This case was last updated from Santa Clara County Superior Courts on 08/08/2019 at 14:40:15 (UTC).

Malek v. Time Warner, Inc., et al.

Case Summary

On 10/26/2018 Malek filed a Contract - Business lawsuit against Time Warner, Inc . This case was filed in Santa Clara County Superior Courts, Downtown Superior Court located in Santa Clara, California. The Judge overseeing this case is Kuhnle, Thomas. The case status is Disposed - Dismissed.

Case Details Parties Documents Dockets

 

Case Details

  • Case Number:

    ******6875

  • Filing Date:

    10/26/2018

  • Case Status:

    Disposed - Dismissed

  • Case Type:

    Contract - Business

  • Court:

    Santa Clara County Superior Courts

  • Courthouse:

    Downtown Superior Court

  • County, State:

    Santa Clara, California

Judge Details

Judge

Kuhnle, Thomas

 

Party Details

Plaintiff

Malek, Alex

Defendants

Lam, Rachel

Middlefield Ventures, Inc.

Blanc, Jose

Intel Capital Corporation

Glu Mobile, Inc.

Time Warner, Inc.

Not Classified By Court

Superior Court of California

Attorney/Law Firm Details

Plaintiff Attorney

Miner, Whitney R

Not Classified By Court Attorney

Superior Court of CA, County of Santa Clara

 

Court Documents

Dismissal - Entire Action

Dismissal of Entire Action With Prejudice: Comment: Dismissal of Entire Action With Prejudice

Notice

Notice CMC reset from 3-8-19 to 5-3-19: Comment: CMC reset from 3/8/19 to 5/3/19

Notice

Notice CMC reset from 2-8-19 to 3-8-19: Comment: CMC reset from 2/8/19 to 3/8/19

Order

Order Sealing Portions of the Complaint: Comment: Order Sealing Portions of the Complaint - signed/TEK

Order: Deeming Case Complex

Order Deeming Case Complex and Staying Discovery and Responsive Pleading Deadline: Comment: Order Deeming Case Complex and Staying Discovery and Responsive Pleading Deadline signed/TEK

Complaint (Unlimited) (Fee Applies)

REDACTED Complaint (Unlimited) (Fee Applies): Comment: Public Complaint

Civil Case Cover Sheet

Civil Case Cover Sheet: Comment: COMPLEX

Motion: Seal

Motion Seal Complaint: Comment: Application to File Complaint Under Seal

Summons: Issued/Filed

Summons Issued Filed:

 

Docket Entries

  • 05/03/2019
  • Conference: Case Management - Judicial Officer: Kuhnle, Thomas; Hearing Time: 10:00 AM; Cancel Reason: Vacated; Comment: (1st CMC) Discovery and responsive pleading deadline stayed, as of 10/31/18, when the case was deemed complex.

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  • 03/26/2019
  • Notice: Entry of Dismissal w/POS - Comment: Notice of Entry of Dismissal and Proof of Service

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  • 03/06/2019
  • View Court Documents
  • Dismissal - Entire Action - Dismissal of Entire Action With Prejudice: Comment: Dismissal of Entire Action With Prejudice

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  • 03/04/2019
  • View Court Documents
  • Notice - Notice CMC reset from 3-8-19 to 5-3-19: Comment: CMC reset from 3/8/19 to 5/3/19

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  • 01/23/2019
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  • Notice - Notice CMC reset from 2-8-19 to 3-8-19: Comment: CMC reset from 2/8/19 to 3/8/19

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  • 10/31/2018
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  • Order - Order Sealing Portions of the Complaint: Comment: Order Sealing Portions of the Complaint - signed/TEK

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  • 10/31/2018
  • View Court Documents
  • Order: Deeming Case Complex - Order Deeming Case Complex and Staying Discovery and Responsive Pleading Deadline: Comment: Order Deeming Case Complex and Staying Discovery and Responsive Pleading Deadline signed/TEK

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  • 10/26/2018
  • View Court Documents
  • Complaint (Unlimited) (Fee Applies) - REDACTED Complaint (Unlimited) (Fee Applies): Comment: Public Complaint

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  • 10/26/2018
  • Filed Under Seal - Comment: SEALED Complaint - Sealing Order issued 10/31/18

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  • 10/26/2018
  • View Court Documents
  • Civil Case Cover Sheet - Civil Case Cover Sheet: Comment: COMPLEX

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  • 10/26/2018
  • View Court Documents
  • Motion: Seal - Motion Seal Complaint: Comment: Application to File Complaint Under Seal

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  • 10/26/2018
  • View Court Documents
  • Summons: Issued/Filed - Summons Issued Filed:

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Complaint Information

E-FILED

10/26/2018 6:10 PM

Enoch H. Liang (Bar No. 212324) Clerk of Court enoch.liang@ Itlattorneys.com Superior Court of CA, Kevin M. Bringuel (Bar No. 196279) County of Santa Clara kevin.bringuel@ Itlattorneys.com 18CV336875

