate, offi cers and employees ., al:tendan.re, a1: Irrianagelmf,ni: meetings and `via reports Hid other iriiForrnatiori provid ed to him ir.i riannect:i otl tli{e:rE,lmifli. L)iirinig, flic relevant pari.od, Bowie participated in. the issuance of false. and/or misleading statem cr.its, iricluciirig the preparation of the false anchor rni;>]ea.cling; press Irelleases and SEC filin;gs . Based on his; kn owlf,d;,re of material non-public, in.formal;ion, regarding the Company,, defendant Bonnie sold 7 7,f}8 5 shares cif ~Witness; Systems stock for proceeds of S 1-3 m illiiori during the relevant period, 10 - Case 1:06-cv-02039-CC Document 1-1 Filed 08/29/2006 Page 12 of 29 2'.O. L),;,ff.riilamt Steven Byrd (:"Fi.y:rd"';) has.-,ii N Senior)/ice P'resicienlir, Global Channels & Alliances of Witness Systems since January :?006. Defendant Byrd joined the Company inn ]\fove-i-Own, 1 999 to oversee Glob,al Channels . Because of Byrd' ;; po.'itiiom, the anew the adverse naii-•ptxlalic iirifcrrmaticirt atiout the business of Witness 'Systems, as, well as its firiances, markets arid present and lAituife business prospects, via access to :internal corporate documents, conive ;T'Sat:1011s and rcnnect :ions with lothe~r corporate officers and em~ploy~e{es., a~.tend.an~c;e; at :mal1a;,le,:mE.li1r meetings uid v3aa reports and other irnfi»m.atEOn provided to ]cairn. ir_ic,Qnn.e;cfiion, therewith . Dix.rMg the relevant ple;riod, Byrd participated in the iissu,arkt,f, o f flllse; and/or Imislead:iri€; statE,jr.iE;ri1;s, including the preparation, af'th.e false iricil cir misleading, press relle;ases and SEC filings . BaEtcl one :his knowledge of material Eim i-public i.nform,atiari regarding th.e, ()arrip any, i112:FE.ndant Byrd sold 410,6810 shares of Wi tness Systems sit,ock for proceeds cif"S'9601,351 during the relevant pe °ioiC . ~! 1 . Diefi-jidant Tern Bishop has been a, director of Witness ~~,ystem.s since October 2004 . AS a member ~~f t11~e Corporate Governance Co.riljyfitlee, de-Feridairit Bishop caused oir allowed the disse ;mi:nati:ori o f the improper public statements, desciribed herein, 2:? . I)efe3adant Thomas J . Crotty ("Crotty") has bye{en a clirector of Witness Systemic.; since April L997 . Because ci#'l-rotty's position, he knew the adverse non- - 11 - Case 1:06-cv-02039-CC Document 1-1 Filed 08/29/2006 Page 13 of 29 public iniFormatiicrri about the, bus;irif,,;s, of''W itn.ess ,SystE,Ir.IS, <1, well as its flnances, markets and present and ftiture business prospects, via access to inter doculmE,n1:s,, con`iE,l-satiorns anal connections with other corporate officers axed ernployees, attendance at Board meetiirt€;,> and, c+mlrm[itl:e;e.s 1 hereaf arid. via reports axed other iziiFozrnatiion provided to him in connection. therewith . During the relevarrit period, Crotty port iripate'd ill the is,>ual1{cc~ of false amd/or misleading, statem.e.rits, including the pn~e~>ara~ti«ia of the fa1,~, and,/or misleading press re-leases and filings . t:rol;ty caused or aIIa wf,d the di .;se.rnii7,atiori of the improper puldic, ,31:atemeIrIts described herein . ,A.S a member (C hair) of the Compensation Cormmut l,ec, ctefe:rEdanit Crotty c,c>ril:rollle;d the other Deff,ni~ ;~~nt.;' stock option. awards. ]Based'. J)Jn his 1311) u,led.g;e; of'ma.te:ri.al non.--public information regarding, the C;o~r.pariy, defendant C zott;y scold 1 .3, million shares of Wi.tness Systems stork i:c>r proceeds of S12 .5 million during the relevant peri od, 23 . ]Cle;fen.dant Joel G. K atz ("`:Katz") has been a director of Witness Systems shice July :L 999 . ;]Because of K atz' s, position,, he knew the adverse 1`1011•-pulblic in.:Forrnation about the business of Witness 'Systems, as wells as its fillamces, mairkets andl present and fu.tur~e ~~i~.>iness x~ra~,pf,cis, via access to internal cor~~or~~lre~ ~~ocunnent.~, con.vE:rsatiion:; and connectiiori, wi th other roiprate officers and e;rriplEcaye-e-s', - 12-- Case 1:06-cv-02039-CC Document 1-1 Filed 08/29/2006 Page 14 of 29 ,31:te:ndanc:e apt Board rneet :irigs arid ronimitl :e,e,s there-of and via reports ~Evrid other inif'ormiirionE provided to him i:n connection ttiE,rE,`vi1:h. During the rele-vant period, Katz participated in -the- issuance ofilllse mid/or rriislem(i:irig st,,il:e,rnents,, iric.l.uciiing, the prep~~~ati~>>n of the false widlor misleading, press releases & nd 5 E+~ fili ngs . As ;i ine;rnbe;r (Chair) o,Fthc. Audit Committee, arid a member oiE'ttie, Co :qx)ral:e; 1,31overmanre ,ind TJonlimil:ing Cornnzittees, defendant K,11,2d c,aused or ,allowed the di>sernirntian of the irripropellr public si:mements described herein . Defendant ]Keitz is considered a financial (-,,q? e:r1: on die; board. Based n his Iaioviledllw of mate:riaJ no ne-public information re;;ard:in~; the ~Cc~rnp~a~r_~~~, i~~efi~n~~a nti~n~~ant Katz sold 27,000 shares of Witness `,~,Ys~te;ms stock, for prc~cf,E,ci~~ o~f'`6433,~)~~3 during tlh~e relevant period. 24. I)efeAdan.t Dan J . ]:,auteribach ("`L a.uitenb9ich") has been a director of 'Niitness >.y~sire;rns since March 2,CEO:? . F3~~r,~~us~e c~i' ~Lau.t~enb~acr~'s position, he kne,", the adverse non-public information about the business of rw"we-11 as its finances, TI].aiT'k.e'tl 5 and present wad Ri1.l;ll"e' business prospects, via ~aiccess to internal GI)]j)/)]C'ilte dIJciL1C11enks, C; OIIvelsm(0115 and connections with other corporate officers, and f.IT]IplGy'E;E's, 2lttelldaC1Ce cit. Boa.T'd 1Tllf`E;tll1;g 5 and CO n[1IT1ittf.f,fi thereof ,and v llcl ]reports and other infi>>rmaition provided to him in connection theirewitti . As a. meirriber of the Corporate I-Jovell-ti'm1re, Committee, defendant I!<3ultenb,ir1h caused or allowed the, diss,emiiial:ion of die, irripropf:rpubliic; s1:ateme'nirs,desrriblecl 1herei :n. .A,s ~i n1cirrihE,a• ofthe - :13- Case 1:06-cv-02039-CC Document 1-1 Filed 08/29/2006 Page 15 of 29 Cornpensatioil Committee, d e fetl,dant Lautenbach controlled ilie ether Defendants' stock option awards . During the relevant period,, Lau1;e;nba{;11 pairtic:iptit:ed in the issuance of false andlor misleading ,statements, including the preparal :ion of t]7{e false ari(Por 1.riisl eaiiiirig, press releases, wid SEC filinggs, Based on ]rig, knov4edge. of material non-public i:nfanriatio:n ~rf,ga~-din~g the iCorn pany, defendant Lautenbach sold l3.,[IO{) shares o-f `V1'tTless Systems stock far prcce e,cls +)F$154600 during t he relevant e;riod . 25 . Defendant Pewr S iiiisg;alli ("Si~ni:;glli")'i has been a Swor of W, Witness Systerns, since :rubi 2000 . Acme of h>inisgall .i's ponitioil„ he knew the advemE, nonjubl.i c information about the business of VVitrif,sS ISyste]mS, arc well as its j-11]aI7ne.S, markets and I)l'E'Ee,l°lt and :fl11l m bUSlllew pT'CI5pE;C;tS, NO access to Wernal corporate documents, C;C/Tlvl',]"s21t1O]715 and connections with other wiporate officers, and eIT]IplQiyeE;s, attendance at Board 1T.LE;E;tll1g 5 and comahteesthereol"and via reports and other :LTlj-OTT"llat]lC1 Tl pro vided. to him in connection therewith . A~ 5 a men-riber (Chair) of 1:rie (,oq)ora1 :e Govemance Committee and as a member of the Audit Co>rrmidtl :e,e,, de-fe-nd,a:nt S iriisgalli caused, or allowed the- dissemination of the improper public statelmeair.s described lhereiin. During the relevant p eriicxi, Siriiisg;alli pa:rt:icipai:e;cl in the issuance of false and/or rni,il.e:aiclin.g; sirEitem+ents, including the preparation of the false and/or misleadiry; press releases id SEC Wings, - 14 - Case 1:06-cv-02039-CC Document 1-1 Filed 08/29/2006 Page 16 of 29 rion.-pulblic itiFi>>nniatim irf,garciing, the Co7r.ip,,ui.y,, cle;fendaiit. 'Sinisl;,a:lli Sold 27,000 shares o~F VVi1;r~e~s,s .3ystf,m~s, ,~tc~ck: four proceeds oi',~4051,'46CM 4Jur :irig tlhe reli,-,vant p,e.ri4)Id. 2:Ei. The d.e.#endt2ints idenitii :ied ir.i'7113 and 211-.25 are referred tohe;rei.n as the "Dire.c.tar DefiendanLts ." 7~1_~~e cle:fernclarits id.e:ritii~ed. i.~~'~'~13-20~~re, rE~fe~rred toh~~ ~rf~irn a, the "I~~ffic;e;r]]efend.a.r,~ts," '],11~~ d~e,fend~a~r.~ts ident:ifi~e~~ in ¶11 ]~ 3~-1{) an.cl ;ZO-:ZS ~~re t•e,fer~°e~~i to~ herein as the; ':`[nsiiclE,r• 1Selling, :Cle,fenic aril:s ." TIIEFIEPTDAN'C S' Di7Tl71S 27 , Each officer and director of Witness ;SysW-Iris named herein awed tlie, Company and `'Vitiies:; Systems shareholders the duty 'to exercise a high degree of care, loyalty and di lLigenre, in the management and, adnnhiiistral:ion co-f the affairs colFthe Connpan.y, as well as in the use and preserv;atiari of its prDperty and assets . The conduct of Witness Soystenns' directors and. officers coimplained. of llelirein~ involves ]cr lowi_ng, ilrytenl:ion.a.1 ,and culpable violations of their olblig;atioms as o,Flicier.> and. ifirectors of''Wiitness 'Sys1,e ;rns. Fiuri.rier, the miscon.cluct of Witness System ;;' {officers has been ratified ]by Witness ~~llstenns' Board, which has failed to take any legal action on lbeha:lf o f the Ca,rnpar}, against them. 13y reason Of their positions as officers, directors and iii{duciairies of Witness ;SystE,1r_<<, and because of th.e;ir ability -to control th.e busiiiess grid c,aiporate affairs of'1:he Cojripamy, the I)efeln6nts awed Witn.ess Systems and its s,1-iarehicolders -15- Case 1:06-cv-02039-CC Document 1-1 Filed 08/29/2006 Page 17 of 29 fiduciiary c)bli:g;atio:ns ol7catidor, trust, loyally and cue, wid vv+e:rE, required 0 use their ability to control and manage Wi1 :r.iess Systems inn a fair, just, honest ,and equitable ajaner, and to act in furtherance of the best interests of Witness Systems and. its, s:har lhol+iers so as to benefit all s,r<< Witness Systems to divert assets to themsel~vf,s via improper an.cllor unlawful Practices . Defenidaril;s a1<<,cf had a clill.y to r~rarnpt:ly disselrii nate. accurate and tnutliiFixl. irrfortn.a.tion with respect to iffie, Conipa ny's operati a:ns, earnings and c,c»:ripensai:ion. practices . 29 . of'coril:rol and a utho~ri.ty a <, of VVirlE,~~(11 s1erns, each o f l:Yie llefend.ar.its via.; able to and ciicl,. directly anal indirectly, control the wrongful acts c,oirriplatined. of hie,reii1. As to 'the, Director Del:Fen(lant.;, these acts ilirl.ude : (i) al;l°e;ernenit to and/or ;acquiescence in. Defendants' option bacloiating, ;scheme, (iii) Nvill higines s to cause, Witness ',-System,; t,D (lis senaiiia1;e; false Proxy Si:ateniellrts for 2000-2005, which Proxy 'Siratenlents failed to, di,,c,l .o;,e De:Feridalnt.;' option bar,kdatin.g; scheme and omitted the iE'act that executive officers vvelrf; allowed to backdate their stock option grants in order to n-vinipulatt the strike price, oi' thic, stock, options they received. Because of their positions with Witness .. 1 E. Case 1:06-cv-02039-CC Document 1-1 Filed 08/29/2006 Page 18 of 29 ;aystf,m.s, each of t4e De;fendl2lrits was aware of tliese wrongful acts, fiad access to adverse na~ri-p~Li~>li~:. 1:C1f~C7718t1i~:C1 and was required to disclose these fic irs,proirript:ly and accurately to Witness Sy;~1:e;rns shareholders and the f ina~~~c'ral markets but failed to do So. ?•0, F3ellrrveen. 20OCi and 2005, I)efiYlndants repeated "I Proxy 'Sitatemerit that the stock optiari grants ma de during that period can-ied ajz e;):er•c.i se price, that was not l ess tliaia the fair ir.iar•k:e:t va4ie of''Oliitness .ays1re;rns stock, ori the date ;;ra~z'teci, as calculated by the public trading price of the stock at the irmrk :e,t' ;> close on that date . However, Cfefe;ndarlts; concealed 1it11: i1 Au,gust 2006 that t4e stock option grants were, repeatedly mid consciously ba ckd'wed'tc> ensure thiat thee strike price associated with the optiori grants was at or ne-air the loviest trading price For iffiat fiscal period. Due -to Defendants' breachi of their fiducimy duty in the, administration of the stock optioil plains, plaintiff seeks ta ',have ffie directors' and officers' plans voided and gain s from those phin> returned tO th e Cornpar,iy. I:n the alternative, plaintiff eeks 'to have ll of the imle:xerr:ise;cl options granted to defendants between. 2000 aand 2002 can,ce .lled, the financial gain", o btained via the exercise fsiach options returned t0 the C'oI_r_ipan.~ and to :have De, f-e :ndanks revise the Coyr.ip~~~ry's financial sEat ernent,~ to reflect t,rle; tinxl:h c;canr,E,rriing the~,e option grants. -1 .- Case 1:06-cv-02039-CC Document 1-1 Filed 08/29/2006 Page 19 of 29 31 . To (iii-sctiar~g;e their duties, the directors of Witness Systarlis were required to exercise reasonable arid prudent s lzpeiriri:sion over the i1rianagerrient, policies, Practices and con:trcols of the business and financial affairs 4) F Witness Systems,, By virtue of such duties, the officers acrid direlctors of 'Witness requil-CA, among other t1l:iri~;;>, to: (a) Inariage„ conduct, supervise and direct the business ai;faii-s of Witness Systems in accordance With a ll a.pp liralblf, law ( inc]LLidir.ig federal and state government ru lie, s, arid regulations mad the c:hatirera.nLd bylaws of' Witness Systems); ~(b;} neither en;gage in self-dealing nor knowingly E ;rrnit any o fi=icer,, d.irertcwor employee o f Witness Systems to engage i.ri s,eli=deal:irij;:; ((,-) neither violate nor knowingly permit any o:fi:icer, director or employee of Witness Systems to violate appli c able laws, rules and regulations; (d) remain iriformeid a , to the status of' 'Ol:itn.ess 'Systems, operations, including, its practices in relatimi to the cost of allowing the pervasive backdating and inigroperl.y acc,ountir.ig for sudh, aril 'upon receipt of notice oir iini:ormation of impm de:nt or unsound practice-s, to make a reasonable- i nqu.i:r~ iti rormection thte;rewi.th, and to take steps to {e{Qrred such cond:itioins or p;rac,i:ice s axicl malke s,ucYi disclosures as -1 8 - Case 1:06-cv-02039-CC Document 1-1 Filed 08/29/2006 Page 20 of 29 are necessary to comply with the US. federal securities la%Afs and their duty of candor to the 'COT17pt1T1y" :i sharc]f10We:CS ; (e) pna dent:Ly protect the, Co]riparry' , a>Se;ts, including taking ally r.