Free Statement - District Court of Arizona - Arizona

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1 concems that you had about the status of the securities 1 MR. KAUP: Objection.
2 offerings that Visitalk had made? 2 THE WITNESS: Yes.
3 A. Yes. 3 Q. BY MR. THOMASON: Was there an issue that .
4 Q. Generally speaking, Mr. Best, what were -- 4 came up in the early days about founders' warrants? And
5 what was the nature of your concems? 5 we‘ll define that in a minute.
6 A. The nature of my concems was that we were 6 A. Yes.
7 in the process of a Series C offering, and Series A and B, 7 Q. First-- okay. When I say "founders'
8 to my knowledge, had not closed. So there was a bleeding 8 warrants," from looking at the history of this company,
9 of various offerings. 9 that term has -- seems to have a meaning.
10 There was issues regarding what type of -- 10 What did you understand founders' warrants
11 there had been some publications about Visitalk's money 11 to be in the context of Visitalk?
12 raise, and so there were some concems about whether or 12 A. The three founders, Peter Thimmesch, Mike
13 not we were properly soliciting the funds. 13 O'Donrrell, and Mark Cardwell, granted themselves at the
14 And in short, when I joined, the Series A 14 inception of the company warrants to purchase stock of
15 and B offering documents and the documentation within 15 Visitalk.com.
16 Visitalk was, in short, a disaster. 16 Q. Okay. Early on, then, was there a concern
17 Q. Okay. What do you mean by that? 17 that you had or a concem that was raised about the
18 A. People had not signed their -- the tiles 18 founders' warrants?
19 were -- were incomplete. In fact, I don't recall, but 19 A. Yes.
20 maybe 10 or 15 files, investor files, having the proper 20 Q. And again, just generally speaking -- we‘ll
21 documentation. 21 get more specific. General speaking, do you recall what
22 Q. Let me take one step back and get some 22 the concem was?
23 overview on the equity status of the company. You've 23 A. In faimess to everybody here, I really
24 talked about Series A and Series B, and I know you don't 24 don't —- V
25 remember the exact amounts of those offerings. But were 25 Q. Okay. Then --

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1 those preferred stock offerings? 1 A. -- remember.
2 A. Yes. I-- 2 Q. Let's take a look at Exhibit 6 from I
3 Q. And those were private offerings? 3 Mr. Schweigerfs deposition.
4 A. Yes. 4 Do you recognize Exhibit 6 as a
5 Q. Who owned the common stock of the company? 5 communication from Snell to you in July of 1999 that dealt
6 Was that the founders? I mean, you may not know exactly, 6 with the founders' warrant issue?
7 but the original investors? 7 A. Yes. Q
8 A. Yeah, I believe so. 8 Q. Does this refresh your recollection as to
,9 Q. And the Series C offering was another 9 the general nature of the problem? §
10 preferred stock offering? 10 A. It does. 5
1 1 A. Correct. 11 Q. Why don't we, just so we have a clear E
A 12 Q. That was in the $20 million range? 12 record here, have you then, now that you've looked at 1
13 A. Correct. I believe the Series A offering 13 this, give us an overview of the nature of the problem.
14 was for a couple hundred thousand dollars, and the Series 14 A. As I now remember it, being somewhat
15 B —- Series A was for a couple hundred thousand. Series B 15 refreshed, the founders' warrants grant had not been
16 was either for a million or $5 million. 16 properly disclosed to the Series A and B shareholders in
17 Q. Okay. And so when Snell was originally 17 the offering documents that were presented.
18 retained, did you ask them to look into your concems 18 There was some issue as well, and I don't $3
19 about the status of the securities offerings? 19 recall what the issue was, but there was some issue with
20 A. That was their first task. 20 respect to Mark Cardwell and Peter -- versus Peter
21 Q. Is this letter, Exhibit 5, the results of 21 Thimmesch and Mike O‘Donnell on the founders' warrants.
22 that initial inquiry? 22 Q. Okay. Do you recall that the actual issue
23 A. Yes. 23 being disclosed to the shareholders was in connection with
” i J 24 Q. Did you feel like you got good advice from 24 Series A and not B?
I 25 Snell on the issues that were initially raised? 25 MR. KAUP: Objection.
