1 Timothy J. Burke (181866) [email protected] 2 STULL, STULL & BRODY 10940 Wilshire Boulevard 3 Suite 2300 Los Angeles, CA 90024 4 Tel: (310) 209-2468 Fax: (310) 209-2087 5 Howard T. Longman 6 STULL, STULL & BRODY 6 East 45th Street 7 New York, NY 10017 Tel: (212) 687-7230 8 Fax: (212) 490-2022 9 Gary S. Graifman KANTROWITZ, GOLDHAMER & 10 GRAIFMAN 210 Summit Avenue 11 Montvale, NJ 07645 Tel: (201) 391-7000 12 Fax: (201) 307-1088 13 Attorneys for Plaintiffs 14 15 UNITED STATES DISTRICT COURT 16 NORTHERN DISTRICT OF CALIFORNIA 17 18 MICHAEL A. BERNSTEIN PROFIT ) CASE NO. C06-04346 JF SHARING KEOGH PLAN and RONALD L. ) 19 SCHWARCZ, on Behalf of Themselves and ) CLASS ACTION All Others Similarly Situated, ) 20 ) DECLARATION OF TIMOTHY J. Plaintiff, ) BURKE IN SUPPORT OF MOTION BY 21 ) RONALD L. SCHWARCZ FOR v. ) APPOINTMENT AS LEAD PLAINTIFF 22 ) PURSUANT TO SECTION 21D OF HAROLD HUGHES, DAVID MOORING, ) THE SECURITIES AND EXCHANGE 23 ROBERT K. EULAU, GEOFFREY TATE, ) ACT OF 1934 AND APPROVAL OF BRUCE DUNLEVIE, P. MICHAEL ) LEAD PLAINTIFF’S CHOICE OF 24 FARMWALD, JOHN D. DANFORTH, ) COUNSEL MARK HOROWITZ, KEVIN KENNEDY, ) 25 CHARLES GESCHKE, WILLIAM ) DATE: October 27, 2006 DAVIDOW, and RAMBUS, INC., ) TIME: 9:00 a.m. 26 ) JUDGE: Honorable Jeremy Fogel Defendants. ) CTRM: Courtroom 3, 5th Floor 27 ______) 28
DECL OF TIMOTHY J. BURKE ISO MTN BY RONALD L. SCHWARZ FOR APPT AS LEAD PLTF AND APPROVAL OF CHOICE OF LEAD COUNSEL - CASE NO. C06-04346 JF W:\STULL\RAMBUS2\PLD\LP DEC.wpd 1 I, Timothy J. Burke, declare: 2 1. I am an attorney with the law firm of Stull, Stull & Brody. I make this 3 declaration in support of the Motion of Ronald L. Schwarcz for Appointment as Lead Plaintiff 4 Pursuant to Section 21d of the Securities and Exchange Act of 1934 and Approval of Lead 5 Plaintiff’s Choice of Counsel (the “Motion”). I have personal knowledge of the matters stated 6 herein, and if called as a witness, I could and would competently testify thereto. 7 2. Attached hereto are true and correct copies of the following documents: 8 Exhibit 1: The complaint entitled Michael A. Bernstein Profit Sharing Plan v. 9 Hughes, et al., No. C 06-4346 JF (N.D. Cal. July 17, 2006), which 10 was the first complaint filed in this action; 11 Exhibit 2: Notices published over the Business Wire and the Associated Press’ 12 Market Wire on July 19, 2006; 13 Exhibit 3: The Amended Complaint filed by Ronald L. Schwarcz and the 14 Michael A. Bernstein Profit Sharing Plan on July 21, 2006; 15 Exhibit 4: Notice published over the Business Wire on July 21, 2006; 16 Exhibit 5: Certification of Ronald L. Schwarcz with attached chart showing the 17 purchases, sales and losses for the Ronald Schwarcz Revocable Living 18 Trust, the Eleonore Schwarcz Revocable Living Trust, and the Ronald 19 Schwarcz IRA. 20 Exhibit 6: The firm biography of Stull, Stull & Brody. 21 Exhibit 7: The firm biography of Kantrowitz, Goldhamer & Graifman 22 23 I declare under penalty of perjury that the foregoing is true and correct. 24 Executed this 18th day of September 2006 at Los Angeles, California. 25 26 /s/ 27 Timothy J. Burke 28
1 DECL OF TIMOTHY J. BURKE ISO MTN BY RONALD L. SCHWARZ FOR APPT AS LEAD PLTF AND APPROVAL OF CHOICE OF LEAD COUNSEL - CASE NO. C06-04346 JF W:\STULL\RAMBUS2\PLD\LP DEC.wpd
J~JUL . I'f.. .rlvl S1H,k b LLL \L. JtKVIUt L '. ' o _ 4. ;_ I.4 b7Ub9JI4b4U ^I G.NU 9411-D F. 6 E-Filing, An- P . Tl othy) (i818b6) sarm 2 STULL, STLn.L BRODY 10940 Wilshire Boulevard 3 Suite 2300 Las eles, CA 90024 4 Tel: 310) 209.2468 0 Fax, 310) 209-2087 Howard T. Longmate JU I ~~D L 6 STULL, STULL & BRODY C 7 7 New Yo York, NY 10017 ~~rH q Q $ 0 2~~6 Tel: r 8 : ~2i25 490.2022 a i;R 9 Gary S. Graifrnan K,ANTROWITZ , GOLDHAMER & GRAIFMAN 10 210 Sun mit Avenue Montvale, NJ 07645 11 Tel; (201) 391-7000 Fax: {201) 307.1088 12
13, UNITED STATES DISTRICT COIJ'1T 14 NORTHERN DISTRICT OF CALIFORNIA 15 06 04 ;g3"4 0 ■ v 16 . MICHAEL A. BERNSTEIN PROFIT ) CASE N0. SHARING KEOGH PLAN, on Behalf ofitself) 17 and All Others Similarly Situated, CLASS A0 14N 18 Plamlif, ) COMPLAINT FOR VIOLATION OF FEDERAL SECURITIES LAWS 19 V. ) FOR TRIAL Y I {v 20 HAROLD HUGMS, DAVID MOORING, ) -n ROBERT K. EOLAU, GEOFFREY TATE, ) r«- 21 BRUCE DUNLEVIE, P. MICHAEL M FARMWALD, JOHN D. DAI ORTH, C . 22 MARK I4OROWITZ KEVIN KENNEDY, CHARLES GES&ki,. WILLrAM .,., 23 DAVmoW, and RANMUS, INC.; 24 Defendants. 25 2s 27 28 .
COMPI..AINT CASE NO. W:1S?ULL\RAMaU"MCOMPLAIM' OQO1Wpd 1 Plaintiff, by its attorneys, submits this Class Action Complaint (the "Complaint") against the
2 defendants named herein .
3 NATURE AND SUMMARY OF THE ACTIO N
4 1 . This is a class action complaint brought on behalf of purchasers of the .common
5 shares of Rambus, hie . ("Rambus" or the "Company") who (the "Class") purchased such shares
6 between or December 12, 2001 and June 27, 2006, inclusive (the "Class Period") against Rambus
7 and Individual Defendants as described herein who were members of the Board of Directors of
8 Rambus (the "Board"), or were executive officers of Rambus, and signed its Form 10-Ks and/or
9 authorized issuance of its Proxy Statements .
10 2. When stock options are awarded, the strike price of the options ordinarily is set equal
11 to the share price on the day of the award. In this way, the executives of a company. are supposed to
12 have their interests aligned with the shareholders, whose holdings are diluted each time an option is
1 3 exercised.
14 1 3. As further alleged below, defendants improperly backdated (and/or had knowledge of
15 such backdating) stock option grants to various officers of the Company to make it appear that they
16 were made on dates when the market price of Rambus stock was lower than the market price on the
17 actual grant dates . This improper backdating resulted in option grants with lower exercise price s
18 and thereby improperly increased the value of the options and improperly reduced the amounts the
19 recipients of these option had to pay the Company upon exercise of the options, and unfairly
20 transferred shareholder equity to defendants. Defendants' conduct also violated the Company's
21 shareholder-approved stock option-plans, the Company's corporate governance guidelines, the
22 Company's standards of business conduct and the Company's conflicts of interest policy .
23 4. During the Class Period, defendants caused Rambus to file false and misleading
24 statements with the Securities Exchange Commission ("SEC"), including . but not limited to, Proxy
25 Statements filed with the SEC, which stated "Unless otherwise indicated, options were granted at an
26 exercise price equal to the fair market value of the Company's Common Stock at the date of grant ."
27 Since according to the scheme of backdating options, on the actual date that the defendants agreed
28 to grant options to the recipient the trading price of the . stock was higher then the "fair marke t
2 COMPLAINT CASE NO. W:ISTULL1RAMBUSIPLDICOMPLAINT 003.wpd c.
1 value" of the stock on the date of grant, the aforementioned statement repeated in Rambus Proxy
2 Statements issued during the Class Period, which are enumerated and described more fully below,
3 was materially false and misleading. Furthermore, if the option grant is backdated, the options
4 value is not "fair" from the vantage point of the Company and its shareholders .
5 5. Defendants' backdating of options .grants also violated provisions of the Internal
6 Revenue Code relating to deduction of option payments and thereby rendered the Company's
7 financial statements in Form 10-K filings for the years 2002, 2003, 2004 and 2005 materially false
8 and misleading. Rambus' Audit Committee of its Board of Directors (the "Audit Committee" )
9 continuing investigation may determine that the Company has to absorb substantial charges to
10 correct the error which will likely wipe out a.portion of past profits reported. In addition, the
1 1 Company's financial statements in Form 10-K filings for the years 2002, 2003, 2004 and 2005 were
12 rendered false and misleading because, in violation of Generally Accepted Accounting Principles
1 3 ("GAAP"), defendants understated expenses for the repo rting period, since if the exercise price at
14 the time of the actual grant is below the market price on that date, the difference, according to
1 5 GAAP, must be expensed by the Company, which it was not, resulting in understating expenses and
16 thus overstating net income .
17 6. In fact, defendants were aware that the practices employed by the Board of Directors
18 allowed the stock option grants to be backdated frequently when the Company's shares were trading
19 at or near the lowest .price for the relevant period. By 2004 defendants' backdating scheme had
20 yielded stock option grants to the Company's executive officers worth millions of dollars .
21 7. On May 30, 2006, Rambus announced that the Audit Committee had commenced an
22 internal investigation into the timing of the Company's stock option practices issued in or before .
23 2003. The Company has also announced that the Audit Committee had uncovered discrepancies
24 between the dates that some stock options went on the.books and the dates that they should have
25 ~ been recorded under applicable accounting rules . As reported in BizJournal. Com on May 31, 2006,
26 this announcement caused a 6.11 % drop in Rambus' common stock price to $24 .26 .
27 8. On June 27, 2006 it was announced late in the afternoon that Rambus may have to
28 restate earnings for prior periods due the back dating . of option grants. Rambus shares fell 5%o in
3 COMPLAINT CASE NO. W:ISTULLIRAMBUS\PLD\COMPLAINT 003.wpd I i
1 after hours trading. The June 28, 2006 edition of The Wall Street Journal reported that a
2 preliminary board review found improperly dated stock-option grants that may lead to a restatement
3 of prior financial results : "Rambus's board `has reached a preliminary conclusion that the actua l
4 measurement dates for certain stock option grants issued in prior years differ from the recorded
5 grant dates for such awards,' the company said ." On June 27, 2006 Rambus common stock traded
6 at $23 .13 per share, but on news of the above announcements Rambus common shares declined to
7 close at $20 .55 per share on June 28, 2006 . Plaintiff and the members of the Class have bee n
8 damaged as a result of the above declines in Rambus' share price .
9 JURISDICTION AND VENUE
10 9. Jurisdiction is conferred by Section 27 of the Securities Exchange Act of 1934 (the
11 "Exchange Act")[15 U .S .C . § 78aa] and 28 U.S .C . §§ 1331, 1337 . The claims asserted herein arise
12 under and pursuant to Sections 10(b), 14(a) and 20(a) of the Exchange Act [15 U.S .C . §§ 78n(a),
13 78j(b) and 78t(a)] and Rule 1 Ob-5 promulgated :thereunder by the Securities and Exchange
14 Commission ("SEC"), 17 C .F.R. § 240.1Ob-5 .
15 10 . Venue is proper in this District pursuant to Section 27 of the Exchange Act, 15
16 U.S.C. § 78aa and 28 U .S .C. § 1391(b) and (c) . Venue is proper in this District because many of the
17 acts and practices complained of herein occurred in substantial part in this District.
1 8 11 . In connection with the acts, transactions and conduct alleged herein, defendants used
19 the means and instrumentalities ,of interstate commerce, including the United States mails, interstate
20 telephone communications and the facilities of the national securities exchanges and markets . 2 1 PARTIES
22 I 12 . Plaintiff purchased shares of Rambus and engaged in transactions of Rambu s 23 I securities during the Class Period, as set forth in the certification attached hereto, and suffere d
24 damages; thereby.
25 13 . Defendant Rambus is a. Delaware corporation. with its principal executive offices
26 located at 4440 El Camino Real, Los Altos, California 94022 . According to its public filings,
27 Rambus is a technology licensing company specializing in the invention and designing of high-
28 speed chip interfaces . Since its founding in 1990, the Company's patented innovations, break 4 COMPLAINT CASE NO. W:ISTULLIRAMBUS\PLDICOMPLAINT 003 .wpd through technologies and renowned integration expertise have helped industry-leading chip and
system companies bring superior products to market. Rambus is. a supplier of process control and
yield management solutions for the semiconductor manufacturing and related microelectronic s
4 industries. Rambus' stock is publicly traded on the Nasdaq under the ticker symbol RMBS.
5 14. Defendant Harold Hughes ("Hughes") has served as Chief Executive Officer of the
6 Company since 2005 and has been a director of the Company since June 2003 . He also served as
7 interim Chief Financial . Officer of the Company for the period March 2, 2006 to on or about April
8 11, 2006. Hughes also signed the Company's annual 10-K Reports for the years 2004 and 2005,
9 authorized the issuance of the Company's Proxy Statements for that period, as well as certifications
1Q pursuant to the Sarbanes-Oxley Act of 2002 . Since at least as early as June 2003, he served as a
1 1 member of the Audit Committee and served as its Chairman until January 9, 2005, at which time
12 Hughes discontinued his service on the Audit Committee when he was elected by the Board to serve
13 as Chief Executive Officer of the Company. Hughes signed the 2004 and 2005 annual 10-K Reports
14 for Rambus during this period as well as authorized the issuance of the Company's Proxy
15 Statements for 2004 and 2005 .
16 15. Defendant Robert K. Eulau ("Eulau") served as the Senior Vice President of Finance
17 and Chief Financial Officer of Rambus for the period from May 2001 until his resignation effective
18 on or about March 2, . 2006. Eulau signed the various annual:10-K Reports for Rambus during . the
1 9 Class Period, as well . as certifications pursuant to the Sarbanes-Oxley Act of 2002 . Defendant Eulau
20 received backdated stock-option grants as set forth in Exhibit. A attached hereto .
21 16. Defendant Geoffrey Tate ("Tate") is Chairman of the Board of Directors. Tate
22 served as the Company's Chief Executive Officer until January 2005 and currently serves a s
23 Chairman of the Board of Directors of Rambus . Tate served as President, . Chief Executive Officer
24 and director of the Company from May 1990 to December 1999 . Tate was also the sole member of
25 the .Stock Option Committee from October of 2001 until October 2003, when the Boar d
of Directors dissolved the Stock Option Committee and vested its power and authority in Rambus '
Compensation Committee of its Board of Directors (the "Compensation Committee"). Tate,. as the
sole member of the Stock Option Committee , had the authority to administer the issuance of stock
5 COMPLAINT CASE NO. . W:ISTULLIRAMBUSIPLDICOMPlAINT 003.wpd 1 options under the Company's 1997 Stock Plan and the 1999 Non-Statutory Stock Option Plan of up
2 to 100,000 shares per employee per year, other than to executive officers and members of our Board"
3 of Directors . In addition, Tate had the authority to administer the issuance of common stoc k
4 equivalents under the 1997 Stock Plan . Tate received backdated stock-option grants as set forth in
5 Exhibit A attached hereto . Tate also signed all of the various annual 10-K Reports and authorize d
6 the issuance of all of the Company's Proxy Statements during the entire Class Period .
7 17. Defendant Bruce Dunlevie ("Dunlevie") is currently a director of the Company .
8 Dunlevie has served as a Director of the Company since its inception in March 1990. Since at least
9 as early as October 2001, Dunlevie served, and currently serves, as a member of the Compensation .
10 Committee of the Company, of which he is Chairman. From at least as early as October 2001, until
11 he resigned .on March 11 , 2005, Dunlevie served as a member of the Audit Committee . He has been
12 a General Partner of.the venture capital firm Benchmark Capital since May 1995 and a General
13 Partner in the venture capital firm Merrill, Pickard, Anderson & Eyre since 1989 . Dunlevie also
14 signed the annual 10-K Reports during the Class Period and authorized the issuance of all of th e
15 Company's Proxy Statements during the entire Class Period.
16 18. Defendant P . Michael Farmwald ("Farmwald") has served as a Director of th e
17 Company since co-founding the Company in March 1990 to present. On January 25, 2005 ,
1 8 Farmwald was appointed to the Audit Committee, and currently serves there. He was appointed to 19 the Compensation Committee during October 2002, and served there until July of 2003 . In addition, 20 he had served as Vice President and Chief Scientist of Rambus from March 1990 to November
21 1993 . Farmwald also signed the annual 10-K Reports during the Class Period and authorized th e
22 issuance of the Company's Proxy Statements during the entire Class Period .
23 19. Defendant John D. Danforth ("Danforth") served as Senior Vice-President, General .
24 Counsel and Secretary of the Company since October 2001 . Danforth, in his capacity as Secretary,
25 signed the Company's Proxy Statements during the Class Period on behalf of the Board o f
26 Directors. .
27 20. Defendant David Mooring ("Mooring") was a director of the Company since
28 December 1999 until May of 2006 . He signed all the Company's annual 10-K Reports during th e
6 COMPLAINT CASE NO . W:ISTULLIRAMBUSIPLDICOMPLAINT 003.wpd 1 Class Period and authorized the issuance of the Company's Proxy Statements during the Class
2 Period. From 1999 to 2004, Mooring was .President of Rambus . Mooring received backdated stock-
3 option grants as set forth in Exhibit A attached hereto .
4 21 . Defendant Mark Horowitz ("Horowitz") has served as a Director of the Company
5 since co-founding Rambus in March 1990 . He has also served as a Vice President from March 1990
6 to May 1994. Horowitz signed all of the Company's annual 10-K Reports during the Class Period
7 as well as authorized the issuance of the Company's Proxy Statements during the Class Period .
8 22. Defendant Kevin Kennedy ("Kennedy") has served as a Director of the Company
9 since April 2003 . He also has served, since July 2003 and continues to serve, as a member of the
10 Compensation Committee and also serves as a member of the Corporate Governance and
11 Nominating Committee, of which he is the Chairman . Kennedy signed Rambus' 2003, 2004 and
12 2005 annual 10-K Reports and authorized the issuance of the Company's Proxy Statements for 200 4
13 and 2005 .
14 23. Defendant William Davidow ("Davidow") served as a director of the Company
15 since the founding of the Company in March 1990 until May 4, 2005 at which time he was
16 appointed Director Emeritus. . He served as Chairman of the Board of Directors from March 199 0
17 I until January 2005. He served as a member of both the Audit Committee and Compensation
18 Committee since as early as December 2001 . Davidow signed Rambus' 2001, 2002, 2003 and 2004
19 annual 10-K Reports and authorized the issuance of the Company's Proxy Statements for 2001,
20 2002, 2003, 2004 and 200 5
21 24. Defendant Charles Geschke ("Geschke") served as a director of Rambus since
22 February 1996 until he resigned effective March 11, 2005 . He was a member of the Audit
23 Committee from as early as December 2001 until July 2003 . He was a member of the
24 Compensation Committee from as early as December 2001 and its Chairman from October 2002 .
25 He was a member of the Corporate Governance/Nominating Committee from the time it was formed
26 . in October 2002. Geschke signed Rambus' 2001, 2002, 2003 and 2004 annual 10-K Reports and
27 authorized the issuance of the Company's Proxy Statements for 2001, 2002, 2003 and 2004 .
28 7
COMPLAINT CASE NO . W:ISTULURAMBUSIPLDICOMPLAWT 003.wpd 1 25. Collectively, defendants Hughes, Eulau, Mooring, Tate, Dunlevie, Farmwald,
2 Danforth, Horowitz, Kennedy, Chou, Davidow and Geschke are referred thereon as the "Individual
3 Defendants ."
4 26. Defendants Davidow, Geschke, Dunlevie, Hughes, and Farmwald are also referred to
5 as the "Audit Committee Directors ." Defendants Farmwald, Geschke, Dunlevie, and Kennedy are
6 also referred to as the "Compensation Committee Directors ." Defendants Tate, Mooring, Danforth
7 and Eulau are also referred to herein as the `Backdated Option Recipients ."
8 CLASS ALLEGATIONS
9 27. Plaintiff brings this action as a class action pursuant to Federal Rule of Civil
1 0 Procedure 23(a) and (b)(3) on behalf of a Class, consisting of all those who purchased the common
11 stock of Rambus between December 12, 2001, (the date the Company filed its form 10-K with the
12 SEC for the its fiscal year ending September 30, 2001)) and June 27, 2006. (the:date the Company
13 disclosed that it planned to restate earnings for certain period because of its practice of backdating
14 options), inclusive and who were damaged thereby. Excluded from the Class are defendants, the
15 officers and directors of the Company, at all relevant times, members of their immediate families
16 and their legal representatives, heirs, successors or assigns and any entity in which defendants have
17 or had a controlling interest .
_18 28_ The members of the Class-are so numerous that joinder of all members is
19 impracticable . During the Class Period, Rambus had more than 100 million shares of common
20 stock outstanding, which were, actively traded on the NASDAQ, under the ticker symbol "RMBS,"
21 and tens of millions of shares of common stock were traded during the Class Period. While the
22 exact number of Class members is unknown to plaintiff at this time and can only be ascertained
23 through appropriate discovery. Plaintiff believes that there are hundreds or thousands of members
24 in the proposed Class . Record owners and other members of the Class maybe identified from
25 records maintained by Rambus or its transfer agent and brokerage firms and may be notified of the
26 pendency of this action by mail, using the form of notice similar to that customarily used in
27 securities class actions .
28
8 COMPLAINT CASE NO . W:ISTULLIRAMBUSIPLQICOMPLAINT 003.wpd 1 29. Plaintiff's claims are typical of the claims of the members of the Class as al l
2 members of the Class are similarly affected by defendants' wrongful conduct in violation of federal .
3 law that is complained of herein.
4 30. Plaintiff will fairly and adequately protect the interests of the members of the Class
5 and has retained counsel competent and experienced in class and securities litigation.
6 31 . Common questions of law and fact exist as to all members of the Class an d
7 predominate over any questions solely affecting individual members of the Class . Among the
8 questions of law and fact common to the Class are :
9 (a) whether the federal securities laws were violated by defendants ' acts as
10 alleged herein ;
11 (b) whether statements made by defendants to . the investing public during the
12 Class Period misrepresented material facts about a.) how the Company awarded options to it s
1.3 executives, and b.) whether the Company's financial form 10-K and Proxy Statements, filed with
14 the SEC during the Class Period contained false and misleading statements, and .
15 (c) to what extent the members of the Class have sustained damages and the
16 proper measure of damages .
17 32. A class action is superior to all other available methods for the fair and efficien t
18 adjudication of this controversy since joinder of all members is impracticable . Furthermore, as the
19 damages suffered by individual Class members may be relatively small, the expense and burden of
20 individual litigation make it impossible for members of the Class to individually redress the wrongs
21 done to them. There will be no difficulty in the management of this action as a class action .
22 SUBSTANTIVE ALLEGATION S
23 33 . From fiscal 2001 to 20041, the Compensation Committee granted certain Rambus
24 stock options to the Backdated Option Recipients and certain other executives of the Company, as
25 set forth in Exhibit A hereto . Frequently the grants were dated just after a sharp drop in th e 26 27 Rambus' fiscal years 2001 and 2002 ended on September 30 of 2001 and 2002, 28 respectively. Fiscal years 2003-2006 ended on December 31 .
9 COMPLAIN T CASE NO. W : ISTULLIRAMBUSIPLDICOMPLAENT 003 .wpd Company's stock price and before a substantial rise in the Company's stock price . See Exhibit B
attached hereto which shows the exercise price for Rambus shares on the various dates of grant
compared to the price of Rambus stock for ten days before and after such grant .
34. For example, as demonstrated on Exhibit A, the Company's Proxy statement filed
with the SEC March 19, 2004 reported that on November 25, 2003, defendants Tate, Mooring and
Eulau, in addition to Rambus officers, John D . Danforth, the Company's Sr. Vice-President,
General Counsel and Secretary and Ed Larsen, the Company's Sr. Vice-President for
Administration, received options for 760,000 common shares of Rambus at an exercise price of .
9 $25.16, or the price of shares on the date of grant . However, a mere three days later, on November
10 28, the price had risen to close at $30.00 per share, thus creating an almost instant profit for the
11 recipients of these options-of nearly $3,800,000 .
12 . 35. Similarly, on August 23, 2001 options were issued at $4 .86 and the next day the price
13 went to $5 .67 per share and three days after tl .at, on August 27, to $7.37 per share. More
14 extraordinary, the price of Rambus shares had been $5 .35 per share on the day before the optio n
15 grant date. In fact, the exercise price of $4.86 per share was virtually the lowest trading price of
1 6 Rambus shares on the 10 days before the option grant date of August 23, 2001 and the 10 days after
17 that date. (See Exhibit B). Defendants Tate and Mooring each received options to. purchase 600,000
18 shares of Rambus and realized virtually instant profits of over $1 .5 million dollars each.
19 36. The reason for the extraordinary pattern of stock option grants as alleged herein is
.20 that many, if not all, of the purpo rted grant dates set forth therein were not the actual dates on which
21 the stock option grants were made. Rather, at the behest of the defendants, and/or the
Compensation Committee, defendants improperly backdated the stock option grants to make it
appear as though the grants were made on dates when the market price of Rambus stock was lowe r
than the market price on the actual grant dates .
37 . This improper backdating violated the terms of the Company's shareholder-
approved stock option plan. Pursuant to the terms of the Companys shareholder-approved stock
option plans, the exercise price of options must be no less than the closing price of Rambus stock on
the date of grant. In this way, the executives of a company are supposed to have their interest s
10 COMPLAIN T CASE NO. W:ISTULL RAMBUSIPLDICOMPLAINT 003 .wpd 1 aligned with the shareholders, whose holdings are diluted each time an option is exercised .
2 Backdating improperly increased the value of the options to the Backdated Option Recipients and
3 gave them an immediate paper profit which undermined the incentive purpose . of such options,
4 improperly reduced the amounts the Backdated Option Recipients had to pay the Company upon
5 exercise of the options, and unfairly transferred shareholder equity to defendants . .