&c;e;ssary sI:e;psto reco~ve;r rOnaIN;Ae; assets (cash, stock ciptions) improperly paid to Company exec,uti.ves &,rid directors together with the related costs {Professional fees) praxiin.,urtely caused b,y thee illegal conductdescribed he .reili; (E;r establish a.ncl maintain systerr (g) maintain and implement an "1{1 equate, i irict:ioning system 1:)E internal legal., fina,neial an'd accounting controls, such that Witness Systems" financial t3 tf.]T 'L E: Y1tS .- Llll:hl(fi I'lg its e:xp f.lls f.:i, accounting for stock option p-ants and other financial inform at:ion --~lwoiakl be accurate arild the actions of its, dirc~ctors would N ., iii , ac•,c,o~°d~~~i+~~~ Nvil;ri all ppliic;atfle ]Iaws; (h) exercise contro l and. ;>upe:rv.is,i on ever the public sta.te:me311rs to the securities markets anal trading in[W itn.e.ss Systerris stock by the officers, and. employees of Wittac>> Systems ; and Case 1:06-cv-02039-CC Document 1-1 Filed 08/29/2006 Page 21 of 29 ( i) supervise the pre.parairio n and filing of any financial reports or other information required by law fixwn'Witrne,ss 5ys1:e,rns and to examine and valijalte any reports of e;xaun.i~natiioris, audits or otheir fi3nancial info.rmati{»n concerning the financial affairs of Witness Systems ands to make fill and accurate disclosure of all material facts concerning, in ter crl'ia, each o f the subjects an d duties set forth above . 32. Each Defendant, by virme oil his or her Position as a +3Er•e,c,tor anTor officer, owed to the Company and[ to its slharelhOldl;,Ir,'' the filluciw~r dvties of' layaity, good faith and the exercise of due care and diLigE,nce :ire t:rlE; rn.a.riEigf,mie,nt ancl aclmi:ni>traticm of the affairs of tlae, Gomp,a:ny, as well as in the usel an.d preservation of it:; property and assets. The conduct of'the Defend'.ants com.rrlaUle,{d ofl'iereir~ involves a knowin,g and culpable v i ol.a~tioja of their obligations as directors millor officers of Witness Systems, the absence of g oc>ci faith o n their part, and a reckless id isre gard~ :for their duties to the C~~t~i~~,any and its ,~h~~'f~holdfars ~ iDI~ff,1i4j~~ant~~ w~e_r~, aware or should. have been aware posed a risk of serious iqjlij~r to the Company. The cort(luelt cff'the; Defendants, who were also officers ail,3lor,directors of'1 :he Connilituiy during, l :he relevaiat period has been ratified by the Director Gf,ie .ndan1:s,wrio cornprisf,ci Witness 'Systenns' entire Board during thie relli.e;wait: periiod. 3?•, Dei=e;ridants breached their duties Of I0',r<y and good faiths 17)]y Ellffxing or by themselves causing the Company to misrepresent its financial rE„suits andl Case 1:06-cv-02039-CC Document 1-1 Filed 08/29/2006 Page 22 of 29 prospects, as detailed herein infNa,, and by failing to prevenn1t the De ;fen.darit.s fi-arn taking such illegal ac;tio,ns . In addition., as a result of Defendants" illegal actlons and course, of conduct during the relf e;vati1: per:ioct, the C o rripan y is now the sub ject ofart SE-C. investigatioli, As a resu lt, Witness Systems has expended arid will ccoritiiaue to expend significant sums oiF .rrkoney. Such expell'dii:ures include, bu t are not limited to . (a) impravid.eritly paid executive, cornpensa.tion; (lb) increased capital costs as a result of the loss of market c,apita][izati.mn and th~~ CO,rripan,y' s damaged irf,pijtatio:n in. 1.Yte iyi,vestrnent coirunu.nit.y; (c) costs incurred to carry 0111 : :LIArna l investigations, inoduAT legal fees paid to outside counsel ; and (d) incurring possible IRS penalties, f :)r improperly reporting, C;OT17.y1 E,IIs 34. These actions have irrepar,abt, damaged Witness Syst+yrrs' corporak, image and goodwill. For at least the foreseeable, Alt.ure, Witness Systems will suffer from what is kr~cawn, as the Au's discourEt," a term applied to the stocks of conapanie ;; who have been. itnplirai:exl im illle;gal behavior and have misled the investiiij ; public, such that ab ility i:o :raise equity capital or debt on Eavorable term.,; iii the fijiAire; is, now impaired. -21 - Case 1:06-cv-02039-CC Document 1-1 Filed 08/29/2006 Page 23 of 29 .A,l:l)INI; AND ABETTING, ALIND CONCERTED ACTION 351 . [n carnmittiirig th e wron;gfia:l acts alleged herein, L)E,i=e;ndwi1,s, have plu-Sued ar jained. :in the pursuit af'a common course of conduct and acted in concert with once; another ire fi.irthe;ranc-e, of their common lan. 3 6 . During all times relevant hereto, Def.-mdants co;llectiively and individually iirutiated a course of Conduct whi ch 'was designed 1:o and did: (i) conceal the fact that the Company was allowing its directors and senior officers to diveft hundreds of rni lllio>ns of do llars to Witness Systems insiders, a nd directors. ,and causing Witness Systems to nzisrepiresient its fi_r_iaric;ia.l results; (:ii), rnai»taini i)efialnidants" exlecutive and directorial positions at Witness 'S .ysire;rns and the prcrfrt~;, povit-.r and prestige which efendLants enjoyed as a resiuh, of these plositiciris; (iii) deceive the i:nvestling public, inc-]luding shareholders o f' 'Wi.tness 'Sys1:e.rns, regarding Defil-Illidants" c.ornpe;nsatiixi practices a T]ICI Witness Systie:rlis' financial X>f,riorm .amcle. 3 i'. The p-uplosse and Effect cpf'De,fenclants' c,crm.rnon course of ro:ndu.ct was, among her things, to disguise Defendants" violat io ns oil law, breaches of fiduciaj~l duly, abuse- of control. gross mismanagement, r,oq)o:rate Waste arid -unjusttmridun .erit, to conceal adverse I1Cl f6C1-niltll)1C1 co]C1iceC1'LLTlly the C',OlTIpiill.y ' :i operation and finanicial condition and 1'.G artificially inflate the price ol' Witness C,}'ste Cll ;i C;OI171rC10iI]l stock so they could dispose of millions a1fd{oll.ars of their own Witniess Systems stock, arid -12 - Case 1:06-cv-02039-CC Document 1-1 Filed 08/29/2006 Page 24 of 29 enlEarrw(. the-ir e;a;E,(;iative and dlireetoriai p0siiriorns and receive the substantial connpen.sat:ion they obtained as ii result thereof 38 . Defenicfarit:s a.c,c,ornpli .;hed their common en.teq):rise a.r.icil'cir common ourse c}ficondluct l);y causing the Company to purposefially, ,3mdli)r neicklils, ~ly engage n the optiori backdal:ing; s~~lhe~iR~ alleged herein ,~rild iriisr~~pirf,.~e~~i1: VVi1rEE,~~s, Sy'st~:im~~' financial rE,sul.ts. E',ax,rt cot' the Defiendants was a flirect , nie;c;e:ssary, arid subst.a.r.itial. paxtici~pant iii the common e:ntey~~risi~ an.cl/or c,c~rnnalon course of con~.duct co~ri~rlaian~e~d of herein„ 39 . Ea.e,ri of the De:Ffnid,aints aided arid abetted_ and rendered .;ubsl:arttial~ assi.'tance, iri the wrongs cirnp~lain~,d of h~~~°e;irn. ]In taking such actions 1:o s~abstaail.ially assist the rOMIrIissioli Ofthie: ,wroir.gdo:irig complained af lf{,resin, each De;fen.clarit acted With laz,Dv7le4;e, ,Df~lhe Silb.>tant:iall.~ assisted of that ~wrcorigdo lllg , and was aware of his Car her CI\ rE',I'zl1l i~cm tr1bLl t11J '.Cl to aml fur'tlieli'aric;E~ af'1:rye; Viroiij;+3oij7;g . BA(;]K:I;ROIC2JTi 40 . Witness Syste.:ms, is a provideir ofiNcfrk:#oirce optimization ;;o-ftvv,3ire and services that enabille, companies o Copt:imize Nvor:kfarr,el pe,rfconmanee in their custo mer service operations . The C-l.CITI] paLl y ' S IrCl]7la.Ct 3f) 0 S011.1'k1QiT'1 om SlstS Cl f's Ojlw ilT' e p ]CU d3L1lCt.i Case 1:06-cv-02039-CC Document 1-1 Filed 08/29/2006 Page 25 of 29 arid. services desi~;il~e~d to optimize the )v c,rkf'or,;i~, :priD ces,si1;3 and tf,c,lvl~olo ;;Y involved in .tic Customer Sell7lice function . 4 1 . Pir•otighout the relevant period, De-Fendants caused Witness Systems 1:o grant hie:rn mil ][iorns of stoc k options permitting; them to buy Witness Systems stock for pennies an. 1t1i(, dollar which hey could in turn sell , thel Company's stock price- increased., A stock option gives the holder the right to buy ~i stock at a cen[ain .Arict inn the fu.ture, an option grant„ with an exercise; price also kio-mi as the " ;>ixikl.- price" -- usuall.y, set at the ;closing price cof itrif, stock that (Ivy, the, closing pirice, o f the :nig4t before or bay computing are average ~of t he high and low prices on the claw of'1:rie, vote. 42 . E[owe;tiTe,z•, ];YLaTl_~ of the' rlLlIld ]Cf;ds of thou~s,a.ml:; of options granted. to Witness Syste:clls' executives had << :hid{le:n, valuable, conaponerit : they "ler•e irfisdatcil, often making them e-ve n more signi:Ecantl,r valuable. 'Me imi sd.ated stock ol.ytion grants fell largely into three categories : (i) "look hark" grants, in which the date a f,1:he, grant was picked retroactively a decision in February to pick a kuwa7 :,)i date;? ; (ii 'l "vva:it and see" grants,, in which grant d,ate~ vas selle;cted, but the decision was finalized -- arici soraed .rnes changed -- at a later date (e .~;., a decision on Januizu'y 1 to issue a grant yri Jaxiiuu), 15, but there i s a perioiJ after January ]L :i in wh.kc:h th.e girwlt0Y' warts to ,ice, 1:Fa II],Cll2' a1lVaT1ta~~PO11.5 price occurs and, if one ClC?E'.~~~ uses that later date -- 2q~ ~- Case 1:06-cv-02039-CC Document 1-1 Filed 08/29/2006 Page 26 of 29 instead); arid (iii' grants ~wrIf,r•e ;1:l~~e,~~eI~v~a.s a fljilur~~ to c;oin.~~letE~ the option ;ralrkt iwacf,ss by die date of tl1+v grantwhere there is a df°(:]S1 lJ:[1 to issue a grant as ofa certain date, but after that date thtre are changes iin the grantees car a mounts t4) grantees, and although 1:he work is not complete on those grant ;; as c~i'~rrie stated ;;rant date, , that date is r«»ZettiE.less Izseld;l. 4.3 . Certain of Witness `i:yste;rns' manipulative stock option grants are, described below : 2(}I}1D 0XFi.1an ~Girants 44. Drfie,ndaixts, dated most, o fthe C;oml>,an;y' .; top offlc ;e;rs' 2000 oplion grants as of December 20, 2000 aat $7 .50 per share, the low of the moritrl, xhen the stock traded as hi gh as $1 5.44 per share . Within a week of the, grant date, the stock would rea.c~h S 1 4 .00 per share. Defendants Gould and Treaster received :25,000 and 22,300 opirion 's, resspwctive Ly, at the $7 .50 per share exercise price . Farmer S)ianior Vice President Al.ain I,ive;rnac-he ("Livemoche") receive d 4.0,000 shares at the `.67 . .i0 exercise price. Def-.ndants dated the irf,rnaining grants to the Comriany"s top officers, as of April 1,4, :?+~ at $6 .56 per ,ha~`e, th.e low of the month, when the stock traded as Within tvuo days of the S l 1 . :L 2: jn,:r share. lCle;fendants Gould and Treaster recei ved 15,01aO and 11,000 oj)tionsl, - 25 - Case 1:06-cv-02039-CC Document 1-1 Filed 08/29/2006 Page 27 of 29 res-pe+:,tivel,y, at the $Ei.SFi per share, exercise- I>>ri ce . Former Senior Vice Piresid.ent L,ivernoche, relrriivE,ti 11,000 shares at the $6 .56 1wice . 2001 C}lptiio» Grants 45 . De.fendluits dated all of Witness Systernsc' 2001. ol)tion. grants to top officers on two dates : March 20, 200 l and. April 17, 100 1 , both oi',wtiichLWe;re the; l ow ~of the Riotith. Defendant Gcouldl received 4OO, Of?(} options dated March 20, 2001 at $6 .i~0 p~~7~ s:har~~ -- tli~~ rnon~thl.y tovu, The stock had traded as high as $12.12 per share iii March ?0101 . With in five days ofthe grwi1,,datf,, the stock reached . $7.75 C>f.i:e;ridanir VViirrwilf,inner received ]L i50,(}0+) options as of A p,rit 1 7, 2:[)U L pit S'7 .50 r~e;r slhare, -- th e low of the month . The stock traded ws hi;g h as $14 .4.5 per share in A pril .2001. Within two days of the grant, the is1 :Ock, reached. $10.00 pex share. 46. Below are several of Witness Systems' grants, which occurred right befwel significant stock price inrirf,~i,;e.s: - 26 .. Case 1:06-cv-02039-CC Document 1-1 Filed 08/29/2006 Page 28 of 29 W'itne'ss 5 rAe m MIF ,JI via, NOD . ida y is„ 2 oo 0 40 35 3 0 4114 ![ IO m 4A 25 /0 q {F I? 10 L ~ LL. . uariar:!aoo O5l10f2DOQ 0 3 4 28 f20D 0 04 12612 I N1 0 Witness Systern MovonrtFer 3*, 2U00 - ,Ja nluaie,y,t 7'„ 20 01 77 16 15 74 m .e .'n a i2 a A ~~ 11 10 9 6 7 -- ~ inoiznou 1211 112000 oI w sircb I 71f3Q1200 9 12 l S4f2600 41 f11tL041 27 Case 1:06-cv-02039-CC Document 1-1 Filed 08/29/2006 Page 29 of 29 Witness System March 15, 2001 - May 1;!, 20al 15 14 13 4.111 7141 12 ~ 1 7 .c i 10 M `m 8 7 6 0 31 16 12 D9 1 Q4 ;OII C: 0111 M 2512 001 015 f'15 12 001 0 3f2 6 12 00 ' 1 0 g l1 6 I2 o01 O 5 1 641 1 20 11 4'1, C,om]Aicat:ing i-natters and magnifying the harm to Witness Systems, during, the r{t~1f,vant period, Witness Systems " internal controls ard accounting controls with respect to qpfiori grants and exercises, and its firianc:ial rf,pmrtfrig, Nveri, grossly i.riadEI 11W, •A~eal;~l~~;~,~f~s allowed dates oil t~o1;r~ grartts and exell-c,ises -to 1bI mriatiipulated and the Company's executive compensation, expenses to 'be iriater :iall.y . understated 'The~~y ,a~~,o allowed j;:r~~jiir dates to bE, changed to rora~~id.e~~ more favorably ]iri.c.e.cl oX)tions, in effect. augmenting their campellasaltiort, with III) l~)e nefit running to t.rie: Ct»r.[p - '219 . Case 1:06-cv-02039-CC Document 1-2 Filed 08/29/2006 Page 1 of 31 48 . Specifically, in, i.riamr instances the reporl :e;d dates VVil:r.ie;ss Systems stockk options vveire granteil dlifFere.cl :frorn ;the d atE,~; o n which the options appear to have been actually granted. The practice applied to the verAielraing majority of stock option grants made during the relevant period, which allowed executives and employees to make more money on the i r options because it set a lower `,st:Hke price" at which the options could be exercised, allowing E,ir,iplaye;e;s'to take, larger profits when the Stock price, later rose . .liYu almost every case Of ]'r7ll Sid[lt1lZgY M 6 price of' Witness S,ysteinls sh a!res im M e reported ojvioh!-g-rW'~ tt` ~d'4te iw~a'15 ln~w~e~r~ than Me sk arle price 1011,1 the, aaual dozy the options were issimd . 49 . 'T'hLrouighl their iiduci&~,~ duties ofcare, ;go &l :Fait11 all([ loyalty, UriFenda3ljrs ovvl,.Id 1:cs Witness 'Syste,rns a duly to ensure that the Compaui.y's financial reporl .ing; fairly presented., in all material respects, t.rif; operatians and financial cor.ldit;ion of' the; Company. In order to adequately can .