LTL ATTORNEYSLLP

601 Gateway Blvd, Suite 1010

South San Francisco, CA 904080

Tel: (650) 422-2130; Fax: (213) 612-3773

Caleb H. Liang (Bar No. 261920) caleb.liang@ Itlattorneys.com

Kevin B. Kelly (Bar No. 274145) kevin.kelly@ ltlattorneys.com

LTL ATTORNEYSLLP

300 South Grand Avenue, 14th Floor

Los Angeles, CA 90071

Tel: (213) 612-8900; Fax: (213) 612-3773

Chris Kao (Bar No. 227080) ckao@ kaollp.com

Andrew Hamill (Bar No. 251156) ahamill@ kaollp.com

Whitney Miner (Bar No. 290825) wminer@ kaollp.com

KAO LLP

1 Post Street, Suite 1000

San Francisco, CA 94104

Attorneys for Plaintiff Alex Malek

SUPERIOR COURT OF THE STATE OF CALIFORNIA FOR THE COUNTY OF SANTA CLARA

Reviewed By: R. Walker

ALEX MALEK, an individual, caseNo. 18CV336875 Plaintiff, COMPLAINT FOR: V. (1) INTENTIONAL INTERFERENCE WITH CONTRACT;

TIME WARNER INC.; RACHEL LAM; | (2) INTENTIONAL INTERFERENCE WITH INTEL CAPITAL CORPORATION; PROSPECTIVE ECONOMIC ADVANTAGE MIDDLEFIELD VENTURES INC.; (3) NEGLIGENT INTERFERENCE WITH JOSE BLANC; GLU MOBILE, INC.; PROSPECTIVE ECONOMIC ADVANTAGE;

and DOES 1 through 100. Defendants.

and (4) UNFAIR COMPETITION.

DEMAND FOR A JURY TRIAL

INTRODUCTION

1. Pursuant to his employment with Crowdstar, Plaintiff was granted stock options as part of his compensation from Crowdstar Inc. (“Crowdstar”). These stock options were vested with the lowest strike price being |} BBl These options were not available to members of the public at large, but available only to Plaintiff as a result of his employment with Crowdstar. Plaintiff naturally expected that Crowdstar would fulfill these contracts in good faith, and that these contracts would not be unlawfully interfered with by third parties, thereby entitling Plaintiff to the full benefit of such stock options in Crowdstar.

2. The Defendants Time Warner Inc., Rachel Lam, Intel Capital Corporation, Middlefield Ventures Inc., and Jose Blanc (collectively the “Controlling Defendants”) were the controlling shareholders, representatives of controlling shareholders, and/or directors of Crowdstar. A's such, they were well aware of these vested stock option rights. However, the Controlling Defendants interfered with these vested contractual rights and economic expectancies by accepting a deal for Crowdstar that resulted in an artificially low valuation of the Crowdstar common shares at I thccby rendering Plaintiff’s options worthless. Controlling D efendants accepted this inferior deal while ignoring several potential deals that would have provided value to Plaintiff’s vested contractual rights and economic expectancies. Their interference consisted of the following actions: 4, Second, while Crowdstar itself was still negotiating with Glu, and while Glu had an offerCrowdstar (the “Entire Acquisition LOI’), Controlling Defendants and Glu simultaneously pursued a competing offer to buy only the preferred shareholders’ shares along with their contractual drag-along rights (the “Preferred Only LOI”’). As compared to the Entire A cquisition LOI, the Preferred Only LOI unfairly and disproportionately devalued common shares, gave zero value to option holders, and offered less money overall to all shareholders than the Entire Acquisition LOI. Further, the Entire A cquisition LOT offer included an earnout, whereby Glu would pay Crowdstar significant additional monetary compensation for hitting targets on 2017 revenues. Negotiation of the Preferred Only LOI ultimately resulted in a sale of the preferred shares and exercise of drag-along rights (the “Preferred Only Transaction”) pre-empting any further negotiations between Crowdstar and Glu on the Entire A cquisition LOI, and with HBC. In pursuing the Preferred Only LOI and the Preferred Only Transaction, Controlling Defendants and Glu relied upon Crowdstar’s confidential information from the Entire A cquisition LOI talks with Glu, such as Crowdstar’s business performance metrics and market strategies.

D. Based upon Crowdstar’s preferred and common equity structure, as the valuation exceeded about [, the common shareholders portion of the equity would grow much faster relative to the preferred’s share. As a result, Controlling Defendants—who were also preferred shareholders—received approximately the same amount of money from the Preferred Only Transaction than they would have under the Entire A cquisition LOI. However, minority shareholders and common shareholders received far less money than they would have under the Entire A cquisition LOI. Option holders having an expectancy in the earnout received nothing under the Preferred Only Transaction.

0. Third, not only did the Preferred Only Transaction sell Crowdstar at a value of less than the opportunities under the HBC offer and Entire A cquisition LOI, but it also sold Crowdstar well below internal Crowdstar valuations acknowledged by the Controlling Defendants.

7. Defendant Glu, as a result of the ongoing negotiations regarding the Entire A cquisition LOI, also was aware of the vested stock options owned by Plaintiff. However, Glu also interfered with this contract by tendering the Preferred Only LOI and participating in the negotiations that eventually led to the transaction that rendered all the options held by Plaintiff (and the other

Crowdstar employees) worthless. All Defendants intentionally and/or negligently, in bad faith,

negotiated the common shares to be valued at | EEEG_—— I . v hich meant that he could not

execute his vested stock options.

8. Glu’s decision to offer the Preferred Only LOI, and the Controlling Defendants’ decision to accept the Preferred Only LOT over the Entire A cquisition LOI, deflated the sales price of Crowdstar by up to [, most of which would have gone to the common shareholders and option-holders given that the Controlling D efendants agreed to give up their portion of the earnout in relation to the Entire A cquisition LOI and that the Entire A cquisition LOI would have converted all in-the-money and vested options to Crowdstar stock. Had it not been for the unjustifiable interference by Defendants, Plaintiff would have realized far greater value for his stock options.

