I THE WEISER LAW FIRM, P.C. KATHLEEN A. HERKENHOFF...

I THE WEISER LAW FIRM, P.C.KATHLEEN A. HERKENHOFF (168562)

2 12707 High Bluff Drive, Suite 200San Diego, CA 92130

3 Telephone: 858/794-1441Facsimile: 858/7941450

4 kahweiserlawfirm.com

5 THE WEISER LAW FIRM, P.C.ROBERT B. WEISER

6 BRETT D. STECKERJEFFREY J. CIARLANTO

7 JOSEPH M. PROFY121 North Wayne Avenue, Suite 100

8 Wayne, PA 19087Telephone: 610/225-2677

9 Facsimile: 610/225-2678

10 Attorney for Plaintiff Yahia Tawila and Proposed Co-Lead Counsel

11 [Additional counsel appear on signature page]

12UNITED STATES DISTRICT COURT

13NORTHERN DISTRICT OF CALIFORNIA

14SAN JOSE DIVISION

15DEBRA SALZMAN, Derivatively on Behalf Case No. CV11-03269-PSG

16 of Nominal Defendant,Action Filed: July 1, 2011

17 Plaintiff,1 DECLARATION OF KATHLEEN A.

18 vs. HERKENHOFF IN SUPPORT OF MOTION1 TO CONSOLIDATE RELATED ACTIONS,

19 CAROL A. BARTZ and JERRY YANG, ) APPOINT LEAD PLAINTIFFS ANDAPPOINT CO-LEAD COUNSEL

20 Defendants, )DATE: August 16, 2011

21 — and — ) TIME: 10:00 a.m.) JUDGE: PAUL SINGH GREWAL

22 YAHOO! INC., a Delaware corporation,

23 Nominal Defendant )

24[Caption continued on next va2e.1

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1JANE OH. Derivativel y on Behalf of Herself ) Case No. CV11-03286-HRL

2 and All Others Similarly Situated,) Action Filed: July 5, 2011

3 Plaintiff,

4 vs.)

5 CAROL A. BARTZ. JERRY YANG, ROY )BOSTOCK, PATTCHART, SUSAN JAMES, )

6 VYOMESEI JOSHI, DAVID KENNY, )ARTHUR KERN, BRAD SMITH, and GARY 1

7 WILSON,

8 Defendants. )

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10 YAHOO! INC., ))

11 Nominal Defendant. 1

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13 YAHLA TAWILA, Derivatively on Behalf of Case No. CV11-03301-HRLYAHOO! INC., )

14 ) Action Filed: July 6, 2011Plaintiff. )

15vs.

16CAROL A. BARTZ.

' JERRY YANG. ROY )

1 7 ROSTOCK, PATTI HART, SUE JAMES, )VYOMESH JOSHI, DAVID KENNY,

18 ARTHUR KERN, BRAD SMITH, and GARY )WILSON, )

19Defendants, )

20— and —

21 )YAHOO! INC., )

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)Nominal Party. )

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1 IRON WORKERS MID-SOUTH PENSION j Case No. CV H-03302-PSGFUND, Derivatively on Behalf of YAHOO! )

2 INC,. ) Action Filed: July 6, 2011

3 Plaintiff, ))

4 vs. )

5 CAROL BARTZ, JERRY YANG, ROY J. )BOSTOCK, PATTI S. HART, SUSAN M. )

6 JAMES, VYOMESH JOSH!, ARTHUR FL )KERN, BRAD D. SMITH, GARY L,

7 WILSON and JACK MA, ))

8 Defendants,

9 — and —

10 YAHOO! INC.. a Delaware corporation

11 Nominal Defendant. )

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I, Kathleen A. Herkenhoff, declare as follows:

2 I. I am of counsel to The Weiser Law Firm, P.C. ("The Weiser Firm"), counsel for

3 Plaintiff Yahia Tawila ("Tawila") in Taw!la v. Burt; et al., Case No. CVI1-0330l-HRL (the

4 -Tawila Action -). I am an attorney duly licensed to practice before all courts of the State of

5 California. I submit this declaration in support of the Motion to Consolidate Related Actions,

6 Appoint Lead Plaintiffs and Appoint Co-Lead Counsel (the -Motion"), which Motion has been

7 jointly filed by Tawila and Plaintiff Jane Oh, the named plaintiff in Oh v. Bartz, et al., .Case No.

8 CV11-03286-HRL (the "Oh Action"). I have personal knowledge of the mailers stated herein and, if

9 called upon, I could and would competently testify thereto.

10 2. Currently, the Weiser Firm is serving as co-lead or sole lead counsel in several

11 stockholder derivative actions that could have a significant impact on corporate governance issues

12 nationwide, including several cases based on the failure of corporate boards of directors to amend

13 executive compensation following shareholders' rejection of such compensation in "say on pay"

14 votes. Earlier this year. in In re KeyCory Derivative Litig., No. 1:10-ev-0 786-DAP (N.D. Ohio

15 2010). the Weiser Firm served as lead counsel and produced what it believes to be the first-ever

16 settlement of any such case. The KeyCorp derivative action was based on allegations of misconduct

17 arising from the failure of the KeyCorp Board of Directors to amend the executive compensation

18 awarded for 2009, even though a majority of KeyCorp's voting stockholders rejected such

19 compensation in a -say on pay" vote. The settlement of the KeyCorp case provided for a series of

20 corporate governance measures related to: (a) the ideological underpinnings of compensation

21 principles at k.cyCorp; (b) the actual award of executive compensation at KeyCorp; (c) the

22 disclosure of those decisions and ideology in KeyCorp's financial filings; (d) the composition of the

23 KeyCorp Board, its sub-committees, and their advisors; and (e) KeyCom's and its Board's ongoing

24 relationship with Key Corp shareholders. In addition, pursuant to the settlement, certain of the

25 defendants in the KeyCorp case relinquished highly-valuable economic rights which existed under

26 their respective employment contracts. The Weiser Firm believes that collectively, these measures

27 will save KeyCorp millions (or perhaps tens of millions) of dollars over time.

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DECLARATION OF KATHLEEN A. HERKENHOFF IN SUPPORT OF MOTION TO CONSOLIDATERELATED ACTIONS, APPOINT LEAD PLANITIFFS AND APPOINT CO-LEAD COUNSEL - - 1 -

1 3. In addition, the Weiser Firm very recently obtained extraordinary relief in connection

2 with the settlement of a shareholder derivative action brought on behalf of Vitacost.com , Inc. (Kloss

3 v. Kerker, et al., Case No.: 502010CA018594XXXXN4B,F1. Circuit Ct., 15th Judicial Circuit, Palm

4 Beach Cty.), which actually preserved that company's corporate form and the equity interests of its

5 shareholders. The Vitacost action centered upon Vitacosf s December 7, 2010 announcement that its

6 historical financial statements could not be relied upon due to a failure to adhere to certain critical

7 corporate formalities fourteen years earlier. As a result, trading in Vitacost stock was halted by

8 NASDAQ and Vitacost stockholders held illiquid shares of uncertain legal status. Pursuant to the

9 settlement, the Court entered an Order which: (I) confirmed the number of shares in the Company

10 based on the number of outstanding shares in the Company's initial public offering in 2009 (in

11 effect, "quieting title" to Vitacost shares), thus reassuring Vitacost stockholders and the market that

12 Vitacost's outstanding shares and options were valid; and (2) deemed Vitacost's certificate of

13 incorporation valid and effective. In the absence of this settlement, Vitacost could not have become

14 -current" with respect to its historical financial statements, its stock could not have resumed trading,

15 and Vitacost would have almost certainly been forced to file for bankruptcy. This settlement was

16 unprecedented and historic, and in essence saved the Company and the interests of its stockholders.

17 4. Attached are true and correct copies of the following exhibits:

18 Exhibit A Initial complaint tiled in the Tmvila Action;

Exhibit B Initial complaint filed in the Oh Action;

2 0 Exhibit C Initial complaint filed in Salzman v. Bcu-tz et al., Case No. CV11-03269-PSG(the "Salzman Action);

21Exhibit D Initial complaint filed in Iron Workers Mid-South Pension Fund v. Bartz, et

22 al., Case No. CV I 1-03302-PSG the -Iron Workers Action");

23 Exhibit E The Weiser Law Firm resume;

24 Exhibit F Glancy Binkow & Goldberg LLP firm resume;

Exhibit G October 26, 2009 Stipulation of Settlement entered by the parties in Gregoryv. Tuchman, et al., C.A. No. 3925-CC (Del. Ch.) C`TeleTechTh

26Exhibit H Relevant excerpts from the January 5, 2010 Settlement Hearing Transcript in

27 TeleTech;

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DECLARATION OF KATHLEEN A. HERKENHOFF IN SUPPORT OF MOTION TO CONSOLIDATERELATED ACTIONS, APPOINT LEAD PLANITIFES AND APPOINT CO-LEAD COUNSEL - - 2 -

I Exhibit 1 Final Judgment Approving Settlement and Order of Dismissal entered onJanuary 5, 2010 in TeleTech.,

2Exhibit J Stipulation Consolidating Actions, Appointing Lead Counsel and Related

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Matters and Order Thereon entered on August 26, 2010 in King v. Meyer 111,et al.. Civil Action No. 1:10-cv-01786-DAP N.D. Ohio) ("Keycorp").

41 declare under penalty of perjury under the laws of the United States of America that the

5foregoing is true and correct. Executed this 11th day of July, 2011, at San Diego, California.

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7 A rE' ;Al am.;8

KATHLEEN A. ERRE -RPOF '9

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DFCLARAFION OF KATHLEEN A. HERKENHOFT IN SUPPORT OF MOTION TO CONSOLIDATE

RELATED ACTIONS, APPOINT LEAD PLANITIFFS AND APPOINT CO-LEAD COUNSEL - - 3 -

EXHIBIT A

1 THE WEISER LAW FIRM, P.C.KATHLEEN A. HERR'ENHOFF (168562) ' , ' VW

2 12707 High Bluff Drive, Suite 200 5San Diego, CA 92130

3 Telephone: (858) 794-1441 !IP" 44.57Facsimile: (858) 794-1450 p

4 [email protected] :FL)" /4

okf:ckVie, - ,10415• VVie.

5 Attorney for Plaintiff Yahia Tawila bini,(1.),h1,10:4;19San 4„csfoc,;,`-kirr,

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7

8 UNI1ED STALES DISTRICT COURT

9 NORTHERN DISTRICT OF CALIFORNIAliTh:

10 SAN JOSE DIVISION

110 3 3 01YAH1A TAW1LA, Derivatively on Behalf of ) GaYN112 YAHOO! INC., )

) VERIFIED SHAREHOLDER DERIVATIVE13 Plaintiff, ) COMPLAINT FOR BREACH OF

) FIDUCIARY DUTY, GROSS14 VS. ) MISMANAGEMENT, ABUSE OF

) CONTROL, CORPORATE WASTE AND15 CAROL A. BARTZ, JERRY YANG, ROY ) UNJUST ENRICHMENT

BOSTOCK, PATH HART, SUE JAMES, )16 VYOMESH JOSHI, DAVID KENNY, )

ARTHUR KERN, BRAD SMITH, and GARY)17 WILSON, )

)18 Defendants, )

)19 - and - )

)20 YAHOO! INC., )

)21 Nominal Party. ) ) DEMAND FOR JURY TRIAL

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1 VERifIED SHAREHOLDER DERIVATIVE COMPLAJNT

2 1. Plaintiff Yahia Tawila ("Plaintiff"), by and through his undersigned attorneys, hereby

3 submits this Verified Shareholder Derivative Complaint (the "Complaint") for the benefit of nominal

4 defendant Yahoo! Inc. ("Yahoo" or the "Company") against certain members of its Board of

5 Directors (the "Board") and executive officers seeking to remedy defendants' breaches of fiduciary

6 duties and unjust enrichment from April 2011 to the present (the "Relevant Period").

7 2. According to its public filings, Yahoo operates as a digital media company that

8 delivers personalized digital content and experiences across devices and worldwide. The Company's

9 communications and communities offerings provide a range of communication and social services to

10 users and small businesses across various devices and through its broadband Internet access partners,

11 Its search and marketplace offerings provide answers to users' information needs by delivering

12 meaningful search, local, and listings experiences on the search results page and across Yahoo.

13 3. During the Relevant Period, defendants issued materially false and misleading

14 statements regarding the Company's business and financial results. Specifically, defendants failed to

15 disclose that an important corporate asset in China had been transferred at much less than market

16 value. As a result of defen its' false statements, Yahoo's stock traded at artificially inflated prices

17 during the Relevant Period, reaching a high of $18.65 per share on May 6, 2011.

18 4. On May 10, 2011, Yahoo shareholders learned for the first time that the Company's

19 $1 billion investment in a strategic partnership with Alibaba Group Holdings Limited ("Alibaba"),

20 China's largest e-conunerce company, likely had been severely impaired by the misappropriation of

21 Alibaba's most valuable asset, Alipay, an e-commerce payment system, from Alibaba to another

22 private company controlled by Alibaba's Chairman, Jack Ma ("Ma").

23 5. On May 15, 2011, defendants caused the Company to issue a press release entitled

24 "Joint Statement from Alibaba Group and Yahoo! Inc. Regarding Aiipay," which stated in part:

25 "Alibaba Group, and its major stockholders Yahoo! Inc. and Sofibank Corporation,are engaged in and committed to productive negotiations to resolve the outstanding

26 issues related to Alipay in a manner that serves the interests of all shareholders assoon as possible."

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28VERIFIED SHAREHOLDER DERIVATIVE COMPLAINT FOR BREACH OF FIDUCIARY DUTY,GROSS MISMANAGEMENT, ABUSE OF CONTROL CORPORATE WASTE AND UNJUSTENRICHMENT- - 1 -

1 6, On this news, Yahoo's stock collapsed $0.74 per share to close at $15.81 per share on

2 May 16, 2011 -a decline of 15% from its Relevant Period high of $18.65 per share.

3 7. According to news reports, Alibaba received only $46 million for Alipay's assets,

4 which securities analysts valued at $5 billion.

5 8. The true facts, which were known by the defendants, but concealed from the investing

6 public during the Relevant Period, were as follows:

7 (a) Defendants had been informed on March 31, 2011, at the latest, that Alipay's

8 structure had been shifted from Alibaba, reducing the value of Yahoo's investment in Alibaba by

9 billions of dollars; and

10 (b) Chinese regulations regarding forei ownership had been anticipated to

11 change as far back as 2009, which would require Yahoo or Alibaba to divest themselves of Alipay,

12 but defendants had failed to develop a strategy to recover the value Yahoo had in Alibaba.

13 9. As a result of defendants' false statements, Yahoo's stock traded at artificially

14 inflated levels during the Relevant Period, However, after the above revelations seeped into the

15 market, the Company's shares were hammered by massive sales, sending them down over 15% ft um

16 their Relevant Period high.

17 10, Further, as a result of defendants' breaches, the price of the Company's stock still has

18 not recovered and currently trades for under $16 per share.

19 11. Accordingly, as a result of defendants' breaches, the Company has been damaged.

20 JURISDICTION AND VENUE

21 12. This Court has jurisdiction over this action pursuant to 28 U.S.C. § 1332(a)(2) in that

22 Plaintiffs and defendants are citizens of different states and/or countries and the matter in

23 controversy exceeds $75,000.00, exclusive of interests and costs. This Court has supplemental

24 jurisdiction over the state law claims asserted herein pursuant to 28 U.S.C. §1367(a). This action is

25 not a collusive one to confer jurisdiction on a court of the United States which it would not otherwise

26 have.

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28VERIFIED SHAREHOLDER DERIVATIVE COMPLAINT FOR BREACH OF FIDUCIARY DUTY,GROSS MISMANAGEMENT, ABUSE OF CONTROL, CORPORATE WASTE AND UNJUSTENRICHMENT - - 2 -

1 13. Venue is proper in this district because a substantial portion of the II • sactions and

2 wrongs complained of herein, including defendants' primary participation in the wrongful acts

3 detailed herein, occurred in this district. One or more of the defen• : Its either resides in or maintains

4 executive offices in this district, and defeat; its have received substantial compensation in this

5 district by engaging in numerous activities and conducting business here, which had an effect in this

6 disffict.

7 INT • 3 !STRICT ASSIGNMENT

8 14. A substantial part of the events or omissions which give rise to the claims in this

9 action occurred in the City of Sunnyvale, in the County of Santa Clara, and as such this action is

10 properly assigned to the San Jose Division of this Court.

11 THE P ' TIES

12 15. Plaintiff is a current shareholder of Yahoo and has been continuously throughout the

13 Relevant Period. Plaintiff is a citizen of The Arab Republic of Egypt.

14 16. Nominal party Yahoo is a Delaware corporation with its executive offices located at

15 701 First Avenue, Sunnyvale, California 94089. According to its public filings, the Company,

16 together with its consolidated subsidiaries, operates as a digital media company that delivers

17 personalized digital content and experiences, across devices and worldwide,

18 17. Defendant Carol A. Bartz ("Bartz") has served as the Company's Chief Executive

19 Officer ("CEO") since 2009. In addition, defendant Bartz has served as a director of the Company

20 since 2009. Upon information and belief, defendant Bartz is a citizen of California.

21 18. Defendant Jerry Yang ("Yang") has served as a director of the Coma y since 1995.

22 In addition, defendant Yang is a co-founder of the Company and has served in an executive capacity

23 as its Chief Yahoo during the Relevant Period. Upon information and belief, defendant Yang is a

24 citizen of California.

25 19. Defendant Roy Bostock ("Bostock") has sewed as a director of the Corn y since

26 May 2003. In addition, defendant Bostock has served as Chairman of the Board since 2008. Upon

27 infonnation and belief defendant Bostock is a citizen of New York.

28VERIFIED SHAREHOLDER DERIVATIVE COMPLAINT FOR BREACH OF FIDUCIARY DUTY,GROSS MISMANAGEMENT, ABUSE OF CONTROL CORPORATE WASTE AND UNJUSTENRICHMENT- -3-

1 20. Defendant Patti Hart ("Hart") has served as a director of the Company since 2010. In

2 addition, defendant Hart has served as a member of the Board's Audit and Finance Committee (the

3 "Audit Committee") during the Relevant Period. Upon information and belief, defendant Hart is a

4 citizen of Nevada.

5 21. Defendant Sue James ("James") has served as a director of the Company since 2010.

6 In addition, defendant James served on the Audit Committee during the Relevant Period. Upon

7 information and belief, defendant James is a citizen of California.

8 22. Defendant Vyomesh Joshi ("Joshi") has served as a director of the Company since

9 2005. In addition, defendant Joshi served on the Audit Committee during the Relevant Period.

10 Upon information and belief, defendant Joshi is a citizen of California,

11 23. Defendant David Kenny ("Kenny") has served as a director of the Company since

12 April 2011. Upon information and belief, defendant Kenny is a citizen of Massachusetts.

13 24. Defendant Arthur Kern ("Kern") ha c served as a director of the Company since 1996.

14 Upon information and belief, defendant Kern is a citizen of California

15 25. Defendant Brad Smith ("Smith") has served as a director ofthe Company since 2010.

16 Upon information and belief, defendant Smith is a citizen of California,

17 26. Defendant Gary Wilson ("Wilson") has served as a director of the Company since

18 2001. In addition, defendant Wilson has served as a member of the Audit Committee during the

19 Relevant Period. Upon information and belief, defendant Wilson is a citizen of New York,

20 27, Collectively, defendants Bartz, Yang, Bostock, Hart, James, Joshi, Kenny, Kern,

21 Smith, and Wilson shall be collectively referred to herein as the "Defendants."

22 28. Collectively, defendants Hart, James, Joshi, and Wilson shall be collectively referred

23 to herein as "Audit Committee Defendants."

24 DEFENDANTS' DUTIES

25 29. By reason of their positions as officers, directors, and/or fiduciaries of Yahoo and

26 because of their ability to control the business and corporate affairs of Yahoo, Defendants owed

27 Yahoo and its shareholders fiduciary obligations of good faith, loyalty, and candor, and were and are


1 required to use their utmost ability to control and manage Yahoo in a fair, just, honest, and equitable

2 manner, Defendants were and are required to act in furtherance of the best interests of Yahoo and its

3 shareholders so as to benefit all shareholders equally and not in furtherance of their personal interest

4 or benefit Each director and officer of the Company owes to Yahoo and its shareholders the

5 fiduciary duty to exercise good faith and diligence in the administration of the affairs of the

6 Company and in the use and preservation of its property and assets, and the highest obligations of

7 fair dealing,

8 , 30. Defendants, because of their positions of control and authority as directors and/or

9 officers of Yahoo, were able to and did, directly and/or indirectly, exercise control over the wrongful

10 acts complained of herein. Because of their advisory, executive, managerial, and directorial

11 positions with Yahoo, each of the Defendants had knowledge of material non-public information

12 regarding the Company.

13 31. To discharge their duties, the officers and directors of Yahoo were required to

14 exercise reasonable and prudent supervision over the management, policies, practices and controls of

15 the Company. By virtue of such duties, the officers and directors of Yahoo were required to, among

16 other things;

17 (a) Exercise good faith to ensure that the affairs of the Company were conducted

18 in an efficient, business-like manner so as to make it possible to provide the highest quality

19 performance of their business;

20 (b) Exercise good faith to ensure that the Company was operated in a diligent,

21 honest and prudent manner and complied with all applicable federal and state laws, rules, regulations

22 and requirements, and all contractual obligations, including acting only within the scope of its legal

23 authority; and

24 (e) When put on notice of problems with the Company's business practices

25 and operations, exercise good faith in taking appropriate action to correct the misconduct and

26 prevent its recurrence,

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28VERIFIED SHAREHOLDER DERIVATIVE COMPLAINT FOR BREACH OF FIDUCIARY DUTY,GROSS MISMANAGEMENT, ABUSE OF CONTROL, CORPORATE WASTE AND UNJUSTENRICHMENT- - 5 -

1 32. Pursuant to the Audit Committee's Charter, the members of the Audit Committee are

2 required, inter alia, to:

3 (a) Review the Company's annual audited and quarterly financial statements;

4 (b) Review critical accounting policies and such other accounting policies of the

5 Company as are deemed appropriate for review prior to the filing of any annual or quarterly financial

6 statements with the SEC;

7 (c) Review the effect of regulatory and accounting initiatives on the financial

8 statements of the Company;

9 (d) Review the Company's earnings press releases, as well as financial

10 information and earnings guidance provided by the Company to analysts and rating agencies;

11 (e) Recommend to the Board whether to include the audited annual financial

12 statements in the Company's annual report on Form 10-K to be filed with the SEC; and

13 (f) Review with management any significant deficiencies and material

14 weaknesses in the design or operation of the Company's internal controls.

15 SUBSTANTIVE ALLEGATIONS

16 33. According to its public filings, Yahoo, based in Sunnyvale, California, is a global

17 digital media company. Despite its global brand, Yahoo's business has languished for the past

18 several years, as the Company has largely failed to keep up with Google and struggled to grow in

19 highly regulated and politicized fast-growing markets like China.

20 34. To overcome this situation, in 2005, Defendants caused the Company to invest $1

21 billion for a 40% interest in Alibaba, China's largest e-commerce company, and one seat on

22 Alibaba's four-person board of directors. As apart of their strategic partnership, Yahoo also turned

23 over operation of Yahoo China to Alibaba.

35. In a shareholder report discussing the Yahoo-Alibaba strategic partnership, and

25 heralding the transaction as a great opportunity for Yahoo to expand its business in China,

26 Defendants stated:

27 Through this transaction, the Company has combined its leading search capabilitieswith Alibaba's leading online marketplace and online payment system and Alibaba's

28 strong local presence, expertise and vision in the China market. These factorsVERIFIED SHAREHOLDER DERIVATIVE COMPLAINT FOR BREACH OF FIDUCIARY DUTY,GROSS MISMANAGEMENT, ABUSE OF CONTROL CORPORATE WASTE AND UNJUSTENRICHMENT - - 6-

1 contributed to a purchase price in excess of the Company's share of the fair value ofAliababa's net tangible and intangible assets acquired resulting in goodwill.

236. As the remainder of the decade unfolded, Alibaba grew rapidly. By 2011, Yahoo's

340% stake in Alibaba had grown significantly in importance to Yahoo and, in fact, had become,

4according to many industry experts, Yahoo's most valuable corporate asset, accounting for as much

5as two-thirds of Yahoo's entire $21 billion market capitalization.

637. For example, as famed hedge fund manager David Einhom's Greenlight Capital

7wrote about Yahoo in April 2011, "We would not be surprised if [Yahoo's] 40% stake in Alibaba

8Group alone was ultimately worth [Yahoo's] entire current market value." Greenlight Capital

9continued:

10We believe that Yahoo's most valuable asset is its 40% stake in Alibaba Group's

11 still-private holdings, which are separate and distinct from its ownership in thepublicly-traded Alibaba.com , which we are essentially getting for free.

1238. Until recently, one of Alibaba's most profitable "still-private holdings" was Alipay,

13an e-commerce payment system similar to eBay Inc.'s PayPal. As China's economy grew rapidly

14during the late 2000s, so did Alipay's profits. According to U.S. securities analysts, including Brett

15Hariss of Bagelli rt Co., Alipay is worth more than $5 billion. But most importantly for Yahoo and

16its shareholders, Yahoo, as Alibaba's largest shareholder, had a direct connection to the profits

17stemming from Alipay's fast- wing and lucrative online payment system.

1839. Doing business in China can be complex and difficult for U.S. companies. Yahoo's

19experience in China has been no different. But, unlike other large U.S. publicly traded companies,

20Yahoo's single most valuable corporate asset is an investment tied up in a foreign corporation

21located in China, more than 4,000 miles away from Yahoo's corporate headquarters located in

22Sunnyvale, California.

2340. Yahoo's counterparts in China had been consulting with Yahoo for months and

24months on anticipated changes to Chinese regulations regarding foreign ownership. Defendants

25failed to address this issue and ultimately in 2010, Alibaba transferred ownership in Alipay to

26Alibaba CEO Ma for $46 million. This was made known to Defendants on March 31, 2011, at the

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1 latest However, in an effort to make Yahoo attractive to hedge funds and other investors,

2 Defendants continued to conceal this information.

3 DEFENDANTS' FALSE AND MISLEADING STATEMENTS ISSUEDDURING THE RELEVANT PERIOD

441. On April 19, 2011, Defendants caused the Company to issue a press release

5announcing its first quarter 2011 financial results. Defendants reported earnings of $223 million, or

6$0.17 diluted earnings per share, and revenue of $1,064 million. The release stated in part:

7"We are solidly executing toward our plan for returning Yaho& to sustainable

8 revenue and profit growth," said Carol Bartz, CEO of Yahoo!. "During the quarter,we beat the midpoint of revenue guidance while continuing to deliver on the bottom

9 line. We continued to extend our lead as the world's premier digital media compan ywith users to Yahoo! branded properties increasing 15% year over year and minutes

10 spent increasing 17%."

II 42. These were positive results and statements (with never a word about the Alipay

12 fiasco), and Yahoo's stock reacted favorably, increasing to $16.87 per share

13 THE TRUtH FINALLY EMERGES

14 43. On May 10, 2011, Yahoo shareholders learned for the first time that the Company's

15 $1 billion investment in its strategic partnership with Alibriba likely had been severely impaired by

16 the misappropriation of Alibaba's most valuable asset, Alipay, from Alibaba to another private

17 company controlled by Alibaba's Chairman, Ma.

18 44. On this news, Yahoo's stock fell by 7%, to close at $17.20 per share.

19 45, On May 12, 2011, Defendants caused the Company to issue a press release entitled

20 "Yahoo! Inc, Releases Statement Regarding Alipay," which stated in part:

21 On March 31, 2011, Yahoo! and Sofibank were notified by Alibaba Group of twotransactions that occurred without the knowledge or approval of the Alibaba Group

22 board of directors or shareholders. The first was the transfer of ownership of Alipayin August 2010, The second was the deconsolidation of Alipay effective in the first

23 quarter of 2011.

24 Yahoo! disclosed this restructuring in its l 0-Q after discussions with Alibaba Groupand obtaining a better understanding of this complex situation.

25Yahoo! continues to work closely with Alibaba and Softbank to protect economic

26 value for all interested parties. We believe ongoing negotiations among all of theparties provide the best opportunity to achieve an outcome in the best interest of all

27 stakeholders

28VERIFIED SHAREHOLDER DERIVATIVE COMPLAINT FOR BREACH OF FIDUCIARY DUTY,GROSS MISMANAGEMENT, ABUSE OF CONTROL, CORPORATE WASTE AND UNJUSTENRICHMENT- -8-

1 46. According to news reports, Alibaba received only $46 million for Alipay's assets,

2 which securities analysts valued at $5 billion. Additionally, Defendants reportedly were aware of

3 Ma's misappropriation of Alipay, failing to prevent the usurpation of Yahoo's valuable financial

4 interest in Alipay, and then concealing the entire episode from Yahoo shareholders for six months.

5 47. On May 15, 2011, Defendants caused the Company to issue a press release entitled

6 "Joint Statement from Alibaba Group and Yahoo! Inc. Re:. • ing Alipay," which s i in part:

7 "Alibaba Group, and its major stockholders Yahoo! Inc. and Sofibank Corporation,are en:: ged in and committed to productive negotiations to resolve the outstanding

8 issues related to Alipay in a manner that serves the interests of all shareholders assoon as possible."

948. On this news, Yahoo's stock collapsed $0.74 per share to close at $15.81 per share on

10May 16, 2011 a decline of 15% from its Relevant Period high of $18.65 per s .

1149. The true facts, which were known by Defendants, but concealed from the investing

12public during the Relevant Period, were as follows:

13(a) Defendants had been informed on March 31, 2011, at the latest, that Alipay's

14structure had been shifted from Alibaba, reducing the value of Yahoo's investment in Alibaba by

15billions of dollars; and

16(b) Chinese regulations regarding foreign ownership had been anticipated to

17change as far back as 2009, which would require Yahoo or Alibaba to divest themselves of Alipay,

18but defendants had failed to develop a strategy to recover the value Yahoo had in Alibaba.

1950. Further, as a result of Defendants' breaches, the price of the Company's stock still has

20not recovered and currently trades for under $16 per share.

2151. Accordingly, as a result of Defendants' breaches, the Company has been damaged

22DERIVATIVE A 3 DE ND ALLEGATIONS

2352. Plaintiff brings this action derivatively in the right and for the benefit of Yahoo to

24redress the breaches of fiduciary duty and other violations of law by Defem its.

2553. Plaintiff will adequately and fairly represent the interests of Yahoo and its

26shareholders in enforcing and prosecuting its rights.

27


1 54. The Board currently consists of the following ten (10) directors: defendants Bartz,

2 Yang, Bostock, Hart, James, Joshi, Kenny, Kern, Smith, and Wilson. Plaintiff has not made any

3 demand on the present Board to institute this action because such a demand would be a futile,

4 wasteful and useless act, for the following reasons:

5 (a) During the Relevant Period, defendants Hart, James, Joshi, and Wilson served

6 as members of the Audit Committee. Pursuant to the Company's Audit Committee Charter, the

7 members of the Audit Committee were and are responsible for, inter cilia, reviewing the Company's

8 annual and quarterly financial reports and reviewing the integrity of the Company's internal controls.

9 Defendants Hart, James, Joshi, and Wilson breached their fiduciary duties of due care, loyalty, and

10 good faith, because the Audit Committee, inter cilia, allowed or permitted the Company to

11 disseminate false and misleading statements in the Company's SEC filings and other disclosures and

12 caused the above-discussed internal control failures. Therefore, defendants Hart, James, Joshi, and

13 Wilson each face a substantial likelihood of liability for their breach of fiduciary duties and any

14 demand upon them is futile;

15 (b) The principal professional occupation of defendant Bartz is her employment

16 with Yahoo as its CEO, pursuant to which she has received and continues to receive substantial

17 monetary com sation and other benefits. In addition, according to the Company's Proxy

18 Statement filed on April 29, 2011, Defendants have admitted that defendant Bartz is not

19 independent. Thus, defendant Bartz lacks independence from demonstrably interested directors,

20 rendering her incapable of impartially considering a demand to commence and vigorously prosecute

21 this action; and

22 (c) The principal professional occupation of defendant Yang is his employment

23 with Yahoo as its Chief Yahoo, pursuant to which he has received and continues to receive

24 substantial monetary compensation and other benefits. In addition, according to the Company's

25 Proxy Statement filed on April 29, 2011, Defendants have admitted that defendant Yang is not

26 independent. Thus, defendant Y L lacks independence from demonstrably interested directors,

27


I rendering him incapable of impartially considering a demand to commence and vigorously ja osecute

2 this action.

3 COUNT I

4 Against All Defendants for Breach of Fiduciary Duty for Disseminating False andMisleading Information

5

55, Plaintiff incorporates by reference and realleges each and every allegation set forth6

above, as though fully set forth herein.7

56, As alleged in detail herein, each of the Defendants (and particularly the Audit8

Committee Defendants) had a duty to ensure that Yahoo disseminated accurate, truthful and9

complete information to its shareholders.10

57. Defendants violated their fiduciary duties of care, loyalty, and good faith by causing11

or allowing the Company to disseminate to Yahoo shareholders materially misleading and inaccurate12

information through, inter cilia, SEC filings, press releases, conference calls, and other public13

statements and disclosures as detailed herein. These actions could not have been a good faith14

exercise of prudent business judgment.15

58, As a direct and proximate result of Defendants' foregoing breaches of fiduciary16

duties, the Company has suffered sip. Ticant damages, as alleged herein.17

COUNT II18

Against All Defendants for Breach of Fiduciary Duties for Failing19 - to Maintain Internal Controls

20 59. Plaintiff incorporates by referencealiprecedingand subsequent 9: ohs as if fully

21 set forth herein.

22 60. As alleged herein, each of the Defendants (and particularly the Audit Committee

23 Defendants) had a fiduciary duty to, among other things, exercise good faith to ensure that the

24 Company's financial statements were prepared in accordance with GAAP, and, when put on notice

25 of problems with the Company's business practices and operations, exercise good faith in taking

26 appropriate action to correct the misconduct and prevent its recurrence.

27


1 61. Defendants willfully ignored the obvious and pervasive problems with Yahoo's

2 internal controls and practices and procedures and failed to make a good faith effort to correct these

3 problems or prevent their recurrence.

4 62. As a direct and proximate result of the Defendants' foregoing breaches of fiduciary

5 duties, the Company has sustained damages.

6 COUNT III

7 Against All Defendants for Breach of Fiduciary Duties forFailing to Properly Oversee And Manage the Company

8

63. Plaintiff incorporates by reference and realleges each and every allegation contained9

above, as though filly set forth herein.10

64. Defendants owed and owe Yahoo fiduciary obligations. By reason of their fiduciary11

relationships, Defendants specifically owed and owe Yahoo the highest obligation of good faith, fair12

dealing, loyalty and due care.13

65. Defendants, and each of them, violated and breached their fiduciary duties of care,14

loyalty, reasonable inquiry, oversight, good faith and supervision.15

66. As a direct and proximate result of Defendants' failure to perform their fiduciary16

obligations, Yahoo has sustained significant damages, not only monetarily, but also to its corporate17

image and goodwill.18

67. As a result of the misconduct alleged herein, Defendants are liable to the Company.19

68. Plaintiff, on behalf of Yahoo, has no adequate remedy at law.20

COUNT IV21

Against All Defendants for Unjust Enrichment22

69. Plaintiff incorporates by reference and realleges each and every allegation set forth23

above, as though fully set forth herein.24

70. By their wrongful acts and omissions, Defendants were unjustly enriched at the25

expense of and to the detriment of Yahoo.26

71. Plaintiff, as a shareholder and representative of Yahoo, seeks restitution from27

Defendants, and each of them, and seeks an order of this Court disgorging all profits, benefits, and28

VERJFIED SHAREHOLDER DERIVATIVE COMPLAINT FOR BREACH OF FIDUCIARY DUTY,GROSS MISMANAGEMENT, ABUSE OF CONTROL CORPORATE WASTE AND UNJUSTENRICHMENT- - 12 -

1 other compensation obtained by Defendants, and each of them, as a result of their wrongful conduct

2 and fiduciary breaches.

3 COUNTY

4 Against All Defendants for Abuse of Control

5 72. Plaintiff incorporates by reference and realleges each and every allegation contained

6 above, as though fully set forth herein.

7 73. Defendants' misconduct alleged herein constituted an abuse of their ability to control

8 and influence Yahoo, for which they are legally responsible. In particular, Defendants abused their

9 positions of authority by causing or allowing Yahoo to misrepresent material facts regarding its

10 financial position and business prospects.

11 74, As a direct and proximate result of Defendants' abuse of control, Yahoo has sustained

12 situ 'ficant • . Ages.

13 75. As a result of the misconduct alleged herein, Defendants are liable to the Company.

14 76, Plaintiff, on behalf of Yahoo, has no adequate remedy at law.

15 COUNTY!

16 Against All Defendants for Gross Mismanagement

17 77. Plaintiff incorporates by reference and realleges each and every allegation set forth


19 78. Defen. t ts had a duty to Yahoo and its shareholders to prudently supervise, manage

20 and control the operations, business and internal financial accounting and disclosure controls of

21 Yahoo,

22 79. Defendants, by their actions and by engs sing in the wrongdoing described herein,

23 as : I dotted and abdicated their responsibilities and duties with regard to prudently managing the

24 businesses of Yahoo in a manner consistent with the duties imposed upon them by law, By

25 committing the misconduct alleged herein, Defendants breached their duties of due care, diligence

26 and candor in the management and administration of Yahoo's affairs and in the use and preservation

27 of Yahoo's assets.

28VERIFIED SHAREHOLDER DERIVATIVE COMPLAINT FOR BREACH DF FIDUCIARY DUTY,GROSS MISMANAGEMENT, ABUSE OF CONTROL, CORPORATE WASTE AND UNJUSTENRICHMENT- - 13-

1 80. During the course of the discharge of their duties, Defendants knew or recklessly

2 disregarded the unreasonable risks and losses associated with their misconduct, yet Defen. s

3 caused Yahoo to engage in the scheme complained of herein which they knew had an unreasonable

4 risk of damage to Yahoo, thus breaching their duties to the Company. As a result, Defer' ' . ts

5 grossly mismanaged Yahoo.

6 COUNT VII

7 Against All Defendants for Waste of Corporate Assets

8 81. Plaintiff incorporates by reference and realleges each and every allegation contained


10 82. Ma result of the misconduct described above, and by failing to properly consider the

11 interests of the Company and its public shareholders, Defendants have caused Yahoo to incur (and

12 Yahoo may continue to incur) significant legal liability and/or legal costs to defend itself as a result

13 of Defendants' misconduct and unlawful actions.

14 83. As a result of this waste of corporate assets, Defendants are liable to the Company.

15 84. Plaintiff, on behalf of Yahoo, has no adequate remedy at law.

16 P ' • YER FOR RELIEF

17 WHEREFORE, Plaintiff demands judgment as follows:

18 A. Against all Defendants and in favor of the Company for the amount of damages

19 sustained by the Company as a result of Defen.its' breaches of fiduciary duties;

20 B. Directing Yahoo to take all necessary actions to reform and improve its corporate

21 governance and internal procedures to comply with applicable laws and to protect the Company and

22 its shareholders from a repeat of the damaging events described herein, including, but not limited to,

23 putting forward for shareholder vote resolutions for amendments to the Company's By-Laws or

24 Articles of Incorporation and taking such other action as may be necessary to place before

25 shareholders for a vote a proposal to strengthen the Board's supervision of operations and develop

26 and implement procedures for greater shareholder input into the policies and guidelines of the Board;

27

28VERIF1ED SHAREHOLDER DERIVATIVE COMPLAINT FOR BREACH OF FIDUCIARY DUTY.GROSS MISMANAGEMENT, ABUSE OF CONTROL, CORPORATE WASTE AND UNJUSTENRICHMENT- - 14-

1 C. Awarding to Yahoo restitution from Defendants, and each of them, and ordering

2 disgorgement of all profits, benefits and other compensation obtained by the Defendants;

3 D. Awarding to Plaintiff the costs and disbursements of the action, including reasonable

4 attorneys' fees, accountants' and experts' fees, costs, and expenses; and

5 E. Granting such other and further relief as the Court deems just and proper.

6 JURY DE

7 Plaintiff demands a trial by jury.

8 DATED: July6 2011 THE WEISER LAW FIRM, P.C.KATHLEE A. HERKENHOFF (168562)

9

10 40-ALL a..04b. A III N AL _ _

11 !CATHLEEN A„ r mcEt.


13 H Telephone: 858-794-1441Facsimile: 858-7944450

14THE WEISER LAW FIRM, P.C.