6 38. On or about June 6, 1997 Rambus filed with the SEC a Registration Statement on
7 Form S-8 registering its 1990 Stock Plan, 1997 Stock Plan and 1997 Employee Stock Purchase
8 Plan. The 1997 Stock. Plan, contained as a exhibit therein, stated that options granted under the Plan
9 may be Incentive Stock Options or Nonstatutory Stock Options . The Plan at Section 9 defines the
10 "Exercise Price" as follows :
1 1 9 Option Exercise Price and Consideration.
12 (a) Exercise Price . The per share exercise price for the Shares to be issued pursuant to exercise of an Option shall be determined by the 1 3 Administrator, subject to the following :
14 1 (i) In the case of an Incentive Stock Optio n
15 (A) granted to an Employee who, at the time the Incentive Stock Option is granted, owns stock representing more than ten 16 percent (10%) of the voting power of all classes of .stock of the Company or any Parent or Subsidiary, the per Share . exercise price 17 shall be no less than 110% of the Fair Market Value per Share on the date of grant. 18 (B) granted to any Employee other than an Employee 19 described in paragraph (A) immediately above, the per Share exercis e
20
21 (ii) In the case of a Nonstatutory Stock Option, the per Share exercise price shall be determined by the Administrator. In the 22 case of a Nonstatutory Stock Option intended to qualify as "performance-based compensation" within the meaning of 23 Section 162(m) of the Code, the per'Share exercise price shall
24
25 39. Defendants' conduct also violated the terms of the Company's own corporate
26 governance guidelines, the Company's standards of business conduct and the Company's conflicts
27 of interest policy. For example, the Company's Code of Business Conduct and Ethics provides that
28 each director, officer and employee may not profit from possession of significant, non-publi c
11 COMPLAINT CASE NO. W:ISTULLIRAMBUS\PLD1COMPLAINT 003.wpd 1 information; and must engage in "honest and ethical conduct, including the ethical handling of
2 actual or apparent conflicts of interest between personal and professional relationships." The Code
3 further states that Rambus has a responsibility to communicate effectively with shareholders so that
4 they are provided with full and accurate information in all material respects, about Rambus' .
5 financial condition and results of operations.
6 A. Defendants Concealed Their Backdating of Stock Options Thus Rendering Rambus' Proxy Statements Materially False and Misleadin g 7 40. Defendants' backdating scheme also rendered the Company's Proxy Statements 8 issued in connection with shareholder meetings held -from 2002 to 2005. materially false and 9 misleading. The Proxy Statements falsely reported the dates of the stock option grants and falsely 1 0 represented that the options were granted at fair market value . If the option grant was backdated, 11 the options value was not fair from the vantage point of the Company and its shareholders . For 12 example, a report on the 2003 Executive Compensation contained in Rambus' 2004 Proxy 13 Statement falsely represented that "non-cash compensation [to executives] should be closely aligned 14 with shareholder interests." In addition, Rambus Proxy's statement filed in 2005 was also false and 1 5 misleading because in it defendants continued to conceal the Company's illicit policy of backdating 16 options. 17 41. Rambus issued its Proxy Statement dated December 20, 2001 for the annual meeting 18 of stockholders to be held February 5, 2002 . This proxy statement disclosed certain information '19 regarding stock options granted to each of the named executive officers for the fiscal year ended 20 September 30, 2001, and stated further, in a footnote, "Unless otherwise indicated, options wer e 2 1 granted at an exercise price equal to the fair market value of the Company'.s Common Stock at the 22 date of the grant ." This proxy statement, .signed by defendant Danforth, on behalf of the Board of 23 Directors, including defendants Tate, Mooring, Eulau, Dunlevie, Farmwald, Horowitz, Geschke and 24 Davidow, was false and misleading as no mention was made that some or all of the options granted 25 to members of management during the current and prior fiscal years may have been backdated or 26 otherwise manipulated . 27
28
12 COMPLAINT CASE NO. W:ISTULLIRAMBUSIPLDICOMPLAINT 003 .wpd (I
1 42. Rambus issued its Proxy Statement dated December 19, 2002 for the annual . meeting
2 of stockholders to be held January 30, 2003 . This proxy statement disclosed certain information
3 regarding stock options granted to each of the named executive officers for the fiscal year ended
4 September 30, 2002, and stated further, in a footnote, "Unless otherwise indicated, options were
5 granted at an exercise price equal to the fair market value of the Company's Common Stock at the
6 date of the grant ." This proxy statement, signed by defendant Danforth on behalf of the Board of
7 Directors, including defendants Tate, Mooring, Eulau, Dunlevie, Farmwald, Horowitz, Geschke and
8 Davidow, was false and misleading as no mention was made that some or all of the options granted
9 to members of management during the current and prior fiscal years may have been backdated o r
10 otherwise manipulated .
11 43 . . Rambus issued its Proxy Statement dated March 19, 2004 for the annual meeting of
12 stockholders to be held May 4, 2004 . This proxy statement disclosed certain information regarding
13 stock options granted to each of the named executive officers during 2003, and the transitional
14 period October 1, 2002 to December 1, 2002 (due to change of reporting period), including the
15 exercise price and stated further, in a footnote, "Unless otherwise indicated, options were granted a t
16 an exercise price equal to the fair market value of the Company's Common Stock at the date of the
17 grant." This proxy statement, signed by defendant Danforth on behalf of the Board of Directors,
18 which included defendants Hughes, Kennedy, Tate, Mooring, Eulau, Dunlevie, Farmwald,
1 9 Horowitz, Geschke and Davidow, was false and misleading as no mention was made that. some or
20 all of the options granted to members of management during the current and prior periods may have
21 been backdated or otherwise manipulated.
22 44. Rambus issued its Proxy Statement dated March 29, 2005 for the annual meeting of
23 stockholders to be held May 3, 2005. This proxy statement disclosed certain information regarding
24 stock options granted including the exercise price to each of the named executive officers during
25 2004 including the purported exercise price, and stated further, in a footnote, "Unless otherwis e
26 indicated, options were granted at an exercise price equal to the fair market value of the Company's
27 Common Stock at the date of the grant." This proxy statement, signed by defendant Danforth on
28 behalf of the Board of Directors, which included defendants Hughes, Kennedy, Tate, Mooring ,
13 COMPLAIN T CASE NO. W:1ST'ULLIRAMBUSIPLDICOMPLAINT 003.wpd 1 ~ .
Eulau, Dunlevie, Farmwald, Horowitz, Geschke and Davidow, was false and misleading as no
mention .was made that some or all of the options granted to members of management during the
current and prior years may have been backdated or otherwise manipulated.
B. Defendants' Backdating of Options Also Rendered Their Annual Report on Form 10-k to Be Materially False and Misleadin g 5
6 45 . Defendants' backdating scheme also rendered the Company's financial statements in
7 Form 10-K filings for fiscal years 2001, 2002, 2003 and 2004 to be materially false and misleading.
8 46. , Pursuant to APB 25, the applicable GAAP provision at the time of the foregoing
9 stock option grants, if the market price on the date of grant exceeds the exercise price of the options,
10 the company must recognize the difference as an expense, thereby reducing the :company's net
11 income.
12 47. In addition, as set forth in the Company's Proxy Statements, the Company has
13 adopted IRS§162(m) (Section 162(m) of the Tax Code, 26 . U.S .C . § 162) which permits the
14 Company to deduct for federal income taxes purposes compensation paid under the Bonus Plan .
15 The Company's Proxy Statements claimed that the 1997 Stock Plan was designed and administered
16 to meet the requirements of Section 162(m) . Pursuant to Section 162(m), compensation in excess of
17 $1 million per year, including gains on stock options, paid to a corporation's five most
18 highly-compensated officers is tax deductible only if: (i) the compensation is payable solely on
19 account of the attainment of one or more performance goals ; (ii) the performance goals are
20 determined by a compensation committee comprised solely of two or more outside directors, (iii)
21 the material terms under which the compensation is to be paid, including the performance goals, are
22 disclosed to shareholders and approved by a majority of the vote in a separate shareholder vot e
23 before payment of the compensation, and (iv) before any payment of such compensation, the
24 compensation committee certifies that the performance goals and any other material terms were in
25 fact satisfied.
26 48. As a result of the improper backdating of stock options, the Company, with the
27 knowledge, approval, and participation of each of the defendants, violated GAAP by failing to
28 recognize compensation expenses incurred when the improperly backdated options were granted ;
14 COMPLAIN T CASE NO . W:ISTULURAMBUSIPLDICOMPLAINT 003.wpd v 1 violated § 162(m) by taking tax deductions based on stock option grants that were not payable solely
2 on account of the attainment of one or more performance goals and violated the terms of the
3 Company's shareholder-approved stock .option plans.
4 49. . On or about December 4, 2001 the Company filed its Form 10-K report for the fiscal
5 year. ended September 30, 2001 with the SEC. The 10-K report was contemporaneously distributed
6 to the public including its shareholders . This Form 10-K report contained the Company' s
7 comparative financial statements for the current and prior fiscal years which were materially false
8 and misleading and were not prepared in accordance with generally accepted accounting principle s
9 due to the improper accounting for stock option grants which were backdated. As a result Rambus'
10 net earnings and stockholders' equity were overstated and the compensation costs attributable to the
1 1 backdated stock options were correspondingly understated. Rambus will now be forced to
12. acknowledge serious shortcomings in its administration and accounting for stock options .
.13 .50. Also, the Company stated in a footnote to the financial statements that, "Rambus
14 accounts for stock-based awards to employees using the intrinsic value method in accordance with
15 Accounting Principle Board Opinion No . 25, "Accounting for Stock Issued to Employees." Stock
16 options are generally granted with exercise prices equivalent to fair market value, and no
17 compensation cost is recognized. When stock options are compensation granted with exercise 1 8 prices below fair market value, employee stock-related compensation expense is recognized
19 accordingly."
.20 51 . On or about November 26, 2002 the Company filed its Form 10-K report for the
21 fiscal year ended September 30, 2002 with the SEC . This 10-K was signed by defendants Tate,
22 Mooring, Eulau, Davidow, Dunlevie, Farmwald, Geschke and Horowitz . The 10-K report was
23 contemporaneously distributed to the public including its shareholders . This Form 10-K report
24 contained the Company's comparative financial statements for the current and prior fiscal years
25 which were materially false and misleading and were not prepared in accordance with GAAP due to
26 the improper accounting for stock option grants which were backdated . As a result Rambus' net
27 earnings and stockholders' equity were overstated and the compensation costs attributable to the
28 backdated stock options were correspondingly understated, according to the accounting principles
15 COMPLAINT CASE NO. W:ISTULLIRAMBUS\PLD%COMPLAINT 003.wpd 1 set forth in paragraphs 46-48 above . Rambus will now be forced to acknowledge serious
2 shortcomings in its administration and accounting for stock options .
3 52. Also, the Company stated in a footnote to the financial statements that, "Rambus
4 accounts for stock-based awards to employees using the intrinsic value method in accordance with
5 Accounting Principle Board Opinion No . 25, "Accounting for Stock Issued to Employees ." Stock
6 options are generally granted with exercise prices equivalent to fair market value, and no 7 compensation cost is recognized. When stock options are compensation granted with exercise
8 prices below fair market value, employee stock-related compensation expense is recognized
9 accordingly."
10 53.: In connection with the November. 2002 10-K, the Company submitted to the SEC the
11 certifications of its principal executive officer, defendant Tate, and its principal financial officer,
12 defendant Eulau, as required pursuant to 18 U,S.C. 1350, as adopted pursuant to Section 906 of the
1 3 Sarbanes-Oxley Act of 2002 . Each such certification of defendants Tate and Eulau stated, Based
14 1 on my knowledge, this report does not contain any untrue statement of material fact or omit to state
15 a material fact necessary to make the statements made, in light of the circumstances under which
16 such statements were made, not misleading with respect to the period covered by this report ."
17 54. On or about February 13, 2004 the Company filed its Form 10-K report for the year
18 ended December 31, 2003 . This 10-K was signed by,defendants Tate, Mooring, Eulau, Davidow,
19 Dunlevie, Farmwald, Geschke, Horowitz, Hughes and . Kennedy. The 10-K report was
20 contemporaneously distributed to the public including its shareholders . This Form 10-K report
21 contained the Company's comparative fmancial statements for the years 2003 and 2002 and three
22 months ended December 31, 2002 and 2001 which were materially false and misleading and were
23 not prepared in accordance with GAAP due to the improper accounting for stock option grants
24 which were backdated. As a result, Rambus' net earnings and stockholders' equity were overstated
25. and the compensation costs attributable to the backdated options were correspondingly understated,
26 according to the accounting principles set forth in paragraphs 46-48 above. Rambus will now be
27 forced to acknowledge serious shortcomings in its administration and accounting for stock options.
28
16 COMPLAIN T CASE NO. W:ISTULURAMBUSIPLDICOMPLAINT 003 .wpd G
1 .55 . Also, the Company stated in a footnote to the financial statements that, "Rambus
2 accounts for stock-based awards to employees using the intrinsic value method in accordance with
3 Accounting Principle Board Opinion No . 25, "Accounting for Stock Issued to Employees." Stock
4 options are generally granted with exercise prices equivalent to . fair market value, and no
5 compensation cost is recognized. When stock options are compensation granted with exercise
6 prices below fair market value, employee stock-related compensation expense is recognized
7 accordingly."
56. In connection with the February 2004 10-K, the Company submitted to the SEC the
9 certifications of its principal executive officer, defendant Tate, and its principal financial officer,
10 defendant Eulau, as required pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the
11 Sarbanes-Oxley Act of 2002 . Each such certification of defendants . Tate and Eulau stated, "Based
12 on my knowledge, this report does not contain any untrue statement of material fact or omit to state
13 a material fact necessary to make the statements made, in light of the circumstances under whic h
14 such statements were made, not misleading with respect to the period covered by this report."
15 57. On or about February 17, 2005 the Company filed its Form 10-K report for the year
1 6 ended December 31, 2004 with the SEC. The 10-K report was contemporaneously distributed to the
17 public including its shareholders. This Form 10-K report contained the Company's comparative
18 financial statements for the current and prior year which were materially false and misleading and
19 were not prepared in accordance with generally accepted accounting principles due to the improper
20 accounting for stock option grants which were backdated . As a result, Rambus' net earnings were
2 1 overstated and the compensation costs attributable to the backdated options were correspondingly
22 understated, according to the accounting principles set forth in paragraphs 46-48 above . Rambus
23 will now be forced to acknowledge serious shortcomings in its administration and accounting for
24 stock options.
25 58. Also, the Company stated in a footnote to the financial statements that, "Rambus
26 accounts for stock-based awards to employees using the intrinsic value method in accordance with
27 Accounting Principle Board Opinion No . 25, "Accounting . for Stock Issued to Employees ." Stock
28 options are generally granted with exercise prices equivalent to fair market value, and no
1 7 COMPLAINT CASE NO . W:ISTULL\RAMBUS\PLD\COMPLAINT 003.wpd compensation cost is recognized. When stock options are compensation granted with exercise
prices below fair market value, employee stock-related compensation expense is recognized
accordingly." }
59. In connection with the February 2005 10-K, the Company submitted to the SEC the
certifications of its principal executive officer, defendant Hughes, and its principal financial officer,
defendant Eulau, respectively, as required pursuant to 18 U .S.C. 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 . Each such certification of defendants Hughes and
Eulau stated, "Based on my knowledge, this report does not contain any untrue statement of material
fact or omit to state a material fact necessary to make the statements made, in light of th e
circumstances under which such statements were made, not misleading with respect to the period
covered by this report. "
60. On or about February 21, 2006 the. Company filed its .Form 10-K report for the year
ended December 31, 2005 . with the SEC. This 10-K was signed . by defendants Hughes, Eulau, Tate,
Dunlevie, Farmwald, Horowitz, and Mooring . The 10-K report was contemporaneously distributed
to the public including its shareholders . This Form 10-K report contained the Company' s
comparative financial statements for the prior years which were materially false and misleading and
17 were not prepared in accordance with generally accepted accounting principles due to the improper
18 .accounting for stock option grants which were backdated. As a result Rambus' net earnings and
19 stockholders' equity for prior years was overstated and the compensation costs attributable to the
20 backdated stock options were correspondingly understated, according to the accounting principles
21 set forth in paragraphs 46-48 above, Rambus will now be forced to acknowledge serious
22 shortcomings in its administration and accounting for stock options . In connection with this report
23 the Company submitted to the SEC the certifications of its principal executive officer and its
24 principal financial officer a required pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906
25 of the Sarbanes-Oxley Act of 2002 .. Each such certification of defendants Hughes, Eulau, Tate,
26 Dunlevie, Farmwald, Horowitz, and Mooring stated, "Based on my knowledge, this report does not
27 contain . any untrue statement of material fact or omit to state a material fact necessary to make th e
28
1 8 COMPLAINT CASE NO. W:ISTULURAMBUSIPLDICOMPLAINT 003 .wpd statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report ."
61 . As a result of all of the foregoing, plaintiff and members of the Class have been
damaged. On May 31, 2006, after news of the Audit Committee's investigation of backdating of
stock options, Rambus common shares declined from a close of $25 .84 on May 30 to a close of
$24.26 on May 31. On June 28, 2006, Rambus shares declined over 6% or from $23 .13 .
APPLICABILITY OF THE FRAUD ON THE MARKET DOCTRINE
62. At all relevant times, the market for Rambus' common stock was an efficient market
for, the following reasons, among others:
10 : .(a) Rambus' common stock met the requirements for listing, and was listed and
11 actively traded on the NASDAQ, a highly efficient and automated market ;
12- (b) As a regulated issuer, Rambus filed periodic public reports with the SEC and
13 the NASDAQ ;
14 (c) Rambus regularly communicated with public investors via established market
15 communication mechanisms, including through regular disseminations of press releases on the
16 national circuits of major newswire services and through other wide-ranging public disclosures,
17 such as communications with the financial press and other similar reporting services; and
18 (d) Rambus was followed by securities analysts, including those who were
19 employed by major brokerage firms, who wrote reports which were distributed to the sales force and
20 certain customers of their respective brokerage firms . Each of these reports was publicly available
2 1 and entered the public marketplace .
22 63 . As a result of the foregoing, the market for Rambus' promptly digested current
23 information regarding Rambus from all publicly available sources and reflected such information in
24 Rambus' stock price . Under these circumstances, all purchasers of Rambus common stock during
25 the Class Period suffered similar injury through their purchase of Rambus' common stock at
26 artificially inflated . prices and a presumption of reliance applie s
27
28 I 19 COMPLAINT CASE NO . W:\STULLIRAMBUS\PLDICOMPLAINT 003 .wpd G
ADDITIONAL SCIENTER ALLEGATIONS
64. On May 30, 2006 Rambus issued a press release which " . . . announced that the
Audit Committee of the Company's Board of Directors has commenced an internal investigation of
the timing of past option grants and other potentially related issues ...:"
65 . Certain member of Rambus' management listed below, including defendants
Mooring, Eulau and Danforth as Backdated Option Recipients, in the months preceding the May 30,
2006 announcement (from January 1, 2006), sold a total of 2,295,099 artificially . inflated Rambus
8 shares, while in the possession of materially adverse inside knowledge regarding backdating options
9 scheme, as described herein . Many of these shares were acquired by the exercise of stock options
10 for proceeds of $74,261,265 as follows :
11 TOTAL SHARES AND PROCEEDS : 12 AVERAGE PER SHARES PROCEEDS SHARE PROCEEDS 13 Mooring 1,591,999 $ 51,318,569 $ 32 .22 Eulau 350,000 $ 10,510,715 $ 30 .03 14 Danforth 170,000 . $ 6,096,60 8 $ 35 .86 Stark 2 183,100 $ 6,335,373 $34 .60 15 TOTALS 2,295,099 $ 74,261,265 $ 32 .36 16
17 66 . Members of the Compensation Committee during all or pa rt of the Class Period,
18 which included Individual Defendants Farmwald, Geschke, Dunlevie, and Kennedy (previously
19 .. defined herein as the "Compensation Committee Directors"), were aware of, or but for their reckless
20. disregard should have been aware of, the backdating options scheme . The Charter of the
21 Compensation Committee of Rambus states that the purpose of the Compensation Committee is,
22 inter alia, to "recommend and approve appropriate, executive compensation". and to "make
23
24 Z Laura S. Stark is the Sr. Vice President, Platform Solutions. Mrs. Stark joined Rambus in 25 1996 as Strategic Accounts Manager, and held the positions of Strategic Accounts Director and Vice 26 President, Alliances and Infrastructure, before assuming the position of Vice President, Memory Interface Division in October 2000, which she held until February 2005 when she was appointed 27 Vice President, Platform Solutions .
28
20 COMPLAINT CASE NO. W:ISTULL\RAMBUSIPLDICOMPLAINT 003 .wpd 1 recommendations to the Board regarding director compensation." The Committee is charged with
2 annually reviewing and approving for the CEO and executive officers of the Company, the annual
3 salary, bonuses, equity compensation, incentive bonuses and any other benefits, compensation or
4 arrangements. Therefore, because of, their intricate involvement in the formulation and issuance of
5 such options, the Compensation Committee Directors possessed the requisite scienter.
6 67. Those defendants who were members of the Audit Committee, which included
7 Individual Defendants Davidow, Geschke, Dunlevie and Hughes (previously defined herein as the
8 "Compensation Committee Directors") for some of all of the Class Period, were responsible fo r
9 maintaining the adequacy of internal controls, and therefore, knew, or at a minimum recklessly
10 disregarded, the impermissible option backdating scheme which internal controls of the Company t 1 should have detected . The Audit Committee Charter of Rambus states that the Company has an
12. obligation to insure that it produces and publicly distributes financial statements which are
13 consistent, fairly presented and in conformance with generally accepted accounting principles . It is
14 the duty of the Audit Committee to oversee the Company's accounting and financial reportin g 15 process, its system 'of internal accounting controls and the auditing of the Company's financial
16 statements . In addition, members of the Audit Committee whose duty it was to meet periodically
17 with management to review the adequacy of the Company's internal controls, did, or but for their
1.8 reckless disregard should have, detected and been aware of the illicit option backdating scheme .
19 Therefore, the Audit Committee Directors possessed the requisite scienter.
20 COUNT I
21 FOR VIOLATIONS OF SECTION 10(b) OF THE EXCHANGE ACT AND RULE10b-5 PROMULGATED THEREUNDE R 22
23 68. Plaintiff repeats and realleges each and every allegation set forth above. During the
24 Class Period, defendants, and each of them, carried out a plan, scheme and course of conduct that
25 was intended to and/or did: (i) deceive the investing public, including Plaintiff and other.Class
26 members, as alleged herein ; (ii) artificially inflate the market price of Rambus common stock ; and
27 (iii) cause plaintiff and other members of the Class to buy Rambus stock at artificially inflate d
28
21 COMPLAINT CASE NO . W:ISTULLIRAMBUSIPLDICOMPLAINT 003 .wpd Q
1 prices. In furtherance of this unlawful scheme, plan, and course of conduct, defendants, and each of
2 them, took the actions set forth herein.
3 69. . These defendants: (a) employed devices, schemes and artifices to defraud; (b) made
4 untrue statements of material fact and/or omitted to state material facts necessary to make the
5 statements not misleading; and (c) engaged in acts, practices and a course of business which
6 operated as a fraud and deceit upon the buyers of Rambus common stock in violation of Section
7 10(b) of the Exchange Act and Rule IOb-5 promulgated thereunder.
8 70 . Defendants' material misrepresentations and/or omissions were done knowingly or
9 recklessly.
10 . 71 . As a result of the defendants' dissemination of deceptive and misleading information
11 regarding the Rambus' practice of backdating options in violation of the Company's own internal
12 policies and procedures and in contradiction to statement made in the Company's filings with the
13 SEC. Furthermore, the backdating of options resulted in understating expenses and thus overstating
14 net income in the Company's financial results contained in Rambus' Form 10=Ks, filed with the SEC
15 during ,the Class Period . In ignorance of the fact that the market price of Rambus' shares were
16 artificially inflated, and relying upon the integrity of the market in which Rambus common stoc k
17 trades, and/or on the absence of material information that was known to and/or recklessly
18 disregarded by defendants but not disclosed in public statements by defendants during the Class
19 Period, plaintiff and the other members of the Class bought Rambus common stock during the Class
20 Period at artificially inflated prices and were damaged thereby .
21 72. At the time of said misrepresentations and omissions, plaintiff and the other
22 members of the Class were ignorant of the omitted material facts and believed defendants'
23 statements regarding the awarding of options and their financial statements contained in their Form
24 10-Ks to be completely truthful, candid and not deceptive or misleading or suffering from omissions
25 of material facts . Had plaintiff and the other members of the Class known of the omitted material
26 facts, plaintiff and the other members of the Class would not have bought their Rambus common
27 stock during the Class Period, or, if they had bought such stock during the Class Period, they woul d 28 1
22 COMPLAINT CASE NO. W:\STULL\RAMBUS%PLD\COMPLAINT 003.wpd 1 not have done so at the artificially inflated prices which they paid for their Rambus common stock
2 which they bought during the Class Period .
3 73 . By virtue of the foregoing, each of the defendants violated Section 10(b) of the 4 Exchange Act and Rule 1 Ob-5 promulgated thereunder .
5 74. As a direct and proximate result of defendants' wrongful conduct, plaintiff and the
6 other members of the Class suffered damages in connection with their purchases of Rambu s
7 common stock during the Class Period ..
8 COUNT II FOR VIOLATION OF SECTION 14(a) OF THE EXCHANGE ACT 9
10 75. Plaintiff incorporates by reference and realleges each and . every allegation set forth
11 above, as though fully set forth herein .
12 76 . Rule 14a-9, promulgated pursuant to Section 14(a) of the Exchange Act provides that
13 no proxy statement shall contain "any statement which at the time and in light of the circumstances
14 under which it is made is false and misleading with respect to any material fact, or which omits t o
15 state any material fact necessary in order to make the statements therein not false and misleading."
.16 17 C.F.R. Section 240.14a-9.
17 77. The Proxy Statements for annual shareholder meetings held in 2002 through 2005
18 violated Rule 14(a) and Rule 14a-9 because they omitted material facts, including the fact that
19 defendants were causing Rambus to engage in an option backdating scheme, a fact which th e
20 defendants were aware of and participated in from at least 2001 .
21 78 . In the exercise of reasonable care, defendants should have known that the Proxy
22. Statements were materially false and misleading.
23 79 . The misrepresentations and omissions in the Proxy Statement were . material to
24 plaintiff in voting on each Proxy Statement . The Proxy Statements were an essential link in the
25 accomplishment and continuation of defendants' unlawful stock option backdating scheme, as
26 revelations of the truth would have immediately thwarted a continuation of shareholders '
27 endorsement of the directors' position, the executive officers' compensation and the Company's
28 compensation policies .
23 COMPLAINT CASE NO. W:\STULLIRAMBUSIPLDICOMPLAINT 003 .wpd 1 80. Plaintiff, and the Class, were damaged as a result of the material misrepresentations 2 and omissions in the Proxy Statements .
3 COUNT II I
4 AGAINST THE INDIVIDUAL DEFENDANTS PURSUANT TO SECTION 20(a) OF THE EXCHANGE ACT 5
6 81 . Plaintiff repeats and realleges each and every allegation set forth above . 7 82. This claim is asserted against the Individual Defendants pursuant to Section 20(a) of
8 the Exchange Act, 15 U .S.C. §78t(a).