-it out these dutiies, iit is r.iex;essaxy for the I)e:E'e-ndants to know and ii.ndersl:and the m.allerial rioirt -piublic: iYilFormatiiari to be, either disrlka,se;d or ornitted irons the Company' s pUbII1C statf,nle;nts . This mater ial non-pubLic; infoin-naEtio» im;lud.e,cl the problems "Witness Syst{em, facedd because of its deficient internal c,oult:roL;, Furthermore, wllo ~Ar e,re members of the Audit Co~rrirrdtt:ee during the relevant period„ :had a special~ duty t o Imow and. iinderstomd this material iizform.atio» as set out in the Audit Corranittee's charter, which prov:idel,that: ..29 - Case 1:06-cv-02039-CC Document 1-2 Filed 08/29/2006 Page 2 of 31 the Audit Corximiittee is responsible for re ;VieNvinl;, in cor,~junc;tiori Nvith ~nimla ;gemelat, the omp~any's policies g ;e;nf,ra.ll~~ with respect to the ( :onijp,any's eaxiii4igs press releases and with respect to fi»,a:nci all irii=orTnati_cori andL 1-I&Miings guidan.ce; provided to anal, and rating a~ ;f1]1c:les . Clf,i:exiciants,who were officers oil VVilxie-ss :Systems had ample opp,ojrtuinity to discuss this material information with their fellow officers at mariagemeant naeeting,~, and via internal corporate dociument .; and r f-ports . Moreover, DE,i:e;ridants,xho vv,,-,-r(,- dirE,cl:crrs of Wi1:r.[ess Systems had ample aX)pixlunit ;y to tiiisclucss tliii',; material i.riformati on with fellow, directors at any of the scores of Board meetings t1lit OcctzlTed. during the relevant ]peri:od as well as a1: c ommittee lr.le;eti»;gs of the Board. L)e;>j):ite the;se duties, Defendants negligently, recklessly, an cVot• iLritenitiona:lly, caused. or allaNved, by their actions or inactions, the misleading statements to be dis:>emriinated by Witness Systems to the investing public and the Compariy's sharc'hob3ers during the relevant period , 50 . :Spec ifi ca.] ly, since at least 2000, DDef6domts have caused Witness System; to irepo r1: fuse and mi sleading fiscal and quarterly financial results 'whi ch nl,alteri,ally, understated[ its c,orripe31.;ai:ion expenses acid thus ove:r,>t.ateid its earnings as foil ()Nvs: -3CE- Case 1:06-cv-02039-CC Document 1-2 Filed 08/29/2006 Page 3 of 31 Fiscal Year Reported Reported Diluted lEar•riirigs Earniirigs (Loss) (Loss) Per Share From (in im iilliaas), C O ntialuimg Op eratiicnts 2000 Si;.09} 2001 145 . 18) ${0.() 1 2002 10.05 $102 2003 !420.57) $1 113 2004 $19.4:5 $0 . ;39 2005 $(3 .26) $ 0. 6:3 51 AMoreover, dhmu,ghaut the relevant period certairiDeferidwits, exercised many ofthese stock options c,oakribut:irig to their ability to sell over $45 nnillion worth of Witness IS,ystems stock they olbtainie,d often bly cashing in un .cler-priced :;tack. options: CII.Ii PJ'f DATES OF SALES SHMES SOLD Pl[t0I['l:]E:DS REC'F;IVEI) GoULD I LK 20,1oo-o7/ > :sra6 879i, J R1 :) .Ii 13A32 .,J 3'7 Di,sicomEa: lva,rvS 09/1 .1104-05/26/05 'T2,,000 MILLER. $890 7 "l ~1~~]fP~IPF'~IIE IT"F:It 06/09,104-07/111/06 AMOK rr R.F r 2vsrER 08,111 /00-07/0-3/06 s1,,--f 11 3 ,,{) &4 l3oclivF; Q23 .,9 ]l .3 l3YF:D 03,1' 2-3/06-06/30/06 $96Q55 :1 G 7:0'CTY 1,2110 1/0 _3 - 02j, I 8/0z~ lK~Lirz I 0l/:z 7/04 0:S :3 .,(I8:3 LA.L1"rlEN EIACH[ 08/10 3/ia5 SIrJINcA& i.I 11/0 9/04-- 1 .1 /T' /cE4 2'1,.0O0 $4{)5 „9fiU 31:5 R,44 11 ;t -31- Case 1:06-cv-02039-CC Document 1-2 Filed 08/29/2006 Page 4 of 31 "i :?, Then, inn August 2006, ~'Vitrif~,~s Systems annc~urlc,E,d it was iilvestig;a~ti~~~; past im_praper• ;>1:ock option prac tice;,. On August 9,. .2006, IA7i[tncss 'Systems issued[ .a press :rf,l.caise which statedl iii pairt , The Witness S`i,ystf,tnis boarcl of cii.rector:; armounceal t&la}r that the company has voluntarily f orm~:, ~~ ,~~ ~i special c,o~mm.itlee of 1indi-pa.ndenit directors to review stock. option practices and. grxi ts, duiriilg the period i'ron7 the date, o f the c, om.pariy's :[P0 :in February 0 00 through the e,rid of August 200:2 when i1le Sarbanes-Oxley"A.c;t became E,iFfectiivE, . As a result of a recetrt preliminary internal revie vi , the company has identified a number of' :iti;;tan.ce.s iii which a cliscrepancy appeared ill the recoirciel{i grant dates o f suc-1.4 a war•dk As zi result of these developments, tl1e- romparr~ will delay the fl lirig cif iits quarterly report on Foirtn. 1 0- Q for the gia,a:rl:ex June 30, 2006) until th.e specizl committee. completes its r,eviewi. The ccornpairty's board af(Iirectoi°S',faimed committee tic) feIru<< ~an rE~s~olving I,h(,~,e ; issues ,as quickly send credibly ais possible . The pn•e;iim[inary internal re.-view conducted by the c•,c3i.rEpm;y btfore the fcirm,3'tiac of the special committee Xlerit:ifie,cl a number cof" di5e,ren.t deficif,nriie;s :iri the c:olnpan:~",; pr,iritices, p I'OCea.UITe S and CLOemimf,ail:attiom rela'ted to the cf)]E71pa»y' ; granting f stock: arrtii~ms during the perioil reviewed, Many cif' these options were d.istrilbutcd vv:idE,l.y Owrtc»i;g employees and were not granted toy e;xecuti'Arf.S . At thus 1.i:mc, ba;;c+l upon the instances iident]4111-11 to (late, rnan.a.g;ernenit does n.ot aiit:icipal:e; ajay material cijustment to the previously dlisclosf,d :Z00-5 or 2006 financial results o-f operkians . Fiovvev+er, b,lSt-ld cm its pre,limdnary internal 'E,vievv„ the ,c,om] ' ia :.ny believes t will need to i°f,coi-(I ad,diti{ona7 none-cash cri~irg ;e;s for stork-1msed camrie;n< The company is a lso reviewing the tax implications ~C)f these adjustrne.rits, but has not ye t completed that review Consequentl .),, the financial statements reported by the c .ornpaxi`~ in SEC f ilings and el;>ewrierc, and t]he earnings press releases and similar commuricatiCOTIS, issued by the company, should not be relied upon . Al~s,a, Ilie; company now to incur substantial a(Idllli)]Clal ODS'N iASS0(,l.ated With conicucl:ing an inc[epeniielnt reviclix of t his type . 53 . [n effect, during the relevant period, the Defendantscaused Witness Sl~~stems" shares to trade t artii:icial.ly inflated by issuing ~' series f m,~iteri;I11y. false and niii sle a~din;g Statements >°egarclin€; the C ompany" s fiErianciial stal:ernents,, business and prospects . 'apecilical l[}T, Defendants caused or allowed Witriess'Systelyls to issue statements that failed 0 disclose or nni,s,tat{,d the following : (i) that the. Corripany had. problems w ith its internal controls that preve,ntedd it from issuing accurate financiall D-.Iport~, and proj ections; (ii) that because of improperbi recorde d, sta;lc-baseil compensation expenses the Co:rrlpalny'S financial results 'violated (iA.A.P ; and (iii) that the; Company's p ublirc disclosures presented w i Inflated.view oiF 'VVi1.ness 5,3r~~tem.~" earnings and earnings per ;~h,ar~,. DERIVATIVE AND"WEAMS"ll) 54 . ]P1ar:ritifl'b:ri.ngs this action iieirivattive:ly in the right and forthe benefit of Witness 1$ysterns to red:res<< :irijuiries suffered and to be suffered by 'UJitn.e.ss S5.y~3i:e,rn s as a direct result ofC1E,fericianlrs,' violations of s take, and federal lxw, breaches of fi(lucliaiy~ duity, abuse of cont~rol, constructive :Fraud, €; ~colporate waste and .. 33 .- Case 1:06-cv-02039-CC Document 1-2 Filed 08/29/2006 Page 6 of 31 unjust enric;liimf,n1., aswell as the aiding and abetting thereof, by the Defend.a.nets . This is not a collusive action to confer jurisdiction on this Court vilik .h. it would. not otherwise have., 55 . :Plar,riti:fi' will adequately and fairly reprE,sE;rit the iriterests of Witness Systems and its shareholders in er.if orcir i,g and jwosecutirig its rights . 56 . Plaintiff is an owner of Witness S);ysirE:rns stock and was an owner of W itizess '.' Sy .stems stock: during times relevant to I)efe-ijdant,; " illegal and w rongifiil course of concluc;talleged herein. 57. Based upon[ the facts :;E;1: iEorlh throughout t1ii.s Complaint, a.rpf)licalblf, law andl the longstanding rule that equ ity does no t compel a useless; and. futile act, a J»-C- filil1; demand upon the Witness Systems Board of Directors to i:ris,til:Lite Ibis action_ against the officer's and, members of the Witness Systems B aud of I}ir•e;c;tors is excusedl as futile . .A, pre-filing demanicl would be a use-less an13 futile ,act b'e.c.aGUSe, : (a) The members o f"JLli.tness SoY,;tenls" Bcaarcl have ciE,lriomstxateci their un vvill iin€;ne;,; axidl'ar inability to art ill compliance w ith their fiducim), obligations, andlor to sue themselves and/or their fellow directors and al lies in the. tops rank; of'the corporation fior the violations of law cornrilained of herein . These are people they have developed professional relationships wi th , who are their fr if,mb and wit:h whom - 34 .. Case 1:06-cv-02039-CC Document 1-2 Filed 08/29/2006 Page 7 of 31 tlhey ]gave clattiti~;ling; financial financial alliari~ .~~:~, interests and dep~e.r~dE~~i{~iie ;~~~, and therefar~~, they are not able, to an d will not vigorously prlosec'utc, any such actior.i. (i)j The Witness Systems Board o1F Directors and senior irianag!o-li-nent participated in, approved an dVorpe ;mlitteld the wrongs alleged herein to have occurred and participated in e,fforl:s 1:o conceal car disguise those wrongs from ~~L~it~r~es,~ '~5~<.~ten1;~'' stockholders car j°e,ckl .e,ssl.y aruVor ]7{e,g li.g;eritly disregarded ffie wrongs complained oil h[e,rei7i, and are therefore riot disinterested parties,, As a result of their access tO and review ~of i :nternal ro:q) o rate; documents, or conversations an dL connections vvitb other corporate officers, employees, and directors and attei-dance at manag ;ernen.t and/or Board m.e;e-tin;;~~s„ each. of the L)~~.ff,rii~,~~r~t.;,~; k~r~ie;l~v the adverse nary-r~L~~>].i~c Information regarding th.e improper stock option grants and financial e,poilvi;g. Pursuant to their specific duties as Bo ard m(,m.tKII-s, the Director Defendants are chairged with the management of the Company and to eonidlzcl : its, business. aibirs. UelFe.iiilants breached the fidizc iarS, duties that :he;y avve~j to Witnes s 'Systems and its sharelholdclrs in that they failed to prevent arid correct tbe; improper stock. option granting a.r.ld financial ep ortin.g. Certain directors are also darniiiatelci and controlled by otheir directors, and cannot act: iridepender.itly oi' them . Thus, the Witness Systems Bow•cl cannot exercise indeperideirik objective judo€;mer.tt in deciding whether to) 1)]-ing this ac;ti~»n or vvhetll~~ir to vig~~iroi~,~l,y prosecute, this action because ~~,~~~;h of its m{eml)~~Ir,; Case 1:06-cv-02039-CC Document 1-2 Filed 08/29/2006 Page 8 of 31 participated ]personally, iii the un•crngdoin ;g or are dependent upon other Defendants, who did, (c) Die act.; co mplain.edl of con~st:itut~;, v~i~olati~~:ns oftLe; :Fid.uc,iary duties owed, by Witness >.ysire;rns' officers and (1iirecti:) r:> Effid these acts sire: in,c~apable of ratiifirairion. (d) Die members o Maws Systems' Boa rd have benefited, acrid will continue to be,rif,iit, fi-om the `vrong;cloinig, herein alleged and have engaged. in such Conduct to preserve their positions of control and the perquisites df,rived dier•e ;of, a.r.id acre incapable of e:K{e:rc.i.si:ng independent o b jective juiclgment in deciding 'WhelEff to bring Ns action . (e) Aai.f suit by the rurr°eri1: directors o f VVitiiew; Systems to remedy these wrongs would likely further expose die liatrility of ]Defendlants under die federal securities laws, which could rema llt it addidonal civil and/or criminal actions being filed against one CT more af'trie De-IFf,ndlints, thus, they are hopelessly coriflicted in making any supposedly indLe;perideiat Menr.dnatian whettier to sue themselves . (Q Witness Systems has been and %A continue to be exposed itc) si;;nilE'icant losses due bi the wron€;do:irig, cOrnpl,airi{.d of'hl' yet the current Board has riot filedd any lawsuits against Rsdf or others vrhc) were res,pons ilbN Or that -36- Case 1:06-cv-02039-CC Document 1-2 Filed 08/29/2006 Page 9 of 31 urrong:fizl cond.uict to attempt to recover fcfr W itntss S iy ste:rns any part ofthe damages Witness Sy,ste;m , suf fered and will suffer tlierelby . (€;~~ In order to pr<~~~~~irly' prosecute this Lawsuit, it would be necessary for the dlirerltors, to sue themselllve<.; wnd thie o thel- DE,fericlrints, requiring iliem. 1:o expose thet-rEselves and their cimiiradf,<< to millions of clo llair.; in potential civil liability and criirniiiial san.ctit»is, or IRS penalties . TN's they w ill not, .do . 1;h0 Witness Systems,' current amid ast officers and ~lir,~,ctor~~ Eire protR,c1:e;d againsrt personal liability for their actsof nri,xnarna~g ;e~men~t, waste and breach of fiicluci.axy ch11y alleg"e'd in this Co:mpl~aint by directors' and. ciffir,E,j-s' liability insurance hich they causedd the Carn peimy to purchase for their protection. vv:ith. corporate iimls, i.e., m.anies bebmging to the s,tockrioldLe.rs of Witness Systems . FIovvevf,r, due tai certain changes in the language o f dlrector:;' and officers' liability insurance, policies in the past f&i years, tlic, directors' arid officers' liability suEran.c.e: policies coverii'ig fliel Defenda.nits iin this case coril:ain pmVisi.cirl" which e:liminal:e coverage for ally action brought directly by Witness Syste'l.ris, a;;aira;>tt i:he;se; 12(1A', T) e:FeTII lavClt ',i , known as, inter the "137.SULI'PCj .'J e]CSU s insurCid exclusion," As a . result, iFd1e;;E; directors were to ~~ue tl lCJ.riSe;lves or Cl~-Irta.i:n oi'the; officers cFf'`Wi:tness r.Srsterals,, t:her,-, would b e no directors' and, officers' 1]71511 :Cance ])]"Otetctlm and lllll,", this is 8l further reason INIly they ,willl not bring such a suit. On the other 1'ia:nd, if the suit :is. ..3 7 - Case 1:06-cv-02039-CC Document 1-2 Filed 08/29/2006 Page 10 of 31 brolzl;:ht derivativel.y, as this action is broia,ght,, such insurance ccrVE,ra~~;e; {exists and will provide a basi.s fir the Go mpany to effectuate a recovery . (i) In order to b:ri.rig this ad io n IN bre,ac;kiing; Weir ficiix, iEary {iisties, fliE, members cof'the; 'Wiinie;ss Systems' Boand would Wive been required to sue t :1te,rnselve;> `F 8. Plaintiff hes not made agy demand on shareholders of Witness Systems o iii;>t:itul:e: this action since sizcl'a demand would 'be a futile and useless act 17or the fcrllowing; reaso»s°. (a) NV itness Systems; ii-s a pu1i licly traded company QIt j ppnYxi3rwitQ 33 rRlion Owns outstanding;, and thousands ofishareholders; (b) Making die:rnancl on such a number of s1[arehLOld.ers would I)c impossible; for plaiintifP4io his no way offirici iing, out the manies, aci+lresses, or phone, numbers f sLareholders ; and (c) Making demand ri all ;;hairE,ho lciers,,vc,idcl force plairitifi'"to incur ]1il;ge cxpemsle,s, gas ;>>arrurngr all. shareholders could be individual ly identified . - ,5 .3 - Case 1:06-cv-02039-CC Document 1-2 Filed 08/29/2006 Page 11 of 31 THE STOCK iC IIP'17:OrJ B.A,CKDA1l[lvG S5 CH ENIE, AINT) l:']['15 1[lV[]PAL+C"]f Or1 iA1][rCrJ :E The Fiscal 2000 Form 10-K. 5 9 . On or about March 29 , 200 1, the Company filled its, fiscal 2000 Form 10-- K. with the ~SlEC. The fiscal 2000 Fomi 10-14C 'was si:rrnu]ltanec'l<< 2;0{){) financial statemerit.s which Nven,- materially i'alse- arid :rriislead irig ands p:rE,,;eritedt iirt violation of ti.AAP', due- to improper accou.ntin;g four th_e backdated stock options. As a result, Witness 'Sy ,ite ln5 ' ConClpel]S at11 C)Tl expense was UI7.ClE;T'Sta1:E'd and its net 1-,a1"ni rl€;5 W1, 11'r(" clIT'rstalk"d . 