Free Declaration in Support - District Court of California - California

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JORDAN ETH (BAR NO. 121617) [email protected] JUDSON E. LOBDELL (BAR NO. 146041) [email protected] MARK R.S. FOSTER (BAR NO. 223682) [email protected] MORRISON & FOERSTER LLP 425 Market Street San Francisco, California 94105 Telephone: 415-268-7000 Facsimile: 415-268-7522 ANNA ERICKSON WHITE (BAR NO. 161385) [email protected] MORRISON & FOERSTER LLP 755 Page Mill Road Palo Alto, California 94304 Telephone: 650-813-5600 Facsimile: 650-494-0792 Attorneys for Defendants YAHOO! INC., TERRY S. SEMEL, SUSAN L. DECKER, DANIEL L. ROSENSWEIG, and FARZAD NAZEM UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA OAKLAND DIVISION IN RE: YAHOO! INC. ELLEN ROSENTHAL BRODSKY, on Behalf of Herself and All Others Similarly Situated, Plaintiffs, v. YAHOO! INC., TERRY S. SEMEL, SUSAN L. DECKER, FARZAD NAZEM, and DANIEL ROSENSWEIG, Defendants. . CLASS ACTION Case No. CV-08-2150-CW DECLARATION OF MATTHEW H. RICE IN SUPPORT OF DEFENDANTS' MOTION TO DISMISS THE CONSOLIDATED AMENDED COMPLAINT

This Document Relates To: All Actions

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I, Matthew H. Rice, do hereby declare and state as follows: 1. I am a member of the bar of the State of California and am admitted to practice

before this Court. I am an associate with the law firm of Morrison & Foerster LLP, attorneys of record for defendants. I make this declaration in support of Defendants' Notice of Motion and Motion to Dismiss Plaintiffs' Consolidated Amended Complaint. All capitalized and abbreviated terms used herein have the same meanings set forth in the Motion to Dismiss, unless otherwise indicated. I make this declaration based on personal knowledge, except where otherwise indicated. If called as a witness, I would testify to the facts listed below. Methodology for Calculations 2. This declaration summarizes information regarding the Individual Defendants'

holdings and sales of Yahoo! stock reported in SEC filings submitted pursuant to Defendants' Request for Judicial Notice. The numbers of shares and stock prices contained in this declaration have been adjusted, where appropriate, to reflect a May 11, 2004 Yahoo! stock split. The methodology for the calculations contained in this declaration are as follows: (a) To calculate each defendants' beneficial holdings of Yahoo! stock at the

beginning of the Class Period ("Pre-Class Period Holdings"), I followed the following procedure. I reviewed Yahoo!'s Schedule 14A Proxy Statement filed on or about April 9, 2004 (the "2004 Proxy"). Ex. 6.1 The chart on pages 17 and 18 of the 2004 Proxy lists the beneficial ownership of each defendant, including vested stock options, as of February 17, 2004. Id. As note 1 on page 18 of the 2004 Proxy states, the beneficial ownership listed in the chart also includes shares that each person would have the right to acquire (including upon the exercise of options) within sixty days of February 17, 2004, or April 17, 2004. Id. Accordingly, to calculate each defendant's Pre-Class Period Holdings, I added (a) the beneficial ownership listed in the 2004 Proxy to (b) any shares or vested options not represented in the 2004 Proxy that were reported as acquired between February 18, 2004, and April 7, 2004, and then subtracted from this total (c)

Citations to "Ex." are to exhibits attached to the Declaration of Mark R.S. Foster in Support of Defendants' Request for Judicial Notice. 1

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any reported sales of Yahoo! stock between February 18, 2004, and April 7, 2004 and (d) any options that vested, according to the vesting schedules reported in the corresponding Forms 3, 4 or 5, between April 8, 2004 and April 17, 2004. (b) To calculate the value of each defendant's Pre-Class Period Holdings, I

multiplied those holdings by the closing price of Yahoo! stock on April 7, 2004, which was $24.17. Ex. 38. (c) To calculate each defendant's beneficial holdings of Yahoo! stock at the

