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Adrian Mongeli, et al. v. Terayon Communication Systems, Inc., et al. 06-CV-03936-Declaration Of PDF

215 Pages·2007·13.58 MB·English
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Preview Adrian Mongeli, et al. v. Terayon Communication Systems, Inc., et al. 06-CV-03936-Declaration Of

1 MORGAN, LEWIS & BOCKIUS LLP John H. Hemann (Bar No. 165823) 2 Michael J. Lawson (Bar No. 66547) Sheila A. Jambekar (Bar No. 239101) 3 One Market Spear Street Tower 4 San Francisco, CA 94105 Tel: (415) 442-1000 5 Fax: (415) 442-1001 6 ERNST & YOUNG LLP Bruce M. Cormier 7 Joel E. Bonner (Bar No. 105492) 1225 Connecticut Avenue, NW 8 Washington, D.C. 20036 Tel: (202) 327-7603 9 Fax: (202) 327-7601 10 Attorneys for Defendant ERNST & YOUNG LLP 11 12 UNITED STATES DISTRICT COURT 13 NORTHERN DISTRICT OF CALIFORNIA 14 SAN FRANCISCO DIVISION 15 ADRIAN MONGELI, Individually, And Case No. 3-06-CV-03936 MJJ 16 On Behalf Of All Others Similarly Situated, CLASS ACTION 17 Plaintiff, DECLARATION OF SHEILA A. 18 JAMBEKAR IN SUPPORT OF vs. DEFENDANT ERNST & YOUNG LLP’S 19 MOTION TO DISMISS AND REQUEST TERAYON COMMUNICATIONS FOR JUDICIAL NOTICE 20 SYSTEMS, INC., ZAKI RAKIB, JERRY D. CHASE, MARK A. RICHMAN, Hearing Date: June 26, 2007 21 EDWARD LOPEZ, RAY FRITZ, CAROL Time: 9:30 a.m. LUSTENADER, MATTHEW MILLER, Dept.: Courtroom 11 22 SHLOMO RAKIB, DOUG SABELLA, Judge: Hon. Martin J. Jenkins CHRISTOPHER SCHAEPE, MARK Action Filed: June 23, 2006 23 SLAVEN, LEWIS SOLOMON, HOWARD W. SPEAKS, ARTHUR T. 24 TAYLOR, DAVID WOODROW, and ERNST & YOUNG LLP, 25 Defendants. 26 27 28 1-SF/7512727.3 Case Number: 3-06-CV-03936 MJJ DECLARATION OF SHEILA A. JAMBEKAR 1 I, Sheila A. Jambekar, declare as follows: 2 1. I am an attorney at law, duly licensed to practice before this Court and the Courts 3 of the State of California. I am an associate with the law firm of Morgan, Lewis & Bockius LLP, 4 attorneys for Defendant Ernst & Young LLP (“Ernst & Young”). The facts set forth herein are 5 known to me personally, and if called upon to testify, I could and would testify competently to 6 those facts. 7 2. This Declaration is made in support of Defendant Ernst & Young’s Request for 8 Judicial Notice in Support of Its Motion to Dismiss. 9 3. On March 7, 2007, I searched LIVEDGAR via the website, www.gsionline.com, 10 for Terayon Communication Systems, Inc.’s (“Terayon’s”)10-K filings for the years ending 11 December 31, 2001, December 31, 2002, December 31, 2003, December 31, 2004 and December 12 31, 2005. LIVEDGAR is a database through which U.S. Securities and Exchange Commission 13 filings can be obtained. 14 4. Attached as Exhibit A is a true and correct copy of the cover page, table of 15 contents, and pages 35 through 73 of Terayon’s 10-K filing for the year ending December 31, 16 2001, that I obtained from searching LIVEDGAR. 17 5. Attached as Exhibit B is a true and correct copy of the cover page, table of 18 contents, and pages 54 through 103 of Terayon’s 10-K filing for the year ending December 31, 19 2002, that I obtained from searching LIVEDGAR. 20 6. Attached as Exhibit C is a true and correct copy of the cover page, index, and 21 pages 53 through 89 of Terayon’s 10-K filing for the year ending December 31, 2003, that I 22 obtained from searching LIVEDGAR. 23 7. Attached as Exhibit D is a true and correct copy of the cover page, index, and 24 pages 56 through 92 of Terayon’s 10-K filing for the year ending December 31, 2004, that I 25 obtained from searching LIVEDGAR. 26 8. Attached as Exhibit E is a true and correct copy of the cover page, index, and 27 pages 48 and 49 of Terayon’s 10-K filing for the year ending December 31, 2005, that I obtained 28 from searching LIVEDGAR. 1-SF/7512727.3 1 Case Number: 3-06-CV-03936 MJJ DECLARATION OF SHEILA A. JAMBEKAR 1 9. On March 20, 2007, I went to the Yahoo! Finance website at 2 http://finance.yahoo.com/, typed the ticker symbol for Terayon (TERN.PK) into a text box in the 3 upper left corner of the page, and clicked on the link entitled “Get Quotes.” On the next page that 4 opened, I then chose the link entitled “Historical Prices.” Then, on the next page that opened 5 after that, I set the date range for June 1, 2001 until March 31, 2006 and clicked the link “Get 6 Prices.” This opened a new page with a table containing daily stock price information for 7 Terayon between June 1, 2001 until March 31, 2006. I then clicked on the link “Download to 8 Spreadsheet,” which opened a new window containing the same stock price data in an Excel 9 spreadsheet. Attached as Exhibit F is a true and correct copy of the printout of that Excel 10 spreadsheet containing information regarding Terayon’s daily stock prices for the period of June 11 1, 2001 until March 31, 2006. 