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1 THE WITNESS: Yes. Possibly. I mean, my l Q. Now, this communication --
2 recollect -- 2 Oh, I'm sorry. Thank you for pointing that
3 Q. BY MR. THOMASON: Let me just make clear. 3 out. Here you go. That's a good deal.
4 If you don't recall things specifically, I know it was a 4 Would a communication such as the cover
5 long time ago, and I know you're going to tell us. And 5 memo and whatever went with it to the board, would that in
6 that's fine, so -- 6 the normal course of events go to all the board members?
7 A. Right. 7 A. Yes.
8 Q. Let's just talk at an overview level on the 8 Q. And is it your recoHection that
9 founders' warrants. Did the board of directors -- and 9 communications about options on how to resolve the
10 we'll look at a few documents here in a minute -- l0 founders' warrants were sent to all of the board members?
11 ultimately reach a resolution on how the founders' 11 A. Yes.
12 warrants issue would be resolved? 12 (Deposition Exhibit No. 10 was marked for
13 A. Yes. It was combined with the securities 13 identification.)
14 issues as well. 14 TI-[E. WITNESS: To be clear, not one board
15 Q. What do you mean by that? 15 member ever complained about a lack of dissemination of
16 A. I think that there was an agreement by the 16 information by Snell & Wilmer.
‘ 17 board to send out a notice to all shareholders, all Series 17 MR. THOMASON: Okay.
18 A, B, and even C subscribers to refund everybody's money, 18 One more here, Don.
19 to explain the problems with respect to not only the 19 MR. KAUP: Tim, is there any way we can get
20 securities disclosures, but as well the foLmders' warrant 20 an extra couple of sets made of the documents you‘re not g
21 issue, and to offer everybody an absolute right of retum 21 going through yet, get someone copying them so we can have
22 of their money, plus interest. 22 some for at least counsel?
23 Q. Okay. Let me -- 23 MR. SPECT OR: That would be helpful.
24 This was marked. Must not have marked it. 24 MR. THOMASON: Yeah, I'll try to do that at
25 Is this 8, Amy? Have this marked as Exhibit 8. 25 the next break. 1 Z
»
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‘ 1 (Deposition Exhibit No. 8 was marked for 1 What exhibit number was this? -
2 identification.) 2 THEWITNESS: Ten.
3 Q. BY MR. THOMASON: Do you recall that in 3 Q. BY MR. THOMASON: Ten. Do you recognize
4 this, what you have in front of you deals with Series A, 4 Exhibit 10 as the minutes of a special meeting of the
5 that Snell had drafted some proposed language to 5 board of directors of Visitalk from November 24, 19997
6 constitute the notice to Series A shareholders? — 6 A. Yes.
7 A. I do recall that, and this appears to be 7 Q. And do you recall that there was a
8 that document. 8 discussion at that board meeting about a resolution of the
9 Q. And is this one of the items that you were 9 founders' warrants? _
10 referring to a moment ago when you said that shareholders 10 A. I do now.
11 were notified of the issue? 11 Q. You'll see that in the minutes at the
12 A. Yes. 12 bottom of page 4 and over to page 5 that that issue was
13 Q. And was it your understanding that a 13 discussed?
14 communication like that, similar to that, was sent to 14 A. Yes.
15 Series A shareholders? 15 Q. I'll ask you more specifically what you
16 A. Yes. 16 recall. But does the summary on page 4 and that goes over
17 (Deposition Exhibit No. 9 was marked for 17 to page 5 accurately describe what transpired at the board
18 identification.) 18 meeting about the founders' warrants? ’
19 Q. BY MR. THOMASON: You have Exhibit 9 in 19 MR. KAUP: Objection; privileged
20 front of you. Do you recognize this -— and take your 20 MR. BIVENS: Can you again share with us,
1 21 time, Mr. Best -- but as a memorandum from Mike Donahey to 21 Chris, the basis for your objection so we can determine --
22 the board of directors with an accompanying memorandum 22 MR. KAUP: It doesn't reflect that there is
‘ _ 1 23 from Charles A. Pulaski of the Snell firm to you dealing 23 anyone present other than the board members or employees
° 24 with potential solutions of the founders' warrant issue? 24 of the company, and so he's asking for what happened in
llll 25 A. Yes. 25 conversations at which he may or may not have been
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l present. We haven't even established that he was present, l Q. BY MR. THOMASON: Okay. Let me —- and let
.. 2 but it doesn't reflect that anybody other than the company 2 me also go back to page 5 of Exhibit 10, where it says,
3 was present. ' 3 "It was decided that the Board would ask all Series A
4 MR. BIVENS: Well, it will come as no 4 Shareholders to sign a waiver and release of claims
5 surprise that if you regard it as privileged, we're going 5 regarding the failure of the company to disclose the
6 to take the most conservative route and not answer that 6 Founders‘ Warrants to them at the time of the Series A
7 So under the circumstances, I would have to 7 offering."
8 instruct him not to answer that. 8 Is that what you were just referring to?