15 ROBERT B. WEISERBRETT D. SUCKER

16 JEFFREY J. CIAMANTO

17 JOSEPH 51 PROEM121 North Wayne Avenue, Suite 100

18 Wayne, PA 19087Telephone (610) 225-2677

19 Facsimile: (610) 225-2678

20 Attorneys for Plaintiff

21

22

23

24

25

26

27


YAIIOOWC V 1 CATION

Mo ad Ta ° ° in my capacity asattomeyintt Sr Yabia Tawila

t to a duly -. of a ,Jiby ° 1 am. laminar -with the

allegations in the Complaint, and that I have authorized the filing of the Complaint,

that the foregoing is true and correct to the best of my knowlmtge, °on, and

belief

4-3o. P:Verb s

f 11 If gams

EXHIBIT B

Case5 11-cv-03286-HRL Documentl Filed07105111 Pagel of 26

:

A .Is : 4 : ). , .1 LIONEL Z. GLANCY (#134180) 44/VG 01' MICHAEL GOLDBERG (11188669)

. 2 EX KANO S. SAMS II (#192936) ) IGLANCY B1NKOW & GOLDBERG LLP3 1801 Avenue of the Stars, Suite 311 Piz / t 4 Los Angeles, California 90067 n toe, •. 1 •

Telephone: (310) 201-9150415 Facsimile: (310) 201-9160 ilt 049/04, a

d4/1 0 / pinfo@glancylaw. corn 0,91,0 Ayr Ark, 420 ,

1 6 844; et, 0 kk, , IfGNINgervive M.• 7 Attorneys for Plaintiff Jane Oh c't Op 0041 •. Ckipelip

, Oa%8 [Additional Counsel on Signature Page]

• 9UNITED STATES DISTRICT COURT

10 NORTHERN DISTRICT OF CALIFORNIAH R 1,

11 JANE OH, Derivatively on Behalf of Herself and aserAio

12 VAll Others Similarly Situated, t) 11 — 0 32 8 61JJ—I=

cc 13 Plaintiff,

x .tc SHAREHOLDER DERIVATIVE

LI o COMPLAINT

).-, 9 14 vs. .CD 0

2 H 15 CAROL A. BARTZ, JERRY YANG, ROY DEMAND FOR JURY TRIAL

= zi– BOSTOCK, PATH HART, SUSAN JAMES, i._ ct= 16 VYOMESH JOSHI, DAVID KENNY, ARTHUR

cc KERN, BRAD SMITH, AND GARY WILSON

= 170.

18

Defendants,-and-

19YAHOO! INC.,

20

21 Nominal Defendant.n' 22

23

24

25

26

27 .

28

SHAREHOLDER DERIVATIVE COMPLAINT

Case5:11-cv-03286-HRL Document1 Filed07105111 Page2 of 26

1 INTRODUCTION

2

1. Plaintiff, by and through her attorneys, brings this action derivatively on behalf• 3

of nominal defendant Yahoo!, Inc. ("Yahoo" or the "Company") and alleges upon personal4

knowledge as to herself and her own acts, and as to all other matters based upon the5

6 investigation conducted by her attorneys which included, among other things, a review of

7 Securities and Exchange Commission ("SEC") filings, documents, analyst reports, news reports,

8 press releases, and other publicly available information regarding the Company, as follows:

9

2. This is a shareholder derivative action brought on behalf of the Company against10

11 the members of its Board of Directors ("Board") and certain of its executive officers seeking to

12 remedy defendants' breaches of fiduciary duties and other violations of the law that occurred

13 from at least April 19, 2011 through May 13, 2011 ("Relevant Period").

14

3. During the Relevant Period, Defendants participated in the drafting, preparation,

15and/or approval of the various public, shareholder and investor reports and other

1617 communications complained of herein and were aware of, or recklessly disregarded, the

18 misstatements contained therein and omissions therefrom, and were aware of their materially

19 false and misleading nature. Because of their Board membership and/or executive and

20 managerial positions with Yahoo, each of the Individual Defendants had access to the adverse

21undisclosed information about Yahoo's financial condition and performance as particularized

2223 herein and knew (or recklessly disregarded) that these adverse facts rendered the positive•

24 representations made by or about Yahoo and its business or adopted by the Company materially

25 false and misleading.


27 4. This Court has jurisdiction pursuant to 28 U.S.C. §1332(a)(2), as plaintiff and

28 ;

SHAREHOLDER DERIVATIVE COMPLAINT-1-

?


1 defendants are citizens of different states and the amount in controversy exceeds $75,000,

2 exclusive of interests and costs. This action is not a collusive action designed to confer

3 jurisdiction on a court of the United States that it would not otherwise have.

4 5. This Court has jurisdiction over each defendant because each defendant is either a

5corporation that conducts business in, and maintains operations in, this District, or is an individual

• 6who has sufficient minimum contacts with this District so as to render the exercise of jurisdiction

7

8 by the District courts permissible under traditional notions of fair play and substantial justice.

9 6. Venue is proper in this Court under 28 U.S.C. §1391(a) because: (1) one or more

10 defendants either reside in, or maintain executive offices in, this District; (2) a substantial portion

11of the transactions and wrongs complained of herein, including the defendants' primary

1213 participation in the wrongful acts detailed herein, occurred within this District, and (3) defendants

14 have received substantial compensation in this District by conducting business herein and by

15 engaging in numerous activities that have had an effect in this District

16 PARTIES

17

7. Plaintiff Jane Oh is a current shareholder of Yahoo and has been a shareholder of1819 the Company during the Relevant Period. Plaintiff is a citizen of the State of Connecticut.

20 8. Nominal Defendant Yahoo is a digital media company that delivers personalized

21 digital content and experiences across devices and worldwide. Yahoo is incorporated in the State

22 of Delaware and is headquartered in Sunnyvale, California.

23

9. Defendant Canal A. Bartz ("Bartz") is, and at all relevant times was Chief Executive24

Officer ("CEO") and a director of Yahoo. Bartz has served as the Company's CEO and as a2526 member of the Board since January 2009. Bartz served as the Executive Chairman of the Board

27 of Autodesk, Inc. ("Autodesk"), a computer-aided design software provider, from May 2006 to

28


Case5:11-cv-03286-HRL Document1 Filed07/05111 Page4 of 26

1 February 2009, as Chairman, President and CEO of Autodesk from April 1992 to April 2006, and

as a director of Autodesk from April 1992 to February 2009. From 1983 to April 1992, Bartz

served in a number of positions at Sun Microsystems, Inc., a provider of computer systems,

4 software and services (now a subsidiary of Oracle Corporation), including as Vice President of

5Worldwide Field Operations and as an executive officer. Currently, Bartz also serves as the lead

6director of Cisco Systems, Inc. ("Cisco"), a networking technology company, as a director of the

7

8 National Medals of Science and Technology Foundation, and as trustee of the Paley Center for

9 Media. Bartz previously served as a director of BEA Systems, Inc., a provider of database-related

10 software (now a subsidiary of Oracle Corporation), Intel Corp., a semiconductor chip design and

11manufacturing company, and NetApp, Inc., a provider of data-storage and data-management

1213 tools. Plaintiff is informed and believes, and thereupon alleges, that Bartz is a citizen of the State

14 of California.

15 10. Defendant Jerry Yang ("Yang") founded Yahoo and at all relevant times has been a

16 director of the Company. Yang has served as a member of the Company's Board since March

171995 Yang served as the Company's CEO from June 2007 to January 2009 Yang co-developed

1819 Yahoo! in 1994, while he was working towards his Ph.D. in electrical engineering at Stanford

20 University. Currently, Yang also serves as a director of Cisco, Yahoo Japan Corporation, and

21 Alibaba Group Holding Limited, a privately-held company which manages investments in several

22 Asia-based internet businesses ("Alibaba"). Plaintiff is informed and believes, and thereupon

23 alleges, that Yang is a citizen of the State of California.24

11. Defendant Roy Bostock ("Bostock") is, and at all relevant times was, Chairman of25

•26

the board of directors of Yahoo. Bostock has served as the Chairman of the Company's Board

27 since January 2008, and has been a member of Yahoo's Board since May 2003. Bostock has

28

SHAREHOLDER DERIVATIVE COMPLAINT- 3 -

Case5 . 11-cv-03286 7 HRL Document1 Filed07105111 Page5 of 26

1 served as Vice Chairman of the Board of Delta Air Lines, Inc. since October 2008, and as a

2 principal of Sealedge Investments, LLC, a diversified private investment firm, since 2002.

3 Bostock also serves as Chairman Emeritus of The Partnership at Drugfree.org (formerly The

4 , Partnership for a Drug-Free America), and served as its Chairman of the Board from December.

52002 until February 2010. Bostock joined the board of directors of Northwest Airlines

6Corporation, the parent of Northwest Airlines, Inc., in April 2005, and served as the Chairman of

78 its Board from May 2007 until its merger with Delta Air Lines, Inc. in October 2008. Bostock

9 also sewed as Chairman of the Board of the Committee for Economic Development, a

10 Washington, D.C.-based public policy group, from 2002 to 2005. Bostock served as Chairman of

11 the Board of BCom3 Group, Inc., a global advertising agency group (now part of Publicis Groupe12

S.A., a global marketing services holding company), from January 2000 to mid 2001. From July1314 1990 to January 2000, Bostock sewed as Chairman and CEO of D'Arcy Masius Benton &

15 Bowles, Inc., an advertising and marketing services firm, and its successor company, The

16 MacManus Group, Inc. Currently, Bostock also serves as a director of Morgan Stanley, a

17 financial services firm. Plaintiff is informed and believes, and thereupon alleges, that Bostock is a18

citizen of the State of New York.19

20 12. Defendant Patti Hart ("Hart") is, and at all relevant times was, a director of Yahoo.

21 Hart has served as a member of our Board since June 2010. Hart was appointed President and

22 CEO of International Game Technology ("JUT), a global provider of electronic gaming

23 equipment and systems products, in April 2009, and has served on its board of directors since

24June 2006. Prior to joining IGT, Hart was the Chairman and CEO of Pinnacle Systems, Inc., a

2526 digital video hardware and software company (now a subsidiary of Avid Technology, Inc.), from

27 2004 to 2005, and of Excite@Home, Inc., a high-speed broadband Internet service provider, from

28

SHAREHOLDER DERIVATIVE COMPLAINT-4 -


1 2001 to 2002. Hart previously served as a director of Korn/Ferry International, Inc., an executive

2 search firm, Lin TV Corporation, a television station holding company, Plantronics, Inc., a

3 consumer electronics manufacturer, and Spansion LLC, a flash-memory chip manufacturer.

4 Plaintiff is informed and believes, and thereupon alleges, that Hart is a citizen of the State of

5Nevada.

6

13. Defendant Sue James ("James") is, and at all relevant times was, a director of78 Yahoo. James has served as a member of the Company's Board since January 2010. James

9 joined Ernst & Young LLP, a global accounting services firm, in 1975, serving as a partner from

10 1987 until her retirement in June 2006, and as a consultant from June 2006 to December 2009.

11During her tenure with Ernst & Young, Junes was the lead partner or partner-in-charge of audit

1213 work for a number of significant technology companies, including Intel Corporation, Sun

14 Microsystems, Amazon.com, Inc., Autodesk and Hewlett-Packard Company ("HP"), a consumer

15 electronics company, as well as for the Ernst & Young North America Global Account Network.

16 James also served on the Ernst & Young Americas Executive Board of Directors from January

17 2002 through June 2006. Currently, James serves as a director of Applied Materials, Inc., a

1819 supplier of nanotechnology materials, and Coherent, Inc., a laser and optical component

20 manufacturer. James is a certified public accountant and a member of the American Institute of

21 Certified Public Accountants. Plaintiff is informed and believes, and thereupon alleges, that

22 James is a citizen of the State of California.

•23 14. Defendant Vyomesh Joshi ("Joshi") is, and at all relevant times was, a director of24

. Yahoo. Joshi has served as a member of the Company's Board since July 2005. Joshi has served2526 as an officer of HP since 2001 including as Executive Vice President of I-W's Imaging and

27 Printing Group since 2002. Jot served as Chairman of Phogenix Imaging LLC, a joint venture

28


Case5 . 11-cv-03286-HRL Document1 Filed07/05/11 Page7 of 26

1 between HP and Eastman Kodak Company, from 2000 until May 2003. Plaintiff is informed and

2 believes, and thereupon alleges, that Joshi is a citizen of the State of California.

3 15. Defendant David Kenny ("Kenny") is, and at all relevant times was, a director of

4 Yahoo Kenny has served as a member of the Company's Board since April 2011. Kenny has

•5

served as President of Akamai Technologies, Inc., a service provider for accelerating and6

improving the delivery of content and applications over the Internet, since September 2010 and as78 a director since July 2007. From June 2008 to June 2010, Kenny was Managing Partner of

• 9 VivaKi, which is the media and digital arm of Publicis. Kenny served on the Directoire

10 (Management Board) of Publicis from January 2008 to June 2010. From August 1997 to May•• 11

2008, Kenny was CEO of Digitas, Inc ("Digjtas"), a relationship marketing services firm which1213 was acquired by Publicis in 2007. Kenny was also a director of Digitas from 1997 to 2007, and

14 Chairman and CEO from 1999 to 2007. Kenny currently serves as a director of Teach For

15 America, and was a director of The Corporate Executive Board Company, which provides

16 research and analysis on corporate strategy and operations, from February 1999 to August 2010.

17.. Plaintiff is informed and believes, and thereupon alleges, that Kenny is a citizen of the State of, 18 -

Massachusetts.19

20 16. Defendant Arthur Kern ("Kern") is, and at all relevant times was, a director of

21 Yahoo. Kern has served as a member of the Company's Board since January 1996. Kern was

22 also co-founder and CEO of American Media, Inc., a group owner of commercial radio stations

• 23 sold to AMFM (now part of Clear Channel Communications, Inc.) in October 1994. Kern

24previously served as a director of Digitas. Plaintiff is informed and believes, and thereupon

25

• 26 alleges, that Kern is a citizen of the State of California.

27

28

• SHAREHOLDER DERIVATIVE COMPLAINT-6-

Case5 . 11-cv-03286-HRL Document1 Filed07105111 Page8 of 26

117. Defendant Brad Smith ("Smith") is, and at all relevant times was, a director of

2 Yahoo. Smith has served as a member of the Company's Board since June 2010. Smith has

3 served as President and CEO of Intuit Inc., a provider of business and financial management

4 software, and as member of its board of directors since January 2008. Additionally, Smith was

5Senior Vice President and General Manager of Intuit's Small Business Division from May 2006

6to December 2007 and Senior Vice President and General Manager of Intuit's QuickBooks from

7

8 May 2005 to May 2006. Smith also served as Senior Vice President and General Manager of

9 Intuit's Consumer Tax Group from March 2004 until May 2005 and as Vice President and

10 General Manager of Intuit's Accountant Central and Developer Network from February 2003 to

11 March 2004. Prior to joining Intuit in 2003, Smith was Senior Vice President of Marketing and

1213 Business Development of Automatic Data Processing, Inc., a provider of business outsourcing

14 solutions, where he held several executive positions from 1996 to 2003. Plaintiff is informed and

15 believes, and thereupon alleges, that Smith is a citizen of the State of California.

16 18. Defendant Gary Wilson ("Wilson") is, and at all relevant times was, a director of

17 Yahoo. Wilson has served as a member of the Company's Board since November 2001. Wilson

18is a private investor and has been General Partner of Manhattan Pacific Partners, a private equity

1920 company, since May 2009. Wilson served as Chairman of the Board of Northwest Airlines

21 Corporation, the parent of Northwest Airlines, Inc., from April 1997 to May 2007, as Co-

22 Chairman of the Board from 1991 to 1997, and as a director from 1989 to May 2007. Wilson also

23 served as Executive Vice President and Chief Financial Officer ("CFO") of the Walt Disney24

Company, a media and entertainment company, from 1985 to 1989, and served as a director from2526 1985 to 2006. Prior to that time, Wilson served for 11 years in various executive positions at

27 Marriott Corp., an airline food service provider and operator of hotels, restaurants and theme

28



parks, including as Executive Vice President and CFO. Currently, Wilson also serves as a director

• 2 of CB Richard Ellis Group, Inc., a Trustee Emeritus of Duke University, a member of the Board•

3 of Overseers of the Keck School of Medicine of the University of Southern California, and a

4 member of the board of directors of Millennium Promise. Plaintiff is informed and believes, and

thereupon alleges, that Wilson is a citizen of the State of Pennsylvania.• 6

19. Defendants Bartz, Yang, Bostock, Hart, James, Joshi, Kenny, Kern, Smith, and7

8 Wilson are referred to herein as the "Individual Defendants."

9 DUTIES OF THE INDIVIDUAL DEFENDANTS

10 20. By reason of their positions as officers and directors of the Company, and because

11 of their ability to • control the business and corporate affairs of the Company, the Individual

12Defendants owed the Company and its shareholders the fiduciary obligations of good faith, trust,

13.1

14 loyalty, and due care, and were, and are, required to use their utmost ability to control and manage

15 the Company in a fair, just, honest, and equitable manner. The Individual Defendants were, and

16 are, required to act in furtherance of the best interests of the Company and its shareholders so as to

17 benefit all shareholders equally and not in furtherance of their personal interests or benefit.

1821. Each director and officer owed to the Company and its shareholders the fiduciary

1920 duty to exercise good faith and diligence in the administration of the affairs of the Company and

21 in the use and preservation of its property and assets, and the highest obligations of fair dealing.

22 In addition, as officers and directors of a publicly held company, the Individual Defendants had a

23• duty to promptly disseminate accurate and truthful information concerning the Company's

24revenue, margins, operations, performance, management, projections, and forecasts, so that the

2526 market price of the Company's stock would be based 'on truthful and accurate information.

27

28


Case5 . 11-cv-03286-HRL Documentl led07/05/11 Pagel 0 of 26

• 22. The Individual Defendants, because of their positions of control and authority as. • 1

2 directors and/or officers, were able to, and did, directly and/or indirectly, exercise control over the

3 wrongful acts complained of herein, as well as the contents of the various public statements issued

4 by the Company. Because of their executive, managerial, and/or directorial positions within the

5Company, each of the Individual Defendants had access to adverse, non-public information about

6the financial condition, operations, and misrepresentations made.

7

8 • 23. At all times relevant hereto, each of the Individual Defendants was the agent of the

9 other Individual Defendants and of the Company, and was at all times acting within the course

10 and scope of such agency.

11

24. To discharge their duties, the Individual Defendants were required to exercise1213 reasonable and prudent supervision over the management, policies, practices and controls of the

14 financial affairs of the Company. By virtue of such duties, the Individual Defendants were

15 required to, among other things:

16 a. manage, conduct, supervise and direct the business affairs of the

17, Company in accordance with all applicable laws;

18b. neither violate, nor knowingly permit any officer, director or employee of

1920 the Company to violate, applicable laws, rules and regulations;

21 c. establish and maintain systematic and accurate records and reports of the

22 business and affairs of the Company and procedures for the reporting of the business and affairs

23 to the Board and to periodically investigate, or cause independent investigation to be made of,24

said reports and records;25

26d. neither engage in self-dealing, nor knowingly permit any officer, director

27 or employee of the Company to engage in self-dealing;

28

SHAREHOLDER DERIVATTVE COMPLAINT- 9 -

Case5:11-cv-03286-HRL Documentl led07/05/11 Page 1 1 of 26

1e. ensure that the Company complied with its legal obligations and

2 requirements, including acting only within the scope of its legal authority and disseminating

3 truthful and accurate statements to the SEC and the investing public;

•4 f. conduct the affairs of the Company in an efficient, business-like manner

• 5so as to make it possible to provide the highest quality performance of its business, to avoid

6wasting the Company's assets, and to maximize the value of the Company's stock;

7

8 g. properly and accurately guide investors and analysts regarding the true

9 financial condition of the Company at any given time, including making accurate statements

10 about the Company's financial results and prospects, and ensuring that the Company maintained

11an adequate system of financial controls such that the Company's financial reporting would be

• 12true and accurate at all times; and

13

14 h. remain informed regarding how the Company conducted its operations,

15 and, upon receipt of notice or information of imprudent or unsound conditions or practices, to•

16 make reasonable inquiry in connection therewith, and to take steps to correct such conditions or

17practices and make such disclosures as necessary to comply with applicable laws.

18

1925. F-ah Individual Defendant, by virtue of his or her position as a director and/or

20 officer, owed to the Company and its shareholders the fiduciary duties of loyalty, good faith, the

21 exercise of due care and diligence in the management and administration of the affairs of the

22 Company, as well as in the use and preservation of its property and assets. The conduct of the

23 Individual Defendants alleged herein involves a violation of their obligations as directors and/or24

officers of the Company; the absence of good faith on their part, and a reckless disregard for2526 their duties to the Company and its shareholders that the Individual Defendants were aware, or

21 should have been aware, posed a risk of serious injury to the Company. The conduct of the

28


Case 5: 11 -cv-03286-H R L Document1 led07/05/11 Page 12 of 26 -

• Individual Defendants, who were also officers and/or directors of the Company, has been1

2 ratified by the remaining defendants.

3 26. The Individual Defendants breached their duties of loyalty and good faith by

4 allowing defendants to cause, or by themselves causing, the Company to misrepresent its

5financial results and prospects, as detailed herein, and by failing to prevent employees and/or

6officers of the Company from taking such illegal actions. In addition, the Company is now the

7

8 subject of class action litigation alleging violation of federal securities laws, which necessitates

9 the Company to incur excess costs arising from the Individual Defendants' wrongful course of

10 conduct.

1127. Additionally, the Company has established a Code of Ethics ("Code") that

1213 applies to all employees of the Company. The conduct of the Individual Defendants alleged

f4 herein constitutes a violation of the Company's Code. The Code provides, among.other things,

15 the following:

16 Accurate and reliable business records are critical to meeting our fmancial, legal,and business obligations. If you are responsible for creating and maintaining17Yahoo's financial records, you must do so in accordance with applicable legal

18 requirements and generally accepted accounting practices. Disclosure in reports1 and documents filed with or submitted to the U.S. Securities and Exchange

19 Commission and in other public communications made by Yahoo! must be full,

20 fair, accurate, timely, and understandable.

21 BACKGROUND

22 28. Yahoo, based in Sunnyvale, California, is a global digital media company.

23 Despite its global brand, Yahoo's business has languished for the past several years, as the

24Company has largely failed to keep up with Google and struggled to grow in highly regulated

2526 and politicized fast-growing markets like China.

27 29. To overcome this situation, in 2005, Yahoo invested $1 billion for a 40% interest in

• 28 Alibaba, China's largest e-commerce company, and one seat on Alibaba's four-person board of

• SHAREHOLDER DERIVATIVE COMPLAINT-11-

Case5:11-cv-03286-HRL Document1 Filed07/05/11 Page13 of 26

directors. As a part of their strategic partnership, Yahoo also turned over operation of Yahoo1

2 China to Alibaba. In a shareholder report discussing the Yahoo-Alibaba strategic partnership,

3 and heralding the trawrtion as a great opportunity for Yahoo to expand its business in China,

4 Yahoo stated:

5"Through this transaction, the Company has combined its leading search

6 capabilities with Alibaba's leading online marketplace and online payment system

_ and Alibaba's strong local presence, expertise and vision in the China market These

7 factors contributed to a purchase price in excess of the Company's share of the fair

8 value of Alibaba's net tangible and intangible assets acquired resulting in goodwill."

• 9 30. As the remainder of the decade unfolded, Alibaba grew rapidly. By 2011,

10 Yahoo's 40% stake in Alibaba had grown significantly in importance to Yahoo and, in fact, had

11 become, according to many industry experts, Yahoo's most valuable corporate asset, accounting12

for as much as two-third of Yahoo's entire $21 billion market capitalization.13

1431. For example, as famed hedge find manager David Einhom's Greenlight Capital

15 wrote about Yahoo in April 2011, "We would not be surprised if [Yahoo's] 40% stake in

16 Alibaba Group alone was ultimately worth [Yahoo's] entire current market value." Greenlight

17 Capital continued:18

"We believe that Yahoo's most valuable asset is its 40% stake in Alibaba Group's

19 still-private holdings, which are separate and distinct from its ownership in the

20publicly-traded Alibaba.com , which we are essentially getting for free."

21 • 32. Until recently,. one of Alibaba's most profitable "still-private holdings" was

22 Alipay, an e-commerce payment system similar to eBay Inc.'s PayPal. As China's economy

23 grew rapidly during the late 2000s, so did Alipay's profits. According to U.S. securities

24analysts, including Brett Hariss of Bagelli & Co., Alipay is worth more than $5 billion. But

25

most importantly for Yahoo and its shareholders, Yahoo, as Alibaba's largest shareholder, had a2627 direct connection to the profits stemming from Alipay's fast-growing and lucrative online

28 payment system.


,

Case5 . 11-cv-03286-HRL Docume nt1 FUed07105111 Page14 of 26

133. Doing business in China can be complex and difficult for U.S. companies.

2 Yahoo's experience in China has been no different. But, unlike other large U.S. publicly traded

3 companies, Yahoo's single most valuable corporate asset is an investment tied up in a foreign

4 corporation located in China, more than 4,000 miles away from Yahoo's corporate headquarters5

located in Sunnyvale, California.6

34. Yahoo's counterparts in China had been consulting with Yahoo for months and78 months on anticipated changes to Chinese regulations regarding foreign ownership. Yahoo failed to

9 address this issue and ultimately in 2010, Alibaba transferred ownership in Alipay to Alibaba

10 CEO Ma for $46 million. This was made known to Yahoo on March 31, 2011, at the latest.11 However, in an effort to make Yahoo attractive to hedge funds and other investors, defendants12

concealed this information.13

14 THE COMPANY'S FALSE AND MISLEADING STATEMENTS

15 35. On April 19, 2011, Yahoo issued a press release announcing its first quarter 2011

16 financial results. The Company reported earnings of $223 million, or $0.17 diluted earnings per17 share, and revenue of $1,064 million. The release stated in part:18

"We are solidly executing toward our plan for returning Yahoo! to sustainable

19 revenue and profit growth," said Carol Bartz, CEO of Yahoo!. "During the

20 quarter, we beat the midpoint of revenue guidance while continuing to deliver onthe bottom line. We continued to extend our lead as the world's premier digital

21 media company with users to Yahoo! branded properties increasing 15% yearover year and minutes spent increasing 17%."

22

23 36. These were positive results and statements (with never a word about the Alipay

24 fiasco), and Yahoo's stock reacted favorably, increasing to $16.87 per share, up from the

25 previous day close of $16.35 per share.

26 37. Later, on May 2, 2011, Greenlight Capital's investment was revealed, causing27

Yahoo's stock to increase to $18.14 per share.28


Case5:11-cv-03286-HRL Document1 Filed07/05111 Page15 of 26 ..

••

• 38. On May 10, 2011, Yahoo shareholders learned for the first time that the1

2 Company's $1 billion investment in its strategic partnership with Alibaba likely had been1

3 'severely impaired by the misappropriation of Alibaba's most valuable asset, Alipay, from

4 Alibaba to another private company controlled by Alibaba's Chairman, Jack Ma.

539. On this news, Yahoo's stock fell by 7%, to close at $17.20 per share.

640. On May 12, 2011, Yahoo issued a press release entitled "Yahoo! Inc. Releases•

7

8 Statement Regarding Alipay," which stated in part:

9 "Yahoo! Inc. issued the following statement in response to recent media reportsregarding the timing of the restructuring of Alipay:

10On March 31, 2011, Yahoo! and Softbank were notified by Alibaba Group of two

11 transactions that occurred without the knowledge or approval of the AlibabaGroup board of directors or shareholders. The first was the transfer of ownership of

12 Alipay in August 2010. The second was the deconsolidation of Alipay effective inthe first quarter of 2011.

13Yahoo! disclosed this restructuring in its 10-Q after discussions with Alibaba Group

14 and obtaining a better understanding of this complex situation.

Yahoo! tontinues to work closely with Alibaba and Soflbank to protect economic

15 value for all interested parties. We believe ongoing negotiations among all of the

16 parties provide the best opportunity to achieve an outcome in the best interest of allstakeholders."

1741. According to news reports, Alibaba received only $46 million for Alipay's assets,

18

19 which securities analysts valued at $5 billion. Additionally, defendants reportedly were aware of

20 Jack Ma's misappropriation of Alipay, failing to prevent the usurpation of Yahoo's valuable

21 financial interest in Alipay, and then concealing the entire episode from Yahoo shareholders for six22

months.23

2442. On May 15, 2011, Yahoo issued a press release entitled "Joint Statement from

25 Alibaba Group and Yahoo! Inc. Regarding Alipay," which stated in part:

26 Yahoo! Inc. and ALibaba Group issued the following statement regarding Alipay:

27 "Alibaba Group, and its major stockholders Yahoo! Inc and Softbank

28 Corporation, are engaged in and committed to productive negotiations to resolve


'

Case5:11-cv-03286-HRL Document1 Filed07/05/11 Page16 of 26•

the outstanding issues related to Alipay in a manner that serves the interests of all

1 shareholders as soon as possible."

243. On this news, Yahoo's stock collapsed $0.74 per share to close at $15.81 per share

.1 3on May 16, 2011 — a decline of 15% from its Class Period high of $18.65 per share.

444. The true facts, which were known by the Individual Defendants but concealed5

6 from the investing public during the Class Period, were as follows:

7 a. Yahoo management had been informed on March 31, 2011, at the latest,

8 that Alipay's structure had been shifted from Alibaba, reducing the value of Yahoo's investment9

in Alibaba by billions of dollars; and10

11 , b. Chinese regulations regarding foreign ownership had been anticipated to

12 change as far back as 2009, which would require Yahoo or Alibaba to divest them of Alipay,

13 but Yahoo hact failed to develop a strategy to recover the value it had in Alibaba.

14 45. As a result of Yahoo's false statements, Yahoo stock traded at artificially inflated15

levels during the Class Period. However, after the above revelations seeped into the market, the1617 Company's shares were hammered by massive sales, sending them down 15% from their Class

is Period high.

19 DERIVATIVE AND DEMAND EXCUSED ALLEGATIONS

20 46. Plaintiff brings this action derivatively in the right and for the benefit of Yahoo

21to redress injuries suffered, and to be suffered, by Yahoo as a direct result of the breaches of

2223 fiduciary duty, abuse of control, gross mismanagement, waste of corporate assets and unjust

24 enrichment as well as the aiding and abetting thereof, by the Individual Defendants. Yahoo is

25 named as a nominal defendant solely in a derivative capacity. This is not a collusive action to

26 confer jurisdiction in this Court that it would not otherwise have.

27

28


,

Case5:11-cv-03286-HRL Document1 led07/05/11 Page17 of 26

47. Plaintiff will adequately and fairly represent the interests of Yahoo and its1

2 shareholders in enforcing and prosecuting its rights.

3 48. Plaintiff is the owner of Yahoo common stock and was the owner of Yahoo

4 common stock at all times relevant to the Individual Defendants' wrongful course of conduct

5 alleged herein.

649. At the lime that this action was commenced, the Yahoo Board consisted of the

7

8 following directors: defendants Bartz, Yang, Bostock, Hart, James, Joshi, Kenny, Kern, Smith,

9 and Wilson.

10 50. As a result of the facts set forth herein, plaintiff has not made any demand on the

11Yahoo Board to institute this action against the Individual Defendants. Such demand would be

1213 a futile and useless act with respect to each and every one of the Individual Defendants because

14 they are incapable of making an independent and disinterested decision to institute and

15 vigorously prosecute this action for the following reasons:

16 a. The Company has admitted that Defendant Bartz and Yang were not

17 independent directors pursuant to the requirements of the listing standards of the NYSE and the18

Director Independence Categorical Standards ("Categorical Standards"). Specifically, Bartz1920 currently serves as CEO and a director of Yahoo, and Yang was CEO of the Company from

21 June 2007 to January 2009, and is currently an employee of the Company;

22 b. The Company engaged in transactions with entities for which defendants

23 Jot, Kenny, and Smith served as executive officers or employees. Thus, these defendants are1

24hopelessly conflicted in making any supposedly independent determination whether to sue25

'26 themselves;

27 c. The Company provided aggregate payments greater than, or equal to,

28


Case5:11-cv-03286-HRL Document1 Filed07/05/11 Page18 o126

1$10,000 to companies or subsidiaries for which Bostock, Wilson, and James served as non-

2 employee directors. Thus, these defendants are hopelessly conflicted in making any supposedly

3 independent determination whether to sue themselves;

4

5

d. The Company provided a discretionary charitable contribution of

advertising to a non-profit entity with which defendant Wilson is affiliated. Thus, defendant6

Wilson is additionally hopelessly conflicted in making any supposedly independent78 determination whether to sue himself;

9 e. Defendant Bartz has served as the Executive Chairman of the Board of

10 Autodesk, a computer-aided design software provider, from May 2006 to February 2009, as

11Chairman, President and CEO of Autodesk from April 1992 to April 2006, and as a director of

1213 Autodesk from April 1992 to February 2009. Additionally, during her tenure with Ernst &

14 Young, defendant James was the lead partner or partner-in-charge of audit work for Auto desk.

15 Accordingly, because of the close business and personal relationship between Bartz and James,

16 they are unable to impartially consider a demand upon the Board;

17f Defendant Bartz also serves as the lead director of Cisco, a networking

18technology company, where defendant Yang also serves as a director. Accordingly, becnuse of

1920 the close business and personal relationship between Bartz and Yang, they are unable to

21 impartially consider a demand upon the Board;

22 g. Defendant Joshi has served as an officer of HP since 2001, including as .

23 Executive Vice President of HP's Imaging and Printing Grout; since 2002. Additionally, during24

her tenure with Ernst & Young, defendant James was the lead partner or partner-in-charge of2526 audit work for HP. Accordingly, because of the close business and personal relationship

27

28


,

Case 5: 11 -cv-03286-H R L Documentl FUed97105111 Pagel9 of 26

1 between defendants Joshi and James, they are unable to impartially consider a demand upon the

2 Board;

3 h. Defendant Bostock served as Chairman of the Board of BCom3 Group,

4 Inc., a global advertising agency group (now part of Publicis Groupe S.A., a global marketing

5services holding company), from January 2000 to mid 2001. From June 2008 to June 2010,

6moreover, defendant Kenny was Managing Partner of VivaKi, which is the media and digital

7

8 [ arm of Publicis. Kenny also served on the Directoire (Management Board) of Publicis from

9 January 2008 to June 2010, and from August 1997 to May 2008, Kenny was CEO of Digitas,

•Inc., a relationship marketing services firm which was acquired by Publicis in 2007.

• 11Accordingly, because of the close business and personal relationship between defendants

1213 I3ostock and Kenny, they are unable to impartially consider a demand upon the Board;

14 i. From August 1997 to May 2008, Kenny was CEO of Digitas, a

15 relationship marketing services firm which was acquired by Publicis in 2007. Kenny was also a

16 director of Digitas from 1997 to 2007, and Chairman and CEO from 1999 to 2007.

17 Additionally, defendant Kern previously served as a director of Digitas. Accordingly, because1819 of the close business and personal relationship between defendants Kenny and Kern, they are

20 unable to impartially consider a demand upon the Board;

21 j. Defendants face a substantial likelihood of being held liable for breaching

• 22 their fiduciary duties of loyalty and good faith as alleged herein, and are therefore incapable of

23 disinterestedly and independently considering a demand to commence and vigorously prosecute24

this action;25

26k. Yahoo's non-employee directors have received, and continue to receive,

27 substantial compensation in the form of cash and stock option awards. These defendants are

28


. _

Case5:11-cv-03286-HRL Documentl Filed07/05/11 Page20 of 26

1 interested in maintaining their positions, on the Board so as to safeguard their substantial

2 compensation and stock options, which demonstrates that demand upon such individuals would

3 be futile:

4 2010 DIRECTOR COMPENSATION: 5 FEES EARNED STOCK OTHER- DIRECTOR OR PAID IN - COMPENSATI TOTAL- 6 CASH AWARDS ON1 Carlo A. Bartz $1,000,000 $6,626,995 $4,319,839 $11,946,834

7.,-, Roy J. Bostock $0.00 $513,815 $0.00 $513,815.; 8 Arthur H. Kern $0 $219,988 $88,861 $308,849

Susan M. James $111,806 $320,034 $1,000 $432,8409 Vyomesh I. Joshi $0 $309,947 $0 $309,947

10 Patti S. Hart $0 $267,887 $0 $267,887..• Brad D. Smith $41,538 $219,988 $0 $261,526

11 Jerry Yang $0 $0 $1 $1

12Gary L. Wilson $0 $309,947 $0 $309,947

131. Each of the key officers and directors knew of and/or directly benefited

I.;

, 141.'. ' from the wrongdoing complained of herein thereby rendering demand futile;

. 16 m. The Individual Defendants approved and/or permitted the wrongs alleged

' I

17 herein to have occurred and participated in efforts to conceal or disguise those wrongs from

18 Yahoo's stockholders or recklessly and/or negligently disregarded the wrongs complained of

19,. herein, and are therefore not disinterested parties;••. 20 •-,.,21

n. In order to bring this suit, all of Yahoo's directors would be forced to sue..

22 themselves and persons with whom they have extensive business and personal entanglements,

23 which they will not do, thereby excusing demand;

• 24 o. The acts complained of constitute violations of the fiduciary duties owed

25 by Yahoo's officers and directors and these acts are incapable of ratification;26

p. Any suit by the Company's current directors to remedy these wrongs27 -

• 28 would likely expose the Individual Defendants and Yahoo to further violations of the securities


.••. .

,

Case5:11-cv-03286-HRL Docume nt1 led07/05/11 Page21 of 26

•laws that would result in civil actions being filed against one or more of the Individual

1

2 Defendants, thus, they are hopelessly conflicted in making any supposedly independent

3 determination whether to sue themselves;

4 q. Yahoo has been, and will continue to be, exposed to significant losses

5due to the wrongdoing complained of herein, yet the Individual Defendants have not filed any

6lawsuits against themselves or others who were responsible for that wrongful conduct to

8 attempt to recover for Yahoo any part of the damages Yahoo suffered and will suffer thereby;

9 and

10 r. If the current directors were to bring this derivative action against

11themselves, they would thereby expose their own misconduct, which underlies allegations

12against them contained in a class action complaint for violations of securities law, which

13admissions would impair their defense of the class action and greatly increase the probability of14

15 their personal liability in the class action, in an amount likely to be in excess of any insurance

16 coverage available to the Individual Defendants. Thus, the Individual Defendants would be

• 17forced to take positions contrary to the defenses they will likely assert in the securities class

18action.

1951. Moreover, despite the Individual Defendants having knowledge of the claims

20

21 and causes of action raised by plaintiff, the current Board has failed and refused to seek to

22 recover for Yahoo for any of the wrongdoing alleged by plaintiff herein.

23 52. Plaintiff, moreover, has not made any demand on shareholders of Yahoo to24

institute this action since demand would be a futile and useless act for the following reasons:25

26a. Yahoo is a publicly held company with over 10 billion shares outstanding, and

27 thousands of shareholders;

• 28

SHAREHOLDER DERIVATIVE COMPLAINT• - 20 -

Case 5: 11 -cv-03286-H R L Documentl led07/05/11 Pag e 22 of 26

• K Making demand on such a number of shareholders would be impossible for1

2 plaintiff who has no way of finding out the names, addresses of phone numbers of shareholders;

3 and

4 c. Making demand on all shareholders would force plaintiff to incur huge expenses,

5assuming all shareholders could be individually identified.

6

53. Furthermore, the conduct complained of herein could not have been the product7

8 of good faith business judgment, and each of these directors faces a substantial likelihood of

• 9 liability for breaching their fiduciary duties because, through their intentional misconduct, they

10 have subjected Yahoo to substantial damages. Through their intentional misconduct, Individual

11 Defendants have subjected the Company to potential costs, fines, and judgments associated with

12the securities class action. Such actions by the Individual Defendants cannot be protected by

13p.1 14 the business judgment rule. Accordingly, making a pre-suit demand on the Individual

15 Defendants would be f-utile.

16 COUNT I

17 (AGAINST THE INDIVIDUAL DEFENDANTS FOR BREACH OF FIDUCIARY DUTY)

18 54. Plaintiff incorporates by reference each of the preceding paragraphs as though

19 they were set forth in full herein.

20

55. Defendants owed a fiduciary duty to Yahoo to supervise the issuance of the2122 Company's press releases and public filings to ensure that they were truthful and accurate and

• 23 that such filings conformed to applicable securities laws. Defendants, however, breached their

• 24 fiduciary duties by failing to properly supervise and monitor the adequacy of Yahoo's internal

25 controls and by allowing the Company to issue and disseminate misleading statements and

26 filings.27

28


• -21-

Case5 . 11-cv-03286-HRL Document1 Filed07/05/11 Page23 of 26

•156. Defendants have engaged in a sustained and systematic failure to exercise their

2 oversight responsibilities and to ensure that Yahoo complied with applicable laws, rules and

3 regulations.

4' 57. As members of the Yahoo Board, the Individual Defendants were directly

5 responsible for authorizing, permitting the authorization of, or failing to monitor the practices

• 6that resulted in violations of applicable laws as alleged herein. Each of them had knowledge of

7

8 and actively participated in, approved, and/or acquiesced in the wrongdoing alleged herein or

9 abdicated his or her responsibilities with respect to this wrongdoing. The alleged acts of

10 wrongdoing have subjected the Company to unreasonable risks of loss and expenses.