77lhe Fiscal 2001 Forin lei-K. 60 . On car about Ap ril 1, 2002, the Comp,aay filed its fiscal 2001 Forrn. 1 {D-:K: vv:ith the 'S~ IJC . The- fiscal :200 1 Form 10-K was silnultancously distributed to shareholders and the public. The fiscal 20{1 ]1 Form 10-K. included W itnelss Systems" 2',(Ig1 financial s,tatf, -ne;rits whirr were, ni,a'tf;ria:lly false and irnisleading and presented . in violation of CxAAP', clue to improper accounting four the backdated stock ck~ c~ption.s. As a res-ull:, Witness '.'iy';teffi 'S ' COinpen Sat1LC1T1 eX.rIE;TISf' via,, understated and its rict earnings were, overstated . ._ 3 9 - Case 1:06-cv-02039-CC Document 1-2 Filed 08/29/2006 Page 12 of 31 7Cl~ e Fiscal 2002 E'sii•mi 10-K 61 . CFn or about March 1 4, 2003, the Company iileci i1s fiscal 2GCI2 :Farm 10-- k: with 1.hie; The fiscal 200.2 Form 1(}-K, 'was simultmeously distributed to shareholders and the pub] .ic. The fiscal 2CiCl' 2 F'cfirri I O•-K i;riclWe;d WiltriE;,;s Syste-cia;a' 2002 financial stxte;rnerits which tive-_re n1atE;ri,x'Lly false, and rn islf,adir_i€; and.pare,se,med in violation of G14A:P, due to improper accounting far the barkdatf,ci stock options . As a r{es»lt, Witness Systeni ;;" compensation expense ,was understated and its net earnings weIre ave;rstal:e,cl. 7,h{e Fiscal 2003 For-in 10-K 62 . Clfri or about March. 15, 2f}04, the Company filed its, fiscal 20,023 Form 10-- K, witli the The fiscal 20Ci-3 Folln. 1(I-K. WaSS sirruilt&Jneou.sly ~diStribla'ted to share:holdle,rs and the publ ic . The fiscal 2003 Form ]. 0AC ir.icludle;d Witness, S yste:rti," 200<< firianc.ia.l statements which weir: materially false and rr,iisleadinig and presented in violation ofiGAY0 , due to improper arCO un.tirig for the ~~~~c,lcd,a~tf;d stock options . As a result, Witness Syst'e:cri." rompansa tion expense wzis understated and its rtet f,arnin.g;s were overstated . 7'he Fiscal 2.0{p4 Form l 10-:K: 163. Ori lor about March 1 6, ' 2OOS , the Co:rripajny filed its iisin:l :ZOCi4 :Farm 10- k: with the SEC. The fiscal :2004 Form 1CI-I': was simultaneously iiistribul:e;cl to .. 40 ._ Case 1:06-cv-02039-CC Document 1-2 Filed 08/29/2006 Page 13 of 31 shareholders aril the public . The fiscal 20(}4FoM 1 0 -K, iriclucif,d. Witness SSy,,tems" 2004 fimmir;ial statements which were materially false ancl :misle,,Wirig and p:rf,.;E,rited, ill v~i o1~~l:ion. ,~fCiA.~~P', due to improper accounting for the b,~rl~dat~~~dat~~~~~ ~ stock c ~ options. As a result, `~~1~17 +e53 Sf>teI]:]5' C0m pe17.8at1~ C}Tl expense was, UI].CIE;I"Sti31:f`Cl aTld~ As r1(,1 I ~ii]'Ill rl€,i; were oVE'I'Sta1tE;d . The Fiscal 2 005 Form l 0-K 64. On or about March 17, :?iJ+D6, the. Company filed ik<< fiscal 2005 F'orrn 10 - K, with 1f&, SEC . The fiscal 2005 Fonn~ 10--K. was. simultaneously distribute(I to sharehoi,ders and the- public. `[`he fiscal 200'.i F'OM :l O-K. included Witness Systems' 2005 ffinancial statements which were, materially ia.ls+,- an.cl MiSh-'a(hrily. and[ presented in vi~Dlation 'of (jALA.P, due to its improper accounting for the lbacUated stock, options . As a result, Wit:nx.,ss Systenis ' cornpensatEon expensewa s, u.n df,rs tatf,d. auii l its neit earnings were ove-irntate-d.. DE ]FEN DAN TS' SCHEME ] B E+GA[TVS'T'O UNRA.WilL 65 . 'T'he,, 20C1(}-2.O05 Proxy `i1:a[temen t> concealed De-femlants' option backdating sclie-me. Thus, the Compa ny's sharieholide rs relrrmine& unaware of D,,--feniliwnts' wrori€;sioiYig when voting oni proxy proposals, bets-e,e,ri at least 2000 aad!! 2005 . In fact, it was riot until August 1{)06, when the disc,-l.(*L;tkr•e~s I) fn.urnerous Other, companies' biack :dating practices caused the- m,a:ricialt to analyze stock option p ractice;S .. 41 - Case 1:06-cv-02039-CC Document 1-2 Filed 08/29/2006 Page 14 of 31 at irrialry cornparues,, :iricltalcl in.g; Wit nie;ss 'Systerns, and Witness that i:t was i,rivf,,;tigating it's, ipast optims practices, 1:1-lat shareholders k;arll[ed. that the Proxy Sta1:e,rrnents wh ic h they had reliie,cl upon f or years were false a.r.id rni;,leadLing, . Defend.a.rits have, beenm unjustly enriched t the expense oi''ffitness'>yst:ffns, which ]has received and ~wil1L re-relive less money froIrI th e Iaefandants when they ex,ercise their optiow, al; prices bstarili,all y lbwer than they would fiavf, iiEthE, options had in .ot been backdated„ 7,lHT~ AI)'V'T:I7:IS:E; I:N'IP'ACT OF DE]FF:7VD.A,T1TTS' m7 scO mauC"'.C FiE, Unlike most companies which ,void such option lbackd.atinj; abuse, by issuing, stock option grants at the same time each year, which E,lilmiUites the potential four backdating', DE,lFeridamt~~ can,>>airE,ti that executives would riot have any such restrictions . Given the many times Witness 'S , yIS1:E;rl1S ' grants mire the :low o f flu; rnointh ins wfuehi options were ;;ran'te;d, ilte, datE, of t heir stock option grosits was clearly more than 6i' . AL,, a result o f' th.e; lbackd.atin;; of optiicfiis, Defendants have, been unjusty enriched it tree; expense of VViftiess 5ystelirri.;, which has rere:ivE,ci a.n[cl wil l n-,ceivc less money from Defendants when they exercise, their options at prices substantially lowen- than they would have if the op-tior_is :hadd not been ba.ck.d< -- 42', - Case 1:06-cv-02039-CC Document 1-2 Filed 08/29/2006 Page 15 of 31 'COC,LI NfI, OF TFCE '57,.A.7rurCF; C):F' ]LPa77C,u['uCIIVso i58 . The: Counts alleged herein are timely. As an initial nnatl:ff, dLe;fen_clarits 'NTrorigladlly t,oI1rI.,~A led their rr 'Iby IIIs,-. Iv re as,>>1] rir.jg VVirnf, I public investors that VVii:ries,s Systems' option grants were being adrninistered. bly a. committee oil i:ndepe;ndE.l7ir clirectors, and by failing o ciiiSeIose that backdated option s were, iEn f~rir, actua.lli~ on dates other than those d:isc:losed, a nd that strategically 1:imed option grants were issued ased on the m,a:nipaulati{c n of in;i.cler i.rd'armatioln that ensured that the tme fair markelt value of' the Gornpan;y's stock was, in fact, higher than the publicly traded price on the date of the option grant. 69. Witness System;;" public investors :had no reason to know of the defendants" lbreac]hes of 1 ;rie;ir fiduciary duties nfil Awg ust 20106, when idif, disclosures of numerous other comInnic:s' backdating practices caused the market tc analyze stock option practices al many companies, inclit(fing Witness Systems, and Witness Systems annoLtnr,E .d that it was investigating its past options practices . Fi y, as fiduciaries of 'Witness Systems and its public, s:harel7oldell-S, the Cif,i'endarii:s cannot rely o'n ,alay lilnitaariona defense vi11cre, they wi1:rdif.kL from Witness Systearis' public the facts that give rise to the claims asserted here in, t :. e. - 4.3 - Case 1:06-cv-02039-CC Document 1-2 Filed 08/29/2006 Page 16 of 31 that the Witness Systems Board had abdicated its fil d.uciary responsibiliti es to oversee the Company's executive r~~mp~e :nsadari pr,~~~~~ices, and that the option grant dates r1EA been. rnanip ulal:e,cl to rnaxi:mi2;e, the profit iFor flie. grant recipients anii„ accordin;g1v, to maximize the costs for the Cc»n 1MIry. COUNT l[ Violations of §10(b) aiml Rule 1.{I4-5 eof ithe Exch ainge Act Against All :Qieienid,a nt s i l. . Plaintiff i ncoqio ralre,s, by refieremre and re-alleges each ,andd eweiii allegation set forth abico~re, as though fully set forth her.-Ill. )'2. 7,lvrcnug :houit the relevant period., Defi,mia:nts ind ividuall;y and. iii coiweil, cii.rect]y and indirec tly, by the use am~ d means of insirunne ntalLitie;s of interstate, commerce and/or of the mails, engaged and p arl:icipal.exl in a c,oail:inuou-s c ourse of conduct which all owed certain of the Compariy's officers and ii ii•e;c.tors,, iilc lud.:iril, Sole Ofthe to receive improper option grants axe d :make no :rf,c,ompenr,,e to the. Cornpany. Deficiid,ants emp loye,d df,viic,e:ss, schemes and artifices -to deffixid while in of material[, anon.-pu.blir i]afo,nuatiori arid engaged in acts, practices ami a, course of conduct that :iriclLideci the making of, or iparl.ici .ian. ir.~ ~tti~; m~3k111~~ of, u»tmeand/oar mjistea~diqg statern e;rits oi':ma1:e;ria1. 'Facts URIr'Oroffiitl:ing to state, material 44 Case 1:06-cv-02039-CC Document 1-2 Filed 08/29/2006 Page 17 of 31 facts Ilef;,e;ismS' llCl c :Cdc]C to make, the, statements made abC)1l1: Witness S)y ,it cT][15 not rnisle;a.cling;. 74. De-iFendunts, as, top ex:ec;litiv e officers and directors o f'th.e .'oC rnparty, are liable as di:r(,(,,1: part:icipa.r.its iii the wrongs co mplainie,cl of hereiii. Through their Pcrsiticorisc)f ccaitrol arid autl l,orlity as officers ofl;rie' ~C'ompariy, e"'Irlh t>filEe Df,i:e;n(itlliirs was able to and did control the conduct coiripla .i:ned of he ;reiia and the content of the Public st,atf.mitrtts diissenainal;e;d by Witness ;Systclir.is. '75. ]ClE,feulanl:s acted Nvi1li scieilitE;1" till"OlZl;hout the relevant period, in that they either had ~c;tual ]knowledge of the rni ;;re;~iresen.tatic~n~~ zmu&or omissions, of mal:e;rial~ facts ;;et i:cirtlh herein, or acted with. reckless di.m,gard for the truth in that they fiii led to ascertain and disc lose the time facts, eve", though such facts were ,available to t11eam. De fE,lid ants were, amo ng the se nior management f' the; +COm,pwiy, aiad were therdorc clirel,c'tly resrion;i ble for the false and :rriisl~~aciiing statements and/or omissions di~~se~rnil1,~~~(,d t{o die public through press releases, news r-ports and filings with the ;3 EC',, 'r6. Each of the DeliFE;ridan'ts participated iA a scheme ito de-fraud with the aqx)se and ffect of d{,i=raucling; Witness Systej.ris. 7'r. F3:y virtue of the ;FOI'e€;oi.n~;,n~;, L)e:FE,ndamts have- violated § 10(b) of' the Exchange Act, and Rule, I Ob-.5) promulga~ted tlh~er~.~a~nder. Case 1:06-cv-02039-CC Document 1-2 Filed 08/29/2006 Page 18 of 31 C{CIl[]r1'T' I[ Violations oT §14(a) of the Exchange Act Against All ]DIckudairits 78 . Plaintiff inc;oij)o:rat;es by referf,lir,E, and realle;;e's each alld every a1lf,gation, set forth above, as though fully set frth, herciiri. 79 . Rule 7.4a-.9, procnul ;gatE,d pursuant tc> 1314(a) o~F 0te ; ;Exchange Act, provides that no proxy statement shall contain "any stal:e,rnent which, at the t ime and in the light o f the circumstances under whiic;h. it is made, is false or rrdsleadiinq; w ith respect to any imaterial. fact, or which omits to state any material -Fact necessary in, order to 17 C.F.R.. §2410.14,R-9, 80. The :?~)00-ZOCM~~ :Proxy viol.a.t~e~d they omitted rna.u-:rial acts, including the fact that certain oil tlh1c De,fen.claril;s ivere, causiqg Witness Systems to engage in an option backdating- ,rhf,rrie, a fact '46ch . L)elFe;nd.arats vif.re; aware of and fowlicipated in from at least 2000 . $i . In the exercise o:f r+e,asonabile. care, Def+e:ndan,ts should have kn.own that :ma1:e;rially :False an d misleading . 82 . The m :i~~~~~ntal: ion.s and c~rr~is,ians, in the Proxy ~State~rnen~ts were rnate;rial~ -to plaintiff in voting 1:).n each, Proxy S5t.a.be~ment. The Proxy StateliTients were an essential lire: in the ar.co:ciip]~ishmc:nt af'1:rie contirna atio noaf Defendants" unla"ii_2l1 Stock option back-dating scheme, as revelations of the truth would 1,va-ve immediately - 146-. Case 1:06-cv-02039-CC Document 1-2 Filed 08/29/2006 Page 19 of 31 thvvairte d! a continuation ofsharehoklers' endorsement of the directors' positions, the executive o :fi:icer;f compensation and the Conp any's compensation policins„ 83 . The Cairipui,y was damaged as, a res ult. of -the materi;il ~~rM isr+~p:rf,.;E ;Tl~ atll {)T15 ainc orni:>sioris in the Proxy Statements . COUNT 111 Vid atiions of ?3:20(a) of the Exchifingge Act Against All IN fenidam ts 84. Plaintiff inroq),ra1es b,y reference and . realleges each ;vl,d every a.llE,gationn set forth above, as though fijilly ;,et: forth ]here3iri. 8 5 . The Defendants,, by virtue oi_''khE.ir positions with Witness System s and their q?ecH!c acts, wav, a1 the tinge of die wrongs alleged hre;reil contnAliqg persons cf Witness Systems within die meaning of §200) of the Exchange Act . TNO, had the power and influence, and exercised the same to callse Witness Systems to engage in the illegal conduct and practices complained ofhereiin. ~C' OU]V 7C l:`~ Acectia Intiinf; 86 . Plaintiff iinrc»q)orates by reference and re ;allel;e~s each and evf,i}, allegation sE,tt forth. albove~, asthau,gh fixl.ly set ;Forth 11{t!reiri . - 4i` - Case 1:06-cv-02039-CC Document 1-2 Filed 08/29/2006 Page 20 of 31 87. At ,a11 relevant timies, Defelindants, ws directors uid/or o ,Ffic ~Ors of Witness >Ysre;ms, owe'd the Company and its shia[rehol ders fiduciary duties of good fifth, care, camdo:r arid loyally. 