9 83 . During the Class Period, Individual Defendants Hughes, Eulau, Mooring, Tate,
10 Dunlevie, Farmwald, Horowitz, Kennedy, Danforth, Davidow and Geschke were "controlling
11 persons" of defendant Rambus, within the meaning of Section 20(a) of the Exchange Act .
12 84. The Individual Defendants were "controlling persons" of Rambus because, due to the
13 officer and/or director positions they held with Rambus, they had the influence and power over
14 Rambus to cause, and they did cause, Rambus to engage in the wrongful conduct complained of
15 herein, and because they had the power to have prevented Rambus from engaging in the unlawful 16 conduct alleged herein, but they purposely, intentionally and recklessly did not use that power to do
17 SO.
18 85 . As set forth above in Count I, .Rambus violated Section 10(b) of the Exchange Act
19 and Rule 1 Ob-5 promulgated thereunder by its acts and omissions as alleged in this Complaint . By
20 virtue of their status as a "controlling person" of Rambus, the Individual . Defendants are liable, to
21 the same extent as is Rambus for its violations of Section 10(b) of the Exchange Act and Rule 1Ob-5
22 promulgated thereunder, pursuant to Section 20(a) of the Exchange Act.
23 86. As set forth in Count II, Rambus violated Section 14(a) of the Exchange Act by its
24 acts and omissions . By virtue of their status as a"controlling person" of Rambus, the Individual
25 Defendants are liable, to the same extent as is Rambus for its violations of Section 14(a) of the
26 Exchange Act, pursuant to Section 20(a) of the Exchange Act.
27
28
24 COMPLAINT CASE NO . W:ISTULLIRAMBUSIPLDICOMPLAINT 003.wpd 1 PRAYER FOR RELIEF
2 WHEREFORE, plaintiff, oil behalf of itself and the Class, pray for judgment as follows:
3 A. Declaring this action to be a class action properly maintained pursuant to Rule 23(a)
4 and (b)(3) of the Federal Rules of Civil Procedure;
5 B . Finding that the defendants violated Section 10 (b) of the Exchange Act and Rule
6 14b-5 promulgated thereunder and Sections 20(a) and 14 (a) by their acts and
7 omissions as alleged in this Complaint;
8 C. Awarding plaintiff and the members of the Class damages, together with interest
9 thereon;
10 D. Awarding plaintiff and other members of the Class their costs and expenses of this
11 litigation, including reasonable attorneys' fees and experts' fees and other costs and
12 disbursements; and
13 E. Awarding plaintiff and other members of the Class such other and further relief as
14 may be just and proper under the circumstances
15 JURY TRIAL DEMANDED
16 Plaintiff demands a trial by jury as to all issues so triable.
17 Dated: July 14, 2006 Timothy J . Burke STULL; STULL & BROD Y 18
19 By: 20 10940 ilshire Boulevard 21 Suite 2 00 Los Angeles, CA 90024 22 Tel: (310) 209-2468 Fax:. (310) 209-2087 23 Howard T. Longman 24 STULL, STULL & BRODY 6 East 45th Street 25 New York, NY 10017 Tel: (212) 687-7230 26 Fax: (212) 490-2022
27 II 28
25 COMPLAINT CASE NO . W:ISTULLIRAMBUS\PLDICOMPLAINT 003.wpd b C R A1~9T ~C? U C LAWS
M"iohael A Ssrnst m riv& Sbadng Keogh ("Fla4*iff mattes this dezlaration pu rsuant ot Scctton 101 of the Priva#e 5eourities Lit s;ou R0 61M of 1995 as required by work 21D(aX2 ) of Title I of the Securities Exchange Act of 1934.-
2. PlainW has rev.Iewod the =V14 0 and athoriz a its Ming on its behalf
3. Plaintiff did not gage in transctians in The securities which sra the NbJect of the action at the direr.6a of plaizlti s caul or in orce r to pe 1ioipft In this or sr+ other iitigstzon under the securities laws of the UtiJbed states,
-.4. plaintiff is wluing to eeriio as a "prey tive pity on behalf of the class, includlog providing testimony at deposition and trial, if necessary ; Plaintiff uAdentands that the IiriptiI i3 not Wttted, this is not a c form, and soaring in any reoovery i not 4epen'dent upon a ue'otioD of this Cerdfication .. Plaint 'is willing to serie as a representative party either hndivtttie]Jy or as part of a group . P1aiimfff underst ds that a lead plaintL ie a aeprese tative parry who acts on behalf of other clans member in direetn the action ,
5. Plaintif'has made no transactions ddring the class period 1n the debt or equity sec hies that we the subject of the action except those as follows (as used herein, "equity aeewit)" shalt have th 'empe meailbg as that term has for purposes of seo4ion 16(a) of0A SOciu ties exchange Act of 1934, 15 U.S.C. § 78p(a)j: .
Plaintiff prirclisaed 500 shares of l common sock on January a, 2004 at $34135 p share. On krebruary 23, 2004, plain f sold 5 May 20 call opt om5 for $3.80 at a strike price ofS3 5 peg sharereceivi receiving $1964 in net proc `oeds. On April, 29, 2044 i'Iaiuti repurcbesed these optious at S.05 for s total cost of $25.0O. On April 28, 2004 Plaintiff WA 5 January 2005 call options at a strtice prise of S35`receivir g $75Q m net proce.eds. On A•t .tat 2p, 2005 Plaintiff sold 5 WI optiow..1/07 LWS for $1 .80 each receiving X900 gip, net proceeds,
6. Plollrtdff has vet, wjthm the three years preceding the data of the o ui ation, souIt uu eervc or served as a zapregen tive party on behalf of a class tan action involving alleged viajations of the federal securities lass, axeept is the failowit►g cottons:
M chae A, BMsin Profit_4# in P1a iv. acsllite moo. et_a' . 96 CV 00926 MS)), fed in to District of Columbia on may 16, 2006.
aphael A- Ben 0 Manx- tti RW-l vclers , 04 CV 04756 filed in the bistro of Minnesota ouNovember 19, 2004 .
ka=wa V QQuA Ill r i 03 CV A8550i sled in th a Sou m District ofNcw .Xork (m October 20, 2003.
'1. Ala w l not accept aq papnebt for serving as a dVe oAb if of a class beyond t1e parVa pro rata sb•er4 of any recovery, unless ordered oc approved by*aCout pursuant to section 274)(4) ofthte 9eou eitivs Aot,15 U.S.C. § 77z 1(aXL), or &a lien 21D(a)(4) oothc,9w= ime Rcehauge Act, 15 U.S.C. § 78u- 4(aX4).
9. The warms stated in this d taut oa tie true to the best of uty ceur+cnt lmowledge, ipfornaatloil and belief:
10. ' Plaintiff herebycartifiee, under peas t of peju •, that the tbre oing ire true and correct Exec ed this 13th day of Su1y, 2006
M chael A in Profit Sharing Xeogh Pion RAMBUS Stock Options (2001 thru 2004)
Purported Gran t Number of Options Exercise Price Date GEOFF TATE 37125. 600000 $4.8600 37209 100000 $9.3000 37580 400000 $8.6370 37949 350000 $25 .1600 38323 100000 $24 .0400 DAVID 37125 600000 $4.8600 MORRING .37209 100000 $9.3000 37580 .400000 $8.6370 37949 200000 $25 .1600 38323 85000 $24 .0400 ROBERT K. 37062 50000 $2.50001 . EULAU 37062 500000 $9 .0700 37580 80000 $8 .6370 81231101 125000 $4.8600 37949' 30000 $25 .1600 37949 40000 $25 .1600 38323 60000 . $24 .0400
' Rambus' 2002 Proxy states that these options were granted at less than fair market value at time of grant and that vesting of these options was contingent upon "certain business milestones" y
RAMBUS Stock Options (2001 thru 2004)
JOHN D . 37171 400000 $8 :0000 DANFORTH 37355 50000 $7.5000 37580 80000 $8.6370 37949 70000 $25.1600 38323 70000 $24.0400 1130/04* 100000 $31 .1600 .1/30/04* 40000 $31 .1600 1/30104* 20000 $31 .1600 ED LARSEN 37125 160000 $4.8600 11 /21/02* 80000 $8.6370. 37949 70000 $25 .1600 LAURA S . ` 38323 85000 $24 ..0400 STARK Date of Exercise Closing Price Range Ove Closing Price Range Over Grant Price Next 10 Tradin Days Prior 10 Tradinq Days
6/21/01 9.07 12 .31-9.19 12.25-9.1 7 8/23/01 4 .86 7.37-5.67 8 .88 -5.35 1018101 8 .00 11 .72-8.39 8.19-6.98 11/15/01 9 .30 10.74-8.55 9.43-8.26 411.010 7 .50 7.76-7.18 7.99-7.1 2 1112110 8.637 9.42-7.75 8 .20-6.72 11125/0 25.16 30.33-25.25 25.91-24.04 12/3/04 24.04 27.50-23.48 24.15-21-93
Prices in "BOLD" are the lowest prices during the 21 trading days referred t o Bove EXHIBIT 2 Copyright 2006 Market Wire, Incorporated All Rights Reserved Market Wire
July 19, 2006 Wednesday 12:05 PM GMT
LENGTH: 502 words
HEADLINE: Notice of Class Action Filed Against RAMBUS, INC. by Kantrowitz, Goldhamer & Graifman, P.C.
DATELINE: CHESTNUT RIDGE, NY; Jul 19, 2006
BODY: Notice is hereby given that a lawsuit has been filed in the U.S. District Court for the Northern District of California on July 17, 2006 under case number C06-04346 (WHA) by the law firm of Kantrowitz, Goldhamer & Graifman, P.C. and its co-counsel on behalf of a plaintiff and a proposed class of purchasers of securities of Rambus, Inc. (NASDAQ: RMBS) ("Rambus" or "Company") during the period December 12, 2001 through June 27, 2006, inclusive (the "Class Period"). The complaint alleges that Rambus and certain officers and directors violated Sections 10(b), 14(a) and 20(a) of the Securities Exchange Act of 1934 by making false and misleading statements and omissions concerning Rambus' improper and undisclosed practice of backdating options conferred on certain executives which made it appear that such options were issued on dates when the market price of Rambus stock was higher than the actual market price on the actual grant dates. This improper backdating masked the virtually instant profits the option recipients obtained. Under generally accepted accounting principles, these profits were required to be recognized as an expense in the Company's financial statements for the appropriate period, but were not. This backdating of options also violated provisions of the Internal Revenue Code relating to deduction of option payments. Thus, the Company's financial statements in Form 10- K filings for the years 2002, 2003, 2004 and 2005 were materially false and misleading. In addition, the Company's Proxy Statements for annual shareholder meetings held in years 2002 to 2005 were materially false and misleading because they contained statements concealing Rambus' practice of backdating stock options. Plaintiff seeks to recover damages on his own behalf and on behalf of the Class and is represented by the law firm of Kantrowitz, Goldhamer & Graifman, P.C. The firm has significant experience successfully prosecuting complex securities fraud class actions on behalf of defrauded investors. If you engaged in transactions of Rambus securities during the Class Period, you may, not later than sixty (60) days from July 19, 2006, move the court to serve as lead plaintiff if you so choose. In order to serve as lead plaintiff, however, you must meet certain legal requirements. You can see more information concerning this lawsuit on Kantrowitz, Goldhamer & Graifman's website: www.kgglaw.com. If you wish to discuss this action or have any questions concerning this notice or your rights or interests with respect to this matter, please contact: Gary S. Graifman at Kantrowitz, Goldhamer & Graifman, P.C. toll-free at 800- 660-7843 or via e-mail at [email protected] or by writing, Kantrowitz, Goldhamer & Graifman, 747 Chestnut Ridge Road, Chestnut Ridge, New York 10977. CONTACT: Kantrowitz, Goldhamer & Graifman, P.C. Gary S. Graifman, Esq. 1-800-660-7843 or 845/356-2570 Contact via http://www.marketwire.com/mw/emailprcntct?id=5ADDE6E42FA48731
SOURCE: Kantrowitz Goldhamer & Graifman
LOAD-DATE: July 20, 2006 Copyright 2006 Business Wire, Inc. Business Wire
July 19, 2006 Wednesday 4:57 PM GMT
DISTRIBUTION: Business Editors; Legal Editors
LENGTH: 442 words
HEADLINE: Notice of Class Action Filed Against Rambus, Inc. By Stull, Stull & Brody
DATELINE: NEW YORK July 19, 2006
BODY: Notice is hereby given that a lawsuit was been filed in the U.S. District Court for the Northern District of California on July 17, 2006 under case number C06-04346 (WHA) by the law firm of Stull, Stull & Brody on behalf of a plaintiff and a proposed class of purchasers of securities of Rambus, Inc. (NASDAQ: RMBS) ("Rambus" or "Company") during the period December 12, 2001 through June 27, 2006, inclusive (the "Class Period"). The complaint alleges that Rambus and certain officers and directors violated Sections 10(b), 14(a) and 20(a) of the Securities Exchange Act of 1934 by making false and misleading statements and omissions concerning Rambus' improper and undisclosed practice of backdating options conferred on certain executives which made it appear that such options were issued on dates when the market price of Rambus stock was higher than actual market price on the actual grant dates. This improper backdating masked the virtually instant profits the option recipients obtained. Under generally accepted accounting principles, these profits were required to be recognized as an expense in the Company's financial statements for the appropriate period, but were not. This backdating of options also violated provisions of the Internal Revenue Code relating to deduction of option payments. Thus, the Company's financial statements in Form 10- K filings for the years 2002, 2003, 2004 and 2005 were materially false and misleading. In addition, the Company's Proxy Statements for annual shareholder meetings held in years 2002 to 2005 were materially false and misleading because they contained statements concealing Rambus' practice of backdating stock options. Plaintiff seeks to recover damages on his own behalf and on behalf of the Class and is represented by the law firm of Stull, Stull & Brody. This firm has significant experience successfully prosecuting complex securities fraud class actions on behalf of defrauded investors. If you engaged in transactions of Rambus securities during the Class Period, you may, not later than sixty (60) days from July 19, 2006 move the court to serve as lead plaintiff, if you so choose. In order to serve as lead plaintiff, however, you must meet certain legal requirements. If you wish to discuss this action or have any questions concerning this notice or your rights or interests with respect to this matter, please contact: Howard T. Longman, Esq., at Stull, Stull & Brody, toll-free at 800-337-4983 or via email at [email protected] or by writing to Stull, Stull & Brody, 6 East 45th Street, New York, NY 10017.
CONTACT: Stull, Stull & Brody Howard T. Longman, Esq 1-800-337-4983 or 845-371-4788
URL: http://www.businesswire.com
LOAD-DATE: July 20, 2006
i Case 3:06-cv-04 ,,) V1HA Document 6 Filed 07121P06 Pa o f 6 CoP y
Patrice L. Bishop (182256 ) Timothy J. Burke (181866) service(assbla.com STULL, STULL & BRODY 10940 Wilshire Boulevard Suite 2300 Los Angeles, CA 90024 Tel: (310) 209-246 8 Fax: (310) 209-208 7
Howard T. Longman STULL, STULL & BRODY 6 East 45th Street New York, NY 1001 7 'Tel: . (212) 687-7230 Fax: (212) 490-2022
Gary S. Graifinan Joseph H . Weiss KANTROWITZ, GOLDHAMER & WEISS & LURIE- GRAIFMAN - . 551 Fifth Avenue 210 Summit Avenue Suite 1600 Montvale, NJ 07645 New York, NY 1017 6 Tel: (201) 391-7000 Tel: (212) 682-3025 Fax: (201) 307-1088 Fax: . . (212) 682-301 0 Attorneys for Plaintiffs
UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA
MICHAEL A. BERNSTEIN PROFIT CASE NO. C06-04346 WHA SHARING KEOGH PLAN and RONALD L . ' SCHWARCZ, on Behalf of Themselves and CLASS ACTION All Others Similarly Situated, AMENDED COMPLAINT FOR Plaintiffs, VIOLATION OF FEDERAL SECURITIES LAWS V. DEMAND FOR TRIAL BY JURY HAROLD HUGHES, DAVID MOORING, ROBERT K. EULAU, GEOFFREY TATE, BRUCE DUNLEVIE, P. MICHAEL FARMWALD, JOHN D. DANFORTH, MARK HOROWITZ, KEVIN KENNEDY, . CHARLES GESCHKE, WILLIAM DAVIDOW, and RAMBUS, INC.,
Defendants. ) )
AMENDED COMPLAINT FOR VIOLATIONS OF FEDERAL SECURITIES LAWS CASE NO . C06-04346 WHA W :%STULL\RAMBUS\PLAIAmended Complaint 001 .wpd Case 3 :06-cv-043--;L=WHA Document 6 Filed 07121 -db6 Page 2 of 26
1 Plaintiffs, by their attorneys, submit this Amended Class Action Complaint (th e 2 "Complaint") against the defendants named herein ..
3 NATURE AND SUMMARY OF THE ACTIO N 4 1 This is an amended class action complaint brought on behalf of purchasers of th e 5 securities of Rambus, Inc. ("Rambus" or the "Company") who (the "Class") purchased such shares
6 between or December 12, 2001 and July 18, 2006, inclusive .(the "Class Period") againstRambus
7 and Individual Defendants as described herein who were members of the Board of Directors o f 8 Rarnbus (the "Board"), or were executive officers of Rambus, and signed its Form 10-Ks and/o r
9 authorized issuance of its Proxy Statements . 10 2. When stock options are awarded, the strike price of the options ordinarily is set equal
11 to the share price on the day of the award.' In this way, the executives of a company are supposed to 12 have their interests aligned with the shareholders, whose holdings are diluted each time an option is
13 exercised.
14 3. As further alleged below, defendants improperly backdated (and/or had knowledge of 15 such backdating) stock option grants to various officers of the Company to make it appear that they 16 were made on dates when the market price of Rambus stock was lower than the market price on the
17 . actual grant dates. This improper backdating resulted in option grants with lower exercise price s
18 and thereby improperly increased the value of the options and improperly reduced the amounts the
19 recipients of these option had to pay the Company upon exercise of the options, and unfairly 20 transferred shareholder equity to defendants . Defendants' conduct also violated the Company's 21. shareholder-approved stock option plans, the Company's corporate governance guidelines, the
22 Company's standards of business conduct, and the Company's conflicts of interest policy .
23 4. During the Class Period, defendants caused Rambus to file false and misleading
24 statements with the Securities Exchange Commission ("SEC"), including but not limited to, Proxy 25 Statements filed with the SEC, which stated "Unless otherwise indicated, options were granted at an 26 exercise price equal to the fair market value of the Company's Common Stock at the date of grant ."
27 Since according to the scheme of backdating options, on the actual date that the defendants agreed
28 to grant options to the recipient the trading price of the stock was higher then the "fair market
2 AMENDED COMPLAINT FOR VIOLATIONS OF FEDERAL SECURITIES LAWS CASE NO. C06-04346 WH A W :ISTULORAMBUSIPLD\Amended Complaint 001 .wpd Case 3:06-cv-04 WHA Document 6 Filed 07121 (,~06 Page 3 of 26
value" of the stock on the date of grant, the aforementioned statement repeated in Rambus Proxy . Statements issued during the Class Period, which are enumerated and described more fully below,
was materially false and misleading. Furthermore, if the option grant is backdated, the options
value is not "fair" from the vantage point of the Company and its shareholders. 5. Defendants' backdating of options grants also violated provisions of the Internal Revenue Code relating to deduction of option payments and thereby rendered the Company's
financial statements in Form 10-K flings for the years 2002, 2003, 2004 and 2005, as well as
interim Form 10-Qs, materially false and misleading . Rambus' Audit Committee of its Board of 9 . Directors (the "Audit Committee") continuing investigation may determine that the Company has to 1 0 absorb substantial charges to correct the error which will likely wipe, out a portion of past profits
11 reported. In addition, the Company's financial statements in Form 10-K filings for the years 2002,
12 2003, 2004 and 2005 were rendered false and misleading because, in violation of Generally 1 3 Accepted Accounting Principles ("GAAP"), defendants understated expenses for the reporting
14 period, since if the exercise price at the time of the actual grant is below the market price on that
15 . date, the difference, according to GA AP, must be expensed by the Company, which it was not, 16 resulting in understating expenses and thus overstating net income .
17 6. In. fact, defendants were aware that the practices employed by the Board of Directors 18 allowed the stock option grants to be backdated frequently when the Company's shares were trading
1 9 at or near the lowest price for the relevant period . By 2004 defendants' backdating scheme had 20 yielded stock option grants to the Company's executive officers worth millions of dollars.
2 1 7. On May 30, 2006, Rambus announced that the Audit Committee had commenced an 22 internal investigation into the timing of the Company's stock option practices issued in or before
23 2003 . The Company has also announced that the Audit Committee had uncovered discrepancies
24 between the dates that some stock options went on the books and the dates that they should hav e 25 been recorded under applicable accounting rules . As reported in BizJournal.Com on May 31, 2006,
26 this announcement caused a 6 .11 %o drop in Rambus' common stock price to $24 .26. 27 8. On June 27, 2006 it was announced late in the afternoon that Rambus may have to
28 restate earnings for prior periods due the back dating of option grants . Rambus shares fell 5% i n
..3 AMENDED COMPLAINT FOR VIOLATIONS OF FEDERAL SECURITIES LAWS CASE NO. C06-04346 WH A W: STULL\RAMBUS\PLDIAmended Complaint 001 .wpd w J
Case 3:06-cv-04S WHA Document 6 Filed 07/21 6 Page 4 of 26
1 after hours trading. The June 28, 2006 edition of The Wall Street Journal reported that a
2 preliminary board review found improperly dated stock-option grants that may lead to a restatement
3 of prior financial results: "Rambus's board `has reached a preliminary conclusion that the actual
4 .measurement dates for certain stock option grants issued in prior years differ from the recorded
5 grant dates for such awards,' the company said." On June 27, 2006 Rambus common stock traded
6 at $23.13 per share, but on news of the above announcements Rambus common shares declined to
7 close at $20.55 per share on June 28, 2006 . 8 9 :. In a press release dated July 13, 2006, Rambus stated that it would hold a conference
9 call on July 19, 2006 to announce its second quarter . financial results . The release also stated that
10 the "Company will focus primarily on revenue and will not be in a position to finalize other 11 financial results for the second quarter until its Audit Committee has completed its independent
12 investigation of the timing of past options grants . "
13 10. On the morning of July . 19, 2006, Rambus announced that it .would restate results for
14 its years 2003, 2004 and 2005 because it would incur significant costs in connection with errors in
15 its stock-option accounting, and therefore its results from 2003 through December 31, 2005 could
16 no longer be relied upon . The Company also stated that it may have to delay the filing of its SEC 17 Form 10-Q for its quarter ending June 30, 2006 . Rambus also . noted in its July 19, 2006 Form 8-K'
18 filing that it would also record additional "significant" expenses for the investigation of the periods .
19 11 . Following the announcements in paragraph 10 above, Rambus common shares
20 declined approximately 15% to a close of $16 .61 from the previous day close of $19.60, thereby 21 further damaging plaintiffs and members of the Class .
22 JURISDICTION AND VENUE
23 12. Jurisdiction is conferred by Section 27 of the Securities Exchange Act of 1934 (the
24 "Exchange Act") [15 U.S.C. § 78aa] and 28 U .S.C. §§ 1331, 1337. The claims asserted herein arise 25 under and pursuant to Sections 10(b), 14(a) and 20(a) of the Exchange Act [15 U.S .C. §§ 78n(a),
26 78j(b) and 78t(a)] and Rule I Ob-5 promulgated thereunder by the Secu rities and Exchange
27 Commission ("SEC"), 17 C .F.R. § 240. lOb-5.
28
4 AMENDED COMPLAINT FOR VIOLATIONS OF FEDERAL SECURITIES LAWS CASE NO . C06-04346 WHA W:ISTULL1RAMBUSIPLDWmended Complaint 001 .wpd Case 3 :06-cv-04 WHA Document 6 Filed 07121C,- 06 Page 5 of 2 6
1' 13 . Venue is proper in this District pursuant to Section 27 of the Exchange Act, 15
2 U.S.C. § 78aa and 28 U .S.C. § 1391(b) and (c) . Venue is proper in this District because many of the 3 acts and practices complained of herein occurred in substantial part in this District . . 4 14. In connection with the acts, transactions and conduct alleged herein, defendants used
5 the means and instrumentalities of interstate commerce, including the United States mails, interstate
6 telephone communications and the facilities of the national securities exchanges and markets .
7 PARTIES
8 15 . Plaintiffs purchased shares of Rambus and engaged in transactions of Rambu s
9 securities during the Class Period, as set forth in the certification of Ronald L. Schwartz attached
10 hereto or that of plaintiff Bernstein previously filed, and suffered damages thereby . 11 16. Defendant Rambus is a Delaware corporation with its principal executive offices 12 located at 4440 El Camino Real, Los Altos, California 94022. According to its public filings,
1 3 Rambus is a technology licensing company specializing in the invention and designing of high-
14 speed chip interfaces. Since its founding in 1990, the Company's patented innovations, break 15 through technologies and renowned integration expertise have helped industry-leading chip and
16 system companies bring superior products to market . Rambus is a supplier of process control and 17 yield management solutions for the semiconductor manufacturing and related microelectronics
18 industries. Rambus' stock is publicly traded on the NASDAQ under the ticker symbol RMBS .
19 17. Defendant Harold Hughes ("Hughes") has served as Chief Executive Officer of the 20 Company since 2005 and has been a director of the Company since June 2003 . He also served as
21 interim Chief Financial Officer of the Company for the period March 2, 2006 to on or about April
22 11, 2006. Hughes also signed the Company's annual 10-K Reports for the years 2004 and 2005,
23 authorized the issuance of the Company's Proxy Statements for that period, as well as certification s
24 pursuant to the Sarbanes-Oxley Act of 2002 . Since at least as early as June 2003, he served as a 25 member of the Audit `Committee and served as its Chairman until January 9, 2005 ., at which time 26 Hughes discontinued his service on the Audit Committee when he`was elected by the Board to serve
27 as Chief Executive Officer . of the Company . Hughes signed the 2004 and 2005 annual 10-K Report s
28
5 AMENDED COMPLAINT FOR VIOLATIONS OF FEDERAL SECURITIES LAWS CASE NO . C06-04346 WH A W :ISTULLIRAMBUSIPLD\Amended Complaint 001 .wpd Case 3:06-cv-04 -. WHA . Document 6 Filed 07121LO6 Page 6 of 26
1 for Rambus during this period as well as authorized the issuance of the Company's Proxy
2 Statements for 2004 and 2005.
3 18. Defendant Robert K. Eulau ("Eulau") served as the Senior Vice President of Finance . 4 and Chief Financial Officer ofRambus for the period from May 2001 until his resignation effective
5 on or about March 2, 2006. Eulau signed the various annual 10-K Reports for Rambus du ring the
6 Class Period, as well as certifications pursuant to the Sarbanes-Oxley Act of 2002. Defendant Eulau
7 I received backdated stock-option grants as set forth in Exhibit A attached hereto . 8 19. Defendant Geoffrey Tate ("Tate") is Chairman of the Board of Directors . Tate
9 served as the Company's Chief Executive Officer until January 2005 and currently serves as
10 Chairman of the Board of Directors of Rambus. Tate served as President, Chief Executive Officer 11 . and director of the Company from May 1990 to December 1999 . Tate was also the sole member of
12 the Stock Option Committee from October of 2001 until October 2003, when the Boar d
13 of Directors dissolved the Stock Option Committee and vested its power and authority in Rambus'
14 Compensation Committee of its Board of Directors (the "Compensation Committee"). Tate, as. the
15 sole member of the Stock Option Committee, had the authority to administer the issuance of stock
16 options under the Company's 1997 Stock Plan and the 1999 Non-Statutory Stock Option Plan of up 17 to 100,000 shares per employee per year, other than to executive officers and members of our Board
18 of Directors. In addition, Tate had the authority to administer the issuance of common stock
19 equivalents under the 1997 Stock Plan. Tate received backdated stock-option grants as set forth in
20 Exhibit A attached hereto. Tate also signed all of the various annual 10-K. Reports and authorized 21 the issuance of all of the Company's Proxy Statements during the entire Class Period.