9 MR. Tl—lOMASON: You won't need to do that. 9 A. Correct.
10 MR. BIVENS: Okay. 10 Q. And then it says, "Once the waivers are all
ll Q. BY MR. THOMASON: Mr. Best, who was at this 11 signed and retumed, the Founders will keep their
12 board meeting? 12 warrants. The existence of the Founders' Warrants was
13 A. Peter Thimmesch, Michael O'Donnell, Allan 13 disclosed to Series B and Series C Shareholders."
14 Kaplan, Mark Cardwell, and Jeffrey Hirschberg, as 14 Goes on to say, "'Ihe Board decided to it
15 reflected in the minutes. I have no independent 15 follow a dual track on the issue and have research done on
16 recollection. 16 executive compensation plans. If they do not receive
17 Q. Okay. And were Richard Mallery and Michael 17 unanimous consent from the Series A Shareholders by
18 Donahey at the board meeting? 18 December 10th, it was decided that Mr. Thimmesch and
19 A. I apologize. They were. 19 Mr. O'Donnell would waive their rights to the Founders'
20 Q. Okay. And were they present when were you 20 Warrants and receive stock options pursuant to their
21 present at the board meeting? 21 employment agreements."
22 A. I don‘t recall. 22 Is that consistent with your recollection
23 Q. Okay. 23 of the action that was taken by the board?
24 A. I'm -- I more likely than not would have 24 A. Yes. I
25 been present for at least parts of this board meeting. 25 Q. As general counsel to the company, did you
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I 1 Q. Okay. But you don‘t necessarily have a 1 feel that the decision that the board made was an
2 raging, vivid memory of it, sounds like? 2 appropriate one?
3 MR. KAUP: Objection; fonn. 3 A. Yes.
4 THE WITNESS: I do not. Ido recall the 4 Q. Why did you feel that way?
5 action the company took in response to this board meeting. 5 A. There was no more absolute or better way of
6 Q. BY MR. THOMASON: Okay. Just take a look, 6 rectifying this issue than putting the potentially
7 I guess, just to refresh your recollection. If you look 7 aggrieved parties on notice of the problem, and then
8 at —- over on exhibit -- or on page 4, for example. 8 offering them an absolute right of retum for their money.
9 A. Yes. 9 Q. Did you feel that the legal advice that you
10 Q. You'll see like a Chinaeorrr and MP3, 10 were given by Snell & Wilmer on the fouuders' warrant
11 there's a reference to you reviewing some items on those 11 issue was good legal advice?
12 issues? 12 MR. KAUP: Objection; he's not qualified as
13 A. Yes. 13 an expert
14 Q. In any event, 1et's go -- you said that you 14 Q. BY MR. THOMASON: You're not qualified as
15 recall how this issue was resolved as a result of the 15 an expert, Mr. Best. How about that?
16 actions of this board meeting, so tell me what you recall 16 Did you feel-- as general counsel of this .
17 about that. 17 company, did you feel that the legal advice by the lawyers 4
18 A. In response to the board meeting, we sent 18 that you hired was appropriate legal advice?
19 out document Exhibit 8. 19 MR. KAUP: Objection. Same objection.
20 MR. KAUP: I would just remind Mr. Best of 20 THE WITNESS: The answer is yes.
21 his duties -- his ethical duties of confidentiality to his 21 Q. BY MR. THOMASON: Did you feel that it was
22 client. 22 in the best interests of the company?
23 THE WITNESS: Thank you for your reminder. 23 MR. KAUP: Objection. Same objection.
, · _·.` QA We sent out Exhibit 8 to each of the‘Series 24 TI-IE WITNESS: Yes.