8 F; . In breach of their fiduciary duties owed 'to Wi t ness Systeffis and its shaireh.olders, the Defelndants caused Witness Sys,terri:-,,, ai noii;, ol;he;r, 1`riini€;s, to grant backdated stock options to themselves ands/or cf,naiii other officers and dvrf;ct:clrs of Witness Systems aricVar jldIed to propefly investigate whether these grants had been improperly tr.tacif,. By th:iswrongdoing, t.r& :CEE;fen[darits breached tllei[r, fiducia ry duties owed to Witness Systems anicl its s1iaireho[der's . 89 . The De,#endEamts possess complete xrld w d=e;ttE,re,d control ovei- the iimpi-opeldy issued stock option grants and the books and lrf,c,c»-ci .~ cof~ the Company coric:erniing the deta ~its off' suc ~h improperly ba.c;k:dhited stock op tion grants to certain of the Iaefiendanits. 90. As a~ result of l]efendar.its' imiscon[cluc;l., Wi1:r.[ess 'Systems has been substwatial;Ly injured and d amaged iinan.c,ially ,Evnd is ei7titlexl to a[ irecovl.,I:ry as, a. result the.rf,o,F, including hee prol"I,.C{ds c>f trio sf, ilupn-operly g1 rat1l:e,cd options vvlhic;li Uxe been, exercised and sold, 9 1 . lP k l i nltiff' k-Inmi d;, an acrountirig be made of a ll stock optioia gmrits made to any of the Iaefieiadan.ts„ inr:luciiing, 'without li:riiit,atiori, die; dates of the gruits, the Case 1:06-cv-02039-CC Document 1-2 Filed 08/29/2006 Page 21 of 31 ammiti#s ai'idiEr grants, 11w .value of'the grants, the reci]pif,nts of' the grarils, the exercise date of' stock ojpti oris granted to way of tlhe Defendants, as well as the disposition of any proccel{l s :received by any of the Defendants via sale or other exercise of bac;k(la1:e,d stock ogriongnint , received y those Iaefie:ndants, COUNT k, Breach of Fi GluCiiffl•l~ Duty ain dl,ar Aiding .a:ndl Abetting Against A111 1De fen cltill ts 92 . Plaintiff :inc.o7j)ojrates by reference and realleges each ~mil e;-very allegation set forth above, a.,; though fully set -Forth here-in . 93 . Each of the Defendants agreed to and, did participate with . Gould and 1h e other D{efend ants an.cl/or aidedl ari,d abetted ori(, another in a deliberate course ofactiorl designed to dive ii : (-xqx)rai:e; &3:>f,ts in breach ofiFi d uc;iary duties the l]efend.ar.its owed to the i2ornFOriY . 94 . The Ue,iEeficiar7ts have violated fiduciary 'dutie's of care, loyalty, candor and iindepeia,dence owed to its pub lic slharE.llOldf,1-s,, 10-ve engaged in unlawful s,e;lf df.ali:ng a nd. have acted to put their personal interests and,'or their collf,agiacs'' interests ahead of th.e; :interests of Witness ',>y;;1:e;rns ami its shareholders . '95. As d+arrioiristra.te.,d by the allegations above, De'Remiknt:> failed to ex ercliqst the care, requ :iredl, and. brea.che,cl their duties of tayaliry, good Faith, canidor and independence owed to Witness Soistenns ancd its public shwrhold.ers, and they failed to -. 49 .- Case 1:06-cv-02039-CC Document 1-2 Filed 08/29/2006 Page 22 of 31 disclosemate6al in fumation and/or-i-nacle material rni s3rf,pre~se~~ta~tia~ris,1:c~ ,sll,~r~.}io]~cle,Y•s regpr(Lrig I)e fe-ndants' option backdating; sclhe:mc , 96. By reason of the forf,lip) ing, acts, practices arid course of r,omduct, the :CEefeinclttlll:S have failed to exercise ordinary care mul clilii€ ;errce in the exercise Wheir fiduciary obliga .tion;s toward Winiess Systems and its pub lic s harc:holdex:a . 97 . As a proximate result o fTefen_clarits' conduct;, in concert mr itlh Gcraldl, Witness 'Systems has be f,li injured arid is enitit:la-A to damages. COUNT Vl[ Abuse of Cmri tiro:l ALI;,ahi st AL111 Defendants 98 . Plaintiff iji co~por,atf,s, by referciioe and reallleges each and evexy alleggration set forth above, as though fully set forth herein . 99. 71aC De i:e;n0,111tS employed the allegedd scheme i-car the purpose Of rnai:ntairting; and e.ntre:nchimg their.is,e,lves in their ;position of power, prestiigrE, and profit at, and control over, Witness, Systems, and to continue to receive the substantial bezie-fits, salaries and emoluments associal :e;d with their positions a1:'Witness S5,ysl.erns. As a par1. of this scJhemic-, De;fen.dan1;s actively made an~dl~»~ participated in the making (for aided and abetted the making of, rni ;;re;presentWons re;gucling;'Ohtness >.y,stexns. 1 CI() . Deieridants' conduct constituted an abuse ofttiE,ir ability to contr0l arid 1:[1flUE'.Tlcx- Witness Systems, -S 0 - Case 1:06-cv-02039-CC Document 1-2 Filed 08/29/2006 Page 23 of 31 ]~ IJ l . ~3 y re;Gis,c~ri a~f' 11~~e; fi~~rf,~;~~ irig„ VVi1:r~e,~,s 15yst~~~r~~, has b~~~~n dam ~a~gE,ci . ~~OUN7~ ~~I[ ~C:~ri~~~s;s ~vl[is m,ana~ge~n~F~r~1: A~~;;a~i~~;,1k A~11 l)efe:ndl~ul~t~~ 1. 0.?, Pla.i:nti.ff i.ncorporatf~.; lby refer~~m ~c~e a~ricl r~~~~l~leges Each andl ~~~v~~:r~ ~ill~~;gati.c~ri set fort~i a .bo~r~~,~ ~a~~~ tho~u~€;h f~ul]~~~ set farad he~~rei~i,~ l. O:3 . I)efi~»~dant,~ ]~a~d a duty t~~ VVi1ne,~~s ~;~~~;tenas ,a:nd i~t~c s~,h~ireh~old.e;rs tc~ p~~ui~~r:~tly~ ~~up~~~~~ise, :m~~~7~a;~e an.cl c~c~7~tr•cfl tlhe o~~fe;ratio~l;~, ~~lz,~in~e,ss a~r~ci iiriterr~al i:inan.ci,al accauriti ~ng ~~»{d ciii scl,osur~~ c,orilxol,~ c~f' 'VJ:itness ~~,ys~te.m.s. ]: 04 , D~efi~n~dant,~, ~r~ th~~ iir ~icd~>>ns andL b~~ eng;a~~;in.g; i.r~ 1:r~e ~~~ra~ri~;d~~:iri~~ d~,;~~~ribed. h~e,r~ei~n, ~~~r~~1~3~onedL a~ri~i ~ibi3~icated their respo ~n~s~ibil itie~~s andl cltzi~.i~e ~s ~~~itli re.g;ardl to pr~u~de~ril:ly nnanagi :ng the b~~ais,i ness~~;; ~~f 'l~~itn~e,ss ~~y~~tenns in ,~ rria~~~ner ~,on,~i:st~e:nt v~ri:th the; dutiie;s i:rnpc~secl ~upon~ ~rrif~m. b,y lair. ~s~~ cc~rnn~ftt:irig tla~e rni;~c,on~duct alli~;;~ed h~~~~ein., I)efi;,mdan.ts ~rreaeh~e,cl dii~iir c~~.~ties oi~ ~due ~.a~-e, cii:li~;~~~~~ae aria car~do~- i~~ the m~~ai,~;~em~~~r~t at~~cl ad~rnini~~trairion~ of ~~~i.tness ~i.ysi.e:rns ' aifai~~~~~ and. in tl~e ~as~~ ~~t~d X~re;servat:io~i c~f"P~itnFe;s~~s ,3ystE.~r.~s~' <~>~~e;ts . 1O'i, I?~uriir~~; t:be roiar.;f, af'~:rie; di,~~~h~~:r~~~~ c~f ~k~i~,ir duties, I}efi~~l~dant,~ k:r~f,~~ gar reck:less'ly ~~i>reg ;a~rd.e.d 1:rie ra~c~r+~a;~{~rnabli~ rr:sk:s arici lo:~~~e - ~i ]~ - Case 1:06-cv-02039-CC Document 1-2 Filed 08/29/2006 Page 24 of 31 r.Sy>tenns, thus breaching their duties to the Company . ~ks a result, DeliFen(lajits ; grossly na i ,,m.anag If,d Witness 'Sy .stems,, 106). By reason ofthe iareg;oing;, Witness ~Sys1;e,rns has been damaged.. Co nstru ctive FraiLW .A,glliinS1: .A,ll l)efie7ndlainItSS 1 Gi' . Plaintiff iinco'por~Ites by re:Fer•enc;e, and realleges eachh mW every allegation set forth a1:mve, aLv; though t,y set JFort h helrf,inl. 10S . .A,s, corporate fi{iuciaries, DeliEe;ridarits owed to Witness Systems an[d its, sharehobJers a duty ofcaridor and full accurate disclosure regarding the true state U Witness Sysbecns' b u sines;; and asselts and their rmid uct w itE regard ereto. 109". A.s, a rt~siult of die condtxct rompIain,e,d oaf;, ]CIC'fen.darits ma .dle,, or aided. and. abetre;cl the, m,al~in ;~ c~f, numerous rnisr~,~n-e~sen~tatiar.~s, i:a ,~r~dlo~° conceal~~~~ nr~atE,rial f~~~1:s fi-omWitnie.ss 'S;ystffn s' shareholders despite their duties to, inter cai'ia, disclose the true facts regarding their s,t{ewarckr«p of Witness Systear_is, . Thus i:rtey have colmnilled con.st~r~ic~l:ive fraud and violated their duty af'r, ;~i~dor. 110 . ]3y reason iftie foregoing, Witness S ystems has been dama~;~e~d. Case 1:06-cv-02039-CC Document 1-2 Filed 08/29/2006 Page 25 of 31 COUNT IX C'+rponite Waste Against AR ."DO'cridants I 11 . Plaintiff incorpcorate; by reference and realleges each and every allegation set fcirtlh above, as though filly set forth .herein 1 L2. By fa:ilin;g to properly consider the interests ojF the Company and As piublii c; share holder,i, by fading to conduct proper :>upevv:ision., and by priivin.g away millions oiFdollstrs t:cf .Cle;ile;ndanl:s v ia the option bmc,kdaking; Sc4e:rlie, ]Ciefendatrlt:s have caused Witness 'Systerns to waste assets . ]- :L3, As a result (of' Defendants"' corporate waste, they are fialble to till-, Company. COUNT , 3C lUriju!~1: :E',r~~^i~hurnf~r~lt AJIai1uslt AL11 Defendants 114. Plaintiff incoqaarate;s by reference- and realleges each and. every all(,1Y01riop set far1li above, ~is though filly Set fo :rt;ri hereill. 1 1 5 . As a result of'the conduct described above, be and have toee,n unjustly enriched at the, expense f Witn,,-;;.; S,yStems, yin tic, farm of unjusirifie,ci salaries, benefits, b+muses, stock option. grants and od1eir emoluirm-mrsof office' . .. 5 ?, - Case 1:06-cv-02039-CC Document 1-2 Filed 08/29/2006 Page 26 of 31 11Ei. x,11 the: payments and benefits provided to the DeiFera&aj7ts wilre at the expense of Witness ISystellr< s . The Company received no b+°i.iefi t frc :m thc~scpa,yrnen.ts,. `'Vitries Systems was damaged by such p,aymcjat~;. 11.7 . Certain of the Defendar,its sold Witness ',Systems stc)ck fcir aprofiit during the periiod of deception, misusing, confidential man-public corporate yiiFrn~nat:iori. These Defendants sh ould. be rE,qiziiredl to disgorg e the gains which flie.y have an&or Will oth{.-PNi s I-I unj ustlLy ,obtaiin at till', expense O fWitness 15ystelrr1s,. AA constr uctive trust far the benefit of the Company should be, imposed thereon.. COUNT Xt ALl;,ain,st the Officer Defewdanis Iror Rescission 118 . ]Plaintiff' incorporaltes tiy reft ;relIc;e, and realle€;es each mi(l every allegation contained above as though fully se t forth rierein . 119 . A.s ~~ r~es~ult i~:f di~~ a.c,ts allf~g~~d ~~E~rei:n, t11~~ st~~ck op~tiori ~c~ont~rac,ts bi~~:~veen the Officer Defen dants and Witness Systems entered into during the relevant pE;tY~od IA f:re. ObtairiE,d through Defendants' i:raucl, decc:it, and ab use of conlrol . Further, the backdated tock options were, illegal grants and thus i:nvaliici as Ilicy were riot a uthori.z;e.cl iii a~c,rorclarlc,F, with the terms o-f tlhe publicly ii lE,d contracts regarding he ~Officer Defendants' employment ag,reeme-.nt and the Ccfm party"s stork opirion~ plan which was also approved ]by Witness Systems shoreh.crlders and filed with the SEC. - :54 - Case 1:06-cv-02039-CC Document 1-2 Filed 08/29/2006 Page 27 of 31 12',{1. ~~ll ccfnlraet;> v~~l~ic;}f p~rov~i de i:or ;~tc~c;~, op~tio~i g;ran~ts ~~etvv~~~~m the +:~ffic,er L)~~:ff,n{~,a:nt.~ a.r_~d 1~4'it~1~e;,;; ~;y;;lenas ~irid were f~~z~re~redL i~lito aluring th~~ rel~~va~t ~>f,riod. sho~ a~ ld, th~e~rf,i:or~e, ~~e; ~rf~~,c;indLe;cl, ~vitr~ , 3:11 ~,~:~rns ~r~ icl under s~~c-ri ~aont~rac,ts r•ebun~ +e~d to th.e~ Co~r.~~~an.~, andl gall ;~~a~~lh f,xf~c,~a~rory con~tr~~~~ts~ ~~~~mcellecl and ~~leciare ;d void. C~~~17PT'T :X:I:I l~g;aiin~s~t 1;h~~ In~s~i~der~ ;selling; .Clf=t:er~id,ants lo~r~ .B~Y•E~a~~11 o1' .E'i~du~ciar~y~ I)utiE~~~ f~~r 1 `.r~~~idler S'~e~llinig a~r~d rVJ[isa~ip~r~~ ;pri,atiicrr~ a~f' ][i~fi>>r~r~~,~~tia~r~ 1 :Z1 . l'1~~intiff' incc~rp~c~rat~~ ;; by ~-e;ierence an~~ realleg;e;s, E,ar11 a.r.~ct every ;~~legat:icnl set fartla at~ov~e, as tbc~u~,li fu.~l~~ set fords ~~erei~n. il :?;Z . 1~~ 1;~if, ti:rtif, ~~f 1:~-~E, < D~e;fendLa~nts k:r~e,w the inf~onr<<~ti~~ .n dfe;s~crib~:,~~ abc~~Te=, a.r.~d ;;c~l~cl 'V~~itn.e.ss ~>~r.~tenns c,o~~rirn.c~ri st~~~~][c on the b~~s;i~~ ~of su~c-l~i i7~fo~~na.tio~~.. 1?.3 . 7,h~~ i~r~fi»r~n.a~tion d':e~scrib~,c~ above w~t~cp;ro~~~riet~~r~;~ nc~r~-p~utalir i~nfi»r~n.a~tion conr~~~~ii:rig tli~~ t',~:rryp,~my' ~5 ~IIl~i1li~;i~i1 cc~n~~ita~~n ~t~~c~ futi .urf, busin~~,s:~ pr~ospect,~. It ~wa~~ a ~~rcrpriet~~a-~~ asset be~lo ~r~~;in~g t~~ 1:1-~E~ C~~~rrzp;~7ry, ~vhic,ll #~.e; I~:~s:idf,r S~e;llir.~~; I) ~efE,n~~ant;> Li~~exl f~~r thei~° ovum b~,~~~eFt `~ahen~ ~h~~y ~~old'. V~it:r.~e;s,s ,~yst~~~r~s~ ~c~om~mo~n C,tock :. 12;4 . ~~t:1:he, tinne of ~k~if .ir st~QCk ~~ales, tll~~ Insid~~~r S e~flin~~ ; C~E,fe;rici~~~11r~, lc~r~er~~ that the Con~.pany~'s reve,ri~if,.~ v~~~,r•e: ~~~~~~ter:i~~ll,y c~`~E~rst~~~re;d . T'rie [~l,icle~r ~~~~:lli~l;g I)ef+~»{dant,~'' sa1~;,,; o~E ~1~'itn~~~~ ;~ .~;ys~rems con~:m~~m src~ck ~~v~~il~~ in p~c~s~~sessio~a ;~~r~d contr~~ ll c,f' tll:i~~ -- 55~ _ Case 1:06-cv-02039-CC Document 1-2 Filed 08/29/2006 Page 28 of 31 material adverse ncrri-pizblk :irii6trnatic Iri vas a breach of their fi( tzriatry, d utic's of loyalty and . ;good faith . 125 . SiliCI-I the use of the Compaxiy's prc),pr:ietary irifbrmatior~ fir their c~Nvnn gaiia constitutes a breach o f~' fl-ve, Insider Sellinig, De feridants" fiduciary ilzties, the Company is entitled o the imposition. o fa constructive trust on any pro fits the hisi:cler Selling; C1f,i:e;ndants obtained hereby. PRAYER FOR RELIEF WElE- ME FC)]RE, plaintiff demands jud'.grnenEt as follows : j , j A . Awarding n~~~ney~ +i~a:m~~~;~~;s against all ]Cie:fen~clax t;s, ,j ~E i1.ly and severally, for all lc*6es and damages suiFfered as a result. ofthe, acts and transactions com.plain,,-I{d O f h.erein, together with pyre-jiudgF>mf,ii1: iintere~s1:, to e,r~;ure; :CtE~#en~darits do not participate therein oir benefit th ,irE,b:y ; 13. Directimg all Defe-ndants tc) account for all damages ea.ius,e;cl by i:be;rn aji,d a 11 proi i ts,amd special benefits and umjus1t enirichirnen,t they have obtained as a result of' their uinlaw:Fia1 condu ct., inclu.cLing; "'A CSalari.e.s, b'ariixsf,s, fees, stock avvand ;;, options, and r~~:cri~n~on stock sale p~ror~~~~~~s and imposinging a constiatclive trust there Cl . Directing '01 lltt] eSS S;y StE', T17.S t () take al] necessary actions to reform and improve its corporate governance and internal control procedures lo comply wifli appl ica ble lavv, including, but n ot limited to, putting forward for a ;>harcholcler, vvote, Case 1:06-cv-02039-CC Document 1-2 Filed 08/29/2006 Page 29 of 31 resoliuticfris foir am+endnnents to the Company's ]By-I,arvs or Articles of Incorporaticoyi arici takiqg such other action as may be necessary to place be fore share:hol,ders far a ,a~dopjtic»i of the, fol:lo~Ning Corporate (iove.rnarnc,e. .poliiries : (i) a proposa l requiring that the office of C']0 of Witness Systelils, grid (Jhairina.r.L of the Witness Systems Board of Directors be pE,rrnancrEtl,y held by separate iindi.viduials and that the Chairman of the Witness Systems Board meets rigorous "inLdepE,niJent" 5 t,a:ndards; (ii) a prc>p~~ .~~~1. 