1158. Earh of defendants' acts in causing or permitting the Company to disseminate

1213 material misrepresentations and omissions to the investing public and abdicating his or her

14 oversight responsibilities to the Company have subjected the Company to liability for violations

15 of applicable laws, and therefore were not the product of a valid exercise of business judgment,

16 constituting a complete abdication of their duties as officers and/or directors of the Company.

17As a result of defendants' breaches, Yahoo is the subject of a major securities fraud class action

1819 lawsuit by defrauded investors, and the Company's reputation in the business community and

20 financial markets has been irreparably tarnished.

21 COUNT II(AGAINST THE INDIVIDUAL DEFENDANTS FOR GROSS MISIVIANGEMENT)

22

•59. Plaintiff

23incorporates by reference each of the preceding paragraphs as though

• 24 they were set forth in full herein.

25 60. Defendants had a duty to Yahoo and its shareholders to prudently supervise,

26 manage, and control the operations, business, and internal financial accounting and disclosures

27of the Company Defendants, however, by their actions and by engaging in the wrongdoing

28


-

Case5:11-cv-03286-HRL Document1 Filed07/05/11 Page24 of 26

alleged herein, abandoned and abdicated their responsibilities and duties with regard to1

2 prudently managing the business of Yahoo in a manner consistent with the duties imposed upon

3 them by law. By committing the misconduct alleged herein, defendants breached their duties of

4 due care, diligence, and candor in the management and administration of Yahoo's affairs and in •

5the use and preservation of the Company's assets.

6•I 61. During the course of the discharge of their duties, defendants were aware of the

7

8 unreasonable risks and losses associated with their misconduct. Nevertheless, defendants

9 caused Yahoo to engage in the scheme described herein which they knew had an unreasonable

10 risk of damage to the Company, thus breaching their duties to the Company. As a result,.•11

defendants grossly mismanaged Yahoo, thereby causing damage to the Company.12

COUNT III13 (AGAINST THE INDIVIDUAL DEFENDANTS FOR CONTRIBUTION AND

14 1NDE1VDFICATION1


16 they were set forth in fill herein.

1763. Yahoo is alleged to be liable to various persons, entities and/or classes by virtue

18of the facts alleged herein that give rise to defendants' liability to the Company.

19

20 64. Yahoo's alleged liability on account of the wrongful acts, practices, and related

21 misconduct alleged arises, in whole or in part, from the knowing, reckless, disloyal and/or bad

•. 22 faith acts or omissions of defendants, and the Company is entitled to contribution and

23 indemnification from each defendant in connection with all such claims that have been, are, or24

may in the future be asserted against Yahoo, by virtue of the Individual Defendants'2526 misconduct.

27

28


Case5:11-cv-03286-1-IRL Document1 Filed07/05/11 Page25 of 26

COUNT W• 1 (AGAINST THE INDIVIDUAL DEFENDANTS FOR ABUSE OF CONTROL)

265. Plaintiff incorporates by reference each of the preceding paragraphs as though

3they were set forth in fill herein.

466. The Individual Defendants' conduct, as alleged herein, constituted an abuse of5

6 their control over Yahoo.

7 67. As a direct and proximate result of the hidividual Defendants' abuse of control,

8 the Company has suffered, and will continue to suffer, damages for which the Individual9

• Defendants are liable. Plaintiff, moreover, has no adequate remedy at law.10

COUNT V11 (AGAINST THE INDIVIDUAL DEFENDANTS FOR

12 WASTE OF CORPORATE ASSETS)


14 they were set forth in hill herein.

1569. The Individual Defendants' conduct, as alleged herein, constituted a waste of the

1617 corporate assets of Yahoo.

18 70. As a direct and proximate result of the Individual Defepdants' abuse of control,

19 the Company has suffered, and will continue to suffer, damages for which the Individual

20 Defendants are liable. Plaintiff, moreover, has no adequate remedy at law.

21 PRAYER FOR RELIEF22

23 WHEREFORE, Plaintiff prays for judgment as follows:

24 A. Agpinst all of the Individual Defendants and in favor of the Company for the

amount of damages sustained by the Company as a result of the Individual Defendants'

26breaches of fiduciary duties;

27

• 28


Case5:11-cv-03286-HRL Docume nt1 FUed07105111 Page26 of 26

1B. Awarding to plaintiff the costs and disbursements of the action, including

• 2 reasonable attorneys' fees, accountants' and experts' fees, costs, and expenses; and

3 C. Granting such other and further relief as the Court deems just and proper.

4 • JURY DEMAND

5 Plaintiff demands a trial by jury.6

DATED: July 5, 2011 GLANCY BLNKOW & GOLDBERG LLP8

9 By: —EX A OS. 'AMSII

10 LIONEL Z. GLANCYMICHAEL GOLDBERG

11 1801 Avenue of the Stars, Suite 311Los Angeles, California 90067

12 Telephone: (310) 201-9150Facsimile: (310) 201-9160

13THE BRISCOE LAW FIRM, PLLC14 WILLIE C BRISCOE

15 BILLY J BRISCOE8117 Preston Road, Suite 300

16 Dallas, Texas 75225Telephone: 214-706-9314

17 Fascimile: 214-706-9315lg

POWERS TAYLOR

19 PATRICK POWERSMARK TAYLOR

20 PEYTON HEALEYCampbell Centre II

21 8150 North Central Expy.,Suite 1575

122 Dallas, Texas 75206

23 Attorneys for Plaint:if Jane Oh

24

25

26

27

28


1

, Case5:11-cv-03286-HRL Documentl -1 Filed07/051.11 Pagel of.2, .

•

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. the civil docket sheet (SEE INSTRUCTIONS ON PAGE TWO OF THE FORM.) L (a) PLAINTIFFS DEFENDANTS

• JANE OH, Derivatively on Behalf of Herself and All Others Similarly Carol it Bartz [See Attachment for Additional Defendants]Situated

' (b) County of Residence of First Listed Plaintiff Tulsa County, Oklahoma County of Residence of First Listed Defendant• (EXCEPT IN U.S. PLAINTIFF CASES) (TN US. PLAINTIFF CASES ONLY)

NOTE: IN LANDCONDEMNATION CASES, US E TEE LOCATION OF THE6. NO/SOLVED.

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.2.•. U. BASIS OF JURISDICTION (Place an "X" M One Box only) ILL CITIZENSHIP OF PRINCIPAL PARTIES (Place RR '1r in One Box for Plaintiff •.."•.. (For Diversity Cases Only) old One Box for Defendant). PTF DEF PT? DEE

• 10 1 U.S. Govemmeirt 1X1 3 Federal Question Citizen of This Slate p 1 0 1 Incorporated orPrincipal Place ICI 4 0 4Plaintiff (U.S. Govarnucnt Not a Party) °famine& In This State

0 2 US. Govenimmt 0 4 Diversity Citizen of Another Sane 0 2 0 2 Incorporated and Pm' mind Place 0 5 0 5

Defendant (Indicate CilizenshM of Parties h Item Ill) of Business In Another State

Citizen at-Subject all 0 3 0 3 Foreign Nation 0 6 0 6. .: Foreign Country - IV. NATURE OF SUIT (Place an 9C in One Box Only

in CONTRACT TORTS FORFEITURE/PENALTY BANKRUPTCY OTHER STATUTES u.iItO Insurance PERSONAL INJURY PERSONAL INJURY 1=1611/ Agriculture =122 Appeal 28 USC 158 =400 State Reapportionment

cc I= 120 Marine ' M310 Airplane 1=1362 Personal homy— I=620 Mu Food & Ding=423 Withdrawn =410 Antitrust_, I= 130 Miller Act =315 Airplane Product med. Malpractice 0625 Drag Related Seizure 2S USC 157 =430 Banks and Banking

X .Tc r= 140 Negotiable hntmment Liability =365 Personal Injury — &Property 21 USC 881 —1450 Commercets. U Em 150 Recovery of Overpayment =320 Assault, Um! & Product Liability< 1=630Liquor laws PROPERTY RICH'S'S 1=1460 Deportation

o & Enforcement ofJudgment Slander 1=3611 Asbestos Pommel =16411RR. & Truck t_J470Racketecrinfluenced and>•- _1 =820 CoPYrighleco E:1 151 Medicare Act =330 Federal Employers' Injury Prude& =1650 AirlineRegs. Corrupt Organizationso0 .0 152Recovery of Defaulted Liability Liability 1=660 Occupational =830 Patent 1=1480 Grammer CreditLu I— Student Loans =340Marinc PERSONAL PROPERTY Safety/Hearn, =MO Trademark I= 490 Cable/Sat TV-a 1—[Z Z (Excl. Veterans) =345 Minna Pmdwt =370 Other Forint 0690 Other =810 Selective Service

< 1=1 153 Recovery of Overpay nt Liability =850 &amities/Commodities/0371 Truth in Lending LABOR SOCIAL SECURITY (1) 160 Slockhoklers Suits

Exchange= of Veteran's BencEts =350 Molar Vehicle 1=1380 Other Personal1013 'cc =355 Motor Vehicle property Damage =710 Fair Labor Mandan& =861 11/A(1395(0 =875 Customer Challengez 1=1 190 Other Contract Product Liability 1=1385Pmperty Damage Act =862 Black Lung (923) 12 USC 34100- I= 195 Contract Prodnettiability =169 Other Personal Injury product liability = 720 Labor/Mgmt. Relations =863 DIWC/D1WW (405(g)) =890 Other S ratably Actions

it 196 Franchise ---1 730 LabortMgmt.Reporiing =864 SSIDTitle XV/ = 891 Agricultural Acts

REAL PROPERTY CIVIL RIGHTS PRISONER & Disclosure Act =885 REI (405(10) =892 Economic Stabilization Mt• PETITIONS --"J 740 Railway Labor Mt I= 893 Environmental Metros

•. I= 210 Land Condemnation =141 Voting =510 Motions to Vacate =790 Other Labor Litigation CI 894 &logy Allocation Act. . ...

1=1 220 Foreclosure =1442 Employment Sentence =791 Eric!. Rot Inc. =895 Freedom of Information.1 FEDERAL TAX SUITSI= 230 Rent Lease& Ejectment =443 Rousing/ a nshe Corm: Security Act Act.• I= 240 Toni to Ismd Accommodations = 530 Gann/ =870 Taxes (US. Plaintiff n900APP eal of Fee

'. =1245 TortPmduct-Liabitity =444 Welfare =535 Death Penalty or Defendant) Determination.,• 1=I 290 All Other RealProperty =445 Asset w/Disabilities - =540 Mandamus & Other-,

ThforgoRATSC=871 IRS—Third Party UnderEqual Accessto Justice.. Ermloyment =550 Civil Rights 26 USC 7609

.• . =462Nainrakzabon Apo/wagon I=1950 Constitutionality of.. =446 Amer. us/Disabilities -= 555 Prison Condition. =463 Habeas Corpus - State Statutes. Other. Alien DetelEICC:. =440 Other Civil Rights:.• = 465 Other Immigration..- Actims,-- V. ORIGIN (Pace grew in One Box Only) Transferred from Appeal to District

WI Original 02 Removed from 0 3 Remanded from 1=14 Reinstated or 05 another district 06 Multidistrict 0 7 Judge from.,,- Proceeding State Court Appellate Court Reopened (specify) Litigation Magistrate... .1 . .•Judgment

•. • • Cite the U.S. Civil Statute under which you are filing (Do net cite Jurlsdiedonal statutes unless diversity):•. .

.••• VI. CAUSE-OF ACTION 28 U.S.C. §1332(aX2) and 28 U.S.C. §1391(a) -'. Brief description of cause:..,... Breach of Fid. Duty, Gross Mismanagement, Contribution & Indemnification, Abuse of Control & Waste of Corp. Assets

VIL REQUESTED IN Cl CHECK IF THIS IS A CLASS ACTION DEMAND $ CHECK YES only if demanded in complaint:. COMPLAINT: UNDER F.R.C.P. 23 JURY DEMAND: 1=1 Yes= No • VIII. RELATED CASE® PLEASE REFER TO CIVIL Lit 3-12 CONCERNING REQUIREMENT TO FILE

IF ANY . "NOTICE OF RELATED CASE".

' . . IX DIVISIONAL ASSIGNMENT (CIVIL EFL 3-2). (PLACE AND "X" IN ONE BOX ONLY) 0 SAN FRANCISCO/OAKLAND IN SAN JOSE CI EUREKA : DATE SIGNATUREOF ATTORNEY OF RECORD. July 1, 2011 -,• _ _xi* -L-•n---- --a--

jr--...

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' Case5:11-cv-03286-HRL Document1-1 Filed07/05/11 Page2 of 2

ATTACHMENT TO CIVIL COVER SHEET

, ADDITIONAL DEFENDANTS

JERRY YANG, ROY BOSTOCK, PATH HART, SUSAN JAMES, VYOMESH JOSIII,DAVID KENNY, ARTHUR KERN, BRAD SMITH, GARY WILSON AND YAHOO! INC.,NOMINAL DEFENDANT.

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EXHIBIT C

11 Case5 11-ov-03269-PSG Documentl Aled07/01/11 Pagel of 21

Q. David N. Lake, Esq., State Bar No. 180775 ADA)LAW OFFICES F DAVID N. LAKE,

•2 A Professional Corporation16130 Ventura Boulevard, Suite 650

3 •Encino, California 91436 RUNGTelephone: (818) 788-5100 PILED

aa4 Facsimile: (818) 788-5199

david©lakelawpc.com5 JUL 0 20// V IV

fvv

°LEAK 1/8 DIST—S(INC46 Attorneys for Plaintiff ivontHER4Dis‘ficroouirrI

/S/' mg OF CALIFORNIA

7j.

8 UNITED STATES DISTRICT COURT PSI)9 NORTHERN DISTRICT OF CALIFORNIA

10 — I 6DE131aViLZMAISTErivatively Case No.

—11- -on-behalf of the Nominal Defendant,

- 12 Plaintiff; SHAREHOLDER DERIVATIVECOMPLAINT FOR:

13 v.1) CONTRIBUTION PURSUANT

14 TO SECTIONS 10(B) AND 21DCAROL BARTZ and JERRY YANG, OF THE EXCHANGE ACT;

15Defendants, 2) BREACH OF FIDUCIARY

16 DUTY AND WASTE; and

17 and 3) BREACH OF THE DUTY OFFULL DISCLOSURE AND

18 COMPLETE CANDOR19 YAHOO! INC., a Delaware corporation,

JURY TRIAL DEMANDED 20

Nominal Defendant.21

22

23

24

25

• 26

27

28

Complaint

Case5 11-cv-03269-PSG Document1 Aled07/01/11 Page2 of 21

1 Plaintiff, by her attorneys, submits this shareholder's derivative complaint against the

2 individual defendants named herein. The allegations are asserted on information and belief

3 after due investigation of counsel, except as to those matters which relate to plaintiff and her

4 own acts, which are asserted on personal knowledge.

5 NATURE OF THE ACTION

6 1. This is a shareholder's derivative action on behalf of Yahoo! Inc. ("Yahoo"

7 or the "Company") against its Chief Executive Officer, defendant Carol Bath and co-

8 founder Jerry Yang (together, the "Individual Defendants"), for breach of fiduciary duty

9 and corporate waste.

, 11, Yahou eholders-learned-forthe-first • ---

------ 11 Company's $1 billion investment -in a strategic partnership with Alibaba, China's

12 largest e-commerce company, likely had been severely impaired by the claimed

13 misappropriation of Alibaba's most valuable asset, Alipay, an e-commerce payment

14 system, from Alibaba to another private company controlled by Alibaba's Chairman,

15 Ma. On this news, over the next several days the trading price of Yahoo common

16 stock declined by over 10%, wiping out $3 billion in market capitalization. The

17 Individual Defendants reportedly were aware of Ma's planned transfer of Alipay, failed

18 to prevent its occurrence without due compensation, and then concealed the entire

19 episode from Yahoo shareholders for six months.

20 3. On June 6, 2011, a class action complaint was filed against Yahoo, Carol

21 Bartz and Jerry Yang in the United States District Court for the Northern District of

22 California, alleging violation of the federal securities laws arising out of the Alipay

23 debacle, entitled Bonato v. Yahoo! Inc. et aL, 11-cv-2732 (CRB). According to the Class

24 Action Complaint, during the Class Period (April 19, 2011 through May 13, 2011),

25 defendants issued materially false and misleading statements regarding the Company's

26 business and financial results. Specifically, defendants failed to disclose that an important

27 corporate asset in China had been transferred at much less than market value. As a result

28

-2- Complaint


1 of defendants' allegedly false statements, Yahoo's stock traded at artificially inflated prices

2 during the Class Period, reaching a high of $18.65 per share on May 6, 2011.

3 4. On May 10, 2011, Yahoo issued its Quarterly Report on form 10-Q for the

4 period ending March 31, 2011. On page 8, it is stated:

5 To expedite obtaining an essential regulatory license, the ownership ofAlibaba Group's online payment business, Alipay, was restructured so that

6 100 percent of its outstanding shares are held by a Chinese domestic7 company which is majority owned by Alibaba Group's chief executive

officer. Alibaba Group's management and its principal shareholders, Yahoo!8 and Softbank Corporation, are engaged in ongoing discussions regarding the

9 terms of the restructuring and the appropriate commercial arrangementsrelated to the online payment business.

10 5. On May12, 2011, Yahoo-issued-a-press-release-which-stated.

11

12 Yahoo! Inc. (NASDAQ:YHOO), issued the following statement in response

13to recent media reports regarding the timing of the restructuring of Alipay:

On March 31, 2011, Yahoo! and Sofibank were notified by Alibaba Group of14 two transactions that occurred without the knowledge or approval of the

15 Alibaba Group board of directors or shareholders. The first was the transferof ownership of Alipay in August 2010. The second was the deconsolidation

16 of Afipay effective in the first quarter of 2011.

17 Yahoo! disclosed this restructuring in its 10-Q after discussions with AlibabaGroup and obtaining a better understanding of this complex situation.

18 Yahoo! continues to work closely with Alibaba and Softbank to protect19 economic value for all interested parties. We believe ongoing negotiations

among all of the parties provide the best opportunity to achieve an outcome20 in the best interest of all stakeholders.

21 6. On May 13, 2011, Alibaba Group issued a press release which stated

22 in relevant part:

23 Alibaba Group Clarification with Respect to Alipay Status and Related24 Statements by Yahoo!

HONG KONG--Alibaba Group management has taken actions to comply25 with Chinese law governing payment companies in order to secure a license26

to continue operating Alipay. The Alibaba Group board discussed atnumerous board meetings over the past three years the impending imposition

27 of new regulatory requirements on the online payment industry, including

28 ownership structures, as they were being developed in China, and was told in

-3- Complaint

Case5 11-cv-03269-PSG Document1 Filed07/01/11 Page4 of 21

1 a July 2009 board meeting that majority shareholding in Alipay had beentransferred into Chinese ownership. The actions taken by Alibaba Group

2 management to comply with the licensing regulations and to ensure

3 continuation of operations are in the best interests of the company and itsshareholders. The continued operation of Alipay is essential to the

4 preservation and enhancement of the value of Alibaba Group's businesses

5 such as Taobao, as Alipay is the payments platform for e-commerce in thesebusinesses.

67. On May 15, 2011, Yahoo issued a press release entitled "Joint Statement

7from Alibaba Group and Yahoo! Inc. Regarding Alipay," which stated in part:

8

9Yahoo! Inc and Alibaba Group issued the following statement regarding Alipay:

" s • • sa-Grouprand-its-major-stocicholdem-Yahoa! Inc-an • ••o—C rporationrare-engaged committed-to-productive-negotiations_to

11 resolve the outstanding issues related to Alipay in a manner that serves theinterests of all shareholders as soon as possible."12

13 8. According to news reports, Alibaba received only $46 million for Alipay's

14 assets, which securities analysts valued in the billions. There is strong circumstantial

15 evidence that the Individual Defendants did not inform the Yahoo Board of the need for a

16 change of control in the ownership of Alipay, and did not inform the Yahoo Board that the

17 transfer had in fact been effected long before March 2011, although the Individual

18 Defendants were aware of that fact. Given Alipay's obvious value to the Company, the fact

19 that Defendant Wang was on the Alibaba Board of Directors, and the belated Yahoo

20 disclosures all indicate that Yahoo Management was not forthcoming with the public and

21 the Yahoo Board.

22 9. Both Individual Defendants had motive to conceal the facts. Yang, a co-

23 founder, did not want to be perceived as a fool for having recommending the Company's

24 expansion into Asia, when he was the Chief Executive Officer. Defendant Bartz did not

25 want a major crisis impinging on her efforts to turn the Company around, but hoped that

26 she could announce the transfer and fair compensation for Alipay to avoid a market melt-

27 down and save her position. Given the magnitude of the disaster presently affecting the

28

-4- Complaint


1 Company, both Defendants have been strangely quiet which also strongly suggests that

2 they have not been completely forthcoming.

3 10. The Class Action alleges that Yahoo management had been informed on

4 March 31, 2011, at the latest, that Alipay's structure had been shifted from Alibaba,

5 reducing the value of Yahoo's investment in Alibaba by billions of dollars. Chinese

6 regulations regarding foreign ownership had been anticipated to change as far back as

7 2009, which would require Yahoo or Alibaba to divest themselves of Alipay, but Yahoo

8 had failed to develop a strategy to recover the value it had in Alibaba.

9 11. The Yahoo board of directors ("Board") has not, and will not conunence

1 I 'figation-against-the4ndividuat-defendantsrlet-alone-vigorously-prosecute-such-claim.,

n because the Company faces a substantial likelihood of liability in the Class Action, and the

12 Yahoo Board cannot at the same time be defending the Class Action on one hand and

13 seeking damages from the individual defendants. Since this dichotomy sterilizes the Yahoo

14 Board from fairly addressing a demand, a pre-suit demand upon the Yahoo Board is a

15 useless and fittile act, and plaintiff may bring this action to vindicate Yahoo's rights against

16 the two wayward fiduciaries.

17 12. Yahoo management, in defendants Bartz and Yang, have refused to fully

18 explain what has occurred, or comment on what the outcome will be. While claiming that

18 management knew nothing of what was going on with Alipay, the language from the Form

20 10-Q indicates that the transfer of the affiliate was a necessary and anticipated act. Further,

21 since defendant Yang is a long time member of the Alibaba Board, it strains credulity for

22 Yahoo management to claim that they knew nothing of the key developments, given that it

23 was their job to know what was occurring, and that Chinese regulations required a transfer

24 of Alipay. What is clear is that the innocent shareholders are being asked to foot the bill for

25 this gross breach of the conduct by the Individual Defendants.

26 13. Plaintiff brings this action to seek recompense from the fiduciaries to the benefit

27 of the Company for this debacle which has grievously injured the Company by reducing its

28 assets by potentially billions of dollars.

-5- • complaint



2 14. This Court has jurisdiction over this action pursuant to 28 U.S.0 1331

3 (federal question jurisdiction) insofar as this action arises under both Section 10(b) of the

4 Securities Exchange Act of 1934 (the "Exchange Act"), 15 U.S.C. 78j(b), pursuant to

5 which there is a private right of action for contribution, and Section 21D of the Private

6 Securities Litigation Reform Act, 15 U.S.C. 78u-4, which governs the application of any

7 private right of action for contribution asserted pursuant to the Exchange Act. Prior to

8 Congress having enacted an express provision for contribution under Section 21D of the

9 Exchange Act, the United States Supreme Court recognized that a federal cause of action

existed-for-contributiotrpursuant-to-Seetiorr-IG(b)-of the Exchange Aet-and-Rule 10b- . —

-11- See-Musick Peeler & Garrnett Employers-Insurance of Wausau, 508 U.S. 286 (1993).

12 Thus, pursuant to federal statutory law and Supreme Court authority, this Court has

13 original federal question jurisdiction over the Federal contribution claim alleged herein.

14 This Court also has subject matter jurisdiction over the pendent state law claims asserted

15 herein pursuant to 28 U.S.C. 1367 (supplemental jurisdiction), since this statute provides

16 that the district court has supplemental jurisdiction over all other claims where, as here,

17 they are so related to claims in the action within the original jurisdiction of the Court, that

18 they form part of the same case or controversy. This Court also has jurisdiction over this

19 action pursuant to 28 U.S.C. 1332 (Diversity of Citizenship). Plaintiff is a citizen of New

20 York and each defendant is a citizen of a state other than New York. The matter in

21 controversy is in excess of $75,000, exclusive of interest and costs.

22 15. This action is not a collusive one designed to confer jurisdiction on a court

23 of the United States which it would not otherwise have.

24 16. Venue is proper in this judicial district pursuant to 28 U.S.C. 1391(b). A

25 number of the wrongful acts and practices contained of herein occurred in this District.

26 Nominal defendant Yahoo maintains its headquarters in this District.

27 17. In connection with the violations of law alleged herein, the defendants used

28 the means and instrumentalities of interstate commerce including the United States mail,

Complaint


1 interstate wire and telephone facilities, the facilities of the national securities markets and

2 the Internet to distribute the false and misleading statements complained of herein.

3

4 PARTIES

5 18. Plaintiff Debra Salzman ("Plaintiff") is, and was at all relevant times, a

6 shareholder of nominal defendant Yahoo and a citizen of the State of New York.

7 19. Nominal defendant Yahoo is a Delaware corporation, with its executive

8 offices betted at 701 First Avenue, Sunnyvale, California 94089. According to its SEC

9 filings, Yahoo is a digital media company that delivers personalized digital content and

11 er4ences;-aeross-deviees-and-around-the-globe;-to-vast-audienee&-Yahoo-fra-eitize

11 the states of California and Delaware.

12 20. Defendant Carol Bartz ("Bartz") has been Chief Executive Officer of Yahoo

13 since 2009. At all relevant times, Yahoo's most valuable corporate asset, accounting for as

14 much as two-thirds of its entire market capitalization according to some financial experts,

15 was its investment in Alibaba. Defendant Bartz therefore knew, or was reckless in not

16 knowing, that protecting the value of Yahoo's investment in Alibaba was critically

17 important to Yahoo's business, finances and prospectus for future growth and success.

18 Nevertheless, defendant Bartz failed to cause Yahoo to adopt and maintain internal

19 controls and systems designed to protect Yahoo's assets and, in particular, shield Yahoo's

20 material investment in Alibaba from unnecessary risks of loss, including misappropriation

21 of assets and/or usurpation of Alibaba's corporate opportunities by Ma and/or other

22 Alibaba insiders. Defendant Bartz also owed Yahoo and its shareholders a duty to speak

23 the whole truth. However, defendant Bartz did not speak the truth when addressing

24 Yahoo's investment in Alibaba and/or the status thereof. Defendant Bartz is therefore liable

25 to Yahoo for breach of candor and loyalty. Defendant Bartz is a citizen of the State of

26 California.

27 21. Defendant Jerry Yang ("Yang") was a co-founder of the Company, has been

25 the Chief Yahoo and Yahoo director since 1995. At all relevant times, Yahoo's most

-7- Complaint


1 valuable corporate asset, accounting for a substantial portion of its market capitalization

2 according to some financial experts, was its investment in Alibaba. Defendant Yang

3 therefore knew, or was reckless in not knowing, that protecting the value of Yahoo's

4 investment in Alibaba was critically important to Yahoo's business, finances and

5 prospectus for future growth and success. Nevertheless, defendant Yang failed to cause

6 Yahoo to adopt and maintain internal controls and systems designed to protect Yahoo's

7 assets and, in particular, shield Yahoo's material investment in Alibaba from unnecessary

8 risks of loth, including misappropriation of assets and/or usurpation of Alibaba's corporate

9 opportunities by Ma and/or other Alibaba insiders. Defendant Yang also owed Yahoo and

• areholders-a-dutoflo-speak-the-whole iruthz-Howeveroziefendant-Yang-did-not-sp .

11 the truth when addressing Yahoo's investment in Alibaba and/or the status thereof.

12 Defendant Yang is therefore liable to Yahoo for breach of candor and loyalty. Defendant

13 Yang is a citizen of the State of California.

14

15 THE MISSTATEMENTS AND OMISSIONS OF MATERIAL FACTIN VIOLATION OF THE SECURITIES EXHANGE ACT

16 ALLEGED IN THE CLASS ACTION

17 22. Yahoo, based in Sunnyvale, California, is a global digital media company.


19 Company has largely failed to keep up with Google and struggled to grow in highly

20 regulated and politicized fast-growing markets like China.

21 23. ; To overcome this situation, in 2005, Yahoo invested $1 billion for a 40%

22 interest in Alibaba, China's largest e-commerce company, and one seat on Alibaba's four-

23 person board of directors. As a part of their strategic partnership, Yahoo also turned over

24 operation of Yahoo China to Alibaba. In a shareholder report discussing the Yahoo-Alibaba

25 strategic partnership, and heralding the transaction as a great opportunity for Yahoo to

26 expand its business in China, Yahoo stated:

27 24. Through this transaction, the Company has combined its leading search

28 capabilities' with Alibaba's leading online marketplace and online payment system and

-8- Complaint

•


1 Alibaba's strong local presence, expertise and vision in the China market. These factors

2 contributed to a purchase price in excess of the Company's share of the fair value of

3 Aliababa's net tangible and intangible assets acquired resulting in goodwill.

4 25. As the remainder of the decade unfolded, Alibaba grew rapidly. By 2011,

5 Yahoo's 40% stake in Alibaba had grown significantly in importance to Yahoo and, in fact,

6 had become, according to many industry experts, Yahoo's most valuable corporate asset,

7 accounting for a substantial portion of Yahoo's $21 billion market capitalization.

8 26. Until recently, one of Alibaba's most profitable "still-private holdings" was

9 Alipay, an e-commerce payment system similar to eBay Inc.'s PayPal. As China's economy

:idly-Awing-the late-20000rsrnlid-Alipayls-profits:Aecording-to U.S. sec •

11 analysts, including-Brett-Hariss of Bagelli & Co., Alipay is worth more than $5 billion. But

12 most importantly for Yahoo and its shareholders, Yahoo, as Alibaba's largest shareholder,

13 had a direct connection to the profits stemming from Alipay's fast-growing and lucrative

14 online payment system.

15 27. Doing business in China can be complex and difficult for U.S. companies.

16 Yahoo's experience in China has been no different. But, unlike other large U.S. publicly

17 traded companies, Yahoo's single most valuable corporate asset is an investment tied up in a

18 foreign corporation located in China, more than 4,000 miles away from Yahoo's corporate

19 headquarters located in Sunnyvale, California.

20 28. Yahoo's counterparts in China had been consulting with Yahoo for months and

21 months on anticipated changes to Chinese regulations regarding foreign ownership. Yahoo

22 failed to address this issue and ultimately in 2010, Alibaba transferred ownership in Alipay

23 to Alibaba CEO Ma for $46 million. This was made known to Yahoo on March 31, 2011, at

24 the latest, and perhaps as early as 2008. However, in an effort to make Yahoo attractive to

25 hedge funds and other investors, defendants concealed this information.

26 ///

27

28

-9- Complaint

-

Case5 11-cv-03269-PSG Documentl Aled07/01/11 Pagel 0 of 21

1 DEFENDANTS' FALSE AND MISLEADING STATEMENTS

2 ISSUED DURING THE CLASS PERIOD

3 29. On April 19, 2011, Yahoo issued a press release announcing its first quarter

4 2011 financial results. The Company reported earnings of $223 million, or $0.17 diluted

5 earnings per share, and revenue of $1,064 million. The release stated in part:

6 "We are solidly executing toward our plan for returning Yahoo! to sustainablerevenue and profit growth," said Carol Bartz, CEO of Yahoo!, "During the

7 quarter, we beat the midpoint of revenue guidance while continuing to deliver8 on the bottom line. We continued to extend our lead as the world's premier

digital media company with users to Yahoo! branded properties increasing9 15% year over year and minutes spent increasing 17%."

14 30. These were positive results and statements with never a word about the

11 Alipay fiasco), and Yahoo's stock reacted favorably, increasing to $16.87 per share.

1231. Later, on May 2, 2011, Greenlight Capital's investment was revealed, causing

13 Yahoo's stock to increase to $18.14 per share.14

32. On May 10, 2011, Yahoo shareholders learned for the first time that the15

Company's $1 billion investment in its strategic partnership with Alibaba likely had been16 severely impaired by the misappropriation of Alibaba's most valuable asset, Alipay, from17

Alibaba to another private company controlled by Alibaba's Chairman, Jack Ma.18

33. On this news, Yahoo's stock fell by 7%, to close at $17.20 per share.19 34. On May 12, 2011, Yahoo issued a press release entitled "Yahoo! Inc. Releases

20 Statement Regarding Alipay," which stated in part:21

Yahoo! Inc. issued the following statement in response to recent media reports22 regarding the timing of the restructuring of Alipay:

23 On March 31, 2011, Yahoo! and Softbank were notified by Alibaba Group of

24 two transactions that occurred without the knowledge or approval of theAlibaba Group board of directors or shareholders. The first was the transfer of

25 ownership of Alipay in August 2010. The second was the deconsolidation of

26Alipay effective in the first quarter of 2011.Yahoo! disclosed this restructuring in its 10-Q after discussions with Alibaba

27 Group and obtaining a better understanding of this complex situation.

28

-10- Complaint

Case5 11-cv-03269-PSG Documentl Aled07/01/11 Pagel 1 of 21

1 Yahoo! continues to work closely with Alibaba and Softbank to protect

2 economic value for all interested parties. We believe ongoing negotiationsamong all of the parties provide the best opportunity to achieve an outcome in

3 the best interest of all stakeholders

4 35. According to news reports, Alibaba received only $46 million for Alipay's

5 assets, which securities analysts valued at $5 billion. Additionally, defendants reportedly

6 were aware of Jack Ma's misappropriation of Alipay, failing to prevent the usurpation of

7 Yahoo's valuable financial interest in Alipay, and then concealing the entire episode from

8 Yahoo shareholders for six months.

9 36. On May 15, 2011, Yahoo issued a press release entitled "Joint Statement from

- ii -I', • • if otrirtautTakts . latTiCitegarding Aiipay; w s - • m p • :

11 Yahoo! Inc. and Alibaba Group issued the followmg statement regarding

12 Alipay:

13 "Alihaba Group, and its major stockholders Yahoo! Inc. and Softbank

14Corporation, are engaged in and committed to productive negotiations toresolve the outstanding issues related to Alipay in a manner that serves the

15 interests of all shareholders as soon as possible."

16 37. On this news, Yahoo's stock collapsed $0.74 per share to close at $15.81 per

17 share on May 16, 2011 — a decline of 15% from its Class Period high of $18.65 per share.

18 38. The true facts, which were known by the defendants but concealed from the

19 investing public during the Class Period, were as follows:

20 , (a) Yahoo management had been informed on March 31, 2011, at the

21 latest, that Alipay's structure had been shifted from Alibaba, reducing the value of Yahoo's

22 investment in Alibaba by billions of dollars; and

23 (b) Chinese regulations regarding foreign ownership had been anticipated

24 to change as far back as 2009, which would require Yahoo or Alibaba to divest themselves

25 of Alipay, but Yahoo had failed to develop a strategy to recover the value it had in Alibaba.

26 39. As a result of defendants' false statements, Yahoo stock traded at artificially

27 inflated levels during the Class Period. However, after the above revelations seeped into the

28

-11- Complaint

Case5 11-cv-03269-PSG Document1 Filed07/01/11 Pagel 2 of 21

1 market, the Company's shares were hammered by massive sales, sending them down 15%

2 from their Class Period high.

3 LOSS CAUSATION

4 40. During the Class Period, as detailed herein, the defendants made false and

5 misleading statements and engaged in a scheme to deceive the market and a course of

6 conduct that artificially inflated the price of Yahoo common stock and operated as a fraud or

7 deceit on Class Period purchasers of Yahoo common stock by misrepresenting the

8 Company's China business and Alibaba investment. Later, when defendants' prior

9 misrepresentations and fraudulent conduct became apparent to the market, the price of

10—Yahoe,cemmertsteek-fellras-the-prior-artifieial-inflatien-eame-outofthe-priee-ever time. As

11 a result of-their purchases of Yahoo common-stock during the Class Period, plaintiff-and

12 other members of the Class suffered economic loss, i.e., damages, under the federal

13 securities Iws.

14 NO SAFE HARBOR

15 41. Yahoo's verbal "Safe Harbor" warnings accompanying its oral forward-

16 looking statements issued during the Class Period were ineffective to shield those statements

17 from liability.

18 42. The Individual Defendants are also liable for any false or misleading Forward-

19 Looking-Sthement pleaded because, at the time each Forward-Looking-Statement was

20 made, the speaker knew the Forward-Looking-Statement was false or misleading and the

21 Forward-Looking-Statement was authorized and/or approved by an executive officer of

22 Yahoo who knew that the Forward-Looking-Statement was false. None of the historic or

23 present tense statements made by defendants were assumptions underlying or relating to any

24 plan, projection or statement of future economic performance, as they were not stated to be

25 such assumptions underlying or relating to any projection or statement of future economic

26 performance when made, nor were any of the projections or forecasts made by defendants

27 expressly related to or stated to be dependent on those historic or present tense statements

28 when made.

-12- Complaint

Case5 11-cv-03269-PSG Document1 Aled07/01/11 Pagel 3 of 21

1 DERIVATIVE ALLEGATIONS

2 43. Plaintiff brings this action as a derivative action pursuant to Federal Rules of

3 Civil Procedure 23.1 on behalf of and for the benefit of Yahoo.

4 44. Plaintiff will fairly and adequately represent the interests of Yahoo in

5 enforcing and prosecuting its rights, and has retained competent counsel experienced in

6 this type of litigation to prosecute this action.

7DEMAND IS EXCUSED FOR FUTILITY

845. Demand on Yahoo to bring this action has not been made and is not

9

111necessary because such demand would be fiitile. The Board of Yahoo at the time suit

was-filed consisted -af-the-following individuals:-Roy-Bostock, Patti Hart,-Sue_James, 11

Vyomesh Joshi, David Kenny, Arthur Kern, Brad Smith, Gary Wilson and Defendants12

Bartz and Yang.13

46. Yahoo is a defendant in the Securities Class Action which alleges that the14

wrongful acts of Defendants Bartz and Yang have caused the Company to violate the1516 federal securities laws, resulting in the substantial risk of a huge damage award against the

Company. The Company and its Board must defend that action and contend that the17

Individual Defendants did not violate the federal securities laws and thus the Company18

cannot be deemed liable. Therefore, the Yahoo Board, at the same time cannot fairly1920 consider a demand to bring suit against the Individual Defendants for conduct which

includes the same wrongs, since the Board must contend that Bartz and Yang did nothing21

22wrong. Accordingly, the Company's Directors are sterilized from fairly considering a pre-

suit demand, given the overriding obligation to defend the Securities Class Action, and23

take positions consistent with such defense.24

FIRST CLAIM FOR RELIEF25

(Against The Individual Defendants for Contribution Pursuant to26

Sections 10(b) and 21D of the Exchange Act)27

2847. Plaintiff repeats and re-alleges all previous allegations set forth above in

-13-Complaint


1 paragraphs 1 through 46 as though they were fully set forth herein.

2 48. The Individual Defendants had a duty not to defraud the investing

3 public by the dissemination of materially false and misleading press releases and the

4 dissemination of materially false and misleading financial information and

5 projections.

6 49. The Individual Defendants have been sued in the Class Action alleging

7 that the Individual Defendants caused the Company to issue false and misleading

8 statements as alleged above and, as a result, the Company and these defendants

9 violated Section 10(b) of the Exchange Act.

O. It is allegect4n-the-Class-Action4hat-4he4n4ivi4ual-Defendants-a-

11 with scienter-in that they knew that the public documents and statements issued-or

12 disseminated in the name of the Company were materially false and misleading; knew that

13 such statements or documents would be issued or disseminated to the investing public; and

14 knowingly and substantially participated or acquiesced in the issuance or dissemination of

25 such statements or documents as primary violations of the federal securities laws. These

16 Defendants, by virtue of their receipt of information reflecting the true facts regarding

17 Yahoo, their control over, and/or receipt and/or modification of Yahoo's allegedly

18 materially misleading misstatements and/or their associations with the Company that made

19 them privy to confidential proprietary information concerning Yahoo, participated in the

20 fraudulent scheme alleged herein.

21 51. These Individual Defendants knew and/or recklessly disregarded the

22 falsity and misleading nature of the information which they caused to be

23 disseminated to the investing public.