22 20. Defendant Bruce Durtlevie ("Dunlevie") is currently a director of the Company .
23 Dunlevie has served as a Director of the Company since its inception in March 1990 . . Since at least
24 as early as October 2001, Dunlevie served, and currently serves, as a member of the Compensation 25 Committee of the Company, of which he is Chairman . From at least as early as October 2001, until 26 he resigned on March 11, 2005, Dunlevie served as a member of the Audit Committee . He has been
27 a General Partner of the venture capital firm Benchmark Capital since May 1995 and a General
28 Partner in the venture capital firm Merrill, Pickard, Anderson & Eyre since 1989 . Dunlevie also 6
AMENDED COMPLAINT FOR VIOLATIONS OF FEDERAL SECURITIES LAWS CASE NO. C06-04346 WH A W :ISTULLIRAMBUS\PLD\A mended Complaint 001 .wpd 1 n Case 3:06-cv-04 ,.1!wHA Document 6 Filed 07/21 ; 06 Page 7 of 26
1 signed the annual 10-K Reports during the Class Period and authorized the issuance of all of the
2 Company's Proxy Statements during the entire Class Period. 3 21 . Defendant P. Michael Farmwald ("Farmwald") has served as a Director of the
4 . Company since co-founding the Company in March 1990 to present . On January 25, 2005 , 5 Farmwald was appointed to the Audit Committee, and currently serves there . He was appointed to
6 the Compensation Committee during October 2002, and served there until July of 2003 ., In addition, 7 he had served as Vice President and Chief Scientist of Rambus from March 1990 to November
8 1993 . Farmwald also signed the annual 10-K Reports during the Class Period and authorized the
9 issuance of the Company's Proxy Statements during the entire Class Period. 10 22. Defendant John D. Danforth ("Danforth") served as Senior Vice-President, General
11 Counsel and Secretary of the Company since October 2001 . Danforth, in his capacity as Secretary, 12 signed the Company's Proxy Statements during the Class Period on behalf of the Board o f
13 Directors.
14. 23. Defendant David Mooring ("Mooring") was a director of the Company sinc e 15 December 1999 until May of 2006 . He signed: all the Company's annual 10-K Reports during the 16 Class Period and authorized the issuance of the Company's Proxy Statements during the Class
17 Period. From 1999 to 2004, Mooring was President of Rambus . Mooring received backdated stock-
18 option grants as set forth in Exhibit A attached hereto . 19 24. Defendant Mark Horowitz ("Horowitz") has served as a Director of the Company
20 since co-founding Rambus in March 1990 . He has also served as a-Vice President from March 1990 21 to May 1994. Horowitz signed all of the Company's annual 10-K Reports during the Class Period
22 . as well as authorized the issuance of the Company's Proxy Statements during the Class Period.
23 25 . Defendant Kevin Kennedy ("Kennedy") has served as a Director of the Company 24 since April 2001 He also has served, since July 2003 and.continues to serve, as a member of, the
25 Compensation Committee and also serves as a member of the Corporate Governance and 26 Nominating Committee, of which he is the Chairman . Kennedy signed Rambus' 2003, 2004 an d
27 2005 annual 10-K Reports and authorized the issuance of the Company's Proxy Statements for 2004 28 and 2005,
7 AMENDED : COMPLAINT FOR VIOLATIONS OF FEDERAL SECURITIES LAWS CASE NO. C06-04346 WHA W:ISTULLIRAMBUS\PLDIAmended Complaint 001 .wpd 1 ( ~ Case 3:06-cv-04~.. WHA Document 6 Filed 07/21k- 6 Page S of 26
1 26. Defendant William Davidow ("Davidow") served as a director of the Company
2 since the founding of the Company in March 1990 until May 4, 2005 at which time he wa s 3 appointed Director Emeritus. He served as Chairman of the Board of Directors from March 1990
4 until January 2005 . He served as a member of both the Audit Committee and Compensatio n
5 Committee since as early as December 2001 . Davidow signed Rambus' 2001, 2002, 2003 and 2004 .6 annual 10-K Reports and authorized the issuance of the Company's Proxy Statements for 2001 , 7 . 2002, 2003, 2004 and 2005 .
.8 .27. Defendant Charles Geschke ("Geschke") served as a director of Rambus since
9 February 1996 until he resigned effective March 11, 2005 . He was a member of the Audit
10 Committee from as early as December 2001 until July 2003 . He was a member of the 11 Compensation Committee from as .early as December 2001 and its Chairman from October 2002 . :12 He was a member of the Corporate Governance/Nominating Committee from the time it was formed
13 in October 2002. Geschke signed Rambus' 2001 ., 2002, 2003 and 2004 annual 10-K Reports and 14 authorized the issuance of the Company's Proxy Statements for 2001, 2002, 2003 and 2004 .
15 28: Collectively, defendants Hughes, Eulau, Mooring, Tate, Dunlevie, Farmwald , 16 Danforth, Horowitz, Kennedy, Chou, Dayidow and Geschke are referred thereon as the "Individual
17 Defendants ."
18 29. Defendants Davidow, Geschke, Dunlevie, Hughes, and Farmwald are also referred to 19 as the "Audit Committee Directors" Defendants Farmwald, Geschke, Dunlevie, and Kennedy are
20 also referred to as the, "Compensation Committee Directors." Defendants Tate, Mooring, Danforth 21 and Eulau are also referred to herein as the "Backdated Option Recipients ."
22 CLASS ALLEGATIONS
23 30. Plaintiffs bring this action as a class action pursuant to Federal Rule of Civi l 24 Procedure 23(a) and (b)(3) on behalf of a Class, consisting of all those who purchased the common 25 stock of Rambus between December 12, 2001, (the date the Company filed its form 14-K with the
26 SEC for the its fiscal year ending September 30, 2001.)) and July 18, 2006 (the date the Company
27 disclosed that it would restate earnings for 2003 through 2005 because of its practice of backdating
28 options), inclusive and who were damaged thereby. Excluded from the Class are defendants, th e
8 AMENDED COMPLAINT FOR VIOLATIONS OF FEDERAL SECURITIES LAWS CASE NO . C06-04346 WH A W:ISTULLIRAM BUS\PLDIAmended Complaint 001 .wpd Case 3:06-cv-04 WHA Document 6 Filed 07/21 L "t)6 Page 9 of 26
officers and directors of the Company, at all relevant times, members . of their immediate families
and their legal representatives, heirs, successors or assigns and any entity in which defendants have 3 or had a controlling interest.
4 31 . The members of the Class are so numerous that joinder of all members is
5 impracticable. During the Class Period, Rambus. had more than 100 million shares of common
6 stock outstanding, which were actively traded on the NASDAQ, under the ticker symbol "RMBS,"
7 and tens of millions of shares of common stock were traded during the Class Period. While the
8 exact number of Class members is unknown to plaintiffs at this time and can only be ascertained
9 through appropriate discovery. Plaintiffs believe that there are hundreds or thousands of members
10 in the proposed Class . Record owners and other members of the Class maybe identified from
1 1 records maintained by Rambus or its transfer agent and brokerage firms and may be notified of the
12 pendency of this. action by mail, using the form of notice similar to that customarily used in
13 securities class actions.
14 31 Plaintiffs' claims are typical of the claims of the members of the Class as all
15 members of the Class are similarly affected by defendants' wrongful conduct in violation of federal 16 law that is complained of herein.
17 33. Plaintiffs will fairly and adequately protect the interests of the members of the Class 18 and has retained counsel competent and experienced in class and securities litigation .
19 34. Common questions of law and fact exist as to all members of the Class and
20 predominate over any questions. solely affecting individual members of the Class . Among the 21 questions of law and fact common to the Class are : 22 (a) . whether the federal securities laws were violated by defendants' acts a s
23 alleged herein ;
24 (b} whether statements made by defendants to the investing public during the 25 Class Period misrepresented material facts about a.) how the Company awarded options to its
26 executives, and b.) whether the Company's financial form 10-K and Proxy Statements, filed with
27 the SEC during the Class Period, contained false and misleading statements ; and 28
9 AMENDED COMPLAINT FOR VIOLATIONS OF FEDERAL SECURITIES LAWS CASE NO. C06-114346 WH A W:ISTULLIRAMBUSIPLD`Amended Complaint 001 .wpd se 3 :06-cu-443 w ; IHA Document 6 Filed 07121! ~ : 6 Page 10 of 26
1 .(c) to what extent the members of the Class have sustained damages and th e
2 proper measure of damages.
3 35. A class action is superior to all other available methods for the fair and efficient 4 adjudication of this controversy since joinder of all members is impracticable .. Furthermore, as the
5 damages suffered by individual Class members may be relatively small, the expense and burden of
6 individual litigation make it impossible for members . of the Class to individually redress the wrongs
7 done to them. There will be no difficulty in the management of this action as a class action . 8 SUBSTANTIVE ALLEGATION S
9 36. From fiscal 2001 to 2004', the Compensation Committee granted certain Rambus
10 stock options to the Backdated Option Recipients and certain other executives of the Company, as
II set forth in Exhibit A hereto . Frequently.the grants were dated just after a sharp drop in the
12 Company's stock price and before a substantial rise in the Company's stock price . See Exhibit B
13 attached hereto which shows the . exercise price for Rambus shares on the various dates of grant
14 compared to the price of Rambus stock for ten days before and after such grant .
15 37. For example, as demonstrated on Exhibit A, the Company's Proxy statement filed 1 6 with the SEC March 19, 2004 reported that on November 25, 2003, defendants Tate, Mooring and
17 Eulau, in addition to Rambus officers, John D . Danforth, the Company's Sr . Vice-President,
18 General Counsel and Secretary, and Ed Larsen, the Company's Sr. Vice-President for
19 Administration, received options for 760,000 common shares of Rambus at an exercise price of
20 $25.16, or the price of shares on the date of grant. However, a mere three days later, on November 21 28, the price had risen to close at $30.00 per share, thus creating an almost instant profit for the
22 recipients of these options of nearly $3,800,000.
23 38. Similarly, on August 23, 2001 options were issued at $4 .86 and the next day the price
24 went to $5.67 per share and three days after that,, on August 27, to $7 .37 per share . More
25 extraordinary, .the price of Rambus shares had been $5 .35 per share on the day before the option 26
27 Rambus' fiscal years 2001 and 2002 ended on September 30 of 2001 and 2002, 28 respectively. Fiscal years 2003-2006 ended on December 31 .
10 AMENDED COMPLAINT FOR VIOLATIONS OF FEDERAL SECURITIES LAWS CASE NO. C06-04346 WH A W:ISTULLCRAMBUSIPLD\Amended Complaint 001 .wpd Case 3;06-cv-043~"L .WHA Document 6 Fled 071211 La6 Page 11 of 2 6
1 grant date. In fact, the exercise price of $4 .86 per share was virtually the lowest trading price o f 2 Rambus shares on the 10 days before the option grant date of August 23, 2001 and the 10 days after
3 that date see Exhibit B) . Defendants Tate and Mooring each received options to purchase 600,000
4 shares of Rambus and realized . virtually instant profits of over $1 .5 million dollars each . 5 39 . The reason for the extraordinary pattern of stock option grants as alleged herein i s
6 that many, if not all, of the purported grant dates set forth therein were not the actual dates on which 7 the stock option grants were made . Rather, at the behest of the defendants, and/or the
8 Compensation Committee, defendants improperly backdated the stock option grants to make i t 9 appear as though the grants were made on dates when the market price of Rambus stock was lower
10 than the market price on the actual grant dates .
11 40. This improper backdating violated the terms of the Company's shareholder- 12 approved stock option plan . Pursuant to the terms of the Company's shareholder-approved stoc k
13 option plans, the exercise price of options must be no less than the closing price of Rambus stock on 14 the date of grant. In this way, the executives of a company are supposed to have their interests
15 aligned with the shareholders, whose holdings are diluted each time an option is exercised. 16 Backdating improperly increased the value of the options to the Backdated Option Recipients and
17 gave them an immediate paper profit which undermined the incentive purpose of such options ,
18 improperly reduced the amounts the Backdated Option Recipients had to pay the Company upon 19 exercise of the options, and unfairly transferred shareholder equity to defendants .
20 41. On or about June 6, 1997 Rambus filed with the SEC a Registration Statement on 21 Form S-8 registering its 1990 Stock Plan, 1997 Stock Plan and 1997 Employee Stock Purchase
22 Plan. The 1997 Stock Plan, contained as an exhibit therein, stated that options granted under the
23 Plan may be Incentive Stock Options or Nonstatutory Stock Options . The Plan, at Section 9, defines 24 the ":Exercise Price" as follows : 25 9 Option Exercise Price and Consideration .
26 (a) Exercise Price . The per share exercise price for the Shares to be issued Pursuant to exercise of an Option shall be determined by the 27 Administrator, subject to the following:
28 (i) In the case of an Incentive Stock Option
11 AMENDED COMPLAINT FOR VIOLATION S OF. FEDERAL SECURITIES LAWS CASE NO. C06•04346 WHA W :\5TULL\RAMBUS\PLDWmended Complaint OOl .wpd Case 306-cv-043 ,(NHA Document 6 Filed 071211 .:r Page 12 of 26
(A) granted to ., an Employee who, at the time the Incentive Stock Option is granted, owns stock representing more than ten percent (10%) of the voting power of all. classes of stock of the Company or any Parent or Subsidiary, the per Share. exercise price shall be no less than 110% of the Fair Market Value per Share on the date of grant.
(B) granted to any Employee other than an Employee S described in paragraph (A) immediately above, the per Share exercise price shall be no less than 100% of the Fair Market Value Der Shar e 6 1
7 (ii) In the case of a Nonstatutory Stock Option, the per Share exercise price shall be determined by the Administrator. In the 8 case of a Nonstatutory Stock Option intended to qualify as . "performance-based compensation" within the meaning of 9 Section 162(m) of the Code, the per Share exercise price shall be no less than 100% of the Fair Market Value per Share on 10 the date of grant. (emphasis added) 11 42. Defendants' conduct also violated the terms of the Company's own corporate
12 governance guidelines, the Company's standards of business conduct and the Company's conflicts 13 of interest policy . For example, the Company's Code of Business Conduct and Ethics provides that
14 each director, officer and employee may not profit from possession of significant, non-publi c
15 information; and must engage in "honest and ethical conduct, including the ethical handling of 16. actual or apparent conflicts of interest between personal and professional relationships ." The Code
17 further states that Rambus has a responsibility to communicate effectively with shareholders so that 18 they are provided with full and accurate information in all material respects, about Rambus'
19 financial condition and results of operations .
20 A. Defendants Concealed Their Backdating of Stock Options Thus Rendering Rambus' Proxy Statements Materially False and Misleadin g 21
22 43 . Defendants' backdating scheme also rendered the Company's Proxy Statements
23 issued in connection with shareholder meetings held from 2002 to 2005 materially false and
24 misleading. The Proxy. Statements falsely reported the dates of the stock option grants and falsely
25 represented that the options were granted at fair market value. If the option grant was backdated, 26 the options value wasnot fair from the vantage point of the Company and its shareholders . For
27 example,. a report on the 2003 Executive Compensation contained in Rambus' 2004 Proxy 28 Statement falsely represented that. "non-cash compensation [to executives] should be closely aligne d
12 AMENDED COMPLAINT FOR VIOLATIONS OF FEDERAL SECURITIES LAWS CASE NO. C06-04346 WH A W:ISTULLIRAMBUS\PLDIAmended Complaint 001 .wpd Case 3:06-cv-O43 HA Document 6 Filed 07{211 J6 Page 13 of 2 6
1 with shareholder interests." In addition, Rambus Proxy's statement filed in 2005 was also false and
2 misleading because in it defendants continued to conceal the Company's illicit policy of backdating 3 options.
4 44. Rambus issued its Proxy Statement dated December 20, 2001 for the annual meeting 5 of stockholders to be held February 5, 2002 . This proxy statement disclosed certain information
6 regarding stock options granted to each of the named executive officers for the fiscal year ended 7 September 30, 2001, and stated further, in a footnote, "Unless otherwise indicated, options were
8 granted at an exercise price equal to the fair market value of the Company's Common Stock at the
9 date of the grant." This proxy statement, signed by defendant Danforth, on behalf of the Board of 10 Directors, including defendants Tate, Mooring, Eulau, Dunlevie, Farmwald, Horowitz, Geschke and 11 Davidow, was false and misleading as no mention was made that some or all of the options granted
12 to . members of management during the current and prior fiscal years may have been backdated o r
13 otherwise manipulated.
14 45 . Rambus issued its Proxy Statement dated December 19, 2002 for the annual meeting 15 of stockholders to be held January 30, 2003 . This proxy statement disclosed certain information . 16 regarding stock options granted to each of the named executive officers for the fiscal year ende d
17 September 30, 2002, and stated further, in a footnote, "Unless otherwise indicated, options were .
18 granted at an exercise price equal to the fair market value of the Company's Common Stock at the 19 date of the grant." This proxy statement, signed by defendant Danforth on behalf of the Board of
20 Directors, including defendants Tate, Mooring, Eulau, Dunlevie, Farmwald, Horowitz, Geschke and 21 Davidow, was false and misleading as no mention was made that some or all of the options granted
22 to members of management during the current and prior fiscal years may have been backdated o r
23 otherwise manipulated. 24 46. Rambus issued its Proxy Statement dated March 19, 2004 for the annual meeting of 25 stockholders to be held May 4, 2004 . This proxy statement disclosed certain information regarding
26 stock options granted to each of the named executive officers during 2003, and the transitiona l
27 period October 1, 2002 to December 1, 2002 (due to change of reporting period), including the
28 exercise price and stated further, in a footnote, "Unless otherwise indicated, options were granted at
13 AMENDED COMPLAINT FOR VIOLATIONS OF FEDERAL SECURITIES LAW S CASE NO . C06-04346 WHA W:ISTULL\RAMBUS\PLD\Amended Complaint 001 .wpd ase 3:06-cv-043~".f ~VHA Document 6 Filed 07/21 L, 6 Page 14 of 26
1 an exercise price equal to the fair market value of the Company's Common Stock at the date of the
2 grant." This proxy statement, signed by defendant Danforth on behalf of the Board of Directors,
3 which included defendants Hughes, Kennedy, Tate, Mooring, Eulau, Dunlevie, Farmwald,
4 Horowitz, Geschke and Davidow, was false and misleading as no mention was made that some or
5 all of the options granted to members of management during . the current and prior periods may have
6 been backdated or otherwise manipulated .
7 47. Rambus issued its Proxy Statement dated March 24, 2005 for the annual meeting of 8 stockholders to be held May 3, 2005. This proxy . statement disclosed certain information regarding
9 stock options granted including the exercise price to each .of the named executive officers during
.10 2004 including the purported exercise price, and stated further, in a footnote, "Unless otherwise
11 indicated, options Were granted at an exercise price equal to the fair market value of, the Company's 12 Common Stock at the date of the grant ." This proxy statement, signed by defendant Danforth on
13 behalf of the Board of Directors, which included defendants Hughes, Kennedy, Tate, Mooring,
14 Eulau, Dunlevie, Farmwald, Horowitz, Geschke and Davidow, was false and misleading as no 15 mention was made that some or all of the options granted to members of management during the
16 current and prior years may have been backdated or otherwise manipulated .
17 B. Defendants' Baclcdating .of Options Also Rendered Their Annual Report on Form 10-k to Be Material !y and Misleading 18
19 48. Defendants' backdating scheme also rendered the Company 's financial statements in 20 Form 10-K filings for fiscal years 2001, 2002, 2003 and 2004 to be materially false and misleading . 21 49. Pursuant to APB 25, the applicable GAAP provision at the time of the foregoing
22 stock option grants , if the market price on the date of grant exceeds the exercise price of the options,
23 the company must recognize the difference as an expense, thereby reducing the company's net,
24 income. 25 .50 . In addition, as set forth in the. Company's Proxy Statements, the Company has 26 adopted IRS§ 162(m) (Section 162(m) of the Tax Code, 26 U .S .C. §162) which permits the
27 Company to deduct for federal income taxes purposes compensation paid under the Bonus Plan .
28 The Company's Proxy Statements claimed that the 1997 Stock Plan was designed and administered
14 AMENDED COMPLAINT FOR VIOLATIONS OF FEDERAL SECURITIES LAWS CASE NO . C06-04346 WH A W :\STULL\RAMBUS%PLDIAmended Complaint 001 .wpd Case 3 : 06-cv-0434 ^ NHA Document 6 Filed 071211-6 Page 15 of 26
1 to meet the requirements of Section 162(m) . Pursuant to Section 162(m), compensation in excess of 2 $1 million per year, including gains on stock options, paid to a corporation's five mos t
3 highly-compensated officers is tax deductible only if . (i) the compensation is payable solely on
4 account of the attainment of one or more performance goals ; (ii) the performance goals are 5 determined by a compensation committee comprised solely of two or more outside directors, (iii) 6 the material terms under which the compensation is to be paid, including the performance goals, are
7 disclosed to shareholders and approved by a majority of the vote in a separate shareholder vote
8 before payment of the compensation, and (iv) before any payment of such compensation, th e 9 compensation committee certifies that the performance goals and any other material terms were in
10 fact satisfied .
1 1 51 . As a result of the improper backdating of stock options, the Company, with the 12 knowledge, approval, and participation of each of the defendants, violated GAAP by failing to 13 recognize compensation expenses incurred when the improperly backdated options were granted ;
14 violated § 162(m) by taking tax deductions based on stock option grants that were not payable solely
15 on account of the attainment of one or more performance goals and violated the terms of th e
16 Company's shareholder-approved stock option plans .
17 52 . On or about December.4, 200.1 the Company filed its Form 10-K report for the fiscal 18 year ended September 30, 2001 with the SEC . The 10-K report was contemporaneously distribute d
19 to the public .including its shareholders . This Form 10-K report contained he Company's 20 comparative financial statements for the current and prior fiscal years which were materially false
21 and misleading and were not prepared in accordance with generally accepted accounting principles
22 due to the improper accounting for stock option grants which were backdated . As a result Rambus' 23 net earnings and stockholders' equity were overstated and the compensation costs attributable to the
24 backdated stock options were correspondingly understated. Rambus will now be forced to 25 acknowledge serious shortcomings in its administration and accounting for stock options .
26 53 . Also, the Company stated in a footnote to the financial statements that, "Ramous 27 accounts for stock-based awards to employees using the intrinsic value method in accordance with
28 . Accounting Principle Board Opinion No. 25, "Accounting for Stock Issued to Employees ." Stock
15 AMENDED. COMPLAINT FOR VIOLATIONS OF FEDERAL SECURITIES LAWS CASE N.O. C06-04346 WH A W:ISTULLIRAMBUS\PLD'Amended Complaint 001 .wpd Case 3:06-cv-043 -MINA Document 6 Filed 071211a 3 Page 16 of 2 6
1 options are generally granted with exercise prices equivalent to fair market value, and n o
2 compensation cost is recognized . When stock options are compensation granted with exercise 3 prices below fair market value, employee stock-related compensation expense is recognize d
4 accordingly." 5 54. On or about November 26, 2002 the Company filed its Form 10-K report for the
6 fiscal year ended September 30, 2002 with the SEC. This i 0-K was signed by defendants Tate, 7 Mooring, Eulau, Davidow, Dunlevie, Farmwald, Geschke and . Horowitz. The 10-K report was
8 contemporaneously distributed to the public including its shareholders . This Form 10-K report 9 contained the Company's comparative financial statements for the current and prior fiscal years
10 which were materially false and misleading and were not prepared in accordance with GAAP due to
11 the. improper accounting for stock option grants which were backdated . As a result Rambus' net 12 earnings and stockholders' equity were overstated and the compensation costs attributable to the 13 backdated stock options were correspondingly understated, according to the accounting principles
14 set forth in paragraphs 49-51 above . Rambus will now be forced to acknowledge seriou s
15 shortcomings in its administration and accounting for stock options .
16 55. Also, the Company stated in a footnote to the financial statements that, "Rambus 17 accounts for stock-based awards to employees using the intrinsic value method in accordance with 18 Accounting Principle Board Opinion No . 25, "Accounting for Stock Issued to Employees ." Stock
19 . options are generally granted with exercise prices equivalent to fair market value, and n o
20 compensation cost is recognized. When stock options are compensation granted with exercise 21 prices below fair market value, employee stock-related compensation expense. is recognized
.22 accordingly."
23 56. In connection with the November 2002 10-K, the Company submitted to the SEC the 24 certifications of its principal executive officer, defendant Tate, and its principal financial officer ,
25 defendant Eulau, as required pursuant to .18 U.S.C. 1350, as adopted pursuant to Section 906 of the 26 Sarbanes-Oxley Act of 2002 . Each such certification of defendants Tate and Eulau stated, "Based .
27 on my knowledge, this report does not contain any untrue statement of material fact or omit to state 28
16 AMENDED COMPLAINT FOR VIOLATIONS OF FEDERAL SECURITIES LAWS CASE NO. C06-04346 WH A W:ISTULURAMBUSIFLD\Amended Complaint 001 .wpd Case 3:06-cv-043 MINA Document 6 Filed 071211± .o Page 17 of 26
1 a material fact necessary to make the statements made, in light of the circumstances under which
2 such statements were made, not misleading with respect to the period covered by this report ."
3 57. On or about February 13, 2004 the Company filed its Form 10-K report for the year 4 ended December 31, 2003 . This 10-K was signed by defendants Tate, Mooring, Eulau, Davidow,
5 Dunlevie, Farmwald, Geschke, Horowitz, Hughes and Kennedy . The 10-K report was 6 contemporaneously distributed to the public including its shareholders . This Form 10-K report
7 contained the Company's comparative financial statements for the years 2003 and 2002 and three 8 months ended December 31, 2002 and 2001 which were materially false and misleading and were
9 not prepared in accordance with GAAP due to the improper accounting for stock option grant s 10 which were backdated . As a result, Rambus' net earnings and stockholders' equity were overstated
11 and the compensation costs attributable to the backdated options were correspondingly understated,
12 according to the accounting principles set forth in paragraphs 49-51 above . Rambus will now be , 13 forced to acknowledge serious shortcomings in its administration and accounting for stock options .
14 58. Also, the Company stated in a footnote to the financial statements that, "Rambu s 15 accounts for stock-based awards to employees using the intrinsic value method in accordance with
16 Accounting Principle Board Opinion No. 25, "Accounting for Stock Issued to Employees." Stock 17 options are generally granted with exercise prices equivalent to fair market value, and n o
18 compensation cost is recognized. When stock options are compensation granted with exercise
19 prices below fair market value, employee stock related compensation expense is recognized 20 accordingly."