25 A shareholders. 25 Q. BY MR. THOMASON: Was the legal advioe that
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1 independent basis. I will say that the numbers and -— I'm 1 A. Yes. We, in fact, addressed the conflict
2 pointing out to you all the inaccuracies of 2 issue. I believe a Chinese wall was set up. I don't
3 Mr. S0mmerville's statement, which are, including, when it 3 know.
4 says 7.2 million, more shares I -- in the Exhibit 20 it 4 But I do know that the issue was addressed,
5 says 7,650,000 shares. So it looks like there`s another 5 and Snell & Wilmer gave me assurances, and I can't tell
6 discrepancy there. 6 you with specificity what those assurances were, but gave
7 But as a fundamental understand -- you 7 me assurances that it would not become an issue of
8 know, conversation with you as to whether or not this is 8 conflict.
9 accurate, other than what I perceive is two differences, I 9 And whatever duties of loyalty they had at
10 don't know. 10 the end of the day, their duties of loyalty were paramount
11 MR. KAUP: We're at the time I know you 11 to Visitalkcom, and I believe that that information was
12 need to go, Mr. Best. 12 relayed to Michael and Peter as well.
13 When can we complete this, Mr. Bivens? 13 Q. Did you ever see a waiver of conflict --
" 14 MR. BIVENS: It is my view we just did. 14 A. I did not.
15 THE WITNESS: Yeah. We're done. 15 Q. -- letter?
16 MR. KAUP: We're not done. 16 A. I did not.
17 MR. BIVENS: You didn't notice the 17 Q. So you never executed such a letter on
18 deposition, sir. We made him available today till 5:00. 18 behalf of Visitalk?
19 I explained that in advance. 19 A. I did not.
20 You still have a couple minutes by my 20 Q. Do you -— would you have been the one to
21 watch, so I'd fire away if I were you. 21 receive such a conflicts waiver letter from Snell &
22 MR. KAUP: Well, I can notice another 22 Wilmer?
23 deposition myself, and we can go through it that way. I 23 A. I would have been one of the people.
24 thought we were going to try to work in a cooperative 24 Q. Who else would have received it?
25 manner to move this forward. · 25 A. Well, you could have sent it to any member
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1 MR. BIVENS: I don't recall a single 1 of the board.
2 conversation with you on this topic ever before, so I'm 2 Q. Who on the board, aside -- who on the board
3 happy to cooperate with y0u_ Bur to imply that [herds 3 would have had authority to execute a waiver of conflicts
4 been a hjgtg would be false 4 letter OH of
5 KAUP: Wen, I dom mean to hnply 5 A. Well, probably any of the independent board
6 theres a history But ih fact, We have I think ah 6 members, such as Jeffrey Hirschberg or Allan Kaplan.
7 coopmea. Hes cooperated in being here today, and we 7 Q~ B¤¤h¤v w¢r¢¤‘t<>f¤¤<=fS Ofthc ¤¤¤·v¤¤v?
8 all cooperated in going through this and sharing this 8 A· Aclllllllyr l llllllk Allan Kavlan was all
9 dmc. 9 officer of the company while he was a member of the board.
10 So is it your testimony you won't 10 MR` Bn/EN? Chris "
11 voluntarily agree to continue this deposition? ll G0 ahead Flmsli your zmswcn
12 MR. BIVENS: YES- some typ;’l:§c S; In fact, he was an officer of
13 MR. KAUP: Oka . Tell me when ou need to ’ ’
14 leave, and we'll notice our ozlvn deposition. y 14 MR: BIVENS: We are by my Watch about three
15 after 5:00. We'll agree to disagree with you on whether
15 MR. BIVENS: We need to leave at 5:00. , . .
16 Q. BY MR KAUP: ML Best, did you ever come 16 you ve had adequate time to ask questions, but we are at a gr
17 point where Mr. Best needs to go today.
17 to have an understanding that Mr. Thimmesch and 18 MR. KAUP: Okay- §
18 Mr. O'Dom1ell were represented by the Snell & Wilmer firm? 19 MK BIVENS: And Wdh mad it and sign it.
19 A. They did retain Snell & Wilmer to give them 20 (5:04 pm.)
20 EZX advice. 21
21 Q. Do you know when that occurred? STEVEN ANDREW BEST
22 A. N0. 22
E 23 Q. Did you speak to anyone at Snell & Wilmer 23
j 24 about the fact that they were representing Mr. Thimmesch 24 ’
I 25 and Mr. O'Dom1ell? 25
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