24 52. During the Class Period, it is alleged in the Class Action that the Class

25 Action Individual Defendants carried out a plan, scheme and course of conduct that was

26 intended to and, throughout the Class Period which caused plaintiff and other members of

27 the Class to purchase Yahoo common stock at artificially inflated prices. As alleged in

28 the Class Action, these defendants made untrue statements of material fact and/or

-14-Complaint


1 omitted to state material facts necessary to make the statements not misleading that

2 operated as a fraud and deceit upon the purchasers of the Company's common stock in an

3 effort to maintain artificially high market prices for Yahoo's common stock in violation of

4 Section 10(b) of the Exchange Act and Rule 10b-5.

5 53. In addition to the duties of full disclosure imposed on these defendants

6 as a result of their making of affirmative statements and reports, or participation in

7 the making of affirmative statements and reports to the investing public, they each

8 had a duty to disseminate truthful information promptly that would be material to

9 investors in compliance with the integrated disclosure provisions of the SEC as

10 embodied in SEC Regulation S X (17 C.F.R. § 210.04-et-seq.)-and-S-1(41-7-Ca •

11 229A 0 et seq.) and other SEC regulations, including accurate and truthful

12 information with respect to the Company's business, so that the market prices of the

13 Company's publicly traded securities would be based on truthful, complete and

14 accurate information.

15 54. It is alleged in the Class Action that the Individual Defendants, by the

16 use of the mails or other means or instrumentalities of interstate commerce, engaged

17 and participated in a continuous course of conduct to conceal adverse material

18 information about the business, business practices, and future prospects of Yahoo as

19 specified herein. These Defendants are alleged to have employed devices, schemes

20 and artifices to defraud, while in possession of material adverse non-public

21 information and engaged in acts, practices, and a course of conduct as alleged herein

22 in an effort to assure investors of Yahoo's value and future profitability. This

23 included the making of, or the participation in the making of, untrue statements of

24 material facts and omitting to state material facts necessary in order to make the

25 statements made about Yahoo and its business, operations and future prospects, in

26 the light of the circumstances under which they were made, not misleading, and

27 engaging in transactions, practices and a course of business which operated as a

28 fraud and deceit upon the purchasers of Yahoo securities during the Class Period.

-15- Complaint


1 55. As alleged in the Class Action, as a result of the dissemination of the

2 materially false and misleading information and failure to disclose material facts, as

3 set forth above, the market price of Yahoo's securities was artificially inflated during

4 the Class Period. Unaware of the fact that the market price of Yahoo's shares was

5 artificially inflated, and relying directly or indirectly on the false and misleading

6 statements made by these defendants, or upon the integrity of the market in which the

7 securities trade, and/or on the absence of material adverse information that was

8 known to or recklessly disregarded by these defendants but not disclosed in public

9 statements during the Class Period, Class members acquired Yahoo's securities

0uring4heClass-Perio4-at-artifizially hi gh-prizes-and.were-ciamaged-thereb

11 56 As alleged in the Class Action, at the time of said misrepresentations

12 and omissions, the Class members were unaware of their falsity, and believed them

13 to be true. Had the members of the Class and the marketplace known of the true

14 performance, business practices, future prospects and intrinsic value of Yahoo,

15 which were not disclosed by these defendants, members of the Class would not have

16 purchased or otherwise acquired their Yahoo securities during the Class Period, or,

17 if they had acquired such securities during the Class Period, they would not have

18 done so at the artificially inflated prices which they paid.

19 57. As alleged in the Class Action, by virtue of the foregoing, these

20 Individual Defendants each violated Section I0(b) of the Exchange Act and Rule

21 10b-5.

22 58. It is further alleged in the Class Action that the Company participated

23 in the wrongful conduct and is equally liable for violation of Section 10(b) of the

24 Exchange Act. Assuming that the Company is liable, these Individual Defendants

25 caused the Company to violate Section 10(b) of the Exchange Act, and incur

26 liability for damages for violation of the federal securities laws.

27 ///

28

-16-Complaint

Case5:11-cv-03269-PSG Document1 Filed07/01/11 Page17 of 21

Case5 11-cv--03269-PSG Document1 Aled07/01/11 Pagel 8 of 21

1 59. If the Company is deemed to have violated the federal securities laws,

2 and incurs damages therefore, the Individual Defendants are liable to the Company

3 for contribution pursuant to sections 10(b) and 21(D) of the Exchange Act.

4 SECOND CLAIM FOR RELIEF

5 (Against the Individual Defendants for Breach of Fiduciary Duty and Waste)

6 60. Plaintiff repeats and re-alleges all previous allegations set forth above in


8 61. The Class Action Individual Defendants owed and owe Yahoo fiduciary

9 obligations. By reason of their fiduciary relationships, the Class Action Individual

10 Dcfendanti-owed-and-owe-Yahoo-the-highest--obligations-of-gooel-faithrfair-dea •

11 loyalty and due care.

12 62. These Defendants breached their fiduciary duties of care, loyalty,

13 reasonable inquiry, oversight, good faith and supervision.

14 63. The Individual Defendants concealed material information from the

15 Yahoo Board and the investing public because they believed it was in their personal

16 interest to do so. This concealment appears to have had negative effects on their

17 attempts to resolve the compensation issue over Alipay, and their actions may well

18 will cause Yahoo to obtain less compensation then had the business issue been

19 pioperly handled. Such conduct actions was not a good faith exercise of prudent

20 business judgment

21 64. As a direct and proximate result of the Class Action Individual

22 Defendants' misconduct, Yahoo has suffered and will continue to suffer significant

23 damages. As a result of the misconduct alleged herein, the Individual Defendants are

24 liable to the Company.

25 ///

26 ///

27

28

-17-Complaint


1 THIRD CLAIM FOR RELIEF

2 (Against The Individual Defendants for Breach of the Duty

3 of Full Disclosure and Complete Candor)

4 65. Plaintiff repeats and re-alleges all previous allegations set forth above in


6 66. Whenever directors communicate publicly or directly with shareholders

7 about the corporation's affairs, with or without a request for shareholder action, directors

8 have a fiduciary duty to shareholders to exercise due care, good faith and loyalty. When

9 directors communicate publicly or directly with shareholders about corporate matters the

18— -sine-qua-non-of-directore-fiduciary-tty-ta-sliarehelders4s-honesty:--Moreoverra-fiducia

11 who lens that her-earlier communications to her beneficiaries were false and nonetheless

12 knowingly and in bad faith remains silent even as the beneficiaries continue to rely on

13 those earlier statements also breaches his duty of loyalty and of full and fair disclosure.

14 67. Each of the Individual Defendants has breached his/her duty of full

15 disclosure and complete candor by knowingly and/or recklessly disregarding the falsity

16 and misleading nature of the information which they caused it to be disseminated to the

17 investing public.

18 68. In addition to the duties of full disclosure imposed on the Individual

19 Defendants as a result of their making affirmative statements and reports, or participation

20 in the making of affirmative statements and reports to the investing public, they each had a

21 duty to disseminate truthfid information promptly that would be material to investors in

22 compliance with the integrated disclosure provisions of the SEC regulations, including

23 accurate and truthful information with respect to the Company's business, so that the

24 market prices of the Company's publicly traded securities would be based on truthful,

25 complete and accurate information.

26 69. As a direct and proximate result of the Individual Defendants' breach of full

27 disclosure and complete candor, Yahoo has sustained significant damages arising out of

28 ///

-18-Complaint

II

Case5 11-ov-03269-PSG Documentl Filed07/01/11 Page20 of 21

1 the alleged material misstatements to the investing public, and these Individual Defendants

2 are liable tc the Company.

3 JURY DEMAND

4 70. Plaintiff demands a trial by jury.

5

6 WHEREFORE, plaintiff prays for judgment as follows:

7 A. Against the Individual Defendants for contribution pursuant to Sections

8 10(b) and 21(D) of the Exchange Act;

9 B. Against all of the Individual Defendants for the damages sustained by

It- -Yahoo-as a-result-of-the- - • -. - = - - - ; •

II set forth-herein;

12 C. Equitable and/or injunctive relief as permitted by law;

13 D. Restitution and disgorgement of unjust enrichment;

14 E. Attorneys' fees and costs; and

15 F. Any such other and further relief as the Court deems just and proper.

16

17 Dated; June 30, 201118 LAW OFFIC S OF DAVID N. LAKE

19

20By

21 David N. Lake, Esq.

22 Attorney for Plaintiff

23 Of Counsel:

24 Kenneth A. Elan, EsqLAW OFFICES OF KENNETH A. ELAN217 Broadway, Suite 606

26 New York, NY 10007Telephone: (212) 619-0261

27 Facsimile: (212) 385-270728 Email: [email protected]

-19-

• Complaint


_

VERIFICATION

Kenneth Elan, under pain and penalty of perjury under the laws of the United States,

avers that as one of plaintiff's counsel herein I verify that I he have reviewed the foregoing

Shareholder's Derivative Complaint, and that the allegations are true and correct to the best of

my information, knowledge and belief.

Dated: June 27, 2011

Kennet Jan

Case5:11-cv-03269-PSG Documentl -1 Filed07/01/11 Pagel of 2

t, IS 44 (Rev. 12/07)(CAND Rev 1/10) CIVIL COVER SHEETThe JS 44 civil cover sheet and the information contained herein neither replace nor suppkment the Mum and service of pleadings or other papers as required by law, except as providedby local rules of court This 10t111, approved by the Judicial Conference of the United States in September 1974, as required for the use of the Clerk of Coon forthe purpose of initiatingthe civil docket sheet (SEE INSTRUCTIONS ON PAGE TWO OF THE FORM.)

L (a) PLAINTIFFS DEFENDANTSDEBRA SALZMAN, an individual CAROL BARTZ, an individual; JERRY YANG, an individual

(b) County of Residence of First Listed Plaintiff New York County County of Residence of First Listed Defendant

(EXCEPT IN US. PLAINTIFF CASES) (IN US. PLAINT/FE CASES ONLY)Nyjyp . IN LAND CONDEMNATION CAS EESLUSFE TIHELLOCI a\A IT1GON OF THE

LAND INVOLVED.

(e) Attorney's (Finn Name. Address. and Telephone Number) Attorneys Of Known)

David N. Lake, Esq., Law Offices Aof David N.16130 VenturaBoulevard, Suite 650 11 0 3 2 6 A PSG_...Encino, CA 91436818 7885100 ° A D I-1

IL BASIS OF JURISDICTION (Place an ''X' in One Box Only) III. CITIZENSHIP OF PRINCIPAL PARTIES (Piece an "IC' mOne Box for Plaintiff(For Diversity Cases Only) and One Box for Defendant)

PT14 DEF PTF DER0 I US. Government 13 :i Federal potation Citizen of This State [3 I 0 / Immo:teed or PoncipalPlace Ej 4 13 4Plaintiff (U.& Government Not a Pony) of BtainCSS laths Sate

02 U.S. Government 4 Diversity Cirmen of Another State El 2 [.] 2 bromoratcd and Principal Place 1:0 5 0 $Defendant (Indicate Citizenship of Parties in Item In) of Dus boss In Another State,

Citizen or Snbject of a Eirn 3 Foreign Nation 0 6 0 6Foreign Country

IV—NATURE OF_SUIT_Onaa tx- ill OM BaYtthily)

CONTRACT TORTS FORFEITURE/PENALTY BANKRUPTCY OTHERSTATUTES - 1=/ 1101nstrance PERSONAL INJURY PERSONAL1NJURY__,C1610 Agricu lture =422 APper128 USC 156 1=400 Stole Reapportionment

I= 120 Marine =310 Alt/dant =362 Personal Injury— I=620 Other Fool & Drug =423 Withdramd 0410 AntitrustI3 130 Miller Act =315 Airplane Product mak maipactat 0625 Drug Related Semite 2g USC 157 =430 Banks and Banking= 1401Jegoliable Instrument Liability =365 Personal Injury — etProperty 21 'USG Ma "1450 CommerceED 150 Recovery of Ortmayment =20 Assaub, Laid& Product Liability 0630 Liquor Laws PROPERTY RIGHTS 1=460 Deportation

&Enforcement ofJudgment slander 1=368 Asbestos Personal =1640E4i- & Truck __1470 Racketeer Influenced andCI 151 Meditate Act =330 FederalEmployers* Injury Product =650 Airline Reps. =320 Copyrights Corrupt OrganizationsI=1 1521/teovery of Defaulted Liability Liability Cry 6600eetmotianal =1330 Patent 1=1430 Comm= Credit

Student Loans =40 Marine . PERSONAL PROPERTY Seel/Akan =g40Trad0mailt 0490CablerSat TV(Excl. Veterans) =345 Marine Product =370 Other Proud C16900ther =810 St/cense Service.

sociALsEcuRITY .25°Steec‘milieetiScsieCainniad it31 I

qL=1 153 Recovery oftiverparnent LiabiblY =371 Troth in Lending LABOR of VnlerniS BellefitS =350 Motor Vehicle 031100tha Penenal= 160 Stockholders Seas =355 Motor Velucte pmpely D0,686 =710 Fan LaborStandards =861 171A (1395(0 ‘6=g15Dustonler Dludlenge= 190 Other Contract= (923) 12 USC 3410Peaduct Liability nyg3 plot ny Oaniage Act 862 BlackI= 195 Contract Product Liability =360 Other Pomona' Minty "---1 -6,466 .- =720 Lob or/Saw. Relations =563 DIWC/D1WW (405(g)) cage mu sumnoly Actionsr 1 babtlityfl 196 Franchise —1730 Latror/Mmetillegonmg =$64 SS1D Title XVI tr.1291 Agricultural Acts

REAL PROPERTY CIVIL RIGHTS PRISONER A Dielosure Act1740Railway Labor Act

865R51 (405(g)) C1$922 Economic Stablhzation ActPETITIONS — 0803 Environmental Matters

(= 210 Land Condemnation =441 Voting =510 motions to vacate = 790 Mr; Labor Litigation In 594 Enemy Allocation Act17.3 ' 220 Foreclosure =442 Ettmloyment Sentence =791 Empl Ret /no.C m1195 Freedoof Information1=1 230 Rena Least & Ejectment =443 Housing/ Habeas Corpus: Steady Act FEDERAL TAX SUITS ActEn 240 Tout to Land Accommodations = 530 General M870 Taxes (US. Plaintiff 1= 900APPeal of Fafn 245 Ton Product Liability =444 Welfare =535 Death Penalty or Defendant) DetantinationCl 290 All Otha Real PmPerlY =445 Amer eiDisabilities - =240 Mandamus& Other IMMIGRATION Oil IRS--. Third Puny Under Equal Access

Emplownent =550 Call RIghtS n••••n - -.....26 BSC 7609 to Justice

=444 toner vs/Disabilities =555 PrisonCondition

1462/4anualrzabon Application =950 Constitutionality of=463 Habeas all.pth _Other , State Statutes

Alien MINIM=440 Other Civil Rights =465 Other limidgralliallA41001

V. ORIGIN (Place an "X" in One Box Only) Transferred front Appeal 10 Districtat original CD 2 Removed from CI 3 Remanded from 04 Reinstated Or OS another district 06 Multidtstriet 0 7.Itickg from

Proceeding State Court Appellate Court Reopened (specify) Litigation MagistrateJudgment

Cote the U.S. Civil Statute under which you are filing (Do not cite jurisdictional statutes unless diversity):

VI CAUSE OF ACTION IS USC §781(b), 15 USC §78n-4, 28 IJSC§ 1332 Thief description of cause;

Breach of fiduciary duty and contribution VIL REQUESTED IN En CHECK IF THIS IS A CLASS ACTION DEMAND S 575,000+ CHECK YES only if demanded in complaird:

COMPLAINT: IJNDER F.R.C.P. 23 JURY DEMAND:. CI Vest= No VIII RELATED CASE(S) PLEASE REFER TO IKL KR, 3-12 CONCERNING REQUIREMENT TO FILE

IF ANY "NOTICE OF REL ED ASE".

IX. DIVISIONAL ASSIGNMENT (CIVIL L.R. 3 )(PLACE AND "X" IN ONE BOX ONLY) ED SAN FRANCISCO/OAKLAND ral SAN JOSE CI EUREKA DATE S 'NATURE OF ATTORNEY OF RECORD7/1/11

'

- -

Case 5:11 -cv-03269-PSG Coco ment1A F iled07/01 /11 Page 2 of 2

.1S 44 Reverse (Rev. 12/07)

INSTRUCTIONS FOR ATTORNEYS COMPLETING CIVIL COVER SHEET FORM .IS 44

Authority For Civil Cover Sheet

The 15 44 civil cover sheet and the information contained herein neither replaces nor supplements the filings and service of pleading or other papers as requiredby law, except as provided by local rules of court. This form, approved by the Judicial Conference of the United States in September 1974, is required for the useof the Clerk ofCourt for the purpose of initiating the civil docket sheet. Consequently, a civil cover sheet is submitted to the Clerk of Court for each civil complaintfiled. The attorney filing a case should complete the form as follows:I. (a) PlaintifEr-Defendants. Enter names (last, first, middle initial) of plaintiff and defendant. If the plaintiff or defendant is a government agency, use onlythe finll name or standard abbreviations. If the plaintiff or defendant is an official within a govenunent agency, identi6 , first the agency and then the official, givingboth name and title.

(b)County of Residence. For each civil case filed, except U.S. plaintiff cases, enter the name of the county where the first listed plaintiff resides at the timeof filing. In U.S. plaintiff cases, enter the name of the county in which the first listed defendant resides at the time of filing. (NOTE: In land condemnation cases,the county of residence of the "defendant" is the location of the tract of land involved.)

(c)Attorneys. Enter the firm name, address, telephone number, and attorney of record. If there are several attorneys, list them on an attachment, notingin this section "(see attachment)".IL Jurisdiction. The basis ofjuris' diction is set forth under Rule 8(a), F.R.C.P., which requires that jurisdictions be shown in pleadings. Place an "X" in oneof the boxes. If there is more than one basis ofjurisdiction, precedence is given in the order shown below.United States plaintiff. (I) Jurisdiction based on 28 U.S.C. 1345 and 1348. Suits by agencies and officers of the United States are included here.United States defendant. (2) When the plaintiff is suing the United States, its officers or agencies, place an "X" in this box. Federal question. (3) This refers to suits under 28 U.S.C. 1331, where jurisdiction arises under the Constitution of the United States, an amendment to the

-----Constitutimun-actof Congress ora treaty-of the-United-Staterbrcasenhere the U.S:tapanyoheUtplaintiffordefendant code takes precedence, and box I or 2 should be marked.—

Diversity of citizenship. (4)This refers to suits under 28 U.S.C. 1332, where parties are citizens of different states. When Box 4 is cheered, the cifizenship of thedifferent parties must be checked. (See Section III below; federal question actions take precedence over diversity cases.)III. Residence (citizenship) of Principal Parties. This section of the JS 44 is to be completed if diversity of citizenship was Indicated above. Mark this sectionfor each principal party.IV. Nature of Suit. Place an "X" in the appropriate box. If the nature of suit cannot be determined, be sure the cause of action, in Section VI below, is sufficientto enable the deputy clerk or the statistical clerks in the Administrative Office to determine the nature of suit. If the cause fits more than one nature of suit, selectthe most definitive.V. Origin. Place an "X" in one of the seven boxes.Original Pnaceedings. (I) Cases which originate in the United States district courts.Removed fiom State Court. (2) Proceedings initiated in state courts may be removed to the district courts under Title 28 U.S.C., Section 1441. When the petitionfor removal is granted, die& this box.Remanded from Appellate Court. (3) .Check this box for cases remanded to the district court for further action. Use the date of remand as the filing date.Reinstated or Reopened. (4) Check this box for cases reinstated or reopened in the district court. Use the reopening date as the filing date.Transferred from Another District. (5) For cases transferred under Title 28 U.S.C. Section 1404(a). Do not use this for within district transfers or multidistrictlitigation transfers.Multidistrict Litigation. (6) Check this box when a multidistrict case is transferred into the district under authority of Title 28 U.S.C. Section 1407. When this boxis checked, clo not check (5) above.Appeal to District Judge from Magistrate Judgment. (7) Check this box for an appeal from a magistrate judge's decision.VI. Cause of Acfion. Report the civil statute directly related to the cause of action and give a brief description of the cause. Do not cite jurisdictional statuesunless diversity. Example: U.S. Civil Statute: 47 USC 553

Brief Description: Unauthorized reception of cable serviceVII. Requested in Complaint. Class Action. Place an "X" in this box if you are filing a class action under Rule 23, F.R.Cv.P.Demand. In this space enter the dollar amount (in thousands of dollars) being demanded or indicate other demand such as a preliminary injunction.Jury Demand. Check the appropriate box to indicate whether or not a jury is being demanded.VIII. Related Cases. This section of the JS 44 is used to reference related pending cases if any. If there are related pending cases, insert the docket numbersand the corresponding judge names for such cases.Date and Attorney Signature. Date and sign the civil cover sheet.

•

EXHIBIT D

Case5 11-cv-03302-PSG Documentl Aled07/06/11 Pagel of 29

r7b 11

1 ROBBINSUMEDAIJ.P F-9 Mtn

BRIAN J. ROBBINS (190264) P V Ll2 [email protected]

CRAIG W. SMITH (164886)3 gsmith®robbinsumada.com

SHANE P. SANDERS (237146)4 ssanders®robbinsumeda.00m

G/NA STASSI (261263) FILED5 gstassi®robbinsumeda.cora6003 Street, Suite 1900

6 gan Diego, CA 92101 JUL. 0 6 2011

RRRIPKN'tiou0T6TRWOIDT:TaLleirrORNIA I d

Telephone: (619) 525-3990

)::4

7 Facsimile: (619) 525-3991 NORVE8 Attorneys for Plaintiff if

9 UNITED STATES DISTRICT COURT

10 NORTHERN DISTRICT OF CALIFORNIA

11 SAN JOSE DIVISION PSG12

IRON WORKERS MID-SOUTH PENSION qV al. - 0 3 3 0 213 FUND, Derivatively on Behalf of YAHOO! INC.,

) -VERIFIED SHAREHOLDER14 Plaintiff ) DERIVATIVE COMPLAINT FOR

vs. ) BREACH OF FIDUCIARY DUTY,15 ) UNJUST ENRICHMENT, WASTE OF

CAROL BARTZ, JERRY YANG, ROY J. ) CORPORATE ASSETS, AND16 BOSTOCK, PATTI S. HART, SUSAN M. ) VIOLATIONS OF CALIFORNIA

JAMES, VYOMESH JOSHI, ARTHUR H. ) CORPORATIONS CODE17 KERN, BRAD D. SMITH, GARY L. WILSON, )

and JACK MA, )18 )

Defendants, )19 )

-and- )20 )

YAHOO! INC., a Delaware corporation, )21 )

Nominal Defendant. )22 ) DEMAND FOR JURY TRIAL

23

24

25

26

27

28

VERIFIED SHAREHOLDER DERIVATIVE COMPLAINT

BY FAX

Case5 . 11-cv-03302-PSG Document1 Filed07/06/11 Page2 of 29

1 INTRODUCTION

2 1. This is a shareholder derivative action brought by plaintiff, a shareholder of

3 Yahoo! Inc. ("Yahoo" or the "Company"), on behalf of the Company against certain of its

4 officers and directors for breathes of fiduciary duties and violations of law. These wrongs

5 resulted in millions of dollars in damages to Yahoo's reputation, goodwill, and standing in the

6 business community. Moreover, these actions have exposed the Company to millions of dollars

7 in potential liability for violations of federal law. Most notably, however, is that the actions of

8 the Individual Defendants (as defined herein) have cost the Company an asset worth billions of

9 dollars.

10 2. The matter arises out of the Chief Executive Officer ("CEO") of Alibaba Group

11 Holding Limited ("Alibaba"), defendant Jack Ma's ("Ma"), transfer of Alibaba's valuable e-

12 commerce payment system, Alipay, to another entity he controlled. AO-Abe is China's largest e-

13 commerce Company, and Alipay is the method that customers purchase goods (similar to eBay

14 Inc.'s PayPal function in the United States). Alipay is a necessary part of Alibaba, and some

15 analysts have valued it at $5 billion. Despite its tremendous value, according to reports,

16 defendant Ma paid Alibaba only $46 million for Alipay.

17 3. Though Alibaba is a separate Company, Yahoo acquired a 40% stake in it for $1

18 billion in 2005. Defendant Ma's acquisition of Alipay has been disastrous for Yahoo. In

19 addition, in exchange for this $1 billion investment, Yahoo received the right to name two

20 members to Alibaba's board of directors, though for reasons that remain unexplained, it only

21 named one, Yahoo's founder, defendant Jerry Yang ("Yang").

22 4. While Yahoo has seen its importance in the U.S. market diminish, Alibaba has

23 exploded. In fact, Alibaba is now Yahoo's most valuable corporate asset, accounting for as much

24 as two-thirds of Yahoo's entire $21 billion market capitalization. Defendant Ma's acquisition of

25 Alibaba's $5 billion asset for a de minimis sum has had a direct and immediate impact on Yahoo.

26 Since Yahoo has revealed Alipay's ownership transfer, the Company's market capitslinaion has

27 fallen by $3.5 billion, or 15%. That defendant Ma was able to accomplish this scheme is a

28 testament to Yahoo's woefully inadequate internal control systems and ilure of the members of- I -


Case5 . 11-cv-03302-PSG Document1 Filed07/06111 Page3 of 29

1 the Company's Board of Directors (the "Board") to act in accordance with their duties of loyalty

2 to protect Yahoo's valuable assets

3 5. Just as bad as defendant Ma's self-dealing ownership transfer, however, is the

4 manner in which the Board members have treated their duty of candor to the Company's

5 shareholders. Despite Alibaba's board of directors learning about the ownership transfer in July

6 of 2009, Yahoo made no mention of it until an almost hidden disclosure in a quarterly report

7 filed with the U.S. Securities Exchange Commission ("SEC") in May 2011. By Yahoo's own

8 admission, the Company learned about Ma's ownership transfer on March 31, 2011, (and

9 according to Alibaba, actually learned about it much earlier). Nevertheless, three weeks later,

10 the Company announced positive quarterly results without mentioning the Alipay ownership

11 transfer. In short, the Board was aware of Ma's planned misappropriation of Alipay, failed to

12 prevent the usurpation of Yahoo's valuable financial interest in Alipay, and then concealed the

13 entire ugly episode from Yahoo shareholders. Further, as a result of the Individual Defendants'

14 actions, the Company is being sued by an investor in a securities fraud class action.

15 6. According to reports, Yahoo and Alibaba have reached an agreement on the

16 ownership transfer of Alipay. Instead of demanding the return of Alipay to Alibaba, as would be

17 expected, defendant Ma will instead promise not use Alipay to hurt the value of Taobao, an

18 Alibaba owned e-commerce website. This promise hardly compensates Yahoo for the damage

19 Ma has caused the Company.' It is now apparently clear that the Board will not act to protect the

20 Company. Accordingly, plaintiff now brings this action to remedy the harms caused by the

21 Individual Defendants.

22

23

24

25These reports also stated that defendant Ma's controlled company which now owns Alipay

26 "could also inclzule plans for Mr. Ma's new company to further compensate Alibaba Group forthe Alipay transfer, in part to take into consideration future revenue from processing fees it

27 extracts from websites other than TaobEva."

28- 2 -


Case5 . 11-cv-03302-P SG Document1 Filed07/06/11 Page4 of 29


2 7. This Court has jurisdiction over all causes of action asserted herein pursuant to 28

3 U.S.C. §1332(a) in that plaintiff and defendants are citizens of different states and the amount in

4 controversy exceeds $75,000, exclusive of interest and costs. Defendants are citizens of

5 California, Nevada, New York, and China. Plaintiff is not a citizen of any of these states and is

6 not a citizen of a foreign country. This action is not a collusive action designed to confer

7 jurisdiction on a court of the United States that it would not otherwise have.

8 8. This Court has jurisdiction over each defendant named herein becauve each

9 defendant is either a corporation that conducts business in and maintains operations in this

10 District, or is an individual who has sufficient minimum contacts with this District so as to

11 render the exercise of jurisdiction by the District courts permissible under traditional notions of

12 fair play and substantial justice.

13 9. Venue is proper in this Court pursuant to 28 U.S.C. §1391(a) because a

14 substantial portion of the transactions and wrongs complained of herein, including the

15 defendants' primary participation in the wrongful acts detailed herein, and aiding and abetting

16 and conspiracy in violation of fiduciary duties owed to Yahoo, occurred in this District

17 INTRADISTRICT ASSIGNMENT

18 10. A substantial portion of the transactions and wrongdoings which give rise to the

19 oinims in this action occurred in the county of Santa Clara, and as such, this action is properly

20 assigned to the Sal/ Jose division of this Comt

21 THE PARTIES

22 11. Plaintiff Iron Workers Mid-South Pension Fund purchased Yahoo stock on June

23 8, 2010, and has continuously been a shareholder since that lime. Plaintiff is a citizen of

24 Oklahoma, Louisiana, Mississippi, and Texas.

25 12. Nominal defendant Yahoo is a Delaware corporation with principal executive

26 offices located at 701 First Avenue, Sunnyvale, California. Yahoo is a leading digital media

27 company that delivers personalized digital content and experiences, across devices and around

28

- 3 - VERIFIED SHAREHOLDER DERIVATIVE COMPLAINT


1 the globe, to vast audiences. Yahoo provides engaging and innovative canvases for advertisers

2 and online properties and services to users.

3 13. Defendant Carol Bartz (Tart") is Yahoo's CEO and a director and has been

4 since January 2009. Bartz is also Yahoo's President and has been since April 2009. Bartz

5 knowingly, recklessly, or with gross negligence: (1) made improper statements regarding the

6 Company's business health, operations, and future; and (ii) failed to implement an effective

7 system of internal and financial controls to ensure the Company's assets, in particular its most

8 valuable asset, Alibaba, were protected. Finally, on information and beliet Bartz has agreed in

9 principle to an arrangement with defendant Ma that would not result in him returning Ahpay to

10 Alibaba or him paying Alibeha fair value for Alipay. Bartz is named as a defendant in a

11 sectuities class action complaint that alleges she violated sections 10(b) and 20(a) of the

12 Securities Exchange Act of 1934. Bartz is a citizen of California.

13 14. Defendant Yang is a Yahoo director and has been since March 1995. Yang was

14 also Yahoo's CEO Officer from June 2007 to January 2009. Yang co-founded Yahoo in 1994.

15 Yang is also a director of Alibaba, a privately-held Company which manages investments in

16 several Asia-based Internet businesses, and has been Since 2005. Yang knowingly or recklessly:

17 (i) made improper statements regarding the Company's business health, operations, and future;

18 and (ii) failed to implement an effective system of internal and financial controls to ensure the

19 Company's assets, in particular its most valuable asset, Alibaba, were protected. Finally, on

20 information and ballet Yang has agreed to principle to an arrangement with defendant Ma that

21 would not result in him returning Alipay to Alibaba or him paying Alibaba fair value for Alipay.

22 Yang is also named as a defendant in a securities class action complaint that alleges he violated

23 sections 10(b) and 20(a) of the Securities Exchange Act of 1934. Yang is a citizen of California.

24 15. Defendant Roy J. Bostock (13ostock") is Yahoo's Chairman of the Board and has

25 been since January 2008 and a director and has been since May 2003. Bostock knowingly or

26 reckleasly. (i) made improper statements regarding the Company's business health, operations,

27 and future, and (ii) failed to implement an effective system of internal and financial controls to

28 ensure the Company's assets, in particular its most valuable asset, Alibaba, were protected.



1 Finally, on information and ballet Bostock has agreed in principle to an arrangement with

2 defendant Ma that would not result in him returning Alipay to Alibaba or him paying Alibaba

3 fair value for Alipay. Rostock is a citizen of New York.

4 16. Defindant Patti S. Hart ("Hart") is a Yahoo director and has been since June

5 2010. Hart is also a member of Yahoo's Audit Committee and has been since June 2010. Hart

6 knowingly or recklessly: (1) made improper statements regarding the Company's business health,

7 operations, and future; and (ii) failed to implement an effective system of internal and financial

8 controls to ensure the Company's assets, in particular its most valuable asset, Alibaba, were

9 protected. Finally, on information and belief; Hart has agreed in principle to an arrangement

10 with defendant Ma that would not result in him returning Alipay to Alibaba or him paying

11 Alibaba fair value for Alipay. Hart is a citizen of Nevada.

12 17. Defendant Susan M. James ("James") is a Yahoo director and has been since

13 January 2010. James is also Chair of Yahoo's Audit Committee and has been since January

14 2010. James knowingly or recklessly: (1) made improper statements regarding the Company's

15 business health, operations, and future; and (ii) failed to implement an effective system of

16 internal and financial controls to ensure the Company's assets, in particular its most valuable

17 asset, Alibaba, were protected. Finally, on information and belief; James has agreed in principle

18 to an arrangement with defendant Ma that would not result in him returning Alipay to Alibaba or

19 him paying Alibaba fair value for Alipay. James is a citizen of California.

20 18. Defendant Vyomesh Jot ("Josh?) is a Yahoo director and has been since July

21 2005. Jot is also a member of Yahoo's Audit Committee and has been since at least June 2008

22 and a member of the Transactions and Strategic Planning Committee and has been since at least

23 April 2011. Jot knowingly or recklessly: (i) made improper statements regarding the



26 valuable asset, Alibaba, were protected. Finally, on information and belief; Joshi has agreed in

27 principle to an arrangement with defendant Ma that would not result in him returning Alipay to

28 Alibaba or him paying Alibaba fair value for Alipay. Jot is a citizen of California.


Case51 1 -cv-03a.02-PSG Document1 Filed07/06/11 Page7 of 29

1 19. Defendant Arthur H. Kern ("Kern") is a Yahoo director and has been since

2 January 1996. Kern knowingly or recklessly: (i) made improper statements regarding the

3 Company's business health, opera/ions, and fixture; and (ii) failed to implement an effective


5 valuable asset, Alibaba, were protected. Finally, on information and belief, Kern has agreed in

6 principle to an arrangement with defendant Ma that would not result in him retaining Alipay to

7 Alibaba or him paying Alibaba fair value for Alipay. Kern is a citizen of California.

8 20. Defendant Brad D. Smith ("Smith") is a Yahoo director and has been since June

9 2010. Smith is also a member of Yahoo's Transactions and Strategic Planning Committee and

10 has been since at least April 2011. Smith knowingly or recklessly (i) made improper statements

11 regarding the Company's business health, operations, and fixture; and (ii) failed to implement an

12 effective system of internal and financial controls to ensure the Company's assets, in particular

13 its most valuable asset, Alibaba, were protected. Finally, on information and belief, Smith has

14 agreed in principle to an arrangement with defendant Ma that would not result in him returning

15 Alipay to Alibaba or him paying Alibaba fair value for Alipay. Smith is a citizen of California.

16 21. Defendant Gary L. Wilson ("Wilson") is a Yahoo director and has been since

17 November 2001. Wilson is also a member of Yahoo's Audit Committee and has been since at

18 least June 2008. Wilson knowingly or recklessly (i) made improper statements regarding the



21 valuable asset, Alibaba, were protected. Finally, on information and belief, Wilson has agreed in

22 principle to an arrangement with defendant Ma that would not result in him returning Alipay to

23 Alibaba or him paying ALibaba Thir value for Alipay. Wilson is a citizen of California.

24 22. Defendant Ma is Alibaba's Chairman and CEO and has been since 1999, Ma is

25 also a director of SOFTBANK Corp. ("SOFTBANK"), a leading digital information Company

26 and investor in Alibaba, and has been since June 2007. Defendant Ma caused Alibaba to transfer

27 its entire equity interest in Mipay to another private Company he controlled for only $46 million.

28- 6 -


Case5 . 11-cv-03302-PSG Document1 Filed07106111 Page8 of 29

1 By doing so, Ma usurped Alibaba's interest in Alipay and Yahoo's valuable financial interest in

2 Alipay at a blatantly inadequate and unfair price. Ma is a citizen of China.

3 23. The defendants identified in iiN13-14 are refound to herein as the "Officer

4 Defendants." The defendants identified in W13-21 are referred to herein as the "Director

5 Defendants." The defendants identified in W16-18, 21 are referred to herein as the "Audit

6 Committee Defendants." The defendants identified in 111113-21 are referred to herein as the

7 'Yahoo Defendants." The defendants identified in W13-22 are referred to herein as the

8 "Individual Defendants."

9 DUTIES OF THE YAHOO DEFENDANTS

10 Fiduciary Duties

11 24. By reason of their positions as officers, directors, and/or fiduciaries of Yahoo and

12 because of their ability to control the business and corporate affairs of Yahoo, the Yahoo

13 Defendants owed and owe Yahoo and its shareholders fiduciary obligations of trust, loyalty,

14 good faith, and due care, and were and are required to use their utmost ability to control and

15 manage Yahoo in a fair, just, honest, and equitable manner. The Yahoo Defendants were and are

16 required to act in furtherance of the best interests of Yahoo and its shareholders so as to benefit

17 all shareholders equally and not in furtherance of their personal interest or benefit

18 25. Each officer and director of the Company owes to Yahoo and its shareholders the

19 fiduciary duty to exercise good faith and diligence in the administration of the affairs of the

20 Company and in the use and preservation of its property and assets, and the highest obligations

21 of fair dealing. In addition, as officers and/or directors of a publicly held company, the Yahoo

22 Defendants had a duty to promptly disseminate accurate and truthful information with regard to

23 the Company's operations, performance, management, projections, and forecasts so that the1

24 market price of the Company's stock would be based on truthful and accurate information.

25 Additional Dudes of the Audit Committee Defendants

26 26. In addition to these duties, under the Company's Audit Committee Charter in

27 effect since at least 2010, the Audit Committee Defendants, Hart, James, Joshi, and Wilson,

28 owed specific duties to Yahoo to oversee the Company's accounting and financial reporting



1 process. In particular, the Audit Committee was and is charged with reviewing the Companys

2 earnings press releases, guidance, and quarterly and annual financial statements.

3 27. The Audit Committee's Charter also expressly provides that the Audit Committee

4 must review and discuss with management and the independent auditors, periodically, the

5 following:

6 (a) all significant deficiencies in the design or operation of internal controls

7 which could adversely affect the Company's ability to record, process, summarize, and report

8 financial date, including any material weaknesses in internal controls identified by the

9 Company's independent auditors;

10 (b) any fraud, whether or not material, that involves management or other

11 employees who have a significant role in the Company's internal controls; and

12 (c) any significant changes in internal controls or in other factors that could

13 significantly affect internal controls, including any corrective actions with regard to significant

14 deficiencies and material weaknesses.

15 Control, Access, and Authority

16 28. The Yahoo Defendants, because of their positions of control and authority as

17 officers and/or directors of Yahoo, were able to and did, directly and/or indirectly, exercise

18 control over the wrongful acts complained of herein, as well as the contents of the various public

19 statements issued by the Company.

20 29. Because of their advisory, executive, managerial, and directorial positions with

21 Yahoo, each of the Yahoo Defendants had access to adverse, non-public information about the

22 financial condition, operations, and growth prospects of Yahoo. While in possession of this

23 material, non-public information, the Yahoo Defendants made improper representations

24 regarding the Company, including information regarding Yahoo's relationship with Alibaba and

25 Alipay.

26 30. At all times relevant hereto, each of the Yahoo Defendants was the agent of each

27 of the other Yahoo Defendants and of Yahoo, and was at all times acting within the course and

28 scope of such agency.


Case5 . 11-cv-03302-PSG Documentl Filed07106111 Pagel 0 of 29

I Reasonable and Prudent Supervision

2 31. To discharge their duties, the officers and directors of Yahoo were required to

3 exercise reasonable and prudent supervision over the management, policies, practices, and

4 controls of the financial affairs of the Company. By virtue of such duties, the officers and

5 directors of Yahoo were required to, among other things-

6 (a) properly and accurately guide investors and analysts as to the true

7 financial condition of the Company at any given time, including making accurate statements

8 about the Company's financial health;

9 (b) ensure that the Company complied with its legal obligations and

10 requirements, inclnding acting only within the scope of its legal authority and disseminating

11 truthful and accurate statements to the investing public;

12 (e) refrain from acting upon material, inside corporate information to benefit

13 themselves;

14 (d) conduct the affairs of the Company in an efficient, business-like manner

15 so as to make it possible to provide the highest quality performance of its business, to avoid

16 wasting the Company's assets, and to maximize the value of the Company's stock;

17 (e) remain informed as to how Yahoo conducted its operations, and, upon

18 receipt of notice or information of imprudent or unsound conditions or practices, make

19 reasonable inquiry in connection therewith, and take steps to correct such conditions or practices

20 and make such disclosures as necessary to comply with securities laws; and

21 (f) ensure that the Company was operated in a diligent, honest, and prudent

22 manner in compliance with all applicable laws, rules, and regulations.

23 Breaches of Duties

24 32. Each Yahoo Defendant, by virtue of his or her position as a director and/or

25 officer, owed to the Company and to its shareholders the fiduciary duty of loyalty and good faith

26 and the exercise of due care and diligence in the management and administration of the affairs of

27 the Company, as well as in the use and preservation of its property and assets. The conduct of

28 the Yahoo Defendants complained of herein involves a knowing and culpable violation of their


Case5 • 11-cv-03302-PSG Documentl Filed07/06/11 Pagel 1 of 29

1 obligations as officers and directors of Yahoo, the absence of good faith on their part, and a

2 reckless disregard for their duties to the Company and its shareholders that the Yahoo

3 Defendants were aware or should have been aware posed a risk of serious injury to the

4 Company. The conduct of the Yahoo Defendants who were also officers and/or directors of the

5 Company have been ratified by the remaining Yahoo Defendants who collectively comprised all

6 of Yahoo's Board.