21 59. In connection with the February 2004 10-K, the Company submitted to the SEC the 22 certifications of its principal executive officer, defendant Tate, and its principal financial officer,
23 defendant Eulau, as required pursuant to 18 U .S.C. 1350, as adopted pursuant to Section 906 of the
24 Sarbanes-Oxley Act of 2002 . Each such certification of defendants Tate and Eulau stated, "Based 25 on my knowledge, this report does not contain any untrue statement of material fact or omit to state 26 a material fact necessary to make the statements made, in light of the circumstances under which
.27 such statements were made, not misleading with respect to the period covered by this report ."
28
17 AMENDED COMPLAINT FOR VIOLATIONS OF FEDERAL SECURITIES LAWS CASE NO. C06-04346 WH A W:ISTULLIRAMBUSIPLDIAmended Complaint 001 .wpd Case 3:06-cv-043 -NHA Document 6 Filed 0712112: Page 18 of 2 6
1 60. On or about February 17, 2005 the Company filed its Form 10-K report for the year
2 ended December 31, 2004 with the SEC . The 10-K report was contemporaneously distributed to the
3 public including its shareholders . This Form 10-K report contained the Company's comparative 4 financial statements for the current and prior year which were materially false and misleading and
5 were not prepared in accordance with generally accepted accounting principles due to the improper
6 accounting for stock option grants which were backdated . As a result, Rambus' net earnings were
7 overstated and, the compensation costs attributable to the backdated options were correspondingl y 8 understated, according to the accounting principles set forth in paragraphs 49-51 above . Rambus
9 will now be forced to acknowledge serious shortcomings in its administration and accounting fo r
10 stock options.
11 61 . Also, the Company stated in a footnote to the financial statements that, "Rambus
12 accounts for stock-based awards to employees using the intrihsic .value method in accordance with 13 Accounting Principle Board Opinion No . 25, "Accounting for Stock Issued to Employees ." Stock 14 options are generally granted with exercise prices equivalent to fair market value, and n o
15 compensation cost is recognized . When stock options are compensation granted with exercise
16 prices below fair market value, employee stock-related compensation expense is recognize d
17 accordingly."
18 62. In connection with the February 2005 10-K, the Company submitted to the SEC th e
19 certifications of its principal executive officer, defendant Hughes, and its principal financial officer ,
20 defendant Eulau, respectively, as required pursuant to 18 U .S.C. 1350, as adopted pursuant to
21 Section 906 of the Sarbanes-Oxley Act of 2002 . Each such certification of defendants Hughes and 22 Eulau stated, "Based on my knowledge, this report does not contain any untrue statement of material
23 fact or omit to state a material fact necessary to make the statements made, in light of the
24 circumstances under which such statements were made, not misleading with respect to the perio d
25 covered by this report." 26 63. On or about February 21, 2006 the Company filed its Form 10-K report for the year
27 ended December'31, 2005 with the SEC. This 10-K was signed by defendants Hughes, Eulau, Tate ,
28 Dunlevie, Farmwald, Horowitz, and Mooring . The i 0-K report was contemporaneously distributed
18 AMENDED COMPLAINT FOR VIOLATIONS OF FEDERAL SECURITIES LAWS CASE NO. C06-04346 WH A W:\STULL\RAMBUS\PLD\Amended Complaint 001 .wpd Case 3:06-cv-0434 ;VHA Document 6 Filed 071211 Page 19 of 26
1 to the public including its shareholders . This Form 10-K report contained the Company's
2 comparative financial statements for the prior years which were materially false and misleading and 3 were not prepared in accordance with generally accepted accounting principles due to the improper
4 accounting for stock option grants which were backdated . As a result Rambus' net earnings and 5 stockholders' equity for prior years was overstated and the compensation costs attributable to the
6 backdated stock options were correspondingly understated, according to the accounting principles 7 set forth in paragraphs 49-51 above, Rambus will now be forced to acknowledge serious
8 shortcomings in its administration and accounting for stock options . In connection. with this report
9 the Company submitted to the SEC the certifications of its principal executive officer and its 10 principal financial officer a required pursuant to 18 U .S.C . 1350, as adopted pursuant to Section 906
11 of the Sarbanes-Oxley .Act of 2002. Each such certification of defendants Hughes, Eulau, Tate, 12 Dunlevie, Farmwald, Horowitz, and Mooring stated, "Based on my knowledge, this report does not
13 contain any untrue statement of material fact or omit to state a material fact necessary to make the
14 statements made, in light of the circumstances under which such statements were made, no t 15 misleading with respect to the period covered by this report ."
16 64. As a result of all of the foregoing, plaintiffs and members of the Class have been 17 damaged. On May 31, 2006, after news of the Audit Committee's investigation of backdating of
18 stock options, Rambus common shares declined from a close of $25 .84 on May 30 to a close of 19 $24.26 on May 31 . On June 28, 2006, Rambus shares declined over 6% or from $23 .13.
20 65. Then, on July 19, 2006 on news that the Company would restate its results for 2003 21 through 2005, the Company's common shares declined approximately 15% to $16.61 per share from
22 the prior day's close of $19 .60, in active trading on NASDAQ.
23 APPLICABILITY OF THE FRAUD ON THE MARKET DOCTRIN E 24 66. At all relevant times, the market for Rambus' common stock was an efficient market 25 for the following reasons, among others :
.26 T (a) Rambus' common stock met the requirements for listing, and was listed and
27 actively traded on the NASDAQ, a highly efficient and automated market ; 28 .
19 AMENDED COMPLAINT FOR VIOLATIONS OF FEDERAL SECURITIES LAWS CASE NO. C06 .04346 WH A W:ISTULURAMBUSIPLDIAmended Complaint 001 .wpd Case 3:06-cv-043 .-VHA Document 6 . Filed 0712112-- Page 20 of 2 6
1 (b) As a regulated issuer, Rambus filed periodic public reports with the SEC and 2 the NASDAQ;
3 (c) Rambus regularly communicated with public investors via established market 4 communication mechanisms, including through regular disseminations of press releases on the
5 national circuits of major newswire services and through other wide -ranging public disclosures, 6 such as communications with the financial press and other similar reporting services ; and
7 (d) Rambus was followed by secu rities analysts, including those who were
8 employed by major brokerage firms , who wrote reports which were distributed to the sales force and
9 certain customers of their respective brokerage firms . Each of these reports was publicly available
10 and entered the public marketplace .
1 1 67. As a result of the foregoing, the market for Rambus ' promptly digested current
12 information regarding Rambus from all publicly available sources and reflected such information in 13 Rambus ' stock price. Under these circumstances , all. purchasers of Rambus common stock during
14 the Class Period' suffered similar injury through their purchase of Rambus ' common stock at 15 artificially inflated prices and a presumption of reliance applie s
16 ADDITIONAL SCIENTER ALLEGATION S 17 68. Certain member of Rambus ' management listed below, including defendants
18 Mooring, Eulau and Danforth as Backdated Option Recipients, in the months preceding the May 30,
19 2006 announcement (from January 1, 2006 ), sold a total of 2,295,099 artificially inflated Rambus 20 shares, while in the possession of materially adverse inside knowledge regarding backdating options
21 scheme,as described herein. Many of these shares were acquired by the exercise of stock options ; 22 for proceeds of $74,261,265 as follows :
23 11 24 II 25 11
26 27 28
20 AMENDED COMPLAINT FOR VIOLATIONS OF FEDERAL SECURITIES LAWS CASE NO . C06-04346 WH A W :ISTULLIRAMBUSIPLD1Amended Complaint 001 .wpd case 3:06-cv-0434-1HA Document 6 Filed 0712112, 3 Page 21 of 26
I TOTAL SHARES. AND PROCEEDS :
2 AVERAGE PER SHARES PROCEEDS SHARE PROCEEDS 3 Mooring 1,591,999 $ 51,318,569 $ 32 .22 Eulau 350,000 $ 10,510,715 $ 30 .03 4 Danforth 170;000 $ 6,096,608 $ 35.86 Starke 183 ;100 $ 6,335,373 $34:60 5 TOTALS 2,295,099 $ 74,261,265 $ 3236 6
7 .69 . Members of the Compensation Committee during all or part of the Class Period, 8 which included Individual Defendants. Farmwald, Geschke, Dunlevie, and Kennedy (previousl y
9 defined herein as the "Compensation Committee Directors"), were aware of, or but for their reckless
10 . disregard should have been aware of, the backdating options scheme . The Charter of the 11 Compensation Committee of Rambus states that the purpose of the Compensation Committee is,
12 inter alia, to "recommend and approve appropriate executive compensation" and to "make 13 recommendations to the Board regarding . director compensation ." The Committee is charged with
14 annually reviewing and approving for the CEO and executive officers of the Company, the annual
15 salary, bonuses; equity compensation, incentive bonuses and any other benefits, compensation or 16 arrangements . Therefore, because of their intricate involvement in the formulation and issuance of
17 such options, the Compensation Committee Directors possessed the . requisite scienter. 18 70. Those defendants who were members of the Audit Committee, which include d
19 Individual Defendants Davidow, Geschke, Dunlevie and Hughes (previously defined herein as the
20 "Compensation Committee Directors") for some of all of the Class Period ., were responsible for 21 maintaining the adequacy of internal controls, and therefore, knew, or at a minimum recklessly 22 disregarded, the impermissible option backdating scheme which internal controls of the Company
23
24 2 Laura S. Stark is the Sr. Vice President, Platform Solutions. Mrs. Stark joined Rambus in 25 1996 as Strategic Accounts Manager, and held the positions of Strategic Accounts Director and Vice 26 President, Alliances and Infrastructure, before assuming the position of Vice President, Memor y Interface Division in October 2000, which she held until February 2005 when she was appointed 27 Vice. President, Platform Solutions.
28
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1 should have detected. The Audit Committee Charter of Rambus states that the Company has an 2 obligation to insure that it produces and publicly distributes financial statements which are
3 consistent, fairly presented and in conformance with generally accepted accounting principles . It is
4 the duty of the Audit Committee to oversee the Company's. accounting and financial reporting 5 process, its system .of internal accounting controls and the auditing of the Company's financial 6 statements. In addition,members of the Audit Committee whose duty it was to meet periodically
7 with management to review the adequacy of the Company's internal controls, did, or but for their 8 reckless disregard should have, detected and been aware of the illicit option backdating scheme .
9 Therefore, the Audit Committee Directors possessed the requisite scienter.
10 COUNT I 11 FOR VIOLATIONS OF SECTION 10(b) OF THE EXCHANGE ACT AND RULE10b-5 PROMULGATED THEREUNDE R 12 13 71 . Plaintiffs repeat and reallege each and every allegation set forth above . During the 14 Class Period, defendants, and each of them, carried out a plan, scheme and course of conduct that
15 was intended to and/or did: (i) deceive the investing public,. including plaintiffs and other Class
16 members, as alleged herein; (ii) artificially inflate the market price of Rambus common stock ; and
17 (iii) cause plaintiffs and other members of the Class to buy Rambus stock at artificially inflate d 18 prices. In furtherance of this unlawful scheme, plan, and course of conduct, defendants, and each of
19 them, took the actions set forth herein. 20 72. These defendants : (a) employed devices, schemes and artifices to defraud ; (b) made
21 untrue statements of material fact and/or omitted to state material facts necessary to make th e 22 statements not misleading,, and (c) engaged in acts, practices and a course of business whic h
23 operated as a fraud and deceit upon the buyers of Rambus common stock in violation of Section
24 10(b) of the Exchange Act and Rule 1 Ob-5 promulgated thereunder. 25 73. Defendants' material misrepresentations and/or omissions were done knowingly or
26 recklessly . 27 74. As a result of the defendants' dissemination of deceptive and misleading information
28 regarding the Rambus' practice of backdating options in violation of the Company's own internal
22 AMENDED COMPLAINT FOR VIOLATIONS OF FEDERAL SECURITIES LAWS CASE NO. C06-04346 WH A W:ISTULLIRAMBUS\PLD\Amended Complaint 001 .wpd Case 3:.06-cv-043 HA Document 6 Filed. 07121/ Page 23 of 26 .
policies and procedures and in contradiction to statement made in. the Company's filings with the SEC. Furthermore, the backdating of options resulted in understating expenses and thus overstating
net income in the Company's financial results contained in Rambus' Form 10-Ks filed with the SEC
during the Class Period. In ignorance of the fact that the market price of Rambus' shares were artificially inflated, and relying upon the integrity of the market in which Rambus common stock trades, and/or on the absence of material information that was known to and/or recklessly
disregarded by defendants but not disclosed in public statements by defendants during, the Class
Period, plaintiffs and the other members of the Class bought Rambus common stock during the Class Period at artificially inflated prices and were damaged thereby .
75 . At the time of said misrepre sentations and omissions, plaintiffs and the other members of the Class were ignorant of the omitted material facts and believed defendants'
statements regarding the awarding of options and their financial statements contained in their Form 10-Ks to be completely truthful, candid and not deceptive or misleading or suffering from omissions
of material facts . Had plaintiffs and the other members of the Class known of the omitted material facts, plaintiffs and the other members of the Class would not have bought their Rambus common
stock during the Class Period, or, if they had bought such stock during the Class Period, they would
17 not have done so at the artificially inflated prices which they paid for their Rambus common stock 18 which they bought during the Class. Period.
19 76. By virtue of the foregoing, each of the defendants violated Section 10(b) of the
20 Exchange Act and Rule lOb-5 promulgated thereunder .
21 77. As a direct and proximate result of defendants' wrongful conduct, plaintiffs and . the
22 other members of the Class suffered damages in connection with their purchases of Rambus
23 common stock during the Class Period.
24 COUNT II FOR VIOLATION OF SECTION 14(a) OF THE EXCHANGE ACT 25
26 78. Plaintiffs incorporate by reference and reallege each and every allegation set forth 27 above, as though fully set forth herein .
28
23 AMENDED COMPLAINT FOR VIOLATIONS OF FEDERAL SECURITIES LAWS CASE NO . C06-04346 WH A W :\STULL\RAMBUS\PLDIAmended Complaint 001 .wpd Case 3:06-cv-0434; , NHA Document 6 Filed 07121/" Page 24 of.26
79. Rule 14a-9, promulgated pursuant to Section 14(a) . of the Exchange Act provides that
no proxy statement shall contain "any statement which at the time and in light of the circumstances under which it is made is false and misleading with respect to any material fact, or which omits to
state any material fact necessary in order .to make the statements therein not false and misleading ." 17 C.F.R. Section 240.14a-9.
80. The Proxy Statements for annual shareholder meetings held in 2002 through 2005
violated Rule 14(a) and Rule 14a-9 .because they omitted material facts, including the fact that defendants were causing Rambus to engage in an option backdating scheme, a fact which the 9 defendants were aware of and participated in from at least 2001 .
10 81 . In the exercise of reasonable care, defendants should have known that the Proxy
1 1 Statements were materially false and misleading . 12 82. The misrepresentations and omissions in the Proxy Statement were material to
1.3 plaintiffs in voting on each Proxy Statement . The Proxy Statements were an essential link in the 14 accomplishment and continuation .of defendants' unlawful stock option backdating scheme, as
15 revelations of the truth would have immediately thwarted a continuation of shareholders'
1 6 endorsement of the directors' position, the executive officers' compensation and the Company's
17 . compensation policies .
18 83 . Plaintiffs, and the Class, were damaged as a result of the material misrepresentations 19 and omissions in the Proxy Statements .
20 COUNT III 21 AGAINST THE INDIVIDUAL DEFENDANTS PURSUANT TO SECTION 201alOF THE EXCHANGE AC T 22
23 84. Plaintiffs repeat and reallege each and every allegation set forth above . 24 85 .. This claim is asserted against the Individual Defendants pursuant to Section 20(a) of
25 the Exchange Act, 15 U.S .C. §78t(a). 26 86. During the Class Period, Individual Defendants Hughes, Eulau, Mooring, Tate,
27 Dunlevie, Farmwald, Horowitz, Kennedy, Danforth, Davidow and Geschke were "controlling 28 persons" of defendant Rambus, within the meaning of Section 20(a) of the Exchange Act .
24 AMENDED COMPLAINT FOR VIOLATIONS OF FEDERAL SECURITIES LAWS CASE NO . C06-04346 WH A W :ISTULL\RAMBUS\PLDAAmended Complaint 001 .wpd Case 3:06-cv-0434, ~NHA Document 6 Filed 071211Ca Page 25 of 26
87. The Individual Defendants were "controlling persons" of Rambus because, due to the officer and/or director positions they held with Rambus, they had the influence and power over
Rambus to cause, and they did cause, Rambus to engage in the wrongful conduct complained of herein, and because they had the power to have prevented Rambus from engaging in the unlawful
5 conduct alleged herein, but they purposely, intentionally and recklessly did not use that power to d o
6 So.
7 88. As set forth above in Count I, Rambus violated Section 1.0(b) of the Exchange Act
8 and Rule 1 Ob-5 promulgated thereunder by its acts and omissions as alleged in this Complaint . By
9 virtue of their status as a "controlling person" of Rambus, the Individual Defendants are liable, to 10 the same extent as is Rambus for its violations of Section i 0(b) of the Exchange Act and Rule 1 Ob-5
11 promulgated thereunder, pursuant to Section 20(a) of the Exchange Act .
12 89. As set forth in Count 11, Rambus violated Section 14(a) of the Exchange Act by its 13 acts and omissions . By virtue of their status as a "controlling person" of Rambus, the Individual
14 Defendants are liable, to the same extent as is Rambus for its violations of Section 14(a) of the
15 Exchange Act, pursuant to Section 20(a) of the Exchange Act .
16 PRAYER FOR RELIEF
17 WHEREFORE, plaintiffs, on behalf of themselves and the Class, pray for judgment a s 18 follows:
19 A. Declaring this action .to be a class action properly maintained pursuant to Rule 23(a)
20 and (b)(3) of the Federal Rules of Civil Procedure ;
21 B . Finding that the defendants violated Section 10(b) of the Exchange Act and Rule 22 lob-5 promulgated thereunder and Sections 20(a) and 14(a) by their acts and
23 omissions as alleged in this Complaint;
24 C. Awarding plaintiffs and the members of the Class damages, together with interest 25 thereon;
26 D. Awarding plaintiffs and other members of the Class their costs and expenses of this 27 litigation, including reasonable attorneys' fees and experts' fees and other costs and
28.1 disbursements ; and
25 AMENDED COMPLAINT FOR VIOLATIONS OF FEDERAL SECURITIES LAWS CASE NO. C06-04346 WH A W:\STULLIRAMBUSLPLD\Amended Complaint 001 .wpd Case 3:O6-cv-043 UHA Document 6 . Filed 07121/2 S Page 26 of 2 6
E. Awarding plaintiffs and other members of the Class such other and further relief as may be just and proper under the . circumstance s
JURY TRIAL DEMANDED Plaintiffs demand a trial by jury as to all issues so triable .
Dated: July 21, 2006 Patrice L. Bishop . Timothy J . Burke STULL, STULL & BRODY
7
8 By: . Is/ Patrice L. Bishop 9 10940 Wilshire Boulevard Suite 2300 10 Los Angeles, CA 90024 Tel: (310) 209-2468 11 Fax: (310) 209-2087
12 Howard T. Longman STULL, STULL & BRODY 13 6 East 45th Street New York, NY 10017 14 Tel: (212) 687-7230 Fax: (212) 490-2022 15 Gary S. Graifinan KANTROWITZ, GOLDHAMER & GRAIFMAN 210 Summit Avenue Montvale, NJ 07645 Tel: (201) 391-7000 Fax: (201) 307-1088
Joseph H. Weiss . W EIS S & LURIE 551 Fifth Avenue Suite 1600 New York, NY 10176 Tel: (212) 682-3025 Fax: (212) 682-3010
Attorneys for Plaintiffs
26 . AMENDED COMPLAINT FOR VIOLATIONS OF FEDERAL SECURITIES LAWS CASE NO . C06-04346 WH A W :ISTULL\RAMBUSIPLD\Amended Complaint 001 .wpd RAMBUS Stock Options (2001 thru 2004)
Purported'Gran t Number of Options Exercise Price Date GEOFF TATE 37125 600000 $4.8600 37209 100000 $9.3000 37580 400000 .$8.6370 37949 350000 $25..1600 38323 100000 $24.0400 DAVID 37125 600000 $4.8600 MORRING 37209 100000 $9.3000 37580 400000 $8.6370 37949 200000 $25.1600 38323 85000 $24 .0400 ROBERT K. 37062 50000 $2.50001 E U LAU 37062 500000 $9.0700 37580 80000 $8.6370 8/23//01 125000 $4.8600 37949 30000 $25 .1600 37949 40000 $25,1600 38323 60000 $24 .0400
Rambt s' 2002 Proxy states that these options were granted at less than fair market value at time of grant and that vesting of these options was contingent upon "certain business milestones" Case 3:06-cv-04~ WHA Document 6 Filed 07121.,. 6 Page 2 of 2
RAMBUS Stock Options (2001 thru 2004 )
JOHN D . 37171 400000 $8 .0000 DANFORTH 37355 50000 $7 .5000 37580 80000 $8.6370 37949 70000 $25 .1600 38323 70000 $24 .0400 1/30/04* 100000 $31 .1600 1/30/04* 40000 $31 .1600 1 /30/04* 20000 • $31 .1600 ED LARSEN 37125 160000 $4.8600 11 /21102* 80000 $8.6370 37949 70000 $25 .1600 LAURA S. 38323 85000 $24.0400 STARK Case 3:06-cv-04(i-WHA Document 6 Filed 07/21,.-,/ 6 Page 1 of 1
Exhibit B
Date of Exercise Closing Price Range. Over Closing Price Range Over Grant Price Next 10 Trading Days Prior 10 Trading Days
6121101 9.07 12 .31-9 .19 12 .25-9.1 7 8/23/01 4.86 7.37-5.67 8.88 -5 .35 10/8/01 8.00 11 .72-8.39 8 .19-6.98 11/15/01 9.30 10 .74-8.55 . 9.43-8 .2 6 4/10/02 7.50 7.76-7.18 7 .99-7.1 2 11/21/02 8 .637 9 .42-7.75 8.20-6.72 11/25 103 25.16 30.33-25 .25 25 .91-24 .04 1213104 24..04 27.50-23 .48 . 24 .15-21-93
rices in "BOLD" are the lowest prices during the 21 trading days referred t o bove
Case 3:06-cv-04~ -WHA Document 6 .Filed 0712'lc-bC Page 2 of 8
SECURITY BUY DATE SALE DATE COST ALE RMBS• 03-Jan-02 3-Jan-02 . (25,950:00) 26,399.58 449.58 RMBS 19-Mar-02 . . 24-Jun-02 (41,100.00) 17,213.40 (23,886.0)
TOTAL (67,0550.00) 43,61 2.98- (23,437.02) Case 3 :06-cv-04C)-WHA Document 6 Filed 07/21c---)06. .. . Page 3. of 8
.SECURITY BUY DATE.- SALE gm, ~ PLL RMBS 2.5-Nov-02 . 29-Jan-03 . 17,811 .90 .23j 14.30 5,302.40 RMBS . 25-Nov-02 30-Jan-03 7,137.00 10,064.74 2,927.74 RMB'S 25-Nov-02 4-Feb-03 . 19,593.10 29,846.08 10,252:98 RMBS • 05-Feb-03 5-F. eb-03 13,764.95 . 13,764.63 . 9.68 RM BS 11-Feb.03 -- . '20-Feb-03 •21,72540 29,894.09 2"169.60 . RMBS 28-Feb-03 28-Feb-03 30,325.00' 30,254.08 •(70,92) 'RMBS 03-Mar-03 3-Mae-03' . 30,825.00 32;014.01 1,189.01 RMBS 18-Mar-03 18-Mar-03 39,930.00 . 40,108.76 118.76 R.MSS .26-Mar-03 3-Apr-03 . 13,812.50 -14,484.37 671 .87> RMBS, 26-Mar-03 4-Apr-03 . 13,812.50 15,049.33 1,236.83 RMBS 09-Apr-03 .9-Apr-03 31,425.00 31,153.53 (271 .47) .RMBS • :16: Apr-03- 16-Apr-03 . 30,165.00 29,273.62 (891 .38) RMBBS 24-Apr-03 . 30-Apr-03 10,102.75 . 10,379.56 276:81 RMBS . 24-Apr-03 •. ; 5-May-03 18,762.25 , 19,440.62- 678.37 RMBS .21-May-03 21-May-03 30,02.5.00 30,533.55. 508.55 RMBS 054ar-03 28--May-03 14,086.70 18,364.18' . 4,277.48 RMBS 10-Jun-03 19-Jun.03 35,405.00 . 35,113.34 : (291.66) .RMBS . 05-Mar-03- 8-Aug-03 (30,965.00) 31,315.9 350.49 RMBS 17-Aug-03 . 22 ug-03 - 35,025.00 35,673.21 ' 648.27 RMBS 05-Mar-03 24-Sep-03 6,999.95 8,112.36 1,102.41 . RMBS 23-Mar-01 26-Sep-03 10,434.95 6;223.70 (4,211 .25) RMBS 05-Mar-03 26-Sep-03 7,043.35 7,764:68 721 .33 •RMBS 25-Sep-03 2-Oct-03' 16,370.00-. . 17,494.22 1,124.22 RMBS 20-Oct-03 . 20-Oct-03 50,705.00. 51,012.60 • , 307.60 RMBS . 21-O 03 21-Oct-03 ' 76,770 .00 77,426.31 . 656.31 RMBS 27-Oct-03 27-Oct-03 72,380.00' 72,959.53 .589.53. RMBS 06-Nov-03 6-Nov-03 . . 75,330.00 75,566.45 236:45 . RMBS 17-Nov-03 13-Nov-03 7,49.9.05 7,671 .59 172.54 RMBS 18-Nov-03 .. 25-Nov.03 2,485.00 2,524.93 . 39.93 RIBS 18-Nbv-03 '28-Nov-03 • 22,473.00 •24,156.90 . 1,683.90 RMBS . 03-Dec.-03 3-Dec43 73,767.05 72,091 .62 •'(1,675.43) RMBS 03-Dec-03 12-Dec-03 18,293 .95 18,339.99 • 46.04 RMBS • 22-Dec-03 22-Use-03 52,865.00 53,592.49 727.49