9. Crowdstar’s sales had increased year after year since Jeffrey Tseng took over as CEO and Crowdstar was on the verge of releasing an exciting new product. Apparently Crowdstar’s success failed to satisfy the Controlling Defendants and their own self-interested motivations to immediately exit at the cost of maximizing shareholder value, move towards near term plans to retire, or liquidate their holdings. Despite having economic and personal preferences for immediate liquidity, and hence being interested, Controlling Defendants did not obtain disinterested and independent board approval or otherwise set out to deal with the minority and common shareholders and option holders in a procedurally fair manner, interfering with Plaintiff’s rights to the Crowdstar options awarded to him as part of his employment at Crowdstar.

THE PARTIES

10. Plaintiff Alex Malek is an individual residing in New Y ork County, New Y ork. Plaintiff was the former Director of Analytics, and a vested option-holder, of Crowdstar, a mobile and social online gaming company that was acquired in November 2016 by Glu Mobile, Inc. Plaintiff held these vested options as part of his compensation as a high-level Crowdstar employee and to recognize his work in contributing to the growth and success of Crowdstar. of business in San Francisco County, California. At all relevant times, Glu was in negotiations to acquire, and eventually did acquire, Crowdstar. 12. Defendant Time Warner Inc. (“TWI”) is a Delaware corporation, with its principal

place of business in New Y ork County, New York. Prior to Glu’s acquisition of Crowdstar, TWI was

a preferred shareholder of Crowdstar that [ I /s such, TWI was the largest single shareholder of

Crowdstar at all relevant times and held a seat on Crowdstar’s board of directors.

13. Defendant Rachel Lam (“Lam”) is an individual residing in New Y ork County, New Y ork. Lam was a Senior Vice President of Defendant TWI. She was also a board director of Crowdstar. On information and belief, Lam—either personally or by virtue of her position at TWI— held shares in Glu at the time that Glu acquired Crowdstar and was also herself a former board member of Glu. At the time of the events described herein, upon information and belief, Lam planned to retire from TWI and was pressing to exit TWI’s investment in Crowdstar for her own personal benefit. Lam in fact did retire from Defendant TWI in January 2017, shortly after Glu acquired Crowdstar.

14. Defendant Intel Capital Corporation (“Intel”) 1s a Delaware corporation, with its

principal place of business in Santa Clara County, California. Prior to Glu’s acquisition of

Crowdstar, Intel was a preferred shareholder of Crowdstar that [ GG . A's such, at all relative times, Intel had

the contractual right to designate a voting board member at a time of its choosing, a right which Intel exercised in October 2016, during the events described herein. Upon information and belief, in 2016, Defendant Intel was also actively looking to exit all or a majority of its venture capital investments.

15. Defendant Jose Blanc is an individual. On information and belief, Blanc resides in Santa Clara County, California. Blanc is the Vice President of Finance of Intel. Until October 2016, he was a board observer of Crowdstar, representing the interests of Intel. In October 2016, Blanc became a director on the board of Crowdstar, representing Intel. information and belief, Middlefield was owned by Intel. Prior to Glu’s acquisition of Crowdstar,

Middlefield was a preferred shareholder of Crowdstar that [ GGG, nd . T ogether with Intel, Middlefield held or . At all relevant times,

Middlefield acted in concert with Intel and its interests were represented by the same individual or individuals.

17. Crowdstar was a Delaware corporation with its principal place of business in San Mateo County, California. On information and belief, at all times, the average of Crowdstar’s property factor, payroll factor, and sales factor (as defined in Sections 25129, 25132, and 25134 of the Revenue and Taxation Code) was more than 50 percent. A ccording to Crowstar’s May, 2013, Voting A greement, California residents owned more than one-half of the company’s outstanding voting securities. Thus, pursuant to California Corporations Code Section 2115, California law governs the standard of care owed by the Controlling Defendants in this action.

18. Plaintiff is unaware of the true names and capacities, whether individual, corporate, associate or otherwise, of Defendants Does 1 through 100 inclusive, or any of them, and therefore sues these Defendants, and each of them, by such fictitious names. The Doe Defendants include persons and entities assisting or acting in concert with the named Defendants in connection with the actions complained of herein and include persons and entities that are responsible in some manner for the acts, occurrences and liability hereinafter alleged and referred to.

19. Plaintiff is informed and believes that at all times, Defendants, and each of them, were the agents, employees, and officers of each of the remaining Defendants, and in doing the things alleged, were acting within the scope, course and purpose of such agency and employment, or within the apparent scope of such agency or employment, and with the permission and consent of each of the remaining Defendants. Plaintiff will amend this Complaint to set forth the true names and capacities of these Defendants when they have been ascertained, along with appropriate charging allegations, as may be necessary.

JURISDICTION AND VENUE

21. This Court has jurisdiction over each defendant named herein because each defendant is either a corporation that conducts business in and maintains operations in this County, oris an individual who has sufficient minimum contacts with California so as to render the exercise of jurisdiction by the California courts permissible under traditional notions of fair play and substantial justice.

22. Venue is proper in this County because one or more of the defendants either resides in or maintains executive offices in this County, a substantial portion of the transactions and wrongs complained of herein occurred in this County, and defendants have received substantial compensation in this County by conducting business here and engaging in numerous activities that had an effect in

this County.