7 33. The Yahoo Defendants breached their duty of loyalty and good faith by allowing

8 defendants to cause, or by themselves causing, the Company to make improper statements. The

9 Yahoo Defendants also failed to prevent the other Yahoo Defendants from taking such illegal

10 actions. The Yahoo Defendants also breached their duty of loyalty by failing to properly monitor

11 and set up internal controls to monitor the Company's most important asset, Alibaba. In

12 addition, as a result of defendants' illegal actions and course of conduct, the Company is now the

13 subject of a class action lawsuit that alleges violations of securities laws. As a result, Yahoo has

14 expended, and will continue to expend, significant sums of money.

15 CONSPIRACY, AIDING AM) ABETTING, AND CONCERTED ACTION

16 34. In committing the wrongful acts alleged herein, the Yahoo Defendants have

17 pursued, or joined in the pursuit of a common course of conduct, and have acted in concert with

18 and conspired with one another in furtherance of their common plan or design. In addition to the

19 wrongful conduct herein alleged as giving rise to primary liability, the Yahoo Defendants further

20 aided and abetted and/or assisted each other in breaching their respective duties.

21 35. During all times relevant hereto, the Yahoo Defendants, collectively and

22 individually, initiated a course of conduct that was designed to and did: (i) deceive the investing

23 public, including shareholders of Yahoo, regarding the Yahoo Defendants' management of

24 Yahoo's operations; and (ii) enhance the Yahoo Defendants' executive and directorial positions at

25 Yahoo and the profits, power, and prestige that the Yahoo Defendants enjoyed as a result of

26 holding these positions. In furtherance of this plan, conspiracy, and course of conduct, the

27 Yahoo Defendants, collectively and individually, took the actions set forth herein.

28


Case5:11-cv-03302-PSG Document1 Filed07/06/11 Pagel 2 of 29

1 36. The Yahoo Defendants engaged in a conspiracy, common enterprise, and/or

2 common •course of conduct. During this time, the Yahoo Defendants caused the Company to

3 issue improper financial statements.

4 37. The purpose and effect of the Yahoo Defendants' conspiracy, common enterprise,

5 and/or common course of conduct was, among other things, to disguise the Yahoo Defendants'

6 violations of law, breaches of fiduciary duty, waste of corporate assets, and unjust enrichment;

7 and to conceal adverse infornaation concerning the Company's operations, financial condition,

8 and future business prospects

9 38. The Yahoo Defendants accomplished their conspiracy, common enterprise, and/or

10 common course of conduct by causing the Company to purposefully or recklessly release

11 improper statements. Because the actions described herein occurred under the authority of the

12 Board, each of the Yahoo Defendants was a direct, necessary, and substantial participant in the

13 conspiracy, common enterprise, and/or common course of conduct complained of herein.

14 39. Each of the Yahoo Defendants aided and abetted and rendered substantial

15 assistance in the wrongs complained of herein. In taking such actions to substantially assist the

16 commission of the wrongdoing complained of herein, each Yahoo Defendant acted with

17 knowledge of the primary wrongdoing, substantially assisted in the accomplishment of that

18 wrongdoing, and was aware of' his or her overall contribution to and furtherance of the

19 wrongdoing.

20 BACKGROUND ON YAHOO AND ALIBABA

21 40. Yahoo, based in Sunnyvale, California, is a global digital media Company.


23 Company has largely failed to keep up with Google Inc. and struggled to grow in highly

24 regulated and politicized fast-growing markets like China.

25 41. To overcome this situation, in 2005, Yahoo invested $1 billion for a 40% interest

26 in Alibaha, China's largest c-commerce company, and one seat on Alibaha's four-person board of

27 directors. As a part of their strategic partnership, Yahoo also turned over operation of Yahoo

28 China to Alibaha. In a shareholder report discussing the Yahoo-Alibaba strategic partnership,



1 and heralding the transaction as a great opportunity for Yahoo to expand its business in China,

2 Yahoo stated:

3 Through this transaction, the Company has combined its leading searchcapabilities with Alibaba's leading online marketplace and online payment4 systems and Alibaba's strong local presence, expertise and vision in the China

5 market. These factors contributed to a purchase price in excess of the Company'sshare of its fair value of Aliababa's net tangible and intangible assets acquired

6 resulting in goodwilL

7 42. As the remainder of the decade unfolded, Alibaba grew rapidly, but Yahoo not so

8 much. Thus, by 2011, Yahoo's 40% stake in Alibaba had grown significantly in importance to

9 Yahoo and, in fact, had become, according to many industry experts, Yahoo's most valuable

10 corporate asset, accounting for as much as two-thuds of Yahoo's entire $21 billion market

11 capitalization.

12 43. For example, as famed hedge fund manager David Einhorri's Greenlight Capital

13 wrote about Yahoo in April 2011, "Me would not be surprised if YHOO's 40% stake in Alibaba

14 Group alone was ultimately worth YHOO's entire current market value." Greenlight Capital

15 continued

16 We believe that Yahoo's most valuable asset is its 40% stake in Alibaba Group'sstill-private holdings, which are separate and distinct fowl its ownership in the

17 publicly-traded Alibaba.com, which we are essentially getting for free ....18 44. Until recently, one of Alibaba's most profitable "still-private holdings" was

19 Alipay, an e-commerce payment system similar to eBay Inc.'s PayPal, As China's economy

20 grew rapidly during the late 2000s, so did Alipay's profits. According to U.S. securities analysts,

21 including Brett Harriss of Gabelli & Co, Alipay is worth more than $5 billion. But most

22 importantly for Yahoo and its shareholders, Yahoo, as Alibaba's largest shareholder, had a direct,

23 connection to the profits stemming from Alipay's fast-growing and lucrative online payment

24 system.

25 45. Doing business in China can be complex and difficult for U.S. companies.

26 Yahoo's experience in China has been no different But, unlike other large U.S. publicly traded

27 companies, Yahoo's single most valuable corporate asset is an investment tied up in a foreign

28


Case5 11-cv-03302-PSG Document1 Filed07/06/11 Pagel 4 of 29

1 corporation located in China, more than 4,000 miles away from Yahoo's corporate headquarters

2 located in Sunnyvale, California.

3 46. Because of this unique and delicate risk specific to Yahoo, the Yahoo Defendants,

4 as Yahoo's directors owed the Company a fiduciary obligation to safeguard Yahoo's investment

5 in Alibaba and, at all times, to shield it against unnecessary risks of loss, including from

6 misappropriation of assets or usurpation of corporation opportunities by Alibaba's insiders,

7 including defendant Ma, Alibaba's Chairman and CEO. However, as detailed, below, the Yahoo

8 Defendants utterly failed to implement the internal controls and systems for protecting Yahoo's

9 material investment in Alibaba, with disastrous results for Yahoo and its shareholders

10 THE ALEPAY OWNERSHIP TRANSFER AND THE YAHOO DEFENDANTS'

11 IMPROPER STATEMENTS

12 47. According to Alibaba, over the past three years the Alibaba board of directors

13 (which defendant Yang was a member) repeatedly discussed new regulatory requirements in

14 China that could require the transfer of Alipay into different ownership. At a July 2009 Alibaba

15 board of director's meeting, Alibaba management told the board of directors that it would

18 transfer Alipay to Chinese ownership. In August 2010, Alibaba transferred Alipay's equity to

17 another private Company controlled by defendant Ma by August 2010. Thereafter, Alipay was

/ 8 deconsolidated, leaving Alibaba without any ownership interest in Alipay, and Yahoo without

19 any connection to the profits stemming from Alipay's lucrative e-COMIIIICIte payment system.

20 According to some reports, Ma paid Alibaba only $46 million for Alipay, despite its estimated

21 market value of $5 billion.

22 48. Between at least August 2010 and April 2011, the Yahoo Defendants caused the

23 Company to issue a series of reports to shareholders that failed to disclose that defendant Ma

24 transferred Ali-babas ownership in Alipay to another private Company he controlled. For

25 example, in Yahoo's SEC report on Form 10-Q for the quarter ended September 30, 2010, filed

28 on November 8, 2010, when discussing Yahoo's investment in Alibaba and its impact on Yahoo's

' 27 business, the Company stated:

28



Equity Investment in Alibaba Group. The investment in Alibaba Group Holding1 Limited ("Alibaba Group") is accounted for using the equity method, and the total2 investment, including net tangible assets, identifiable intangible assets and

goodwill, is classified as part of investments in equity interests on the Companys3 condensed consolidated balance sheets. The Company records its share of the

results of Alibaba Group, and its consolidated subsidiaries, and any related4 amortization expense, one quarter in arrears, within earnings in equity interests in

the condensed consolidated statements of income.5

* *6

7 The loss from operations of $71 million for the nine months ended June 30, 2010is primarily due to Alibaba Group's impairment loss of $192 million on goodwill

8 related to the business that Yahoo! contributed to Alibaba Group. Thisimpairment does not impact Yahool's earnings in equity interests as Yahool's

9 investment balance related to this contributed business was carried over at cost

10and therefore Yahoo! has no basis in the impaired goodwill.

11 The Company also has commercial arrangements with Ali-baba Group to providetechnical, development, and advertising services. For the three and nine months

12 ended September 30, 2009 and 2010, these transactions were not material.

13 49. Similarly, in Yahoo's Annual Report on Form 10-K for the year ended December

14 31, 2010, filed with the SEC on February 28, 2011, defendants Bartz, Bostock, Hart, James,

15 Jot, Kern, Smith, Wilson, and Yang failed to disclose any facts regarding the transfer of Alipay

16 from Alibaba by defendant Ma. Instead, in the 2010 Form 10-K stated:

17 Equity Investment in Allbaba Group. On October 23, 2005, the Company

18 acquired approximately 46 percent of the outstanding common stock of AlibabaGroup, which represented approximately 40 percent on a fully diluted basis, in

19 exchange for $1.0 billion in cash, the contribution of the Company's China-basedbusinesses, including 3721 Network Software Company Limited ("Yahoo!

20 China"), and direct transaction costs of $8 million. Another investor in Alibaba

21Group is SOFTBANK. Alibaba Group is a privately-held Company. Through itsinvestment in Alibaba Group, the Company has combined its search capabilities

22 with Alibaba Group's leading online marketplace and online payment system andAlibaba Group's strong local presence, expertise, and vision in the China market_

23 These factors contributed to a purchase price in excess of the Company's share ofthe fair value of Alibaba Group's net tangible and intangible assets acquired

24 resulting in goodwill.

25 The investment in Alibaba Group is being accounted for using the equity method,

26 and the total investment, including net tangible assets, identifiable intangibleassets and goodwill, is classified as past of investments in equity interests on the

27 Company's consolidated balance sheets. The Company records its share of the

28results of Alibaba Group and any related amortization expense, one quarter in


Case5 . 11-cv-03302-PSG Document1 Filed07/06/11 Pagel 6 of 29

arrears, within earnings in equity interests in the consolidated statements of

1 income.

2The Company's initial purchase price was based on acquiring a 40 percent equity

3 interest in Alibaba Group on a fully diluted basis; however, the Companyacquired a 46 percent interest based on outstanding shares. In allocating the

4 initial excess of the carrying value of the investment in Alibaba Group over itsproportionate share of the net assets of Alibaba Group, the Company allocated a

5 portion of the excess to goodwill to account for the estimated reductions in thecarrying value of the investment in Alibaba that may occur as the Company's

6equity interest is diluted to 40 percent. As of December 31, 2009 and 2010, the

7 Company's ownership interest in Alihaba Group was approximately 44 percentand 43 percent, respectively.

In the initial public offering ("IRO") of Alibaha.com on November 6, 2007,

9 Alibaba Group sold an approximate 27 percent interest in Alibaba.com through

10 the issuance of new Alibaba.00rn shares, the sale of previously held shares inAlibaba.com, and the exchange of certain Alibaba Group shares previously held

11 by Alibaba Group employees for shares in Alihaba.com , resulting in a gain ondisposal of interests in Alibaba.com . Accordingly, in the first quarter of 2008, the

12 Company recorded a non-cash gain of $401 million, net of tax, within earnings inequity interests representing the Company's share of Alibaba Group's gain, and

13 the Company's ownership interest in Alibaba Group increased approximately 1

14 percent from 43 percent to 44 percent.

* * *15

16 Since acquiring its interest in Alibaba Group, the Company has recorded, inretained earnings, cumulative earnings in equity interests of $308 million and

17 $350 million, respectively as of December 31, 2009 and 2010.

18 The Company also has commercial arrangements with Alibaba Group to provide

19technical, development, and advertising services. For the years ended December31, 2009 and 2010, these transactions were not material.

20Equity Investment in Alibaba.com Limited. As part of the LPO of Alibabasom,

21 the Company purchased an approximate 1 percent interest in the common stock ofAlibaba.com. This investment was accounted for using the equity method,

22 consistent with the Company's investment in Alibaba Group, which holds thecontrolling interest in Alibaba.corn. In September 2009, the Company sold its

23 direct investment in Alibaba.com for net proceeds of $145 million and recorded a

24 pre-tax gain of $98 million in other income, net

25 50. On April 19, 2011, Yahoo issued a press release announcing its first quarter 2011

26 financial results. The Company reported earnings of $223 million, or $0.17 diluted earnings per

27

28


Case5:11-cv-03302-PSG Documentl Filed07106111 Pagel 7 of 29

1 share, and revenue of $1,064 million. Notably absent from these were positive results was any

2 mention of defendant Ma's transfer of Alipay.

3 DEFENDANT MA'S TRANSFER OF ALIPAY TO HIMSELF IS REVEALED

4 51. On May 10, 2011, Yahoo revealed, buried in the text of its Quarterly Report on

5 Form 10-Q for the quarter ended March 31, 2011, that "the ownership of Alibaba Group's online

6 payment business, Aftpay, was restructured so that 100 percent of its outstanding shares are held

7 by a Chinese domestic Company which is majority owned by Alibaba Group's chief executive

8 officer, [defendant Ma]."

9 52. On this news, the trading price of Yahoo shares collapsed, wiping out more than

10 $3 billion in valuable shareholders' equity, as shareholders feared that Yahoo's stake in Alibaba

11 could be weakened by the misappropriation of Alipay by defendant Ma. Yahoo's shareholders'

12 equity still has not recovered.

13 53. On May 12, 2011, Yahoo issued a press release entitled "Yahoo! Inc. Releases

14 Statement Regarding Alipay." It was in this press release that the Company revealed that it knew

15 about the Alipay ownership transfer since at least March 31, 2011, almost three weeks before the

16 Company announced its positive first quarter financial results. In particular, the press release

17 stated:

18 On March 31, 2011, Yahoo! and SOFTBANK were notified by Alibaba Group of

19 two transactions that occurred without the knowledge or approval of the AlibabaGroup board of directors or shareholders. The first was the transfer of ownership

20 of Alipay in August 2010. The second was the deconsolidation of Alipay effectivein the first quarter of 2011.

21Yahoo! disclosed this restructuring in its 10-Q after discussions with Alibaba

22 Group and obtaining a better understanding of this complex situation.

23 Yahoo! continues to work closely with Alibaba and Softbank to protect economic24 value for all interested parties. We believe ongoing negotiations among all of the

parties provide the best opportunity to achieve an outcome in the best interest of25 all stakeholders.

26 54. Alibaba responded to Yahoo's press release on May 13, 2011, refuting the

• 27 allegation that the Yahoo Board was surprised by the Alipay ownership transfer. In particular,

28 Aftbaba stated that its board of directors had been meeting over the past three years to discuss



1 Alipay's ownership structure, and was told in July 2009 that Alipay would be transferred to

2 Chinese ownership. The press release stated:

3 Alibaba Group management has taken actions to comply with Chinese law

4 governing payment companies in order to secure a license to continue operatingAlipay. The Alibaha Group board discussed at numerous board meetings over the

5 past three years the impending imposition of new regulatory requirements on theonline payment industry, including ownership structures, as they were being

6 developed in China, and was told in a July 2009 board meeting that majorityshareholding in Alipay had been transferred into Chinese ownership. The actions

7 taken by Alibaba Group management to comply with the licensing regulationsand to ensure continuation of operations are in the best interests of the Companyand its shareholders The continued operation of Alipay is essential to the

9 preservation and enhancement of the value of Alibaba Group's businesses such asTaobao, as Alipay is the payments platform for e-commerce in these businesses.

10

11 55. On May 15, 2011, Yahoo issued a press release entitled "Joint Statement from

12 Alibaba Group and Yahoo! Inc. Regarding AliPsYrn which stated in Part:

13 "Alibaba Group, and its major stockholders Yahoo! Inc. and SoftbankCorporation, are engaged in and committed to productive negotiations to resolve

14 the outstanding issues related to Alipay in a manner that serves the interests of all

15 shareholders as soon as possible."

16 56. Stunned by the Alipay transfer, Yahoo shareholders and financial analysts alike

17 questioned why the Yahoo Defendants had not paid closer attention to the possible change in

18 ownership of Alipay over the years and why the Yahoo Defendants elected not to detail the

19 situation in its April 2011 earnings press release call. For example, on May 13, 2011, The Wall

20 Street Journal quoted Stifel, Nicolaus & Company analyst Jordan Robert stating:

21 "If Yahoo knew of this transaction yet failed to disclose it, for whatever reason,investors could lose faith in other Yahoo disclosure;" Stifel Nicolaus analyst

22 Jordan Rohan said in a note to clients. "If Yahoo did not know about it, trustissues loom even larger, as one could conclude that other material transactions

23 may have occurred and were not disclosed."

24 57. Similarly, on May 23, 2011, Bloomberg quoted Gamco Investors Inc. portfolio

25 manager Larry Haverty stating:•

26 If an asset disappears, that's a risk.... This disappearance apparently took place

27 long before it was announced. That would indicate to me the corporation's risk-control procedures, which are a board responsibility, were not operating in the

28 way that they should have.

- 17 - VERIFIED SHAREHOLDER DERIVATWE COMPLAINT


1 58. On May 31, 2011, reports began to surface that Yahoo and defendant Ma reached

2 an agreement in principle over the ownership transfer of Alipay. According to these reports, as

3 part of the resolution, Alibaba and Ma would promise not to hurt the value of Taobao, an e-

4 commerce site owned by Ahlaba. In addition, the resolution may include plans for the Ma-

5 controlled entity to provide some sort of additional compensation to Alibaba for the Alipay

6 transfer. This agreement, as reported, is woefully in adequate to compensate Yahoo for the

7 billions of dollars in lost in the Alipay transfer or the billions of dollars in liability it now faces.

8 DAMAGES TO YAHOO

9 59. As a result of the Individual Defendants' improprieties, Yahoo disseminated

10 improper public statements concerning its business health and prospects, in light of the loss of its

11 ownership in Alipay. These improper statements have devastated Yahoo's credibility as reflected

12 by the Company's $3.57 billion, or almost 15%, market capitalization loss.

13 60. Further, as a direct and proximate result of the Individual Defendant& actions,

14 Yahoo has expended, and will continue to expend, significant sums of money, including costs

15 incurred from defending and paying any settlement in the class action for violations of federal

16 securities laws and benefits and bonuses paid to the Yahoo Defendants even while they were

17 breaching their fiduciary duties to the Company.

18 61. Finally, Alibaba reportedly only received $46 million for an asset worth $5

19 billion. Based on Yahoo's 40% ownership interest in Alibaba, the Company has lost an asset

20 worth $2 billion to it

21 DERIVATIVE AND DEMAND FUTILITY ALLEGATIONS

22 62. Plaintiff incorporates by reference and rea/leges each and every allegation

23 contained above as though fully set forth herein.

24 63. Plaintiff brings thic action derivatively in the right and for the benefit of Yahoo to

25 redress injuries suffered, and to be suffered, by Yahoo as a direct result of the breaches of

26 fiduciary duty, gross mismanagement, abuse of control, waste of corporate assets, and unjust

27

28- 18 -


Ca se5 . 11-cv-03302-PSG Documentl Filed07/06/11 Page20 of 29

1 enrichment, as well as the aiding and abetting thereof, by the Yahoo Defendants. Yahoo is

2 named as a nominal defendant solely in a derivative capacity.

3 64. Plaintiff will adequately and fairly represent the interests of Yahoo in enforcing

4 and prosecuting its rights.

5 65. Plaintiff was a Yahoo shareholder at the time of the wrongdoing of which he

6 complains, and is currently a Yahoo shareholder

7 66. At the time plaintiff filed this case, the Board of Yahoo consisted of the following

8 ten individnals: David Kenny, and defendants Bartz, Bostock, Hart, James, Joshi, Kern, Smith,

9 Wilson, and Yang. Plaintiff has not made any demand on the present Board to institute this

10 action because such a demand would be a futile, wasteful, and useless act, as set forth below.

1/ 67. Defendants Bartz, Rostock, Hart, James, Joshi, Kern, Smith, Wilson, and Yang

12 have known about defendant Ma's transfer of Alipay to himself from Alibaba since at least

13 March 31, 2011, yet have not instituted litigation against Ma. Further, according to reports,

14 Yahoo has reached an agreement in principle with Ma over the Alipay transfer that does not

15 involve him returning it to Alibaba, and on information and belief, the potential payment he is

16 considering is not close to the actual value of Alipay. Rather, the main consideration defendant

17 Ma is offering is merely a promise not to hurt one of Alibaba's other key assets, Taobao, an

18 obligation Ma is already under since he is CEO of Alibaba. In other words, the Board is set to

19 allow Ma to essentially take a $5 billion asset from Alibaba in exchange for a promise to do

20 something he is already required to do. The Board's decision to essentially give away an asset

21 worth billions of dollars is not a decision protected by the business judgment rule and

22 demonstrates the futility of making a demand upon the Board.

23 68. In addition to being the founder and "Chief Yahoo!" of the Company, defendant

24 Yang sits on the Board of Alibaba. Over the past three years, Yang was told about new

25 regulatory requirements in China concerning the online payment industry regarding ownership

26 structure of the payment entities dining Board meetings. On information and ballet the potential

27 transfer of Alipay to defendant Ma was discussed at these meetings. Moreover, at the July 2009

28 Alibaba board of directors meeting, Alibaba informed its directors, including Yang, about the



1 decision to transfer Alipay ownership to Ma. Nevertheless, he did not disclose the Alipay

2 transfer to the public and made improper statements concerning the Company's business for

3 almost two years. Therefore, Yang aces a substantial likelihood of liability, raising a reasonable

4 doubt about his ability to disinterestedly consider a demand.

5 69. Moreover, defendant Yang, as Yahoo's representative on the Alibaba board of

6 directors was charged with monitoring Alibaba and its largest asset, Alipay. Thus, Yang had a

7 strict fiduciary duty to ensure that Yahoo's best interests were being represented by the Alibaba

8 board of directors. Nevertheless, Yang oversaw Alibaba's transfer of its $5 billion asset to

9 defendant Ma for only $46 million. This complete abdication of duties subjects Yang to a

10 substantial likelihood of liability; raising a reasonable doubt about his ability to disinterestedly

11 consider a demand.

12 70. Demand is futile as to defendant Bartz because she faces a substantial likelihood

13 of liability. Defendant Bartz, as the Company's CEO and President was ultimately responsible

14 for the Company's operations, financial statements, and internal controls. As detailed herein,

15 Bartz, however, made a number of improper statements concerning the Company's business

16 health and prospects that failed to reveal defendant Ma's self-dealing transfer of Alipay to

17 himself Instead, Bartz continued to present Yahoo's investment in Alibaba as if it still owned

18 Alipay.

19 71. Defendants Bartz, Bostock, Hart, James, Joslai, Kern, Smith, Wilson, and Yang all

20 face a substantial likelihood of liability by patently failing in their duty to implement adequate

21 internal controls to monitor and protect Yahoo and its assets, including its most important assets,

22 its ownership interests in Alipay. One specific example of their failure to implement adequate

23 internal controls and protect the Company's assets is defendants Bartz, Bostock, Hart, James,

24 Jot, Kern, Smith, Wilson, and Yang's troubling decision to only appoint one director to the

25 board of directors of Alibaba. As The Wall Street Journal reported on May 31, 2011, Yahoo had

• 26 the option of placing two board members of Alibaba's board, stating: "Yahoo might have been

27 better informed had it filled the second seat on Mibaba's board to which it was entitled.... Two

28 seats would give you more attention paid." This failure to take advantage of a key monitoring



1

1 and decision making role concerning Yahoo's most valuable asset represents a complete

2 abdication of fiduciary duty by defendants Bartz, Bostock, Hart, James, Joshi, Kern, Smith,

3 Wilson, and Yang. Defendant Bartz, Rostock, Hart, James, Joshi, Kern, Smith, Wilson, and

4 Yang's failure significantly harmed Yahoo when defendant Ma transfellad Alipay to himself for

5 a patently inadequate amount According, demand upon defendants Bartz, Rostock, Hart, James,

6 Joshi, Kern, Smith, Wilson, and Yang is futile.

7 72. Defendants Bartz, Bostock, Hart, James, Jot, Kern, Smith, Wilson, and Yang

8 also face a substantial likelihood of liability for making improper statements about the

9 Company's business health and prospects. In particular, since at least August 2010 through May

10 2011, Yahoo issued improper statements concerning Yahoo's investment in Alibaba and its status

11 and impact on Yahoo's business and affairs. Defendants Bartz, Rostock, Hart, James, Joshi,

12 Kern, Smith, Wilson, and Yang all made improper statements during this time because they

13 either knew OT in reckless disregard for the fiduciary duties did not know that Alibaba had

14 transferred ownership to an entity controlled by defendant Ma. Further, it is undisputed that

15 since at least March 31, 2011, the Board knew about Alibaba's transfer of ownership of Alipay to

16 defendant Ma. Despite knowing about this transfer, the Board allowed Yahoo to issues its April

17 19, 2011, press release announcing its first quarter financial results without disclosing the Alipay

18 ownership transfer. Defendants Bartz, Bostock, Hart, James, Joshi, Kern, Smith, Wilson, and

19 Yang knowing complete and total disregard for their duty of candor cannot be a decision

20 protected by the business judgment rule and furthermore is in violation of their fiduciary duties

21 of loyalty. Accordingly, demand upon defendants Bartz, Bostoelc, Hart, James, Jot, Kern,

22 Smith, Wilson, and Yang is futile.

23 73. Defendants Hart, James, Joshi, and Wilson, as members of the Audit Committee,

24 had additional and heightened responsibilities, including reviewing and discussing: (1) the

25 Company's earnings press releases, as well as financial information and earnings guidance

26 provided by the Company to analysts and rating agencies; and (ii) the Company's internal

27 controls. Thus, the Audit Committee was responsible for overseeing and directly participating in

28 Yahoo's financial reporting process, as well as the governance of Yahoo's financial assets,- 21 -

VERINED SHAREHOLDER DERIVATIVE COMPLAINT


1 including Mamba. Nevertheless, defendants Hart, James, Joshi, and Wilson utterly failed to act

2 in accordance with their duties. Defendants Hart, James, Joshi, and Wilson each reviewed and

3 approved the improper public statements concerning the Company's business health and

4 prospects. The most blatant example of defendants Hart, James, Jot, and Wilson's failure to

5 abide by their duties is their review and approval of the April 19, 2011, press release announcing

6 the Company's first quarter 2011 financial results, which made no mention of the Alipay

7 ownership transfer. In addition, defendants Hart, James, Joshi, and Wilson, as members of the

8 Audit Committee, utterly failed to maintain adequate internal controls over Yahoo's most

9 valuable asset and participated in the preparation of improper financial statements and earnings

10 press releases that contained false and/or misleading material information about this asset

11 Accordingly, defendants Hart, James, Josh, and Wilson face a substantial likelihood of liability,

12 creating a reasonable doubt that making a demand upon them would have been futile.

13 74. Any suit by the current directors of Yahoo to remedy these wrongs would likely

14 expose the Yahoo Defendants to further violations of the securities laws that would result in civil

15 actions being filed against one or more of the Yahoo Defendants, and thus, they are hopelessly

16 conflicted in making any supposedly independent determination whether to sue themselves.

17 75. Yahoo has been and will continue to be exposed to significant losses due to the

18 wrongdoing complained of herein, yet the Yahoo Defendants and current Board have not filed

19 any lawsuits against themselves or others who were responsible for that wrongful conduct to

20 attempt to recover for Yahoo any part of the damages Yahoo suffered and will suffer thereby.

21 76. If the current directors were to bring this derivative action against themselves,

22 they would thereby expose their own misconduct, which underlies allegations against them

23 contained in class action complaints for violations of securities law, which admissions would

24 impair their defense of the class actions and greatly increase the probability of their personal

25 liability in the class actions, in an amount likely to be in excess of any insurance coverage

26 available to the Yahoo Defendants. In essence, they would be forced to take positions contrary

27 to the defenses they will likely assert in the securities class actions. This they will not do. Thus,

28 demand is futile.



1 77. If Yahoo's current and past officers and directors are protected against personal

2 liability for their acts of mismanagement, and breach of fiduciary, duty alleged in this Complaint

3 by directors and officers' liability insurance, they caused the Company to purchase that insurance

4 for their protection with corporate funds, i.e., monies belonging to the stockholders of Yahoo.

5 However, due to certain changes in the language of directors' and officers' liability insurance

6 policies in the past few years, the directors' and officers' liability insurance policies covering the

7 defendants in this case contain provisions that eliminate coverage for any action brought directly

8 by Yahoo against these defendants, known as, inter alt., the "insured versus insured exclusion."

9 As a result, if these directors were to sue themselves or certain of the officers of Yahoo, there

10 would be no directors and officen t insurance protection and thus, this is a further reason why

11 they will not bring such a suit. On the other hand, if the suit is brought derivatively, as this

12 action is brought, such insurance coverage exists and will provide a basis for the Company to

13 effectuate recovery. If there is no directors and officers' liability insurance at all, then the current

14 directors will not cause Yahoo to sue them, since they will face a large uninsured liability.

15 COUNT I

16 Against the Yahoo Defendants for Breach of Hsinchu,/ Duty

17 78. Plaintiff incorporates by reference and realleges each and every allegation

18 contained above, as though fully set forth herein.

19 79. The Yahoo Defendants, owed and owe Yahoo fiduciary obligations. By reason of

20 their fiduciary relationships, the Yahoo Defendants owed and owe Yahoo the highest obligation

21 of good faith, fair dealing, loyalty, and due care.

22 80. The Yahoo Defendants and each of them, violated and breached their fiduciary

23 duties of, care candor, good faith, and loyalty. More specifically, the Yahoo Defendants violated

24 their duty of good faith by consciously failing to prevent to Company from engaging in the

25 unlawful act complained of herein.

26 8 / . The Officer Defendants either knew, were reckless, or were grossly negligent in

27 failing to protect Yahoo's most valuable asset, Alibaba, including by failing to implement

28 adequate internal controls to monitor and secure Alibaba's assets. Further, the Officer



1 Defendants either knew, were reckless is not knowing, or were grossly negligence in cause

2 Yahoo to make improper statements about Yahoo's business and affairs that failed to disclose

3 that Alipay was no longer part of Alibaba.

4 82. The Director Defendants, as directors of the Company, owed Yahoo the highest

5 duty of loyalty. These defendants breathed their duty of loyalty by recklessly permitting the

6 improper activity concerning the transfer of Alipay to defendant Ma. The Director Defendants

7 either knew or were reckless in not knowing that Ma transferred Alipay to himself and caused

8 Yahoo to make improper statements regarding Yahoo's business that failed to reveal this fact.

9 The Director Defendants also breached their duty to implement an internal controls system to

10 protect Yahoo's most valuable asset — its investment in Alibaba — from known and/or reasonably

11 anticipated risks of loss, including the misappropriation of Alibaba's assets by Ma. The Director

12 Defendants' failures to implement internal controls were conscious, and contrary to their duty to

13 act. Accordingly, the Director Defendants breached their duty of loyalty to the Company.

14 83. The Audit Committee Defendants, defendants Hart, James, Joshi, and Wilson,

15 breached their fiduciary duty of loyalty by approving the statements described herein which were

16 made during their tenure on the Audit Committee, which they knew or were reckless in not

17 knowing contained improper statements and omissions. The Audit Committee Defendants

18 completely and utterly failed in their duty of oversight, and defendants Hart, James, Jot, and

19 Wilson failed in their duty to appropriately review financial results, as required by the Audit

20 Committee Charter in effect at the time

21 84. As a direct and proximate result of the Yahoo Defendants' breathes of their

22 fiduciary obligations, Yahoo has sustained significant damages, as alleged herein. As a result of

23 the misconduct alleged herein, these defendants are liable to the Company.

24 85. Plaintiff on behalf of Yahoo, has no adequate remedy at law.

25 COUNT II

26 Against the Yahoo Defendants for Waste of Corporate Assets





1 87. As a result of the Yahoo Defendants failure to conduct proper supervision, Yahoo

2 has wasted its assets by paying improper compensation and bonuses to certain of its executive

3 officers and directors that breached their fiduciary duty.

4 88. As a result of the waste of corporate assets, the Yahoo Defendants are liable to the

5 Company.

6 89. Plaintiff, on behalf of Yahoo, has no adequate remedy at law.

7 COUNT HI

8 Against the Individual Defendants for Unjust Enrichment



11 91. By their wrongful acts and omissions, the Individual Defendants were unjustly

12 enriched at the expense of and to the detriment of Yahoo. The Yahoo Defendants were unjustly

13 enriched as a result of the compensation and director remuneration they received while breaching

14 fiduciary duties owed to Yahoo.

15 92 Defendant Ma was unjustly enriched because he caused Alibaba's ownership of

16 Alipay to be transferred to another private Company that Ma controls. This transfer impaired

17 Yahoo's investment in Alibaba and constitutes misappeapriation of corporate assets.

18 93. Plaintiff; as a shareholder and Irv' ebentative of Yahoo, seeks restitution from

19 these defendants, and each of them, and seeks an order of this Court disgorging all profits,

20 benefits, and other compensation obtained by these defendants, and each of them, from their

21 wrongful conduct and fiduciary breaches.

22 94. Plaintiffi on behalf of Yahoo, has no adequate remedy at law.

23 PRAYER FOR RELIEF

24 WHEREFORE, plaintiff, on behalf of Yahoo, demands judgment as follows:

25 A. Against all of the defendants and in favor of the Company for the amount of

26 damages sustained by the Company as a result of the defendant& breaches of fiduciary duties,

27 waste of corporate assets, and unjust enrichment

28



1 B. Directing Yahoo to take all necessary actions to reform and improve its corporate

2 governance and internal procedures to comply with applicable laws and to protect Yahoo and its

3 shareholders from a repeat of the damaging events described herein, including, but not limited to,

4 putting forward for shareholder vote, resolutions for amendments to the Company's By-Laws or

5 Articles of Incorporation and taking such other action as may be necessary to place before

6 shareholders for a vote of the following Corporate Governance Policies:

7 1. a proposal to strengthen the Company's controls over reporting of the

8 Company's business health and prospects, including its relationship and business dealings with

9 Alibaba;

10 2. a proposal to strengthen the Board's supervision of operations and

11 develop and implement procedures for greater shareholder input into the policies and guidelines

12 of the Board;

13 3. a pmvision to permit the shareholders of Yahoo to nominate at least three

14 candidates for election to the Board; and

15 4. a proposal to strengthen Yahoo's oversight of its disclosure procedures;

16 C. Extraordinary equitable and/or injunctive relief as permitted by law, equity, and

17 state statutory provisions sued hereunder, inchviiag attaching, impounding, imposing a

18 constructive trust on, or otherwise restricting the proceeds of defendants' trading activities or

19 their other assets so as to assure that plaintiff on behalf of Yahoo has an effective remedy;

20 D. Awarding to Yahoo restitution flow defendants, and each of them, and ordering

21 disgorgement of all profits, benefits, and other compensation obtained by the defendants;

22 E. Ordering the transfer of ownership of Alipay back to Alibaba from defendant Ma;

23 F. Awarding to plaintiff the costs and disbursements of the action, including

24 reasonable attorneys' fees, accountants' and experts' fees, costs, and expenses; and

25 G. Granting such other and further relief as the Court deems just and proper.

26

27

28



1 JURY DEMAND

2 Plaintiff demands a trial by jury.

3 Dated: July 5, 2011 ROBBINS LIMEDA LLPBRIAN J. ROBBINS

4 CRAIG W. S a.SHANE P.JI"--r S

5 GINA S

t°11r - BRIAN J. ROBBINS

7600 B Street, Suite 1900

8 San Diego, CA 92101Telephone: (619) 525-3990

9 Facsimile: (619) 525-3991brobbins®robbinsumeda.com

10 [email protected]@lrobbinsumeda.com

11 gstassi©robbinsumeda.corn

12 Attorneys for Plaintiff

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VERIFICATION

I, Christina Carroll, hereby declare as follows:

I am counsel for Iron Workers Mid-South Pension Fund, a shareholder of Yahoo! Inc.

Iron Workers Mid-South Pension Fund has been a shareholder continuously since June 8, 2010.

Iron Workers Mid-South Pension Fund has retained competent counsel and is ready, willing, and

able to pursue its action vigorously on behalf of the Company. I have reviewed the Verified

Shareholder Derivative Company for Breach of Fiduciary Duty, Unjust Enrichment, Waste of

Corporate Assets, and Violations of California Corporations Code (the "Complaint"). Based

upon discussions with and reliance upon my counsel, and as to those facts of which I have

personal knowledge, the Complaint is true and correct to the best of my knowledge, information,

and belief.

I declare under penalty of perjury that the foregoing is true and correct

Signed and Accepted:

Dated: 7 TC I

eiteet-— egArLs:)-17 CHRISTINA CARROLL

EXHIBIT E

THE WEISER LAW FIRM, P.C.

A LEADING NATIONAL SHAREHOLDER LITIGATION FIRM DEDICATED EXCLUSIVELY TOPROTECTING INDIVIDUAL AND INSTITUTIONAL SHAREHOLDERS' INTERESTS AND

PROMOTING IMPROVED CORPORATE GOVERNANCE PRACTICES

FIRM BIOGRAPHY

The Weiser Law Firm, P.C., a national shareholder litigation firm, was founded by its two

principals, Patricia C. Weiser and Robert B. Weiser, in December, 2004. Prior to December, 2004,

Ms. Weiser and Mr. Weiser had both managed litigation groups at one of the nation's largest

shareholder litigation firms. The Weiser Law Firm is devoted to protecting the interests of individual

and institutional investors in shareholder class, derivative and ERISA actions in state and federal

courts nationwide. The attorneys at The Weiser Law Firm devote a large percentage of their time to

addressing complex corporate governance issues.

PATRICIA C. WEISER

Ms. Weiser, a founding member of the firm, received her law degree from the Widener

University School of Law in Wilmington, Delaware. While in law school, she served as an intern

for the Honorable Clarence J. Newcomer, U.S.D.J. for the Eastern District of Pennsylvania. She

is licensed to practice law in Pennsylvania and New Jersey and has been admitted to practice

before the United States District Court for the Eastern District of Pennsylvania and the United

States District Court for the Eastern District of Michigan.

Ms. Weiser's practice is focused on shareholder class action litigation challenging

management misconduct in connection with corporate takeovers and disputed contests for

corporate control. Ms. Weiser participated as lead or co-lead counsel in the following notable

cases where significant financial benefits were achieved for shareholders:

In re Atlas Energy, Inc. Shareholder Litigation (Delaware Chancery Court) in whichClass Counsel were solely responsible for an aggregate benefit to the shareholderclass of more than $7 million and the additional disclosure of over forty pages ofsignificant material information to shareholders concerning the transaction.

In re Mediacom Communications Corp. Shareholders Litigation (Delaware ChanceryCourt) in which Class Counsel were solely responsible for obtaining an aggregatebenefit to the shareholder class of more than $10 million and the additionaldisclosure of significant material information to shareholders concerning thetransaction.

In re Storage USA Shareholder Litigation (Shelby County Chancery Court,Tennessee), in which Class Counsel were solely responsible for an aggregatefinancial benefit to the class of $10.5 million in connection with the acquisition of thecompany by its controlling shareholder;

In re Sodexho Marriot Shareholders Litigation (Delaware Chancery Court), in whichClass Counsel shared responsibility for creating an aggregate financial benefit ofapproximately $166 million for members of the class, in connection with theacquisition of the company by its controlling shareholder, Sodexho Alliance, S.A.;

In re Travelocity.com Shareholder Litigation, (Delaware Chancery Court), in whichClass Counsel shared responsibility for creating an aggregate financial benefit ofapproximately $75 million for members of the class, in connection with theacquisition of the company by its controlling shareholder, Sabre Holdings;

In re Delhaize America Shareholder Litigation (North Carolina Business Court), inwhich Class Counsel shared responsibility for creating an aggregate financial benefitof approximately $225 million for the members of the class in connection with theacquisition of the company by it controlling shareholder; and

Lieb, et al. v. Unocal Corporation, et al. (Los Angeles Superior Court), in whichClass Counsel shared responsibility for creating a $500 million benefit via theincreased consideration paid by Chevron Corp. to Unocal shareholders in themerger. In addition, Co-Lead Counsel caused defendants to issue importantadditional disclosures relating to the proposed merger with Chevron prior to theshareholder vote on the merger.