TOTAL (944,104.95) 974,788.92 30,683:97 Case -3 :06-cv-04.. J-WHA Document 6 Filed 07!2{06 Page 4 cif 8
SECURITY BUY DATE SALTE . COS t RMBS 11-May-04 5-Jan-00 (60;330.00) 60,884.82 554.52 RMBS 7-Jan-04 7 lan-04 (99,900:00). 102,393.24 2,493.24 RMBS 28-Jan-04 28-Jan-04 (63,765.00) 62,741 .38 (1,023.82) RMBS 3-Feb-04 .3-Feb-04 (74,501 .00) 15,296.45 795.45 :RMBS 4-Feb-04 4-Feb-04 (88,020.00k 88,465,84 .445.84 RMBS 6-Feb-04 6-Feb-04 (88,800.00) 89,210:85 410.85 . RMBS -10-Feb-04 10-Feb.04 ' (90,719.60) 90,445.75 (273,85) RMOS .11-Feb-04 11-Feb-04 (148,682.00), 148,918.07 . 236.07 RMBS 12-Feb-04 12-Feb-04 (150,600.00) - .141,863..06 ` ...(2,736:94) RMBS 13-Feb-04 13-Feb-04 (37,342.45) 38,225:75 883,30 RMBS 19-Feb-04 19-Fe6-04 (67,805.00) 68;391 .79 586.79 RMB a 20-Feb-04 20-Feb-04 . (61,325.00). 67,617.81 . 292.81 RMBS. . 23-Feb-04 23-Feb-04 (661465.00) .66,750.74 . 285.74 RMBS•. .'27-Feb-04- 27-Feb-04 (130,685.00) 128,630.44 (2,054.56) RMBS 2-Mar-04 2-Mar-04 (64,777.00) 63,984.48 (782.52) RMBS 5-Mar-04 5-Mar-04 (127,384.00) . 125,870.99 (1 ,513.01) RMBS . . 17-Mar-04 . 17-Mar-04 (56,125.00) '56,372.80 247.80 RMBS 23-Mar-04 23-Mar-04 (67,325,00) 65,977.37 . (1,347.63) , RMBS 6-Apr44 . 6-Apr-04 . (85,795.00) . . .85,467.96 (327.04) RMBS 8-Apr-04 8-Apr-04. . (87,060.00) 85}378.96 (1,681.04) RMBS 12-Apr-64 I2-Apr-04 (145,105.00) 143,025.57 (2,079.43) .. RMSS 18-Nov-03 15 Aprc-04 (12,379.95) 12,689.75 309.80 -RMBS 15-Apr-0.4 16-Apr-04 (51,225.00) . • 51,393.76 168.76 RMBS 5-May-04 5-May-04 (39.,865.00) 40,41.4.03 549.03 . RMBS 10-May-04 ; . 10-May-04 (58,83000) 58,269.38 (560.62) RMBS 17-May-04 17-May-04 (55,740.00) .55,468.67 (271 .34) . . :RMBS . 21-May O4 . 21-May-04 (55,830.00) .54,058.68. (1,771 32) RIBS 26-May-04 26-May-04 . (55,88000) 56,901 .73 .1,021 .73 RMBS -23-Jun-04 23-Jun-04 (51,1.04"'95)' . 51,373.84 268.89 RMBS 20-Feb-01 13-Jul-04 (22;483.70) .7,484.87 (14,998.83) RMBS 15-Apr-04 16-Jul-04 (2,766.00) :1,672,61. . (1,093.99) RMBS 23-Nov-04 24-Nov-04 - (66,884.95) 65,503.46 • (1,381 „49). RMBS 23-Nov-04 24-Nov-04 (44,214.95) . 43,853.96 . (360.99) RMBS . 29-Nov-04 •29-Nov-04 . (80,199.95) .. 84,383.10 4,183.1 5 RMBS 1-Dec-04 1-Dec-04 (70,334.95) 70,633,35 298 0 .4 RMBS 2-Dec-04 '2-Dec-04 (58,119.95) • 58,559.63 • " 439.68 RMBS 13-Dec-04 13-Dec-04 (78,715. 9.5) 78,958.23 ' 242.28 RMBS 21-Dec-04 22-Dec-04• (86,901 M) 87,748.04 846.14 RMBS 4-Oct-04 4-Oct-05 (106,993.03) . . 107,519.55 526.92
TOTAL 2,866,981 .28 $2,848,800 .26 (18,181 .02) Case. 3 :06-cv-04 a'-WHA Document 6 Filed 07/21 J06 Page 5 of•8
SECURITY BUY DATE SALE DATE L ' RIMS 4-.lain-05 4-Jan-05, (63,650.14) 65;083.49 1,433.35 RMBS 19-Jan-05 19-,Jafi-05 . (57,014.95) 55,783.18. (1,231 .77) •RMBS -11-Jul-05 11 -Jul-05 (16,648.95) 16,784.34 .• 137.39 . RMBS '' . . '5-May40 X10-Oct-05 (232,267.95) . 44;803.16 . (I'87,464679) RMBS 18-Oct-05 X18-Oct-05 (36,584 95) 37,033:50 448.55 RMBS . 15-Apia-04 17-Nov-05 (186,809.35) 71,532.05 .(115,277.30)- RMBS 15-Apr-04 30-Nov-05. (127;230.55). 84,181 .50 -(43,04a 0a5)
TOTAL .(720,204:84) 375,201 .22 (345,003.62)
J Case 3:06-cv-04 -WhkA Document 6 Filed 0712 J06 Page 6 of 8
AFIQUEU BUY DATE SALE DATE COST fJj, RMBS .17-Jan-06 ..171an-08: (342,723.90) $44422.42 1,698.52 RMBS 24-Jan-06 • 24-Jain-06 (170,009.95) 173,734.66. 3,724.71 RMBS 25- an-06 25-Jan-06 (174,009.95). 174,234.67 224.72 ' RMBS :264an-06 '26-Jan-06 • (172,500.95) • . 175,084.65 - 2,574.70 RMBS' . 314an~06 37-Jan-06, (147,209.95) 147,364.4l . . 154.46 - RMBS 1-Feb-Q6 1-Feb-06 (138,495.95) 140,985;67 2y489.72 RMBS 2-Feb-06 2-Feb-06 (132,159:95); ;137,185.8'1 : 5,025.66 RMBS . : 6-Feb-06 _ 6-deb-06 (137,509.95) 144,536.71 , 3,026.76 RMSS 8-Feb;-06 8-Feb-06 (139,759.95) 142,786.61 3,026.66 -RMBS 13-Feb-06. 13-Feb-06 .(137,156.24)' .138,235.78 i ;079.54 RMBS. 7-Feb-06'. 16-Feb-06 (144,593.95) 1-47,535.47 2,941 .52 RMBS 22-Feb-06 22-Feb-06 .(l 36,54311) 144,011 .59 7,467:88 ' .RMBS 7-Feb-06 23-Feb-06 (89,661 .94) 96,137.08 . 6,475.14 .RMBS 28-Feb-OS 28-Feb-06 (1553009:95) 157,085.15 : 2,075.20 RMBS 1-Mar-06 1-Mar-06 (156,059.95) 160,131 .04 4,071 .09 RMBS . 2-Mar-06 2-Mar-06 (165,906.20) 1:63,560.17 2,346.03 RMBS • .' 9-Mar-06 9-Mar-06 (160,009.95) 157,485:19 .2,524.76-.- RMBS 10-Mar-06 10-Mar-06 . (162;395:40) . 165,290.71 2,895.31 RMBS : 14-Mar46 14-Mar-06 (157,529.96) 159,085.11 1,555.1 6 RMBS 16-Mar-06 16-Mar-06 (162,500.95), 159,420.10 . 3,089,$5 RMBS' 28-Mar-06 28-Mar-06 (1.90,114.81) 190,104.15. 10.66 RM13S 29-Mar-06 29-Mar-06 (189,359.95) 195,826:85 6,466.90 RMBS 23-Mar-06 29*Mar-06 (187,165.00) 197,483.86. 10,318:86 RMBS 30-Mar-06 30-Mar-06 (398;605.14) 395,60249 . 3,003.05 RMBS .4-Apr-06 4-Apr-06 (388,046.50) . 387,343.49 70101 , RMBS 5-Apr-06 5-Apr-06 (387,384.80) 391,681 .95 4,297.15 RMBS 11-Apr-06 11-Apr-06 (206,227.95) . '. 204,083.77. . 2,144.18 ' RMBS 12-Apr-06 12-Apr-06 (205,839.23) 208,878.62 3,03.9.39 RMBS 13-Apr-06 13-Apr-06 (213,009.95) .219,414.29 6,404.34 RMBS .18-Apr-06 18-Apr-06 . .(229,259.95) 233,625.59 4,365.64 RMBS 19-Apr-06 18-Apr-06 (464,220 71). 462,357.26 1,863.45 RMBS .21-Apr-06 21-Apr-06' (190,896.95) 193,773.03 . 2,876.08 . RMBS 21-Apr-06 24-Apr-06 (203,459..95) 220,767.04 1-7,307.69 RMBS . . 24-Apr-06 . . 24-Apr-06 (190,009.95): :' . 21.9,471.23. 29;46 .28 RMBS 26.-Apr-06 26-Apr-06 (423,675.22) 430,584.80 6,901.58 RMBS 27: Apr46 27-Apr-06 : (96,759.95) • . 100,049.91 3,289.96 RMBS 26-Apr-06 27-Apr-06 (3,990.00) 4,022,92' 3292 RMBS . 28-Apr-06' . 1-May:06 . 4195,950.95) . 198,159.95 2,209.00 RMBS 2-May-06 .2-May-06 (1.93,109 .95) . . . 1 86,452.60 '6,657.35 RMBS 3-May-06 3-May-06 (178,759.95) : 178,707:55 52.40 - RMBS .. . 4-May-06 4-May-06 (179,259.95) 182,484.37 3,224.42 RMBS ; 5-May-06 ,-'5-May-06 (185,500.90) 184,384:37 1,116.53 RMBS 10-May-06 10-May-06 (368,722.67) 358,382.61 10,340.08 Cash 3:06-cv-04 -WHA Document 6 Filed 07/2-C)06. Page 7 of 8
RMBS 11-May-06 11.May-06 . (342,871 .90) .: 325,738.63 17,133.27 , RMBS 20-Apr-06 16-May-06 . . . (228,054,95) 162,571 .27 75,483.68 RAMS .20-4r-06- 15-May-06 (225,209.951 151 ,682:30 73,527.65 RMBS 20-Apr-06 15-May-06 (222,88147) 147,794.63 75,086.84 ` RMBS 17-may-.06 . 17-May-06 . : (298,761 .73) 290,998.11 7,765.62 RMBS 18-May-06 18-May-06 (293,093.27) - 283,290.27 . . 9,803:00 RMBS 23-May-06 23-May-06 (129,501 :56) 139,185.72 9,684.16. RMBS 23-May-08 23-May-06 (1 390800.95) . 135,491 .83 .4,309.12 RMBS 24-May-06 . 24-May-06 (415,659:85) 391,800.07 23,859.78 RMBS 25-May-06 25-May-06 (133,199,95) 133,802.83 -602.88 Pm B's 31..-May-06 31 -May-06 ..(366,950 .85) 366,01 11 .82 . 939.03 RMBS 10-Apr-06 1-Jun-06 (211,834.38) 134,985.89 76,848.49 RMBS 10-Apr-06' . 1 -Jun-06 (209,255.95) 139,985.74 69,274.21 RMBS 1-Jun -06 1-Jun-06 . (128,009.95). 141,985.68 13,975.73 RMBS . 2-Jun-06 2-Jun-06' (429,347.60) 413,727. 30 15,620.30 RMBS 22-Jun-06 22-Jun-06 (224;671.90) . '223,626.18 1,045.72 . RMBS. 28-Apr-06 23-Jun-06 . .(198,159.95) . . 111-,405.28 86,754.67. . . RMBS 27-Jun-06 27-Jun-08 (1091015.00) 107,810.68 1,204.32 RMBS 27-Jun -06 5-Jul-06 (9,489.45) . 9,749.75 260.30 RMBS 2-May-06 6-Jul-06 (190,003.57) 125,236:20 -64,767.37 RMBS- 23-Mar-06` 6-Jul-08 ('185,958.71) 121 ,636.23 . 64,322.48 RMBS 6-JuI-06 6-Jul-06: (122,291 .95) 121,173.23 1,118.72 RMBS 10-Jul-06 . 10-Jul-06 (237,519.90) 228,902.99 8,616.91 .-RMBS 11-Jul-06 11-Jul-06 (11 3,836.01) 116,048.36 2,212:35 RMBS 12.Ju1-06 •'12Jul-06 (112,240.95) 112,562. 57 321 .62 RMBS . 13-Jut-06 . . 13-Jul-06 . (227,919.90) •.221,341 .16 6,578.74 . RMBS 17. -Jul-06 17-Jul-06 (221,042.15) 217,055.29 3,986.86:• RMBS' 26-Apr-06 18-Jul-06 (159,665.99) . . 78,523.50 . 81,142.49 RMBS • . 18-Jul-06 . 18- Jul-06 (197,664.81) 195,125.66 2,539.1 5 RIMS . - 6-Novi-05. . . 19-Jut-06 (1,020,175.96) . . . 748,213.83 271,962.13 RMBS 6-Jan-05. 19-JuI-06 (567,698.40) . 474,357.78 33,340.62
TOTAL (16,262,889.98) 15,329,77,4.08 933,115-.90
.~
EXHIBIT 4 Copyright 2006 Business Wire, Inc. Business Wire
July 21, 2006 Friday 10:10 PM GMT
DISTRIBUTION: Business Editors; Legal Writers
LENGTH: 497 words
HEADLINE: Notice of Amended Class Action Complaint against Rambus, Inc. by Stull, Stull & Brody
DATELINE: NEW YORK July 21, 2006
BODY: Notice is hereby given that an amended class action complaint was filed today in the U.S. District Court for the Northern District of California under case number C06-04346 (WHA) by the law firm of Stull, Stull & Brody on behalf of plaintiffs and a proposed class of purchasers of securities of Rambus, Inc. (NASDAQ: RMBS) ("Rambus" or "Company") during the period December 12, 2001 through July 18, 2006, inclusive (the "Class Period"). The Amended Complaint was filed in order to extend the Class Period contained in the original complaint to include the period up to the time Rambus announced that it would restate its financial results going back to 2003 because of its practice of backdating options given to various executives of the Company. The amended complaint alleges that Rambus and certain officers and directors violated Sections 10(b), 14(a) and 20(a) of the Securities Exchange Act of 1934 by making false and misleading statements and omissions concerning Rambus' improper and undisclosed practice of backdating options conferred on certain executives which made it appear that such options were issued on dates when the market price of Rambus stock was higher than actual market price on the actual grant dates. This improper backdating masked the virtually instant profits the option recipients obtained. Under generally accepted accounting principles, these profits were required to be recognized as an expense in the Company's financial statements for the appropriate period, but were not. This backdating of options also violated provisions of the Internal Revenue Code relating to deduction of option payments. Thus, the Company's financial statements in Form 10-K filings for the years 2002, 2003, 2004 and 2005 were materially false and misleading. In addition, the Company's Proxy Statements for annual shareholder meetings held in years 2002 to 2005 were materially false and misleading because they contained statements concealing Rambus' practice of backdating stock options. Plaintiff seeks to recover damages on his own behalf and on behalf of the Class and is represented by, the law firms of Stull, Stull & Brody. This firm has significant experience successfully prosecuting complex securities fraud class actions on behalf of defrauded investors. If you engaged in transactions of Rambus securities during the Class Period, you may, not later than sixty (60) days from July 19, 2006 move the court to serve as lead plaintiff, if you so choose. In order to serve as lead plaintiff, however, you must meet certain legal requirements. If you wish to discuss this action or have any questions concerning this notice or your rights or interests with respect to this matter, please contact: Howard T. Longman, Esq., at Stull, Stull & Brody, toll-free at 800-337-4983 or via email at [email protected] or by writing to Stull, Stull & Brody, 6 East 45th Street, New York, NY 10017.
CONTACT: Stull, Stull & Brody Howard T. Longman, Esq. 1-800-337-4983 or 845-371-4788
URL: http://www.businesswire.com
LOAD-DATE: July 22, 2006 EXHIBIT 5 AMENDED CERTIFICATION OF PLAINTIFF PURSUANT TO FEDERAL SECURITIES LAWS
1 . Ronald L . Schwarcz ("Plaintiff') on behalf of the Ronald Schwarcz Revocable Living Trusts and Ronald Schwartz IRA makes this declaration pursuant to Section 101 of the Private Securities Litigation Reform Act of 1995 as required by Section 21O(a)(2) of Title I of the Securities Exchange Act of 1934.
2 . Plaintiff reviewed the amended complaint and authorized its filing on his behalf.
3 . Plaintiff did not engage in transactions in the securities which are the subject of the action at the direction of plaintiff's counsel or in order to participate in this or any other litigation under the securities laws of the United States .
4. Plaintiff is willing to serve as a representative party on behalf of the class, including providing . testimony at deposition and trial, if necessary . Plaintiff understands that the litigation is not settled, this is not a claim form, and sharing in any recovery is not dependent upon execution of this Certification . Plaintiff is willing to serve as a representative party either individually or as part of a group . Plaintiff understands that a lead plaintiff is a representative party who acts on behalf of other class members in directing the action .
5. Plaintiff has made no transactions during the class period in the debt or equity securities that are the subject of the action except those as follows (as used herein, "equity security" shall have the same meaning as that term has for purposes of section 16(a) of the Securities Exchange Act of 1934, 15 U.S.C. § 78p(a)) :
Schedule of Transactions Attached Hereto
6. Plaintiff has not, within the three years preceding the date of the certification, sought to serve or served as a representative party on behalf of a class in an action involving alleged violations of the federal securities laws .
7. Plaintiff will not accept any payment for serving as representative on behalf of a class beyond the party's pro rata share of any recovery, unless ordered or approved by the Court pursuant to section 27(a)(4) of the Securities Act, 15 U.S.C. § 77z-1(a)(4), or section 21D(a)(4) of the Securities Exchange Act, 15 U .S.C. § 78u- 4(a)(4).
9. The matters stated in this declaration are true to the best of my current knowledge, information and belief.
10 . Plaintiff hereby certifies, under penalty of perjury, that the foregoing is true and correct .
Executed this 13th day of September, 2006
Ronald L. Schwarcz B A S I C L O 8 S C A L C U L A T I O N S Page : 1
. PURCHASES. SALES COMPUTATION
- - - - AU4W81 OF SHARES BEGINNING TRADE TRADE _ USED FOR IASS -DESCRIPTION FULL NAME SHARES DATE SHARES- PRICE DATE SHARES PRICE COMPUTATION 5051431 A
5050.30 SCHWA&CE RIIY LIV T8.UST 25,500 .000 01/03/02 3,000 .000 8 .79986. 3,000 . 000+ 0 - - 0 .000 OPENING 06/24/02 - 700 .000 3 .45987 700 .000 * D - 0 .000 OPENING 06/24/02 1,500 .000 3 .44520 1,500 .000 * 0 0 .000 OPENING 06/24/02 1,800-000 3 .42989 1,800-000 • 0 0 .000 OPENING 06/24/02 500 .000 3 .42988 - 500 .000 * . 0 0 .000 OPEN ING . 06/24/02 500 .000 3 .46988 $ 00 .000 * 0 5 .000 OPENING 01/20/03 2,000 .000 6 .90595 2,000 .000 * 0 - 0 .000 OP EN ING 01/29/03 2,000 .000 11 .55715 2,000 .000 0 0 .000 OPENING - 01/30/03 800 .000 12-58093 800 .000 * 0 0 .000 OPENING 02/04/03 1,400..000 13 .57959 1,400-000 0 0 .000 OPENING 02/04/03 300 .000 13 .46623 309 .000 * 0 0 .000 OPENING 02/.04/03 500-000 13 .58956 500 .000 • 0 0 .000 OPENING 02/05/03 1,006 .000 13 .76463 1,000 .000 • 0 0 .000 OPENING ...... - .. . .._, . . _ . 0 .004---OPSLII ...... 02/20/03-. ..'.- -_-- ._2,000-000_- -- .-14 .84705 ...... 2,.000-0,DA _# .0 ...... 02/28/03 2,000 .000 15 .12704 2,000 .000 * 0 0 .000 OPENING 03/03/03 2,000 .000 16 .00701 2,000 .000 • 0 0-000 OPENING 03/18/03 3,000 .000 13,36959 3,000-000 • 0 0-000 OPENING 04/03/03 1,000 .000 14 .48437 500 .000 + 0 0 .000 OPENING 01/03/02 1,000 .000 8-69000 0-000 500 .000 *( 8 .63000-14 .48437 ) 2,927 .185 PukCNASED & SOLD . 04/04/03 500 .000 14 .99928 .500 .000 *( 8 .63000-14 .99926 ) .( 3,184 .640 PURCHASED & SOLD D1/03/02 1 .000 .000 8 .64500 04/04/03 500 .000 15 .09938 500 .000 *( 8 .64;500-15 .09938 ) 3,227 .190 PURCHASED & SOLD 04/09/03 2, .000 .000 15 .57677 500 .000 8 .64500-15 .57677) - 3,465 .885 PURCHASED Sr SOLD SOLD - 01/03/02 1,000 .000 8 .67500 0 .000 1,000 .000 •( 8 .67500-15 .57677 ) 6 .901-770 PURCHASED & 03/19/02 5,000 .000 8 .22000 . 0 .000 - 500 .000 8 .22000-15 .57677 ) 3,678 .385 PURCHASED & SOLD 04/16/03 2,000-000 14 .63681 2,000-000 •( 8 .22000-14 .63681 ) 12 .833 .620 PURCHASED & SOLD 04/30/63 700 .000 14 .82794 700 .000 8-22000-14 .82794 ) 4,625.558 PURCHASED & SOLD - 04/30/03 700-000 26 .80321 700 .000 +( 8-22000-26 .80321 ) 13,005 .247 PURCHASED & SOLD 05/05/03 1,300 .000 14 .95432 - 1,100 .000 8 .22000-14 .95432 ) 7,407 .752 PURCHASED & SOLD - 11/25/02 800 .000 8-97125 0 .000 200 .000 +( . 8-92125-14 .05432 ) 1,206 .614 PURCHASED & SOLD . 05/21/03 2,000 .000 15 .26618 600 .000 8-92125-15-26678 ) 3,807 .318 PURCHASED & SOLD 11/25/02 4,200 .000 8 .90595 0 .000 1,400 .000 +, .[ 8 .9059.5-15-26678 ) 8,905 .162 PURCHASED & SOLD 05/28/03 500-000 18 .31924 500 .000 •(- 8.90595-18 .31924 ) 4,706 .645 PURCHASED & SOLD - 05/28/03 500 .000 18 .40912 $00 .000 8 .90595-18 .40912) - ( 4,751 .585 PURCHASED & SOLD . 06/10/03 2,000 .000 17 .55667 - 1,800 .000 •( 8 .90591-17,-55667 ) { 15,571 .296 PURCHASED & SOLD 11/25/02 2,000 .000 8 .90595 0 .000 .200 .000 • .( 8 .90595-17 .55667 ) 1,730 .144 PURCHASED & SOLD 08/08/03 600 .000 15 .65252 600 .000 •( 8 .90595-15-65252 ) 4,047 .942 PURCHASED & SOLD 00108/03 600.000 15 .65922 600 .000 +( 8 .90595-15-65922) - 4,051 .962 PURCHASED & SOLD . 08/00/03 800-000 15 .66056 600 .000 *( 8-40595-10 .66056 ) 4,052 .766 PORCHASED f. SOLD 02/05/03 1,000 .000 13 .75495 0 .000 200 .000 •(13 .75495-35 .66056 ) (- - 381 .122 PURCHASED & SOLD 08/22/03 2,000-000 . 17 .83664 800 .000 !(13 .75495-17-83664 ) { 3,265 .352 PURCHASED F. SOLD 02/31/03 2,000 .000 13 .86250 0 .000 1,200 .000 +(13 .86250-17 .85664 ) { 4,768 .968 PURCHASED & SOLD 09/24/03 230 .000 16 .24922 230 .000 •(13 .86250-16 .24922 ) 548 .946 SURCEASED & SOLD 09/24/03 270 .000 16 .20385 270 .000 •(13 .96250-16 .20385 ) 632 .165 PURCHASED & SOLD 09/26/03 900 .000 15 .54264 300 .000 •(13 .85250-15 .54264 ) 504 .042 PURCHASED & SOLD 02/28/0 3 2,000 .000 15-16250 0 .000 600 .000 •(15-16x50-15 .94264 ) 226 .084 PURCHASED & BOLD - 10/02/03 1,000 .000 .17 .49422 1,000 .000 4(15 .16250-17 .49422 ) { 2,331 .720 PURCHASED & SOLD 10/20/03 2,000-000 25 .50630 400 .000 •(15 .16250-25-.50630 ) 4,137 .520 PURCHASED & SOLD .03/03/03 2,000 .000 15 .41250 0 .000 1,600 .000 *(15-41250-25 .50630 ) 16,150 .090 PURCHASED I. SOL O 10/21/03 . 3,000 .000 25 .60877 400 .000 +(15 .41250-25 .60877 ) 4,158 .508 PURCHASED & SOLD 03/05/03 2,000 .000 15 .48250 0 .000 2,000 .000 +(15 .48350-29-80677 ) { 20,652 .540 PURCHASED & SOLD 03/05/03 500 .000 13 .99990 0 .000 500 .000 +(13 .99990-25-60877 ) 5,904 .435. PURCHASED & SOLD 03/05/03 1,500 .000 14 .06670 0 .000 100 .000 •(14 .08670-25-80877 ) [ 1,172 .207 PURCHASED & SOLD - 10/27/03 100-000 24 .28880 100 .000 *(14 .06670-24 .28880 ) 1,020-110 PURCHASED & SOLD 10/27/03 1,300 .000 24 .32495 1,300 .000 •(14 .08670-24-32495)) . ( 13,309-725 PURCHASED & SOLD 03/18/03 3 .000-000 13 .31000 10/27/03 1,600-000 24 .32388 1,600 .000 +(13 .31000-24 .32388 ) 17 .622 .209 PURCHASED & SOLD 11106/03 3,000 .000 25 .10882 1,400 .000 +(13-31000-25 .18882 ) 16,630 .348 PU RCHASED & SOLD 03/23/03 200 .000 26 .02475 0 .000 - 200 .000 •f26 .05405-25 .18882) - 167 .186 . 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0 i x It S N 0 I 1 V Z II B 4 Y Z) 8809 3I330 B A 9 1 C L 0 S S CALCULATIONS Page : 9 r1r 0
PURCHASES - SUES CEMPWIATION
NUMBER OF SHARES BEGINNING USED POP SHARES DATE SNARES PRICE DATE .5100525 PRICE COMPUTATION FORMULA LOSS D69CAIPTION
05/21/06 5,00.0 .000 24 .39785 1,900 .009 +(35 .75199-24 .39785) 55,635 .286 PURCHASED & SOLD 05/04/06 5,000 .000 35 .85199 . 0 .000' _ 100 .000 •(35 .85199-24 .39785) .1,145 .414. PURCHASED & SOLD 05/31/06 5,000 .000 24 .39726 4,900 .000 +(35 .85199-24 .39726) 56,129 .177 PURCHASED 6: SOLD 05/05/06 4,500 .000 37 .10910 . 0 .000 100 .000 '(37 .10910-24 .39726) 1,271 .184 PURCHASED 6r SOLD 05/31/06 5,000 .000 24 .40126 4,400 .000 '(37 :10910-24 .40726) 55,888 .096 PORCH S. SOLD 05/05/D6 500 .000 37 .01990 .0 .000 500 .000 +(37 .01990-24 .40726) 6,306-320 . 005050050 & SOLD 05/10/06 9,800 .000 36 .54254 0 .000 100 .000 '(36 .54254-24 .40726) 1,213 .528 PURCHASED 4-SOIX 06/01/06 . 5,000 .000 26 .99718 -4,900 .000 '(36 .54254-26 .99716) 46,772 .254 PURCHASED & SOLD 05/10/06 5,000 .000 37 .20199 -0 .000 100 .000 •(37 .20199-26 .99718) 1,020 .481 5878055550 6, SOLD 06/01/06 5,000 .000 27 .99715 4,900 :000 x ;37 .29199-27 .997 ;SL 45,103 .716 PURCHASED & SOLD 05/11/06 5,000 .000 33 .7 5 599 0 .000 100 .000 +(33 .75599-27 .99715) , 575,554 PURCHASED & SOLD 06/01/06 5,000 .000 28 .39714 4,900 .000 •(33 .75599-28 .39714) 26,258 .365 PURCHASED & SOLD 05/11/06 5,000 .000 34 .81839 0 .000 100,000 •(34-81539-28-39714) 642-125 PURCHASED & SOLD ...... -06/02/06- ...... --5-,000-400-- . . .27-63716 .. .. ._ 4,900-0030 ...R{34 .41839-2-7,43716}----- . . & .S01d1 ...... ---- - 05/17/06 4,160 .000 29 .52025 . - 0 .000 100 .000 •(29-52025-27,63716) 188 .309 P1 650 & SOLD 06/02/06 5,000 .000 27 .61115 . 4,060 .000 •(29 .52025-27 .61115) 7,750 .946 98750100500 & SOLD 05/17/06 840 .000. 29 .40185 0 .000 840-000 •(29 .40185-27,61115) 1,504 .188 PURCHAS ED & SOLD 05/17/06 5,000,000 30 .25199 0 . .000 100-000 '(30 .25199-27 .61115) 264 .084 PURCCBASSED & SOLD - 06/02/06 5,000 .000 27 .49715 . 4,900-000 •(30 .25199-27 .49715) - 13,496 .716 9080115550 6 SOLD 05/18/06 5,000 .000 28 .90666 0 .000 - 100-000 . '(28 .90666-27 .49715) 140 .951 PURCHASED 6: SOLD 06/22/06 5,000 .000 22 .39852 4,900 .000 '(28 .90566-22 .39852) 31,889 .886 PURCHASED & SOLD 05/18/06 5,000 .000 29 .71199 - 0 .000 108 .000 '(29 .71199-22 .39852) 731 .347 PURCHASED & SOLD 06/22/06 5,000 .000 22 .32672 - 4,900 .000 '(29 .71199-22 .32672) 36,187 .823 0UY1r215SED 0 SOLD 05/23/06 1,600 . 000 27 .94553 0 .000 100-000 •(27 .94553-22 .32672) 561 .981 PbRCHASED 6, SOLD - 06/22/06 68 .000 22 .29926 68 .000 •(27 .94553-22 .29926) 383-946 PURCHASED & SOLD - 06/22/06 1,732 .000 22 .28356 1,632 .000 '(27 .94553-22 .26356) 9,240 .335 PURCHASED & SOLD 05/23/06 500 .000 27 .96000 0 .000 - 100 .000 '(27 .96000-22 .28356) 567 .644 PURCHASED & SOLD 06/22/06 3,200 .000 22 .37932 400-000 "(27-96000-22 .27932) 2,272 .272 PURCHASED & SOLD 05/23/06 400 .000 -27 .98000 0 .000 400-000 •(27 .98000--22 .27932) 2,280 .272 PURCHASED & SOLO 05/23/456 1,000 .000 27 .95000 0 1 000 1, .000 .000 ''(27-95000-22 .27932) 5,670 .680 PURCHASED & SOLD 05/23/06 500-000 27 .97000 0 .000 500-000 1 (27 .97000-22 .27932) 2 .845 .340 PURCHASED & SOLD 05/23/06 800 .000 27 .99000 0 .000 800-000 '(27 .99000-22 .27932) - 4,568 .544 PURCHASED 5. SOLD 05/23/06 1,199-000 25 .65830 0 .000 - - 100 .000 •(25 .85830-22 .27932) 357 .898 PURC ASED & SOLD 06/27/06 4,600 .000 23 .43710 - 1,099-000 •(25 .85830-23 .43710) - 2,660 .899 PURCHASED & SOLD 05/23/06 100 .000 25 .86000 0-000 - 100-000 *(25-66000-23 .43710) 242 .290 PDRCHIASRD & SOLD - 05/23/06 400 .000 25 .87000 . 0-000 400 .000 '(25 .87000-23-43710) 973 .160 PUB.CRASED-& SOLD 05/23/06 100 . 000 25 .92000 - 0- 0190 100-000 •(25 .92000-23 :43710)- - -246 .290 PURCHASED & SOLD - 05/23/06 ' 452-000 - 25 .93000 0-000 452-000 +(25 .93000-23 .43710) - 1,126.791 PURCHASED & SOLD 05/23/06 200 .000 25 .96000 - - 0 .000 - .200 .000 . •(25 .96000-23 .43710) - 504 .580 PURCHASED & SOLD 00/23/06 500-000 25 .97000 0 .000 500 .000 `(25 .97000-23 .43710) 1,266-450 PURCHASED & SOLD 05/23/06 100 .000 25 .95000 0 .000 100-000 •(25 .95000-23 .43710) 251 .290 PURCHASED & SOLD 05/23/06 1,949 .000 . 25 .90000 _ 0 .000 1,649 .006 •(25 .90000-23 .43710) 4,061 .322 PURCHASED & SOLD 07/05/06 400 .000 24 .37438 300,000 •(25 :90040-24 .37438) 457 .686 P05050050 & SOLD 05/24/06 5,000 .000 27-75199 0-000 100 .000 •(27 .75199-24 .37438) - 937 .761 PORCHASED & SOLD 07/06/06 - 5,000 .000 25 .04724 4,900 .000 •(27 .75199-25 .04724) - 13,253 .275 PURCHASED & 551.0 05/24/06 5,000 .000 28 .16599 0 .000 - 100 .000 '(28 .18599-25 .04724) 313 .875 PURCHASED & SOLD - 07/06/06 5,000 .000 24 .32725 4,900-000 . "(28 .18599-24 .32725) 18,907-826 PURCHASED & SOLD 05/24/06 5,000-000- 27 .19399 - 0-000- - 100-000 "(27 .19399-24-32725) 286-674 -P8350100500 & SOLD 07/06/06 5,000 .000 24 .23465 4,900 .000 -(27 .19399-24 .23465) . 14,500 .766 PURCHASED & SOLD 05/25/06 4,000-000 26 .64000 0 .000 100 .000 '(26 .64000-24 .23465) .240 .535 PD 0555 0 & SOLD - 07/10/06 5,000 .000 22 .98288 3,400-000 '(26 .64000-22-98286) 14,262 .768 PURCHASED & SOLD 05/25/06 1,000 .000 26 .63995 0 .000 1,000-000 •-(26 .63995-22 .98288) 3,657.070 PURCHASED & SOLD - 35/30/06 5,000 .050 26 .61767 0 .000 - 100,000 '(26 .61767-22 .98288) 363 .479 PURCHASED & SOLD - 07/301 06 4,800 .000 22 .79723 4,800 .000 •(26 .61767-22 .79723) 18,318 .112 PURCHASED & SOLD 07/10/06 -200 .000 22 .80945 100 .000 +(26 .61767-22 .80945) 300 .822 -5 URCKk8RD & SOLD - 05/30/06 5,000 .000 26 .22579 - - - 0-000 , - -100-000 •(26 .22579-22 .80945) 341-634 PURCHASED & SOLD 07/11/06 5,000 .000 23 .20967- 4,900 .000 -(26 .22579-23 .20967) 14,778 .980 PURCHASED & 5013) SLZ'95£19b6 :WWI QNY2n '- - .
