Free Statement - District Court of Arizona - Arizona

Biltmore Associates v. Thimmesch Richard John Rothwell Vol. I
CIV 02-2405-PHX—HRH 8/25/2006
. 24 (Pages 93 to 96)
’ } Page 93 Page 95
(1) founders' warrants. Mike O'Donnell addressed the entire ( 1) were probably going to have an offering price of $13 or
(2) group formally regarding the founders' warrants and told (2) $15 per share.
( 3) us all -- I was sitting in the front row, front row and ( 3) They related it verbally to eBay's initial
(4) center, as a matter of fact, next to Allan Kaplan. He (4 ) public offering. ln fact, then Peter Thimmesch chimed
(5) told us very specifically about the founders' warrants, (5) in and mentioned that eBay increased six-fold during its
_ ` ° ( 6) how they had been=issued, that they had been issued ( 6) first month, and they came out at about $15 a share.
` (7 ) during the first week of incorporation. That they had ( 7 ) Then the attorney from Snell & Vlhlmer joined in again,
(8) made a mistake in_the preparation of the Series A (8) Dick, and indicated that - indicated that that's how
· I ( 9) preferred stock purchase agreements and term sheets. ( 9) the stock market worked and this anti-dilution issue was
. _ " (10) That they had worked that issue all out for the most (10) insignificant.
i ( 1 1 ) part. ( 1 1 ) And that there was a large transaction about to
. ‘ — (12 )' He. implied that there may have been a couple of (12) occur with MP3.com, and this company couldn‘t move
- (13) people who had still not signed the-release claim or (13) forward until this Series A errors and corrections were
I ( 1 4 ) release of claims document, but that he took that into ( 1 4 ) made so that Visitalk could go on andmake its private
» · _(1 5) telling us how they had not yet addressed the fact that (1 5) offering to MP3.com for $15 million.
· ( 1 6) those stock warrants would dilute the Series A ( 1 6) And -- well, there was more. l mean, I can go
. _ (17) stockholders should they be issued. And that's why they I (17) on. That's whatl remember relative to this issue.
(1 8 ) were also now correcting the purchase agreement, I ( 1 8 ) Another what seemed like a significant issue during the
( 1 9) "believe it was, but it was an anti-dilution clause (1 9) meeting was Mike O'Donnell informed everybody that Mark
- _ (2 0) reIated_ to the Series A preferred stockholders. (2 0) Cardwell was leaving the company -- this wasin December
I (2 1) There was quite a bit of discussion and (2 1) of ‘99 -- and that he had decided to pursue other
= (22 )_ questions by the shareholders. And this all went on for (2 2 ) passions or something to that effect. He waved to Mark
· · * I (23 )- about a half an hour, at which time a partner at Snell & (23) Cardwell who stood up briefly - he was sitting in the
Z. n (.2 4 ) Vlhlmer stood up, introduced himself as a partner with (2 4 ) back right-hand corner -- and bid him farewell and said
I i (25 )’ Snell-& Vlhlmer. In fact, lbelieve he said he was the (2 5) we will all miss him. _ U
I . _; · V Page 94 Page 96
(1) principal partner or leading partner. I don't know the (1_) I know I was surprised, and it appeared that a
(.2) proper terminology. Sorry. But he did indicate his (2) ’ few ofmy. other stockholders were becausewe had all met
_ ‘ i (3) name was Dick. I can see the guy. l remember his face (3) Mark when there were only ahandful of stockholders and I
· (4) if l wereto see him in person, but I don't remember his (4 )‘ Mark wasvintroduced as the chief technology officer. So
( (5 ). last name. It starts with an M, I think. _ Sorry. l (5) that discussion led to several questions regarding what
X . ( 6 )» P But he captivated me and several of the other (6) does that mean regarding technology. There were fears
. (7). stockholders. And ljudge that based upon a meeting (7) expressed of was Mark Cardwell taking, you know, the
· l · (8 )‘. with me after the meetingland discussing his (8) technology with him. l l
(9) conversation and his presentation. _ (9) I Peter Thimmesch discussed that, no, that Peter.
" · (1 0) But Dick stood up and told the entire group ( 1 0) had invented the technology and that we didn't haveto
i (1 1) . that Visitalk was doing fabulously. That we were going _( 11) worry. That they had a qualified technology officer · ·
(12) I to belpublic in the next few months. That we had a I (12) taking over for Mark whose name was Lance Booth, and
( 13 ), principal of Goldman Sachs there present; And that we (1 3 ) that everything was fabulous. and that's it. That's it
(14,) were all about to be millionaires. (14 ) in a nutshell.
(15) , And that this anti-dilution issue didn't (15) Q. Mr. Rothwell, can you tell aus how the + was
· . _ · _( 1 6) generally affect us individually because in the practice (16) there any impact on you from the statements by Dick from
· . . ‘ _( 17) of buying stock on‘WaIl Street, as smaIl.investors go · (17) Snell & Vlhlmer during the meeting which you just
[ . _` ( ` (18) ganyway, that there isn't generally any research done (18) described? _ I V l I
- - (19.) regardingthe number of shares outstanding and the. P ( 1 9) — _ MR.`CLAUS:_ Form, foundation. ` -
. ` I . (2 Q ) " dilutioniof variousseries of stocks to another. That . j (2 0) ° THE WITNESS:-g Well, there was certainly impact ~ _.
. - . ` »_ . (2 1)- when it's all said and done, we'll all own common stock, . (.21) on me personally. I had been a little bit concerned for l
‘ . ‘ (2 2 )‘ _, and_ that stock is going to go out at some price. · (2.2) a few weeks after being asked to sign that release of `. _
_ _ , ‘— ‘ (2 3) I And at that point, while Dick was still _ _ · ( 23 )_ claims-document, as were afew of `my close friends that l
» . ‘4_) ‘ (2 4-) standing, Mike O'DonnelI interjected that their initial (24 ,)— I discussed Wsilalk with on a daily basis. I . - I
. — (2_5) _ discussions Goldman Sachs had indicated that they (2 5) · And lwas veryreassured and happy to hear the .
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. Case 2 :02—cv—02405—H RH · Document 384-39 Filed 07/24/2007 Page 1 of 2