1:o sirren~~;then~ 1rYif~ VVi1:r~e~~,s ;~yste~rns l3oard',~ sup ~e.rvi,;iic~n of openation.s anti develop and imp lE,mie;nt procedures, for greater sh.a.reholider input into the policies and guidelines f'1 :riE; Board; (.iii;) appropriately test and them strengtlle.n the in.te:nial wa+dit a»d control ffir.ictirmn; (iii! notate :iridi.pe:ndent auditing fi nris every five yeans, (v) control and limit insider stock selling and the tell-ins and . timing of stock option grants'; and. (vi) r,,--forin executive cornpensatio», I). C)ircirrin.g thc. imposition of a constructive trust over DeliFe,ndaint.>' stock options ;md any proceeds derived th.e:refirc».ri ; ~:, Awarding ;.punitive {damages ; - 57 - Case 1:06-cv-02039-CC Document 1-2 Filed 08/29/2006 Page 30 of 31 F . AvrTarcling; costs and disbiu:r;>enre,rits o.Ftli:i s acticfri, including, reasonable iEttIJ:C71e;yS' , i3ecoU17ta:Clts ' , and E'xPE:I-tS' faeS; and G. Granting such other and further relief as this Court may deem just and propelr. JURY ]D11L1ZALlV D Plaintiff clf,m.ands a trial. ]by jltiry . Im'TF;l7 : .~12 2'0106 C-1-1 :['CVVOOI) HARLEY H PL]IrTES, L,LP ~ IVLA.F:TTN I) . CHTTAVOC)D Georgia IS 1.2Gte liar No . 11.49 501 JOHN F . HALRNES; Gec~rg;ia State Bar No . f1{)1 :356 2300 ]Pronienadle II l :?:30 Peachtree Street, N.]E. Atlaril:a., GAL 30309 ,CelE,plhone : 404/873-3 9OU 40,41376-4476 (fzm) LE;RA,CF[ CC~UCi]H:L][lV ST'OT.A. CiELLE1: R_[JDIVMTJ & R_OEGl3TNS5 I.]LP »/~R_REN J. RoBBINS ,ppikVIIIS, El., DOWNS III 655 West'Broa.dway, Smile 1900 .~ain ]]i~~ ;~o, C.A. 92101-3301. "f ielf,pli,one : 619/231-10-58 61 1) /23 1 -7423 (Jlx) Co-Lead couinsel i=or :Plaintifi' - 58 - Case 1:06-cv-02039-CC Document 1-2 Filed 08/29/2006 Page 31 of 31 r I, .A» Ex1IW11i]p` MILLER, bare;by declare as follolms: I lume 1,0011 ft 3 fixrcgakip, cota;p ;LA1!!t E lik dl 1bT{!LY the CQ ,aafthi Ilen:cFf: l: ml ida:amd mist bollrirc; 1hC 3!laftn 1U I'eltr 8x1e trw mmi ma dukt gzr=4 talege, twit xha matters; :,,GWzd dm:rminE arc bUe. lb;eouterd Mat at' am lpi01;a, C:alifil3aillik. ------)L 1919VAREINOUlat Case 1:06-cv-02039-CC Document 1-3 Filed 08/29/2006 Page 1 of 2 C IOR I~ I 'G~ l ~~f ~Ir l11F~~~ i~ ~'~ .isaa '~ Re v . 5105 N D GO,) CIVIL (~~C~1/1EF;~t;ti we f I~ d i ng s ar ot h e r pap~! err' r e quire d The j$414 civil cover sheet a nd t he I n fornte,ti o ri ra nl, a in e tl h e rein n e itlie:r r ep l a ce ;tor s u ppl e mi :n t th e f il!iri g a nd service o Ie ri a ting the civil I reci)rid i,SEE E : % CF!pt as provided by loc a l ruler of court . T his brm is require d for the use of the Clerk, cif COLA (+5r th e purpose of initi INSTRUCTIONS ATTACHET) L (a) F'L_A11VT'I IFF(5) DEFENDARTI A . Edward M :i1l.eX, Dei-iliat Lively on D,'i 13 . Gould, Nicholas S . Ili .scombe, Wi1liau~ F' . Behalf of Witne = . .o ,iqs l: em s , Inc . f:-,Fans;, Kat]nleenMil3er, I,oren F3„ W :in .pflieimer, Nancy Y . 'Dreaster, Joh.-n R . Bow-n+', 'Steven Byrd., Tony ]3=Lrlio,?, 'Thomas .3 . Grotty, ,Joe'L +J . Katz, Dan J . Laui°en1:)+3ch and Peter' Si_n7 :sga :L :L :i (b) CO W V 'fY' AF ° RESIDENCE OF FIRST LI STIE I ) COUNTY OF ° RESIDENCE OF FIRST LIlSTl 2[3 ~ Lt Z t O il--•--.--. __.-- .--° -'- --- PLAINTIFF . Sari. I y ]_ EL ;O DEFENDANT- , Y ~ ~T (I?XCF: P'f IIV U .:. . P L IU MTI f F CASES) pN U. S . P1.T P . CASES OML`f} and Ld .Ltni Systems, Jr!c . . ,3 a Delaware corporation M O T E '. 1 :411t IVD C 4M DI :I CASES, LISE THE LOCATION OF THE Nominal Defendant : 1'MCT {) F LF,N I } I N U'OI.VRD AZTOF:N EY:y (1-um 1+wi ADDRESS, TELEPHONE ATrc> RN r_"Yi (« N;NoM) WI1INIBlEI2, Ji IEAWI_ ADDRESS) Martin D . Chi.t.WOoc clnitwood H.aYl.e;}, Barnes .L.L,P 1236 PeachtYe .e~ St,. NE, Suite 2300 Atlanta, GA, `~CI309 4134-873-390G IM chitwood@ch i .t:Grc) odla1a, 12 01M IL 13 A:ill;i C11= .11111RJSEl{c1rlOIN Ill . CITIZENSHIP' 1DIF PRINC-PAL PARTIES' ( PL1 L CE ,AFI "W'01 ONE BO X ONLY ( ( PLAC E AN "`X " IN ONE 607( F'OR IPi AIV C, O N IE 13CIX FpP; OEF ENDA, N'I] ( FOR D f VE : R'SfTYG ,fl:i E:S I ] i ELF I)EF PL. F FIEF l' 1 ERNMfE N'f ~ 7 FEb@IZAL 1 7 U E :VFIOM 7 CI'f12EMC f' fHI5S1 ' A E l}~ 5 . G DV ICJ 4 + P ACIitFF 9 lI51 NE ?SGPIN'fHVSlS1A1'E ,.,.1 PLAINTIFF ~ ( U. S GOSFERNMI E N F IJO7 AFA R T V) I P IiAfEO . AND PF , INCI iPAL PUCE . N 2 :I CITIZEN OF WJOTH EI i :'~TIIT1= 5 ~_ I :' INC'14 O I-, 2 U D f C-I 4 ~ ~1 ^ E] ~ OF BU S IN E S S IN ANOTHER ;TA T I= EI ELI G~q ~TF DFICq i CI7I ZI = NSHiIP OF J P,kRTII:S IN 1111 I F A E o 1 f _ J ,` I IOREiC NF,O IfP TI Yf ( '. FOREIG N I I)1, ~Cl Ftll{311W (ai3Xe. AN X iw ONE BOX ortLY~ TFWVSFE . RRED FR DIM APPEiLL TO Cd5TR1CT FISTI;A7EI ~(~T 1-] + Jll[IGIEJUIIG M E :N I~l 1 P01 RCICI~EDIIVC L_~ 2 FiT AT E Ci C~URTCM C- ~ y A FP I°.~L'II„A EC~~R'f L_J 4R£OISE NE,O'['~ t~ ~] 5 ~PE'.CIFIIOIDISTRICT 5fRI C) L_J 6 LIT{oAfkON ACTION (CETE'fHE U .S .CIM L SI'A'I'UiT IeI INDIE P VIIH ICHYCI UA RF: F'II .INGAliO N IRITlE/ 11l PIEF .57 'A'fEM ENT DFCA ,LI:S EL- DO NOT C ITIe V. CAUSE OF JUFtl:tDLC'fIOM/UL :iTA1U' f ES UIJL E;S DIVISRSiT1') I; IF !'O PAPLEX , CHECK REASON 1 81=L.Ci V + !) lf nn u su aliy large numb er of ~ ~ ae s . I _, 6 . Problems lo c a ting ar p r e se rvi ng e vi d en ce GK I L .r . Unusually large nu i rlD er of c[a i nns ar d i- fer i ses . 7 . Pending piwrsl ll el imrestiga l; it i ns or z i clinns by +3 avernm e ri t . Ell '! ;s . Factual issues are exceptionally complex I }~°'~I 8 . ' Mull+ple use of e : x ,pe: ris . Ell E.fl, t . Grara[ er th a n norma l vo lu me ; of evidi:nce . I ~~491 . Nee d f or discovery outside United 9 tatr s bo uri da ries . ~ CY,'S . Exlencl ed discovery Iacri o d is n e e dle d . I_I 10 . I:x i si nT h i g hly 1 e Ch n ic el issues and proOf CONTINUED ON REAiiE F;;~i~ FOR OFF IC E USE ON LY T~ F . l UC+ ;EE r1 = F 7- ---- .^- . FEi :E P rai -----_ , ~ .__ f ~l +? JI'fT S - - - - „FP1r N ~a IF '_- - - - - I - - _ ~l .JC ; L ~ tiL~C :: . It1D(3E,~ IJF C 7JF ;c LT "#r iI.I IT _--, . '. ;e°U ;iC, Ci R eEeri - ( _ ~.~~. - =------_ _ _ -~ _ _ ~- - - - _____------t;. w~f "1- - _---- .~-~~. 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LN 0 :3 1[B I91)yl !! 3~ 1 999 [_~ SM1fO l lHO(x^W110'YI'dFi N ISIIOH EI'+ 4 El SJJ=131+f=19 Sj VtR l3J3 F% YUC R'lLLL am tog dCI 1N:3V' N:deR13li(J ~7,ili C~ 1CYJ3Z i E S l [.] ((US(*) NVVJCI egg EZI C" 1611, NW El (SL tJ Nlj3L= V 1'?J?;3 ~ S MlC~l i P 13CY11S rror9 mi .wua Ese C=1 )IJ'dldl AHcIA C5 _1 i a SINJNi YY. T. " t, fl :a I 'H'lll11: 1 ff. 31 'NM~= 10 ~1]L~f3~ ~C~'J~2f 2 51 [_] IR!81 `J Nf l7 N :Ti'IF I Z9e [~ I 1N;3~ Lf~:I N~ (o 9fi£1)1 11H 198 E- I c<< ~:~n ~; ~rarnvraaru,nr,~~rC~ 1Ni3M f l Olll ' ~ 7 .L1s13 HS~sI tiaI ff Rti3a ir U iiiZrw7 ~':-) Siaf? F3 9, tivna5~ H 5 ~aitai~~ ~35TT 9 MM a :a7X5 [d my>iNa~i ~A IINI] X0'9 3NO NIX NV 3 OV •i d) 1.I f1I l~ ~~ 0 : l8fl. L'VV 1/k Case 1:06-cv-02039-CC Document 1-4 Filed 08/29/2006 Page 1 of 28 ~a s~ ~ , Aqa p• ~ +. }! I i' i rA~ ~YI11 54a ~ ~t~r:riit.E~d ~~~ taf-i y,s E)i stri c' t, ("o urt PTImalHio1ti;V ]DL'STA3('7C OF G-:ECIRGIA ------ SiM11ROPJtS IN A CIVIL CASE A. Isciwa:rd l.14iller , deri.vat: .ve:7Ly on behalf of Witn ess System.,, Inc . Jr. CASE 1-,ftY.V.113HR: David B . ~Gould, Nicholas S . Discodhe, William F . Evans, Kathleen Miller, L 7,c3reiz B . Wimpfheimer, Nancy Y . Tre,aster, 2 John :Et. Bourne, Steven Byrd, Tom Bishop, Thomas J . Crony, Joel G „ K,a1tz, :Dan J . T autefbaucn, and Peter Sinisgatli, Defendants, la:iCness Systems, Inc., a De1a,ware Corp ., Nominal Defendant . 'To: (]Name, and adlxss of defendant;) David B . Gould c/o CT Corporation :L ;?1)L Peachtree St . NE Atlanta, GA 30361. YOU i41RfE HEREBY' SUMMONED a rid required to serve upon PL.AJIV'TIF'F';> ATTO FIN EY {name and address) IVlarlikiri ID . Chit wood C HITIM1IOC i CI HARLEY f1A1RINE 'S LIP 1 .231} PeacPitr osi S tree1:, Suite 2.300 Atlanta, GA 30 :309 1404) 67'043900 an answer 10 As c :cinnplaat which is herewith semE:cl upon yaw within 20 d".> after service 0 this summons upon you, em;W:;ive of the day of senrirk If you fail •tci do ;so, judgment try default will be taken EIgMairist )(Ow for the relief demanded in the cornplalint, You must also rife your answer mri1%thie : Clerk o f this {',Dart within a reasonable period of time after senrice. AUG It i 1jN" CLE_.------_RK _ _---J--_------_ _ _ DATE ------nI:1rUIiN CIF SERVICE ae:rvice of the Summons and Complaint Was made by one' DATE NAME OF SERVER (PRINT) TITLE Check cane box below to rrndimr& 4?pXIM)ViFr te naOthild o f sie,vrCe c3 Served per:.cnalhy upon the defendaint . Place where serveid°. Left copies thereof at the ii E:feindarit's dwellling house ar usual place of abode with a person of suitable age and discretion then residing tht3re lin . Name o # person with whom the summons arid complaint viere left: n Returned unexecuted : ci Other (.specify) : sTmrI:IVIENT 01= SERVICE FIEI=:3 ------W~~ .__------!51=lPJ I C '. E S TOTAL ------CiECLARpil'IiDN OF SERVER declare under penalty of pe rjury under the Laws of the U nited States c4 America that the foregoing information contained in the Return o f Service and :7tatornertit of ;iorviice Fees is true and c:orirecL E:xecui,ed on Delta Signature of Server Address of Server Case 1:06-cv-02039-CC Document 1-4 Filed 08/29/2006 Page 3 of 28 ~i 1CJ '1n~~i~t C~~cl ~~t.~ it.~~~~ :D~;i Sfiri C "t C'/10111t, NORTHERN DISTRICT OF Gl:{DRI;,LA ------ SUMMONS EN A CVVIL CASE, A . E:dlurELYc l Miller, derivatively on behalf of Witness Systems , Inc . Plaintiff, V. C.ASE :NiTMBElt: David ]3 .. Isou1d , Nicholas S . Discoribe, William IF . Evans, Kathleen Miller,, 6 ., ck I,CI7'E'.Tl 13 . Vimpf'he .imer, Nancy Y . Treaster, John it . ]gorar-ne, Steven Byrd, Tom Bishop, Thomas .J . {G r otty, Joel G . Kai: .s :, Dan ,J . and Pe ter Sixrifaf;a:L:L:C, 11141 Witness Sys tems , Inc ., a Delaware Corp ., Nominal Defendant . Tip: (3Jarrie and ,adih•ess of deff,ric'lant ;i Nicholas S . I?isrs :nnbe Witness Systems, Inc . c/o CT Corporation 1201 P'e ac:ht.r.ee St . NE Atlanta, GA :3!} :3 6 1 YOU ARE HEREBY SUMMONED and required to serve upon F'LA,IIWTII FPa ATTORN EY (nairre aril address) iVlartit n D . Chitwood i;,INI 'lVOC Ci HARLEY HIia lilV EIS LLP 1,2:31) Peaohtree; Street, S uite e' :tC1C1 Atlanta, GA 30309 AM 8753900 an ainmvwnz the complaint which is, herewilh :,eraF:cl upon you, withlin 20 days after service f this summons upon you, exclusive f the days of semir.Ea. If you fail to do .s% jjudgmient by default MV be taken against you for the relief demanded in the rprnplaiint. You must also file your ans wer %M*" he Cleric of this Court within a reasonable period of time after service . in' Isii CL E I DATE ~ ------CE Yl DEPUTY CLERK Case 1:06-cv-02039-CC Document 1-4 Filed 08/29/2006 Page 4 of 28 RE'rum OF SERVICE Sisrv'ice cif the SumrnOMs and Complaint w as made by imie' DATE NAME OF SEERVER (PRIM) 'rITLIE ------ 1,'Ir Erc* nrw boar ,balo Lv to ;ndicatea ap,crro,o,riai'e rnet'hod ofservice d Served persoriai lly Upon the d !efendlant. Place where sarved : Left copies thereof at the defendant's dwelling house or usual place of abode with peirson o f :,uitahll e age and discretion then residing therein. Name f person with whom the sumimoris and cornpIlaint ware left : iD Returned unexecuted : (3 Other (specify) : ------STA7E NI E!NIT OF SE RV------ICE FEES TRAVEL SFRVI(:E: :i TOTAL ------ix.c.uguynoti OF SERVER ------ declare Un der penalty oi : perjury u nder the laws of the United Slates 1' America that the foregaing informa tlian contained in 'the Return of Service and Statement of Service Fees is tirue, and corriac:t. Executed oil D ate E'signature: of Server Address of Server Case 1:06-cv-02039-CC Document 1-4 Filed 08/29/2006 Page 5 of 28 1U ]:]11l1tiE;+d LSt-ater.." D]Ls1;]C'lC~'t C1011f'1: :NO]RT'TEEPSd DISTRICT OF G TiDR IsLA ------ SlUL4MOrfS, IN A C]5T.QL (:ASE; A . Edward Miller, derivat3:vely on, behalf' of Witness Systemss Inc . Plaintiff, V. CASE NMABE1L David B . Goif:Ld, Nicholas S . Ed.C, c.ombe„ W'1.1.1.isim I? .. Eviwz,s, Kathleen 1N[ 3. 1. 7.er , 1 Loran B , W:Lmp:Elzetmer, Nancy Y . Treaster, ,John Ft, l3OexT1.711a, Steven Byrd, Tom Bishop, Z1ama.o J . Crot ty , Joel G . R:a.t. x, , Dan ,J .. I.aUt:enbriu(Az, and Peter Sin.3.sg;a7. J_j_„ Defendants, and ---- Witness liy8tio ns, .,Inc a DE! l clWell'E : C o TI? . , Nominal Defendwit . 7'O: I,Tlsime a.nd address ~o:F diejEendan't) William 7 . Evaas Witness Systems, Inc . c/o CT Corporation, Inc . 1201 W . Peachtree St . NE Atlanta, GA 30361 YOU ARE IHEIR HB'Y SUMMONED and required to serve upon f'Q1d19FIF' S i4'TTiJRN 1=`f lnarne and addrinsl nAarEihn p. Chitwood C;k117V+JOI3Q FiAIR IL I:`( hI AFiPJF:S LLP 12.30 I Pefichtree 'StrE:et,, Suite 2300 Atlanta, GA 30 ,109 {4041 8713900 an answer to he complaint which is herewith served u pon you, w ith h 20 days a fter ;;errica of this sur nm aii :; upon you, exclusive ol the day of si3rvice . H` you fail to do so, j u ii{}rneiir by default YOU be taken againsit you i tr the Eeliet demanded in this .complaint You must aW3 file; ymm answer 0th the { ;lark n1 ' this Court within a reasonable period of time after s{ervire . pas ti ill CLERK lj~ DATE IBY1 CiE~~iT'1'' ~: LIE131< -- Case 1:06-cv-02039-CC Document 1-4 Filed 08/29/2006 Page 6 of 28 RE'rum OF SERVICE _~------F------__- ~-- --~------_-_------_---_------.~ervlice c~f the Summons aid omC' il~~im[ was nn~3cle b y imFe DATE NAME OF SERVER PRII4'7} TITLE ------ l,heck one boar ,biW'o w to bdicate apprap,riai`e .n+eilhod of service 0 Served personally upon the clefiancla nt. Place whore served : Left copies thereof at the defendant's dwelling house air usual pIac:e of abode with a person of suitable g e and discretion then residing heireiri . Name ni ' person w,ii:h whom the summons and complaint NvOl'e left : _------~------_--- a Returned niexEacutecl : o Other Ispecify) : ------SUNEII471:M1f OF SERVICE FEES ------ TRAVEL SEI RV I C IES l"On41L ------IDECLAIR,ATIOIV OF ,SIERVIEIi declare uncler penalty of perjury Under the law-1, olf 'the IJiniti.cl Statles of America that the forelping information conta lined in the Return aif Ser vic e and S tal: emEmit a if Servi ce Feas is truo and correct . Executed n Date 'Sligna'tUre of Server Address Df Server Case 1:06-cv-02039-CC Document 1-4 Filed 08/29/2006 Page 7 of 28 ~~CZ~E9 ~I~EEY={5~~~ ~lLQLOSl~ ~II]~ ~J371~ G7JSIl===~ _-_==~ ____== = ==s~ ==__~~ =z_ _~- =~_ _~_==___-°== _~_ 1-T~~.i.1 - ~~,~~~ ~~~ -t~~~ti~~~~, District 1 C~' cilairt rvcarrffl? 