FACTS COMMONTO ALL CLAIMS FOR RELIEF

Controlling Defendants’ Access To The Board And Crowdstar’s Confidential Information.

23. By virtue of its controlling shares, Defendant TWI was able to appoint its representative Defendant Lam to the board of directors. By virtue of their controlling shares, Defendants Intel and Middlefield were allowed to designate a director of their choosing. Intel and Middlefield initially appointed Defendant Blanc as a board observer, and in October 2016, designated Blanc as a director of Crowdstar.

24. TWI, Intel, Middlefield, Blanc, and Lam (the “Controlling Defendants”) had visibility into Crowdstar’s transactions and direct contact with potential acquirers and investors by virtue of fulfilling board functions. One such example was Defendant Glu’s potential acquisition of Crowdstar. option-holders). The earnout provision would require Glu to provide Crowdstar’s shareholders and vested option-holders additional compensation depending on the revenue Crowdstar generated in fiscal year 2017.

206. In order to facilitate the diligence necessary for Glu and Crowdstar to move forward with the proposed acquisition, on information and belief, on October 30, 2015, Glu and Crowdstar executed a Nondisclosure Agreement (“NDA”) agreeing to treat the information received in the process of researching and negotiating the acquisition as confidential. The NDA expired within 1

year, or by October 30, 2016.

Controlling Defendants Decided T o Negotiate Only With Glu And Igqnored HBC’s Competing Offer Of Passive Investment.

27. The negotiations, diligence, and exchange of confidential information continued through the following year. In early September 2016, after Crowdstar presented to Glu, Glu initiated discussions regarding a deal that would include an upfront payment, plus an earnout amount depending on 2017 financial performance. Those discussions continued into early October 2016.

28. Oninformation and belief, on October 10, 2016, Glu presented two proposals for acquiring Crowdstar: (1) N | | N, ith a higher earnout (unsecured) paid to common shareholders and options-holders starting in March 2018, or (2) |, with a lower earnout (unsecured) paid to shareholders and option-holders starting in March 2018.

29. Oninformation and belief, on October 20, 2016, a Board of Directors meeting was held. Lam was present and represented TW 1. Blanc was also present and represented Intel and Middlefield. Atthe meeting, CEO Jeffrey Tseng also presented an opportunity from HBC, which wanted to discuss an investment of ||l to fund development of a consumer fashion gaming platform at a || enterprise value for Crowdstar. Instead of a sale to Glu, Crowdstar had the opportunity to seek a significant investment that would allow it to grow significantly and profit, or at least use as a valuation in further negotiations to get acquired.

30. Oninformation and belief, Controlling Defendants refused to hold a board meeting or conversation in a timely fashion to consider this opportunity from HBC, despite its valuation of Crowdstar at [N and instead focused on Glu offers, which permitted them a quick exit from Crowdstar (and upon information and belief, further permitted Lam to retire from TWI with a

bonus for the exit from Crowdstar).

Glu Submits The Entire A cquisition LOI With An Earnout That Benefitted Common Shareholders And Options Holders For Future Success.

31. On information and belief, on October 21, 2016, Glu issued a Letter of Intent (the “Entire A cquisition LOI”) for its acquisition of Crowdstar based upon its second proposal. Under the terms of the Entire A cquisition LOI, Glu would purchase Crowdstar’s shares for || | N payable upon closing, pay Crowdstar’s preferred and common shareholders (including holders of in-the- money and vested options, which would be exercised and converted to Crowdstar common stock) an earnout of up to | payable over two years beginning in the first Quarter of 2018.

32. There was good reason to support Crowdstar negotiating a high earnout. Crowdstar had experienced strong success with its flagship hit fashion game primarily targeting a female demographic, Covet Fashion. It was poised to release a new interior design game that would appeal to a wider audience of both genders, Design Home, after over a year and |l invested in development. Given a similar game concept and similar monetization strategy, Crowdstar believed that Design Home would likely exceed Covet Fashion’s success. Indeed Design Home’s performance after 50,000 users was at least as good as Covet Fashion’s performance at launch.

33. Notably, the Entire A cquisition LOI provided that all in-the-money and vested options would be exercised and converted to common shares. As of February 2016 (just eight months earlier), a common share of Crowdstar was valued by an independent 409A valuation at [Jilij per

share.

Controlling Defendants Re-Balanced T heir Investment To Favor Up-Front Consideration And Divest 95% Of Their Portion Of The Earnout.

34. Oninformation and belief, on Friday, October 21, 2016, the same day that Glu issued and Crowdstar signed the Entire A cquisition LOI, Intel initiated its right to designate a member of the Board of Directors, assigning Blanc to Crowdstar’s Board. Defendants heavily discounted the value of the earnout, which depended on the revenue Crowdstar would generate in 2017. Thus, board member Ted Lu proposed that the Controlling D efendants keep I of the upfront consideration, which had originally been carved out for key management employees, in exchange for their assigning 90-100% of their portion of the earnout, which would be allocated to key management employees and the common shareholders, most of whom were also vested option-holders. The Controlling Defendants agreed to assigning 95% of their portion of the

earnout.

CEQ Jeffrey Tseng Conducts Due Diligence on Glu regarding The Earnout. 36. Upon information and belief, the next day on Saturday, October 22, 2016, CEO

Jettrey Tseng emailed the Board of Directors to again discuss the HBC investment as a possible alternative to the Entire A cquisition LOI from Glu. The Controlling Defendants refused to even consider Mr. Tseng’s request and conduct a reasonable investigation as to its potential.