end of the Class Period ("End of Class Period Holdings"), I followed the following procedure. I reviewed Yahoo!'s Schedule 14A Proxy Statement filed on or about April 14, 2006 (the "2006 Proxy"). Ex. 15. The chart on page 21 of the 2006 Proxy lists the beneficial ownership of each defendant, including vested stock options, as of March 10, 2006. Id. As note 1 on pages 21 and 22 of the 2006 Proxy indicates, the beneficial ownership listed in the table includes shares that each person had the right to acquire (including upon the exercise of options) within sixty days of March 10, 2006, or May 9, 2006. Id. Accordingly, to calculate each defendant's End of Class Period Holdings, I added (a) the beneficial ownership listed in the 2006 Proxy to (b) any Yahoo! shares or vested options not represented by the 2006 Proxy that were reported as acquired between March 11, 2006 and July 18, 2006 and (c) any options to purchase Yahoo! stock that vested, according to the vesting schedules reported in the corresponding Forms 3, 4 or 5, between May 10, 2006 and July 18, 2006, and subtracted from that total (d) any reported sales of Yahoo! stock between March 11, 2006, and July 18, 2006. (d) To determine the value of each defendant's End of Class Period Holdings, I

multiplied those holdings by the closing price of Yahoo! stock on July 18, 2006, which was $32.24. Ex. 38. (e) To determine the percentage of their beneficial holdings that each

defendant sold during the Class Period, I followed the following procedure. I divided each defendant's (a) total Class Period sales by the sum of (b) their End of Class Period Holdings plus (c) their total Class Period sales.

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Holdings And Sales for Each Defendant 3. Susan Decker (a) Pre-Class Period Holdings: 2,850,118.4 shares or vested options

Susan Decker's beneficial ownership listed in the 2004 Proxy was 2,901,160 shares or vested options. Ex. 6. Decker did not report the sale of any Yahoo! shares between February 18, 2004 and April 7, 2004. Between April 8, 2004, and April 17, 2004, 51,041.65 of Decker's Yahoo! options vested. Ex. 1. 2,901,160 minus 51,041.65 equals 2,850,118.4. Therefore, Decker's PreClass Period Holdings were 2,850,118.4 shares or vested options to purchase shares of Yahoo! stock. (b) (c) Value of Pre-Class Period Holdings: $68,887,361.73. End of Class Period Holdings: 3,986,305.7 shares or vested options

Susan Decker's beneficial ownership listed on the 2006 Proxy was 3,893,993 shares or vested options. Ex. 15. Decker reported the acquisition of 50,646 Yahoo! shares on May 31, 2006. Ex. 18. 41,666.67 of Decker's Yahoo! options vested between May 10, 2006, and July 18, 2006. Ex. 1. Decker did not report the sale of any shares of Yahoo! stock between March 11, 2006, and July 18, 2006. 3,893,993 plus 50,646 plus 41,666.67 equals 3,986,305.7. Therefore, Decker's End of Class Period Holdings amounted to 3,986,305.7 shares or vested options to purchase shares of Yahoo! stock. (d) (e) Value of End of Class Period Holdings: $128,518,495.77. Sales as a Percentage of Total Holdings: 35.6%

Susan Decker sold 2,203,333 Yahoo! shares during the Class Period. CAC ¶ 2. Decker's End of Class Period Holdings were 3,986,305.7 shares or vested options. See ¶ 3(c), supra. 3,986,305.7 plus 2,203,333 equals 6,189,638.7. 2,203,333 divided by 6,189,638.7 equals 0.356. Decker sold 35.6% of her beneficial holdings during the Class Period. 4. Farzad Nazem (a) Pre-Class Period Holdings: 6,704,980 shares or vested options

Farzad Nazem's beneficial ownership listed in the 2004 Proxy was 6,723,730 shares or vested options. Ex. 6. Nazem did not report the sale of any Yahoo! shares between February 18, 2004,
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and April 7, 2004. Between April 8, 2004, and April 17, 2004, 18,750 of Nazem's Yahoo! options vested. Ex. 2. 6,723,730 minus 18,750 equals 6,704,980. Therefore, Nazem's Pre-Class Period Holdings were 6,704,980 shares or vested options to purchase shares of Yahoo! stock. (b) (c) Value of Pre-Class Period Holdings: $162,059,366.60. End of Class Period Holdings: 3,339,160 shares or vested options

Farzad Nazem's beneficial ownership listed on the 2006 Proxy was 4,026,660 shares or vested options. Ex. 15. Nazem reported the acquisition of 50,000 Yahoo! shares on May 31, 2006. Ex. 19. 62,500 of Nazem's Yahoo! options vested between May 10, 2006, and July 18, 2006. Exs. 2, 19. Nazem sold 800,000 shares of Yahoo! stock between March 11, 2006, and July 18, 2006. Ex. 19. 4,026,660 plus 50,000 plus 62,500 minus 800,000 equals 3,339,160. Therefore, Nazem's End of Class Period Holdings amounted to 3,339,160 shares or vested options to purchase shares of Yahoo! stock. (d) (e) Value of End of Class Period Holdings: $107,654,518.40. Sales as a Percentage of Total Holdings: 58.1%