1RrT uaniucr OFIGEo:R.c:IA ------ ~iiJl17[TN[O:N'S ]Q1 A t`l1M, CASE A. Edwar d Miller, derivatively on behalf of Witness Systems, Inc . Plaint if f , V. C;A,S:E NUMB ;F: .~~ [ : 0)131 David B . Could, Nicholas S . Discombe, William F. Evans, Kathleen Miller, Loren. B . Nancy Y . T'xeas,t:er.,, John R. BCiLII'IYf'_, Steven Byrd, Tom Bishop, . Thomas J . Cro1.1:'T , Joel G . Katz, Dan J . Lau t e.nb< Witness Systems, Inc ., a Delaware Corp., Nom.i n.a.1. Defendant . 7'O'. (rdaYne and aclalres,; of defendant) Kathleen FZ_LLi& Witness Systems, Inc . c/o CT Corporation, inc . 1201 W . Peachtree St . nE; Atlanta, GA 30 361 YOU AM E: HEREBY SLIAAIMICIpJED and required to some upon PLATn1FI='S xf7ORN 1=Y (narne and addrE :ssh nnartihn C). (,r,i'tNvood {;H17V100 D Fi A1RU :V HIARPJE:$ L1LP 1230 IPe< an ww+rJFSr to the co mplainl:,N hic;h is herewith served upon yciui , within 20 days after service of this surnmons upon You, exclusive of the dray 01 sisrN ic.e. If YOU 1ai1 to it) so, jiudS;rneaiit by default will be taken against you far the reMal demanded in the corriFdli3m:. You must W so file your answer with the Clerk oi' this Court within a reasuable period of time afi:er servke . JAMES N, auc .s (:I_E:Fih; IP ~` go' (BY) CI E:P'LrT'ti -ftER1K Case 1:06-cv-02039-CC Document 1-4 Filed 08/29/2006 Page 8 of 28 ------RETURN CIF SERVICE E:rvice of the Summo ns, and Complaint W as made by me' DATE NAME : OF SERVER (PRINT) 17ITLI= Check one box below to irnd,~mre appnvpriti te nao thioiY of service n Served per.sonally upon the de•fendairn: . Pl'ace where served :~ ------ _esft copies thereof a 4'thie defendant's dirve lllin g house or usual place a# abode virith a person of suitable age and dis cret i on the n residing tlia:re lin . Name of person with whom the summons and complaint vivre left: ri Returned unexecuted : c) Other (.-,pecffV1 : :>1r/a'fIuVIEINT 01: SERVICE FEES 1'FIAIIE: L. SERVICES 'r0TAL ------DEC'LA,FI'Ai'll3N OIL SERVER I declare under penalty of perjury under he laws of tho United States of America th at t he foregoing information contained in the Return of :iE:rvlice and Statement of Service Fees i :o true and correct . Executed or Data Signature of Server Address of Server Case 1:06-cv-02039-CC Document 1-4 Filed 08/29/2006 Page 9 of 28 /Ii~', ~ t ' ,p~ ~ 4s w !! 1 trriit;E .%od. NaRT:eI RNI 1o1s1T1Fux:,r OF GVEoRGIA ------ SUtVfM O]vS P1 A CINIL CASE A . Ediward Miller', on behalf of Witn.e s~s, .~ySt:EM;s„ :Ci11: . Pla:Cnit :i E E , 11. CASE rO:JM]BEP:: David B . Gou.l.6, Pli:c;tio=La .s S . Discombe, 1William f . E',varis, F .ai_liLeein ]Killer, 91 :Lo ren B . W'i.mpf1ie:inW1- :, Nancy 'Y . Treaster', John R. Bou.YTW, Steven. Byrd, Tom Bishop, 'T'homas J . Ci•at:t.}r ;, Joel i;, 'Katz, Dan. J . tautenba .u.c.rt, and Peter '5infsgalli, Defendants, and 'Witness, ISy,<_-mE.vn:a , a Delaware Corp ., No-minal Die#en~d[arO:, Tp: ~rfa~nrnc and address of defe~nilas~t) Loren B . G~~ impi'i-e _Liner Witness Systems,, .Clll_ . c/o CT Co-r-poration 1201 'W' . St . NE Atlanta, GA 30 :3i5 1 YOU ARE HERE-131( SUi hn11AO 111E:C) aid required to serve upon PLAINTIFF'S A1r1F0RIV E :l' {nanzEe and adidress~i Nlartilhn D . C;hiil: vJ oocl cHu'VA100 i) FiARL E:ti- HARNESS LLP 1230 Peachtree Street, Suite 23+00 Atlanta, G A 3 03 09 (404) 1373-3900 an anawieir to thi, complaint which is herewith served upon you, within 20 clays after servioe of this SUITinions upon you, exc llusllve of the day of :sarviice. If you fail to do so, judgment by default viill be taken againsl you for the relief demanded in the coimiplaint . 'You nnust also file your answer with the Clerk of this Court within a reasonable period of times after sEarvlice , ~rxNw-',; ,V. 4TATT~nf ------14U'3 .410 2d~a° ------CLEAN. DATE (BY) DEPU Y~ CLERK ~-+^--- Case 1:06-cv-02039-CC Document 1-4 Filed 08/29/2006 Page 10 of 28 RE.TURN OF SERVICE Service of the Summons and Complaint was made by ~ me' DATE NAME OF SERVER iPPWTI 'I'TI_E: ------ (:Beck one bcix be/01W to indicve oppro)2riate method of seJTiae o Served per.;ckn ially upon the deFern idan•t . Place where served : Left copies thereof at the defend ant's d wellling house or us ual place of abode With a person of suitable agle and d iscirertli on their residing therein . NamEe of person with whom the summons and oompliaint ware lefi[: ca Returned une;cecutiacl: o Other {[ specify}: ------__-'------'-----w------;il'{vi-F:AAIEW'T OF SIEIR'VII C:E: IFEES TRAVEL. SERVICES 'roTAL ------DEC'LA,RAl'U'JN OF SERVER declare under penalty of perjury Under the laws of the United States of America that the foregoling information contained in the Return +s1' Service and al:ati :rnant of ;Service Fees is tru e an d c:cirirect . Executed on Date Signature of Server Address Of SEw'ver Case 1:06-cv-02039-CC Document 1-4 Filed 08/29/2006 Page 11 of 28 ~ k a ~b %sj; ~1 d w ~w 1.1-nite, d lk'5 t; atels) :Dis 17wiet C: ourt rfO:R:7.'liEF:N I)][:i7C]RHC'I' 01i' GrEIaA:(iLIL ------S1JNMOL1f5i :Q1i A C717111, CASE A, . Edward r4:l:L:ler, derivat ivel.y, on be4ifG] L]` o iE id:Evie ss Systems, Inc. . P1airtt3.f'f' , V. c;A,sE NUMBER: DaLvj_d 14.. Gc»x:ld , 'Nicholas S . Ed.scouibe, Wi.l:l.i.< Witness a!tf3l: em,3, Inc . , a Dela .wa.re Corp . ,. Nominal Def'enLdLstrit: . (r1Effne and a,d.drr.-,m, a)i' dcfe;nd:art) N ancy y . Tret a S t:E'7' Wi.t: rie:.~, .a systems , inc . clo CT Corporation 1201. w. 1 :1each-tree St . NE Ati: IclTli :bi :, GA : 30 3~61 YOU ARE HERE:EW SUMMONED and required to serve Upon PLAINTIFFS A,TT'ClFIN EY Cnarne and address) Nlaihtiiiri D . Chit wood CHI'f1NCiCID HARLEY 11ARINE'S LIP 1 .231D F'ea chtree 'Sueet, Suite 2,1300 Atlanta, GA 303+D'9 1404) 87'3-3900 an ainswer to the cnrnplaint which i:, herewith served upon you, within :?(} days sifter service of this :;Unnirons upon you, ~relief exclusive of the day of serrrice. It you fail to do so, j udginent by default vr ilil be takien ag ainst you for Itie period of deimianded in the complaint, YOU rnui st also fi bs y our answer vvii:h the CIlerlc of this Court within a reasonable tirne after service . Jalx 3 0 '~Mir CLERK /~ DA'T IE _~- -~- -_------Case 1:06-cv-02039-CC Document 1-4 Filed 08/29/2006 Page 12 of 28 RETURN OF SERVICE ~'~en~i +cis of the ; '5~~inmc~n~s Arid I~~~mplairit ti va.s made by rnie'------D ------ NAME OF SERVER iPPWTM 7'I'f LE c ------ C:Fieck cane box lyeb ia to imAcawe appropriipte method f seivice o Served persciniail'y upon the defendant . Place where salved; Left copies thereof at the d iefendanl :':a dwell ling house r usual place of abode With a person of suitablle ague and, discretion then residing therei n. Name of person with whom the summons and compliaint were lElf•t: o Returned unexecuted : o ethe r Ispeclf1r) : ------:y1- w- -fl :-MEINT C)1 = SERVICE FEES ------l'FA1! E L. SERVICES TOTAL ------DECLARATION 17'F SERVER declare under pi.rka ilty of penury under the la,wvs cif the United States of America that the foregoing information contained !i n the Return ~ :)If Service and Statement Waif Service Fees is true and rorreac,t. Executed Dil Dale Signature of Server Address of Server Case 1:06-cv-02039-CC Document 1-4 Filed 08/29/2006 Page 13 of 28 --- =-- -a- = -a-=s- ==------am -v-- s-- a= l~.~r3.i.1t~n,~~~ ~~~~r~a~~t~e,;~ 1~)i~s,~ri.~~t, Court vc~~trev.»rf :oi~sT~U:c~:r OF GV:EORc,YA, ------ SUNJl1IGN15 IN A. CIVIL CIALSE A. Edward Mfi.].].ez- , der_Lva lt iv,el,y on 'be'half of W1.t.rLe;ssfa 5ys1.i.ia,s, I•nc . ]?:La:ilnt i f f , IV, Ca,SE TrCTE1?I 3]ER.: David B. Gou].d„ r1:Cc1to :L;3is S . Discombe , Will ia.u~ E' . F:vfi-ns,. Ma1t1.1:Leen Miller, Loren. B . Wi.niFii`tiEs:Lme,r, Nancy Y . Treaste r , John. R.. EicrurnE: :, :i1teloreia Byrd, Tom Bish op, Thoma.s J . (;r.o t_ i_y„ Joel C . 'Katz, Dan J . Laut enIaAAc:h, find Peter ginisgalli, Defendants, and. - W i tn~e.ss SyEot:Eern:a, a Delaware Corp . , 'ga~nina l Defen.d.a.n~t. . TO: (1-fame and address ofilefendant) .Jolziz R . BouYn.e. {41 I.t: i L E! Si,i SITS 1 =P]R3 , I'R C . C~/Cl CT Corporation 1 2'.CI J. W,, Peachtree St . NE Atlanta, GA 30361 YOU ARE HEREBY SUMMONED and required to serv e upon PLAI!NTIFF".5 ATTORN EY I,n arrie and +adclres.o1 Nlartihiti D, C 'hitv+rood CHIIrN'o C)D HIAMLEY II,ARNES UP 1230 F'eac htreEa Street, SLiite :t3O0 Atlants, GA 30309 (404) 873-3900 an answer to the complaint which i,s herewith served upon YOU, Within ;21J days after service of this summons upon you, excllusi4e of the dall of service . 'If you f1W to do SO, judgment by default will be itaken against )(ou for ffiet rfafief demanded in flies c oinplairEt . You must Ono file your i ns vver with the Cleirlk of th us Court within a i,easoiiatde pejriod of time after service C; L. E R.K. DA T E ------IB'Y MPUTY (',LE: Ftk: Case 1:06-cv-02039-CC Document 1-4 Filed 08/29/2006 Page 14 of 28 RETURN CIF SERVICE ;~erviae of the Summons and Complaint was made by me' DATE NAME OF SERVER (PRINT) TIT LIE ------ {:/reck or,~e box i4i?l~:Plw to irndrea [e appropriate ethod of sm~vice i:j S erved personally upon the deFE;nda mt. Place where served : Left opies thereof at the de1'en di ant's dw elling house or usual place of abode with a person of suitable age arid dliscretion then residing tlhereini. Name of per;;cmi With vvhurn the summons and ramplaiin# vvere lefr• i] Returned Unexelcuted : 13 Other (spec-ify) ., ------STATENI E:1111' 'OF SERVICE FEES TIRA' V E L S E R V I CES) TOTAL ------[)I?(,-- I_AIii4'fllCm OF :ij_Ft11F.Fi ------ ~decsl+are under penalty 131' perjury under the laws )1 the United States of America that the foregoing irnformatic~n contained in -the Return of Service and Statement of Service Fees is true and corrac;t. Executed on ID a1:e aiginature : DI Server Address of Server Case 1:06-cv-02039-CC Document 1-4 Filed 08/29/2006 Page 15 of 28 x_ V 3 9 ---sam--m-m ----s-= ------ U"nai te; d "States, aC)i.;itr7i c'1~ (Court ]NORTHERN IDIS7'It][CT OF IR;()]RCI[A ------ ISIJ1VJQv1:01"i IN A CIVIL CASE A . Edward HIL]L:Li.ir, de rivat ively on behalf oi' tiTjll;nes,s Systems, Inc . Plaintiff, V. CASE NUMBER: Tismicl li , . ('Towlii, Nicholas S . Discombe, Ffj.7.]AL .1sn IF . Zmwns , Kathlee n, Nf1.]:].er , Imii-ESii ]3 , la: Lmp E'h eimer, Nancy Y . 7'rect .. t:er ;, John R . ]aowrine , Steven Byrd ., Tom 111-shop,, 71u= i1 ; ,J . i:.~rO tty , Jo e l G . R:aLt;z,, Dan J . . I.auii:en,baw--lip an d Peter Die f' e.riclZirit: s „ -- and S1:li.ne;s;s Systems,., Inc a. LIe7_awarf: Corp ,, TO : +RJai= and iiciclress of de:fendam) i 1` eve-n Byrd la:itness Systems, Inc ., C /o CT Corporat i.ari i .2{D i 'W . Peacr .tre.e: St:,, ZJE Atlanta, GA. 30363. YOU ARE HEREBY !> 1JIIANIONIEI] and required 1:o :serve upon PLAINTIFF'S i4'T'TORN 1=lirirma and aid drfsssl PJlanihin (). CItiihrvn+od (;I-1117'VVO QD IiARLE-Fe FlE1Fil'df:a UP '12:30 Pe ac:hitree Street, Sulite 2300 Arhsrita, 'GA 30;30f} 1404) 873-3900 an answe r to the complaint which 'is fiie:rOI rvith served upon, y ou, within `! CI idi3yrs, Mien service oaf this s umrnoirsp upon yolj, exclusive of the defy o f seno ic.e.. If you if ail i ;o d+D :.c. , ju+dgrneiil; by default tiv lNl be taken against you fo r the relief d+aina indecl in the complaint . You must a llso file youir answer with the Clerk coif thi ;5 Court w, it:hirE a r aascmiable period of time Oter sen ii ire:. JAMES N. HA TPI rr J - CLERK _------~/ cf;vf i)ri?trr~r c;LE~t~--- Case 1:06-cv-02039-CC Document 1-4 Filed 08/29/2006 Page 16 of 28 &C 'L4 4 j3fLv _ MU 3iL07lT i9Jy` iii iLStiYLNj!S1QL- -==_- ------RETURN OF "SERVICE ServPr,e of the Summons and ('.or»plairnt was; imadie by nni3' C}ATI- NAME OF SERVER 1PAPOI T'I "f i.E: ------ Gheck one box 6E,/ow to h7dhMte vppnopriate method o,f service [3 Served personallhf upon the diefendanl. Place whero served : Left copies thereof alt the dE;feinda nt's +iin+e llling house o ir usual place of abode with a .1pisr'soin of suitable age and discretion then rF:s9clin g tlio~relin . Name of person with whom the summons and complaint vierle Heft: ------ in Returned Linexecuted : iD Other isj:iechly-) : ------STA,T'ENfEcMIF OF SEFIVICE FEES------ 'TRAVEL SERVICE-13 l'CII'AI_ ------IDIEiC' Li41R,ATIC) N OF .51ERNI:11 deelairs, wider plen alty of perjury under the laws elf the United States of America that the 1fo reflciiing information onrit6lned in the, Return o f Service and State mE;rnt of Servioe Fees, is truo and correct . Executed can D,ate Signature of Server ~4ddres;s of Se rver Case 1:06-cv-02039-CC Document 1-4 Filed 08/29/2006 Page 17 of 28 ~ "' ea=- _--- =a= ----a--^s_~-----_- sso- __mm - a----a_Fs 1Chlite'd States E)istrict 1vCIR'THM][trf :DiSuu:C:'C O:F (1:EOlLtGu~ ------ SITTNII4CI1vS IN A, CIVIL CASE A . Edwa.Yd. N[i.].]_er ;, de;r:tva-tively on behalf of Wi.t:xie:a s 1i;yi3tein,s, Inc . ]P:L+9.int if f , V . CASE NUMBER.: David. F. . C.ou]Ld ;, Nicholas S . Discombe, William 1% E)mm; , ]Kathleen Mil l er , 0 31) La x'en 11 . tidj'mpi :he :Lin,er , 'Nancy Y . Treaster, J ohrL R . 