UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA

Transcription

1 Richard M. Heimann (State Bar No. 00) James M. Finberg (State Bar No. 0) Melanie M. Piech (State Bar No. ) Joy A. Kruse (State Bar No. ) LIEFF, CABRASER, HEIMANN & BERNSTEIN, LLP Embarcadero Center West Battery Street, 0th Floor San Francisco, CA - Telephone: () -000 Facsimile: () -00 Counsel for Lead Plaintiffs General Investors and No. Financial Investors UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA 0 IN RE TRANSMETA CORPORATION SECURITIES LITIGATION / This Document Relates To: ALL ACTIONS / Case No. C 0-00 WHA CLASS ACTION DECLARATION OF JAMES M. FINBERG IN SUPPORT OF PRELIMINARY APPROVAL OF SETTLEMENT Date: December, 00 Time: :00 a.m.. Judge: The Honorable William H. Alsup 0 I, James M. Finberg, declare as follows:. I am a member in good standing of the Bar of the State of California and am admitted to practice before this Court. I am a member of the law firm of Lieff, Cabraser, Heimann & Bernstein, LLP ( LCHB ), counsel for Lead Plaintiffs General Investors and No. Financial Investors. I submit this declaration in support of preliminary approval of the proposed Settlement between the Class and Defendants Transmeta Corp., Mark Allen, and David Ditzel ( Settlement ).. Prior to agreeing to the terms of the Settlement, LCHB conducted an extensive factual investigation regarding all claims brought in this action, including those dismissed on Defendant s Rule motion but released under the terms of the proposed Settlement. This investigation included both informal discovery and formal discovery. It. - - C 0-00 WHA

2 0 0 included four depositions and dozens of witness interviews. And, it involved the examination of approximately 0,000 pages of documents relating to all claims alleged.. Most of the witness interviews were performed by three investigative firms David Fechheimer, John E. Conway & Associates, and The Mintz Group at my direction. Other work was performed by other LCHB attorneys assigned to the case and by LCHB s paralegals. I have general knowledge regarding the work described herein as I assigned most of the tasks, received frequent progress reports regarding their status and completion, participated in regular attorney meetings where the litigation strategy for the case and the ongoing factual investigation were discussed, and read what were identified by other LCHB attorneys and LCHB legal assistants as the most important documents.. Beginning with the firm s appointment as Lead Counsel, LCHB sought to identify and contact persons having knowledge about the Crusoe microprocessor chip s performance, particularly the time of the initial public offering in November 000. Toward that end, the three investigative firms that LCHB retained for this case contacted numerous former employees to interview them about the Crusoe s performance. LCHB also sought to identify and contact persons with knowledge about the truth or falsity of the statement made by defendant David Ditzel to Reuters on June, 00 concerning revenues for the second quarter of 00. Most of the helpful information from those interviews was incorporated into plaintiffs proposed fifth amended complaint. Exhibit A contains a description of some of the information obtained from some of the persons interviewed.. In addition to this informal investigation, LCHB also obtained formal discovery from the defendants regarding the Crusoe product. These documents included electronic mail by Transmeta s engineers regarding benchmark testing and the performance of the Crusoe chip in comparison to Intel s Pentium III. A sample of these documents was contained in plaintiffs proposed fifth amended complaint.. In addition to the documents obtained from defendants, plaintiffs also issued subpoenas to, or received documents from, the following third parties: Deutsche Bank Securities, Inc.; Dreyfus Brokerage Services, Inc.; Comdisco, Inc.; Mellon Investor Services. - - C 0-00 WHA

3 0 0 LLC; T.D. Waterhouse Investor Services, Inc.; Toronto Dominion Bank/TD Waterhouse Group, Inc.; the McGraw-Hill Companies, Inc.; IBM; Intel Corporation; NEC USA, Inc.; Reuters America Inc.; Ziff Davis Publishing Inc; and S.G. Cowen Securities Corporation.. The following persons were deposed prior to the settlement mediation: a. On August, 00, Michael Dzieciolowski was deposed. Dzieciolowski was an assistant vice president at Chase Mellon Shareholder Services at the time of Transmeta s IPO. He functioned as a customer service representative and Transmeta was one of his clients. Dzieciolowski was responsible for the issuance of Transmeta shares to Comdisco on November, 000 and December, 000. His testimony was relevant to the plaintiffs ability to trace their shares to the IPO as required by section. Mr. Dzieciolowski was questioned about the declaration he submitted in support of defendants motion for summary judgment. b. On August, 00, Kim Aiken was deposed. At the time of the IPO, Ms. Aiken was employed as an administrative specialist for Comdiso, Inc. Ms. Aiken was questioned about a declaration she had submitted in support of defendants motion for summary judgment regarding plaintiffs ability to trace their shares to the IPO. c. On August, 00, Arlie Andrews, Transmeta s treasurer, was deposed. Ms. Andrews was questioned about her declaration submitted in support of defendants motion for summary judgment. She was questioned about the exercise of warrants by Comdisco which was relevant to plaintiffs ability to trace their shares to the initial public offering as required by section. d. The defendants deposed William Danzell, the representative for Lead Plaintiffs General Investors Ltd. and Financial Investors, Ltd., and proposed class representative Roger Duffus.. Prior to the mediation, defendants also provided to LCHB, for settlement purposes only in defendants view, documents regarding the revenues anticipated for Q 00. These documents included information on chip shipments for each week in the second quarter of 00, documents comparing forecast revenues to actual in that quarter, and the board minutes. - - C 0-00 WHA

4 0 0 from the meeting regarding the decision to announce that the Company would not meet Q 00 estimates. Those documents were a subject of the mediation. Because of defendants position that those documents were only produced for settlement purposes, since they related to a dismissed claim, those documents were not included in plaintiffs proposed fifth amended complaint.. A settlement mediation session took place on September, 00. Antonio Piazza, a mediator experienced in resolving complex class actions presided over the mediation. Prior to the mediation session, both sides submitted written presentations. Mr. Danzell, the representative of Lead Plaintiffs, participated in the mediation session by telephone. After the mediation session, Mr. Piazza had several telephone conversations with counsel for both sides and with the carriers for defendants. 0. After the mediation session, but before agreeing to the settlement terms, LCHB conducted the following additional discovery: a. LCHB obtained and reviewed, additional pages of documents on the issues of the Crusoe s performance and revenue in Q 00. b. LCHB interviewed the following engineers regarding the performance of the Crusoe: Douglas Laird, Executive Vice President of Product Development; Jack Lo; and Mark Hennecke. Both Dr. Lo and Mr. Hennecke were involved in conducting benchmark testing of the Crusoe chip. c. LCHB deposed defendant David Ditzel. This deposition included questioning about his statement to Reuters on June, 00 regarding revenue for Q 00, his knowledge prior to making that statement, and about Crusoe s performance.. LCHB requested a deposition of defendant Mark Allen. His counsel advised that Mr. Allen had suffered traumatic injuries to his foot and back while in Idaho, had been evacuated to California, underwent reconstructive foot surgery, was convalescing at home in a body brace, with his foot confined until at least the end of January and receiving pain medication. Thus, according to Mr. Allen s counsel, he was not available for deposition due to the serious accident C 0-00 WHA

5 . In addition, LCHB consulted with an expert regarding damages, Candace Preston of Financial Markets Analysis. I declare under penalty of perjury under the laws of the United States that the foregoing is true and correct. Executed this day of December 00, in San Francisco, California. JAMES M. FINBERG C 0-00 WHA