37. Oninformation and belief, on Monday, October 24, 2016, Mr. Tseng requested an in- person meeting at Glu to conduct reverse due diligence on Glu’s ability to pay the earnout, which proceeded on Tuesday, October 25, 2016. Also, on Monday, October 24, 2016, Mr. Tseng sent a note to Lam asking her input on ways to further secure the earnout in case Glu refused Crowdstar’s counter-offer for Glu to deposit some portion of the earnout in escrow. Lam never responded.

38. On information and belief, a Board of Directors call was held the next day on Wednesday, October 26, 2016. After outlining the results of his reverse due diligence analysis, upon information and belief, Mr. Tseng voted to negotiate further on the security for the earnout listed in the Entire A cquisition LOI, while Lam voted to proceed with an unsecured earnout. Lam’s position was, of course, consistent with her (and TWI’s) lack of economic interest in the earnout after ceding 95% of the earnout to the key management and options holders.

39. Lam voted to accept the offer, while Mr. Tseng voted not to accept without further assurances that Glu would actually have the wherewithal and resources to fund the earnout portion of the deal when it came due. It was expected that the Controlling Defendants would then negotiate further with Glu to move forward the sale of Crowdstar with security for the earnout, or consider the HBC offer. The Controlling Defendants, however, instead undermined and preempted the Entire A cquisition LOI by knowingly forcing a sale of the entirety of Crowdstar through their preferred shares and drag-along rights at a discount price, thereby interfering with Plaintiff’s vested stock

options.

By Selling Their Own Preferred Shares, Controlling Defendants Preempted Crowdstar’s Ability To Further Negotiate T he Entire A cquisition LOI With Glu And Sell Crowdstar As A Whole (Or Further Explore An Investment O pportunity From HBC).

40. Oninformation and belief, later that day, on W ednesday, October 26, 2016, Crowdstar’s bankers reported a call they had with Glu’s team. Crowdstar’s bankers reported that Glu refused to provide more security on the earnout in the Entire A cquisition LOI. Glu then, for the first time, raised the possibility of just buying out the preferred shareholders, characterizing this secondary proposal as a structure where “preferred gets their money back.” Of course, the largest preferred shareholders were the Controlling Defendants.

41. Oninformation and belief, Crowdstar and its bankers then had another call with Glu that evening. On that call, the preferred shareholders indicated that they were interested in selling their shares to Glu, but that Crowdstar also had an alternative structure that it would like to propose for an entire acquisition that would help the common shareholders and options holders to realize more economic value.

42. Glu, of course, had no interest in discussing a deal that would cost it more money (Entire A cquisition LOT), when it could gain a controlling interest in Crowdstar for much cheaper by just buying the preferred shareholders’ shares.

43. That day (Thursday, October 27), HBC submitted its written offer for a || Gz investment, at a ||l valuation for Crowdstar. On information and belief, at around 7:10 p.m. Mr. Tseng requested a meeting of the Board of Directors to discuss, among other things, the possible HBC investment. at approximately | ]} BBl and declined to pay any earnout whatsoever.

45. On information and belief, a momming call was held on Friday, October 28, 2016 to discuss Glu’s Preferred Only LOI. That morning, prior to the call, TWI sent an email completely ignoring the HBC offer, but asking to discuss the Preferred Only LOI. In other words, TWI and Lam were only interested in discussing the Glu deal that would profit the Controlling D efendants and provide them an immediate exit, even though it valued Crowdstar much lower as a going concern B ithout even considering the HBC offer that valued Crowdstar nearly three times as much and that also created long-term value for the other shareholders and optionholders [l ]

46. On information and belief, the Controlling D efendants then abandoned any attempt to sell Crowdstar and maximize value for all shareholders and option holders, instead focusing solely on the Preferred Only LOI. Upon information and belief, the negotiations between Glu and the Controlling Defendants over the Preferred Only LOI reached an impasse when the Controlling Defendants refused to give certain representations and warranties that Glu wanted with respect to Crowdstar’s business and liabilities.

47. Oninformation and belief, after the apparent impasse on the Preferred Only LOI, later in the day on Friday, October 28, Glu offered another acquisition deal (the “Second Entire Acquisition Proposal”) to Crowdstar. However, because Glu knew that the common equity and optionholders were about to receive close to zero in the Preferred Only LOI, upon information and belief, Glu knew that the Second Entire A cquisition Proposal could be worse economically than the Entire A cquisition LOI from October 21 (just a week ago) from which Crowdstar was obviously trying to negotiate a better deal foritself. After all, the possibility of a revived purchase of only preferred shares still loomed. For example, the Second Entire A cquisition Proposal had the same upfront price as the October 21 Entire A cquisition LOI, but did away with any cash earnout whatsoever, substituting instead Restricted Stock Units (“RSUs”) that would vest over four years in lieu of the monetary earnout previously proposed. RSUs, which are restricted stock in Glu, are worse than cash from an eamout. Crowdstar during parallel track negotiations. Moreover, the Controlling Defendants used their control over the board of Crowdstar to continue to demand data from Crowdstar and provide it to Glu to further advance their negotiations of the Preferred Only LOI, at the expense of the other shareholders.