12 I declare under penalty of perjury under the laws of the United States and the State of 13 California that the foregoing is true and correct. Executed on this 23rd day of March 2007, in San 14 Francisco, California. 15 / S/ Sheila A. Jambekar 16 17 18 19 20 21 22 23 24 25 26 27 28 1-SF/7512727.3 2 Case Number: 3-06-CV-03936 MJJ DECLARATION OF SHEILA A. JAMBEKAR Exhibit A Table of Contents SECURITIES AND EXCHANGE COMMISSION Washington , D .C . 2 054 9 Form 10-K (Mark one) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2001 or TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 193 4 For the transition period from to Commission File Number: 000-24647 Terayon Communication Systems, Inc. (Exact name of registrant as specified in its charter) Delaware 77-0328533 (State or other jurisdiction of (IRS Employ- incorporation or organization Identification No ) 2952 Bunker Hill Lane Santa Clara, California 95054 (408)727-440 0 (Address, including zip code, and telephone number, including area code, of the registrant's principal executive offices) Secu ri ties registered pursuant to Section 12(b) of the Act : Name of each exchange Title of Each Class : on Which Registered : None None Secu rities registered pursuant to Section 12(g) of the Act : Common Stock, par value $0.001 per share (Title of Class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days . Yes 0 No ❑ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K . The aggregate market value of the voting stock held by non-affiliates of the registrant, based upon the closing sale price of the Common Stock on March 28, 2002 as reported on the Nasdaq National Market, was approximately $471,647,933 . Shares of Common Stock held by each officer and director and by each person known to the Company who owns 5% or more of the outstanding Common Stock have been excluded in that such persons may be deemed to be affiliates . This determination of affiliate status is not necessarily a conclusive determination for other purposes . As of March 28, 2002, registrant had outstanding 72,701,056 shares of Common Stoc k DOCUMENTS INCORPORATED BY REFERENCE Portions of the definitive Proxy Statement to be filed with the Securities and Exchange Commission in May 2002, pursuant to Section 14 of the Securities Exchange Act of 1934, in connection with the 2001 Annual Meeting of Stockholders of Terayon Communication Systems, incorporated : Part III . TABLE OF CONTENTS PARTI Item 1 . Business Item 2 . Propertie s Item ; . Leal Proceedines Item 4 . Submission of Matters to a Vote of Security Holders PART l I Item 5 . Market for the Re iistrant's Common Equity and Related Stockholder Matters Item 6 . Selected Financial Data Item 7 . Manaeement's Discussion and Analysis of Financial Condition and Results of Operations Item 7a. Market Risk Disclosure Informatio n Item 8 . Financial Statements and Sunolementa1y Dat a Item 9 . Changes in and Disaereements with Accountants on Accounting and Financial Disclosures PART II I Item 10 . Directors and Officers of the Remst rant Item 11 . Executive Compensation Item 12 . Security Ownership of Certain Beneficial Owners and Management Item 13 . Certain Relationship and Related Transaction s PART I V Item 14 . Exhibits. Financial Statement Schedules, and Reports on Form 8 K SIGNATURE S EXHIBIT INDEX EXHIBIT 10 .3 EXHIBIT 10 .14 EXHIBIT 10 .15 EXHIBIT 10 .16 EXHIBIT 10 .17 EXHIBIT 10 .18 EXHBIIT 21 .1 EXHIBIT 23 .1 Table of Content s Item 8. Financial Statements and Supplementary Data TERAYON COMMUNICATION SYSTEMS, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Pag e Report of Ernst & Young LLP, Independent Auditors 36 Consolidated Balance Sheets 37 Consolidated Statements of Operations 38 Consolidated Statements of Stockholders' Equity 39-40 Consolidated Statements of Cash Flows 41 Notes to Consolidated Financial Statements 42-7 3 35 Table of Contents REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS The Board of Directors and Stockholder s Terayon Communication Systems, In c We have audited the accompanying consolidated balance sheets of Terayon Communication Systems, Inc . as of December 31, 2001 and 2000, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2001 . Our audits also included the financial statement schedule listed in the index at Item 14(a) . These financial statements and schedule are the responsibility of the Company's management . Our responsibility is to express an opinion on these financial statements and schedule based on our audits . We conducted our audits in accordance with auditing standards generally accepted in the United States . Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement . An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements . An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation . We believe that our audits provide a reasonable basis for our opinion . In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Terayon Communication Systems, Inc . at December 31, 2001 and 2000, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States . Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein . /s/ ERNST & YOUNG LL P San Jose , Californi a January 28, 2002 36 Table of Contents TERAYON COMMUNICATION SYSTEMS, INC . CONSOLIDATED BALANCE SHEETS December 31 , 2001 2000 (In thousands, except share data) ASSETS Current assets : Cash and cash equivalents $ 100,274 $ 347,01 5 Short-term investments 233,614 215,442 Accounts receivable, less allowance for doubtful accounts o f $7,207 in 2001 and $6,542 in 2000 48,386 42,772 Accounts receivable from related parties 4,006 17,454 Other current receivables 7,476 32,02 7 Inventory 16,658 87,76 7 Other current assets 13,462 7,02 1 Total current assets 423,876 749,49 8 Property and equipment, net 25,279 33,53 3 Intangibles and other assets, net 17,491 643,69 6 Total assets $ 466,646 $1,426,72 7 LIABILITIES AND STOCKHOLDERS'EQUITY Current liabilities : Accounts payable $ 42,821 S 123,994 Accrued payroll and related expenses 9,441 13,10 5 Deferred revenues 4,169 4,99 8 Warranty reserves 8,368 5,92 5 Accrued purchase price payable - 14,13 8 Accrued restructuring charges 8,197 - Accrued vendor cancellation charges 17,291 19,00 0 Other accrued liabilities 14,015 6,71 9 Current portion of long-term debt 3,273 10,85 3 Short-term debt - 2,69 7 Current portion of capital lease obligations 126 13 1 Total current liabilities 107,701 201,56 0 Long-term debt 2,467 11 9 Long-term portion of capital lease obligations ° 233 35 8 Other long ,term obligations 1,800 3,444 Convertible subordinated notes 174,141 500,00 0 Deferred tax liability - 18,56 5 Commitments and contingencie s Stockholders' equity : Preferred stock, $0 .001 par value : Authorized shares - 5,000,00 0 Issued and outstanding shares - none in 2001 and 2000 - - Common stock, $0 .001 par value : Authorized shares - 200,000,000 Issued - 72,201,322 in 2001 and 67,431,261 in 200 0 Outstanding - 72,073,483 in 2001 and 67,396,539 in 2000 73 6 8 Additional paid in capital 1,074,203 1,037,964 Accumulated deficit (892,994) (329,148 ) Deferred compensation (458) (6,788 ) Stockholders' notes receivable - (3 ) Treasury Stock, at cost ; 127,839 shares in 2001 and 34,722 shares in 2000 (768) (73 ) Accumulated other comprehensive income 248 66 1 Total stockholders' equity 180,304 702,68 1 Total liabilities and stockholders' equity $ 466,646 $1,426,727 See accompanying notes . 37 Table of Contents TERAYON COMMUNICATION SYSTEMS, INC . CONSOLIDATED STATEMENTS OF OPERATION S Years Ended December 31, 2001 2000 1999 (In thousands , except per share data) Revenues: Product revenues $ 227,036 $ 220,22 8 $ 57,345 <7 AA< 110 Z21 Related party product revenue s 39,664 Total revenues 279,481 339,549 97,009 Cost of goods sold : Cost of product revenue s 196,430 205,787 46,215 Cost of related party product revenues 33,181 64,744 25,82 9 Special charge s 33,506 19,000 Total cost of goods sold 263,117 289,53 1 72,044 Gross profit 16,364 50,01 8 24,965 Operating expenses : Research and development 79,927 68,27 0 17,579 Cost of product development assistance agreement - 9,563 35,147 In-process research and developmen t - 30,53 5 14,600 Sales and marketing 55,701 45,26 1 15,727 General and administrative 31,309 24,809 7,476 Goodwill amortization 25,410 59,05 7 3,52 4 Restructuring costs and asset write-offs 587,149 - Total operating expenses 779,496 237,49 5 94,053 Loss from operations (763,132) (187,477 ) (69,088 ) Interest income 18,132 19,79 4 5,101 Interest expense (15,224) (11,265 ) (93 ) Other expens e (2,864) ( 1,819 ) Loss before extraordinary gain and tax benefit (763,088) (180,767 ) (64,080) Income tax benefit (13,915) - Loss before extraordinary gain (749,173) (180,767 ) (64,080 ) 12 l,)7 - Extraordinary gain on early retirement of debt Net loss $ (563,846) $(180,767) $ (64,080) Basic and diluted net loss per share before extraordinary gain $ (10 .96) $ (2 .95) $ (1 .55) Extraordinary gain on early retirement of deb t 2 .71 Basic and diluted net loss per shar e $ (8.25 ) $ (2.95 ) $ (1 .55 ) Shares used in computing historical basic and diluted net loss per share applicable to common stockholders 68,331 61,349 41,26 0 See accompanying notes . 38

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