Biltmore Associates v. Thimmesch Richard John Rothwell Vol. I
CIV 02-2405-PHX—HRH 8/25/2006
. 25 (Pages 97 to 100)
-2 Page 97 Page 99
( 1) partner from Snell & Wilmer make such specific ( 1) 50 percent of that $2,000 a month because there wasn't
(2) addressments to some of the issues that seemed to be (2) any money to pay me, or at least I didn't feel there was
(3) lingering on, and specifically that there was an IPO (3) enough money to pay me. And then I received the
(4 ) about to occur, that there was a brokerage house and a (4) possibly the possibility to accrue stock in the
(5) principal in that brokerage house that was leading that (5) reorganized company.
(6) IPO, and that most of all that I was going to be a ( 6) Q. (BY MR. CLAUS) How much stock?
(7) millionaire. V (7) A. I don't know.
(8) So yeah. Iwas thrilled and relieved and put (8) Q. Do you currently own shares in the reorganized
(9) at ease for quite some time, on into the February 2000 ( 9) debtor?
( 1 0) board meeting. I ( 1 0) A. Yes.
(1 1) MR. KAUP: Let's take the a quick break. We'II (1 1) Q. How many shares?
(12) call you back in 10 minutes, Mr. Rothwell, and then (12) A. I don't know.
(1 3) Mr. Claus vvlll ask questions. (13) Q. Why don't you know? "
( 1 4 ) THE WITNESS: Okay. (1 4) A. Because they haven't all been issued yet, to my
( 15) (A recess was taken from 1:40 p.m. to (1 5) knowledge. a ·
(1 6) 2:05 p.m.)- (1 6) Q. More than 1,000 shares?
(17) (Exhibit Nos. 1 through 8 were marked for (17) A. Yes.
(18) identification.) (18) Q. More than 10,000 shares?
(1 9) MR. KAUP: I'm done. (1 9) A. Yes.
(2 0) · (2 0) Q. More than 100,000 shares?
(21) EXAMINATION (21) A. Yes.
_(22) (22) Q. More than a million shares?
(23) Q. (BY MR. CLAUS)_ Mr. Rothwell, when did you l _ I (23) A. No. ”
(24) cease acting as the CEO of Visitalk? (24) Q. Did you pay any consideration in return for
.( 25 )_ A. I'm sorry. What is that? . . (25) between 100,000 and a million shares in the reorganized
_ . Page 98 Page 100
(1) _ Q. When did you cease acting aswthe CEO of (1) debtor? ~
(2) Visitalk? V __ (2) I MR. KAUP: Objection. Form.
(3) A. When did I cease? - _ 1 (3) THE WITNESS: First of all, sir, for clarity, ._
‘ · (4) Q. Yes. i ‘ (4) the maximum number of shares that I could receive in the
(5) A. It was in September of 2004. (5) reorganized debtor was approximately 280,000 shares.- ·
( 6) Q. Didyou authorizethe tiling ofthe initial · I (6) Q. (BY MR. CLAUS) Okay. So then Iet's lower the
(7 ) complaint inthis-lawsuit? ` · (7 ) ceiling. (
(8) A. Of the additional complaint? I (,8) A. Okay. . ·
. . (9) Q- Did you authorize the tiling of the initial - (9) Q. You are sanguine in your knowledge that you
(10) complaint in this lawsuit on November 27, 2002? (10) have not received more than 280,000 shares?
‘ (1 1) A. Yes. Q (11) A. I will not receive more than 280,000 shares.
(12) Q. What are you.to receive, Mr. Rothwell, from any -( 12) Q. So then let me re-ask my question.
(13) recovery in this lawsuit? V (13) Did you pay any consideration —
(1 4) A. Nothing to my knowledge. (1 4 ) A. Yes. -
(15) Q. Have you been compensated during your tenure as (15) Q. — for your — let me tinish.
(1 6) CEO of Wsitalk? 8 - - (1 6) Did you pay any consideration for your .
· ` .( 17) A. Yes. ( 17) acquisition of between 100,000 and 280,000 shares in the -
(18) Q. . What was the manner of yourcompensation? Was (1 8) reorganized debtor? V
‘ (1 9) it in-kind compensation or did you receive a salary? (19) A. Yes.
(20) MR. KAUP: Objection'. Form. ._ (20) ` IIlIR..KAU_P:. Objection. Form. 1 A
l » (2 1) THE WITNESS: Ireceiveda small salary. And I (2 1) . Q. ° (BY MR. CLAUS) What did you pay?
‘ ( `( 22) don't remember the wording of the approved bankruptcy (22) 1A. I paid — tirst of all, I don't recall the
. i gi ( ’ (2 3) document, but I received $2,000 a month which — I (23) exact sums or quantities that-I paid,·but I paid
y" ..·’ (2 4 )· received the right to receive $2,000,a month, which I `( 2 4 ) hundreds of _hours of work on my part. And I also .
(25) did not take most- or I didn't take more than _ ·. (2 5) contributed some funds. I paid some of the debt of 1 ‘
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Case 2:02-cv-02405-HRH

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