Nazem sold 4,623,324 Yahoo! shares during the Class Period. CAC ¶ 2. Nazem's End of Class Period Holdings were 3,339,160 shares or vested options. See ¶ 4(c), supra. 4,623,324 plus 3,339,160 equals 7,962,484. 4,623,324 divided by 7,949,984 equals 0.581. Nazem sold 58.1% of his beneficial holdings during the Class Period. 5. Daniel Rosensweig (a) Pre-Class Period Holdings: 908,414.7 shares or vested options

Daniel Rosensweig's beneficial ownership listed in the 2004 Proxy was 922,998 shares or vested options. Ex. 6. Rosensweig did not report the sale of any Yahoo! shares between February 18, 2004, and April 7, 2004. Between April 8, 2004, and April 17, 2004, 14,583.3 of Rosensweig's Yahoo! options vested. Ex. 3. 922,998 minus 14,583.3 equals 908,414.7. Therefore, Rosensweig's Pre-Class Period Holdings were 908,414.7 shares or vested options to purchase shares of Yahoo! stock. (b) (c) Value of Pre-Class Period Holdings: $21,956,383.30. End of Class Period Holdings: 982,958.03 shares or vested options 4

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Daniel Rosensweig's beneficial ownership listed on the 2006 Proxy was 1,167,562 shares or vested options. Ex. 15. Rosensweig reported the acquisition of 50,646 Yahoo! shares on May 31, 2006. Ex. 20. 68,750 of Rosensweig's Yahoo! options vested between May 10, 2006, and July 18, 2006. Exs. 3, 20. Rosensweig sold 304,000 shares of Yahoo! stock between March 11, 2006, and July 18, 2006. Ex. 20. 1,167,562 plus 50,646 plus 68,750 minus 304,000 equals 982,958. Therefore, Rosensweig's End of Class Period Holdings at the end of the Class Period amounted to 982,958 shares or vested options to purchase shares of Yahoo! stock. (d) (e) Value of End of Class Period Holdings: $31,690,565.92. Sales as a Percentage of Total Holdings: 68.1%

Daniel Rosensweig sold 2,101,000 Yahoo! shares during the Class Period. CAC ¶ 2. Rosensweig's End of Class Period Holdings were 982,958 shares or vested options. See ¶ 5(c), supra. 2,101,000 plus 982,958 equals 3,083,958. 2,101,000 divided by 3,083,958 equals 0.681. Rosensweig sold 68.1% of his beneficial holdings during the Class Period. 6. Terry Semel (a) Pre-Class Period Holdings: 21,251,488.6 shares or vested options

Terry Semel's beneficial ownership listed in the 2004 Proxy was 20,109,822 shares or vested options. Ex. 6. Semel did not report the sale of any Yahoo! shares between February 18, 2004, and April 7, 2004. On March 10, 2004, Semel was granted an option to buy 1,800,000 shares of Yahoo! stock, which were fully vested upon grant. Ex. 4. Between April 8, 2004, and April 17, 2004, 658,333.4 of Semel's Yahoo! options vested. Id. 20,109,822 plus 1,800,000 minus 658,333.4 equals 21,251,488.6. Therefore, Semel's Pre-Class Period Holdings were 21,251,488.6 shares or vested options to purchase shares of Yahoo! stock. (b) (c) Value of Pre-Class Period Holdings: $513,648,479.46. End of Class Period Holdings: 18,506,857 shares or vested options

Terry Semel's beneficial ownership listed on the 2006 Proxy was 18,394,357 shares or vested options. Ex. 15. Semel did not report the acquisition of any Yahoo! shares or vested options not represented by the 2006 Proxy between March 11, 2006, and July 18, 2006. 112,500 of Semel's Yahoo! options vested between May 10, 2006, and July 18, 2006. Exs. 4, 21. Semel did not
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report the sale of any Yahoo! stock between March 11, 2006, and July 18, 2006. 18,394,357 plus 112,500 equals 18,506,857. Therefore, Semel's End of Class Period Holdings amounted to 18,506,857 shares or vested options to purchase shares of Yahoo! stock. (d) (e) Value of End of Class Period Holdings: $596,661,069.68. Sales as a Percentage of Total Holdings: 49.3%