1io uriie„ ;5 t{e•ae-n Byrd , Tom Bishop, TtamELS! :f .. (,ro1:lt,Y , Joel G . Kat z, I7la.n. J . I,axL:E!IFtmiICh ;, and Peter Sinisgalli, Defendants, W i.tmews :ivlatems, Inc. , a De 1.amaa-e~ Corp ., „ Nominal DeferLdEL111: ., TO : Qdaine and address of .3+.1:en{dmit) 7'om Bishop Wi i.riE:s;S 3 'yst M s , Inc . C/o CT Corporation 1201 14 . Reachtree St . NE Atlanta, GA 30361 YOU LJtEi IHEREBY $LIAAIMICM IE:[) and required to serve upcari PLAINTIFF'S A717OI1W E:1' lrian-mi and a ddi'ess) IVlartihn CI . (;hiil:vuncscl 12'3 Ci Peachtree S;tireiet, 'Smite: 2;30ia Atlanta, GA 3CGOG, (4104) g'73••3900 an ansrrie r to the complaint w hich is herewith served upon you, within 20 days after service of this sIuirHTIMI s upon youi, exclusive o1P the day of service. H' you fall to do so, jtacl El m on t by default mill be taken against you for the relief cle mairidied in the corri pla h t. You must 13150 files your answer tiro li th the Clerk of this Court within a rea soin,abba perio id O f time after service. ,T WIt S 6 :210S NM T ------CLERK DATE i ~ ------f6Y'1 DEPUTY CLIERI< ~-- Case 1:06-cv-02039-CC Document 1-4 Filed 08/29/2006 Page 18 of 28 .TLIFtlil OF ------FIE ------SERVICE Service of the Summons and Complaint was made by ma' DATE NAME OF 'iE:FIV E:R Lf'fPWT,I TITLE ------ Check cane box 1'relow to r,rnffic,a re appropria te methINd of service Served personally upon the defendant . Pllaaa w heire s+eiveid ; ball copies thereof at the ~ dei'end+ant` ;o dwelling house or usu al place of abode vvitli a person of suitable age and dli screhtion then residing therein. IIVarn e of person with whom the summons and complaint vvlwe lefi [: 10 Returned u ne7CE : CUf13iI : o Clthi~rl Isp ,erifyM ; ------ST'Al'E:f4Alcta CIF SERVICE FEES TRA,VE:l, SERVICES TOTAL ------DECLARAT'H)IN OF SERVER declare d er penalty of perjury under the lar+v,s of the United States of America that tho foregoing information contained in th a Return o f Service d Statement of Service Fees is; itrue and c,arrect. Exec{uted on Date Signature o f 'Server Address cif Server Case 1:06-cv-02039-CC Document 1-4 Filed 08/29/2006 Page 19 of 28 ~Ul7n~:it~;~~;~~l lit~ ~>~~~tF,~c ~D~~i~~#~~i{~,~~ ~(~` cila7rt NoIRUEEIR;r1 n1:STRICT OF IcE:M 011 ------ :i1JNEW[4:N'S 11N AL CIVIL CW131E A. . E.dIGFFU'cI r si:L:Li_-r , derivat iu ely onn behalf of `rjL1:im;s;s Systems, Inc . Plaintiff, V. CA'312 MMER: David B . {':ou :Lci , Nicholas S . Discombe, W'i.l.].i.smi F., Lzrm.m , Kathleen Miller , L~ore,n 11 . 41jLmpi` hia:ime r, Nancy Y . Treaster, Johri RL Bour ni., ;5tieven B yrd, Tom B ishop, T'ha,i .;f . (J.ro1.i.y , Joel G . Katz, Dan. J . L,a.u.t:e:xitQtuc:tr;, and :Pie t e r Sinisga 1 I i , ~Defendan t a , - W'i.t.r,Le:SF; 'Inc . , a Delaware Corp . ,. Nominal D e f en,d.a.rit: . TO; {N< YOU ARE HI:RE:EtIl SUNI PJIONM articd required to save upon PL,AI1NTIFF'a TORN EY {Wattle and aclcire,s:i! Nlain:ihn D . ChitwFood CHI"fWOC![} HARLEY HARINE'5 LLP 1.2910 F'eaolitriae; 'Stre+at, Suite .!.IOCf Atlainita, GA 310 3+a 'B (404) 8712-:3900 an ainsw er to the complaint which is herewith served upon you, withlin 20 days after service of this summons upon YOU, exclusive of the day of swvice . If you fail to do so, jiudgimient by default IMP be taken aig ainst you for the re liei' deimiarndecd in the complaint ., YOU must also file your answer with 'the Clerk of this Court wilthin a reasonable period al time after sep/iice . mug .9 Q Tat _. CLERK --- D~4'Ti~ ------U31(y 1)1;.I)IJ'F'( CLERK Case 1:06-cv-02039-CC Document 1-4 Filed 08/29/2006 Page 20 of 28 ------RETURN CIF SERVICE ae,rvice of the Summons, and Coimiplautt was made by me DA TE NAME OF SERVER (IIRIVT1 TIT LIE ------ C:heck once box ihel0lw'1'o h7,00,68 m, apprvpriate method of service 0 Served personally upon the de FEmdamt. Place where served, Left copies thereof at the defendant's dwelling house or usual place of abode with a person o f suitable age and dliscretion then residing therein . Name of person with whom the summons and complaint wore lef1, : _------_-_------_--_---- 0 Re1tuinni3cl umi,)( EicutE:cl: Cl Other (sjuacffy) :~ ------5TATENIE:MT OF SERVICE FEES ------TRAVEL SERVIC ES TOTAL ------:lt ------D1EC1Li41RA'T I O-N- -C -tF - .-5 1?-IiNl------ declare under penalty of perjury under the l aym of the United Suite ., ; of Ame;rli ca that the, foregoing nrf+or matiti ni contained in the Re 1tui rn of Service and Statement of Service Fleas li s tr ue and correct Executed on Date Signa 1tuire of Server Address of Server Case 1:06-cv-02039-CC Document 1-4 Filed 08/29/2006 Page 21 of 28 ~~i N1 s s i ~ ~s ~J''d r 5.ini r d - s~~-- =s~ = -m - - -~~ ~av~ ~mmav- - - - ~~m a - - - - ^------e- - m - -a- aoa 1 -T 1I.i.1~+y.~~. States E)a stric t; (. ;oijr t rvONreERN IDISTRICT OF GEORGIA ------ SMvIAZCIPJS IN A CIVIL CASE A. Edward Miller,, derivatively on 'b e'half of W'itnLe:f~fi a,mteims , Inc, ICASE rUINI 3ER: 'David B . Gou, l.df, tz :Lc:hcs :Uis 15 . 'Disco•mbe, William F . E;VjRYM :, 3C:1t3z :La_en Miller, Loren. B . W3.uLpfheiYner„ Nancy Y . Treaster , John R. . Baua•rie„ :itelx i>» ]g.yrd , Tom Bishop , Thomas J . C:rot:t.3r ;, Joel i; . '.Kat z , Dan J . Laea t en.bia .u~c:h, and ]?eat+ax 15i•n isgalli, Die Eie-ndants, - and. - Witness Ir ;y€it:e.ni;s ;, Inc . , a "Delaware Corp . , 1Noimi.nal Defendant. . T'{): (Name and address of cie ;fen(hant) Joel G . Kzitz c/c, CT Corporation 12101 W . Peac-litree St . NE YOU ARE HEREBY SUMMONED and required to serve union PLAINTIFF'S A,TTOFIPJ EY Inane iirkl ~x9clre;ss1 Nlantihn D. Chitvsroad CHII'fIN'CiC)[) H AFIL.EY HARNES LIP 1230 Fleachi :risE: 5treeit, SPuiite 2300 Ailan -ta, CiA 30309 1404) 8j"13-3900 an ans w er to the cornpll air it which i.s hierevsria ,h se,rvisci upon you, w ithi r , 2iJ days after service, of 1; hi :; , surnimions upon you, exclusive of ~the day oaf service. Ilf you fi) ill to do so, judgment b y da'f ault will be i t aken uEla i nst )(CILI for the relief demanded in the comp llairit. You must also file your answer v, ii, thi the Clerk of this Court within a, reasonable per iod of tnie aftier ;se ;rvic ie. 1 jpx JAM F`'.3 .~I. RXTTE-,'N' Aas ;' D ~ CLERK (DATE { IB'YI DE~JTY {:l_E:FX Case 1:06-cv-02039-CC Document 1-4 Filed 08/29/2006 Page 22 of 28 ______--____~_~__ ------^------^z IRIETIJI31~ (IF 51EIR'V~IC.f'. `iESrvice c~ f ih~a S~urr~rn+~n,~ ai~c~ Corriplai~nl: was macEe by im~e' DATE NA,Illli: CAF a1=R~J1=R 11'Rllli7] 'ElTL'E ~~~ 7E?C'k 0/!E! I 5 f 7J~ +bl°~ OW ifL ~ ~'/ 7C~IC' 8 tE? BJ7~)IO~pi7i 3t'B LI7~°1'hod of 58 fS R1:E! 0 5erwed {~e,nsori~~lly upon the d lefi,rEC lant. Place vvlie~re served : Left c,e~plE:S 1 '~'12ff.0~f a# t his de •fer~dai~i ;':s dv~~elfing Fic~use oar usual pl~3c:e u1 ' ;~t~cidle ~nrit lh a pere~on of ;~uiii.able ~if~e~ aanCl discrestic~n i:hen re;~i dling the~reriri . Name ~~t person with ~nrh ~oin the surrinnor~ :~ +ancl c~a~npllair~t ~v~are D Re'[II F R~B1j Ufl@ :KE:[,U t~3[~ : n Cith ,~r I',sperifyl : S~T'p~TEiIIAI:~J"C CIF' ;51~It~JIC'E I~E:E:S'~ TRA,1r'E'.L :iEF~~'I~C E;5 1'O'f ~41L IDE~CL,ARATIA~U OF S EIR'UEIR declarES ~uiicie:r Fienallt~y of perjury antler t lh~~ IeEw .~ of the; ~Unlit~3d St~~te :s of A ~n~eric ,a that tf~e~ fcme~~nin ~~ inforrna ~tior~ c~~ntain ~ed i nn tlh ~~ Return of f~e;rvic~e ar~d ~ita ~tetmE.rit c~f ~~e~rric~e Fee ;; is i:r~u~3 an~~ correct. Fxe~ci~led can Gat+. Siginat~ire o~f ~~er~re :r ,4~~dres ;s of Sen ~er Case 1:06-cv-02039-CC Document 1-4 Filed 08/29/2006 Page 23 of 28 ''. Ci ii !,I.~1 1, 1. m--6==mo- --moo-=-_-=-m__- 6-s_o---_--_ ICJ"jaite,icl States Di.shi+c,1r C7ourt NORTHERN nIisIRI[c~r ofAMcy7R.c.IA ------ SiJINQvI:C}]vS IN A. CIVIL CMM A . Edward Miller, derivatively on behalf` of Witness S;ys t+eins , Inc . Plaintif f, v, CALSE, r11J14113'ER-- Dav i.d. 11 . Could, N:iehol,as S . D iscombe, William 1~' . Fhrauis, Kathleen . Mi ller, ,. ~ .. . . Laze n Et . Gfj_uipi`h i.:Emer , ]Kvnc'y Y . Treas ter, John . P:.- bCiLl7'IIE: ;, Steven Byrd , Tom. Bishop, Thomas J . (;roL•1 .y, Joel G . Katz, Dan J . I,avte.n&wc :Yi„ and Peter Sinis ga 111 , Defendants, - and W'itn*s«i Systems, ' Cmc . , a Delaware Corp . , Namina l Defendant . TO: and address of(Jefen(LaTit) Dan J . La.u.t.eribatic_ll Witness Systems, Inc . c/o CT Corporation 1201 W . Peachtree St . NE Axletnta, GA 30361 Y OII ARE HI:RE:BY SUMMONED ancd required to some upon PL .AdIN TIFFa A,TT'CIFtN EY In a me and add re,ssl Nlain ;ihri D. ChitwFood CH I'fWOClf3 HARLEY WA RINE5 L.LP 12310 F'eachirise Street, Su ite :.tOC) Atlanta, GA 3103112 VIN 8=3900 an answer to they complaint which is Iherewth aenmcl upon yma, +NEthlin 20 days afteir service o f this, :siinninons upion you, exclusive of the day o f :,e ndco . If you fail to do .so, jju dgmant by default will be taken against you for the irelielf dernanded in the complaint You must also fif e your an swer with 1he Clerk of this Court within a rea,sonw ble: period o"f time; alter se rwice. ------GL ERK----~ ~?~ DATE eo& . 1 T13YI DEMYTY CLERK Case 1:06-cv-02039-CC Document 1-4 Filed 08/29/2006 Page 24 of 28 ------ RETURN ~DF SE:PiVIICIE Se w i ce of the Summons a nd Complaint was made by me' DATE NA1MI E OF SERVER 1PRIN71 TITLE ------ C'heck one box below to indicate tipproErriafe method of service n Served personally upon the defendant . Place where served : Left copies thereof alt tYie dE:feindarit's, dwelling house o ir usual place of abode with a parson of suitable age and discretion then residing therelin . Name of person with whom the summons and complaint viciria left: c2 Returned unoxecuted : 1:1 Other (spechry) : ------S7ATENIE;~111~ OF SERVICE ------FEES------~ T RA V EL SERVICE-S TOTAL ------D IE I'.IL1aIRA TII CIpJ OF SERVER ------ declare under pe n alty of perjury under the laws of the United State;; o f America that ithe foregoinfi information contained in the Reitui rn of Service and Statement of Service Fees li s true and correct . Executed on Date 5i gnaituMs of Server Address o 'f Server Case 1:06-cv-02039-CC Document 1-4 Filed 08/29/2006 Page 25 of 28 Cl 11 111 it ~601 1 v rl l. --==-cR-- aa_a---- - m_a=--__ -xa_--6=== ------m- m__----_s "U~~ni:~tE~~cl State's ]C)~i~;~t;~MiIc;1t ~C~'1211art N0]R'I'IEEP;P1 TI1:57'lZ[CT OFIGEO:R.Gr]A ------ S1JM N[O;NS 11N AL C3111, OUKE A . Edward 11i:L:Le:r, derivatively on. behalf of Wii:ni?a,s Sys tems , Inc . Plaintiff, . V. cEU>>E MIA]gER: David B . (aou=Ld, ]!Iic'ho las S . Di acomble., William F . ],van;a , :Kathleen Miller, I,oren 11 . WimpiE]zeiiner , Nancy Y . Treas,ter , John F: .. FsoUX-]W , '5 C e'aen Byrd, Tom EdsliaFI, Thomas :f . Crott ;y , Joel G . Katz, Dam J . I,&uit:eMbau c:t1, and :Pe ter Sinis ga.J..l.i., Defendan t s, - and -- Wi. t:ries,s :iym . mm;s, Inc . , a Delaware Corp . 11 Nominal die fertcl< YOU AR E HEREBY SUihIMO111ELG and roqu ireid to seirve upon PLAINTIFFS Al'1'C)FtN EY {I niame and address) Nlsirt ihi3 D 1. Chitv+rciod Chli'fwbOD HARLEY HARNES LL.P 1230 Peaclhi:ree Street, ;iuii:e :?:i00 Atlanta, GA 30309 (404) 8-713-391DID an answer to the c+smpllairrt which is herewith served upon you, Within 20 days after service 431: this ,surnirmns u pon you, exclusive of the day oaf service . Ilf !you Mil to do SO, Judgment by de-Fault will b e itak e n agaiins t )KOU for the relief demanded in the cnEnpllaint . You must ailso file your answer vii-th the Clerk of this Court within a r e asonFiblEa p{ericscl of time after service, Ik tb 216 CLERK DATE il3'Y) IIID E IPIJTY CLERK ~--- Case 1:06-cv-02039-CC Document 1-4 Filed 08/29/2006 Page 26 of 28 ------ ------RETURN OF ISERVICE Service of the Summons and Complaint was made by me" AT E NAME OF .iE:Ft\/E:Ft IF'F7GNTM TITLE ------ C:fieck cane bcrx beh i iN to l xdic ive apFirq)vit pte method of sigivice in Served personally pon the defendant . Race wheire seiveld o and Le1t copies thereof t the +d ei'en id an#':. dwelling house or usual place of abo de with a person f suitable age discretion then residing therein[. Name of person With vvhorn the summons a rid corn plaiLnt wore left: : ------~------ i:1 Rai:unsecl uni .xecute:dl: ID Other isjDecify) : ------STAT 'ENIE:AII' OF SERVICE FEES -- TRAVEL 5ERV1 Cl =a TOTAL ------DECLARATION CAFS1:1I1l1=R declare under penalty of perjury under the laws of this United ' Suites o-f Ame:riica that lhe fonsgciing information contained in the Return of Service and Statement of Service Fees li s true and CDIrrecl . E;Ki.c:Litled on Date Signature of Server Address o'f Server Case 1:06-cv-02039-CC Document 1-4 Filed 08/29/2006 Page 27 of 28 j (Yr' 3 ' w 16'Jn.ite-dl ',-States, District rvcm:rEo.1Rri nasnucr 40 ,GEo R.cIUk ------~c~AYMo»S ]I 1 A CASE A . Edward M:i.l. l.e:r, clE.y^_Lua1t?f,ve ly on behalf of Witness Systems, Inc . Plaint if f , 'v. CASE NJUBER: David B . Hv, l.d, Nicholas S . Discombe, .- co William F' . ENELIIs ;, Kathleen Miller, , 0 Loren B . W3.mpfheiinE:r„ Nancy Y . Treaster, John R.. Bouxme:,, Steven Byrd, Tom . Bishop, Thomas J . {;rot:t,y ;, Joel G . Ka t z, Dan . .] . Lautenba.v.c.h, and Peter Sisisgalli, Defendants, and - Witness Systems, Inc . , a Delaware Corp ina l Defendant. ,Nom . TO: (rfarne, and addr ess of' de:feniiant) wi tn e ss Systems, Inc . c/o CT Corporation 1201 W. Peachtree St . NE Atlanta, GA :30 3 6 1 YOU ARE F{I:REEiIf SUNHJIONIECi and required to serve upon I'lJUNTIFFS ATTORIV EY (name and address) NWirtilsn 0 . C'hitwood CHI I"fINUC}[} HIARL.EYV ARNES LL.P' 1230 Fleachi:rao Street, Suite 2300 Atlanta, GE1 30309 YEO41 f37 an ains 'n er to the ~Cornpll airit which is h ar emriith saved upon you, within 20 days afi :er service o 1 ` this surnamms upon you, exclusive of 1 thie day al service. 'ff you hW to do so, judgment by default will be taken against you for the relief deimian ided in the .complaint You must sl.oa file yaw answer with the Clerk d this Court w ithin a reasonable period of time; after :aervic ia . r .~- _ ~.~ I~Ki ~ .7~' zQS - CLERK 9 DATE {13`rl DEPUTY C . I.ETRR---- ~~ ------Case 1:06-cv-02039-CC Document 1-4 Filed 08/29/2006 Page 28 of 28 RETURN CIF SERVICE ------,er tice of the Summons and ~Coimiplaint vi made by me' DATE NAME OF SE:FtVE:Ft fPfrANTh TITLE ------ C;hevk cane bm 15ealow to indicate ii-Mite nnethod of svvice o Served personally pon t his defeinidan't. P lace where served : Left copies thereof at the id ei'enid+arit` s dwelling house or usual place of abiode with a person of suitable age arid dliscreiion then residing therein . (Name of person with tiv horn this summons rid complaint were lefi: : ------_------_-----_-__------_ 0 Returned unexecut(od .'. D Other jsjqo?cAIy) : ------STA,T'ENIETII' OF SERVICE FEES I TRAVEL S E RV'I1'I=:i TOTAL ------DIEI21Li41R A'TIICIN OF SERVER declare under penalty of perjury under the laws of the United Starte :~ lolf America that: the foregoing information contained in the R eturn of Service and Statement of Service Fees ~.~ its true and correct . E:Ki)c;Litied on Date Signature of Server Address lolf Serve r