49, In any event, Glu and the Controlling D efendants apparently worked out their differences on the representations and warranties over the next few days and effectively sold Crowdstar at a discounted valuation of approximately || Nl (the “Preferred Only Transaction”). On November 3, 2016, Glu announced the acquisition of Crowdstar in its Q3 2016 Earnings Call. Notably, under the final purchase on November 3, 2016 the vested option-holders— who had received their options as part of the consideration for their employment—Ilost all value in their options, as the value of the common shares|ijili] was ultimately priced at just one cent below the lowest strike price for option-holders [ GG

50. Instead of negotiating for the greatest value for all the shareholders and other interest holders (such as with the Entire A cquisition LOI), the Controlling Defendants improperly competed with Crowdstar by simultaneously negotiating the sale of their own preferred shares in the Preferred Only LOI. From Glu’s perspective, it was likely thrilled to gain control of Crowdstar while saving B (Lt Glu otherwise might have had to pay to Crowdstar’s vested option-holders and shareholders in the Entire A cquisition LOI. At the same time, the Preferred Only LOI benefited the Controlling Defendants, who had little remaining interest in the earnout, by permitting them to “cash out” their respective venture capital investments at the expense of minority shareholders, common shareholders, and vested option-holders. In doing so, the Controlling D efendants interfered with the vested option-holders’ contractual rights, interfered with economic expectancies, and engaged in unfair competition. By negotiating and entering into the Preferred Only LOT and closing the Preferred Only Transaction, all Defendants further used the information that they gained during the due diligence for the Entire A cquisition LOI. A cquisition LOT and Preferred Only LOI by Glu, Controlling Defendants, as preferred shareholders, clearly had a conflict of interest with the common shareholders and option holders. Under Crowdstar’s equity structure, as the valuation increased above BB, common shareholders’ equity portion increased significantly faster than that of the preferred shareholders’ equity. Hence, Controlling Defendants generally favored liquidity, or in other words, a lower risk lower reward strategy investment. Meanwhile common shareholders and option holders favored higher risk higher reward strategies such as maintaining Crowdstar as an independent private business. The Delaware Court of Chancery recognized precisely this type of conflict between preferred shareholders and

common shareholders:

The cash flow rights of typical VC preferred stock cause the economic incentives of its holders to diverge from those of the common stockholders.

The different cash flow rights of preferred stockholders are particularly likely to affect the choice between (i) selling or dissolving the company and (11) maintaining the company as an independent private business. “In particular, preferred dominated boards may favor immediate ‘liquidity events’ (such as dissolution or sale of the business) even if operating the firm as a stand-alone going concern would generate more value for shareholders.” (internal citations omitted).

In re Trados Inc. Shareholder Litigation, 73 A.3d 17, 49 (2013). As Trados ultimately concluded:

“The costs of this value-reducing behavior are borne, in the first instance,

by common shareholders.” “[B]ecause VCs in ... sales often exit as

preferred shareholders with liquidation preferences that must be paid in

full before common shareholders receive any payout, common

shareholders may receive little (if any) payout. At the same time, the sale

eliminates any ‘option value’ (upside potential) of the common stock.”

(internal citations omitted). Here, under the Preferred Only LOI and the Preferred Only Transaction that ultimately resulted, Controlling Defendants received approximately the same amount of money from the Preferred Only LOI that they would have under the Entire A cquisition LOI. However, minority shareholders received far less money than they would have under the Entire A cquisition LOI or under an investment by HBC at an enterprise value of || . Option holders and the key management personnel having an expectancy in the earnout received nothing under the Preferred Only Transaction. another conflict of interest. Plaintiff is informed and believes that Lam, who represented the interests of TWI, received a significant bonus from TW1I for completing the purchase in November 2016 before retiring from her position as TWI’s Senior Vice President in January 2017. Upon information and belief, Lam also personally gained from Glu’s acquisition of Crowdstar as a Glu shareholder. Lam personally favored a quick exit for less money to Crowdstar as a whole rather than a longer term investment for a higher valuation. She did not recuse herself from decisions involving those competing trade-offs even though her conflict of interest was clear.

53. The Controlling D efendants therefore sold Crowdstar to Glu at a valuation of approximately [, despite other concurrent offers for Crowdstar at valuations of ||l I thcreby guaranteeing themselves the ability to immediately “cash out”, and in doing so, interfered with Plaintiff’s vested rights in his stock options and other economic expectancies in

Crowdstar.

FIRST CAUSE OF ACTION

(Intentional Interference With Contract) [Against All Defendants And DOES 1 Through 100]

54. Plaintiff incorporates by reference the preceding averments set forth in the previous paragraphs.

55. Pursuant to his employment with Crowdstar, Plaintiff was granted stock options as part of his compensation.

56. These stock options were vested with the lowest strike price being il per share. These options were not available to members of the public at large, but available only to Plaintiff and other Crowdstar employees as a result of their (often years-long) employment with Crowdstar. Plaintiff naturally expected that Crowdstar would fulfill these contracts in good faith, and that these contracts would not be unlawfully interfered with by third parties, thereby entitling Plaintiff and the other Crowdstar employees to the full benefit of such stock options in Crowdstar. option rights regarding Crowdstar. However, rather than obtaining the full benefit of these options, the Controlling Defendants’ interference with this contract served to render the options held by Plaintiff (and the other Crowdstar employees) worthless.