In addition, the Weiser Law Firm has participated as lead or co-lead counsel in cases

achieving significant therapeutic benefits to shareholders in connection with M&A transactions,

including In re Art Technology Group, Inc., Shareholders Litig., where Class Counsel secured a

preliminary injunction in Delaware Chancery Court, enjoining the close of a $1 billion merger

transaction for defendants' failure to disclose information concerning potential conflicts of

interest suffered by the target company's financial advisor as a result of certain fees previously

paid to that advisor by the buyer in the transaction.

In Weigard v. Hicks, et al., No. 5732-VCS ("Health Grades"), the Weiser Firm and co-

counsel successfully demonstrated to the Delaware Chancery Court that the defendants had likely

breached their fiduciary duties to the company's shareholders by failing to maximize value as

required by Revlon, Inc. v. MacAndrews & Forbes Holdings, Inc., 506 A.2d 173 (Del. 1986). In

Health Grades, the Class Counsel were successful in reaching a settlement in which defendants

agreed to, among other things, modify the merger agreement, including by reducing the termination

fee, imposing a "majority of the minority" requirement, reducing the period of notice to the buyer

before Health Grades could enter into a superior proposal, extending the tender offer so as to allow

other potential bidders an opportunity to make a competing bid, as well as to create and empower

an independent committee. The settlement also required Health Grades to issue a "Fort Howard'

press release.

Moreover, at the preliminary injunction hearing in Health Grades, Vice Chancellor Strine

"applaud[ed]" counsel for their preparation and the extraordinary high-quality of the work:

I want to applaud the lawyers today for being so well prepared. And I particularlywant to applaud the plaintiffs for being not only well prepared but exceedinglymeasured and logical in their argument. I really -- in a world where we all read briefsand letters and probably read e-mails to each other where l-y words are there andeverybody is saying outrageous, the plaintiffs have really focused their claims -- youknow, the claims they pressed in the injunction in a reasonable way. They haven'tthrown hand grenades; but they've made some, frankly, very potent argumentsabout the reasonableness of the board's process without, frankly, making wildlyspeculative -- often we see sinister motives thrown around without basis. Mr.Jenkins and his team admirably really focused on the core of the matter and in avery skillful way.

Ms. Weiser was also part of the litigation team that won an injunction in the seminal

Delaware Chancery Court case In re Pure Resources Shareholder Litigation, forcing changes to

certain terms of the proposed transaction as well as the public disclosure of significant

additional information concerning the transaction, and, ultimately being partially responsible for

an aggregate financial benefit of approximately $41 million for the shareholder class.

ROBERT B. WEISER

Mr. Weiser, a founding member of the firm, received his law degree from the Villanova

University School of Law. While in law school, he also served as a law clerk for the Honorable

Clarence J. Newcomer, U.S.D.J. for the Eastern District of Pennsylvania. He is licensed to

practice law in Pennsylvania and New Jersey and has been admitted to practice before the

United States District Court for the Eastern District of Pennsylvania and the United States

District Court for the District of New Jersey. Mr. Weiser's practice is focused on shareholder

derivative litigation and ERISA class action litigation. While employed at his prior firm, Mr.

Weiser managed the firm's shareholder derivative litigation practice, with a particular focus on

corporate governance matters. Mr. Weiser has been involved in some of the most successful

shareholder derivative actions in the history of corporate litigation. Over the past several years,

Mr. Weiser has been among the nationwide-leaders in prosecuting "option backdating cases" on

a derivative basis. In addition to being among the attorneys that developed the central pleading

theory in the backdating cases (which in turn produced some of the ground-breaking decisions

in this area of law), Mr. Weiser (along with his co-counsel) successfully prosecuted backdating

cases which caused the subject corporations to cumulatively receive tens of millions of dollars

in benefits. More recently, Mr. Weiser has launched a wave of actions that challenge the

executive compensation awarded at the nation's largest banks which received federal "bailout"

funds. A sampling of the notable cases in which Mr. Weiser has served as lead or co-lead

counsel include:

In re Oracle Corp. Derivative Litig., 824 A.2d 917 (Del. Ch. 2003). Mr. Weiserwas co-lead counsel in the Oracle action. In that case, plaintiffs challengedcertain multi-million dollar stock sales made by Oracle's senior officers, includingLarry Ellison, Oracle's founder. Oracle's board of directors appointed a "speciallitigation committee" to investigate plaintiffs' claims, and after a lengthyinvestigation, the committee moved to dismiss the case, having concluded thatplaintiffs' claims lacked merit. Among other things, plaintiffs' challenged theindependence of the committee members, their good faith, and their ultimateconclusion. The court denied the committee's motion, which allowed the actionto proceed to trial. At the time it was issued, the Oracle decision was one of onlyfour reported Delaware cases where a special litigation committee's motion todismiss was denied by a Delaware chancellor and many commentators view theOracle case as a landmark decision for shareholders. For example, the WallStreet Journal called the seminal decision "one of the most far-reaching ever oncorporate governance." This case eventually settled for $100 million on the eve oftrial. Mr. Weiser believes that the $100 million recovery was the second largestderivative settlement ever. The Oracle case, and its impact on corporategovernance matters nationwide, is the subject of numerous scholarly articles andtreatises.

In re Affiliated Computer Services Derivative Litig., USDC for the ND of TX, No.3:06-cv-1110. In this option backdating action, plaintiffs challenged the stockoption grants received by ACS' officers & directors over a multi-year period.Plaintiffs in a related action purported to settle these claims for approximately$1.8 million, a paltry sum which Mr. Weiser and his co-counsel believed was farless than they were worth. After objecting to the settlement of the related action,and engaging in a contentious discovery battle, Mr. Weiser and his co-counselwere able to materially enhance the settlement by securing a $30 millionrecovery for ACS. Mr. Weiser believes that this is the largest derivative recoveryin an action litigated in Texas.

In re KB Home Derivative Litigation, Superior Court of the State of CA, LosAngeles County, Master File No. BC355179. Mr. Weiser was co-lead counsel inthis action. In this option backdating action, plaintiffs challenged the stock optiongrants received by KB Home's officers & directors over a multi-year period. Inaddition to obtaining valuable corporate governance enhancements for KB, Mr.Weiser and his co-lead counsel settled this action for benefits worth at least $30million to KB, making it one of the largest derivative settlements in the history ofCalifornia corporate litigation.

David, et al., v. Woffen, et al., Superior Court of the State of CA, Orange County,Lead Case No. 01-CC-03930 (the "Broadcom Derivative Action"). Mr. Weiserwas co-lead counsel in the Broadcom Derivative Action. Like the Oracle case,the Broadcom Derivative Action was also produced a ground-breakingsettlement. In connection with the eventual settlement of the BroadcomDerivative Action, plaintiffs were able to compel Broadcom to make sweeping,substantial changes to its corporate governance practices which included aprovision which allows Broadcom's shareholders to nominate directors toBroadcom's Board. In particular, the shareholder-nominated director provisionwas thought to be a highly significant and unusual achievement for Broadcom'sshareholders. As the Associated Press reported in commenting on thesettlement: "[in contrast to the Broadcom settlement] the Securities andExchange Commission has met fierce resistance to a proposal just to allowshareholder nominations under very limited circumstances." This type ofcorporate governance relief has only been achieved in a handful of shareholderderivative actions, and it became a model for corporate governance settlementsthat followed.

Barry v. Cotsakos, CV 49084 (San Mateo County, CA) (the "Etrade DerivativeLitigation"). Mr. Weiser was co-lead counsel in the Etrade Derivative Litigation.Mr. Weiser believes that the Etrade Derivative Litigation is one of the mostsuccessful executive compensation cases ever brought against a publicly tradedcorporation's board of directors. In that case, the plaintiff challenged thepayment of excessive compensation awarded to Etrade's then-current ChiefExecutive Officer. As a result of the settlement of the case, Etrade's ChiefExecutive Officer returned approximately $25 million to the Company, and healso agreed to forego other valuable financial benefits. The Etrade settlementalso provided for sweeping changes to the company's corporate governancepractices and the structure of its Board. These measures, and the resultingchange in the public's perception of Etrade, were profiled in a September 8, 2003

Wall Street Journal article entitled "How One Firm Uses Strict Governance To FixIts Troubles." Since the time of the Etrade settlement, Etrade added independentdirectors to its Board, who have since forced out the company's Chief ExecutiveOfficer. In response to these changes, the Company's stock increased morethan 300% in the 18 months following the settlement and the "new" Etrade wasthe subject of several positive media reports.

Klotz v. Parfet, et aL, Case No. 03-06483-CK (In the Circuit Court of JacksonCounty, Michigan) (the "CMS Derivative Litigation"). Mr. Weiser was co-leadcounsel in the CMS Derivative Litigation. In that case, plaintiff alleged that CMS'Board of Directors failed to develop and implement adequate corporategovernance practices and internal controls. Plaintiff alleged that the Board'sinternal control failures caused the Company to suffer enormous damages to itsreputation and prestige. In settling the CMS Derivative Litigation, the WeiserFirm was able to recover $12 million for the Company, and the Board agreed toadopt what one commentator called "some of the most substantial corporategovernance reforms" ever undertaken by a publicly traded corporation. Mr.Weiser believes that the CMS derivative settlement is the largest in the history ofMichigan corporate litigation.

Gebhardt v. Allumbaugh, eta!, Case No. 2002-13602 (Harris County, Texas)(the"El Paso Derivative Litigation"). Mr. Weiser was lead counsel in the El PasoDerivative Litigation. This action centered on the Company's alleged anti-competitive conduct in California during that the state's energy crisis of 2001-02.In addition to making sweeping changes to the Board's structure and the

Company's corporate governance practices, Mr. Weiser was able to secure a$16.75 million recovery for the Company. Mr. Weiser believes that the El PasoDerivative Litigation was either the first or second largest derivative settlement inTexas history at the time it was agreed to.

Eliasoph v. Johnson, C.A. No. 05-CVS-3698 (North Carolina General CivilLitigation Court)(the "SPX Derivative Litigation"). Mr. Weiser was lead counsel inthe SPX Derivative Litigation. Like the Etrade Derivative Litigation, Mr. Weiserbelieves that the SPX Derivative Litigation is among the most successfulexecutive compensation cases ever brought against a publicly tradedcorporation's board of directors. In this case, the plaintiff challenged the fairnessof the Company's entire executive compensation structure. In connection withthe settlement of the SPX action, the Company's board of directors agreed toadopt a new executive compensation plan which was designed in part, withplaintiff's counsel and her expert. The new compensation plan more closelyaligned shareholder and management interests and it was estimated that the newplan would save the Company at least $25 million.

In Re Staples, Inc. Shareholders Litigation, 792 A.2d 934 (Del. Ch. June 5,2001). Mr. Weiser was one of three lead counsel in the Staples action. In thatcase, plaintiffs secured a financial benefit worth at least $12 million to Staples bywinning an injunction preventing Staples from holding a shareholder vote on animproperly disclosed recapitalization plan that would have unfairly benefittedStaples' insiders at the expense of the Company and its stockholders.

Wanstrath v. Doctor R. Crants, et al., C.A. No. 99-1719-III (Tenn. Chan. Ct., 20thJudicial District, 1999)(the "Prison Realty Derivative Litigation"). In the PrisonRealty Derivative Litigation, plaintiff challenged the transfer of assets from PrisonRealty to a private entity owned and controlled by several of the Company's topexecutives. Plaintiffs also alleged that the proposed transaction would havecrippled the Company's liquidity. Plaintiffs were able to halt the plannedtransaction, which prevented the Company from suffering a $120 million loss,which was a highly significant victory in light of the Company's then-precariousfinancial position. As a result of the settlement of the case, the members of theCompany's top management were removed, the composition of the Board ofDirectors was significantly altered and important corporate governance provisionswere also put in place to prevent future abuse. Notably, all of these corporatebenefits occurred at a time when the Company was facing near-certainbankruptcy which would have wiped out shareholders' equity in the Company.Because the Company had adopted these significant changes, it was able torenegotiate the terms of its credit facility with its lenders and it never had to filefor bankruptcy protection. Since the time the case was settled, the Company'snew management has led the Company, now-named Corrections Corporation ofAmerica, to profitability, and the price of the common stock increased more than400% in the two years following the settlement.

Huscher v. Curley, et. at , No. 00 Civ. 21379 (Mich. Cir. Ct., 2000) (the "Sotheby'sDerivative Litigation"). In the Sotheby's Derivative Litigation, plaintiffs alleged thatthe Company's Chief Executive Officer had entered into illegal price-fixingagreements with the Company's leading purported competitor, Christie'sInternational PLC. As a result of the settlement of this case, the Companyreceived the return of certain monetary benefits which had been provided to theChief Executive Officer that were worth approximately $12 million to theCompany. In addition, significant changes in the Company's top managementand Board of Directors were achieved in conjunction with the settlement of thecase.

Mr. Weiser has been a frequent commentator on corporate governance matters and has

lectured on corporate governance issues in both this country and abroad.

BRETT D. STECKER

Mr. Stecker is a graduate of Franklin & Marshall College and of Villanova University School

of Law. While in college, Mr. Stecker earned a B.A. in Government and served as a legislative

intern for United States Senator Alfonse M. D'Amato. While in law school, Mr. Stecker served as

an Executive Member of the Moot Court Board and represented Villanova in national competitions.

Upon graduation from law school, Mr. Stecker was an associate with the Litigation Department of

Blank Rome LLP in Philadelphia, PA. After two years at that firm, Mr. Stecker moved to Weir &

Partners, LLP, a boutique commercial litigation firm in Philadelphia, where he focused his practice

on banking litigation in cases dealing with consumer lending, check fraud, and the enforcement of

guarantee and other security agreements. At The Weiser Law Firm, Mr. Stecker concentrates his

practice on shareholder derivative and ERISA litigation.

JEFFREY J. CIARLANTO

Mr. Ciarlanto is a graduate of The Pennsylvania State University and Villanova University

School of Law. While in college, Mr. Ciarlanto earned Bachelor of Arts degrees in Economics and

Political Science and graduated with honors. During law school, Mr. Ciarlanto served as the

Business Editor of Villanova Law's Sports and Entertainment Law Journal. Mr. Ciarlanto also

served as a judicial extern for the Honorable Matthew D. Carrafiello of the Philadelphia Court of

Common Pleas. Mr. Ciarlanto is licensed to practice law in Pennsylvania and New Jersey. Prior to

joining The Weiser Law Firm, Mr. Ciarlanto was an associate at Marks, O'Neill, O'Brien &

Courtney, P.C., where he focused his practice on labor and employment law. At The Weiser Law

Firm, Mr. Ciarlanto concentrates his practice on shareholder derivative and ERISA litigation.

HENRY J. YOUNG

Mr. Young is a graduate of the University of Sheffield, England and of William Mitchell

College of Law, Minnesota. Mr. Young earned a B.A. in Archaeology and worked as an

archaeologist before moving to the United States and attending law school. During law school, Mr.

Young received the 2000 Kennedy Scholarship for Public Service and the 1997 Founders'

Scholarship. He was also a guest student at Brooklyn Law School specializing in International

Law. Mr. Young has devoted almost his entire legal career to representing investors harmed by

corporate fraud and executive malfeasance. At The Weiser Law Firm, he concentrates his practice

on protecting the interests of investors in corporate mergers and acquisitions.

KATHLEEN A. HERKENHOFF

Ms. Herkenhoff joined The Weiser Law Firm in January 2010, opening the firm's San

Diego, California office. As detailed below, Ms. Herkenhoff has been exclusively litigating securities

actions for 16 years, first at the Securities and Exchange Commission ("SEC") and most recently

as a Partner at Coughlin Stoia Geller Rudman & Robbins LLP in San Diego. Ms. Herkenhoff

earned her Bachelor of Arts degree in English Literature from the University of California (Berkeley)

in 1989. She earned her Juris Doctor degree from Pepperdine University School of Law in 1993,

where she was on the Dean's Honor List and received American Jurisprudence Awards in both

Constitutional Law and Agency-Partnership. Following law school, Ms. Herkenhoff worked at the

SEC's Los Angeles office, investigating and prosecuting complex securities fraud and insider

trading actions.

In 1997, Ms. Herkenhoff joined Milberg Weiss Bershad Hynes & Lerach LLP in Los

Angeles, California, and ultimately moved to the firm's San Diego office, where she served as a

Partner from 2002 to 2009 (the San Diego office became known as Coughlin Stoia). Over the past

12 years at Coughlin Stoia, Ms. Herkenhoff has practiced in all areas of securities class and

derivative litigation, working tirelessly to achieve nearly one billion in settlement recoveries for

victimized shareholders. Many of these settlements also include sweeping corporate governance

improvements negotiated by Ms. Herkenhoff. A sample of notable settlements includes:

• $618 million in opt-out litigation against AOL Time Warner, Inc.

• $122 million in class action against Mattel, Inc.

• $100 million in class action against Honeywell International, Inc.

• $30+ million in derivative stock option backdating cases

Ms. Herkenhoff continues her nearly two decades of securities litigation experience by joining the

firm's extensive M&A and derivative practice groups. Ms. Herkenhoff is licensed to practice law in

all California state and federal courts, as well as in the District of Colorado.

JOSEPH M. PROFY

Mr. Profy is a 1991 graduate of the University of Notre Dame and earned his Juris Doctor

degree Cum Laude from the Dickinson School of Law in 1995. He is licensed to practice law in the

Commonwealth of Pennsylvania and the State of New Jersey and has been admitted to practice in the

United States District Court for Eastern District of Pennsylvania, The Third Circuit Court of Appeals and

the United States Supreme Court. From 1995 to 1997, Mr. Profy served as a law clerk to the

Honorable John P. Fullam, United States District Court for the Eastern District of Pennsylvania. From

1997 to 2002, Mr. Profy was an associate with Reed Smith LLP. In 2002, Mr. Profy joined Blank Rome

LLP as an associate and in 2006 he was elevated to partner at Blank Rome LLP. In June of 2011, Mr.

Profy joined the Weiser Law Firm.

EXHIBIT F

GLANCY BINKOW & GOLDBERG LLPATTORNEYS AT LAW

New York Office 1801 AVENUE OF THE STARS, SUITE 311 SAN FRANCICSO OFFICE

LOS ANGELES, CALIFORNIA 900671430 BROADWAY ONE EMBARCADERO CENTER

SUITE 1603 SUITE 760NEW YoRK, NY 10018 SAN FRANosco, CA94105

TELEPHONE (212) 382-2221 TELEPHONE (310) 201-9150 TELEPHONE (415)972-8160FACSIMILE (212) 382-3944 FAcswELE (310) 201-9160 FACSIIVI[LE (415) 972-8166

[email protected]

FIRM RESUME

Glancy Binkow & Goldberg LLP has represented investors, consumers and employees infederal and state courts throughout the United States for sixteen years. Based in Los Angeles,California and with offices in New York, New York and San Francisco, California, Glancy Binkow& Goldberg has developed expertise prosecuting securities fraud, antitrust and complex commerciallitigation. As Lead Counsel or as a member of Plaintiffs' Counsel Executive Committees, GlancyBinkow & Goldberg has recovered in excess of $1 billion for parties wronged by corporate fraudand malfeasance. The firm's efforts on behalf of individual investors have been the subject ofarticles in such publications as The Wall Street Journal, The New York Times and The Los AngelesTimes.

Appointed as Lead or Co-Lead Counsel by federal judges throughout the United States,Glancy Binkow & Goldberg has achieved significant recoveries for class members, including:

In re Mercury Interactive Corporation Securities Litigation USDC Northern District of California,Case No. 05-3395, in which Glancy Binkow & Goldberg served as Co-Lead Counsel and achieveda settlement valued at over $117 million.

In re Real Estate Associates Limited Partnership Litigation, USDC Central District of California,Case No. 98-7035 DDP, in which the firm served as local counsel and plaintiffs achieved a $184million jury verdict after a complex six week trial in Los Angeles, California and later settled thecase for $83 million.

In re Lumenis, Ltd. Securities Litigation USDC Southern District of New York, Case No.02-CV-1989, in which Glancy Binkow & Goldberg served as Co-Lead Counsel and achieved a settlementvalued at over $20 million.

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In re Heritage Bond Litigation, USDC Central District of California, Case No. 02-ML-1475-DT,where as Co-Lead Counsel, Glancy Binkow & Goldberg recovered in excess of $28 million fordefrauded investors and continues to pursue additional defendants.

In re ECI Telecom Ltd. Securities Litigation USDC Eastern District of Virginia, Case No. 01-913-A, in which Glancy Binkow & Goldberg served as sole Lead Counsel and recovered almost $22million for defrauded ECI investors.

Jenson v. First Trust Corporation USDC Central District of Californaia, Case No. 05-cv-3124-ABC,in which the firm was appointed sole lead counsel and achieved an $8.5 million settlement in a verydifficult case involving a trustee's potential liability for losses incurred by investors in a Ponzischeme. Kevin Ruf of the firm also successfully defended in the 9th Circuit Court of Appeals thetrial court's granting of class certification in this case.

Yaldo v. Airtouch Communications State of Michigan, Wayne County, Case No. 99-909694-CP,in which Glancy Binkow & Goldberg served as Co-Lead Counsel and achieved a settlement valuedat over $32 million for defrauded consumers.

In re Infonet Services Corporation Securities Litigation USDC Central District of California, CaseNo. CV 01-10456 NM, in which as Co-Lead Counsel, Glancy Binkow & Goldberg achieved asettlement of $18 million.

In re Musicmaker.com Securities Litigation USDC Central District of California, Case No. 00-02018, a securities fraud class action in which Glancy Binkow & Goldberg was sole Lead Counselfor the Class and recovered in excess of $13 million.

In re ESC Medical Systems, Ltd. Securities Litigation, USDC Southern District of New York, CaseNo. 98 Civ. 7530, a securities fraud class action in which Glancy Binkow & Goldberg served as soleLead Counsel for the Class and achieved a settlement valued in excess of $17 million.

In re Lason, Inc. Securities Litigation USDC Eastern District of Michigan, Case No. 99 76079, inwhich Glancy Binkow & Goldberg was Co-Lead Counsel and recovered almost $13 million fordefrauded Lason stockholders.

In re Inso Corp. Securities Litigation USDC District of Massachusetts, Case No. 99 10193, asecurities fraud class action in which Glancy Binkow & Goldberg served as Co-Lead Counsel forthe Class and achieved a settlement valued in excess of $12 million.

In re National TechTeam Securities Litigation USDC Eastern District of Michigan, Case No. 97-74587, a securities fraud class action in which Glancy Binkow & Goldberg served as Co-LeadCounsel for the Class and achieved a settlement valued in excess of $11 million.

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In re Ramp Networks, Inc. Securities Litigation USDC Northern District of California, Case No.C-00-3645 JCS, a securities fraud class action in which Glancy Binkow & Goldberg served as Co-Lead Counsel for the Class and achieved a settlement of nearly $7 million.

In re Gilat Satellite Networks, Ltd. Securities Litigation USDC Eastern District of New York, CaseNo. 02-1510 CPS, a securities fraud class action in which Glancy Binkow & Goldberg served as Co-Lead Counsel for the Class and achieved a settlement of $20 million.

Taft v. Ackermans (KPNQwest Securities Litigation) USDC Southern District of New York, CaseNo. 02-CV-07951, a securities fraud class action in which Glancy Binkow & Goldberg served asCo-Lead Counsel for the Class and achieved a settlement worth $11 million.

Ree v. Procom Technologies Inc., USDC Southern District of New York, Case No. 02CV7613,a securities fraud class action in which Glancy Binkow & Goldberg served as Co-Lead Counsel forthe Class and achieved a settlement of $2.7 million.

Capri v. Comerica, Inc. USDC Eastern District of Michigan, Case No. 02CV60211 MOB, asecurities fraud class action in which Glancy Binkow & Goldberg served as Co-Lead Counsel forthe Class and achieved a settlement of $6.0 million.

Tatz v. Nanophase Technologies Corp. USDC Northern District of Illinois, Case No. 01C8440, asecurities fraud class action in which Glancy Binkow & Goldberg served as Co-Lead Counsel forthe Class and achieved a settlement of $2.5 million.

In re Livent, Inc. Noteholders Litigation USDC Southern District of New York, Case No. 99 Civ9425, a securities fraud class action in which Glancy Binkow & Goldberg served as Co-LeadCounsel for the Class and achieved a settlement of over $27 million.

Plumbing Solutions Inc. v. Plug Power Inc., USDC Eastern District of New York, Case No. CV 005553 (ERK) (RML), a securities fraud class action in which Glancy Binkow & Goldberg served asCo-Lead Counsel for the Class and achieved a settlement of over $5 million.

Schleicher v. Wendt (Conseco Securities Litigation), USDC Southern District of Indiana, Case No.02-1332 SEB, a securities fraud class action in which Glancy Binkow & Goldberg served as LeadCounsel for the Class and achieved a settlement of over $41 million.

Lapin v. Goldman Sachs USDC Southern District of New York, Case No. 03-0850-KJD, asecurities fraud class action in which Glancy Binkow & Goldberg served as Co-Lead Counsel forthe Class and achieved a settlement of $29 million.

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Glancy Binkow & Goldberg filed the initial landmark antitrust lawsuit against all of themajor NASDAQ market makers and served on Plaintiffs' Counsel's Executive Committee in In re Nasdaq Market-Makers Antitrust Litigation USDC Southern District of New York, Case No. 94 C3996 (RWS), MDL Docket No. 1023, which recovered $900 million for investors in numerousheavily traded Nasdaq issues.

The firm currently serves as Lead or Co-Lead Counsel in numerous securities fraud andconsumer fraud actions throughout the United States, including, among others:

Senn v. Sealed Air Corporation USDC New Jersey, Case No. 03-cv4372, in which the firm acts asco-lead counsel (the case has tentatively settled).

Shah v Morgan Stanley Co. USDC Southern District of New York, Case No. 03 Civ. 8761 (RJH)

Payne v. IT Group Inc.,USDC Western District of Pennsylvania, Case No. 02-1927

Winer Family Trust v. Queen (Pennexx Securities Litigation) USDC Eastern District of Pennsylvania, Case No. 2:03-cv-04318 JP

In re ADC Telecommunications Inc. Securities Litigation USDC District of Minnesota, Case No. 03-1194 (JNE/JGL)

In re Simon Transportation Services, Inc. Securities Litigation,USDC District of Utah, Case No. 2:98 CV 0863 K

The firm has also previously acted as Class Counsel in obtaining substantial benefits forshareholders in a number of actions, including:

In re F & M Distributors Securities Litigation,Eastern District of Michigan, Case No. 95 CV 71778 DT (Executive Committee Member) ($20.25million settlement)

James F. Schofield v. McNeil Partners, L.P. Securities Litigation,California Superior Court, County of Los Angeles, Case No. BC 133799

Resources High Equity Securities Litigation,California Superior Court, County of Los Angeles, Case No. BC 080254

The firm has served and currently serves as Class Counsel in a number of antitrust classactions, including:

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In re Nasdaq Market-Makers Antitrust Litigation USDC Southern District of New York, Case No. 94 C 3996 (RWS), MDL Docket No. 1023

In re Brand Name Prescription Drug Antitrust Litigation,USDC Northern District of Illinois, Eastern Division, Case No. 94 C 897

The firm has served and currently serves as Class Counsel in a number of wage and hourclass actions, including:

Smith v. L'Oreal, Los Angeles Superior Court, Case No. BC 284690, in which firm partner KevinRuf successfully argued before the California Supreme Court and achieved the reversal of lowercourt holdings which could have curtailed employee rights to prompt payment of wages.

Mathews v. American Laser Centers, USDC Eastern District of Michigan, Case No. 2:08-cv-10638,in which the firm represents employees of ALC who contend they are entitled to unpaid overtimeand other benefits.

Baldwin v. Johnny Rockets, Los Angeles Superior Court, Case No. BC 385539, in which the firmrepresents a class of restaurant managers who contend they are entitled to overtime and otherbenefits because they were improperly classified by their employer as "exempt" from such benefits.

Jenkin v. Sunglass Hut, USDC Central District of California, Case No. CV08-5394, in which thefirm represents Sunglass Hut employees who contend they were denied meal and rest breaks andother compensation.

Bousquet v. Cerritos Ford, Los Angeles Superior Court, Case No. BC 354026, in which the firmrepresents mechanics claiming unpaid overtime.

Paredes v. Pacific Ford, Los Angeles Superior Court, Case No. BC 372598, in which the firmrepresents mechanics claiming unpaid overtime.

The firm currently also serves as Interim Co-Lead Counsel in In re Nokia, Inc. ERISALitigation, USDC Southern District of New York, Case No. 10-CV-03306-PKC. This consolidatedaction is brought pursuant to the Employee Retirement Income Security Act of 1974 on behalf ofparticipants and beneficiaries of the Nokia Retirement Savings and Investment Plan from January1, 2008 through the present seeking to recover losses to the Plan as a result of its investments inNokia stock.

The firm has represented, or currently represents, numerous plaintiffs in shareholderderivative actions, including, among others:

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In re Acura Pharmaceuticals, Inc. In the Circuit Court of Cook County, Illinois, County Department - Chancery Division,Case No. 10CH46380;

Diep v. Chen et al. USDC Southern District of New York, Case No. 11-CV-3210

Dulberg v. Plastina, et al. USDC Central District of California, Case No. 8:11-cv-00351 JVS (RNBx);

Garay v. Gamache et al. USDC Northern District of Illinois, Case No. 11-cv-04412;

Markowitz v. Duprey, et al. In the Circuit Court of Cook County, Illinois, County Department - Chancery Division,Case No. 11-CH-11048

Oh v. Bartz, et al. USDC Northern District of California, Case No. 11-cv-03286; and

Surloff v. Georgiopoulos, et al. USDC Southern District of New York, Case No. 11-CV-1855-RJH

Glancy Binkow & Goldberg LLP has been responsible for obtaining favorable appellateopinions which have broken new ground in the class action or securities fields, or which havepromoted shareholder rights in prosecuting these actions. Glancy Binkow & Goldberg successfullyargued the appeals in a number of cases.

In Smith v. L'Oreal 39 Ca1.4th 77 (2006), firm partner Kevin Ruf established ground-breaking law when the California Supreme Court agreed with the firm's position that waitingpenalties under the California Labor Code are available to any employee after termination ofemployment, regardless of the reason for that termination.

Other notable firm cases are: Silber v. Mabon I 957 F.2d 697 (9th Cir. 1992) and Silber v. Mabon II 18 F.3d 1449 (9th Cir. 1994), which are the leading decisions in the Ninth Circuitregarding the rights of opt-outs in class action settlements. In Rothman v. Gregor 220 F.3d 81 (2dCir. 2000), Glancy Binkow & Goldberg won a seminal victory for investors before the SecondCircuit Court of Appeals, which adopted a more favorable pleading standard for investors inreversing the District Court's dismissal of the investors' complaint. After this successful appeal,Glancy Binkow & Goldberg then recovered millions of dollars for defrauded investors of the GTInteractive Corporation. The firm also argued Falkowski v. Imation Corp., 309 F.3d 1123 (9th Cir.2002), as amended, 320 F.3d 905 (9th Cir. 2003) and favorably obtained the substantial reversal ofa lower court's dismissal of a cutting edge, complex class action initiated to seek redress for a groupof employees whose stock options were improperly forfeited by a giant corporation in the course of

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its sale of the subsidiary at which they worked. The revived action is currently proceeding in theCalifornia state court system.

The firm is also involved in the representation of individual investors in court proceedingsthroughout the United States and in arbitrations before the American Arbitration Association,National Association of Securities Dealers, New York Stock Exchange, and Pacific Stock Exchange.Mr. Glancy has successfully represented litigants in proceedings against such major securities firmsand insurance companies as A.G. Edwards & Sons, Bear Stearns, Merrill Lynch & Co., MorganStanley, PaineWebber, Prudential, and Shearson Lehman Brothers.

One of firm's unique skills is the use of "group litigation" - the representation of groups ofindividuals who have been collectively victimized or defrauded by large institutions. This type oflitigation brought on behalf of individuals who have been similarly damaged often provides anefficient and effective economic remedy that frequently has advantages over the class action orindividual action devices. The firm has successfully achieved results for groups of individuals incases against major corporations such as Metropolitan Life Insurance Company, and OccidentalPetroleum Corporation.

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Glancy Binkow & Goldberg LLP currently consists of the following attorneys:

THE FIRM'S PARTNERS

LIONEL Z. GLANCY, a graduate of the University of Michigan Law School, is the foundingpartner of the firm. After serving as a law clerk for United States District Judge Howard McKibben,he began his career as an associate at Patterson Belknap Webb & Tyler LLP, concentrating insecurities litigation. Thereafter, he started a boutique law firm specializing in securities litigation,and other complex litigation, from the Plaintiffs perspective. Mr. Glancy has established adistinguished career in the field of securities litigation over the last fifteen years, appearing as leadcounsel on behalf of aggrieved investors in securities class action cases throughout the country. Hehas appeared and argued before dozens of district courts and several appellate courts, and hasrecovered billions of dollars in settlement proceeds for large classes of shareholders. Well knownin securities law, he has lectured on its developments and practice at CLE seminars and law schools.

PETER A. BINKOW, a partner in Glancy Binkow & Goldberg, was born in Detroit, Michigan onAugust 16, 1965. Mr. Binkow earned his degree in English Literature from the University ofMichigan in1988 and attended law school at the University of Southern California (J.D., 1994). Mr.Binkow joined the Law Offices of Lionel Z. Glancy upon graduation and became a partner in 2002.

Mr. Binkow has prosecuted lawsuits on behalf of consumers and investors in state and federal courtsthroughout the United States. He has served as Lead or Co-Lead Counsel in many class actioncases, including In re Mercury Interactive Corp Securities Litigation ($117.5 million recovery), Inre Lumenis Ltd Securities Litigation ($20.1 million recovery), In re Heritage Bond Litigation ($28million recovery), In re National Techteam Securities Litigation ($11 million recovery), In re CreditAcceptance Corporation Securities Litigation ($2.5 million recovery), In re Lason Inc. Securities Litigation ($12.68 million recovery), In re ESC Medical Systems, Ltd. Securities Litigation ($17million recovery) In re UT Interactive Securities Litigation ($3 million recovery) and many others.Mr. Binkow has prepared and/or argued appeals before the Ninth Circuit, Sixth Circuit and SecondCircuit Courts of Appeals.

Mr. Binkow is admitted to practice before the state of California, the United States District Courtsfor the Central, Northern and Southern Districts of California, the United States District Court forthe Eastern District of Michigan and the Ninth Circuit Court of Appeals. He is a member of the LosAngeles County Bar Association and the American Bar Association.

MICHAEL GOLDBERG, a partner in Glancy Binkow & Goldberg, specializes in federalsecurities, federal and state antitrust, and consumer fraud class action lawsuits. He has successfullylitigated numerous cases which resulted in multi-million dollar recoveries for investors, consumersand businesses.

Mr. Goldberg was born in New York on April 27, 1966. He earned his B.A. degree in 1989 fromPitzer College - The Claremont Colleges, and his J.D. degree in 1996 from Thomas M. Cooley Law

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School. After graduation from law school, Mr. Goldberg joined the Law Offices of Lionel Z. Glancyand became a partner of Glancy Binkow & Goldberg in 2003. He was admitted to both theCalifornia and Florida bars in 1997 and is admitted to practice in numerous courts.

SUSAN G. KUPFER, a partner of Glancy Binkow & Goldberg LLP, joined the firm in 2003, whereshe established its antitrust practice. She is a native of New York City and received her A.B. degreefrom Mount Holyoke College in 1969 and her J.D. from Boston University School of Law in 1973.She did graduate work at Harvard Law School. In 1977, she was named Assistant Dean and Directorof Clinical Programs at Harvard, where she supervised that program of legal practice and taught itsrelated academic components: Introduction to Advocacy (a NITA-style workshop), LawyeringProcess and Professional Responsibility.

For much of her legal career, Ms. Kupfer has been a professor of law. She subsequently taught atHastings College of the Law, Boston University School of Law, Golden Gate University School ofLaw and Northeastern University School of Law. From 1991 to 2002, she was a lecturer on law atUniversity of California, Berkeley, Boalt Hall, teaching Civil Procedure and Conflict of Laws. Herareas of academic expertise are Civil Procedure, Federal Courts, Conflict of Laws, ConstitutionalLaw, Legal Ethics and Jurisprudence. Her publications include articles on federal civil rightslitigation, legal ethics and jurisprudence. She has also taught various aspects of practical legal andethical training, including trial advocacy, negotiation and legal ethics, to both law students andpracticing attorneys.

Ms. Kupfer previously served as corporate counsel to The Architects Collaborative in Cambridgeand San Francisco and was the executive director of the Massachusetts Commission on JudicialConduct. She returned to the practice of law in San Francisco with Morgenstein & Jubelirer andBerman DeValerio Pease Tabacco Burt & Pucillo before joining the Glancy Firm. Her practice isconcentrated in antitrust, securities and consumer complex litigation. She has been a member of thelead counsel team which achieved significant settlements in the following cases: In re Sorbates Antitrust Litigation ($96.5 million settlement), In re Pillar Point Partners Antitrust Litigation ($50million settlement), In re Critical Path Securities Litigation ($17.5 million settlement).

Ms. Kupfer is a member of the Massachusetts and California State Bars and the United StatesDistrict Courts for the Northern, Central and Southern districts of California, the District ofMassachusetts, the First and Ninth Circuits Courts of Appeal and the U.S. Supreme Court. She wasnamed one of Northern California's Super Lawyers of the Year in 2004, 2005, and 2006 in antitrustlitigation.

Ms. Kupfer is currently serving in leadership positions in the following cases:

In re Korean Air Lines Co., Ltd. Antitrust Litigation U.S.D.C., Central District of California, MDL1891, No. 07-5107, Interim Co-Lead Counsel

Page 9

In re: Urethane Antitrust Litigation U.S.D.C., District of Kansas, No. 2:04-md-01616, Co-LeadCounsel.

In re: Western States Wholesale Natural Gas Antitrust Litigation, U.S.D.C., District of Nevada, No.2:03-cv-01431, Co-Lead Counsel.

Sullivan et al v. DB Investments, Inc., et al., U.S.D.C, District of New Jersey, No. 3:04-cv-02819,Counsel for Reseller Subclass.

KEVIN F. RUF, a partner in Glancy Binkow & Goldberg LLP, was born in Wilmington, Delawareon December 7, 1961. Mr. Ruf graduated from the University of California at Berkeley in 1984 witha B.A. in Economics and earned his J.D. from the University of Michigan in 1987. Mr. Ruf wasadmitted to the State Bar of California in 1988. Mr. Ruf was an associate at the Los Angeles firmManatt Phelps and Phillips from 1988 until 1992, where he specialized in commercial litigation andwas a leading trial lawyer among the associates there. In 1993 he joined the firm Corbin &Fitzgerald in order to gain experience in criminal law. There he specialized in white collar criminaldefense work, including matters related to National Medical Enterprises, Cynergy Film Productionsand the Estate of Doris Duke. Mr. Ruf joined Glancy Binkow & Goldberg in 2001 and has takena lead trial lawyer role in many of the firm's cases. In 2006, Mr. Ruf argued before the CaliforniaSupreme Court in the case Smith v. L'Oreal and achieved a unanimous reversal of the lower courtrulings; the case established a fundamental right of all California workers to immediate payment ofall earnings at the conclusion of employment. In 2007, Mr. Ruf took an important case before theNinth Circuit Court of Appeals, convincing the Court to affirm the lower court's certification of aclass action in a fraud case (fraud cases have traditionally faced difficulty as class actions becauseof the requirement of individual reliance). Mr. Ruf has extensive trial experience, including jurytrials, and considers his courtroom and oral advocacy skills to be his strongest asset as a litigator.Mr. Ruf currently acts as the Head of the Firm's Labor and Consumer Practice, and has extensiveexperience in Securities cases as well. Mr. Ruf also has experience in real estate law and has beena Licensed California Real Estate Broker since 1999.

MARC L. GODINO has extensive experience successfully litigating complex, class action lawsuitsas a plaintiffs' lawyer. Marc has played a primary role in cases resulting in settlements of more than$100 million. He has prosecuted securities, derivative, merger & acquisition, and consumer casesthroughout the country in both State and Federal court as well as represented defrauded investorsat FINRA arbitrations. Marc supervises the firm's consumer class action department.

While an associate with Stull Stull & Brody, Marc was one of the two primary attorneys involvedin Small v. Fritz Co., 30 Cal. 4th 167 (April 7, 2003) in which the California Supreme Court creatednew law in the state of California for shareholders that held shares in detrimental reliance on falsestatements made by corporate officers. The decision was widely covered by national mediaincluding The National Law Journal, Los Angeles Times, New York Times, and the New York LawJournal, among others and was heralded as a significant victory for shareholders.