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o~ ~~a s x0aa5 4n o av3 s soa o I s v 8 B A S I C L O B S C A L C U L A T I O N S' - pages Y F27 0
PURS ES SALES COMPUTATION
NUHASA OF SHARES BEGINNING TBADS TRADE USED FOR PULE, NAME - SHARES DATE SNARES PRIM DATE SHARES PRICE COMPUTATION FORMULA LOSS DESCRIPTION
ELEANORE SCH ARCZ REV I,15 TRUST 5,500-000 04/02/02 5,000-000 7 .84976 5,000-000 • 0 0 .000 OPBNINC - - - 04/02/02 200 .000 7 .87175 200 .000 • 0 0 .000 05204170 04/02/02 - 4,200-000 . 7 .85904 300 .000 • 0 0 .000 OPENING 01/31/02 3,850 .000 A - 0-000 3,850-00(t • 0- 0 .000 8KAR.B RECEIVED AND SOLD 03/19/02 5,000 .000 8 .22000 0 .000 50 .000 +( 8 .22000- 7 .85904) 18 .048 PURCHASED G SOLD - - - 04/02102 100 .000 7 .87970 300-000 •( 8 .22000- 7 .87970) 34 .030 PURCHASED & SOLD 04/02/02 3,850 .000 7 .88976 3,850 .000 •( 9 .22000- 7 .88976) . -1,211 .424 PURCSSED 1, SOLD - - - - 04/02/02 1,000 .000 7 .88481 1,000 .000'•{ 8 .22000- 7 .88481) 335 .190 PURCFABED 6 SOLD
8,050 .000 14,350 .000 14,350 .000 - 1,658 .69 2
;, _...... _ ...... ', . _ .. _ ...... _,, ...... '. . . .._ _ . . .. _ . __ ...... _ _ - ___. _ ._, __ ...9RA#8]TOTAi. . -- 58 .6 B A 5 I C - L O S S C A L C U L A T I O N S Page : 7 .1 F 0
PURCHASES - SALES COMPUTATION
PURSER Of SHARE S - - - SEGINHING TRADE TRADE USED FOR FULL NAME SHARES DATE SHARES B&1C6 DATE SHARES PRICE . COMPUTATION FORMULA LOSS DESCRIPTION
RONAI SCHWARCZ IRA 30 .400 . 000 06/ 26/03 1,400 . 000 16 . 97423 1,400 - 000 • 0 0'.000 O98NING 07/19/ 06 45,400 -000 17 . 00378 29,000 .000 • 0 0 . 000 OPENIN 3 03/18/03 1,000 - 000 8 .24495 0 .000 1,000 . 000 •( 8 .24495- 17 .00376) - (' 8,758 . 830 PURCHASED & SOLD . - 03/05 / 03 2,800 .000 13 . 84000 0 - 000 2,800-000 •( 13 .64000-17 . 00376) - ( . 8,856 .584 PURCHASED & SOLD 10/18 /05 4,000 .000 12 .24000 0 .000 4,000 . 000 • 1 12 . 24000-17 .0D378 ) ( 19 .055 .120 PURCHASED & SOIL 10/18/05 1,000- 000 13 .26495 0 .000 1,000 .000 "( 12 .29495-17 . 00378) ( - 4,738 .830 PURCHASED 6: SOLD 05/16/06 5,000 .000 30 .50199 0 .000 5,000 .000 •(30 . 50199-27 . 00376) 67,491 .050 PURCHASED & SOLD - - - 05/16/06 2,600 . 000 30 . 48383 0 .000 2,600 .060 • ( 30 .46383-17 .00378 ) 35,048 . 130 PURCHASED & SOLD
- - - 16,400 . 000 46,800 . 000 46,800 .000 61,127 .616
...... _ .--- ._ - .- . - ...... - . : ...... GRAM -TOTAI.• 611 27 .816 EXHIBIT 6 STULL, STULL & BRODY ATTORNEYS AT LAW
6 EAST 45TH STREET 10940 WILSHIRE BOULEVARD SUITE 500 SUITE 2300 NEW YORK, NY 10017 LOS ANGELES, CA 90024 TELEPHONE: (212) 687-7230 TELEPHONE: (310) 209-2468 FACSIMILE: (212) 490-2022 FACSIMILE: (310) 209-2087
BRIEF BIOGRAPHY OF STULL, STULL & BRODY
Over the past 30 years, Stull, Stull & Brody has developed a national reputation
representing plaintiffs in securities class actions. Stull, Stull & Brody has litigated
hundreds of securities cases obtaining nearly a billion dollars in settlements for
aggrieved shareholders. Stull, Stull & Brody has also represented claimants in numerous
class actions alleging violations of ERISA. With 16 attorneys and a full complement of
secretarial and administrative personnel, Stull, Stull & Brody is capable of effectively
prosecuting all types of complex litigation. Our lawyers possess outstanding credentials
and have repeatedly been acknowledged for their achievements.
Stull, Stull & Brody has been recognized by numerous Courts for the high quality
of its legal representation and for its excellence in the field of securities as evidenced
by the following comments of judges in cases where Stull, Stull & Brody has taken a
leading role:
[T]his is one of the largest, if not the largest, securities fraud settlements in this district. The settlement size is particularly noteworthy as class counsel did not have the benefit of an SEC or other regulatory agency investigation and so prosecuted the case without assistance. . . . The management of the case was also of extremely high quality. . . . [C]lass counsel is of high caliber and has extensive experience in similar class action litigation. Each of the co-lead counsel firms has a national reputation for advocacy in securities class actions, and there is no doubt that this standing enhanced their ability to prosecute the case effectively and to negotiate credibly. . . . The submissions were of consistently high quality, and class counsel has been notably diligent in preparing filing in a timely manner even when under tight deadlines. In re Ikon Office Solutions, Inc Securities Litigation, 2000 U.S. Dist. LEXIS 6510 (E.D. Pa. May 9, 2000).
I am satisfied that counsel in this case are highly competent, very skilled in this very specialized area and were at all times during the course of the litigation . . . well prepared, well spoken, []knew their stuff and []were a credit to their profession. They are the top of the line. In Re Electro- Catheter Corporation Securities Litigation, Civ. No. 87-41 (D.N.J. September 7, 1989).
The court takes note of the competence of both plaintiffs’ counsel and defendants’ counsel and their extensive experience in litigating securities class actions. The competence of plaintiffs’ counsel resulted in this case being vigorously and efficiently prosecuted against very able opponents over a twenty month period and was a factor in bringing about settlement. Schaffer v. Timberland Co., 94-634-JD (D.N.H. 1997).
This case is a “model for how commercial litigation should be conducted and can be resolved.” Bash v. Diagnostek, CV 94-794 M (D.N.M.).
Indeed, I indicate to. . .counsel for plaintiff that they have done an admirable job in this case in bringing it to finality and in bringing back to the shareholders of this corporation some moneys [sic] as a result of cer- tain things which occurred during the course of the operation of this corporation which perhaps should not have occurred. Finkel v. O'Brien, Civ. No. 85-2539 (D.N.J. March 27, 1990).
All the firms involved in this litigation are highly experienced and well respected, particularly in the field of securities law litigation. The Stull . . . firm [is one] of this area's, if not the nation's most active and successful law firms specializing in securities litigation. Stull v. Baker, 410 F.Supp. 1326, 1332 (S.D.N.Y. 1976).
Stull, Stull & Brody's expertise in the field of securities litigation has also been recognized by the following courts: In re Frontier Group Insurance, Inc. Securities
Litigation, 172 F.R.D. 31 (E.D.N.Y. 1997); In re Allegheny International Inc. Shareholder
Litigation, 86-835 (W.D. Pa.) (Order, December 10, 1987, Diamond J.); Zucker v. United
States Steel, C-1-79-588 (S.D. Ohio) (Order, October 14, 1981, Rubin, C.J.); Friedman v.
Colgate Palmolive, 80 Civ. 2340 (CPS) (E.D. N.Y.) (Order, June 16, 1981, Sifton, J.);
Zuckerman v. Sparton, G79-457-C.A. (W.D. Mich.) (Opinion and Order, April 14, 1981,
Fox, J.); Mottoros v. Abrams, 524 F.Supp. 254 (N.D. Ill. 1981); Koenig v. Smith, 79 C 452
3 (ERN) (E.D.N.Y.) (Memorandum Opinion and Order, December 3, 1980, Neaher, J.);
Koenig v. Kenneally, 79 Civ. 0487 (LBS) (S.D.N.Y.) (Opinion No. 49289, November 5, 1979,
Sand, J.); In Re Commonwealth Oil-Tesoro Petroleum Securities Litigation, MDL No. 347
(Order, July 24, 1979, Higginbotham, J.); Wietschner v. McCulloch, CV 78-4036-RMT
(C.D. Ca.) (Order, June 29, 1979, Takasugi, J.); Fruchthandler v. LTV Corp., 77C 1879
(E.D.N.Y.) (Order, May 10, 1978, Nickerson, J.); Lewis v. Adikes, 76 F.R.D. 68 (E.D.N.Y.
1977); Lewis v. Black, [1976-77 Transfer Binder] Fed. Sec. L. Rep. (CCH) ¶95,738 (E.D.N.Y.
1976) (Mishler, C.J.); Fruchthandler v. Blakely, 73 F.R.D. 318 (S.D.N.Y. 1976).
SEMINAL CASES
Throughout its 30 year history, Stull, Stull & Brody has been involved with a number of seminal cases that have significantly affected the landscape of securities litigation.
In Rand v. Monsanto Company, 926 F.2d 596 (7th Cir. 1991),the firm appeared for the plaintiff in a landmark decision establishing the principle that a representative plaintiff need not be willing to bear all costs of an action to satisfy the adequacy of representation requirement.
In Small v. Fritz Companies Inc., 30 Cal.4th 167 (2003), the firm successfully argued before the California Supreme Court that a non-trading shareholder has the right to sue a corporation for damages where the shareholder relies on false financial statements issued by the corporation. The decision represented a significant doctrinal change and was widely heralded as a potent new weapon for investors.
In Lewis v. Black, 74 F.R.D. 1 (E.D.N.Y. 1975), the firm established that neither the personality nor the motive of a proposed class representative was determinative of whether he would provide vigorous advocacy for the class, thereby preventing defendant corporations from compelling representatives to respond to questions regarding motives and actions in past cases.
In In re Cabletron Systems, Inc. Securities Litigation, 311 F.3d 11 (1st Cir. 2002), the firm was instrumental in obtaining a reversal of a dismissal of a complaint under the pleading requirements of the Private Securities Litigation Reform Act. This case established in the First Circuit that plaintiffs are not required to provide the names of informants in a complaint.
In In re Frontier Group Insurance Litigation, Master File No. 94 Civ. 5213
4 (E.D.N.Y. 2002), the firm was instrumental in defeating a Daubert challenge and sustained the ability of the expert to testify as to aggregate damages based on the use of a trading model.
In Harman v. Lyphomed, Inc., 122 F.R.D. 522 (N.D. Ill. 1988) the firm established the applicability of the fraud-on-the-market theory of reliance for stocks trading on NASDAQ.
The firm was instrumental in establishing new law on "fraud on the market" theory in the 5th Circuit decision of Finkel v. Docutel/Olivetti Corporation, 817 F.2d 356 (5th Cir. 1987), cert. denied, 485 U.S. 959 (1988), and, in the Northern District of Illinois decision of Mottoros v. Abrams, 524 F.Supp. 254 (N.D. Ill. 1981).
As a lead counsel, Stull, Stull & Brody has successfully litigated hundreds of actions, recovering nearly a billion dollars on behalf of defrauded shareholders. A sampling of these cases in which Stull, Stull & Brody had a leading role include:
• In re BankAmerica Corp. Securities Litigation, MDL No. 1264 (E.D. Mo. 2002) (recovery of $333.2 million)
• In re Geodyne Resources, Inc. Securities Litigation (Harris County Tex.) (recovery of $200 million)
• In re Computer Associates Sec. Litig., Master File No. 98-CV-4839 (TCP) (E.D.N.Y. 2003) (recovery of 5.7 million shares (estimated at $134 million))
• In re Ikon Office Solutions, Inc. Securities Litigation, 2000 U.S. Dist. LEXIS 6510 (E.D. Pa. May 9, 2000) (recovery of $111 million)
• Morse v. Abbott Laboratories, C.A. No. 90 C 1982 (N.D. Ill. 1994) (jury verdict of $15 million)
• In re Salomon Brothers Treasury Litigation, Consolidated Action No. 91 Civ. 5471 (RPP) (S.D.N.Y. 1994) (recovery of $100 million)
• In re Westinghouse Securities Litigation, Civil Action No. 91-354 (W.D. Pa. 1999) (recovery of $67.25 million)
• In re Thomas & Betts Securities Litigation, Case No. 00-2127 (W.D. Tenn. 2002) - related case: Pifko v. KPMG LLP, Civ. Action No. 01-CV-2553 (W.D. Tenn. 2004) (recovery of $51.15 millon)
• In re Tenneco Inc. Securities Litigation, Civ. Action No. H-91-2010 (S.D. Tex. 1992) (recovery of $50 million)
• In re Apria Healthcare Group Securities Litigation, Master File No. 797060 (Superior Court of California, Orange County) (recovery of $42 million)
5 • In re Cannon Group Securities Litigation, 86-5559-WMB (JRx) (C.D. Ca. 1988) (recovery of $33 million)
• Teichler v. DSC Communications Corporation, CA 3-85-2005-T (N.D. Tex. 1990) (recovery of $30 million)
• Berger v. Compaq Computer Corp., Civ. Action No. 98-1148 (S.D. Tex. 2002) (recovery of $28.65 million)
• In re: Northeast Utilities Securities Litigation, Civil Action No. 397 CV 00189 AVC (D. Ct.) (recovery of $25 million)
• Lasky v. Brown (United Companies Financial Corporation) Securities Litigation, Civil Action No. 99-1035-B-M2 (M.D. La. 2002) (recovery of $20.5 million)
• Feinberg v. Hibernia Corp., Civil Action No. 90-4245 (E.D. La. 1995) (recovery of $20 million)
• In re Dreyfus Aggressive Growth Mutual Fund Litigation, Master File No. 98 Civ. 4318 (HB) (S.D.N.Y.) (recovery of $18.5 million)
• In re C.R. Bard, Inc. Securities Litigation, Master File No. 90-948 (AMW) (D.N.J. 1991) (recovery of $17.9 million)
• Spring v. Continental Illinois Corporation, 84 C 4648 (N.D. Ill. 1987) (recovery of $17.5 million)
• In re Green Tree Financial Corporation Stock Litigation, Master File No. 97- 2666 (JRT/RLE) (D. Minn. 2003) ($12.45 million)
• In re Elscint Securities Litigation, Civ. Action No. 85-2662-K (D. Mass. 1989) (recovery of $12 million)
• In re National Medical Enterprises Securities Litigation II, Case No. CV 93- 5224 TJH (Bx) (C.D. Ca.) (recovery of $11.65 million)
• Bash v. Diagnostic, Inc., Civil Action No. 94-784 (D.N.M.) (recovery of $10.7 million)
• In re Cybermedia, Inc. Securities Litigation, Master File No. 98-1811CBM (Ex) (C.D. Ca.) (recovery of $10.5 million)
• In re Complete Management Inc. Sec. Litig., Master File No. 99 Civ. 1454 (NRB) (S.D.N.Y.) (recovery of $10.15 million)
• In re Physicians Corp. of America Sec. Litig., Case No. 97-3678-CIV (S.D. Fla. 2003) (recovery of $10.2 million)
6 • In re U.S.A. Detergent Securities Litigation, 97-CV-2459 (D.N.J. 1999) (recovery of $10 million)
• In re Trump Hotels Shareholder Derivative Litig., 98-Civ-7820 (GEL) (S.D.N.Y. 2001) (recovery of assets for corporation valued in the range of $10 million)
• In re Nice Systems, Ltd. Securities Litigation, Master File No. 2:01 CV 737 (Judge Greenaway) (D.N.J. 2003) (recovery of $10 million, subject to court approval)
• Harman v. Lyphomed, 88 C 476 (N.D. Ill. 1989) (recovery of $9.99 million)
• In re Beverly Enterprises, Inc. Securities Litigation, Master File No. CV 88- 01189-RSWL (Tx) (C.D. Ca. 1992) (recovery of $9.975 million)
• Greenfield v. Compuserve Corp., Case No. 96-CV-06-4810 (Franklin County, Ohio) (recovery of $9.5 million)
• In re Stratosphere Securities Litigation, Master File No. CV-S-96-00708-PMP (RLH) (D. Nev.) (recovery of $9 million)
• In re Steven Madden Ltd. Securities Litigation, No. 00-CV-3676 (JG) (E.D.N.Y. 2002) (recovery of $9 million)
• In re Gibraltar Financial Corporation Securities Litigation, CV 87-07876 MRP (Gx) (C.D. Ca. 1989) (recovery of $8.5 million)
• In re FHP Securities Litigation, Master File No. SACV 91-580-GLT (RWRx) (C.D. Ca. 1992) (recovery of $8.25 million)
• Zucker v. Maxicare Health Plans, Inc., Case No. 88-02499-LEW (Tx) (C.D. Ca. 1991) (recovery of $8.1 million)
• In re Orion Pictures Corp. Securities Litigation, Master File No. 91 CV 1903 (CBA) (E.D.N.Y. 1992) (recovery of $8 million)
• Berlinsky v. Alcatel, 94-CIV-9084 CBM (S.D.N.Y.) (recovery of $8 million)
• In re Triton Energy Corporation Securities Litigation, Master File No. 3:92- CV-1069-H (N.D. Tex. 1993) (recovery of $8 million)
• In re Cityscape, CV 97 5668 (E.D.N.Y.) (recovery of $7 million)
• In re Dime Savings Bank of New York Securities Litigation, MDL Docket No. 846 (E.D.N.Y. 1993) (recovery of $6.8 million)
• In re Western Digital Securities Litigation, SACV 91-375(A) GLT (RWRx) (C.D. Ca.) (recovery of $6.75 million)
7 • In re Bank of New England Corporation Class Action and Shareholder Liti- gations, C.A. Nos. 89-2582-S, 89-2811-S (D. Mass. 1992) (recovery of $6.5 million)
• In re Berkshire Realty Company, Inc. Shareholder Litigation, C.A. No. 17242 (Delaware Chancery Court 2004) (recovery of $6.25 million)
• Gerstein v. Micron Technology, Inc., et al., Civil No. 89-1262 (D. Id. 1993) (recovery of $6 million)
• In re Ziff-Davis, Inc. Securities Litigation, Master File No. 98-CIV-7158 (SWK) (S.D.N.Y. 2002) (recovery of $6 million)
• Dynegy Inc., et al. v. Bernard V. Shapiro, et al., No. 2002-00080, in the 129th Judicial District, Harris County, Texas (recovery of $6 million)
• In re Ascend Communications Securities Litigation, Case No. 97-9376 MRP (AN) (C.D. Ca. 2002) (recovery of $5.45 million)
• In re Brightpoint, Inc. Securities Litigation, Case No. IP 01 1796 C-T/K (recovery of $5.25 million)
• Kushner v. Wang Laboratories, Civil Action No. 89-1963-Y (D. Mass. 1994) (recovery of $5 million)
• In re SouthEast Banking Corp. Securities Litigation, Master File No. 90-0760- CIV-MOORE (S.D. Fla. 1993) (recovery of $5 million)
• Wells v. Southmark Corporation, et al., CA3-85-1518-G (N.D. Tex. 1992) (recovery of $5 million)
• In re Sunglass Hut Intl., Inc. Securities Litigation, Case No. 97-0191-CIV- MOORE (S.D. Fl. 2001) (recovery of $4.5 million)
• Clive T. Miller v. Apropos Technology, Inc., et al., No. 01 C 8406 (N.D. Ill. 2004) (recovery of $4.5 million)
• In re Fidelity Holdings Securities Litigation, Case No. CV 00 5078 (CPS) (VVP) (E.D.N.Y. 2003) (recovery of $4.45 million)
• In re NetEase.com Sec. Litig., Civil Action No. 01-CV-9405 (RO) (S.D.N.Y. 2003) (recovery of $4.35 million)
• In re Flextronics, Inc. Sec. Litig., No. C-03-2102 PJH (N.D. Ca. 2004) (recovery of $4.25 million)
• Schaffer v. Timberland Co., 94-634-JD (D.N.H. 1997) (recovery of $4.2 million)
• In re HMO America Securities Litigation, Civ. No. 92 C 3305 (CPK) (N.D. Ill.