58. Despite their knowledge of Plaintiff and the other Crowdstar employees’ interest in maximizing the value of these stock options, the Controlling D efendants actively worked to render them worthless in the above-described Preferred Only LOI/Transaction by valuing the common shares of stock at i, one cent below the lowest strike price for the options held by Plaintiff,

59. Inaccepting the Preferred Only LOI and ultimately closing the Preferred Only Transaction, the Controlling Defendants refused to even consider the HBC deal, which valued Crowdstar at nearly three times as much as the Preferred Only Transaction’s valuation of Crowdstar at [ The HBC offer valued common shares at almost ten times what common shareholders would have received under the Preferred Only LOI and Preferred Only Transaction.

60. Defendant Glu, as a result of the ongoing negotiations regarding the Entire A cquisition LOI, also was aware of the vested stock options owned by Plaintiff. However, Glu also interfered with this contract by tendering the Preferred Only LOI and participating in the negotiations that eventually led to the transaction that rendered all the options held by Plaintiff (and the other Crowdstar employees) worthless.

61. Glu’s decision to offer the Preferred Only LOI, and the Controlling Defendants’ decision to accept the Preferred Only LOI over the Entire A cquisition LOI, deflated the sales price of Crowdstar by up to [, most of which would have gone to the common shareholders and option-holders given that the Controlling Defendants agreed to give up their portion of the earnout in relation to the Entire A cquisition LOI and that the Entire A cquisition LOI would have converted all in-the-money and vested options to Crowdstar stock.

62. All Defendants intentionally, in bad faith, negotiated the common shares to be valued at [ urposefully setting this price at one cent lower than the strike price for the stock options held by Plaintiff, which meant that he could not execute his vested stock options. below the price at which Plaintiff could execute his stock options, prevented performance of these agreements and caused Plaintiff to effectively lose all of his stock options.

64. Clearly, Defendants’ conduct of setting this [l price was intended to disrupt the performance of these contracts.

65. Defendants’ conduct harmed Plaintiff because his stock options were rendered worthless. Plaintiff did not receive any compensation for the almost 90,000 vested stock options Plaintiff held—this was because the common shares received [N whereas the lowest

strike price for Plaintiff’s options |GGG

66. The pricing of the common shares at ||} BBl was not an accident; instead, Defendants |G

reprehensible and despicable conduct in an amount to be determined at trial.

SECOND CAUSE OF ACTION

(Intentional Interference With Prospective Economic A dvantage) [Against All Defendants And DOES 1 Through 100]

67. Plaintiff incorporates by reference the preceding averments set forth in the previous paragraphs.

68. Pursuant to his employment with Crowdstar, Plaintiff was granted stock options as part of his compensation from Crowdstar. These stock options were vested with the lowest strike price being . These options were not available to members of the public at large, but available only to Plaintiff as a result of his employment with Crowdstar. Plaintiff naturally expected that Crowdstar would fulfill these contracts in good faith, and that these contracts would not be unlawfully interfered with by third parties, thereby entitling Plaintiff to the full benefit of such stock options in Crowdstar. Plaintiff alone was granted, as part of his compensation, almost 90,000 stock options in Crowdstar. representatives of controlling shareholders of Crowdstar, were well aware of these vested stock option rights.

70. Despite their knowledge of Plaintiff’s interest in maximizing the value of these stock options, the Controlling D efendants intentionally and/or negligently allowed these stock options to be rendered worthless by accepting the Preferred Only LOI, which valued the common shares at [l one cent below the strike price for these options, instead of exploring the HBC deal or further negotiating the Entire A cquisition LOI, thereby intentionally or negligently disregarding Plaintiff’s vested interests.

71. Innegotiating the Preferred Only LOI and closing the Preferred Only Transaction, the Controlling Defendants pre-empted the successful negotiation and/or further negotiation of the Entire A cquisition LOI, which would have included a | N N, 2nd a carve-out of 95% of Controlling Shareholder’s portion of the earnout. Based on public statements from Glu’s earnings calls, it is apparent that since Glu has taken over Crowdstar, the Crowdstar revenue numbers have far exceeded the amount necessary to receive the || | G under the Entire A cquisition

LOL

72. Defendant Glu, as a result of the ongoing negotiations regarding the Entire A cquisition LOI, also was aware of Plaintiff’s vested stock options. However, Glu also interfered with this contract by tendering the Preferred Only LOI and participating in the negotiations that eventually led to the transaction that rendered all the options held by Plaintiff worthless.

73. Plaintiff was therefore unable to profitably execute his stock options, rendering them worthless. All the Defendants’ actions were, at a minimum, negligent in that it was reasonably foreseeable that their decision to accept the Preferred Only LOI and negotiate the price of common shares to be il would interfere with Plaintiff’s ability to exercise his vested stock options. value for their stock options.

75. Asdiscussed above, Defendants’ actions were independently wrongful, in addition to interfering with Plaintiff’s prospective economic advantage. The actions of Controlling Defendants constituted a breach of fiduciary duty as to Crowdstar’s common shareholders. Glu’s actions also aided and abetted a breach of fiduciary duty. In addition, all Defendants took confidential information, gathered at the expense of Crowdstar for the sole purpose of pursuing the Entire A cquisition LOT on behalf of all shareholders, to negotiate a separate transaction that harmed the interests of Crowdstar and its common shareholders and option holders.

76. The pricing of the common shares at ||} BBl was not an accident; instead, Defendants purposely chose the [JJili] value so that Plaintiff (and other Crowdstar employees) could not exercise their vested stock options. Defendants’ conduct was willful, oppressive, and fraudulent and/or malicious. A ccordingly, Plaintiff is entitled to an award of punitive damages in order to

punish Defendants for their reprehensible and despicable conduct in an amount to be determined at

trial.