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Recent successes with the firm include: In reMagma Design Automation, Inc. Securities Litigation,Case No. 05-2394 (N.D.Cal.) ($13,500,000.00 cash settlement for shareholders); (In re HovnanianEnterprises, Inc. Securities Litigation, Case No. 08-cv-0099 (D.N.J.) ($4,000,000.00 cash settlementfor shareholders); In re Skilled Healthcare Group, Inc. Securities Litigation, Case No. 09-5416(C.D.Cal.) ($3,000,000.00 cash settlement for shareholders); In re Youbet.com, Inc. ShareholderLitigation, Case No. BC426144 (L. A. Sup. Ct.) (settlement provided supplemental disclosures toshareholders in this merger action); Burth v. MSC Software Corp., et al., Case No. 30-2009-00282743 (Orange Cty. Sup. Ct.) (settlement provided supplemental disclosures to shareholders inthis merger action)Shin et al., v. BMW of North America, 2009 WL 2163509 (C.D.Cal. July 16,2009) (after defeating a motion to dismiss, the case settled on very favorable terms for classmembers including free replacement of cracked wheels); Payday Advance Plus, Inc. v. MIVA, Inc.,Case No. 06-1923 (S.D.N. Y.) ($3,936,812 cash settlement for class members); Villefranche v. HSBCBank Nevada, NA., Case No. 09-3693 (C.D.Cal.) (after defeating a motion to dismiss, the caseresulted in 100% recovery to class members).

Other published decisions include: In re 2TheMart.com Securities Litigation, 114 F.Supp 2d 955(C.D.Ca 2002); In re Irvine Sensors Securities Litigation, 2003 U.S. Dist. LEXIS 18397 (C.D.Ca2003).

The following represent just a few of the cases that Marc is currently litigating in a leadershipposition:In re Toyota Motor Corp. Hybrid Brake Marketing, Sales Practices and Products LiabilityLitigation, MDL 02172 (C.D. Ca.), Co-Lead CounselIn re Stec, Inc. Derivative Litigation, Case No. 10-00667 (C.D. Ca.), Co-Lead CounselSabbag v. Akeena Solar, Inc., et al., Case No. 10-002735 (N.D. Ca.), Co-Lead CounselConroy v. Citibank, NA., et al., Case No. 10-4930 (C. D. Cal.), Co-Lead Counsel

Marc received his undergraduate degree from Susquehanna University with a bachelor of sciencedegree in Business Management. He received his J.D from Whittier Law School in 1995.

Marc is admitted to practice before the state of California, the United States District Courts for theCentral, Northern and Southern Districts of California, the District of Colorado, and the NinthCircuit Court of Appeals.

OF COUNSEL

ROBIN BRONZAFT HOWALD, a native of Brooklyn, New York, returned home in 2001 to openthe firm's New York City office. Ms. Howald graduated magna cum laude from Barnard Collegein 1980, with a B.A. in psychology. In 1983, she received her J.D. from Stanford Law School, whereshe served as an Articles Editor for the Stanford Law Review. In addition to her current focus onsecurities fraud and consumer class action matters, during her 20-year career Ms. Howald hashandled cases in many different practice areas, including commercial disputes, professionalmalpractice, wrongful termination, bankruptcy, patent and construction matters. As outside counsel

Page 11

for the City of Torrance, California, she also handled a number of civil rights and land use matters,as well as a ground-breaking environmental action concerning Mobil Oil's Torrance refinery. Ms.Howald has experience in pre-trial and trial procedure and has successfully prosecuted post-trialmotions and appeals.

Mrs. Howald is a member of the bar of both California (1983) and New York (1995), and is admittedto practice in all federal judicial districts in California, the Southern and Eastern Districts of NewYork, and the United States Supreme Court. She co-authored "Potential Tort Liability in BusinessTakeovers" (California Lawyer, September 1986), was a speaker and contributing author at theEighth Annual Current Environmental and Natural Resources Issues Seminar at the University ofKentucky College of Law (April 1991), and served as a Judge Pro Tem for the Los Angeles CountySmall Claims Court (1996-1997). Married in 1985, Mrs. Howald and her husband have two sons.An avid runner, Mrs. Howald has completed six marathons.

EX KANO S. SAMS II earned his Bachelor of Arts degree in Political Science from the Universityof California Los Angeles in 1993. Mr. Sams earned his Juris Doctor degree from the University ofCalifornia Los Angeles School of Law in 1996, where he served as a member of the UCLA LawReview. Since graduating from UCLA Law School, he has dedicated his entire career exclusivelyto representing plaintiffs in large-scale class action and complex civil litigation matters.

After law school, Mr. Sams practiced class action civil rights litigation on behalf of plaintiffs incases involving employment discrimination, housing discrimination, and sexual harassment.Subsequently, Mr. Sams was a partner at Coughlin Stoia Geller Rudman & Robbins LLP (currentlyRobbins Geller Rudman & Dowd LLP), where his practice focused on securities and consumer classactions. While at Coughlin Stoia and its predecessor, he worked in the firm's San Diego, SanFrancisco, and Los Angeles offices.

Mr. Sams has served as lead counsel in dozens of securities class actions throughout the country.In one securities fraud class action that he actively litigated, Mr. Sams assisted in a successful appealbefore a Fifth Circuit panel that included former United States Supreme Court Justice Sandra DayO'Connor sitting by designation, in which the court vacated the lower court's denial of classcertification, reversed the lower court's grant of summary judgment, and issued an importantdecision on the issue of loss causation in securities litigation: Alaska Electrical Pension Fund v.Flowserve Corp., 572 F.3d 221 (5th Cir. 2009). The case eventually settled for $55 million. Mr.Sams also worked on a securities fraud class action where lead counsel obtained a settlement thatrepresented approximately 78% of the likely recoverable damages in the case. He has also led largelitigation teams in securities class actions and has prepared massive summary judgment oppositions,drafted and argued numerous motions, worked closely with expert witnesses, and has taken anddefended dozens of depositions.

Mr. Sams has also successfully represented consumers in class action litigation. Mr. Sams workedon nationwide litigation and a trial against major tobacco companies and in statewide tobaccolitigation that resulted in a $12.5 billion recovery for California cities and counties in a landmark

Page 12

settlement. He also was a principal attorney in a consumer class action against one of the largestbanks in the country that resulted in a recovery of over 80% of the compensatory damages and achange in the company's business practices. Additionally, Mr. Sams has also handled severalcomplex environmental matters. Mr. Sams participated in settlement negotiations on behalf ofnational environmental organizations along with the United States Department of Justice and theOhio Attorney General's Office that resulted in a consent decree requiring the company to conductwide-ranging remediation measures to ameliorate the effects of air and water pollution and to paycivil penalties. He also participated in discovery and trial preparation in an unfair business practicesaction that led to a favorable settlement near the eve of trial providing for monetary relief for apublic water provider against the threat of groundwater contamination.

Mr. Sams is admitted to practice law in the State of California. He is also admitted to practice beforethe United States Courts of Appeals for the Fifth, Sixth, Eighth, Ninth, Tenth, and Eleventh Circuitsand before the district courts for the Northern, Southern, Eastern, and Central Districts of California,the Northern District of Illinois, the Eastern District of Michigan, and the District of Colorado. Mr.Sams is a member of the Los Angeles County Bar Association, the John M. Langston BarAssociation, and the Consumer Attorneys of California.

JALA AMSELLEM has been engaged in the private practice of civil ligation for over ten years.She has handled a broad variety of cases in the areas of corporate commercial, family law, personalinjury and entertainment litigation. Jala is also a former legal writing professor who taught legalskills for twelve years. In her last academic position she was the Associate Director of the legalwriting program at The George Washington School of Law. Recently, Jala founded The Bar Coach,a company dedicated to assisting bar takers pass the California Bar Exam.

Jala received her undergraduate degree from New York University in 1982 and her J.D. from TouroLaw School in 1985. At Touro, Jala was the Senior Editor of the law review. Jala is admitted to thebars of California, New York, New Jersey, Michigan and the District of Columbia.

ASSOCIATES

DALE MacDIARMID is a native of Los Angeles, California. He holds a B.A. in Journalism (withDistinction) from the University of Hawaii, and a J. D. from Southwestern University School of Law,where he was a member of the Board of Governors of the Trial Advocacy Honors Program. He isadmitted to practice in California, before the United States District Courts for the Southern, Centraland Northern Districts of California and the District of Colorado. Dale is a member of Kappa TauAlpha, the national journalism honor society, and before joining Glancy Binkow & Goldberg he wasa writer and editor for newspapers and magazines in Honolulu and Los Angeles.

Page 13

ANDY SOHRN joined Glancy Binkow & Goldberg LLP in 2006. He was admitted to theCalifornia Bar in January 2006 after receiving his J.D. from the University of California LosAngeles School of Law in May 2005. While attending law school, Andy was the Managing Editorof the Pacific Basin Law Journal, participated in Moot Court and was a Teaching Assistant for theLawyering Skills program. He also holds a B.A. in Economics and Mathematics from YaleUniversity (class of 2002).

COBY MARIE TURNER joined Glancy Binkow and Goldberg LLP in 2010. Coby was aRegent's Scholar at the University of California, Santa Barbara, and holds a B.A. in BusinessEconomics and Political Science. She received her J.D. from the University of Southern California,Gould School of Law. During law school, Coby was an editor of the Hale Moot Court HonorsProgram, the President of the International Law and Relations Organization, and an extern forMental Health Advocacy Services in Los Angeles, California. Coby was admitted to the CaliforniaState Bar in 2009.

ROBERT V. PRONGAY is an associate in the Firm's Los Angeles office, where he focuses onthe investigation, initiation, and litigation, of complex securities cases brought on behalf ofinstitutional and individual investors.

Mr. Prongay earned his Bachelor of Arts degree in Economics from the University of SouthernCalifornia in 2005 and earned his Juris Doctor degree from Seton Hall University School of Lawin 2008. While attending law school, Mr. Prongay worked as a summer associate at the Firm, andinterned for a federal magistrate judge for the United States District Court for the District of NewJersey. Mr. Prongay is admitted to the State Bar of California, as well as the United States DistrictCourts for the Central, Northern and Southern Districts of California, and the District of Colorado.

LOUIS BOYARSKY joined Glancy Binkow & Goldberg LLP in 2010. Louis received hisJD/MBA from Loyola Law School, Los Angeles and Loyola Marymount University's GraduateSchool of Business. While in law school, Louis served as a staff writer for the Loyola of LosAngeles Entertainment Law Review. The Law Review published his article: Stealth CelebrityTestimonials of Prescription Drugs: Placing the Consumer in Harm's Way and How the FDA hasDropped the Ball. Additionally, while in law school, Louis externed for the Honorable Suzanne H.Segal, magistrate judge for the Central District of California.

Louis is a member of the St. Thomas More Legal Honor Society, the Alpha Sigma Nu NationalJesuit Honor Society and the Beta Gamma Sigma Business Honor Society. Louis is admitted topractice before the state of California and the United States District Court for the Central Districtof California.

Page 14

CASEY E. SADLER is a native of New York, New York. After graduating from the University ofSouthern California, Gould School of Law, Mr. Sadler joined Glancy Binkow & Goldberg LLP in2010. While attending law school, Mr Sadler externed for the Enforcement Division of theSecurities and Exchange Commission, spent a summer working for P.H. Parekh & Co, one of theleading appellate law firms in New Delhi, India, and was a member of USC's Hale Moot CourtHonors Program. Mr. Sadler holds a B.A. in Political Science from Emory University and wasadmitted to the State Bar of California in December 2010.

ELIZABETH M. GONSIOROWSKI graduated with honors from Vassar College, where shereceived a BA in Cognitive Science. As a student at Brooklyn Law School, she interned with theHonorable Ramon Reyes in the Eastern District of New York. After graduating from Brooklyn Lawin 2008, she was awarded a fellowship to work with the World Intellectual Property Organizationat the United Nations. She is admitted to practice in California, New York and New Jersey.

Page 15

EXHIBIT G

I N THE COURT OF CHANCERY OF THE STATE OF DELAWARE

SUSAN M. GREGORY,•

Plaintiff,

•vs.

•KENNETH D. TUCHMAN, JAMES E.•BARLETT, WILLIAM A.

LINNENBRINGER, RUTH C, LIPPER,SHRIKANT MEHTA, SHIRLEY YOUNG, .ROD DAMMEYER, GEORGE C.HEILMEIER, JOHN T. MCLENNAN,MORTON MEYERSON, ALAN : C.A. No.:3925-CC

SILVERMAN, MARK C. THOMPSON,SHARON A. O'LEARY, DENNIS J. LACEY, :JOHN SIMON, ALAN SCHUTZMAN,BRIAN DELANEY, JOHN TROIKA, LARRYKESSLER, MICHAEL E. FOSS, andMARGOT O'DELL,

Defendants,

and

TELETECH HOLDINGS, INC.,

NominalDefendant

STIPULATION OF SETTLEMENT

This Stipulation of Settlement (the "Stipulation") is dated as of October 26, 2009, and

is entered into by and between the following parties to the above-captioned stockholder's

derivative action (the "Action"): (a) Susan M. Gregory ("PlaintifP') in her capacity as a

shareholder of TeleTech Holdings, Inc, ("TeleTech" or the "Company"); (b) Kenneth D.

Tuchman, James E. Barlett, William A. Linnenbringer, Ruth C. Lipper, Shrikant Mehta,

Shirley Young, Rod Dammeyer, George C. Heilmeier, John T. McLennan, Morton Meyerson,

N I-3471800-1

Alan Silverman, Mark C. Thompson, Sharon A. O'Leary, Dennis .1 Lacey, John Simon, Alan

Shutzman, Brian Delaney, John Troka, Larry Kessler, Michael E. Foss, and Margot O'Dell

(collectively, "Defendants"); and (c) nominal defendant TeleTech, on the terms and conditions

herein. Plaintiff, Defendants, and Teletech are referred to as the "Settling Parties," as defined in

Section V.

I. FACTUAL BACKGROUND OF THE ACTION

On November 8, 2007, the Company announced that the Audit Committee (the "Audit

Committee") of the Board of Directors (the "Board") had commenced an "independent" internal

investigation into the Company's historical stock option granting practices between 1996 and

2007. The Company also announced that it would not be able to timely file its quarterly report

on Form 10-Q for the second quarter ended September 30, 2007 due to the ongoing stock option

investigation.

Several months later, on February 20, 2008, the Company disclosed for the first time that

the Audit Committee had found "instances of selecting option grant dates with some hindsight."

Further, on that same day, the Board revealed for the first time that grants issued in previous

years to defendants Tuchman and Barlett exceeded the annual limits expressly set by the terms of

the Company's stock option plans (the "Plans").

Plaintiff initiated the Action on July 28, 2008, when she filed a shareholder derivative

complaint in the Court of Chancery of the State of Delaware (the "Court"). Generally, Plaintiff

alleged that certain of the Company's current and former officers and directors breached their

fiduciary duties to the Company because, infer alio, they allegedly caused backdated or

otherwise manipulated stock options to be granted to several of the Company's senior officers

KU:1-3474800-1

and directors over a multi-year period. Further, Plaintiff alleged that Defendants violated the

express terms of the Plans by exceeding the annual individual limits imposed therein..

On January 25, 2008, the first of several class actions initiated pursuant to the Federal

securities laws was filed against TeleTech in the United States District Court for the Southern

Dishict of New York. The cases were eventually consolidated into one action, (the "Class

Action"), which is being resolved in connection with resolution of the Action.

On November 19, 2008, Defendants filed three motions to dismiss: (1) a motion to

dismiss pursuant to Court of Chancery Rule 231 filed by Nominal Defendant Teletech and

Individual Defendants Linnenbringer, Lipper, Mehta and Young; (2) a motion to dismiss

pursuant to Court of Chancery Rules 12(b)(2), 12(b)(4), 12(6)(5), 23.1 and 12(b)(6) filed by

Defendants O'Leary, Lacey, Simon, Schutzman, Delaney, Troka, Kessler, Foss and O'Dell; and

(3) a motion to dismiss pursuant to Court of Chancery Rules 231 and 12(6)(6) filed by

Defendants Tuchman, Barlett, Dammeyer, lieilmeier, McLennan, Meyerson, Silverman and

Thompson (collectively, the "Motions to Dismiss"). In the Motions to Dismiss, Defendants

argued, inter al/a, that Plaintiff had failed to: (1) either make a demand on the Board or,

alternatively, adequately plead that such a demand would have been futile; (2) make any claim

for which relief could be granted; (3) adequately plead that the Board had failed to act within

their business judgment; (4) sufficiently allege that any of Plaintiff's challenged grants were

backdated; and (5) sufficiently allege that the challenged grants allegedly in excess of individual

plan limits were outside the power and scope of the Compensation Committee to confirm.

Defendants also asserted that certain of Plaintiff's claims were time-barred by applicable statutes

of limitations.

io..r13474800-1

After exchanging certain information, on December 2, 2008 the Settling Parties, along

with parties in the Class Action, participated in a formal joint mediation before JAMS mediators

the Hon. (Ret.) Daniel Weinstein ("Judge Weinstein") and Jed D. Me'nick, Esq. in New York,

NY. Although the Settling Parties made some progress at the mediation, neither the Action nor

the Class Action settled at that time. The mediation, however, served as springboard for

continued settlement discussions which occurred throughout the winter and spring of 2009.

During the slimmer of 2009, Plaintiffs reviewed tens of thousands of documents that were

produced by the Company in connection with the ongoing settlement discussions. With the

substantial assistance of Judge Weinstein and Mr. Me!nick, the Settling Parties weie able to

reach an agreement-in-principle on the settlement terms herein, which ultimately culminated in

the proposed settlement (the "Settlement") reflected in this Stipulation.

IL INVESTIGATION AND RESEARCH CONDUCTED BY PLAINTIFF'SCOUNSEL

Plaintiffs Counsel (as that term is defined in Section V hereof) believe that they have

conducted an extensive investigation during the development and prosecution of the Action.

This investigation has included, infer alio, (i) inspecting, reviewing and analyzing the

Company's public filings; (ii) preparing a detailed amended complaint; (iii) performing a

detailed internal analysis of Defendants' stock options; (iv) researching the applicable law with

respect to the claims asserted in the Action and the potential defenses thereto (v) researching

corporate governance issues; (vi) preparing a mediation brief; (vii) attending formal mediation

and participating in numerous telephonic meetings with Defense Counsel, Judge Weinstein and

Mr. Melnick; (vii); employing a financial expert to conduct an analysis of the stock option grants

at issue; and (vi) reviewing Defendants' non-public documents.

Rtr1-3474500-1

III. NO ACKNOWLEDGMENT OF WRONGDOING OR LIABILITY

Without conceding the merit of any of Plaintiff's allegations, or the lack of merit of any

of Defendants' defenses, and solely in order to avoid the potentially protracted time, expense,

and uncertainty associated with continued litigation, Defendants have concluded that it is

desirable that the Action be fully and finally settled in the manner and upon the terms and

conditions set forth in this Stipulation. Defendants have denied and continue to deny each and

all of the claims and contentions alleged by the Plaintiff in the Action. Defendants have denied

and continue to deny all charges of wrongdoing or liability against them arising out of any of the

conduct, statements, acts or omissions alleged, or that could have been alleged, in the Action.

Each of the Defendants denies and continues to deny the allegations concerning any alleged

breach of fiduciary duty. Defendants have further asserted and continue to assert that at all

relevant times, they acted in good faith and in a manner they reasonably believed to be in the

best interests of the Company and its stockholders.

IV. CLAIMS OF THE PLAINTIFF AND BENEFITS OF SETTLEMENT

Plaintiff's Counsel believe that the claims asserted in the Action have merit and that their

investigation supports the claims asserted. Without conceding the merit of any of Defendants'

defenses or the lack of merit of any of their allegations, and solely in order to avoid the

potentially protracted time, expense, and uncertainty associated with continued litigation,

including potential trial and appeals, Plaintiff has concluded that it is desirable that the Action be

fully and finally settled in the manner and upon the terms and conditions set forth in this

Stipulation. Based on these considerations, among others, Plaintiff's Counsel believe that the

Settlement set forth in this Stipulation confers substantial benefits upon TeleTech and Current

TeleTech Stockholders (as that term is defined in Section V below).

ItL F 1-3474800-I

V. TERMS OF STIPULATION AND AGREEMENT OF SETTLEMENT

NOW, THEREFORE, IT IS HEREBY STIPULATED AND AGREED by and among

Plaintiff, on behalf of herself and derivatively on behalf of TeleTech, and Defendants, by and

through their respective counsel, that, subject to the approval of the Court, the Action and the

Released Claims shall be finally and fully compromised, settled and released, and the Action

shall be dismissed with prejudice, as to Defendants, upon and subject to the terms and conditions

of the Stipulation, as follows:

I. Definitions

As used herein, the following terms have the meanings specified below:

1.1. "Current TeleTech Stockholder" means any record or beneficial holder of

TeleTech common stock as of October 26, 2009, and their successors in interest.

1.2. "Defendants" means Kenneth D. Tuchman, James E. Barlett, William A.

Linnenbringer, Ruth C. Lipper, Shrikant Mehta, Shirley Young, Rod Dammeyer, George C.

Heilmeier, John T. McLennan, Morton Meyerson, Alan Silverman, Mark C. Thompson,

Sharon A. O'Leary, Dennis J. Lacey, John Simon, Alan Shutzman, Brian Delaney, John

Troka, Larry Kessler, Michael E. Foss, and Margot O'Dell.

1.3. "Defense Counsel" means counsel of record who represent the

Defendants and TeleTech in the Action and include Dewey & LeBoeuf LLP, Brownstein

Hyatt Farber Schreck, McDermott Will & Emery LLP and Richards Layton & Finger, P.A

IA. "Effective Date" means the date that the Final Judgment and Order

approving the Settlement in accordance with this Stipulation becomes Final within the meaning

of Section 1.6 hereof

RI III-34748001

1.5. "Final" means that with respect to any court order, including but not

limited to the Final Judgment and Order, that such order represents a final and binding

determination of all issues within its scope and is not subject to further review on appeal or

otherwise. Without limitation, an order (including the Final Judgment and Order) becomes

"Final" when: (a) the date as of which the time to appeal the Court's order has expired without

any appeal having been sought or taken or (b) if an appeal is filed, sought or taken, the date as of

which such appeal shall have been finally determined in such a manner as to affirm the Court's

original order without any material change thereto and the time, if any, for commencing any

further appeal has expired. For purposes of this definition, an "appeal" includes appeals as of

right, discretionary appeals, interlocutory appeals, proceedings involving writs of certiorari,

mandamus, or prohibition, and any other proceedings of like kind. Any appeal or other

proceeding pertaining to any order issued in respect of any application by Plaintiff's Counsel for

attorneys' fees and/or expenses, shall not in any way delay or preclude the Final Judgment Order

from becoming Final.

1,6. "Final Judgment and Order" means the Final judgment and Order of

Dismissal to be rendered by the Court, substantially in the form attached hereto as Exhibit C.

1.7. "Person" means an individual, corporation, limited liability company,

professional corporation, joint venture, limited liability partnership, partnership, limited

partnership, association, joint stock company, estate, legal representative, trust, unincorporated

association, government Or any political subdivision or agency thereof, and any business or legal

entity and their spouses, heirs, predecessors, successors, representatives, or assignees

1.8. "Plaintiff" means Susan M. Gregory, together with any of her agents,

heirs, assigns, predecessors and/or successors.

I34 74800-I

1.9. "Plaintiffs Counsel" means counsel who represent the Plaintiff in the

Action and include The Weiser Law Firm, P.C., The Shuman Law Firm, and Rosenthal, Monhait

& Goddess, P.A.

1.10 "Plaintiffs Settlement Counsel" means The Weiser Law Firm, P.C.

1.11. "Related Parties" means each of a Defendant's past or present directors,

families, officers, managers, employees, partners, members, principals, agents, underwriters,

insurers, co-insurers, reinsurers, controlling shareholders, attorneys, accountants or auditors,

banks or investment banks, associates, personal or legal representatives, predecessors,

successors, parents, subsidiaries, divisions, joint ventures, assigns, spouses, heirs, executors,

administrators, related or affiliated entities, any entity in which a Defendant has a controlling

interest, any members of their immediate families, or any trust of which any Defendant is the

settlor or which is for the benefit of any Defendant and/or member(s) of his or her family.

1.12. "Released Claims" shall collectively mean any and all claims (including

"Unknown Claims" as defined in 1.16 hereof), debts, demands, rights, liabilities, damages,

actions, losses, obligations, judgments, suits, fees, expenses, costs, any other relief of any nature

whatsoever, matters, issues and causes of action of any and every kind, nature or description

whatsoever, whether known or unknown, under state, federal, local, common, foreign Of

statutory law or any other law, rule or regulation, contingent or absolute, suspected or

unsuspected, disclosed or undisclosed, concealed or hidden, or matured or unmatured, direct or

derivative that were or could have been asserted in the Action Or in the future could be asserted

in any court, tribunal or proceeding by Plaintiff, TeleTech or by any Current TeleTech

Stockholder ( claiming, derivatively or otherwise, in the right of or on behalf of, the Company),

against any of the Released Persons, which have arisen, could have arisen, arise now or hereafter

In I' 1-34 7480U- I

arise out of, are based upon or relate in any manner to the allegations, matters, acts, facts,

circumstances, transactions, events, occurrences, disclosures, statements, representations,

misrepresentations, omissions, acts or failures to act, or any other matter, thing or cause

whatsoever, or any series thereof, arising out of, embraced, involved or set forth in, or referred to

or otherwise related, directly or indirectly, in any way to, the Action or the subject matter or

allegations of the Action, including, without limitation, claims for negligence, gross negligence,

breach of fiduciary duty, including without limitation the duties of care and/or loyalty, fraud,

constructive fraud, self:dealing, misrepresentation (whether intentional, negligent or innocent),

omission (whether intentional, negligent or innocent), concealment (whether intentional,

negligent Or innocent), mismanagement, gross mismanagement, abuse of control, waste, money

damages, unjust enrichment, breach of contract, or violations of any federal, state, local Or

foreign law, or any other rule, law, Or regulation, or any other source of legal or equitable

obligation of any kind or description in whatever forum or allegations that could have been made

in the Action,

1,13. "Released Persons" means each and all of the Defendants and their

respective Related Parties,

1.14, "Settlement" means the proposed settlement and compromise of the

Action as provided for herein.

1.15, "Settling Parties" means, collectively, each of the Defendants and the

Plaintiff on behalf of herself and derivatively on behalf of TeleTech, and Teletech

1.16. "Unknown Claims" means any Released Claims which Plaintiff,

TeleTech, or any Current TeleTech Stockholder does not know or suspect to exist in his, her or

its favor at the time of the release of the Released Persons which, if known by him, her or it,

Fl 74800-1

might have affected his, her or its settlement with and release of the Released Petsons, or might

have affected his, her or its decision not to object to this Settlement. Plaintiff, TeleTech, or

Current TeleTech Stockholders may hereafter discover facts in addition to oi different from

those which he, she or it now knows or believes to be true with respect to the subject matter of

the Released Claims, but Plaintiff, TeleTech, or Current TeleTech Stockholders shall expressly,

upon the Effective Date, be deemed to have, and by operation of the Judgment shall have, fully,

finally, and forever settled and released any and all Released Claims, known or unknown,

suspected or unsuspected, contingent or non-contingent, whether or not concealed or hidden,

which now exist, or heretofore have existed upon any theory of law or equity now existing or

coming into existence in the future, including, but not limited to, conduct which is negligent,

intentional, with or without malice, or a breach of any duty, law or rule, without regard to the

subsequent discovery or existence of such different or additional facts. Plaintiff and TeleTech

acknowledge, and Current TeleTech Stockholders shall be deemed by operation of the Final

Judgment and Order to have acknowledged, that the foregoing waiver was separately bargained

for and a key element of the Settlement of which this release is a material and essential part and

expressly waive (i) the benefits of the provisions of Section 1542 of the California Civil Code,

which provides that

"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMSWHICH THE CREDITOR DOES NOT KNOW OR SUSPECTTO EXIST IN HIS FAVOR AT THE TIME OF EXECUTINGTHE RELEASE, WHICH IF KNOWN BY HIM MUST HAVEMATERIALLY AFFECTED HIS SETTLEMENT WITH THEDEBTOR;"

and (ii) the benefits of any comparable law, statute, regulation or legal principle of any other

jurisdiction.

I' I -347,1800-1

2. The Settlement

As a result of the filing, prosecution and Settlement of the Action, the Company received

the monetary relief described at section V.2.A, below, Defendants have also agreed that the

Company and/or the Board will adopt the corporate governance provisions described at section

V,2..B, below.

A. Monetary Relief

To resolve the Action, the Company shall receive 6,5 million to be paid on behalf of the

Defendants' by the Company's directors & officers' insurance cornet(s),

B. Corporate Governance Relief

Within 90 days of the issuance of an order approving the settlement the Board will

adopt resolutions, amend appropriate committee charters, and take other steps required to ensure

adherence to the following Corporate Governance Policies. The Company further agrees that the

governance provisions included herein will become effective no later than twelve (12) months

after the date of the adoption of the above resolutions and will remain in effect for no less than

three (3) years; provided, however, that if the Company ceases to be a publicly traded company

prior to the end of such thtee (3) year pet iod, such governance provisions shall expire on the date

and at the time the Company ceases to be a publicly traded company,

1. Policies and Procedures

a. The Compensation Committee of the Board shall annually examine the

Company's director and executive officer compensation policies. The Compensation Committee

shall recommend that the Board shall establish a comprehensive and responsible set of

assumptions, policies and procedures for determining executive compensation policies and

procedures for determining executives' and directors' compensation.

Pr F1-3474800-1

b. The Compensation Committee's Charter will be amended to provide for the

retention of outside counsel to provide legal advice to the Compensation Committee.

c. The Company shall adopt a process to protect against the untimely filing of the

required forms with the United States Securities and Exchange Commission ("SEC") by Section

16 officers and directors who are recipients of option grants, RSU grants and warrants.

d. Re-pricing of "underwater" stock options shall be prohibited absent express

stockholder approval.

e. The Compensation Committee shall engage recognized experts to advise the

Compensation Committee regarding executive compensation plans and their compliance with

legal requirements for proper documentation, disclosure and accounting.

2. Stock Option Plans

a. The Compensation Committee shall annually examine the Company's existing

policies and procedures for determining executive and director compensation. Equity award

plans shall provide an objective, measurable and good faith mechanism for pricing equities

awarded thereunder.

b. All equity award plans shall clearly define the method for determining the

exercise price, the grant date and the fair market value of stock (e.g., the closing price on a

specified date, or the average closing price over a specified period). The fair market value of

TeleTech stock on a grant date shall be the closing price for a share of TeleTech common stock

on such day as reported on the NASDAQ Stock Market or other primary exchange on which the

Company's shares are traded or, if no sales prices are reported on that date, on the last preceding

date on which such prices of TeleTech stock are so reported.

RI. I' I-3474800-1

c. The Compensation Committee shall include a provision in any current and/or

subsequent equity award plans, whether subject to stockholder approval or not, to the effect that

the date of grant of an option shall, for all purposes, be the date on which the Board or

Compensation Committee makes the final determination granting such option and all conditions

and requirements for the issuance of such option grant are satisfied. Notice of the determination

shall be given to each employee or consultant to whom an option is so granted no more than one

week after the date of such grant.

d. The Compensation Committee shall ensure that equity award plans shall not

permit stock options to be issued with an exercise price below the fair market value on the date

of the grant.

e. The Compensation Committee shall ensure that its executive compensation plans,

policies or procedures shall designate a Company employee who is responsible for ensuring

compliance with the terms and conditions of the equity award plans, NASDAQ (or other primary

exchange on which the Company's shares are traded) guidelines and applicable laws and

regulations concerning equity award plans (e.g., timely and accurate filing of SEC Forms 3, 4

and 5). This designated Company employee shall prepare an annual report for the Compensation

Committee's review which details all stock option and RSUs granted during the applicable six-

month period and which otherwise summarizes the Company's compliance with this paragraph,

f. Retroactive awards of stock grants or Rals in excess of the annual limits

imposed by the terms of the Company's equity award plans shall be prohibited. This limitation

shall not preclude the Company's ability to modify annual limits. However, any such

modifications of annual limits will require unanimous written approval by the Compensation

Committee and notice to stockholders before any such modifications are to become effective.

RI F I-3,174800-1

3. Granting of Stock Option Awards

a. Authority to grant stock option awards should be limited to the full Board or a

Compensation Committee constituted according to SEC and NASDAQ (or other primary

exchange on which the Company's shares are traded) rules and regulations.

b. All grants that require Board or Compensation Committee approval shall be made

only at a meeting of the Board or Compensation Committee, respectively, or by any duly

authorized delegation procedures and not by unanimous written consent. The reporter for any

and all meetings where options are granted shall promptly prepare minutes of the meeting.

c. The Compensation Committee shall ensure that the authorized body for awarding

TeleTech equity compensation awards shall be specified in the Compensation Committee

Charter and any current and/or subsequent equity award plans, whether subject to stockholder

approval or not,

d. For grants made to the Company's "named executive officers" within the

meaning of the SEC's proxy rules, the Company will provide an appropriate description in the

CD&A in the annual proxy statement of how such equity compensation grant dates were chosen.

e. The grant date shall be the same date the Board or Compensation Committee

takes final action to grant the option or such later date as may be specified by the Board or

Compensation Committee in the granting resolutions. Written documentation identifying

grantees, amounts, and prices of all stock options granted on a particular date shall be prepaied

and distributed to Grantees for signature on the date of grant or within fifteen (15) business days

thereafter. This signed documentation shall be transmitted to the Company's legal and

accounting departments on the date of grant or within fifteen (15) business days thereafter

RIF I -3474800-1

The Company's senior officers shall be prohibited from determining the date of

any option award,

4. Director Independence

a. A majority of the Board and all of the Compensation Committee shall be

comprised of independent directors,

b. The Company agrees to continue to comply with NASDAQ (or other primary

exchange on which the Company's shares are traded) and SEC rules and regulations regarding

the number, duties and qualifications for independent directors

c. Since the Action was initiated, the Board added a new independent director,

5. Director Nomination Procedures

a, If there is a vacancy on the Board requiring the appointment of a new independent

director, the Nominating and Governance Committee shall establish a procedure, to be overseen

by the Chairman of the Nominating and Governance Committee, to nominate new directors to

the Board,

b. The procedure for identifying and nominating new directors shall provide for:

Objective criteria to assist in conducting the canvassing efforts detailed

below.

An appropriate review, including background information and interviews

of pi ospective candidates that will be conducted and after which qualified candidates will

be sent to the Nominating and Governance Committee for review.

Identification of candidates from those submitted for review, based on the

Nominating and Governance Committee's business judgment as to the most qualified

candidate(s) for the open independent director position(s) on the Board.

R I' 1-347480(1-1

c. Once the Nominating and Governance Committee recommends the new

independent director for election to the Board, the Board, subject to its fiduciary duties, shall

move to fill the vacancy in a manner consistent with the Company's Charter and Bylaws.

Defendants agree that the Settlement, including foregoing monetary payments and corporate

governance measures provide substantial benefits to TeleTech and Current Teletech

Stockholders.

VI. HEARING ORDER AND SETTLEMENT HEARING

6.1. Within five (5) days of the execution of this Stipulation, the Settling Parties shall

jointly submit this Stipulation together with its Exhibits to the Court and shall apply for entry of

an order (the "Hearing Order"), substantially in the form of Exhibit A attached hereto, providing

for the scheduling of a hearing on the Settlement set forth in this Stipulation, and approval for the

mailing and publication of a Notice of Settlement of the Action (the "Notice"), substantially in

the form of Exhibit B attached hereto. Within ten (10) days of the entry of the Hearing Order,

TeleTech shall cause the Notice to be mailed to all Current Teletech Stockholders that can be

identified using reasonable efforts. Additionally, within ten (10) days of the entry of the Hearing

Order, TeleTech shall cause the Notice (and this Stipulation) to be published on its corporate

website.

6.2. TeleTech shall pay for the costs associated with disseminating Notice. Prior to

the Settlement Hearing, Teletech's Counsel shall file with the Court an appropriate declaration

with respect to the preparation, publication and mailing of the Notice.

VU. RELEASES

7.1. Upon the Effective Date, as defined in Section V, 11 1.4, Plaintiff and Plaintiffs

Counsel, on their own behalf and derivatively on behalf of TeleTech (as nominal defendant).

TeleTech and COMM TeleTech Stockholders shall be deemed to have, and by operation of the

Final Judgment and Order shall have fully, finally, and forever released, relinquished,

extinguished, and discharged all Released Claims (including Unknown Claims as defined in

Section V, 11 1,6) against each and all of the Released Persons and shall be permanently barred

and enjoined from instituting, commencing, or prosecuting or asserting any Released Claim

against any of the Released Persons.

7.2. Upon the Effective Date, as defined in Section V. 111, ,l, Teletech and each of the

Released Persons shall be deemed to have, and by operation of the Final Judgment and Order

shall have, fully, finally, and forever released, relinquished, extinguished, and discharged

Plaintiff and Plaintiff's Counsel from all claims (including Unknown Claims as defined in

Section V, 11 1,16), arising out of, relating to, or in connection with the institution, prosecution,

assertion, Settlement or resolution of the Action or the Released Claims,

VIII. PLAINTIFF'S COUNSEL'S ATTORNEYS' FEES AND REIMBURSEMENT OFEXPENSES

8.1. TeleTech, on behalf of all Defendants, has agreed, subject to approval by the

Court, to pay a total sum of $1,500,000 to Plaintiffs Counsel for their fees and expenses

Defendants shall not object to this request.

8.2. Such sum as the Court awards Plaintiffs' Counsel (the "Fee Award") shall be paid

to Plaintiff's Settlement Counsel, within 10 days after the entry of the Final Judgment and Order,

Or any other order making the Fee Award . In the event that Order concerning the Fee Award is

reversed or modified, and in the event that the Fee Award has been paid to any extent, then

Plaintiffs Settlement Counsel shall within five (5) business days from the reversal or

modification refund the Fee Award (or such portion as the modification may require) plus

interest thereon at a rate of 3% per annum simple interest to Telerech. Plaintiff s Counsel, as a

RI_ F1-3474800-I

condition of receiving the Fee Award, on behalf of themselves and each partner and/or

shareholder of their respective law firms, agree that each of their respective law firms and its

partners and/or shareholders are subject to the jurisdiction of the Court for the purpose of

enforcing the provisions of this paragraph.,

8..3. Approval of Plaintiff's Counsels' request for the Fee Award shall not be a

condition of the Settlement. Any order or proceedings relating to Plaintiff's Counsels' request

for the Fee Award or any appeal from any order relating thereto or modification thereof shall not

operate to terminate or cancel this Stipulation, and shall not affect the Final Judgment and Order

approving this Stipulation or prevent the Settlement from becoming Final.

8.4. Based on the benefits that Plaintiff's Counsel believes that Plaintiff has achieved

through her prosecution of the Action, Plaintiff's Counsel intends to seek Court approval for an

award in the amount of $2,000 (the "Special Award") for Plaintiff Defendants will not object to

a request for Court approval of the Special Award. The Special Award shall be paid out of the

Fee Award to the extent that application is approved by the Court.

IX. CONDITIONS OF SETTLEMENT, EFFECT OF NON-APPROVAL,CANCELLATION OR TERMINATION

9.1, The Effective Date shall be conditioned on the occurrence of all of the following

events:

A. The Court has entered the Hearing Order, substantially similar in form to Exhibit A,

attached hereto;

B. The Company has received $6.5 million pursuant to the Settlement;

C. The Court has entered the Judgment substantially in the form of Exhibit C;

D. The Judgment has become Final, as defined in Section V, 1.5; and

E The final judgment and order approving the settlement of the Class Action is rendered

R I -3474800-1

by the United States District Court and such order is not subject to further review on

appeal or otherwise.

9.2. If all of the conditions specified in II 9.1 are not met, then the Stipulation shall be

canceled and terminated, unless Plaintiffs Settlement Counsel and Defense Counsel mutually

agree in writing to proceed with the Stipulation.

93 If the Effective Date does not occur, Or if the Stipulation is not approved by the

Court or the Settlement set forth in the Stipulation is terminated or fails to become effective in

accordance with its terms, the Settling Parties shall be restored to their respective positions in the

Action as of the date of execution of this Stipulation. In such event, the terms and provisions of

the Stipulation, shall have no further force and effect with respect to the Settling Parties and shall

not be used in the Action Or in any other proceeding for any purpose, and any Judgment or order

entered by the Court in accordance with the terms of the Stipulation shall be treated as vacated,

171111C prO 11177C.

9.4. If the Effective Date does not Occur Or if the Stipulation is not approved by the

Court or the Settlement set forth in the Stipulation is terminated or fails to become effective in

accordance with its terms, the monetary provision of the Settlement shall be refunded by the

Company to its insurance carrier(s) within five (5) days of the entry of any such order that would

prevent the Effective Date from occurring.