Terry Semel sold 17,966,786 Yahoo! shares during the Class Period.2 Ex. 21. Semel's End of Class Period Holdings were 18,506,857 shares or vested options. See ¶ 6(c), supra. 17,966,786 plus 18,506,857 equals 36,473,643. 17,966,786 divided by 36,473,643 equals 0.493. Semel sold 49.3% of his beneficial holdings during the Class Period. Average Daily Closing Price of Yahoo! Stock 7. To determine the average daily closing price of Yahoo! stock, I reviewed the chart

of Yahoo!'s Historical Stock Prices (Ex. 38), and totaled the adjusted daily closing prices listed on that chart for each trading day from April 8, 2004 through July 18, 2006. The total figure is 19,344.87. I then divided this figure by the total number of trading days (five hundred seventythree (573)) during that same period. Id. 19,344.87 divided by 573 equals 33.76. Therefore, the average daily closing price of Yahoo! stock during the Class Period was $33.76. Sales During Select Portions of the Class Period 8. During the second, third and fourth quarters of 2004, Decker sold a total of

1,200,000 Yahoo! shares, Nazem sold a total of 1,900,000 Yahoo! shares, Rosensweig sold a total of 657,000 Yahoo! shares, and Semel sold a total of 10 million shares. Exs. 18-21. Together, the Individual Defendants sold 13,757,000 shares during the second, third, and fourth quarters of 2004, which is more than half of the total alleged Class Period sales of 26,694,443 shares. See CAC ¶ 2. 9. On July 7, 2004, Yahoo! announced its results for 2Q 2004. CAC ¶ 61. The

announced results were within management guidance, but "only matched Wall Street estimates" and were "not enough to satisfy the street." CAC ¶¶ 65, 66, 67. No defendant sold Yahoo!
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The CAC alleges that Semel sold 17,766,786 Yahoo! shares during the class period. CAC ¶ 2. 6

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shares during the thirty-nine days prior to the announcement. Ex. 18-21, 38. The following defendants sold Yahoo! shares within thirty days of the July 7, 2004 announcement: Defendant Semel Transaction Date 7/13/2004 7/14/2004 7/27/2004 7/13/2004 7/16/2004 7/19/2004 8/2/2004 Shares Sold 1,632,500 367,500 1,000,000 100,000 20,000 91,000 76,000

5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Nazem Rosensweig Exs. 19, 20, 21. 11. Exs. 19, 20, 21. 10. Nazem Rosensweig

On July 19, 2005, Yahoo! announced its results for 2Q 2005. CAC ¶ 103. The

announced results were "in-line with management's guidance" but "fell shy of some analysts' expectations." CAC ¶ 111. No defendant sold Yahoo! shares during the seventeen days prior to the announcement. Ex. 18-21, 38. The following defendants sold Yahoo! shares within thirty days of the July 19, 2005 announcement: Defendant Semel Transaction Date 7/26/2005 7/27/2005 8/19/2005 8/18/2005 8/1/2005 9/1/2005 Shares Sold 200,000 200,000 542,836 100,000 76,000 76,000

On January 17, 2006, Yahoo! announced its results for 4Q 2005 and FY 05.

CAC ¶ 124. The announced results were "within [Yahoo!'s] guidance" but "fell shy of analyst expectations." CAC ¶¶ 126, 128. No defendant sold Yahoo! shares during the thirteen days prior to the announcement. Ex. 18-21, 38. The following defendants sold Yahoo! shares within thirty days of the January 17, 2006 announcement:

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Defendant Semel Rosensweig Exs. 20, 21. 12.

Transaction Date 2/15/2006 2/16/2006 2/17/2006 2/1/2006

Shares Sold 400,000 100,000 200,000 76,000

On July 18, 2006, Yahoo! announced its results for 2Q 2006. CAC ¶ 150. The

announced results "missed revenue estimates," but were announced as within Yahoo!'s guidance. Id.; Ex. 33 at 6, 22. No defendant sold Yahoo! shares during the fourteen days prior to the announcement. Ex. 18-21, 38. The following defendants sold Yahoo! shares within thirty days of the July 18, 2006 announcement: Defendant Nazem Rosensweig Exs. 19, 21. I declare under penalty of perjury under the laws of the United States of America that the foregoing is true and correct and that this Declaration was executed in San Francisco, California, on this 20th day of June, 2008. Dated: June 20, 2008 By: /s/ Matthew H. Rice [e-filing signature] Transaction Date 8/10/2006 8/11/2006 8/15/2006 Shares Sold 100,000 100,000 74,000

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ECF ATTESTATION I, Mark R.S. Foster, am the ECF User whose ID and Password are being used to file this: DECLARATION OF MATTHEW H. RICE IN SUPPORT OF DEFENDANTS' MOTION TO DISMISS PLAINTIFFS' CONSOLIDATED AMENDED COMPLAINT In compliance with General Order 45, X.B., I hereby attest that Matthew H. Rice has concurred in this filing. Dated: June 20, 2008 MORRISON & FOERSTER LLP By: /s/ Mark R.S. Foster [e-filing signature]

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