8 1993) (recovery of $4 million)
• In re Nanophase Technologies Corporation Securities Litigation, Case No. 98 C 3450 (N.D. Ill.) (recovery of $4 million)
• In re Quintex Securities Litigation, Master File No. CV-89-6182-R (C.D. Ca. 1990) (recovery of $4 million)
• Walsingham v. Biocontrol Tech. Inc., Civil Action No. 96-809 (W.D. Pa.) (recovery of $3.7 million)
• In re Irvine Sensors Corp. Sec. Litig., Master File No. SA 02-00159 GLT (MLGx) (C.D. Ca. 1994) (recovery of $3.5 million)
• In re iTurf Inc. Shareholders Litigation, Consolidated Civil Action No. 18242 NC (Delaware Chancery Court) (recovery of $3.25 million)
• In re Kay Jewelers Securities Litigation, Civil Action No. 90-1663A (E.D. Va. 1991) (recovery of $3 million)
• Clarkson v. Greyhound Lines, Inc., 96-11329-C (Dist. Ct., Dallas County, Tex.) (recovery of $3 million)
• In re Spectrian Corp. Securities Litigation, Master File No. C-97-4672-CW (N.D. Ca.) (recovery of $2.975 million)
• Moriarty v. Molina, Case No. 99-0255-CIV-MORENO (S.D. Fla. 2003) (recovery of $2.8 million)
• In re Peritus Software Services, Inc. Securities Litigation, Civ. Action No. 98CV10955 WGY (D. Mass. 2000) (recovery of $2.8 million)
• In re 2TheMart.com, Inc. Sec. Litig., Case No. 99-1127 DOC (ANx) (C.D. Ca. 2002) (recovery of $2.7 million)
• McBride v. Vision Twenty-One, Inc., Case No. 99-138-CIV-T-25F (M.D. Fl. 2003) (recovery of $2.5 million)
• In re Pharmaprint Inc. Sec. Litig., Civ. No. 00-61 (AJL) (D.N.J. 2003) (recovery of $2.3 million)
Stull, Stull & Brody is presently serving as plaintiffs’ lead or co-lead counsel in a number of pending actions in various district courts, including:
Securities Class Action Cases
• Unger v. Amedisys, Inc., et al., Case No. 01-703 (JJB) (M.D. La.)
• Adam Burstyn, et al. v. Worldwide Xceed Group, Inc., et al., Case No. 01
9 CV 1125 (GEL) (S.D.N.Y.)
• In re Cabletron Systems, Inc. Sec. Litig., C 97-542 (D.R.I.)
• Sharon Bobbitt v. Andrew J. Filiposki, et al., No. 03 C 3599 (N.D. Ill.)
• In re FleetBoston Financial Corp. Sec. Litig., Civ. No. 02-4561 (WGB) (D.N.J.)
• Dan Gavish, et al. v. Revlon, Inc., et al., Case No. 00 Civ. 7291 (SHS) (S.D.N.Y.)
• Thomas Levitan v. John B. McCoy, Jr., et al., Case No. 00 C 5096 (N.D. Ill.)
• In re Light Management Group, Inc. Sec. Litig., Civil Action No. 02-CV- 3345(RO) (S.D.N.Y.)
• In re Metris Companies, Inc. Sec. Litig., Civil Action No. 02-CV-3677 JMR/FLN (D. Minn.)
• In re Peregrine Systems, Inc. Sec. Litig., Civil Action No. 02-CV-870 J (RBB) (S.D. Ca.) (for Securities Act of 1933 claims)
• Frank Pringle v. Merck & Co., Inc., et al., Civil Action No. 03-3125 c/w 04- 0147, 04-022 & 04-406 (E.D. La.)
• In re Rhythms Sec. Litig., Civil Action No. 02-K-35 (GCL) (D. Co.)
• In re Safety Kleen Rollins Shareholder Litig., Case No. 3:00-1343-17 (D.S.C.)
• In re Xerox Sec. Litig., Civil Action No. 3:99 CV 2374 (AWT) (D. Ct.)
ERISA Class Action Cases
• In re AEP ERISA Litigation, Master File No. C2-03-67 (S.D. Ohio)
• In re AOL Time Warner ERISA Litigation, Civil Action No. 02 CV 8853 (SWK) (S.D.N.Y.)
• Harrington v. Household International, Inc., Civil Action No. 02 C 8257 (N.D. Ill.)
• In re Lucent Technologies, Inc. ERISA Litig., Civil Action No. 01-cv-3491 (JAP) (D.N.J.)
• In re Sears, Roebuck & Co. ERISA Litig., No. 02 C 8324 (N.D. Ill.)
• In re Sprint Corporation ERISA Litig., Master File No. 2:03-CV-02202-JWL (D. Kan.)
• Overby v. Tyco International, Ltd., Case No. 02-CV-1357-B (D.N.H.)
10 Stull, Stull & Brody’s advocacy in these and other ERISA class actions, which have been brought on behalf of 401(k) retirement plan participants and beneficiaries, has also yielded new law in the ERISA field. For example, in the Lucent ERISA litigation the firm was largely responsible for a frequently-cited ruling by the District Court dated
February 11, 2002, where the Court denied a motion to stay the ERISA litigation against
Lucent until resolution of a related securities class action against the company. Stull,
Stull & Brody’s briefing on the stay motion pointed out the many significant differences between ERISA and securities class actions, even when the ERISA and securities cases involve the same factual issues. The District Court ultimately ruled that “resolution of the securities class action . . . will not necessarily resolve all issues in this matter” and “[t]he legal issues here will still have to be determined, and a stay or continuance shall not change that fact.”
ATTORNEYS
Stull, Stull & Brody maintains offices in both New York and Los Angeles. The following section sets forth basic educational and experience information for each of
Stull, Stull & Brody’s attorneys.
NEW YORK
Jules Brody is a graduate of Brooklyn College, magna cum laude, and received his L.L.B. from the New York University School of Law in 1964. Mr. Brody made the Dean’s List and was an editor of the Law Review. Mr. Brody was the author of “The Equitable Power to Assess Counsel Fees” which was published in the New York University Intramural Law Review in May 1964. At NYU, Mr. Brody was a John Norton Pomeroy Scholar and received the American Jurisprudence Prize in Commercial Law and graduated in the top 10% of his class. He was admitted to the New York State Bar in 1964. Mr. Brody received his LL.M. in taxation from the graduate division of the NYU School of Law in 1967. Mr. Brody is also admitted to practice before the United States District Courts for the Southern and Eastern Districts of New York, the United States Courts of Appeals for the Second, Fourth and Fifth Circuits, and has been specially admitted to practice before various district courts throughout the United States.
11 Edwin J. Mills is Of Counsel to Stull, Stull & Brody. He is a graduate of Fordham University and received his J.D. from Brooklyn Law School in 1977. Mr. Mills was admitted to practice in the State of New York and in the Eastern District of New York in 1978. He has represented classes of purchasers of securities and shareholders for over 20 years in federal and state courts throughout the United States. He is experienced in all aspects of securities class action litigation, including settlement negotiation and trial. Mr. Mills is also active in several large ERISA class action cases brought on behalf of 401(k) retirement plan participants and beneficiaries, including cases involving Lucent Technologies, Household International, Tyco International, Conseco, American Electric Power and Sears.
Mark Levine is a graduate of the University of Maryland and received his J.D. from Brooklyn Law School in 1981. He was admitted to the New York State Bar in 1982 and is admitted to practice before the United States District Courts for the Southern, Western and Eastern Districts of New York and the Northern District of Illinois, the United States Court of Appeals for the Second, Fourth, Sixth, Ninth, Tenth and Eleventh Circuits, and has been specially admitted to practice before various other state and federal courts. He has participated in the litigation of securities class actions throughout the United States.
Howard T. Longman received his undergraduate degree from the University of Virginia and his J.D. from New York Law School in 1982. Mr. Longman is a member of the New York State Bar and has also been admitted to practice before the United States District Courts for the Southern and Eastern Districts of New York.
Patrick K. Slyne received his J.D. from the University of Wyoming in 1988. He is a member of the Colorado, Connecticut and Wyoming state bars.
Melissa R. Emert received her undergraduate degree from the State University of New York at Stony Brook and her J.D. from Brooklyn Law School in 1988. Ms. Emert is a member of the New York State Bar and has also been admitted to practice before the United States District Courts for the Southern and Eastern Districts of New York.
Aaron L. Brody received his undergraduate degree from Yeshiva University, summa cum laude, Class of 1990, and his J.D. from New York University School of Law in 1995. At NYU, Mr. Brody concentrated on securities law and was a staff editor on the Review of Law and Social Change. Mr. Brody is a member of the New York State Bar and is admitted to practice before the United States District Courts for the Southern and Eastern Districts of New York.
Tzivia Brody received her undergraduate degree from Stern College, magna cum laude, Class of 1992, and her J.D. from the Benjamin M. Cardozo School of Law in 1995. Ms. Brody is a member of the New York State Bar and is admitted to practice before the United States District Courts for the Southern and Eastern Districts of New York.
Jason D’Agnenica received his undergraduate degree from Providence College, Class of 1995, and his J.D. from St. John’s University School of Law in 1998. Mr. D’Agnenica is a member of the New Jersey State Bar and is admitted to practice before the United States District Court for the District of New Jersey and the Southern and Eastern Districts of New York.
12 Nathan G. Lamm received his undergraduate degree from Yeshiva University, Class of 1997, and his J.D. from Benjamin N. Cardozo School of Law in 2000. Mr. Lamm is a member of the New York State Bar and is admitted to practice before the Southern and Eastern Districts of New York.
Menashe Y. Shapiro received his undergraduate degree from Yeshiva University, cum laude, Class of 1997, and his J.D. from Benjamin N. Cardozo School of Law in 2000. Mr. Shapiro is a member of the New Jersey State Bar and is admitted to practice before the United States District Court for the District of New Jersey and the Southern and Eastern Districts of New York.
James Henry Glavin IV received his undergraduate degree from Boston College, Class of 1999, and his J.D. from Fordham University School of Law in 2002. While at Fordham, Mr. Glavin served as an editor on the Moot Court Board and International Law Journal. Mr. Glavin is a member of the New York State Bar and is admitted to practice before the United States District Courts for the Southern and Eastern Districts of New York.
Michael J. Klein received his undergraduate degree in 2001 from Emory University and his J.D., with honors, from the University of Connecticut School of Law in 2004. While at the University of Connecticut, Mr. Klein served as an executive editor of the Connecticut Law Review. Mr. Klein is a member of the New York and Connecticut State Bars and is admitted to practice before the United States District Courts for the Southern and Eastern Districts of New York.
James E. Lahm received his undergraduate degree from The Ohio State University and his J.D. from Benjamin N. Cardozo School of Law in 2004. Mr. Lahm is a member of the New Jersey State Bar and is admitted to practice before the United States District Court for the Southern and Eastern Districts of New York and the District of New Jersey.
LOS ANGELES OFFICE
Patrice L. Bishop received her undergraduate degree from New York University and her J.D. from Loyola Law School - Los Angeles in 1994. Ms. Bishop is a member of the California State Bar and is admitted to practice before the United States District Courts for the Northern, Central, Southern and Eastern Districts of California, and the United States Court of Appeals for the Eighth and Ninth Circuits.
Timothy J. Burke graduated magna cum laude from Suffolk University and received his J.D. from the University of California at Los Angeles in 1995. Mr. Burke is a member of the California State Bar, and is admitted to practice before the United States District Courts for the Northern, Central, Southern and Eastern Districts of California, and the United States Court of Appeals for the Ninth Circuit.
13 EXHIBIT 7 KANTROWITZ, GOLDHAMER & GRAIFMAN 210 Summit Avenue Montvale, New Jersey 07645 Tel: 201-391-7000 Fax: 201-307-1086 website: www.kgglaw.com
-and-
747 Chestnut Ridge Road Chestnut Ridge, New York 10977 Tel: 845-356-2570 Fax: 845-356-4335
THE FIRM
KANTROWITZ, GOLDHAMER & GRAIFMAN, is a full-service law firm (the
“Firm”) with offices located in Montvale, New Jersey, at 210 Summit Avenue, Montvale, New
Jersey 07645 and with offices at 747 Chestnut Ridge Road, Chestnut Ridge, New York.
The Firm is managed by its three (3) partners, PAUL B. GOLDHAMER, BARRY S.
KANTROWITZ and GARY S. GRAIFMAN and Special Counsel, former senior partner,
WALTER L. KANTROWITZ.
Among the various areas of law practiced by the Firm, the Firm specializes in commercial litigation and class action litigation, which is managed by Gary S. Graifman of the Firm (see below).
The Firm has a total of twelve (12) attorneys, including the three partners and special counsel. There are five (5) associates and twelve (12) support personnel (paralegals, secretaries and bookkeeping), as well as three (3) of counsel attorneys at the firm's offices. The biographical information of Gary S. Graifman, partner in charge of this matter, and associates Randy J.
Perlmutter, Reginald H. Rutishauser and William Schiffman are set forth below.
Gary S. Graifman, Esq. is a partner in the firm of KANTROWITZ, GOLDHAMER
& GRAIFMAN. Prior to joining the firm, he was a partner in the firm of ATLAS &
GRAIFMAN in New York City, New York. Mr. Graifman specializes in the area of commercial litigation and securities and consumer class action litigation. He is admitted to practice before the courts of the State of New York, the State of New Jersey, the United States Federal Courts for the Southern District of New York, the Eastern District of New York, the District of New
Jersey, the United States Court of Appeals for the Second Circuit and the Eighth Circuit. He is also a member of the Class Action Committee of the New Jersey State Bar Association. Mr.
Graifman has litigated numerous cases involving complex business litigation and employment law. He has litigated a number of cases resulting in reported decisions, including cases of first impression.
In a recent settlement of a nationwide consumer fraud class action on behalf of 11,000 businesses who had been defrauded by the telephone company Norvergence and various equipment leasing companies, the New Jersey Superior Court approved a partial settlement with
CIT Technology Financing, U.S. Bancorp, De Lage Laden Leasing and two other leasing companies on June 30, 2006. The firm, Kantrowitz Goldhamer & Graifman, was Co-Lead Counsel.
The presiding Judge, Judge Robert Coogan stated that: “The class counsel at bar ...are well qualified, they are experienced in class action litigation. Counsel have vigorously pursued this litigation in this court, and although it’s a rounded number, it has been two years, almost.
[W]hat was shown here and what leads me to acknowledge this is the dimension, the worthiness, the scope of the advocacy, and the overall professional presentation, both in terms of the pleadings and here in the courtroom. There’s also one other thing that I think as a jurist we judges fail to take note of, but now is the appropriate time to do it, it’s the concept of collegiality.
Collegiality amongst yourselves, collegiality of yourselves to the Court. And then I say collegiality amongst yourselves I mean that without there being one ounce of sacrifice of the responsibility that each of you have as a litigator to advocate. There has been full advocacy here, but it’s been done with a recognition of that other asset, which is collegiality. The record will confirm counsel have done it this morning, that this pursuit has been vigorous. There has been extensive document discovery conducted here, depositions were conducted. And all of that to a point prior, prior to the time of beginning the time to, process of trying to resolve the case. ... I’m satisfied that counsel who have accepted the responsibility of appearing on behalf of the named plaintiffs have fairly and adequately represented the interest of the class. Adequately I use only because that’s the standard. The reality here is that it was superior work.”
The following represent examples of class action, complex business litigation and reported cases of note Mr. Graifman and the firm have taken an active role in:
1. In re: Painewebber Limited Partnership Litigation, 94 Civ. 8547 (SHS) (S.D.N.Y.) Court approved a settlement involving a fund of approximately $200 million dollars. This suit was first initiated by KANTROWITZ, GOLDHAMER & GRAIFMAN, P.C. and two other firms in Texas. The case later expanded to cover a multitude of other claims and was settled in a consolidated New York action.
2. In re NICE Systems, Ltd. Securities Litigation, Master File No. 2:01cv737 (JAG)(U.S. District Ct., D. New Jersey). Mr. Graifman and the Firm served as Liaison Counsel for the class in this securities fraud class action litigation which settled for $ 10 million dollars and was approved by the Court on April 7, 2003.
3. MARTINEZ v DISTRICT 1199J NEW JERSEY BENEFIT FUND, et al., Docket No. 97cv3381 (WJM) (U.S. District Court D. New Jersey). Mr. Graifman and the Firm served as Lead Counsel in certified class action against Union Benefit Fund in which claims alleging violation of ERISA were upheld. The case was fully litigated to final judgment for the plaintiff class and thereafter, upon execution on the judgment was satisfied with full payment being made to reimburse class members 100% of their losses (Union Members received full reimbursement for all medical bills paid out-of-pocket during the class period).
4. In re PHARMAPRINT, Inc. Securities Litigation, Master File No. 00cv61 (JAP) (U.S. District Ct., D. New Jersey). Firm was Co-Lead Counsel for the plaintiff class in this securities fraud class action which settled for $ 2.3 million dollars in connection with claims against this out of business company.
5. Birenbaum v. John Hancock Mutual Life Ins. Co., L-1957-96 (N.J. Superior Court, Essex Co.). Mr. Graifman and the Firm served as Co-Counsel for the class in this securities fraud class action certified and settled as a nationwide class action in New Jersey State Court.
6. Maizes & Maizes, et al. v. Apple Computer, Inc., et al. L-13780-95 (N.J. Superior Court, Essex Co.). Mr. Graifman and the Firm served as Liaison Counsel in consumer fraud class action pending in New Jersey State Court alleging misrepresentation in the sale of computer monitors by various computer monitor distributors. The action was related to In re: Computer Monitor, Proceeding No. 3158, pending in California Superior, San Francisco County. Joint efforts of negotiation resulted in a settlement which was approved by the California Court. The settlement was valued in excess of $15 million dollars.
6. Goldberg v. IDM Environmental, L-11783-96 (N.J. Superior Court, Middlesex Co. 1966) Securities fraud class action in New Jersey state court. Settlement included payment of $1.125 million to nationwide claims of shareholders.
7. Amplidyne, Inc. Securities Litigation, 99-4468 (D. New Jersey). Securities fraud class action litigation settled, alleging violations of Section 10(b) and Section 20 of the Exchange Act of 1934.
8. In re: Anadigics Securities Litigation, 98 Civ. 917 (MLC) (D.N.J.) Securities fraud class action litigation alleging violations of Section 10(b) and Section 20 of the Exchange Act of 1934. The action was settled for approximate $11.75 million dollars.
9. In re: Interactive Network, Inc. Securities Litigation (Civ. Action No. 95-0026 (DLJ) (N.D. Cal.). Securities fraud class action litigation alleging violations of Section 10(b) and Section 20 of the Exchange Act of 1934. Nationwide class certified in connection with settlement in the sum of $1.9 million dollars.
10. In re: Delgratia Mining Corp. Securities Litigation, MDL Dock. No. 1201 (D. Nev.). Securities fraud class action litigation alleging violations of Section 10(b) and Section 20 of the Exchange Act of 1934. Nationwide class action settled for stock of defendant and distribution of a cash payment.
11. Feiner v. Orange & Rockland Utilities, Inc., 862 F. Supp. 1084, RICO Bus. Disp. Guide 8672 (S.D.N.Y., Sept. 8, 1994) (No. 93 Civ. 5796 (CLB) (filed as class action on behalf of ratepayers of utility) (settled on appeal before the Second Circuit).
12. Dakota Industries, Inc. v. Ever Best Ltd., 38 F.3d 910, 31 U.S.P.Q.2d 1355 (8th Cir. (S.D.), July 8, 1994) (No. 93-2723, 93-2765). In this trademark infringement matter, Mr. Graifman and the Firm served as lead trial counsel for the defendant, a nationwide jeans distributor. After a three week trial in Sioux Falls, South Dakota, the jury returned a verdict for defendant.
13. Nu-Life Const. Corp. v. Board of Educ. of City of New York, 809 F.Supp. 171, 80 Ed. Law Rep. 568 (E.D.N.Y., Nov. 14, 1992) (No. Civ-86-0807) (ADS)). In this major RICO action based on wire fraud, mail fraud and violations of the Hobbs Act, Mr. Graifman and the Firm served as sole trial counsel for plaintiffs who alleged that they were subjected to extortion demands by various school construction authority supervisors and inspectors. After a six week jury trial before Judge Spatt, one plaintiff procured a partial settlement and the other received a verdict on their RICO claims against the respective school inspectorial staff members.
14. Nu-Life Const. Corp. v. Board of Educ. of City of New York, Div. of School Bldgs. of Bd. of Educ. of City of New York, 795 F.Supp. 602, RICO Bus. Disp. Guide 8035 (E.D.N.Y., June 16, 1992) (No. CV-86-0807 (ADS)). See above description.
15. Nu-Life Const. Corp. v. Board of Educ. of City of New York, 789 F.Supp. 103, 75 Ed. Law Rep. 1009, RICO Bus. Disp. Guide 7885 (E.D.N.Y., Dec. 2, 1991) (No. CV-86-0807 (ADS)). See above description.
16. Dakota Industries, Inc. v. Ever Best Ltd., 944 F.2d 438, 20 U.S.P.Q.2d 1158 (8th Cir. (S.D.), Sept. 12, 1991) (No. 91-1036).
17. Elliot Gould v. Ladenberg Thalman, 1990 WL 209641, Fed. Sec. L. Rep. P. 95, 667 (S.D.N.Y., Dec. 17, 1990) (No. 90 Civ. 4140 (MBM)). Securities fraud claims litigated on behalf of Elliot Gould against former financial advisors. Case settled before trial.
18. Sablosky v. Edward S. Gordon Co., Inc., 73 N.Y.2d 133, 535 N.E.2d 643, 538 N.Y.S.2d 513, 4 IER Cases 1315 (N.Y., Feb. 21, 1989) (No. 32). Reported case decided by New York Court of Appeals which concerned the scope of contractual obligations and enforcement thereof.
19. SSH Co., Ltd. v. Shearson Lehman Bros. Inc., 678 F.Supp. 1055, Blue Sky L. Rep. P. 72, 695, Fed. Sec. L. Rep. P. 93, 647 (S.D.N.Y., Dec. 24, 1987) (No. 86 Civ 5981 (PNL)).
20. Stephano v. News Group Publications, Inc., 64 N.Y.2d 174, 474 N.E.2d 580, 485 N.Y.S.2d 220, 11 Media L. Rep. 1303 (N.Y., Dec. 20, 1984). Mr. Graifman litigated this case defining the parameters of right of privacy and right of publicity in the State of New York.
21. Brooke Shields v. Garry Gross, 58 N.Y.2d 338, 448 N.E.2d 108, 461 N.Y.S.2d 254, 9 Media L. Rep. 1466 (N.Y., Mar. 29, 1983). Mr. Graifman represented fashion photographer, Gary Gross, sued by Brooke Shields relating to scope of the right of privacy and right of publicity in New York. This case of first impression was decided by the New York Court of Appeals, which affirmed the original trial court judgment in favor of photographer.
W:\STULL\RAMBUS2\PLD\LP EX 7.wpd Randy J. Perlmutter, Esq. is an associate with the firm of KANTROWITZ,
GOLDHAMER & GRAIFMAN. Mr. Perlmutter is a graduate of the University of
Massachusetts at Amherst and New York Law School, where he was an Articles Editor for the
New York Law School of International Comparative Law Journal of International Comparative
Law and a member of the Moot Court Association. Mr. Perlmutter returns to New York Law
School annually as a Judge of various moot court competitions including the Robert Wagner
Labor & Employment National Competition. Mr. Perlmutter started his career as a Regional
Director and Human Resources Manager of a large retail corporation. Mr. Perlmutter also worked for in-house counsel at a high end women’s fashion company where he regularly advised upper management and field management on policies, practices and procedures related to employment matters. Mr. Perlmutter practices in the areas of commercial litigation and employment law. He is a member of the Human Resources Committee with the Commerce and
Industry Association of New Jersey, where he has been a recent lecturer.
Reginald H. Rutishauser, Esq., is an associate in the firm of KANTROWITZ,
GOLDHAMER & GRAIFMAN, P.C. Mr. Rutishauser is primarily a litigator and appellate advocate at the firm who has assisted in the prosecution of various class actions. He is admitted to practice before the Courts of New York State, New Jersey, and the United States District
Courts for the Eastern District of New York, the Southern District of New York, and the District of New Jersey, as well as the United States Court of Appeals for the Second Circuit. Mr.
W:\STULL\RAMBUS2\PLD\LP EX 7.wpd Rutishauser was admitted as a Certified Public Accountant in the State of New Jersey. He has a
Masters of Science Degree in Taxation from Pace University, and a Bachelors of Arts degree from Colgate University. He is a member of the Rockland County Bar Association
William T. Schiffman, Esq., received his J.D. degree from Brooklyn Law School, 1974 and is admitted to practice in New York (1975), Texas (1976), and New Jersey (1981).
Mr. Schiffman was Law Clerk to the Honorable Woodrow Seals, United States District
Judge, Southern District of Texas from 1974-1977. In that position Mr. Schiffman was responsible for preparing decisions and orders on motions as well as observing trials and assisting Judge Seals in preparing finds of fact and conclusions of law.
From 1977-1979, Mr. Schiffman was associated with the law firm of Urban & Coolidge in Houston Texas. Mr. Schiffman's principal practice area was commercial litigation.
From 1979 to 1985, Mr. Schiffman was an attorney for AT&T, first in the Long Lines
Department in Atlanta, Georgia, and then in company headquarters in New Jersey. Mr.
Schiffman's responsibilities principally in the area of general litigation and the AT&T antitrust litigation prior to divestiture.
From 1985 to 1993, Mr. Schiffman was with the law firm of Jacob & Meyers, first as the managing attorney of several offices, then as New Jersey resident partner in charge of the northern New Jersey offices. The practice was principally in the area of litigation.
From 1993 to date, Mr. Schiffman has been associated with Kantrowitz & Goldhamer,
P.C., in New York, and its affiliate, Kantrowitz & Goldhamer in New Jersey. Mr. Schiffman's
W:\STULL\RAMBUS2\PLD\LP EX 7.wpd responsibilities are principally in the area of litigation including securities and employment class action, as well as complex contested matrimonial and general commercial litigation.
Peter L. Benza, Esq., joined Kantrowitz, Goldhamer, & Graifman in 2005 as an associate in the Commercial Litigation and Personal Injury Departments. Peter is a member of the bars of New York, New Jersey, and Pennsylvania. He is also admitted to practice in both the
Eastern and Southern District Federal Courts of New York as well as Federal Court in New
Jersey. He earned a Bachelor of Arts in Psychology from Emory University in 1987 and his Juris
Doctor from Seton Hall University in 1993. In 1995, Peter was chosen to be General Counsel for Saint Barnabas Hospital in The Bronx, New York. He acted as administrator for all legal matters concerning the hospital, including employment and environmental compliance issues and risk management. Peter stayed on at this position until 1998. Prior to 1995, Peter spent three years at a New Jersey firm specializing in environmental law. In 1998, Peter gained experience as a litigator and practitioner primarily in health care issues, at Ruskin, Moscou, Evans, and
Faltischek PC in Mineola, New York.
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