THIRD CAUSE OF ACTION

(Negligent Interference With Prospective Economic A dvantage) [Against All Defendants And DOES 1 Through 100] 77. Plaintiff incorporates by reference the preceding averments set forth in the previous paragraphs. 79. The Controlling Defendants, as directors, controlling shareholders, and/or representatives of controlling shareholders of Crowdstar, were well aware of these vested stock option rights.

80. Despite their knowledge of Plaintiff and the other Crowdstar employees’ interest in maximizing the value of these stock options, the Controlling Defendants intentionally and/or negligently allowed these stock options to be rendered worthless by closing the Preferred Only Transaction which valued the common shares at JJJll, one cent below the strike price for these options, over exploring the HBC deal or further negotiating the Entire A cquisition LOI Entire A cquisition LOI, thereby intentionally or negligently disregarding Plaintiff’s vested interests.

81. Innegotiating the Preferred Only LOI and closing the Preferred Only Transaction, the Controlling Defendants pre-empted the successful negotiation and/or further negotiation of the Entire A cquisition LOI, which would have included a | N N, 2nd a carve-out of 95% of Controlling Shareholder’s portion of the earnout. Based on public statements from Glu’s earnings calls, it is apparent that since Glu has taken over Crowdstar, the Crowdstar revenue numbers have far exceeded the amount necessary to receive the entire ||| |} BB under the Entire A cquisition

LOL

82. Defendant Glu, as a result of the ongoing negotiations regarding the Entire A cquisition LOI, also was aware of Plaintiff’s vested stock options, as well as incentives, which would have included a [ G, 2nd a carve-out of 95% of Controlling Shareholder’s portion of the earnout. However, Defendant Glu also interfered with this contract by tendering the Preferred Only LOT and participating in the negotiations that eventually led to the transaction that rendered all the options and expectancies held by Plaintiff (and the other Crowdstar employees) worthless. 84. As discussed above, Defendants’ actions were independently wrongful, in addition to interfering with Plaintiff’s prospective economic advantage. The actions of Controlling Defendants TWI, Lam, Intel, Blanc and Middlefield constituted a breach of fiduciary duty against Crowdstar’s common shareholders. Defendant Glu’s actions aided and abetted a breach of fiduciary duty. In addition, all Defendants wrongfully took information, gathered at the expense of Crowdstaror the sole purpose of pursuing the A cquisition LOTI on behalf of all shareholders and option holders, to negotiate a separate transaction that harmed the interests of Crowdstar and its common shareholders and option holders.

85. Defendants’ actions negligently interfered with Plaintiff’s prospective economic advantage regarding Crowdstar. Had it not been for the unjustifiable interference by Defendants,

Plaintiff would have realized far greater value for his stock options.

FOURTH CAUSE OF ACTION

(Unfair Competition Under California Business And Professional Code § 17200) [Against All Defendants And DOES 501 Through 600]

86. Plaintiff incorporates by reference the preceding averments set forth in the previous paragraphs.

87. In committing the acts and omissions described herein, each of the named D efendants has violated California Business and Profession Code §§ 17200, et seq., the Unfair Competition Law (“UCL”). The acts and omissions described above are unlawful, in that they violate a statute, ordinance, or an established rule of common law. The acts and omissions described above are fraudulent within the meaning of the UCL because they are deceptive, and likely, if not certain to deceive the members of the general public, including Plaintiff and the other former Crowdstar employees.

88. Each Defendant named in this cause of action has benefitted financially in some manner, either directly or indirectly, as a result of the UCL violations stated in this complaint. stock options they held at the time of the merger. 90. Asaproximate and foreseeable result of Defendants' unfair competition, Plaintiff has suffered irreparable harm and other damages. Plaintiff is therefore entitled to orders in equity

restoring the status quo prior to the time they were harmed by Defendants’ UCL violations.

PRAYER FOR RELIEF

WHEREFORE, Plaintiff prays for judgment against all Defendants, and each of them as

follows:

On The First Cause Of A ction For Intentional Interference With C ontract

1. For compensatory damages in an amount to be determined at trial; For exemplary damages in an amount to be determined at trial; For costs of suit herein incurred;

For reasonable attorney’s fees; and

n o= =

For such other and further relief as the Court may deem proper.

On The Second Cause Of Action For Intentional Interference With Prospective Economic A dvantage

1. For compensatory damages in an amount to be determined at trial; For exemplary damages in an amount to be determined at trial; For costs of suit herein incurred;

For reasonable attorney’s fees; and

or = W N

For such other and further relief as the Court may deem proper.

On The Third Cause Of Action For Negligent Interference With Prospective Economic A dvantage

1. For compensatory damages in an amount to be determined at trial; 2. For costs of suit herein incurred;

3. For reasonable attorney’s fees; and

4 On The Fourth Cause Of A ction For Unfair Competition Under California Business And Professional Code § 17200

1. Forrestitution and disgorgement in an amount to be determined at trial; 2. For costs of suit herein incurred; 3. Forreasonable attorney’s fees; and

4. For such other and further relief as the Court may deem proper.

DEMAND FOR JURY TRIAL

Plaintiff hereby demands a jury trial.

DATED: October 26, 2018 LTL ATTORNEYS LLP

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(& DA

Enoch Liang Kevin Bringuel Caleb Liang Kevin Kelly

KAO LLP