X. MISCELLANEOUS PROVISIONS

10,1.. The Settling Parties (a) acknowledge that it is their intent to consummate this

agreement; and (b) agree to cooperate to the extent reasonably necessary to effectuate and

implement all terms and conditions of the Stipulation and to exercise their good faith best efforts

to accomplish the foregoing terms and conditions of the Stipulation,

RI. F1-3474890-1

10.2. The Settling Parties intend this Settlement to be a final and complete resolution of

all disputes between them with respect to the Action and their subject matter. The Settling

Parties agree that the Settlement was negotiated in good-faith by the Settling Parties and reflects

a Settlement that was reached voluntarily after consultation with experienced counsel.

10.3. Pending Court approval of the Stipulation and the Settlement, (i) Plaintiff agrees

not to initiate any proceedings other than those incident to the Settlement itself; and (ii)

Defendants may seek to prevent or stay any other action or claims brought seeking to assert any

Released Claim. If any action that would be barred by the releases contemplated by this

Stipulation is commenced against any of the Released Persons prior to the entry of Final

Judgment, and such action is not dismissed prior to the Settlement Hearing contemplated by this

Stipulation, any Defendant may, at his, her or its sole option, withdraw from the Settlement prior

to the Settlement Hearing. The Settlement shall remain binding as to the remaining parties

thereto, if any.

10.4. Neither the Stipulation nor the Settlement, nor any act performed or document

executed pursuant to or in furtherance of the Stipulation or the Settlement: (a) is or may be

deemed to be or may be used as an admission of, or evidence of, the validity or invalidity of any

Released Claim, or of any wrongdoing or liability or lack thereof of the Defendants and Released

Persons; or (b) is or may be deemed to be or may be used as an admission of, or evidence of, any

fault or omission or lack thereof of any of the Defendants and Released Persons in any civil,

criminal or administrative proceeding in any court, administrative agency or other tribunal.

Defendants and Released Persons may file the Stipulation and/or the Judgment in any action that

may be brought against them in order to support a defense or counterclaim based on principles of

res judicata, collateral estoppel, release, good faith settlement, judgment bar or reduction or any

RLF1-34748t10-1

other theory of claim preclusion or issue preclusion or similar defense or counterclaim.

Defendants have denied and continue to deny each and all of the claims alleged in the Action.

Plaintiff, TeleTech or any Current TeleTech Stockholder, may file the Stipulation in any

proceeding brought to enforce any of its terms or provisions. The Settling Parties and their

counsel, and each of them, agree, to the extent permitted by law, that all agreements made and

orders entered during the course of the Action relating to the confidentiality of information shall

survive this Stipulation.

10.5. Plaintiff agrees not to institute, join in, or cooperate in any way in any threatened,

pending, or future litigation, lawsuit, claim or action against the Released Persons, or any of

them, alleging, prosecuting, regarding, concerning, relating to, referring to or arising out of in

any way the Released Claims.

10.6, Plaintiff warrants and represents that she has not assigned or transferred or

attempted to assign or transfer to any person or entity any Released Claim or any portion thereof

or interest therein,

10.7. Plaintiff hereby represents and warrants that she has adequate information

regarding the terms of this Settlement, the scope and effect of the releases set forth herein, and

all other matters encompassed by this Stipulation to make an informed and knowledgeable

decision with regard to entering into this Stipulation, and that she has independently and without

reliance upon the Defendants made her own analysis and decision to enter into this Stipulation.

10.8. Defendants hereby represent and warrant that they have adequate information

regarding the terms of this Settlement, the scope and effect of the releases set forth herein, and

all other matters encompassed by this Stipulation to make an informed and knowledgeable

decision with regard to entering into this Stipulation, and that they have independently and

RL 1:1-3,171800-1

without reliance upon the Plaintiff made their own analysis and decision to enter into this

Stipulation. Defendants acknowledge and hereby verify that the Plaintiff has not made any

representation or warranty and has no duty or obligation to them, whether express or implied, of

any kind or character, except as expressly set forth herein.

10.9. This Stipulation has been jointly drafted by the parties at arm's length. No

provision or ambiguity in this Stipulation shall be construed or interpreted against any party by

virtue of its participation in the drafting of this Stipulation. The Stipulation shall in all cases be

construed as a whole, according to its fair meaning and not strictly for or against any of the

parties.

10..10.. The covenants contained in this Stipulation provide good and sufficient

consideration for every promise, duty, release, obligation, agreement and right contained in this

Stipulation.

10.11. Any failure by any party to insist upon the strict performance by any other party

of any of the provisions of the Stipulation shall not be deemed a waiver of any of the provisions,

and such party, notwithstanding such failure, shall have the right thereafter to insist upon the

strict performance of any and all of the provisions of the Stipulation to be performed by such

other party.

10.12. All of the Exhibits to the Stipulation are material and integral parts hereof and are

fully incorporated herein by reference.

10.13. The Stipulation may be amended or modified only by a written instrument signed

by or on behalf of all Settling Parties or their respective successors-in-interest.

1014k The Stipulation and the Exhibits attached hereto constitute the entire agreement

between Plaintiff and Defendants and no representations, warranties or inducements have been

RI. F1-3474800-1

made to any party concerning the Stipulation or its Exhibits other than the representations,

warranties and covenants contained and memorialized in such documents. Except as otherwise

provided herein, each party shall bear its own costs,

10,15. Each counsel or other Person executing the Stipulation or any of its Exhibits on

behalf of any party hereto hereby warrants that such Person has the full authority to do so,

1016. The Stipulation may be executed in one or more counterparts.. All executed

counterparts and each of them shall be deemed to be one and the same instrument. A complete

set of original executed counterparts shall be filed with the Court.

10.17. The Stipulation shall be binding upon, and inure to the benefit of, the successors

and assigns of the parties hereto.

1018, The Court shall retain jurisdiction with respect to implementation and

enforcement of the terms of the Stipulation, and all parties hereto submit to the jurisdiction of the

Court for purposes of implementing and enforcing the Settlement embodied in the Stipulation

and for any matters arising out of, concerning, or relating thereto,

10,19. The Stipulation and the Exhibits hereto shall be considered to have been

negotiated, executed and delivered, and to be wholly performed, in the State of Delaware, and

the rights and obligations of the parties to the Stipulation shall be construed and enforced in

accordance with, and governed by, the internal, substantive laws of the State of Delaware

without giving effect to that State's choice of law principles.

1020. FN WITNESS WHEREOF, the parties hereto have caused the Stipulation to be

executed, by their duly authorized attorneys.

1211 : I -1174800-1

Dated: October 26, 2009

Respectfully submitted,

/31 NO111(117 lvi. AiOnhail Rosenthal, Monbait & Goddess,P.A.Norman M. Monhait (41040)919 Market Street, Suite 1401P.O. Box 1070Wilmington, DE 19899-1070Phone: (302) 656 4433Fax: (302) 658-7567

Counsel for Plaintiff

The Weiser Law Firm, P.C.Robert B. WeiserBrett D. SteckerJeffrey J. Ciarlanto121 N. Wayne Avenue, Suite 100Wayne, PA 19087Phone: (610) 225-2677Fax: (610) 225-2678

The Shuman Law FirmKip B. ShumanRusty E. Glenn801 Fast 17th AvenueDenver, CO 80218Phone: (303) 861-3003Fax: (303) 830-6920

/s/ Brock E. Czeschin Richards Layton & Finger, P.A.Allen M. Terrell, Jr., Esquire (# 709)Brock E. Czeschin, Esquire (# 3938)One Rodney Square920 North King StreetWilmington, DE 19801

RM-3474800-1

Counsel for defendants Kenneth DTuchnicm, James E Barlett, RodDammeyer, George H Heihneier,John T McLennan, MortonMeyerson, Alan Silverman, Mark CThompson, Sharon A O'Lecny,Dennis]. Lacey, John Simon, AlanSchutzman, Brian Delaney JohnTroka, Larry Kessler, Michael EFoss, and Margot O'Dell, andnominal defendant Tele TechHoldings, Inc

OF COUNSEL

Dewey & LeBoeul LLPRalph C. FerraraGeoffrey H. Coll1101 New York Avenue, N.W.Suite 1100Washington, DC 20005Phone: (202) 346-8000Fax: (202) 346-8102

Counsel for Nominal Defendant

Brownstein Hyatt Farber SchreckTimothy R. BeyerZhonette M. Brown410 Seventeenth StreetSuite 2200Denver, CO 80202Phone: (303) 223-1116Fax: (303) 223-1111

Counsel for Defendants James EBaden, William A. Linnenbringer,Ruth C Lipper, Shrikant Mehta,Shirley Young, Rod Dammeyer,George H Heihneier, John TMcIetlI7C111, Morton Meyerson, AlanSilverman, Mark C. Thompson,Sharon A. O'Leary, Dennis J Lacey,John Simon, Alan Schutzman, BrianDelaney, John C Thoka, Larry

RL F -3471800-I

Kessler, Michael E Foss andMargot O'Dell

McDermott Will & Emery LLPLaurence BermanMatt Oster2049 Century Park East, 38th FloorLos Angeles, CA 90067Phone: (310) 277-4110Fax: (310) 277-4730

Counsel for Defendant Kenneth DTI1C17117CM

121.1: I -317=4800- I

EXHIBIT H

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

SUSAN M. GREGORY, ••

Plaintiff,•

vs. : Civil Action: No. 3925-CC

KENNETH D. TUCHMAN, JAMES E.BARLETT, WILLIAM A. •LINNENBRINGER, RUTH C. LIPPER,SHRIKANT MEHTA, SHIRLEY YOUNG,ROD DAMMEYER, GEORGE C.HEILMEIER, JOHN T. MCLENNAN, •MORTON MEYERSON, ALAN •SILVERMAN, MARK C. THOMPSON,SHARON A. O'LEARY, DENNIS J. •LACEY, JOHN SIMON, ALAN •SCHUTZMAN, BRIAN DELANEY, JOHNTROKA, LARRY KESSLER, MICHAELE. FOSS and MARGOT O'DELL, •

•

Defendants, •

and •TELETECH HOLDINGS, INC.,

•

Nominal Defendant.- - -Chancery Court34 The CircleGeorgetown, DelawareTuesday, January 5, 20102:30 p.m.

- - -

BEFORE: HON. WILLIAM B. CHANDLER III, CHANCELLOR.

- - -SETTLEMENT HEARING

- - -

CHANCERY COURT REPORTERS410 Federal Street

Dover, Delaware 19901 (302) 739-3934

2

1 APPEARANCES:(By telephone):

2NORMAN M. MONHAIT, ESQ.

3 Rosenthal, Monhait & Goddess, P.A.-and-

4 ROBERT B. WEISER, ESQ.BRETT D. STECKER, ESQ.

5 JEFFREY J. CIARLANTO, ESQ.of the Pennsylvania bar

6 The Weiser Law Firm, P.C.-and-

7 KIP B. SHUMAN, ESQ.of the Colorado bar

8 The Shuman Law Firmfor Plaintiff

9

10 BROCK E. CZESCHIN, EQ.Richards, Layton & Finger, P.A.

11 -and- •

TIMOTHY R. BEYER, ESQ.

12 of the Colorado barBrownstein, Hyatt, Farber, Schreck

13 for Defendants Kenneth D. Tuchman, JamesBarlett, Rod Dammeyer, George Heilmeier,

14 John McLennan, Morton Meyerson, AlanSilverman, Mark Thompson, Sharon O'Leary,

15 Dennis Lacey, John Simon, Alan Schutzman,Brian Delaney, John Troka, Larry Kessler,

16 Michael Foss Margot O'Dell and NominalDefendant TeleTech Holdings, Inc.

17 -and-GEOFFREY H. COLL, ESQ.

18 Dewey & LeBoeuf, LLPfor Nominal Defendant

19

20

21- - -

22

23

24

CHANCERY COURT REPORTERS

3

1 THE COURT: Good afternoon, counsel.

2 Do you have any trouble hearing me?

3 MR. MONHAIT: No. I hear you fine.

4 Can others hear the Chancellor?

5 THE COURT: All right. I have you on

6 speaker phone. I am in the courtroom, and the only

7 person present in the courtroom besides my clerk and

8 my staff is a member of the press, Jeff Feely, and

9 there is no one else here. It is past the hour of

10 2:30 at which this settlement hearing was scheduled,

11 which is Gregory versus Tuchman, et al, Civil Action

12 Number 3925.

13 So if there are introductions, please

14 feel free to do that. If not, whoever is going to

15 present the settlement to me should feel free to

16 begin.

17 MR. MONHAIT: Your Honor, good

18 afternoon. This is Norm Monhait. Thank you very much

19 for agreeing to conduct this hearing by phone.

20 I have on the line with me Robert

21 Weiser and Kip Shuman who have been the principal

22 counsel on behalf of the plaintiff in this action, and

23 Mr. Weiser will be speaking in support of the

24 settlement. Your Honor has granted his pro hac vice


4

1 motion this morning.

2 THE COURT: Very well then.

3 Mr. Weiser, where are you? Are you in New York or

4 here in Wilmington?

5 MR. WEISER: Neither, Your Honor. I

6 am in Wayne, Pennsylvania which is one of the western

7 suburbs of Philadelphia.

8 THE COURT: I'm sorry. I now look and

9 see that your office is in Wayne. My apologies.

10 MR. WEISER: None needed.

11 MR. CZESCHIN: Brock Czeschin from

12 Richards, Layton on behalf of the defendants, and I

13 have on the phone Geoffrey Coll from Dewey & LeBoeuf

14 representing the nominal defendant Teletech, and

15 Mr. Timothy Beyer of Brownstein, Hyatt, Farber,

16 Schreck in Denver who represents all the individual

17 defendants other than Mr. Tuchman.

18 THE COURT: Very well then. Welcome

19 to all. I'm glad you're able to make it by telephone.

20 Hopefully that is a little more convenient for all.

21 MR. MONHAIT: It is, thank you.

22 MR. WEISER: Your Honor, thank you.

23 As Your Honor knows, we are here on a

24 final unopposed motion for final settlement approval.


26

1 MR. COLL: Geoff Coll on behalf of the

2 nominal defendants, but we are also happy to rest on

3 the submissions.

4 THE COURT: All right.

5 Well, counsel, thank you very much for

6 being available on by telephone. This, I know, is

7 convenient for you, but it also is convenient to the

8 Court to do it this way.

9 I have read the brief that was

10 submitted and the affidavits, of course, by Mr. Weiser

11 and his firm and Mr. Monhait's firm and the others, so

12 I am familiar with the issues and with the terms of

13 the settlement.

14 Let me say at the outset that it is

15 comforting to know that this litigation was mediated

16 and that Judge Weinstein was involved in that. That

17 is something that I do recognize and get comfort from.1

18 Secondly, I have to tell you, having

19 had a number of options dating, backdating and excess

20 grant cases in my career, I think I am the only judge

21 perhaps on this Court who can say this, but I think

22 every one of my cases has successfully settled in a[

23 way that has resulted in very generous settlements

24 that were highly beneficial to the companies involved


27

1 and to their stockholders.

2 So I take some, I don't know, personal

3 pride in that I am glad that that has worked out in

4 each of these cases, and this one in particular, as

5 well as the Ryan versus Gifford involving Maxim. I am

6 happy about that and glad that you were able to

7 achieve this result, and I compliment all counsel

8 involved, those who represent the company and

9 represent the individual defendants as well as counsel

10 for the plaintiffs.

11 So having said that, let me turn then

12 to what I think I am obliged to do at this point.

13 First, a Court, in reviewing the proposed settlement

14 of a derivative litigation, looks primarily at whether

15 the settlement is fair, reasonable and adequate.

16 There is no real litmus test or a blueprint for how

17 courts arrive at what is a fair, reasonable and

18 adequate settlement, but we tend to focus on a number

19 of different factors which include the risks of

20 establishing liability in the litigation and the risks

21 of recovering or establishing any damages as a result ;

22 of any liability that is found.

23 In this particular case, Mr. Weiser

24 talked about the damages issue at length, and I don't


;

32

1 shortly.

2 THE COURT: Thank you, Mr. Czeschin.

3 Everyone, have a very good day.

4

5

6 (The teleconference concluded at

7 3:20 p.m.)

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24


•

33

CERTIFICATE

I, MAUREEN M. McCAFFERY, Official Court

Reporter of the Chancery Court, State of Delaware, do

hereby certify that the foregoing pages numbered

3 through 32 contain a true and correct transcription

of the proceedings as stenographically reported by

me at the hearing in the above cause before the

Chancellor of the State of Delaware, on the date

therein indicated.

IN WITNESS WHEREOF, I have

hereunto set my hand at Dover, this 8th day of

January, 2010.

/s/Maureen M. McCaffery

Maureen M. McCafferyOfficial Court Reporterof the Chancery CourtState of Delaware

Certification Number: 201-RPRExpiration: 1/31/11


EXHIBIT I

cest-li‘GRANTED EFiled: Jan 5 2010 4316119itt to"132' 4145initittIC Transaction ID 287937'4 vytea.: nen

&Se Nu. OV40-GC W1-11 ASI4AVe

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

XSUSAN M. GREGORY,

•Plaintiff, •

•VS.

KENNETH D. TUCHMAN, JAMES E.BARLETT, WILLIAM A.LINNENBRINGER, RUTH C. LIPPER,SHRIKANT MEHTA, SHIRLEY YOUNG,ROD DAMMEYER, GEORGE C.HEILMEIER, JOHN T. MCLENNAN, C.A. No. 3925-CCMORTON MEYERSON, ALANSILVERMAN, MARK C. THOMPSON,SHARON A. O'LEARY, DENNIS J. LACEY,JOHN SIMON, ALAN SCHUTZMAN,BRIAN DELANEY, JOHN TROKA, LARRYKESSLER, MICHAEL E. FOSS, andMARGOT O'DELL,

Defendants,

•and

TELETECH HOLDINGS, INC., •

NominalDefendant

•X

FINAL JUDGMENT APPROVINGSETTLEMENT AND ORDER OF DISMISSAL

A hearing having been held before this Court (the "Court") on January 5, 2010, pursuant

to the Court's Hearing Order dated October 27, 2009 (the "Hearing Order"), upon a Stipulation

of Settlement filed on October 26, 2009 (the "Stipulation") in the above-captioned action (the

"Action") brought derivatively on behalf of TeleTech Holdings, Inc. ("TeleTech"), it appearing

RLF1 3474899v.1

that due notice of said hearing was given in accordance with the Hearing Order and that said

notice was adequate and sufficient; and the Parties having appeared by their attorneys of record;

and the attorneys for the respective Parties having been heard in support of the Settlement of the

Action, and an opportunity to be heard having been given to all other Persons desiring to be

heard as provided in the Notice; and the entire matter of the Settlement having been considered

by the Court;

IT IS HEREBY ORDERED, ADJUDGED AND DECREED, this 5th day of January

2010, as follows:

1. Unless otherwise defined herein, all defined terms shall have the meanings

as set forth in the Stipulation.

2. The Notice, annexed as Exhibit B to the Stipulation, has been

disseminated by TeleTech pursuant to and in the manner directed by the terms of the Hearing

Order,; proof of the dissemination of the Notice was filed with the Court; and full opportunity to

be heard has been offered to all Parties and all Persons in interest. The form and manner of the

Notice is hereby determined to have been the best notice practicable under the circumstances and

to have been given in full compliance with each of the requirements of Court of Chancery Rule

23.1 and due process, and it is further determined that all Current TeleTech Stockholders are

bound by the Judgment herein.

3. The Court finds that the Stipulation and the terms of the Settlement set

forth therein are fair, reasonable and adequate and in the best interests of TeleTech and Current

TeleTech Stockholders. The Settlement is hereby approved pursuant to Court of Chancery Rule

23.1. The Parties to the Stipulation are hereby authorized and directed to comply with and to

- 2 -RLF1 3474899v.1

consummate the Settlement in accordance with its terms and provisions, and the Clerk of Court

is directed to enter and docket this Judgment.

4. This Judgment shall not constitute any evidence or admission by any Party

herein that any acts of wrongdoing have been committed by any of the Parties to the Action and

should not be deemed to create any inference that there is any liability therefore.

5. The Action (as well as all claims contained therein and all of the Released

Claims) is hereby dismissed on the merits and with prejudice, with each party to bear his, her, or

its own costs except as detailed in the Stipulation.

6. Plaintiff (acting on her own behalf individually and derivatively on behalf

of TeleTech), Current TeleTech Stockholders, and Plaintiffs' Counsel shall be deemed to have,

and by operation of this Final Judgment and Order have fully, finally, and forever compromised,

settled, released, discharged and dismissed all Released Claims (including "Unknown Claims,"

as defined in the Stipulation) and any and all claims arising out of, relating to, or in connection

with the defense, settlement or resolution of the Action against the Released Persons, and shall

be forever enjoined from instituting, commencing, or prosecuting or asserting these claims,

except that this agreement shall have no effect on any and all rights or claims Individual

Defendants and/or TeleTech may have under any policies of insurance or for indemnification.

7. TeleTech and each of the Released Persons shall be deemed to have, and

by operation of the Judgment have, fully, finally, and forever compromised, settled, released and

discharged Plaintiff and Plaintiff's Counsel from all claims (including Unknown Claims) arising

out of, relating to, or in connection with their institution, prosecution, assertion, settlement or

resolution of the Action or the Released Claims.

- 3 -RLF1 3474899v.1

8. Neither the Stipulation nor the Settlement, nor any act performed or

document produced or executed pursuant to or in furtherance of the Stipulation or the Settlement:

(a) is or may be deemed to be or may be offered, attempted to be offered or used in any way by

the Settling Parties or any other person as a presumption, a concession or any admission of, or

evidence of, any fault, wrongdoing or liability of the Individual Defendants or of the validity of

any Released Claims; or (b) is intended by the Settling Parties to be offered or received as

evidence or used by any other person in any other actions or proceedings, whether civil, criminal

or administrative. The Released Parties may file the Stipulation and/or this Judgment in any

action that may be brought against them in order to support a defense or counterclaim based on

principles of res judzcata, collateral estoppel, full faith and credit, release, good faith settlement,

judgment bar or reduction, or any other theory of claim preclusion or issue preclusion or similar

defense or counterclaim.

9. This Court further finds that the Settlement has been entered into and

made in good faith through arm's-length negotiations, and that Plaintiff and Plaintiff's Counsel

have fairly and adequately represented the interests of Current TeleTech Stockholders in

connection with the Action.

10. Plaintiff's Counsel are hereby awarded attorneys' fees and expenses in the

amount of $1,500,000.00 (the "Fee Award"), which sum the Court finds to be fair and reasonable

and which shall be paid to Plaintiff's Counsel in accordance with the terms of the Stipulation.

11. Plaintiff is hereby awarded $2,500.00 (the "Special Award") based on the

benefits that Plaintiff has achieved through her prosecution of the Action. The Special Award

shall be paid out of the Fee Award in accordance with the terms of the Stipulation.

- 4 -RLF1 3474899v.1

12. In the event that the Settlement of the Action does not become effective as

set forth in the Stipulation for any reason, then, without the need for any further action by any

Party thereto or by the Court, the Stipulation and this Judgment shall become null and void and

of no further force or effect, and shall not be used or referred to for any purpose whatsoever. In

that event, the Stipulation, this Judgment and all negotiations and proceedings relating thereto

shall be withdrawn without prejudice as to the rights of all Parties thereto, who shall be restored

to their respective positions existing prior to the execution of the Stipulation and this Judgment.

13. All other relief not expressly granted in this Judgment is denied.

14. Without affecting the finality of this Judgment in any way, this Court

reserves jurisdiction over all matters relating to the administration and consummation of the

Settlement, including but not limited to (a) implementation of this settlement; and (b) construing,

enforcing and administering the Stipulation.

SO ORDERED.

Signed this 5th day of January, 2010.

CHANCELLOR WILLIAM B. CHANDLER III

- 5 -RLF1 3474899v.1

This document constitute ,: a riding of the &tun and should be heated as such

Court: DE Court of Chancery Civil Action

Judge: William B Chandler

File & ServeTransaction ID: 28791044

Current Date: Jan 05, 2010

Case Number: 3925-CC

Case Name: CONF ORDER Gregory, Susan M vs Kenneth D Tuchman TeleTech Holdings Inc et al

/s/ Judge William B Chandler

EXHIBIT J

Case: 1:10-cv-01786-DAP Doc #: 5 Filed: 08/26/10 1 of 8. PagelD #: 125

IN THE UNITED STATES DISTRICT COURTNORTHERN DISTRICT OF OHIO

EASTERN DIVISION

•JAMES T. KING, derivatively on behalf of : Civil Action No. 1:10-cv-01786-DAPKEYCORP,

Plaintiff, .

v.

HENRY L. MEYER, III, WILLIAM G.BARES, PETER G. TEN EYCK, II,CAROL A. CARTWRIGHT, EDWARD P.CAMPBELL, BILL R. SANFORD,ALEXANDER M. CUTLER, THOMAS C.STEVENS, EDUARDO R. MENASCE,JEFFREY B. WEEDEN, LAURALEE E.MARTIN, H. JAMES DALLAS, BETH E.MOONEY, JOSEPH A. CARRABBA,RUTH ANN M. GILLIS, KRISTEN L.MANOS, and MERCER, INC.,

Defendants,

•and•

KEYCORP,•

Nominal Defendant.

-1-


IRVING LASSOFF, derivatively on behalf : Civil Action No. 1:10-cv-01813-JGof KEYCORP,

Plaintiff,

v. •

HENRY L. MEYER, III, WILLIAM G.BARES, PETER G. TEN EYCK, II,CAROL A. CARTWRIGHT, EDWARD P.CAMPBELL, BILL R. SANFORD,ALEXANDER M. CUTLER, THOMAS C.STEVENS, EDUARDO R. MENASCE,JEFFREY B. WEEDEN, LAURALEE E.MARTIN, H. JAMES DALLAS, BETH E.MOONEY, JOSEPH A. CARRABBA,

•RUTH ANN M. GILLIS, KRISTEN L.MANOS, and MERCER, INC., •

Defendants,

and •

KEYCORP,

•Nominal Defendant.

STIPULATION CONSOLIDATING ACTIONS, APPOINTING LEAD COUNSEL ANDRELATED MATTERS AND ORDER THEREON

WHEREAS, there are presently two related shareholder derivative actions against certain

of the officers and directors of KeyCorp pending in this Court;

WHEREAS, the two KeyCorp shareholder derivative actions arise out of the same

alleged transactions and occurrences and involve the same or substantially similar alleged issues

of fact and law, and, therefore, should be consolidated for all purposes;

WHEREAS, in an effort to assure consistent rulings and decisions and the avoidance of

unnecessary duplication of effort, all of the undersigned counsel, on behalf of parties to this

stipulation in the related KeyCorp shareholder derivative actions currently pending in this Court,

enter into this stipulation. The counsel are: (1) The Weiser Law Firm, P.C., Hutton Law Group,

and Landskroner Grieco Madden, LLC on behalf of plaintiff James T. King; (2) Ryan &

-2-


Maniskas, LLP and Landskroner Grieco Madden, LLC on behalf of plaintiff Irving Lassoff; (3)

Jones Day on behalf of individual defendants Henry L. Meyer III ("Meyer"), Thomas C. Stevens

("Stevens"), Jeffrey B. Weeden ("Weeden"), and Beth E. Mooney ("Mooney"); (4) Calfee,

Halter & Griswold LLP on behalf of individual defendants William G. Bares ("Bares"), Peter G.

Ten Eyck II ("Ten Eyck"), Carol A. Cartwright ("Cartwright"), Edward P. Campbell

("Campbell"), Bill R. Sanford ("Sanford"), Alexander M. Cutler ("Cutler"), Eduardo R. Menasce

("Menasce"), Lauralee E. Martin ("Martin"), H. James Dallas ("Dallas"), Joseph A. Carraba

("Carraba"), Ruth Ann M. Gillis ("Gillis"), and Kristen L. Manos ("Manos"); 1 (5) Vorys, Sater,

Seymour & Pease LLP on behalf of defendant Mercer, Inc. ("Mercer"); and (6) Baker &

Hostetler LLP on behalf of nominal party KeyCorp;

WHEREAS, KeyCorp, Mercer, and the Individual Defendants take no position at the

present time as to the appointment of (a) The Weiser Law Firm, P.C. as lead counsel for

plaintiffs; and (b) Landskroner Grieco Madden, LLC as liaison counsel for plaintiffs;

WHEREAS, the plaintiffs, KeyCorp, Mercer, and the Individual Defendants agree that it

would be duplicative and wasteful of the Court's resources for defendants named in plaintiffs'

shareholder derivative actions to have to respond to the individual complaints prior to the agreed-

upon consolidation Therefore, the plaintiffs, KeyCorp, Mercer, and the Individual Defendants

agree that no response is necessary to the individual complaints that have already been filed until

after the KeyCorp shareholder derivative actions have been consolidated and a consolidated

complaint has been filed.

* * *

Now, therefore, the parties hereto stipulate and the Court ORDERS as follows:2

1 Collectively, defendants Meyer, Stevens, Weeden, Mooney, Bares, Ten Eyck, Cartwright,Campbell, Sanford, Cutler, Menasce, Martin, Dallas, Carraba, Gillis, and Manos shall be referredto herein as the "Individual Defendants."2 By virtue of this stipulation and order, no party waives or otherwise compromises any of itspotential arguments, rights or defenses with respect to and including, among other things,jurisdiction, venue, or choice of law.

-3-


I. CONSOLIDATION OF THE RELATED SHAREHOLDER DERIVATIVEACTIONS

The following shareholder derivative actions are hereby related and consolidated for all

purposes, including pre-trial proceedings and trial:

Abbreviated Case Name Case Number Date Filed King v. Meyer, et al., 1 : 10- cv-01786-DAP July 6, 20103Lassoff v. Meyer, et al., 1:10-cv-01813-JG August 17, 2010

II. CAPTION OF CASES

Every pleading filed in these consolidated actions, or in any separate action included

herein, shall bear the following caption:

IN THE UNITED STATES DISTRICT COURTNORTHERN DISTRICT OF OHIO

EASTERN DIVISION

IN RE KEYCORP DERIVATIVE ) Lead Case No. 1:10-cv-01786-DAPLITIGATION )

)This Document Relates to: )

)ALL ACTIONS ) )

III. MASTER DOCKET

The files of these consolidated actions shall be maintained in one file under Master File

No. 1:10-cv-01786-DAP.

IV. PLEADINGS AND MOTIONS

Plaintiffs shall file a consolidated complaint (the "Consolidated Complaint") no later than

60 days from the date of entry of this Order, unless otherwise agreed between the parties and

approved by the Court, which shall be deemed the operative complaint, superseding all

complaints filed in any of the actions consolidated hereunder. Defendants shall have up to 45

days after the filing of the Consolidated Complaint to move, answer or otherwise respond to the

3 The KeyCorp shareholder derivative action captioned King v. Meyer, et al., Case No. 1:10-cv-01786-DAP (the "King Action"), was filed on July 6, 2010 in the Court of Common Pleas ofCuyahoga County, Ohio, Case No. CV-10-730994. On August 12, 2010, certain of thedefendants removed the King Action to this Court pursuant to 28 U.S.C. §§ 1441 and 1446.

-4-


Consolidated Complaint. Plaintiffs shall file their opposition to any motion(s) to dismiss within

45 days after the filing of Defendants' motion(s). Defendants shall file any replies to plaintiffs'

opposition within 30 days after plaintiffs' filing of the opposition.

V. ORGANIZATION OF COUNSEL

Lead Counsel for plaintiffs for the conduct of these consolidated actions is:

THE WEISER LAW FIRM, P.C.ROBERT B. WEISERBRETT D. STECKER

JEFFREY J. CIARLANTO121 N. Wayne Avenue, Suite 100

Wayne, PA 19087Telephone: (610) 225-2677Facsimile: (610) 225-2678

Each counsel's appearance and service in these capacities is subject to approval of a pro

hac vice application to be filed within 60 days.

Lead Counsel shall have authority to speak for plaintiffs in matters regarding pre-trial

procedure, trial and settlement negotiations and shall make all work assignments in such manner

as to facilitate the orderly and efficient prosecution of this litigation and to avoid duplicative or

unproductive effort.

Lead Counsel shall be responsible for coordinating all activities and appearances on

behalf of plaintiffs and for the dissemination of notices and orders of this Court. No motion,

request for discovery, or other pre-trial or trial proceedings shall be initiated or filed by any

plaintiffs except through plaintiffs' Lead Counsel.

Lead Counsel also shall be available and responsible for communications to and from this

Court, including distributing orders and other directions from the Court to counsel. Lead

Counsel shall be responsible for creating and maintaining a master service list of all parties and

their respective counsel. Service on Lead Counsel shall be sufficient as notice to plaintiffs in this

consolidated action.

Liaison counsel for plaintiffs for the conduct of these consolidated actions is:

-5-


LANDSKRONER GRIECO MADDEN, LLCJACK LANDSKRONER

DREW LEGANDO1360 West 9th Street, Suite 200

Cleveland, OH 44113Telephone: (216) 522-9000Facsimile: (216) 522-9007

VI. NEWLY FILED OR TRANSFERRED ACTIONS

This Order shall apply to each case arising out of the same or substantially the same

transactions or events as these cases, which is subsequently filed in or transferred to this Court.

When a case which properly belongs as part of the In re KeyCorp Derivative Litigation,

Lead Case No. 1: 10-cv-01786-DAP, is hereafter filed in this Court or transferred here from

another court, this Court requests the assistance of counsel in calling to the attention of the clerk

of the Court the filing or transfer of any case which might properly be consolidated as part of the

In re KeyCorp Derivative Litigation, Lead Case No. 1:10-cv-01786-DAP, and counsel are to

assist in assuring that counsel in subsequent actions receive notice of this Order.

IT IS SO STIPULATED.

DATED: August 19, 2010 THE WEISER LAW FIRM, P.C.ROBERT B. WEISERBRETT D. STECKERJEFFREY J. CIARLANTO121 N. Wayne Avenue, Suite 100Wayne, PA 19087Telephone: (610) 225-2677Facsimile: (610) 225-2678

By: s/ Robert B. Weiser (with permission) ROBERT B. WEISER

[Proposed] Lead Counsel and Counsel for Plaintiff JamesT. King

RYAN & MANISKAS, LLPKATHARINE M. RYANRICHARD A. MANISKAS995 Old Eagle School Rd.Suite 311Wayne, PA 19087Telephone: (484) 588-5516Facsimile: (484) 450-2582

-6-


Counsel for Plaintiff Irving Lassoff

LANDSKRONER GRIECO MADDEN, LLCJACK LANDSKRONER(Ohio Bar Registration No. 0059227)DREW LEGANDO(Ohio Bar Registration No. 0084209)1360 West 9th Street, Suite 200Cleveland, OH 44113Telephone: 216-522-9000216-522-9007 (fax)

By: s/ Jack Landskroner (with permission) JACK LANDSKRONER

[Proposed] Liaison Counsel and Counsel for PlaintiffsJames T. King and Irving Lassoff

Dated: August 19, 2010 JONES DAYJOHN M. NEWMAN, JR.(Ohio Bar Registration No. 0005763)GEOFFREY J. RITTS(Ohio Bar Registration No. 0062603)MICHAEL A. PLATT(Ohio Bar Registration No. 0082926)901 Lakeside AvenueCleveland, OH 44114Telephone: 216-586-3939Fax: 216-579-0212

By: s/ Michael A. Platt MICHAEL A. PLATT

Counsel for defendants Henry L. Meyer III, Thomas C.Stevens, Jeffrey B. Weeden, and Beth E. Mooney

Dated: August 19, 2010 CALFEE, HALTER & GRISWOLD LLPMITCHELL G. BLAIR(Ohio Bar Registration No. 0010892)KIMBERLY M. MOSES(Ohio Bar Registration No. 0029601)1400 KeyBank Center800 Superior AvenueCleveland, OH 44114Telephone: 216-622-8361Fax: 216-241-0816

-7-


By: s/ Mitchell G. Blair (with permission) MITCHELL G. BLAIR

Counsel for defendants William G. Bares, Peter G. TenEyck II, Carol A. Cartwright, Edward P. Campbell, Bill R.Sanford, Alexander M. Cutler, Eduardo R. Menasce,Lauralee E. Martin, H. James Dallas, Joseph A. Carraba,Ruth Ann M Gillis, and Kristen L. Manos

Dated: August 19, 2010 VORYS, SATER, SEYMOUR & PEASE LLPDAVID J. TOCCO(Ohio Bar Registration No. 0037266)LAURA G. KUYKENDALL(Ohio Bar Registration No. 0012591)2100 One Cleveland Center1375 East Ninth StreetCleveland, OH 44114Telephone: 216-479-6113Fax: 216-479-6060

By: s/ Laura G. Kuykendall (with permission) LAURA G. KUYKENDALL

Counsel for defendant Mercer, Inc.

Dated: August 19, 2010 BAKER & HOSTETLER LLPDANIEL R. WARREN(Ohio Bar Registration No. 0054595)3200 PNC Center1900 East Ninth StreetCleveland, OH 44114Telephone: 216-861-7145Fax: 216-696-0740

By: s/ Daniel R. Warren (with permission) DANIEL R. WARREN

Counsel for nominal party KeyCorp

ORDER

PURSUANT TO STIPULATION, IT IS SO ORDERED.

Date: 8/26/10 /s/Dan Aaron Polster -8-

1 CERTIFICATE OF SERVICE

2 I hereby certify that onJuly 11, 2011,1 authorized the electronic filing of the foregoing with

3 the Clerk of the Court using the CM/ECF system which will send notification of such filing to the

4 e-mail addresses denoted on the attached Electronic Mail Notice List. I hereby certify that I caused

5 to be hand delivered the foregoing document or paper to the non CM/ECF participants indicated on

6 the attached Manual Notice List that are noted by a double asterisk (**). I also certify that I caused

7 to he mailed the foregoing document or paper via the United States Postal Service to the non-

8 CM/ECF participants indicated on the attached Manual Notice List that are noted by a single asterisk

9 (*).

10 I further certify that 1 caused this document to be forwarded to the following Designated

11 Internet Site at: http://securities.stanford.edu .

12 I certify under penalty of perjury under the laws of the United States of America that the

13 foregoing is true and correct. Executed on July 11,

14 / 41, a 11.ATHLFE

15THE WEISER LAW Ft • , .


17 Telephone: 858/794-1441

18Facsimile: 858/794-1450

19 E-mail: kah0weiserlawfirm.com

22

23

25

26

27

28

YAHOO Service List*THE WEISER LAW FIRM, P.C. **ROBBINS UMEDA LLPKATHLEEN A. HERKENHOFF BRIAN J. ROBBINS12707 High Bluff Drive, Suite 200 CRAIG W. SMITHSan Diego, CA 92130 SHANE P. SANDERSTelephone: 858/794-1441 GINA STASSIFacsimile: 858/794-1450 600 B Street, Suite [email protected] San Diego, CA 92101

Telephone: 619/525-3990— and — Facsimile: 619/525-3991

[email protected]*THE WEISER LAW FIRM, P.C. [email protected] B. WEISER [email protected] D. STECKER [email protected] J. CIARLANTOJOSEPH M. PROFY121 N. Wayne Avenue, Suite 100 Attorneys for Plaintiff Iron Workers Mid-Wayne, PA 19087 South Pension FundTelephone: 610/225-2677Facsimile: 610/[email protected]@[email protected]@weiserlawfirm.com

Attorneys for Plaintiff & Movant Yahia Tawila

*GLANCY BINKOW & GOLDBERG LLP *THE BRISCOE LAW FIRM, PLLCLIONEL Z. GLANCY WILLIE C. BRISCOEMICHAELGOLDBERG BILLY J. BRISCOEEX KANO SAMS II 8117 Preston Road, Suite 3001801 Avenue of the Stars, Suite 311 Dallas, TX 75225Los Angeles, CA 90067 Telephone: 214/706-9314Telephone: 310/201-9150 Facsimile: 214/706-9315Facsimile: 310/[email protected]

Attorneys for Plaintiff & Movant Jan Oh Attorneys for Plaintiff & Movant Jane Oh

*POWERS TAYLOR **LAW OFFICES OF DAVID N LAKEPATRICK POWERS DAVID N. LAKEMARK TAYLOR 16130 Ventura Boulevard, Suite 650PEYTON HEALEY Encino, CA 91436Campbell Centre II [email protected] North Central Expy., Suite 1575Dallas, TX 75206Telephone: 214/239-8900Facsimile: 214/[email protected]

Attorneys for Plaintiff Debra SalzmanAttorneys for Plaintiff & Movant Jane Oh

• *LAW OFFICES OF ETH A. ELANTH A. ELAN

217 Broadway, Suite 606New York, NY 10007Telephone: 212/619-0261Facsimile: 212/[email protected]

Attorneys for Plaintiff Debra Salzman

Defendants**MO • • SON & FOERSTER LLPMARK FOSTER425 Market SheetSan Francisco, CA 94105Telephone: 415/268-6335Facsimile: 415/[email protected]

Attorneys for Yahoo, Inc., Carol A. Bartz, JerryYang, Roy Bostock, Patti Hart, Susan James,Vyomesh Joshi, David Kenny, Arthur Kern,Brad Smith, and Gary Wilson

*Defendant Jack Ma24/F, Jubilee Center18 Fenwick StreetWanchai, Hong Kong, China

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